Good morning, and welcome to the Bausch + Lomb third quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Allison Ryan. Please go ahead.
Thank you. Good morning, everyone, and welcome to our third quarter 2022 financial results conference call. Participating on today's call are Chief Executive Officer, Mr. Joe Papa, and Chief Financial Officer, Mr. Sam Eldessouky. In addition to this live webcast, a copy of today's slide presentation and a replay of this conference call will be available on our website under the Investor Relations section. Before we begin, we would like to remind you that our presentation today contains forward-looking information. We would ask that you take a moment to read the forward-looking statement legend at the beginning of our presentation as it contains important information. This presentation contains non-GAAP financial measures. For more information about these measures, please refer to slide two of the presentation. Non-GAAP reconciliations can be found in the appendix to the presentation posted on our website.
Finally, the financial guidance in this presentation is effective as of today only. It is our policy to generally not update guidance until the following quarter and to not update or affirm guidance other than through broadly disseminated public disclosure. With that, it is my pleasure to turn the call over to Joe.
Thank you, Allison, and thank you everyone for joining us today. I will begin some comments about our Bausch + Lomb third quarter highlights. Sam Eldessouky, our CFO, will then review the third quarter financial results in detail and discuss our 2022 guidance. Finally, I will conclude by discussing our product pipeline and upcoming catalyst before opening the line for questions. Before I start, I want to especially thank our B+L team for their strong efforts in the third quarter of 2022, our first full quarter as a public company. As an integrated eye care company operating today, Bausch + Lomb is uniquely positioned in the eye health market. On page four, you see that we are building on approximately 170 years of success as a leading eye health brand. Bausch + Lomb is a company with the highest brand awareness in eye care.
As a global leader in consumer eye health, we have outpaced U.S. market growth by approximately 1.7x since 2018. Turning to slide five. We continue to see compelling opportunities for a standalone Bausch + Lomb as a pure play eye health company. First, we believe the company is well positioned for growth in large durable markets driven by new products and favorable mega trends or tailwinds that are expected to continue driving demand for our eye health products. Second, we continue to see margin expansion over the long term based on our new product launch opportunities. Finally, as a publicly traded company, we expect to have balance sheet flexibility to expand investment in business and additional strategic bolt-on product opportunities.
Given the challenges presented by the current economic environment, I want to spend a moment to share our insights on the potential impact of inflationary pressures on the eye health category. On slide six, we've presented data and other insights which show that the eye health business is resilient to economic pressures. The first statistic on the left underscores just how important eyesight is. 81% of U.S. adults surveyed would be willing to give up something else that is very important to them if it meant never losing their eyesight. Looking at Bausch + Lomb within this eye health sector, we believe our business is well positioned against an economic downturn because Bausch + Lomb has the highest brand awareness in eye care.
Bausch + Lomb has a diverse product portfolio of more than 400 branded and generic products, as well as products that are offered at various ranges of price points. Bausch + Lomb has a geographic presence in approximately 100 countries, and Bausch + Lomb is investing in R&D to expand our portfolio with more than 15 new product launches expected in 2023. To summarize, the survey data and our team's experience through previous economic cycles tells us that eye health will continue to be a priority for consumers and patients. We believe customers will continue to want the best and most trusted products and services, which means that Bausch + Lomb is well positioned within the overall eye health sector. Moving now to the third quarter highlights on slide seven.
Our third quarter overall organic revenue growth was 5%, and importantly, it reflects growth in all three of our business segments. A few key highlights to note. First, our continued momentum in key portfolios. Reported revenue of Ocuvite and PreserVision grew by 14%. We're pleased to report that PreserVision currently has an approximately 95% market share in the U.S. The 14% organic growth in surgical implantable was driven by the premium and standard IOLs. Next, our investment in the faster-growing eye health categories. LUMIFY U.S. weekly market share in the redness relief category has reached 49%, and we are seeing signs of a strong early launch in Canada.
We're also well positioned to take advantage of the US prescription dry eye market, which grew at a 24% CAGR from 2016 to 2021 and is expected to see double-digit growth from 2021 to 2027. NOV03, our potential first-in-class treatment for dry eye disease associated with meibomian gland dysfunction, has a June 2023 PDUFA date. Finally, new product category expansion. We entered into an exclusive European distribution agreement for a minimally invasive surgical procedure for the treatment of glaucoma during the third quarter. Our premium LuxSmart IOL is now launched in 19 countries. To summarize, our third quarter results demonstrate that our business is continuing to deliver strong performance despite the currency and inflationary headwind pressures.
Our key brands have demonstrated their durability through challenging economic conditions, and remain focused on continuing to invest in innovation to drive future growth in large, fast-growing markets and categories. With that, I will turn the call over to Sam to cover the financial results in more detail.
Thank you, Joe. Before we get into the details, I will remind listeners that when we talk about organic revenue growth, we mean on a constant currency basis and adjusted to remove the impact of divestitures and discontinuations. Turning now to our results on slide eight. We're pleased to report our sixth consecutive quarter of organic growth, demonstrating the durability of our business in a highly attractive eye care market. Our total company revenue was $942 million for the third quarter, up 5% organically. The revenue growth was broad-based, with strong performance across all segments. Key consumer brands, such as our eye vitamin franchise and LUMIFY, are maintaining leading market share positions. Our contact lens portfolio continues to grow, and procedural volume is driving demand in surgical, which is also creating positive tailwinds in our Ophthalmic Pharmaceuticals segment.
In an economic environment where sustained levels of high inflation are leading to some changes in consumer behavior, customers are remaining loyal to trusted brands like Bausch + Lomb. While we are not immune to the economic pressures, we do expect the Bausch + Lomb portfolio to continue to demonstrate strong resilience as consumers and patients prioritize their vision care needs. We are pleased with the recovery in China. The B&L business in China grew 6% organically compared to the prior year quarter, and 28% on a sequential basis. We're encouraged by the improvement trends and will continue to monitor the pace of the recovery as the market works to return to pre-COVID levels. Currency had a substantial impact in the quarter, which impacted our reported revenue of -1%. FX headwinds on revenue were approximately $55 million or 575 basis points.
The current strength of the U.S. dollar is something the market has not seen in a long time. The U.S. dollar is at the strongest level in about 20 years versus the euro, and the U.S. dollar strength versus key B&L currencies like the yen and British pounds is also something we have not seen in decades. Overall, we're very pleased with our 5% organic revenue growth in the third quarter and believe that the long-term fundamentals of our business and the eye care market remain highly attractive. Now I'll go into more detail on each of our segments. Revenue in the vision care segment, which includes contact lenses and consumer products, grew organically by 4% in the third quarter. Our consumer portfolio, which was up 3% organically, saw continued market share leadership in key categories such as eye vitamins, redness relief, and lens care.
We're seeing consumer behavior adjusting to inflation. Although the prevalence differs by category and market, generally, price and promotion sensitivity have increased. B&L has the trusted brands consumers are sticking with, and we will continue to manage the balance between strategic pricing and growing market share. The eye vitamin franchise, PreserVision AREDS 2, grew by 14% on a reported basis and 16% organically. PreserVision is the market leader in the eye vitamin category and is a great example of a B&L product with a strong brand equity. The eye vitamin franchise continues to be a strong driver of growth. We recently launched an enhanced AREDS 2 formulation, and we see an opportunity for the category to continue to expand with increased AMD awareness. LUMIFY reported revenue grew by 7% in the quarter and reached a record 49% market share.
Consumers continue to value the level of innovation LUMIFY brings to the redness relief category. LUMIFY recently launched in Canada and is off to a strong start. We see multiple catalysts to continue the growth projection for LUMIFY, including launching into new categories. We saw strong revenue growth in our Biotrue franchise, led by the launch of Biotrue Hydration Plus Multi-Purpose Solution. B&L continues to gain market share in the multipurpose solutions category. In the quarter, B&L market share increased 410 basis points versus the prior year. Artelac, which is a leading dry eye product in Europe and is a $100 million+ revenue brand, grew by 11% organically. Also, during the third quarter, we saw a slight impact to revenue caused by the delayed timing of shipments due to Hurricane Ian, which we expect to recover in Q4.
Revenue in lenses was up 6% organically, with strong growth in each of the three key B&L franchises. 8% reported and 23% organic growth in daily SiHy, 7% reported and 12% organic growth in ULTRA, and 2% reported and 8% organic growth in Biotrue ONEday. The market conditions in China have improved, and the China lens portfolio grew organically by 3% year-over-year. We're very encouraged by the improvement trend. We will continue to monitor the progress as local policies and measures continue to be in place to comply with the Zero-COVID policy. Also, the pace of the recovery has varied by channel, with e-commerce progressing at a faster rate than retail. As the retail market improves, we see an additional opportunity for growth. We continue to be excited about our daily SiHy lenses.
This is a multi-year growth driver for our portfolio as we gain scale and prepare for the future launches of the multifocal and toric lenses. We're focused on accelerating the manufacturing output to meet significant end-market demand. I expect manufacturing output ramp up and yield to continue to improve. Having a diversified portfolio with different modalities and price points also benefit our business in the time of a high-end consumer price sensitivity. Our value-oriented dailies brand, SofLens, grew 9% organically in the quarter. Moving on to our surgical segment. Third quarter revenue grew organically by 8% to $172 million, as procedural volume continues to increase in certain markets. The increase in procedural volume drove 6% organic revenue growth in consumables, which is the largest B&L surgical category, and 14% organic growth in the implantables.
The strong performance in implantables was driven by both our premium and standard IOL portfolios. Our equipment portfolio grew 3% organically in the quarter and was impacted by some constraints on availability of supply. We expect the backlog of cataract surgeries to be a tailwind over an extended period of time. We also have an opportunity to expand the portfolio with several upcoming launches, including a 3-D microscope for which we expect to launch in 2023. Finally, in the Ophthalmic Pharmaceuticals segment, third quarter revenue of $172 million grew by 5% on an organic basis. This was mainly driven by strong performance in the international markets with 15% organic growth. The growth is attributed to improving conditions in China and an increase in surgical procedure volumes in Europe.
International ophtho continues to demonstrate durable growth and the benefits of a large portfolio with an extensive global reach. In the U.S., the tail end of LOE headwinds is becoming less meaningful, and investments in market access of our key promoted brand, VYZULTA, continues to drive volume gains. VYZULTA TRX growth was up 29% in the quarter, and revenue grew by 4%. We're also executing our VYZULTA geographic expansion strategy. We launched VYZULTA in Thailand in the second quarter. We're preparing for a launch in Brazil by the end of this year, and we're targeting further geo-expansion opportunities. We continue to focus on the transformation of the ophtho portfolio. The XIPERE launch is tracking well, and NOV03 has been assigned a PDUFA date of June 28, 2023. This brings us a step closer to what we believe is a substantial market opportunity.
On slide nine, we quantify the impact the FX headwinds are having on the business. The strength of the U.S. dollar against all major currencies is something we have not seen in the markets in decades, and inflation remains at the highest level since the 1980s. B&L continues to perform, and the eye care market is demonstrating resilience to macro headwinds. Our base business performance of $48 million in revenue growth was offset by FX headwinds of approximately $55 million for the quarter. Turning now to slide 10. As a reminder, given the timing of the IPO, the 2021 results were not fully burdened by all the stand-up costs associated with the separation. As we previously disclosed, full year 2021 results did not reflect estimated stand-up costs of approximately $70 million.
With total revenues of $942 million in the third quarter, we remain committed to our strategy to be fully invested in new product launches and in R&D while managing the impact of macro headwinds. Our adjusted EBITDA in the third quarter was $187 million. Adjusted gross margin for the quarter was approximately 60.5%, which is 110 basis points lower than Q3 2021. Apart from the product mix and manufacturing yield, the change in gross margin is largely driven by the high level of inflation, leading to higher cost of energy, transportation, labor, input costs such as resins, and rising prices of surgical components. We're working to mitigate inflation challenges through various efficiency-enhancing initiatives and strategic pricing. We're also monitoring the geopolitical development in Europe to assess the potential impact of increasing energy costs over the coming months.
Over the longer term, the fundamentals and market opportunity for margin expansions continue to be in place. We have a clear path to expand margin in all areas of our business with launches of premium surgical products, a higher margin optho portfolio, increased scale in lenses, and operating leverage. Our investment in R&D continues to trend at roughly 8% of revenue, which is approximately $14 million or 160 basis points higher compared to prior year. We remain focused on high-priority projects while continuously evaluating our pipeline to accelerate new products to market. Adjusted SG&A increased by approximately $12 million year-over-year, which is attributed to an inflation-driven increase in transportation and labor costs. SG&A also reflects the cost structure of B&L as a standalone company, which was not fully reflected in the prior year's results. Finally, adjusted EPS for the quarter was $0.31.
Moving on to slide 12. Adjusted cash flow from operations was $48 million in the third quarter, bringing year-to-date adjusted cash flow to $216 million. Strategic inventory management and maintaining working capital efficiency continue to be key initiatives in light of the macro environment challenges. Third quarter CapEx of $49 million reflects strategic investments in our vision care portfolio and a number of productivity-enhancing initiatives. We ended the quarter with approximately $2.5 billion of debt and net leverage ratio of approximately 2.9x . B&L continues to have a strong balance sheet, which provides us with the flexibility to pursue value-enhancing investment opportunities. Now turning to our guidance on slide 14. We are reaffirming our organic revenue growth guidance for 2022 in the range of 4%-5%.
We continue to see momentum in our business, and we remain committed to making the investments to execute our growth strategy. While our organic performance continues to be strong, based on current exchange rates, we estimate full year FX headwinds to be approximately $210 million, compared to $160 million, including our August guidance. To reflect the $50 million of incremental FX headwinds, we estimate our reported revenue will be in the range of $2.7 billion-$2.75 billion. We're maintaining our gross margin guidance of approximately 60%. We have implemented various cost efficiency measures and strategic price increases, which we expect will allow us to manage approximately 130 basis points of inflation pressure for the full year.
We're updating our adjusted EBITDA guidance for 2022 to be in the range of $750 million-$755 million. This reflects approximately $10 million of FX headwinds incremental to our August guidance. It also reflects a $15 million impact related to the manufacturing yield and output ramp-up of our daily SiHy lenses. As we increase production of the daily SiHy lenses to meet significant end market demand, the output ramp-up and manufacturing yield is trending slower than expected in 2022. We expect that the output ramp-up will accelerate and the yield will improve in the upcoming months, and the incremental headwinds will be substantially reduced in early 2023. We continue to expect interest expense of approximately $150 million.
In the third quarter, we entered into a cross-currency swap to mitigate market fluctuations, and we're exploring other options to manage potential interest rate movements. We are maintaining our estimate for the full year R&D investment at approximately 8% of revenue. Despite the macro volatility, we will continue to prioritize investment in our R&D pipeline as we look forward to a number of launches in 2023 and beyond. Lastly, we expect our full year tax rate to be at the low end of our guidance range of 6%. This is mainly driven by our expectation of the product and geographic mix of taxable income. Looking forward, we want to provide some initial thoughts on our key priorities for 2023. We expect the fundamentals of the eye care market to remain strong, and our focus will be on driving revenue growth.
We have a full pipeline of more than 15 products that we expect to launch in 2023 across all our segments. This includes NOV03 in our ophthalmology portfolio and a number of launches in our surgical business. At this time, we expect macro market conditions to continue to evolve, with inflation stabilizing, although at a higher rate relative to historical levels. We also expect currency to remain volatile. Despite the macro pressures, we will continue to prioritize investment in R&D and product launches as we continue the momentum in our current portfolio and add new products. We have an opportunity to leverage our existing commercial infrastructure for long-term margin expansion. In summary, we're pleased with the third quarter growth reflected in all of our three segments. The B&L portfolio continues to demonstrate resilience and the long-term fundamentals of the eye care market remain solid. Now back to you, Joe.
Thank you, Sam. I will now discuss our product pipeline and the upcoming catalysts that we expect to drive our business results. On slide 16, we highlight some of the key consumer franchises that have been gaining market share. First, on the left, PreserVision maintained a 95.1% market share in the third quarter of 2022, a gain of 120 basis points compared to the prior year quarter. Given the success of our eye vitamin franchise, we are working on a brand family line extension, including an enhanced formulation of Ocuvite with vitamin D for adults aged 50 and over, and a combination of PreserVision products with an antioxidant that helps support healthy heart function.
Next, U.S. market share for Bausch + Lomb multi-purpose solution was 57.4%, up 410 basis points compared to the third quarter of last year, driven by our Biotrue multi-purpose solution. We are expanding the Biotrue mega brand platform to strengthen our competitive advantage in dry eye disease. Finally, on the right, Artelac, a $100 million growing dry eye global franchise, grew organically by 11% compared to the third quarter of last year. Artelac branded products are available in more than 35 countries, and we have more than 10 line extensions underway. We recently launched Elexia moisture eye drops for dry eyes in France. Now turning to slide 17 on LUMIFY. In the U.S., LUMIFY is the number one redness reliever in the category with approximately 49% market share.
Building on the phenomenal success of this product and using the power of our fully integrated eye care work platform, we are planning to expand the brand geographically and through line extensions. In July, we launched LUMIFY in Canada, where it is off to the fastest launch for Bausch + Lomb in the Canadian eye drop market and is generating twice the amount of sales versus the previous leading eye drop launches. Geo expansion continues to be a priority, and LUMIFY is now approved in six countries. In addition to launching in new markets, we are expanding LUMIFY's beauty positioning to specialty eye care and have a number of line extensions planned for 2023 and beyond, including a makeup remover, eye cream, and a lash and brow serum, along with a single-dose preservative-free eye drop and a combination of product with ketotifen for allergy symptom control.
On slide 18, we show the 2022 and near-term launches that we believe will position the company for transformational growth. Our 2022 launches included XIPERE, Revive custom soft contact lenses, our LuxSmart premium IOLs, and most recently, Project Watson, our brand new line of products specifically formulated to help support dogs' eyes, ears, and overall well-being. Looking ahead to 2023 and beyond, our strategic investments in R&D are yielding a pipeline of new innovative products in higher margin, high growth categories such as premium IOLs and pharmaceuticals. On slide 19, as we mentioned earlier, we now have a June 2023 PDUFA date for NOV03, a potential first-in-class treatment for dry eye disease associated with meibomian gland dysfunction. If approved by the FDA, we expect to launch NOV03 in the second half of 2023.
Dry eye disease is one of the most common ocular surface disorders, affecting approximately 18 million Americans. NOV03 is expected to address evaporative dry eye, which is an unmet need in approximately 90% of dry eye disease sufferers. This is a fast-growing market with unmet patient needs. From 2016 to 2021, the US prescription dry eye market grew at a CAGR of approximately 24%. Given the current market for dry eye disease treatments and the results of the two phase III trials, we believe that NOV03 has the potential to be a major future growth driver for our business. On slide 20, our surgical business is preparing for the upcoming launch of the eyeTELLIGENCE system, a cloud-based digital platform that will help streamline the complex processes from pre-surgery assessment to post-surgery evaluation.
Ophthalmic surgical procedures require a sophisticated multi-step process that involves patient diagnostics, clinical treatment planning, surgery planning, post-op analysis, and more. The transitions between each step require the manual transfer of data, which can be time-consuming and lead to unintended human error. When the next generation eyeTELLIGENCE platform is launched, we expect to occur in 2023, the analytics software will allow surgeons to seamlessly integrate all aspects of the cataract, retinal or refractive surgery processes to maximize their overall practice efficiency. We're excited about this significant step forward that will enable us to advance interconnectivity and leverage data support and improve patient outcomes. On slide 21, we feature another anticipated 2023 launch in our surgical business, SeeLuma, which offers ophthalmic surgeons a fully digital surgical visualization platform. The microscope pairs exceptional image quality with ergonomics, allowing surgeons to tackle complicated surgical cases with confidence and ease.
Importantly, the 3D Microscope can be integrated with our eyeTELLIGENCE digital platform. The market opportunity for this product is significant. Industry reports estimate a $400 million market growing at a CAGR of approximately 6%. On slide 22, we show the geographic location expected timing of the upcoming premium IOL launches. Near term, we are preparing for 2023 launches of Bausch + Lomb enVista, the enVista trifocal IOL in Canada, and Bausch + Lomb enVista Aspire, the enVista extended range monofocal IOL in the U.S. and Canada. Our near term focus is launching these premium IOLs in North America and the E.U., followed by the Asia Pacific region. On slide 23, we've listed the progress we have made against three key areas of focus that we identified as the priorities at the beginning of 2022. First, the continuing momentum in our portfolio.
Second, investing in categories that are growing faster than the market. Third, expanding into new product categories. To highlight a few, we are on track to deliver 4%-5% organic revenue growth in 2022 due to, in part, the strong performance of our key franchises, including market share gains. We have made investments in innovation like our SiHy daily lenses, 3D Microscope and NOV03. Lastly, expanded into new categories with XIPERE, Revive contact lenses, and the minimally invasive surgical procedure for glaucoma. We believe that continuing to deliver against these three key areas of focus will position the company for future growth.
To wrap up on slide 24, as a fully integrated eye health company with the highest brand awareness of any eye care company, a global footprint in approximately 100 countries, a comprehensive portfolio of more than 400 products across all price points, Bausch + Lomb is uniquely positioned to meet the eye care needs of patients and customers, even in challenging economic environment. Bausch + Lomb serves our patients and consumers through all phases of their lives, developing and offering new treatments to meet unmet eye health needs and help people to see better, to live better. Our third quarter results demonstrate that our business is continuing to deliver on strong performance despite the currency and inflationary headwind pressures we face. Our team remains focused to continuing to generate momentum in our key products, invest in fast-growing categories, and expand into new product categories.
Looking ahead, we continue to believe that Bausch + Lomb is well positioned for success as a standalone pure play eye health company. With that, operator, let's open up the line for questions.
Certainly. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is coming from Zach Weiner from Jefferies. Zach, your line is live.
Hey, good morning, everyone. Thanks for taking the question. Just one for me on inflationary pressures to start. Can you give some color on the impact in 3Q and, you know, how we should be thinking about inflationary pressures over the next couple of quarters? You know, how that will impact the manufacturing of the SiHy lenses. Thanks.
Morning, Zach, Sam. When you think about the inflation, when we looked in the beginning of the year, we expected inflation to be roughly about 100 basis points on our COGS. As we continue to see inflation rise, right now in the U.S., it's hitting about 8%, Europe about 10%, we've updated our estimate to be about 130 basis points, and that's for the full year. In the quarter, it's remaining relatively in the same direction. It's about 110 basis points in the quarter that we've seen the impact.
As you look forward, really when we think about Q4, we probably expect it to be running around the same rate that we've seen right now. We'll be around that, still the 100 basis points impact. Really from an impact on a daily SiHy, we haven't seen much of an impact on inflation per se on daily SiHy. I think the daily SiHy, it really doesn't have much of an impact on inflation. You see a little bit on transportation, but not really, we're seeing much of an impact on the inflation.
I think the only thing I'd add to what Sam said, as you know, the important part for us as we think about the launch of the SiHy product is that it is a premium priced product relative to obviously a monthly lens or a hydrogel lens. It moves patients to an opportunity for us to have a premium product into the marketplace. That's, you know, you're moving patients from a monthly lens, from a $250 per year lens to a daily hydrogel lens somewhere in that $500 lens up to the daily SiHy at somewhere in that $750 range. Obviously that's gonna help us with some of these inflationary pressure that we see out there.
Very helpful. Thank you.
Operator, next question, please.
Thank you. The next question is coming from Cecilia Furlong from Morgan Stanley. Cecilia, your line is live.
Great. Good morning, and thank you for taking the questions. I wanted to start with R&D, just your comments on the spend in 3Q. You talked about previously kind of a 7%-8% of sales outlook over the next few years. Can you just talk to how you're thinking about R&D spend and key areas of focus beyond 2022?
Sure. Good question. Of course. Certainly one of the things that we're excited about is the future opportunity of the products that we have. I made mention during the call of 15 new product launch opportunities in 2023, and importantly, going into some areas that once again are important to us. Going in with the premium IOLs. We have the LuxSmart product premium out there. We have some new enVista opportunities as we look to 2023. So those are gonna be exciting. We also have the new microscope, 3D microscope. We have the eyeTELLIGENCE. All these things are backed by the R&D programs that we're putting forth.
What we have said as a company is that we wanna make the investments in R&D and everything that we can do to accelerate the timing and launch of these products is important to us. We did see an opportunity in 2022 to move the R&D spend from that 7%-8% to invest and get it to somewhere around 8% this year, as we've talked about. As we think about the future, I think we are not gonna guide to 2023 and beyond, but we do think the trends are gonna be somewhere in that 7%-8% because we do see the opportunities in front of us to invest in our business.
We think the R&D investment is gonna be probably the most critical place that we make these investments to ensure that we have new products coming into the future to support the long-term growth of our company. We're excited about it.
Great. If I could follow-up too, just on daily SiHys, can you talk about the growth you saw in the quarter, and really where you're seeing the greatest share from new fits versus competitive conversions, versus cannibalization? Then also, separately, if you could just comment on China, how you're thinking about recovery into 4Q and really what you saw, from a recovery standpoint, 2Q into 3Q. Thank you for taking the questions.
Sure. A lot of good follow-up questions there. I'm gonna try to get them all. If I miss them, just come back to me. The first comment on the daily SiHy growth is 23%, we grew. Clearly we're excited about that growth in a quarter relative to our daily SiHy. As Sam said, some of the things that we're working on here are our supply chain team is doing a great job on the execution of everything from installing new equipment, getting it validated, running it, ramping up the opportunity in front of us. But the demand is out there. We just wanna make sure that we can supply sufficient amount of daily SiHy out into the marketplace. That clearly was an important part of what we've tried to do.
23% growth is the specific answer. In terms of where it's coming from, everything we see is coming from DT1, OASYS, and just general new starts. We have seen some cannibalization from our own lines, but really mostly that we've seen coming from the DT1, OASYS and new starts is where we saw the primary source of the products. Sam, you wanna talk about the China recovery portion?
Sure. Cecilia, in terms of China, when we've seen a very nice recovery in the third quarter, and as you recall, we had challenges in the first half of the year with the lockdowns in China. We've seen that turn in the third quarter. We had 6% organic revenue growth. That's year over year. When you look at it sequentially, it was about 28% growth. We're very encouraged by the trends that we're seeing in terms of our recovery. We've seen the e-commerce come faster than the retail channel at this point. But one of the things that we're gonna continue to watch is the policies within China. They're still under the zero-COVID policy, and that could spark some lockdowns. We're gonna be optimistic, but we're gonna continue to watch what happens in the next couple of months.
Great. Thank you again for taking the questions.
Thanks, Cecilia. Operator, our next question, please.
Certainly. The next question is coming from Vijay Kumar from Evercore. Vijay, your line is live.
Hi, this is Kevin on for Vijay Kumar. Just one on pricing. Can you talk a little bit about the pricing impact in the quarter? Looking into 2023, how should we think about pricing increases and cadence of that for the year?
Sure. I'll start, and Sam, tell me you wanna add to it. We just going back on pricing, because I think it really comes back to where we were in the beginning of the year. We did take pricing throughout the year in the 2022 timeframe. We started it first in the January time with our ophthalmology prescription products, and then we moved it also to the lenses, contact lenses. We did take pricing on our consumer products in that January timeframe, because we need to give some sufficient advance notice. The actual operating process of actually showing it to the marketplace did not show up until approximately that March time for our pricing on the consumer products.
We have taken that price during the quarter and throughout the year. As we think about pricing going forward, we'll take a similar approach. As Sam was talking before, we've been monitoring the inflationary pressures out there in the marketplace. Our expectation is that we will take our price increases on our ophthalmic prescription product early in January of 2023, as well as some decisions that we're making right now on the pricing in the early 2023 timing for what we'll do with lenses and the consumer products to reflect what we're seeing out in the inflationary pressures. Those plans are in place and we have our plans to go forward with it.
Yeah. We have strong brand equity overall, and you've seen throughout this year, in 2022, we've gained market share across many of our product lines and many of our markets that we participate in. We have a leading position. We'll continue to monitor the market conditions as we go into 2023, and we'll continue to manage the balance between the strategic pricing and continuing market share.
Then probably the only other thing I'll mention on pricing, because one part of it, pricing always is the actual list price changes, but we also are continuing. We mentioned previously that we have something called Project CORE. CORE stands for Cost Optimization Revenue Enhancement, and those programs are also designed to look at not just the list price, but really as it gets to the net price of what we are doing. Our Project CORE has been very beneficial to us in the past, and we also look to for this to help us in the future. Some activities on discounts and some of the other programs that are a part of that will be an important part of what we do on pricing going forward, especially as we look to see what's happening from an inflation point of view.
Of course, as I mentioned before, we also look at as we launch the premium products, we can realize higher pricing on some of these products as we move to a daily SiHy or as we move to a premium IOL versus the other products that are out there in the market today. All that is how we're thinking about pricing as we go to the future for our business.
Thank you. That was very helpful.
Operator, next question.
Certainly. The next question is coming from Robbie Marcus from JP Morgan. Robbie, your line is live.
Hi, this is actually Lily on for Robbie. Thanks for taking the question. Maybe if you could just talk a bit about the environment for capital equipment and what demand has looked like recently. Was this a headwind for you in the quarter, and how are you thinking about this trending into fourth quarter and into 2023? Thanks.
Everything that we've looked at this question on the capital equipment, especially with some of the concerns and questions about recession. What do we know? What we know is that based on prior recessions, the usage of the cataract procedures, which is where we're mostly weighted, continued, like during the recession of the Great Recession of 2008-2009, we saw capital equipment demand continue. Actually, the amount of procedures continue, which ultimately is gonna translate longer term into capital equipment. We do see that from a big macro environment point of view, that the need for cataract surgeries is going to continue even if we head into a recessionary environment, and that's one of the things we've looked at.
We do obviously acknowledge, though, that in our surgical business we had a stronger demand for our surgical consumables and implantables. That is absolutely clear in what we've seen. Just specifically, implantables was a 14% organic growth. The consumables was about a 6% organic growth. Those were the faster-growing segments of our surgical business, and we've been continuing to look at what's going to happen with the capital equipment. Overall, we do know, because one of the questions we've asked ourselves all the time is what happens in a recession for things like cataract procedures. Overall, the direct answer is it was about a 3% capital equipment growth rate. It was lower than the rest of our surgical business, but it continues to grow. Thank you for your question.
Thank you. The next question is coming from Craig Bijou from Bank of America. Craig, your line is live.
Good morning, guys. Thanks for taking the questions. Wanted to follow up on some of your comments on the resiliency of the eye care market. You did talk about price and promotion sensitivity in the consumer business. Maybe wanted to see if you could talk a little bit about the sensitivity on other parts of the business, the contact lenses, maybe even the you know, monofocal versus premium IOLs and what you're seeing there. It sounds like you still have a confidence that you guys can take some price looking at 2023. You know, I guess the question is just you know, how good do you feel about that? Do you think that any changes in the macro, you know, recessionary environment might impact that ability to take price?
Sure. Great question, and, one we ask ourselves all the time in terms of how we're thinking about the future of the business. In terms of the resiliency of the eye care market, we did mention the comments on the consumer side. Clearly, as we look to across all of our business, we take a very segmented approach. We look on the consumer side on price sensitivity, everything for what's happening with the products like LUMIFY, which we see continued strong growth, as I mentioned, I've got a 49% share. We saw the gains in market share that we saw in the PreserVision. As the example I used on PreserVision, we were up significant basis points.
We were up on PreserVision a hundred and twenty basis points for a U.S. market share, just as an example. We're continuing to see that momentum in gaining volume there. On the question directly related to contact lenses, we've checked on the contact lens fit sets, and they're roughly flat from a year ago. That was one of the questions we asked. Clearly within the fit sets and what's the fittings going on, there is more movement towards the daily disposables to be clear. The actual number of the fits are roughly flat versus last year. That's something that we're monitoring closely. Of course, with our INFUSE, as I mentioned, it's up 23% organically. That's something we're really excited about.
On the next part of the question, I guess the macro environment and ability to take price. What we're looking at is the inflationary pressures that Sam talked about and how we're going to look at the pricing environment. Everything that we've looked at so far tells us that on the places where we're planning on pricing, like the ophthalmology prescription business, there is an opportunity for us to take some incremental pricing there. We do believe on the consumer side of the business, we're gonna be smart about what we do. But we do think there's an opportunity to take prices also on the consumer side and on the lens side. Is there anything I left out that you want to add to the comment?
No, I think you covered it well, Joe. I will add, when you think about our lens portfolio, I think we benefit from having the diversification of the portfolio. I think we talked a lot about Dailies AquaComfort Plus and the growth of 22% organic in the quarter. But also when you think about ULTRA grew 12% organically. You have Biotrue ONEday grew at 8% organically. And also soft lens, the Dailies brand within our soft lens, which is a value type of offering on the lenses that grew 9% in the quarter. We're benefiting from the opportunity of having different price points and different offerings within our lenses, and we're seeing the growth across all those different components.
Great. If I could squeeze one follow-up in. I mean, any update on the CEO succession plan?
Sure. Good question. The company, as you recall back in July, we announced that we would be moving forward with a new CEO, and the search committee has undertaken that search. They have looked at internal and external candidates, and they're making good progress, and it is our expectation that the search committee will successfully complete the search by the end of the year. At this point, I've committed to stay to make sure that once the CEO is announced, then there is a successful transition with that CEO. All that continues to move forward at this time.
Thank you, guys.
Thank you. The next question is coming from Larry Biegelsen from Wells Fargo. Larry, your line is live.
Good morning. Thanks for taking the question. Just first on LUMIFY, Joe, maybe could you talk about the outlook there? 7% growth in Q3, that was relatively low. You know, that was on a, I think an ex-FX basis, but, you know, it's mostly a U.S. product. So is this a double-digit grower going forward with some of these line extensions and geographic expansion you talked about? And I'll ask my second question upfront for Sam, which is maybe a little bit more of a framework, Sam, on 2023. I mean, do you still see, you know, 4%-5% organic growth? You talked about revenue growth upfront, and can you help us with kinda FX? Should we think about that as being a similar impact, you know, in 2023 as 2022?
Interest expense, you know, how much does that go up? Or maybe it doesn't because of the swaps. You know, just the last piece, you know, can you grow margins year-over-year in 2023, you know, with this inflation headwind? Thanks for taking the questions, guys.
Great question, Larry. Let me start with the LUMIFY portion. Yes, 7% growth. I mean, one of the important things I need to point out, though, is that we are also at a 49% market share. So we're really excited about what that means in terms of our ability to go from essentially zero share in a couple of years to get to 49% share. To be clear, we do have plans for growth beyond just the U.S. business. As we mentioned, it's off to a great start in Canada. It's outperforming previous launches of eye drops in Canada significantly. In fact, 2x the rate of growth of the next best launch in Canada. We're really excited about that.
Albeit it's a smaller market than the U.S., it obviously is benefiting and seeing the same type of uptick with what we saw here in the U.S. Importantly, though, as we think about it, what are the key growth drivers for LUMIFY? Number one is the geographic expansion, like Canada and other countries coming online. Number two, it is the line extensions that we'll do in terms of LUMIFY EYE ILLUMINATIONS. Essentially taking this brand and coming out with some additional line extensions that are gonna help us to leverage what we are doing with the LUMIFY opportunity. One of the other things that I would mention is that, you know, there's always going to be some shipments that occur, you know, in early in one quarter, a little bit later in the next quarter, things like that, and that's just normal variation.
We actually saw the consumption for LUMIFY, just if we think about the full consumption, to be a low double-digit consumption growth. We're clearly still confident about that. As I said, with these new launches, that's gonna be another part of it. Importantly, last comment is that we're looking for the preservative-free formulation and also adding LUMIFY to an antihistamine ketotifen, so that you'll have the opportunity to help people who have allergic red eyes, for the future. If approved by the FDA, we think that will be the other big growth driver for the LUMIFY business. Sam, I'll turn it to you for the second part of the question.
Sure. Thank you, Larry, for the question. There's many parts here, so I'm gonna try to go through all of them. If I miss anything, just come back. Just when you step back and you think about the top line and the growth and what we've seen in 2022 as just a foundation for the framework as you go into 2023 is we focused on driving organic growth in 2022, and you see that Q1 was 5%, Q2 was 6%, and now Q3 on the board here for 5% organic growth. As we shift going forward, I think the focus on driving growth and getting the organic growth momentum to continue, that will be a key for us as we move forward.
Joe covered a couple of the key highlights or the drivers for us in 2022. We have about 15 product launches that we expect next year, including NOV03, which is a really a great product for us, and we're excited about that launch in 2023. Then on the daily SiHy, which is really seeing a significant market demand right now. We're seeing that continue to shift in terms of the market demand continue to increase as we go forward. We will see that demand continue with us in 2023. From a top-line perspective, I will say that we have all the ingredients right now to continue with the organic growth as we go forward in 2023.
I'm not gonna specifically give a percentage right now as we're not guiding for 2023 today, but just all the key factors are there. From a currency, that's an interesting one because we've seen currency being very volatile in 2022. I think when we started the year with about $160 million of currency headwind, that was about a 425 basis point. Now we're seeing we update that based on the recent movement in the dollar being stronger against almost every currency that we do business in. So we've seen that roughly about $210 million. So when you factor in, we're probably assuming for the full year is roughly about 560 basis points of currency headwind.
It's hard to predict how things will go into 2023 specifically, but at least based on where we are today and where the currencies are, I would expect currency to continue to be a headwind for us going into 2023, just based on the rates of where the dollar is. On the interest expense, we guided for full year 2022 for about $150 million. When we guided, we end up using the curves factoring in the multiple increases from the Fed that were gonna happen into 2022. The full guides for $150 million still remains good for us for 2022. One of the things that we will be watching very closely, and just as a reminder for everyone, this is an interim capital structure for us.
We're gonna be triggering upon the separation a reevaluation on the ratings, and we'll move into more of a permanent capital structure. Right now, our steps that we're taking is trying to make sure that we continue to mitigate any type of incremental or additional headwind in interest expense as we go forward. We entered the cross-currency swap in Q3, and we're evaluating multiple other alternatives and tools that we'll be able to explore for the rest of this year to be able to continue to help us manage the interest expense. I think the last part of your question was on the margin. Can we grow margin? I'll say absolutely.
I think all the fundamentals that we have seen in 2022 as being a base year for us coming out in an IPO and all the product launches and the growth on the top line and the commercial infrastructure that we built in 2022, we believe that all is gonna give us the opportunity to be able to continue to grow margins as we go forward into 2023 and beyond.
Great, Sam Eldessouky. T hanks for that. Go ahead, Joe Papa.
I just second what Sam said in terms of I think it comes down to we've done a lot of the preparation required for us to go forward in 2023 here in 2022. This ability to spend more in R&D now to accelerate some of the timing on these premium IOL, we think that's important. The premium IOL is gonna get a much higher price point. If I use U.S. numbers, a monofocal IOL somewhere in the $100-$125 range, where the premium IOLs can be somewhere in the $750-$900 range. Those types of opportunities on the margin are there.
Same comment, as I mentioned before, on the INFUSE product as we launch, and get a stronger ability to get more share on the SiHy daily at a higher price point. Those are all gonna be important contributors to the margin. The things that Sam talked about on Project CORE, all the things that the supply chain team are doing great work there to look at the cost optimization portion of that. I think all those things are gonna be the benefits for as well as the new products that Sam mentioned.
Joe and Sam, thanks so much for that. Sam, I didn't hear on tax rates. 6% this year. I assume we shouldn't use that. Next year is 13%, which I think was the pro forma rate in 2021, the right rate? Thank you. I'll drop.
Yeah, sure. We're guiding this year at 6%. As I think about next year, again, I'm not gonna guide the exact specific percentage right now. However, I will say we are gonna be still at the low tax rates as we go into 2023. I'm not gonna guide specifically to what number it is right now, Larry. We still have work to do on that, but we will not see the 12% next year.
Thanks so much, guys.
Operator, I think we have time for maybe one more question, please.
Certainly. The next question is coming from Pito Chickering from Deutsche Bank. Pito, your line is live.
Hey. Good morning, guys. Thanks for taking my questions. A follow-up question actually on the CapEx question. I understand the need for this equipment in a recessionary environment, but provider margins have been pretty pressured this year from labor pressures, and therefore, they have lower cash flows to buy new equipment. I guess they're a multi-part question here. I guess number one, do you see providers becoming more efficient with the current equipment that they have? Number two, you talked about sort of 3% instrument growth in the quarter. Why the slowdown? What did that grow in the first half of the year? And number three, how did new orders look for 4Q? Is that 3% range the right number for fourth quarter?
Okay, a lot of good questions there. Yeah. I think that the general question in my mind is what's gonna happen with the actual demand for cataract procedures? That's where I started with this. Do I think cataract procedures in a recessionary environment are going to decline? Simply based on what we've seen historically during recessions, the answer is no. Do I think that one of the comments is that the providers are going to become more efficient? Of course. I do think that people will seek to become more efficient.
I remind you that, you know, one of the things that we talked about previously is that because of what happened with COVID, we had anywhere from a 15% decline in procedures in 2020-2021 to 20% decline 2020- 2021 outside the U.S.. We've seen there's a pent-up demand. There is an opportunity to do more procedures. You're 100% right, though there is, you know, providers have questions about staffing. They have questions about cost of staffing. Do I think there will be an effort to be more efficient? Yes. I do see that. We're gonna keep monitoring it. I can simply say that with some of the innovation that we've brought on our Stellaris equipment, we're seeing good demand for it.
We're working very diligently to get the product out. Our supply chain team, once again, doing a great job dealing with some of the, you know, the issues of making sure you get sufficient microprocessors, chips to get the product out the door. We've got demand out there, so we're excited. We think there's gonna be opportunity there. We've got 3% growth now, of course. I mentioned that before, but we're gonna continue to look to see demand out there and track it very closely. We don't see a specific slowdown other than what I mentioned about this quarter. We still see demand out there. Anything else you wanna add, Sam, in terms of?
No, in terms of the first half, I think we've seen the equipment sales overall has been holding pretty steady for the first half. You would see the performance has been pretty steady, just notwithstanding the different points that Joe just highlighted.
Okay.
Okay.
One very much. Go ahead.
It's a super quick follow-up just on cash flows. Can you sort of walk us through the impact to free cash flows, cash flow from ops through this quarter, and how we should think about cash flow conversion for 4Q?
That's a good question. We always thought about cash conversion for us as a free cash flow is roughly anywhere between 40%-50% of EBITDA. When we think about that as a metric from a conversion for free cash flow, that's probably the right sort of framework to think about. Just one thing I will probably highlight, and you will see as we file our 10-Q later today, we've been strategically building up inventory in certain parts of our business to make sure that we're actually meeting the end demand and market demand that we have. You'll see the inventory's been going up roughly in the range from the beginning of the year until now. It's roughly about $100 million.
That's all strategic in certain parts of our business to support the demand. That's having a little bit of an impact on our free cash flow, but we're still probably gonna be holding around that 40%-50% conversion margin.
Great. Thanks so much.
Well, let me bring a close to today's session. Thank you everyone for joining us today. We look forward to having opportunities to address any additional questions you have, and thanks again for your support of Bausch + Lomb. Have a great day, everyone.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.