STAAR Surgical

(Nasdaq: STAA)
David Bailey, President & CEO Deborah Andrews, CFO May 2007

FORWARDFORWARD-LOOKING STATEMENTS
All statements in this presentation that are not statements of historical fact are forwardforward-looking statements, including any projections of earnings, revenue, cash or other financial items, any statements of the plans, strategies, and objectives of management for future operations, any statements regarding expectations for success of the ICL or other products in U.S. or international markets, any statements concerning proposed new products and government approval of new products, services or developments, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations and assumptions as of the date of this presentation and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. forwardThe risks and uncertainties include our limited capital resources and limited access to financing, our ability to overcome negative publicity resulting from warning letters and other correspondence from the FDA Office of Compliance, the willingness of surgeons and patients to adopt a new product and procedure, and our ability to successfully launch and market the ICL in the U.S. while overcoming the foregoing challenges, our ability to implement our cost savings strategies and realize our expected savings, our ability to reverse the decline in domestic sales of intraocular lenses, our ability to maintain or enhance our existing product sales and gross profit margin and reduce compliance expenditures, the rapid pace of technological change in the ophthalmic industry, our ability to compete with much larger ophthalmic companies, general domestic and international economic conditions, and other factors beyond our control, including those discussed under the heading Risk Factors Factors in our Current Report on Form 8-K filed with the SEC on April 26, 2007 and our 8Annual Report on Form 10K for fiscal year 2006. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not forwardintend to do so.

Investment Considerations
   

Large and growing addressable market Cataract and Refractive Proprietary Collamer technology Leadership in phakic implants; Visian ICL Opportunity to rebuild Share in the Cataract market
 

CMS ruling a positive New product launches

 

Strong International growth Turnaround and growth strategy underway

Company Background


Founded in 1982


(STAAR = Surgical Technology And Applied Research)

Original core technology was foldable IOLs, which are now the gold standard in ophthalmology 1990s: Development of major new technologies: Collamer material and ICL 2000s: New management, ICL/TICL commercialization, Preloaded introduction

Two Main Businesses: Refractive and Cataract

2006
Refractive Revenue
% of Revenue % Change YoY

2005
$5.4
10.4% 31.5%

2004
$4.1
7.8% 37.6%

$12.7
22.3% 136.1%

Cataract Revenue
% of Revenue % Change YoY

$44.3
77.7% (4.7%)

$46.5
89.6% (3.5%)

$48.2
92.2% .3%

Total Revenue
% Change YoY

$57.0
9.8%

$51.9
(.8%)

$52.3
2.5%

Addressable Markets


Refractive Error (Myopia, Astigmatism, Hyperopia). Elective Cataracts: Opacification of the lens of the eye. Age related. Reimbursed

Visian

ICL

Phakic Lens Sites

History of Refractive Surgery

     

Refractive Keratotomy (RK) becomes widespread in 1980s, then declines First laser procedure, Photo Refractive Keratectomy (PRK) becomes widespread in mid-1990s, then declines midSecond laser procedure, Laser In-Situ Keratomileusis In(LASIK) becomes widespread in late 1990s. 2000 - Heavy Investments in LASIK marketing and technology growth stagnates, Low penetration rates 2000 - Phakic Implants, Multifocal/Accommodating implants, Toric Implants Refractive Surgery is going inside the eye

Vision Correction Market



Up to 1.5 billion myopes worldwide; geographic variances in key matrices e.g. mean myopia 3.0 million LASIK procedures/year WW
  

1.4 million US 0.8 million China 0.8 million ROW

Recent cannibalization in the US to PRK 10 to 15%. Driven by large law suits over some corneacorneabased procedures

ICL Market Limits of LASIK



 

Target at -7.5D and above - adjusted population in the US of six million eyes per year. (same in -6 to -7 group) Targeted penetration rate of this market is 10% over time 600,000 procedures In International equate to 100 million eyes per year Support for superiority of phakic implants


Cornea, Cornea, Dec. 2006 ICL safer & more effective than LASIK for -4D to -7.88D ASCRS Presentation Apr. 2007 Phakic IOLs procedure of choice to correct myopia at -6.5D+, Dr. Neatrour

Change in Product Mix and Effect on Gross Margin

100% 90% 80% 70% 60% 46.00% 50% 45.00% 40% 30% 20% 10% 0% Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006* Q1 2007 44.00% 43.00% 42.00% 41.00% 50.00% 49.00% 48.00% 47.00%

Refractive Revenue

Cataract Revenue

Gross Margin

*exclusive of obsolecence charge of 5.3%

International ICL Penetration of LASIK Market

Country Benelux Switzerland Korea Spain Scandinavia South America Germany Middle East UK Italy France India Penetration % of LASIK 5.0% 3.8% 3.2% 2.9% 2.8% 0.6% 0.5% 0.5% 0.2% 0.2% 0.2% 0.1%

Visian Advantages


    

Architecture and Anatomy of the Cornea is completely unchanged with the ICL. Correct the Vision NOT the eye Ease of use for the Surgeon existing skill set Patient friendly topical anesthesia, small incision, quick rehabilitation, wow for patient. Exceptional clinical outcomes Navy driving study, ASCRS April 2007 Additive Vs Subtractive Removable Manageable complication profile - With a LASIK complication an effective solution is not always easily available

Sales & Marketing Strategy

ThreeThree-pronged strategy


Training/Certification


Focused on the surgeon and patient outcomes

Practice Integration
Establishing a cut-off for patient selection cut Integrating the cut-off in the whole network cut

Practice Building


Marketing the procedure to drive volume

Advantages for the Surgeon



ICL integration will build overall refractive volumes



Exceeds patient expectations

Profitable procedure
Few re-treats re Happy patients = free marketing = positive referrals  Mitigated risk


ICL diversifies the practice

LASIK technology is generic procedure  Future growth driven by new technologies ex LASIK


PRK Not A Practice Builder



Concerns about LASIK have led to resurgence of PRK

 According

to Market Scope, PRK represented 13% of laser-based refractive procedures in 2006, laserup from 8% in 2005

PRK resurgence driven by fear of ectasia and the perception that PRK is safer than LASIK
 The

perception of safety has been strongly challenged if not repudiated

PRK Not A Practice Builder



PRK is very poor in early results and in patient satisfaction



The Slade contra-lateral study at 2006 ESCRS indicated contrasignificantly higher pain and lower visual acuity

 

PRK patients will not yield positive referrals If surgeons are uncomfortable with cornea-based corneaprocedures, they should not do LASIK or PRK


Therefore, the Visian ICL is the answer for the 1% to 15% of US volume that is now PRK (140k to 200k eyes)

Worldwide Cataract Market Large and Growing



Worldwide IOL market, estimated 13.8M procedures ($1.28 billion) performed in 05 Market growing to $2.42 billion by 2010 (17.1M procedures), representing a CAGR of 13.5% by 2010 Driven by innovation / improved outcomes

US Cataract Market Large and Growing

 

 

Largest IOL market, estimated 2.9M procedures ($428 million) performed in 05 Market growing to $1.034 billion by 2010 (3.2M procedures), representing a CAGR of 19% by 2010 Medicare reimbursement is DECREASING doctors and looking to upsell the patient Presbyopic IOLs (accommodating and multifocal) and RLE will grow but slower than recently projected Toric IOLs will lead the upsell following CMS

New Cataract Product Introductions



 

STAAR Toric IOL qualifies for dual aspect reimbursement under new CMS ruling Collamer Aspheric IOL launched at ASCRS, April 2007 Silicone Aspheric IOL Q307 Introduction Preloaded Silicone Aspheric Injector 1H2008

Players - Now
Material
Silicone Acrylic Other
STAAR Alcon STAAR

Plate ThreeThree-Piece OneOne-Piece Aspheric BlueBlue-Blocking Toric Accommodating Multifocal

* Enhancements

Bausch & Lomb STAAR AMO Bausch & Lomb STAAR

Alcon AMO AMO Bausch & Lomb STAAR * Alcon AMO Alcon STAAR Eyeonics Alcon AMO Alcon STAAR *

Current US Cataract
   

Opportunity to build share currently >4% Four players; ACL, AMO, B+L, STAAR Revamping the offering 2007 early 08 Strengthening sales effort
direct RMRs  direct sales people to supplement agents  Heavy commission bias to new products


Q107 Financial Recap



11% year-over-year sales growth to $14.9 million year-over 

Refractive product sales up 47.5% Cataract product sales up 2.4%

   

Gross Profit Margin of 48.9% and growing Effective expense management 12% improvement in cash usage Buffered cash position to fund growth strategy
 

Cash as of March 30, 2007 - $9.2 million $16.9 million raised May 1

Strong International Franchise



Products for sale in more than 40 countries

Direct sales in the US, Germany, Australia  Distributor sales in ROW


   

German subsidiary stabilized and growing Intl. Refractive CAGR of 35% since 2004 ICL adoption rate continues to grow New product approvals pending

Revenue Change Year over Year

$3,000 $2,500 $2,000 $1,500
In Thousands

30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20%

$1,000 $500 $0 -$500 -$1,000 -$1,500 -$2,000

Q1 06

Q2 06

Q3 06

Q4 06

Q1 07

Cataract

Refractive

Percent

2005 Sales and Gross Profit

Refractive Revenue as Percent of Total

Refractive Gross Profit as Percent of Total

2006 Sales and Gross Profit

Refractive Revenue as Percent of Total

Refractive Gross Profit as Percent of Total

Long-Term Operating Model LongSales - cataract Sales - refractive Total sales* COS - cataract COS - refractive Total COS GP cataract GP - refractive GP - total G&A M&S R&D Total SG&A & R&D Operating Income Other Income before taxes Income taxes** Net income 60% 40% 100% 40% 15% 30% 60% 85% 70% 9% 28% 8% 45% 25% 1% 26% 1% 24% $ 60,000,000 $ 40,000,000 $100,000,000* $ 24,000,000 $ 6,000,000 $ 30,000,000 $ 36,000,000 $ 34,000,000 $ 70,000,000 $ 9,000,000 $ 28,000,000 $ 8,000,000 $ 45,000,000 $ 25,000,000 $ 500,000 $ 25,500,000 $ 1,300,000 $ 24,200,000

* $100,000,000 is a hypothetical number for demonstration purposes only and is not meant to indicate actual sales or projected sales in any period. **Assumes no U.S. income taxes paid until NOLs absorbed at approximately $80 million earnings.

Investment Considerations
   

Large and growing addressable market Cataract and Refractive Proprietary Collamer technology Leadership in phakic implants; Visian ICL Opportunity to rebuild Share in the Cataract market
 

CMS ruling a positive New product launches

 

Strong International growth Turnaround and growth strategy underway