Question-and-Answer Session
Operator
Thank you. [Operator Instruction] please stand by for your first question.
Your first question will be from the line of Peter Bye of Jefferies & Co.
Peter Bye – Jefferies & Co
Thanks and good morning. I apologize if you’ve already covered this that jumped on way but, you sort of take the mid point of your guidance or even the range for Q4, it’s a pretty heavy sequential ramp in the growth rate. 13% to 15% on the topline. Is there something specific that you see in this quarter? I know you’re talking about Medicare Part D; in a way does that weigh in Q4? Or maybe just give it a little bit more color and if you already have I apologize.
Richard Croarkin – Chief Financial Officer, Senior Vice President
Well Peter I think we did cover some of the underlying factors that go into our fourth quarter that then accumulate into our total guidance that we’ve highlighted. Clearly as we’ve indicated throughout our conference call, we feel good about the underlying brand growth and development. We’ve seen significant strong growth in international. We don’t see anything that’s going to slow that down as we go forward. We certainly believe that there will be some rebalance in our U.S. pharmaceutical sale. So a combination of all those factors have really led us to the guidance that we presented today.
Peter Bye – Jefferies & Co
And then just, maybe if Carey’s there, I’m talking about maybe any update on retain for glaucoma, when we might see some data and where they stand from maybe organizing the page 3 tibidal [ph] on that front?
Cary Rayment – Chairman, President and Chief Financial Officer
Jerry steer in, Jerry go ahead.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
Alright, good morning Peter and Anna Corte Vacitae [ph] Glaucoma as we’ve come to call the project, is one of our top priorities. We’ve reported to you the results of our initial those dose studies, and what we’ve seen in those dose response studies is as we continue to march up the concentration line, we still continue to see increased effectiveness of the higher doses over the lowers. And so what that means is that we’re still looking for the right dose and we’re still looking for the right duration. And your timing of the question is just very good, because this weekend we will have our investigators meeting to actually kick off the next set of studies that you’re talking about. The page 3 studies that will continue to explore, the concentration of Anna Corte for glaucoma, the volume of it and the gyration over which it lasts. So we’re hot on that.
As you know all of the things that are part and parcel of an FDA study, take time in getting the investigators lined up, the IND amendments filed, the ROB s done; we’ve got that pretty well in place now. And so the next time we talk, we will be talking patients enrolled and how we’re marching along to get things done on Anna Corte. But what I’ve said to you by way of summary is that we’ve got the preparatory work done and we’re getting ready to start rolling and it’s just this weekend.
Peter Bye – Jefferies & Co
Alright, only one last follow up; did I hear you correct me on, for the gross margin for in that when your portfolio results will see a 20 basis point improvement year-over-year. If backing in it sort of seems about a 60 to 80 basis point improvement in gross margin year-over-year in Q4? Is that correct?
Richard Croarkin – Chief Financial Officer, Senior Vice President
The full year guidance would be something in the order of magnitude of 30 basis points, on an adjusted basis. So, yes the math is right for the fourth quarter.
Peter Bye – Jefferies & Co
Thank, I’ll jump back in queue.
Operator
Your next question will be from the line of Mark Goodman of Credit Suisse.
Mark Goodman – Credit Suisse
Couple of questions. First of all on this new dry eye product, can you give us a little more flavor for the product Jerry? What you like about it? What the end points are for Phase III? Second of all can you talk about about ReSTOR in Japan where is that product have you got reimbursement yet? And third can you just talk about your strategy now for the laser market now that you are going to have a new product and what you are going to do to kind of take share in that business?
Cary Rayment – Chairman, President and Chief Financial Officer
Sure Jerry why don’t you go ahead.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
Alright, good morning mark and as Kerry said we see the lentil bio opportunity as an exciting one you know if you look at what dry eye is we believe that it is not a single set of conditions that define or characterize dye eye. The single product that’s available for dry eye therapy today is one that increase tear volume and this is not the effect the lentil bio product candidate instead it is what we call a [inaudible] protective and so tear secretor gongs [inaudible] protective and then we would include a few other categories in the over all umbrella of how dry eye products could work make up the constellation of what may be tomorrows dry eye [inaudible] but we have seen the initial results that the company that we have licensed this compound from have obtained they are in the midst of conducting the second study right now and as Kerry said we hope that within a coupe or three years we will have a very competitive product it could be sooner it could also be later and our practice is always been to be Candid with you it could be sooner if the second study replicates the first
Mark Goodman – Credit Suisse
When the first study is done you have seen the data when will we see it.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
You will see it before the second study is done.
Mark Goodman – Credit Suisse
And the end point.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
The end points will be, I am not going to go into the specific ones because while we would share that information with you certainly there are some others that may be online that would be a competitive advantage to share that kind of information with. Suppressive to say thought we would follow the FDA guide lines that have been laid out for dry eye products and that is that we show a one sign improvement in one of the signs and that we show a one unit I should have said unit a moment ago we show a one unit improvement in the sign and a one unit improvement in a symptom so it will be the same kind of requirements for any [inaudible] products before the FDA.
Cary Rayment – Chairman, President and Chief Financial Officer
Okay thanks Jerry ill answer the next question which was AcrySof in Japan what I would say is first of all we are pleased to have approval there clearly in the Japanese market I think we have to view that it is a conservative surgeon based and consumer related to new technology. We're obviously working with key opinion leaders in Japan to get clinical experience with restore and I think it’s consistent with the experience and results that we've had world wide at this point. That said, I think what’s important is to work to get the appropriate reimbursement in Japan as it is in other markets around the world markets.
Its not easy, we would like to have reimbursement scheme that would be similar to what we have in the U.S. We're patient to have the ability to pay the additional costs associated with the higher technology and physicians to be able to appreciate and gain something from the additional work required to provide presbyopic correcting surgery that said the reimbursement is not set yet, it’s a difficult process, that process continues and we’ll see how that ends up. So in the interim, I think we’ll be continuing to work on our private paid basis like we do in a lot of other international markets and so this is going to be a longer-term development in Japan but I think again for Alcon and for the industry it’s a good opportunity long-term. That’s sort of the situation in Japan as we speak as it relates to a WaveLight I’m very excited obviously in terms of the progress we've made. We as we've indicated have over 77% of the shares at this point. We're waiting now for the final cartel approval and so we expect to have that in the coming weeks. beyond that we will start to and I’ve started to at least begin the integration process working with the WaveLight management team. Looking at the global opportunities. But clearly based upon that product technology and the 800 I think the fact that they have 800 lazors placed throughout the world certainly gives a good basis for us to build on. The technology is well received and we then expect to be in a position to work with our global infrastructure and focus on that cataract refractive channel and then also to determine how we then position WaveLight technology along with our other refractive technologies going forward. So overall we're pleased. It’s going to take us some time to make this happen but we’ll be working diligently on this in the coming months.
Mark Goodman – Credit Suisse
I guess. Just an extension to the question before refractive was small. We never got the sense that it was a major focus for the company maybe it was and just a perception but I guess I was wondering what this new technology will this now be a major focus you are going to get more aggressive or?
Cary Rayment – Chairman, President and Chief Financial Officer
Well clearly surgical has always been a major focus we do see the opportunity in this cataract refractive channel as you know we are working on a number of refractive IOLs which include ReSTOR and our AcrySof Toric. We are working on I think a very innovative and I believe will be affective [inaudible] in the future. So these are all technologies that certainly fit with having a solid effective refractive laser to work with. So we will integrate this then and we will continue to build on that platform.
Operator
Your next question will be from Michael Weinstein of J.P. Morgan.
Kim – JP Morgan
Oh hi everybody its Kim here for Mike.
Just turning back to the U.S Pharma business for a second, can you talk a little bit more about what gets this business going forward and assuming that we do have some sustained pressure in U.S Pharma how does it impact your growth margin picture over say the next three to four quarters.
Cary Rayment – Chairman, President and Chief Financial Officer
Kim, I let Kevin Buehler will address that question in more detail.
Kevin Buelher - Senior Vice President, Alcon United States and Chief Marketing Officer Trade Activity
Thanks Kim let me give you a perspective of we look at the pharmaceutical business. In the first place that we start is obviously breaking down international and U.S and when you look at our international business year-to-date our constant currency growth is 16% so obviously what we are seeing is brand development happening across most of our promoted products starting with the glaucoma area and we are seeing TRAVATAN, DuoTrav, Azopt leading the brand development outside of the US and obviously with the product introductions that we have in place in terms of Japan plus the TRAVATAN that Cary announced we would expect that international trend to continue.
Then you move to the US and obviously we have talked about the slower growth that we have seen in the Q3 time period but I would take you back to the chart that Cary showed in terms of RX performance and the underlying performance of our brand and the fact that we growing at a faster rate than the market across almost all of our segments and we are seeing significant market share growth in TRAVATAN(R) Z and TRAVATAN combined we have had an excellent year as it relates to Patanol we are seeing all the franchise grow and we are seeing Vigamox grow.
So you can see that we are growing faster than the market and continuing to take market share. So then you come back to why did we see the Q3 results that we did and I would tell you its three primary factors that influenced that? The first one is in the Q3 time period obviously we have alluded to the Otic growth if we look at this year in the Otic segment what we have seen is a decline of almost 4% year to date versus last year it was more or less flat down 0.6%. And on a year to date basis if we look at allergy we are seeing a similar situation where we are flat this year and last year we saw 5.5% increase so across both of these segments that are seasonal related we are seeing weakness this year going up against the comps that we had last year.
The second factor is we have continued to see inventory reductions in the wholesaler chain and we also saw one supply chain change from a direct basis to a whole seller basis that occurred over the Q2, Q3 time period. Obviously the inventory adjustments that we are seeing have taken us to the low end of the range that we normally see in the two to four weeks and over time the demand that we see on our Pharmaceutical products need to be meet with factory shipments so the inventory reductions cannot continue for ever.
And last is we did talk about the impact from Medicare part D. We are seeing a trend where a greater percentage of our pharmaceuticals units are under some form of managed care contract which carries a rebate and that’s primarily influenced by Medicare part D. But the other dynamic that’s going on is the fact that if Medicare part D started, you saw both increase in enrollment and increasing utilization and you were going in 2007 against those comps in 2006 when in fact the rebate levels that were paid out as this Medicare part D started to gain critical mass we are dealing with a comp issue.
So if I take those three factors and I come back and I look at them in the context of are they relatively short term or relatively long term in terms of effect. I don’t think we have seen Otic and allergy seasonal weakness over time. Typically you may see one of those categories be some what weak but typically you do not see the weakness that we have seen in 2007. I think we have already referenced the inventory adjustments are on the low end and as long as we got brand dynamics adjusting growth I think the inventory adjustments are going to have to correct them selves and reflect what our underlying demand is.
And while I think Medicare part D will be something that we continue to manage over time and its our responsibility in the sales and marketing and manage care areas to develop affective and good paybacks on our time tracking activities with Medicare part D for both access and market share we are not going to see these comp issues continue as the Medicare part D volume ramped up. I hope that helps.
Richard Croarkin – Chief Financial Officer, Senior Vice President
Kim this is Rick responding to the second part of your question our long term guidance has been poor continued margin evolution we are thinking that could be in the range of gross margin evolution. We are talking about in the range of 30BPs a year could be a higher or lower in an individual year but that’s kind of where we see things evolving and more specifically if you look at this last quarter where we had the impacts that Kevin just described in Pharma we still managed to grow margin in the U.S. by some amount so we still feel that we can grow gross margin as we communicated in the past.
Kim – JP Morgan
Okay and just one follow up to Kevin comments. So in your 4Q guidance are you assuming that some of these inventory issues do start to bounce back in the fourth quarter? And then one quick follow up for Rick which is on the tax rate, what are you recommending we model then for the fourth quarter and should we still stick with the initial 13.5% to 14.5 % tax rate guidance for 2008? Thanks.
Kevin Buelher - Senior Vice President, Alcon United States and Chief Marketing Officer Trade Activity
Yes Kim this is Kevin again I would tell you that we are forecasting that some part of that inventory adjustment corrects itself in the fourth quarter. I think the one account that we referenced in terms of the supply chain from direct to wholesaler will not have an impact in Q4. And I think we are also assuming that we will follow normal trends where inventory levels do inch up in the fourth quarter.
Richard Croarkin – Chief Financial Officer, Senior Vice President
Kim this is Rick. For the second part of your question for the Q4 tax rate guidance I would assume something in the range of 17% to 18%. And with regard to the effective tax rate guidance for next year there’s been no change in our view at this point since the last communication which was 15.5% to14.5%.
Kim – JP Morgan
Okay thanks everyone.
Operator
Your next question will come from the line of Larry Biegelsen, of Wachovia.
Larry Biegelsen - Wachovia
Thanks and good morning.
Cary Rayment – Chairman, President and Chief Financial Officer
Good morning Larry.
Larry Biegelsen - Wachovia
Hi. The wholesaler inventory reductions and the supplier change. Kevin, could you quantify, in the quarter, could you quantify that for us please?
Kevin J. Buehler - Senior Vice President, United States and Chief Marketing Officer
Yes it looks to be in the range of $10 million.
Larry Biegelsen - Wachovia
Thank you. And Jerry on the Anna Corte acetate for glaucoma it sounds like you are going into phase three without knowing the optimal duration and dose. Is that correct and is that a risky strategy and I have one more R&D question after that?
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
Well, Larry, whenever we started the dose response initially we took three concentrations and three concentrations is not a bad number to conduct a dose response study over and we have talked about what those concentrations were.
What we are doing with the next study is looking at significantly higher concentrations of the drug in a constant volume in order to nail down the questions and do I think that it is a risky proposition? The answer is no, because we have already evaluated the concentrations that we will be able to deliver and the next study will have those integrated into that study. I could have just said we will be at the pharmaceutical logistical top end of what we can deliver with this next study and that’s why we have this back stock that provides us with the level of assurance that’s at the basis of your question.
Larry Biegelsen - Wachovia
Okay and glen tibio [ph] so it sounds is the second phase three study, or is the second study you referred to is it identical to the first one that from your comments appeared to be successful?
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
Well you threw me off there a little bit Larry with glen tibio, but we say anti-bio but the answer it is a study of the same design but let me talk just for a moment because your question has more associated with it for people who are also on the line. And we recognize that there are levels of uncertainty that are associated with dry eye. I have talked about these before the patient population varies, you cannot always get people who have the ideology of dry eye and the successive studies, environmental factors contribute to the severity and modulation of the disease so do hormonal issues and so on and so on and we recognize all of this. We feel like we have a reasonably good chance of replicating in the second study the end points that are in the first one. But we have seen our competitors say the same thing and peg strike after strike.
Some of the companies have stepped up to the point multiple times as you know Larry and not been able to replicate on the first end points that they had put forward as ones that they had high levels of confidence in. So I’m not going to say to you today we see this as a slam dunk. We know ophthalmology and we know that this is a difficult area but non the less it is one in which patients who suffer from dry eye deserve the opportunity to have a multiple of therapies they can address the signs and symptoms that they have and this clearly is the second mechanism of action and that’s why we continue to pursue it.
Larry Biegelsen - Wachovia
And Jerry, did you say when you expect to see the results from the second Phase III study?
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
I didn’t and its not because I don’t know but its simply because relative to the question that I got from maybe Peter or Mark, I don’t remember who that we are going to wait until we see what those results are before we say anything about the results of the first study. So we’re going to get the first and second study results. We will roll them up and then we will be talking about them with all of you all.
Larry Biegelsen - Wachovia
I’m sorry, I just meant the timing of the second phase three study in terms of what year you would be expect that to be completed.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
Oh, I will tell you that would be in 2008.
Larry Biegelsen - Wachovia
Thank you, no problem.
Richard Croarkin – Chief Financial Officer, Senior Vice President
This is Rick. I just want to make one follow up comment on something I said earlier. I think its self evident but all the guidance that we’re giving in terms of longer term all exclude the impact of WaveLight. WaveLight is an independent company now due to the fact that they have their own shareholders the amount of information they’ve been able to share with us is limited. so When we talk about things like effective tax rate going forward WaveLight will have an impact. I just do not have enough information at this time to be including that in any of the guidance I’m giving you.
Operator
Your next question will be from the line of David Buck [ph] of Buckingham Research Group.
David Buck – Buckingham Research Group
Hi guys, thanks for taking the question. A couple of quick ones, first either for Kerry or Kevin. Can you characterize what you see as the opportunity for PATADAY, sorry, for PATANASE in the U.S. and how you plan to position that. Also can you give a reminder on TRAVATAN(R)Z what the market dynamic you’d expect is in terms of the up take of launch. I think you mentioned the pricing reimbursement was successful. And finally for Rick can you give a sense of the level of R&D spending? I know you mentioned fourth quarter will be higher but can you give some parameters for 2008 - 2009 in terms of percent of sales target? Thanks.
Kevin J. Buehler - Senior Vice President, United States and Chief Marketing Officer
David. This is Kevin. Let me give you a sense for how we see PATANASE. Clearly that category is defined today primarily as a steroid market and there’s one other product Asthalin in that market that would be in the antihistamine segment and today that represents more or less in the range of 10% of the total Rx volume being non steroid. Thus the advantage that we have is that PATANASE is obviously a derivative from Patanol and I think both in terms of ophthalmology but also in primary care there is a general awareness of the efficacy associated with Patanol and the expectation of that efficacy would carry over into the nasal treatment. One of the advantages obviously is the onset of action and that would be one of the areas that we would look to exploit as an alternative to the longer acting steroid segment we also have some direct product advantages to Asthalin so we see it as a very opportunistic product launch for us in a channel primarily in the U.S. where we already have sales and marketing capability.
If I think about TRAVATANZ and I think you were referring to Japan. Obviously today there are two products in the prostaglandin segment with Xalatan and then Rescular [ph] so we see an advantage in the fact that we will be the third product in but really in a situation where we can go head to head with Xalatan we believe we got a much better efficacy profile compared to Rescular [ph] and then if we also start up with the advantage in terms of formulation where in fact we are using the TRAVATAN(R)Z formulation without BAK which does give us an advantage in terms of corneal safety for a chronic drug so we have both our efficacy profile that we bring forward plus an advantage on day one with our formulation without BAK so we are very encouraged with the opportunity in Japan and obviously we are adding to our sales force capability so that we can have the share of voice we need to go directly head to head with Xalatan.
David Buck – Buckingham Research Group
And can you remind what the dollar level of sales is for the prostaglandin category currently?
Kevin J. Buehler - Senior Vice President, United States and Chief Marketing Officer
Yes the total market is about $600 million and about half of it is prostaglandin. And that’s the fastest growing segment within glaucoma in Japan as it is in other markets around the world.
Richard Croarkin – Chief Financial Officer, Senior Vice President
This is Rick. David, for the second part of your question we would like to increase the level of R&D spending and be in the range of 10% to 11% over next few years. That would include impacts for licensing deals like land to buy which would be included in those figures.
David Buck – Buckingham Research Group
Okay thank you.
Operator
Your next question will be from the line of Lawrence Keusch of Goldman Sachs.
Lawrence Keusch - Goldman Sachs
Hi, good morning.
Unidentified Company Representative
Good morning.
Lawrence Keusch - Goldman Sachs
Couple of questions guys. I will just rattle off. First just coming back to the gross margin and try not beat a dead horse here, obviously understand some of the inventory stocking issues that you mentioned which would hopefully begin to reverse in the fourth quarter or normalize I should say but just so I understand what other factors drive that GM pick up in Q4? That’s question one. Question two is J&J recently talked about a contact lens that will deliver a OTC allergy drug. I just wanted to get your thought on how you think about that relative to your allergy franchise and then lastly just any thoughts on the timing of your new line for contact lens manufacturing if things supposed to be coming up right around this time frame?
Richard Croarkin – Chief Financial Officer, Senior Vice President
Okay, Lawrence this is Rick, I will pick up the first part of that on gross margin. You recall we said in the quarter half of the decline in gross margin was due to geographic mix and then I said there was a lot of small things and I mean it there was a lot of small things. We had scrap increase mostly related to our refractive business we had product mix in Japan which impacted gross margin there. We had New York state join a multi state buying program which increased our rebates so I could go on but there were just a lot small items. I don’t think any one in particular is all that consequential.
Kevin Buelher - Senior Vice President, Alcon United States and Chief Marketing Officer Trade Activity
Larry, this is Kevin. In terms of the J&J product I think as a general rule we don’t comment on other people’s pipeline. Obviously we saw the same report that you are referencing. Obviously delivering a drug through a contact lens brand in a drug delivery approach obviously has its own complexities that they will have to deal with and the other issue is the formulation and efficacy of whatever that allergy molecule is. I can just tell you that we are very comfortable with the Patanol and PATADAY franchise in terms of the efficacy that we deliver and now with the. convenience of once a day from PATADAY, I think we cover that space quite well.
I know the issues around the field sea line has been really related to our capacity. Our capacity issues are starting to get better and they get better each quarter as we get additional capacity in terms of our manufacturing but at the same time as we rationalized our product line reducing our commitment in terms of private label and focusing on branded products but right now we are meeting that need.
I can just say when I look at the market share data in the U.S. and I look at the unit sales outside of the U.S. we had a very strong Q3 time period in both OUS and the U.S. performance and we are meeting that need both at retail as well as the ability to continue to deliver starter kits at the doctors office. So we are in a better place,
Lawrence Keusch - Goldman Sachs
Okay, just Rick, just to circle back. You mentioned all these small events but are those small events, are you suggesting that there’s a sort of, even though they are all small, that they are sort of one timers that do ease in the fourth quarter again I’m just wrestling with what may make this go up in the fourth quarter.
Unidentified Company Representative
Yes I, Lawrence, its always difficult to extrapolate from one quarter. I would focus on the year to date, the year to date gross margin is improving 20 BPs and I think that’s the real story. I think to go and over analyze you know geographic and scrap and other things that can happen in any individual quarter can lead us in unproductive directions.
Lawrence Keusch - Goldman Sachs
Okay, great, thanks guys.
Operator
Your next question will be from the line of Frank Pinkerton, of Banc Of America Securities.
Frank Pinkerton - Banc Of America Securities
Great, thanks for taking the question. First maybe I missed it can you outline the economics behind the dry eye drug announced this quarter and if not the economics at least what the ultimate contribution could be from a margin in royalties standpoint if that were approved?
Unidentified Company Representative
Well we don’t go into great detail in terms of our forecasts for these types of products. What I would say overall that clearly the dry eye Rx market opportunity is significant. You know there is one competitive product in the market today as Gerry outlined there are plenty of opportunity for multiple products to treat the sings and symptoms of dry eye and so we think that we have an opportunity here with this in licensing to participate long term and to benefit.
Unidentified Company Representative
If I could just add we think that we have an opportunity here with this in licensing to participate long term and to benefit.
Unidentified Company Representative
If I could just add to that I think we all see this as an unfulfilled market. There is one Rx product. I think most of you know that the directions for use require that it be home therapy to the patient for a substantial period of time before benefit is observed and we are looking for something that will not be a necessarily a direct competitor to this compound because our products will have a different mechanism of action. But it’s a growing market and I think the market in dry eye is going to continue to grow based upon the people living longer, based upon environmental factors and I include here change in climate as well as environmental pollution, and maybe some other things so I think that the dynamic that you ought to look at is that this is a large and growing market and it is not a market that is filled with a lot of Rx competitors today.
Kevin Buelher - Senior Vice President, Alcon United States and Chief Marketing Officer Trade Activity
Frank this is Kevin and I would echo what Jerry is saying. If you look at the U.S. market you are looking at our act as approaching $2 million and a growth rate of almost 15%. So clearly we have got a segment here that is where there’s only one product. Alcon’s opportunity to enter this phase clearly represents not only a revenue opportunity but a growth opportunity in the pharmaceutical area at a very premium price so this is simply an entry into that segment.
Frank Pinkerton - Banc Of America Securities
Okay, great and then just changing gears for a second. I know there has been a lot of focus on the gross margin in the quarter but one comment you made was on the premium IOL lines in the U.S. driving higher gross margins in the quarter. Can you speak to, you know, the percentage of those IOLs or if you have the ability to between base kind of cataract surgeries or presbiopia procedures and what kind of penetration do you see in some of those markets? I know that overall if you look at it cataracts is a very small percent but do we still have a lot of room to grow for restoring some of these other premium IOL lines? Thank you.
Unidentified Company Representative
Frank. The encouraging part of the premium IOLs is that the product portfolio is expanding and I think there has been history over the last year and a half that the presbioptic correcting IOL of which ReSTOR would be one of those the penetration rate of total cataract procedures is in the 4% to 5 % range but as Alcon continues to broaden that product line we are seeing two trends that we think are very encouraging. The first trend is that we are getting trial and we are getting acceptance of the ReSTOR Aspheric and we are seeing volume increases for example in the U.S. we have seen sequential quarter over quarter growth Q1 to Q2 to Q3 and clearly the ReSTOR Aspheric which is addressing this distance issue around Wax [ph] Vision we are getting reports back that are very encouraging and we would hope that that trial and usage continues that I believe will have an influence on the penetration rate considering that we are the market leading product.
The second encouraging trend is that we have introduced Toric which obviously is a little bit different in terms of the segment that we are going after but its also a up charge or a premium priced IOL where the doctor is asking the patient to pay in the U.S. Two parts. One is we are getting extremely good clinical results based on the performance of the Toric product and as a result we’re seeing position acceptance.
The second benefit is its allowing us to introduce a technology with very controlled clinical results that delivers confidence to the position to offer the technology to the patients and when I look at both ReSTOR and Toric we are starting to see penetration rates in the 7% or 8% range which suggests that when you deliver the right technology the opportunity to penetrate and to gain usage against that large cataract base it can be done and we can up charge at a premium selling price and the patient can benefit from the new technology so those are two encouraging trends.
Frank Pinkerton - Banc Of America Securities
Thank you.
Operator
Your next question will be from the line of Gerrard Hart [ph] of Bear Stearns.
Gerard Hart – Bear Stearns
Thanks very much. The first question is on the refractive business, was just wondering, am hearing from this conflicting reports whether WaveLight is or is not charging for the customer on a per procedure fee basis. What are your plans there that could be a pretty good opportunity and in dry eye was wondering whether the first phase three for that trial contains U.S. or European data and are there any up front milestones you are going to have to pay for the licensing?
Unidentified Company Representative
Why don’t you take the refractive? You know at this point, Gerrard [ph], we as we have said do not, we are not actually even close on the tender offer so I don’t really see Alcon in a position to confirm what the per procedure fee is. I think what I would refer you to is how we currently practice in the refractive area primarily in the U.S. and our approach is one that says that we want to expand our installed base so we will create very favorable economic programs that would allow us to gain install base and to realize incremental revenue from the per procedure approach and I would anticipate as we go down the road that we would want to stay consistent with that approach.
Unidentified Company Representative
And Gerry, this Jerry. About the anti bio arrangement it is a pretty standard one I think I would say to you by way of response. We do have upfront payments and depending upon anti bio meeting additional milestones along the way we will have additional payments and we will have a continuing royalty to the company based upon successful approval of the product. Now you ask about U.S. and European patients. The product is sold in Europe in some countries and the studies that are being conducted here and the jurisdictions for which we have license that are primarily the U.S. and I think we called that out in some of the communications that we have made so for the NDA the patients who are in it will be predominantly, exclusively is what I’m looking for, U.S. patrons
Gerard Hart – Bear Stearns
Okay great and then just on the gross margins again just very quickly. Do you expect the negative impact or the geographic mix to continue or in other words why would that stop going forward? Thanks a lot.
Richard Croarkin – Chief Financial Officer, Senior Vice President
Yes Gerard, this is Rick. I think the long term guidance that we have given we are still comfortable with in terms of positive evolving gross margin.
You know the example as Kevin just highlighted was the growing penetration trend of our premium IOLs would be one of those factors that go into obviously the gross margin evolution and given our performance there and our expectations going forward it would one of the positive contributors to positive gross margin evolution. That’s just an example.
Gerard Hart – Bear Stearns
Okay thanks a lot.
Unidentified Company Representative
Operator, we have time for one more question. I think there is another call that some of the analysts probably going to want to hop on here as soon as we finish this next question.
Operator
Okay and so in that final question will be from the line of Lewis Chen of Morgan Stanley.
Lewis Chen – Morgan Stanley
Hi just two questions first just on PATANASE. Recently you filed some in term data for that NDA and I was just curious you know when the final finally will be complete. And you know what it means to file the in term data and secondly with respect to your refractive business would you ever think of acting, just adding a second laser to that product line?
Unidentified Company Representative
I’ll take the second one first. Clearly we are a player in the surgical business. We continue to look at a variety of technologies but what I would say is that there is nothing imminent at this point in time.
Gerald D. Cagle - Senior Vice President, Research and Development and Chief Scientific Officer
And let me pick up on your question about PATANASE. We have filed our six month data and I think we have talked about this before. Its part of our ongoing commitment to FDA to address some outstanding questions from our initial filing. We will have a follow own set of data that will be provided to FDA again this year and then we will work closely with the agency to facilitate an approval as early next year as possible so that’s the things that are going to occur on PATANASE that are yet before us and then I’ve given you the timeline that we would see for the approval of the product going in to 2008.
Lewis Chen – Morgan Stanley
All right, thank you.
Cary Rayment – Chairman, President and Chief Financial Officer
Thanks Jerry and I would like to say thanks for all of you for listening and for your excellent questions today. I am optimistic about our position in the ophthalmic march today and the potential for growth in all of our product categories and geographic regions. At Alcon we are committed to managing our business to deliver solid sustainable growth and the demographic trends of markets we compete in along with our global capabilities clearly provide an excellent base to grow from here so we look forward to meeting with you in our next conference call. Thank you.
Operator
Thank you for your participation in today’s conference. This concludes the presentation and you may now disconnect. Have a great day.
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