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PDL Biopharma Inc (NASDAQ:PDLI)
Q1 2020 Earnings Call
May 7, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the PDL BioPharma First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today May 7th, 2020.

I would now like to turn the conference over to Jody Cain. Please go ahead.

Jody Cain -- Senior Vice President at LHA

This is Jody Cain with LHA. Thank you all for participating in today's call. Please note that a slide presentation to accompany management's prepared remarks is available on the Investor Relations section of the PDL website at pdl.com. Joining me today from PDL are Dominique Monnet, President and CEO; and Ed Imbrogno, Vice President and Chief Financial Officer.

Please turn to Slide 2, and let me remind you that during this call, management will be making forward-looking statements regarding the Company's financial performance and other matters and actual results may differ materially from those expressed in or implied by the forward-looking statements. In particular, there is a significant uncertainty about the duration and potential impact of COVID-19 pandemic.

This means that results could change at any time and the impact of COVID-19 on PDL's operations, financial results and outlook is a best estimate based on the information available for today's discussion. Factors that may cause differences between current expectations and actual results are described in the Company's SEC filings, which are available at sec.gov and in the Investor section of pdl.com.

The forward-looking statements made during this conference call should be considered accurate only as of the date of the live broadcast May 07th, 2020. Although the Company may elect to update forward-looking statements from time-to-time in the future, the Company specifically disclaims any duty or obligation to do so even as new information becomes available or other events occur in the future.

Today's conference call remarks will include a discussion of both GAAP and non-GAAP financial results. PDL believes the non-GAAP financial measures provide investors with useful supplemental information about the financial performance of its business, enable the comparison of financial results between periods, where certain items may vary independently of business performance and allow for greater transparency with respect to key metrics used by management in operating the business.

These non-GAAP financial measures are presented solely for the information and comparative purposes and should not be regarded as a replacement for corresponding GAAP measures. Reconciliation between GAAP and non-GAAP financial measures can be found at the end of the financial results news release that was issued earlier today.

Before turning the call over to Dominique Monnet, I'd like to direct you to Slide 3 in reference to PDL's preliminary proxy statement filed with the SEC on May 5th, 2020.

Now, I'd like to turn the call over to Dominique.

Dominique Monnet -- President and Chief Executive Officer

Thanks Jody. Good afternoon, everyone, and thank you for joining us. I would like to begin by thanking my colleagues at PDL and the teams at LENSAR and Noden for their dedication and perseverance during the COVID-19 pandemic. Thanks to their hard work, engagement and adaptiveness, we have managed to continue to advance our corporate priorities while ensuring safe working conditions for our entire team, most of whom are working from their home offices. I am pleased to report today the good progress that we have continued to make during the pandemic.

Turning to Slide 4, we are fully engaged in executing the monetization of our assets to unlock the full value of the Company for our stockholders. As you may know, our plan is to sell the Company as a whole or to monetize our assets individually with disciplined approach, with a focus on maximizing net proceeds in the form of cash or assets for stockholders. We remain confident in the high quality of our assets. We believe they are attractive to strategic and/or financial buyers or as stand-alone-public operating companies.

Moving to Slide 5, by now you may have read the preliminary proxy statement related to our 2020 Annual Meetings that we filed with the SEC earlier this week. Stockholders of record at the close of business on May 29th, 2020 will be entitled to vote. We will be holding our annual meeting of stockholders in a virtual format on July 16th, 2020 beginning at 10:00 a.m. Pacific Time. We expect to announce the results of voting at the end of the meeting.

As previously stated, the PDL Board is consulting with management and financial accounting and legal advisors on our strategy with respect to dissolution. After carefully considering the risks, timing, viability and potential impact to our stockholders of the alternatives available to us, in the event our whole company sale is not consummated, the board determined that dissolution -- and there is a plan of dissolution outlined in the preliminary proxy statement is in the best interest of all stockholders.

A discussion of the many factors considered during this process is included in the preliminary proxy statement. Approval for the dissolution plan is subject to the approval by the holders of the maturity of our outstanding shares of common stock. Dissolution of the company after liquidation of its key assets will allow an efficient wind down of the Company's operations and protect shareholders from liability due to claims both during or after the dissolution period. In addition, dissolution will allow the Company to reduce overhead expenses with a goal of ultimately increasing total distributions to our shareholders.

I'd like to review several key points in the proposed plan of dissolution. The Company will still exist after filing the Certificate of Dissolution with the State of Delaware for at least three years solidly for wind-down purposes. This time period is required under the laws of Delaware where PDL Inc. operated. It allows for managing potential litigation, resolving any claims and disputes and facilitating distribution and the monetization of any remaining assets.

It also provides for the handling of remaining shareholders and any strategic issues and for a final distribution. The clock begins running on the first dissolution period when the Certificate of Dissolution is filed with the State of Delaware. If stockholders do not approve the plan of dissolution, we will continue our corporate existence and the Board will continue to explore alternatives for returning capital to stockholders.

Our Board and management together with outside financial and legal advisors have been analyzing how best to maximize the value we deliver to our stockholders from our monetization process. On our last call, we stated our ambitious goals of completing a whole company sale or the monetization of all four key assets, namely our royalty rights, LENSAR, Noden, and Evofem holding by the end of 2020.

While we are encouraged by our progress to date, we recognize that the impact of the COVID-19 pandemic on our monetization process and on the business of potential buyers of our assets could cause some delays, which makes it possible if not probable that the timing of the sales or other disposition of certain of these assets may be delayed beyond 2020.

The plan of dissolution permits the Board to abandon or delay the filing of the Certificate of Dissolution and the implementation of the dissolution due to changes in circumstances or if in the best interest of PDL and our stockholders. In view of its flexibility regarding both the decision and timeline for dissolution, we believe that getting shareholders' approval for our plan of dissolution will not affect the value that we can capture through our asset monetization process.

Now on Slide 6, as announced on our last conference call, we have engaged leading investment banks to advise us in the execution of this monetization process. Let me review our progress to date starting with our ownership interest in Evofem Biosciences.

Torreya has been advising us on the sale of Evofem investment. We announced on May 5th that our Board of Directors approved the distribution of the totality of our 13.3 million shares of common stock of Evofem via a special one-time dividend to PDL's stockholders.

As mentioned in Tuesday's press release, we made this decision after careful consideration and in consultation with our financial advisors; Torreya and SVB Leerink with a letter advising the Board and management of all monetization matters. Since the beginning of the year, we explored a number of alternatives and aggressively pursued the sale our Evofem shares via private sales.

For a number of reasons, including the impact of COVID-19, we came to the conclusion that in the current environment, a stock distribution is in the best interest of all shareholders. This distribution will enable PDL shareholders to make their own investment decisions regarding Evofem shares they received through this distribution.

Let me review the process of this distribution. Subject to certain conditions, the Evofem shares will be distributed on May 21st, 2020 to PDL stockholders of record as of the close of business on May 15th, 2020. So distribution will take place in the form of a pro rata dividend of shares of Evofem common stock to each PDL stockholders of record on May 15th. As of May 5th, 2020, PDL has approximately 116.3 million shares of common stock outstanding.

Based on this number, we estimate that PDL stockholders will receive approximately 0.115 shares of Evofem common stock for each share of PDL common stock they hold. The final distribution ratio will be determined based on the number of PDL common shares outstanding on the record date.

The distributed Evofem shares will not be subject to any lock-up period and will be fully registered and freely tradable. Please note that no fractional shares of Evofem will be distributed. Instead, PDL stockholders will receive cash in lieu of any fraction of the share of Evofem common stock that they otherwise would have received. We'll recommend that PDL stockholders consult their tax advisors with respect to U.S. federal, state, local and non-U.S. tax consequences of the distribution.

Let me share now a brief update about Evofem in case you did not get a chance to listen to their first quarter earnings call yesterday. Evofem's lead product candidate, Phexxi is currently under review by the U.S. FDA for the prevention of pregnancy with a PDUFA date of May 25th.

Evofem announced on April 30th, that they are in discussions with the FDA regarding the proposed label for Phexxi. This is not a guarantee that Phexxi will be approved by the FDA, but nonetheless, this progress is encouraging. Evofem also reported yesterday that its launch plans for Phexxi, you may listen to recording of their webcast at evofem.com.

Finally, we continue to pursue potential path to monetize our Evofem warrants to purchase up to 3.3 million shares of Evofem common stock. Our Evofem warrants have a strike price of $6.38.

Let me turn now to our other monetization processes on Slide 7. As previously announced, BofA Securities is acting as our financial advisors in connection with the sale of the whole company or its royalty portfolio. Both work streams on the sale of the whole company and royalty portfolio have been robust. We have a competitive process for the sale of our royalty assets and we are on track with its execution.

Torreya has been leading the process to sell our Noden Pharma subsidiary and we are encouraged by the quality and number of leads we have received. This process [Indecipherable] too have been noticeably affected by the COVID-19 pandemic so will remain on track. We are fully committed to LENSAR success and the development of its next-generation technology while we pursue the appropriate path to maximize its value for PDL stockholders.

We have engaged SVB Leerink to lead this process and evaluate the opportunities available to LENSAR. The two monetization options at present, are a sale of LENSAR or a public spin-off. In our proxy, we estimate that the value of our cash and other non-cash assets that may be ultimately distributed to PDL stockholders after settling our liabilities to be between $350 million and $700 million.

This implies a per share distribution of between approximately $3 and $6 in the form of cash and non-cash assets, based on the current number of outstanding PDL shares as of April 30th, 2020. This is a broad range because we cannot predict with certainty, the amount of cash available to distribute to our stockholders in connection with the dissolution nor can we predict with certainty the value of both the non-cash assets and liabilities, if any, until we are able to dispose of all or substantially all of our assets and settle all our liabilities. We made a number of assumptions in calculating the range of estimated distributable value, and I refer you to the preliminary proxy statement to review these assumptions.

Let me now provide some updates on our key assets. On Slide 8, beginning with LENSAR, net sales for the first quarter of $6 million declined 11% over the prior-year period. The COVID-19 pandemic brought elective surgeries including cataract surgeries which are considered elective in most cases, to an almost complete halt across the world. We started with our key Asian markets, the China and South Korea and progressively advanced across Europe and the U.S.

In line with other industry participants, we expect that the cataract surgery market will progressively begin to reopen in the later part of the second quarter, first in Asia and subsequently in the rest of the world, then ramping up in the third quarter before returning, hopefully, to close to pre-COVID-19 levels in the fourth quarter of this year. In light of the considerable uncertainty in the market, we are not in a position to provide revenue guidance for LENSAR in 2020 at this time.

In view of the COVID-19's impact on the cataract surgery market, we expect to extend the timeline for monetization of LENSAR. That said, what makes LENSAR a particularly attractive company is its technology. LENSAR is well positioned to rebound from the COVID-19 downturn, but effectively, building upon its position as an innovator for the treatment of cataracts that require great accuracy and procedure customization.

LENSAR features the best-in-class technology with its Streamline IV laser, which enables the optimized treatment of tissue-specific cataracts and surgeon management of astigmatism. Between 70% and 90% of cataract patients have treatable visually significant astigmatism prior to surgery, but this astigmatism remains largely uncorrected post-surgery.

Importantly, we believe that LENSAR's next-generation system, which we referred to as GEN2; will substantially enhance its competitive position. GEN2 will combine in a single compact workstation, the state-of-the-art femtosecond laser and a phacoemulsification system, providing surgeons the ability to switch seamlessly between the two technologies.

Further, LENSAR's intellectual property secures a premier technology position for GEN2 development and commercialization. The development of GEN2 is progressing well. LENSAR is targeting submission of a 510(k) application with the U.S. FDA by the end of 2021 with commercial launch of GEN2 expected in 2022.

LENSAR operates without any third-party debt financing. In the case of a public spin-off, we would ensure that LENSAR will be well capitalized to conduct its business and to pursue GEN2 and other growth opportunities.

Turning to our portfolio of royalty assets on Slide 9. We received $13.6 million in net cash royalty from all of our royalty rights in the first quarter of 2020, up from $12.6 million in the year-ago quarter. In assessing the impact of the pandemic on our assets, the pharmaceutical products in our portfolio are mainly related to the treatment of Type 2 diabetes. We believe these are essential drugs that are much less likely to be impacted by COVID-19.

Switching to Noden Pharma on Slide 10. Our strategy to increase the profitability of Tekturna in the U.S. and mitigate the impact of generic competition is paying off. Noden generated operating income of $3.7 million in the first quarter of 2020. We are pleased that braded Tekturna and our authorized generic together are maintaining an approximate 68% share of the U.S. market. Noden Pharma products Tekturna and Rasilez are used by patients who need these unique drugs to control their life threatening hypertension. We haven't seen yet any significant impact from the pandemic on values.

So the 2020 Cares Act provides the opportunity to carry certain losses incurred in the 2019 and 2020 tax years back five years. PDL has significant taxable income and paid cash taxes in eligible carry back years. In connection with PDL's monetization process, they may be the opportunity to recognize certain loss carrybacks.

Turning to our $275 million share repurchase program on Slide 11. Through March 31st, 2020, we repurchased $135.2 million in principal amounts of our convertible notes for $116.7 million and the issuance of 13.4 million shares of our common stock. In the first quarter of 2020, we purchased 6.3 million shares of common stocks for an aggregate of $20.3 million at an average cost of $3.20 per share. As of March 31st, we had $81.1 million remaining under our repurchase program.

With that, I'd like to turn the call over to Ed to discuss our financial results. Ed?

Ed Imbrogno -- Vice President and Chief Financial Officer

Thank you, Dominique. Due to the Board of Directors approval of a plan of complete liquidation and resolution to seek stockholder approval to dissolve the Company and with the initiation in the first quarter of 2020 of the processes to sell certain of the company's assets, our royalty assets and Noden Pharma met the criteria need to be classified as assets held for sale and discontinued operations.

In meeting the criteria, PDL is presenting these assets and liabilities separately on the balance sheet as of March 31st, 2020 and as of December 31st, 2019. The statement of operations for the first quarters of 2020 and 2019 report the results of these two operations as discontinued.

While the current period and prior period are presented on a comparative basis in accordance with GAAP, the presentation has changed from the reporting of GAAP financial results in our fourth quarter 2019 earnings release due to the applicable accounting and reporting guidance.

With that as background, we will now turn to an update of our Q1 financial performance; beginning on Side 12. Total revenues from continuing operations for the first quarter of 2020 were $6 million and consisted primarily of LENSAR product revenue. LENSAR revenue decreased 11% over the prior-year period with procedure volume declining 6%.

As Dominique mentioned, the decrease is primarily due to lower system sales and procedures driven by the negative impact of the COVID-19 pandemic and the associated deferral of elective medical procedures.

Turning to operating expenses. Operating expenses from continuing operations include general and administrative expenses for corporate overhead as these costs have historically not been allocated to individual segments. Operating expenses for the first quarter of 2020 were $37.9 million, a $23 million increase from the first quarter of 2019. The increase is primarily a result of an acceleration of equity awards and the accrual for cash severance and retention payments under our wind-down retention plan totaling $18.7 million, and for increased professional service costs.

The vesting of equity awards was accelerated when the Board approved a plan of complete liquidation as this action constituted a change in control under the Company's equity incentive plan. In connection with the adoption of the wind-down retention plan, the severance liability is being recorded over the remaining service period for the participating employees.

There were decreases in cost of product revenue and sales and marketing expenses from LENSAR due to a decline in revenue while G&A and research and development expenses reflected modest increases primarily due to development of LENSAR's GEN2. Net loss from continuing operations for the first quarter of 2020 was $31.8 million compared with net loss of $8.5 million for the first quarter of 2019.

Moving on to discontinued operations, discontinued operations consisted the following items; net royalty revenues from acquired product rights, which include cash royalties received and a change in fair value of the royalty rights assets were $9.4 million compared with $12.3 million in the prior-year period. The decrease is primarily related to the anticipated decrease in fair value of the royalty rights for the Type 2 diabetes products acquired from Assertio Therapeutics.

We received $136 million in net cash from all of our royalty rights in the first quarter of 2020, up from $12.6 million in the prior-year period. The asset held for sale classification requires us to record the estimated cost to sell the asset as a deduction to the carrying value of the asset. In the first quarter of 2020, we recorded $6 million as the estimated cost to sell the royalty assets.

Product revenue from Noden was $15 million, compared with $20 million in the prior-year period. Revenues for the U.S. and the rest of the world were $3.9 million and $11.1 million respectively in the first quarter of 2020 compared with $12.2 million and $7.8 million respectively in the first quarter of 2019. The decline in U.S. revenue is primarily a result of the launch of an authorized generic of Tekturna as well as the launch of a third-party generic form of aliskiren in March 2019.

U.S. market share for branded Tekturna and the authorized generic of Tekturna of approximately 68% decline from the market share of 73% as of December 31st, 2019. In the first quarter of 2020, we recorded $1.8 million as the estimated cost to sell Noden, and wrote Noden down by $4.9 million upon the determination it met the held-for-sale criteria.

Net loss from discontinued operations for the first quarter of 2020 was approximately $200,000 compared with income of $15.1 million for the first quarter of 2019. The decrease was primarily due to the estimated cost to sell the assets classified as held for sale of $7.9 million and the $4.9 million write down of Noden to reflect the fair value upon its reclassification as an asset held for sale.

On a GAAP basis, the net loss for the first quarter of 2020 was $31.7 million or $0.26 per share compared with GAAP net income of $6.7 million, or $0.05 per diluted share for the first quarter of 2019.

Moving on to our non-GAAP financial results on Slide 13. The adjusted non-GAAP net loss attributable to PDL stockholders was $6.7 million for the first quarter of 2020 compared with the adjusted non-GAAP net income of $11.9 million for the first quarter of 2019.

Turning to our balance sheet on Slide 14. We had cash and cash equivalents from continuing operations of $125.5 million as of March 31, 2020, compared with $169 million as of December 31, 2019. The $43.5 million reduction was primarily the result of common stock repurchases of $19.2 million, the net cash used for the repurchase of convertible debt of $18 million, and net cash used in operations of $14.6 million. This reduction was partially offset by the proceeds from royalty rights of $13.6 million.

With that, we're ready to open the call for questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Max Jacobs with Edison Group.

Maxim Jacobs -- Edison Group Inc. -- Analyst

Hi guys. Thanks for taking my questions. First question is just on the Evofem distribution. I was just wondering what the thinking was to distribute it like right before the PDUFA date. So, I believe the distribution is going to happen on Thursday and the PDUFA will be Monday.

Dominique Monnet -- President and Chief Executive Officer

Yeah, hello, Max. Let me take that question. So you know, we -- until recently, we really focused on our Plan A, which was to try to kind of sell our shares of Evofem through private sales, and this was managed by -- as we stayed, by Torreya. As we are reporting and following the financing that Evofem just did, we came to the conclusion that this could not be done under favorable terms and we thought it was much preferable to leave it at to our shareholders to be able to decide on their own -- to make their own investment decision.

I think what we're hoping for is by distributing these prior or just prior to the PDUFA date and that is essentially as quickly as we can do it now, we would enable them to receive those share, first, at a time where there could be an upside to the share, we trust. I mean, we are confident in the approval of the product. You never know for sure, but we are confident.

And most importantly, we -- around the approval date, there is significant increase, traditionally, in the volume of share trading. And for our shareholders we may decide, maybe not to hold on those shares of Evofem, they would receive those shares during a period where there would indeed be greater opportunity to sell them, both though hopefully an outside enterprise with the approval news and secondly through just [Phonetic] increasing volume.

Maxim Jacobs -- Edison Group Inc. -- Analyst

Okay. Yes, that totally makes sense. So, my second question is just on LENSAR. So, I'm aware of what's going on in the cataract procedure space and also just kind of surgeries in general. I was just wondering what are the contingency plans for -- if we have kind of a second wave of coronavirus -- of a coronavirus pandemic like in the cold flu season? So, if we have additional lockdowns this winter etc.

Dominique Monnet -- President and Chief Executive Officer

Nick Curtis is our CEO of LENSAR is on the line. But before I turn to Nick, I would say at this point, we are approaching it, to try and to make sure that we protect the organization and continue to fund the development of GEN2 and maintain the capability of the organization to its fullest. And indeed on the basis, on the assumption as we laid out that the market would progressively recover ramping up in the third quarter, and hopefully being back to 92% or more of the pre-COVID stage.

This is being said, you're right. We never know whether there is going to be a second wave. And if it was the case and there would be a second total lockdown, we would have to reconsider those plans, and frankly, we would hope that we would then able to continue to work with the team to kind of protect their capability. Because again, what matters most to us, we do expect that once the cataract market reopens, there will be a number of surgery centers, which we want to very quickly get back into business.

And what is most important to us is that LENSAR will be capable to be the first one to satisfy those needs for their customers and that meaning, maintaining the team and continuing to fund the operation so that they can keep their capability intact.

So that's basically the plan at this point. And of course, maintaining the GEN2 development, because that is a big part of the future and the value of LENSAR for the future. In addition to that, that frankly through February of this year, LENSAR was continuing its double-digit growth and which only got interrupted when the cataract surgery market shut down.

So with this, Nick, do you want to add anything?

Nicholas Curtis -- Chief Executive Officer of LENSAR

Just a couple of things, just -- little data points. So, we had 24 of our U.S. sites opened up for elective surgeries again, between last week and this week with 19 of those sites actually opening this week. It's interesting, because we saw half a dozen sites or so come back to what appeared to be very close to their pre-COVID volumes. And then we've seen the rest of those sites much more conservative in terms of kind of trying to reopen and understand what their new normal might be.

There are some substantial safety measures that most of these practices are taking into consideration to try to, let's say keep anything untoward from happening to their patients or to their employees. We've redeployed our group. We've been on site and many of these sites -- we haven't flown to any of the sites yet. We've driven to those sites and we've been servicing these accounts as they've been getting up and running.

So, we're working with the practices and we're cautiously optimistic that by them protecting their employees and their patients, and by us doing everything we can to protect our employees with PPPs -- PPEs that they travel with, that we're adapting to the current market situation.

Dominique Monnet -- President and Chief Executive Officer

And Max -- thank you for that Nick. And Max, bear in mind that a significant part of Nick's business of LENSAR's business comes from outside of the U.S. I think it's -- Nick, correct me if I'm wrong, it's around 50%, isn't it?

Nicholas Curtis -- Chief Executive Officer of LENSAR

Correct.

Dominique Monnet -- President and Chief Executive Officer

And so [Speech Overlap] sorry go ahead, Nick.

Nicholas Curtis -- Chief Executive Officer of LENSAR

We've started to see business coming back in Asia and in specifically, China and in South Korea, we actually believe it. We do have system sales in China in this quarter. And so we've shifted few systems to China. So that's a good sign that they're attempting to get back to some sort of normalcy there.

And in South Korea, we've seen reopening of sites there as well. And in Germany, they've -- where we have quite a robust business, they've -- we've started back with surgeries there as well. And so, we're starting to see other parts opened up. India is still under a shutdown at the moment.

Dominique Monnet -- President and Chief Executive Officer

Yeah. And so, I do think that that diversification geographically is generally not protecting LENSAR or any other company, frankly, truly, but because of this outreach, which really is quite impressive actually for a company of LENSAR's size, I think if that diversified, it will beat the potential risk.

I mean, they are countries which clearly have been doing better. And Germany is the cutting point in being able to manage the crisis. Now, everybody is going to be connected in the future. But I think we are confident, and again, the biggest thing that we're focusing on for us is recognizing that LENSAR's tremendous opportunity and a tremendous team is to continue to protect that capability.

So, when the market reopens than it is now, LENSAR is immediately operationable and customers know that they can rely on their high-quality service and systems to go and satisfy patients' needs. Also bear in mind and I wish to apply there, is cataract surgery elective up to a point. Patients who wait too long, at some point, it is no longer elective.

Nicholas Curtis -- Chief Executive Officer of LENSAR

Yes. That's a really good point. The fact is that patients aren't going away during this time. There are certain markets that are better positioned to come back faster. For instance, in the U.S., where there is an approach of balanced billing and people pay for these elective procedures. The doctors, they will work hard to continue to provide these services to the patients in terms of enhancing your visual outcomes in a variety of different ways.

In China, where doctors are more, let's say unstaffed in their employees and there's bigger issues there in terms of just trying to get the elderly population into the healthcare system, they'll have a backlog of patients, but not necessarily motivated to do make-up for lost time, so to speak. In other markets, it's a little bit different.

And so we'll just have to -- right now, we're -- we just want to make sure that we're in a position that we keep our GEN2 project on track, because that's incredibly important to our future and that we continue to provide the quality of service and support to those accounts when they need it no matter where they are and we're in a pretty good position to do that.

And we're being very responsive to that and we view our relationship with all of our customers as being more of a partnership than as a customer, given sort of our overall size. And I think that partnership, customer centric attitude is going to help us in the long run as we continue to move this forward.

Dominique Monnet -- President and Chief Executive Officer

Hey, thank you, Nick and thank you Max for the question. As you saw from the very long answers you are getting from us, how passionate we think about that business. I think the opportunities are wonderful. The team is wonderful. We are maintaining that capability and be ready for the opportunities when they reopen up. Any other question Max?

Maxim Jacobs -- Edison Group Inc. -- Analyst

Yeah, answered. Thank you.

Dominique Monnet -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Your next question comes from Kenneth Atkins of Cowen & Company.

Kenneth Atkins -- Cowen & Company -- Analyst

Hi, thanks for taking my questions. Just given that there's been such a dramatic impact on elective cataract surgeries, do you expect that the sale of the LENSAR business will be essentially delayed until the epidemic resolves and potential buyers can build more confidence in the ongoing performance of that business or do you still think that you can engage with buyers?

Dominique Monnet -- President and Chief Executive Officer

The answer on this one is actually both, honestly. There's no question that everybody in that business is retreated this time. When your demand shut down almost overnight, I mean, it was not overnight in every market at the same time. But overall, you saw that wave of closer. And by the time, the closure happened it was 95%.

So there is -- what matters in the discussion that we have is, first of all, it's very clear that the growth -- the impressive growth of LENSAR, which even in the U.S. in the first quarter was 17% or 18%, and that was taking into consideration that in March, there was already a very sharp reduction in business. So, if you look at January-February, it was in line with what we have seen in previous year. So, the dynamic that anybody interested in investing in LENSAR that was very well established. And that speaks to the strength of technology we streamlined for.

The second thing, which really people are interested in when we talk to potential strategic, is LENSAR's kind of leadership in establishing the next generation system with GEN2, it's all-in-one Femto-Phaco workstation.

And what has been important for everyone is to see whether this would put this to a halt. And frankly, my hat off to Nick and his team, because being able -- I mean the teams have with proper social distancing when they can continue to manage to advance that program.

And then some of them just took measures to be able to do it still interacting with each other. Most people have been working from home, but that's not always possible. So that program is staying pretty much on track.

The answer to your questions more briefly is, the impact is important, I think everybody's a little bit here on a wait-and-see to see what's going to happen to the market. This is why, as I said right now of all of our work streams, most of them are on track. With regard to LENSAR, it's not that it's not on track.

It's we have decided to make sure we were not trying to make it fit a timeline, because right now, everybody needs time now and to figure out what's going to happen to the market and what that does take hold and we start I think here all of the contacts we have and the discussions we have will, I think, accelerate the process, but we don't know when this would be. That is why I'd not be surprised if -- whether it is going to be a strategic transaction or spin-off this may scale into 2021.

Kenneth Atkins -- Cowen & Company -- Analyst

Okay. Thank you. That's it.

Operator

There are no further questions at this time.

Dominique Monnet -- President and Chief Executive Officer

Well, thank you. Thank you all once again for joining us today. We hope that you and your families are well, and we look forward to updating you on our progress during our next quarterly call in August. In the meantime, we wish you a wonderful rest of your day. Stay safe.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Jody Cain -- Senior Vice President at LHA

Dominique Monnet -- President and Chief Executive Officer

Ed Imbrogno -- Vice President and Chief Financial Officer

Nicholas Curtis -- Chief Executive Officer of LENSAR

Maxim Jacobs -- Edison Group Inc. -- Analyst

Kenneth Atkins -- Cowen & Company -- Analyst

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