Q4 2019 Earnings Call
Welcome to Glaukos corporations fourth quarter and full year 2019 fiscal results conference call.
A copy of the company's press release issued after the market close today is available at Www Dot Blancos dotcom.
After the speakers presentation, there will be a question and answer session.
So asking question. During this session you would need to press star one on your telephone.
This call is being recorded an archived replay will be available online and the Investor Relations section at Www Dot Glaukos dotcom.
I would now like to turn the call over to Chrysler <unk> director of Investor Relations and corporate strategy and.
Please go ahead.
Thank you and good afternoon, joining me today are Glaukos, President and CEO, Tom Burns CFO, Joe Gilliam, and COO, Chris Calcaterra, following our prepared remarks, well open the call to questions. Since your ample time, an opportunity to address everyone's questions. We of course that you limit yourself to one question and one follow up if you still.
Additional questions you may get back into the queue. Please note that all statements other than statements of historical facts made on this call that address activities events or developments, we expect believe or anticipate well there may occur in the future are forward looking statements. These include statements about our plans objectives strategies and prospects.
Regarding among other things are sales our products are pipeline technologies are U.S., an international commercialization.
The efficacy of our current and future products are competitive market position financial condition and results of operations.
These statements are based on current expectations about future events affecting us in are subject to risks uncertainties and factors relating to our operations and business environment. All in all of which are difficult to predict in many of which are beyond our control.
Therefore, they may cause our actual results could differ materially from those expressed or implied by forward looking statements.
Today's press release, and our recent SEC filings for more information about these risk factors you'll find these documents in the Investor section of our website at Www Dot Glaukos Dot com.
Finally, please note that the during today's call. We will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Gawkers is ongoing results of operations, particularly when comparing underlying results from period to period.
Please refer to the tables in the earnings press release as well as the Investor Relations section of our web site for a reconciliation of these measures to their most directly comparable GAAP financial measure with that I will turn the call Liberty block as President and CEO Tom Burns.
Good afternoon. Thank you for joining us this afternoon today Glaukos reported fourth quarter net sales of 65.8 million.
Up 22% versus a year ago quarter and 30% sequentially.
2019, net sales rose, 31% to 237 million from 181.3 million in 2018.
We're also providing a 2020 net sales guidance range of 290 million to 300 million, Joe will discuss our financial results and outlook in more detail later in the call.
2019 was a dynamic year for Glaukos as we took multiple bold steps to expand our global glaucoma business advance our transformative market expanding pipeline and execute a strategic vision designed to establish glaukos as a unique vision care leader with tremendous potential for long term growth and profitability.
I am pleased by our solid performance in 2019 and confident that our best days lie ahead.
We're just beginning to remark lock us as long term value as we leverage our core competencies to build thriving franchises in glaucoma corneal health and retinal disease with novel therapies that disrupt conventional treatment paradigms improve patient outcomes and create new robust market opportunities.
This summer will Mark our fifth anniversary as a public company.
And as we look towards what lies ahead for glaucoma.
Want to first recognize and thank our employees for the significant progress we've made to create a world class Global company any investors, who have supported us along the way.
Over the past five short years, we transformed glaukos from a single product U.S. centric company and true true ups Almac leader with three ft approved fully commercialized products and 17 direct sales markets worldwide.
We assembled experience 600 person teams that includes more than 250 commercial sales professionals and roughly 80 engineers chemist and technical professionals pursuing a host of promising R&D programs.
We have more than tripled the number of publicly disclosed pipeline programs from four to 13 with another 10, yet to be disclosed development programs also underway.
Financially we have delivered compounded annual sales growth of nearly 40% from sales of 46 million in 2014 to 237 million in 2019.
We've also expanded to maintain gross margins into the mid eighties, enabling us to reinvest back into the business and build a global infrastructure strengthen our pharmaceutical expertise upgrade enterprise systems and on numerous R&D and clinical programs well fortifying our healthy balance sheet by doubling our net Casper.
Position from $91 million at the end of 2015 $283 million today [noise].
As many of you know our ambition and long term strategy is always included innovation and disruption of other markets beyond glaucoma, notably in the areas of corneal disorders and retina.
Behind the scenes, we haven't quietly advancing the strategy by seeding development projects, attracting top tier expertise into glaukos and investing in the infrastructure to accelerate our research activities and over the last two years, we've supplemented these organic efforts with business development activities, including HM.
Stab wishing a relationship with the western for rock inhibitor research.
We secured an exclusive U.S. agreement for the Santana Presser flow Micros, Sean.
We acquired dose medical to secure multiple retinal drug delivery programs. We in licensed a novel transdermal cream based drug delivery solution from and Trotters, primarily for dry as well as other Cornell disorders in glaucoma.
And we acquired a vidro, establishing the cornerstone of our corneal how franchise.
So as we enter 2020, our long term strategic vision is now clearly in view as we leverage our strong foundation and core competencies.
Bill disruptive franchises in glaucoma corneal helping retina.
Within each of these areas, where I mean, moving full speed ahead with the same pioneering discipline skilled commercial execution and pipeline development expertise that has made us the worldwide leader of the makes marketplace.
In glaucoma, our goal has always been to create a full portfolio of micro scale surgical devices and sustained pharmaceutical therapies that provide the best benefit to risk calculus at every stage of disease progression from ocular hypertension through refractory disease and in both combo cataract and Standalone procedures.
Our 2019, we continued to convert our U.S. surgeon base to our next generation trabecular bypass device I spent a jack.
With this conversion now largely complete our U.S. reps have shifted shifted their focus back to driving utilization of existing accounts and training new surgeons, who have yet to adopt makes.
An increasing number of your surgeons continue to show growing interest in I spent injected megs, which gives us confidence in the future growth potential of the combo cataract market. Nevertheless, implied in our guidance is an expectation that competitive dynamics, maybe a wealth of headwind to growth for our U.S. glaucoma franchise in 2020 versus the overall.
Market. These dynamics are fluid, but do not but do include the full year impact from a makes competitor who reached more fulsome commercial scale in the back half of 2019, along with the impact of more tissue destructive procedures that have seen increasing utilization over the course of the past year.
Largely due to a currently favorable reimbursement environment.
Our leadership team and commercial organization remain focused on this important area of our business and maximizing our opportunity within the combo cataract market.
Outside the United States are glaucoma franchise continues to deliver strong growth.
As we drive deeper penetration or broader adoption of makes around the globe International growth was broad based across many countries, including established markets in Germany, and Australia, along with newer markets, including Japan, France and the UK.
At the end of 2019, we also received regulatory approval Fry sentence like inject in Japan.
And are now working with the Japanese regulatory body to secure appropriate reimbursement coverage to support a commercial launch by the end of 2020.
Going forward, we plan to continue to support and grow our quality experience or U.S. surgical sales teams, while working to optimize the reimbursement coverage and payment landscapes trained surgeons and leverage our compelling clinical data to grow makes adoptions and drive deeper penetration in our 16 international countries, where we have a dime.
Rick market presence today.
We're also evaluating and have been making initial investments in potential future direct and hybrid markets were favorable opportunities and reimbursement pathway is exist.
Turning now to progress with our glaucoma microscopy scale surgical pipeline first in the fourth quarter of 2019, we completed patient enrollment in the pivotal trial for ice than infinite our three stent standalone product for advanced in refractory glaucoma patients. As a reminder, this is a prospective multi center single arm.
Clinical trial that enrolled roughly 65 refractory subjects with a one year follow up we continue to target ft approval for I spent infinite in late 2021.
Second we are we're in early preparations for the potential U.S. commercial launch of San Tan Pharmaceuticals, micro shunt, assuming FDA approval in late 2022 early 2021.
The micro shrunk as an elegant app external surgical implant is not only a compelling treatment alternative for late stage glaucoma management, but also marks the capstone to our glaucoma treatment algorithm.
Third we intend to pursue I spent a safe for the standalone treatment of mild to moderate open anger glaucoma. Following the enrollment completion of our I dose clinical trials.
Moving onto our sustained pharmaceutical glaucoma quite pipeline, our focus remains on creating solutions with potential to provide 24, seven continuous therapy as a viable alternative to topical medications.
It is worth reminding investors the topical therapies are the mainstay in a mainstay of glaucoma treatment and that they worked for many patients when taken properly. However, the primary issue. The industry has been grappling with for for decades is patient noncompliance. This is ubiquitous well understood and documented with high dose.
We are taking a novel and differentiated approach to address this issue for the benefit of patients. We're excited about our prospects will remain remaining fully aware that success will require much of the same pioneering playbook that we utilized to develop migs over the last decade.
I don't travel Prost now known as Idaho's TR is our first primary sustain pharmaceutical and glaucoma and we believe it has the potential to be a game changing therapy.
2019, we brought we brought this breakthrough technology closer to becoming a reality through continued patient enrollment in the Idhone PR phase three I Indeed clinical program.
Patient enrollment for the Idaho's TR is proceeding inline with our expectations to support our ft approval target of 2022.
The powerful I dose data available, thus far underscores our confidence in the potential of our novel drug delivery platform to produce future generations of sustain therapies for glaucoma and potentially other ocular diseases. Accordingly, we are in late stage development with finalize designs for next generation.
Those t. our extended release implants also known as I dose T. Rex, which in a similar size and form factor to the original I dose PR is designed to provide nearly twice the drug capacity to extend efficacy durations even longer.
We will be engaging with the FDA in the near future to determine the most appropriate and expeditious regulatory pathway to this novel products.
We're also seeking additional drug classes that may be synergistically used in conjunction with the iOS platform through our research and development agreement with the Western we're currently assessing multiple rock compounds, which are showing positive reductions and rapid models.
And we're establishing prototype implants for lead candidates in these same models.
Rock inhibitors when used in conjunction with prostate gland and had been shown as a powerful treatment in reducing intraocular pressure in U.S. pivotal studies.
In summary, we anticipate our glaucoma pipeline portfolio to provide a complete cascade of new product introductions over the coming years, allowing us to expand beyond the combo cataract segment into the broader glaucoma population.
As a result, we believe these pipeline platforms, if approved could significantly expand our glaucoma U.S. addressable market opportunity seven fold from roughly 600000 procedures today to over 4 million annualize.
With the targeted launches of Microsoft in late 2020 to early 2021, I stand infant in late 2021, and I dose TR in 2022, along with our promising longer term programs of I spent as a high dose T. Rex high dose rock and the IP sensor program.
We believe we are in a powerful position to drive sustainable long term growth in our glaucoma franchise going forward.
Turning now to our corneal health franchise, which is targeting a large market with significant unmet commercial and clinical needs across multiple diseases and disorders.
This franchise is anchored by the vitro business. We acquired in late 2009 team that brought us a proprietary bio activated pharmaceutical therapeutic platform.
Our initial therapeutic focus is in keratoconus, a sight threatening degenerative disease in which the cornea progressively spends and weakens leading to vision loss.
There are approximately 1.1 million eyes that are prevalent in the United States today with annual incidents of another 32000 eyes translating into an estimated 3 billion dollar market opportunity.
You know keratoconus as a sight threatening disease and the leading cause of full thickness corneal transplants in the U.S. we.
We believe it remains vastly under treated this is due primarily to under diagnosis and the historic lack of any effective solution.
Today, approximately 20% of keratoconus patients ultimately require a corneal transplants a costly in a base invasive procedure with high failure rates. In fact literature suggests 72% of corneal graphs fail within 20 years and 98% fail within 30 years Sadly as.
The disease onset is often diagnosed and teenage years keratoconus patients may require multiple transplants over ones lifetime.
Well trucks, so our flagship commercial offering today is the first ever bio activated ophthalmic pharmaceutical therapy for the anterior segment and unlike antiquated symptomatic approaches is the first and only treatment option approved by the FDA to actually slow or halt the progression of keratoconus a single application of this buyback.
They did drug in what is known as an EFI off procedure has shown the potential to halt disease progression with sustained durability and safety of over 10 years in the vast majority of patients according to multiple studies.
In order to maximize the availability of this important therapy for patients at the end of 2019 and over the course of 2020 were making substantial investments to fully integrate our commercial organization lower the barriers for adoption by practices increase awareness in the optometric community and resolve many of the ordinary course growing.
Pains associated with the establishment of a new J code.
We we finalize many of these plans shortly after closing the transaction and began their formal deployment in part at our global sales meeting held earlier this month, where we conducted cross functional training and prepared the organization for alignment key account targeting and market segmentation in 2020.
In addition, we are preparing a variety of marketing programs and campaigns designed to educate optometrist regarding keratoconus, increasing glaukos telcos is present at all major optometry meetings.
Optimizing referral network patterns and driving awareness through paid media social media and other mediums.
We will also be executing on multiple business solutions for the benefit of customers and investing in health economics to further solidify the value of corneal cross linking to patients and health systems.
Turning to the Corning will help pipeline, we continue to make progress on the next generation keratoconus therapy at beyond which is designed to shorten procedure times improve patient comfort and shorten recovery times.
Beyond will deliver or utilize a proprietary novel drug formulation stronger Uva irradiation protocol and the ability to deliver increased levels of stock supplemental oxygen.
Patient enrollment for the pivotal phase three clinical trial for Opteon was completed in May of 29 team and we will follow these patients for one year, we are targeting ft approval by 2022.
Beyond Keratoconus, we are developing novel single application bio activated topical ophthalmic pharmaceuticals, and customize Uva beam protocols for presbyopia and other refracted conditions with our pixel therapy.
A phase two a multi center clinical trial outside the United States to investigate the use of our picks of therapy to treat patients with presbyopia is ongoing.
[noise] study results, which we expect to review later this year will help us optimize the pixel parameters and determine the most suitable us clinical and regulatory pathway forward.
Finally on a vidro to ensure we are we are ideally positioned to take full advantage of this opportunity, we're dedicating significant time and resources to a thoughtful and thorough corporate integration, which has been spearheaded by team with deep experience for a much larger and an acquisitive organizations.
This process has been fully underway since day, one, including the aforementioned expansion and realignment of responsibilities within the US field sales organization. The communication in December two a vitro employees on their specific status with respect to our retention and restructuring plans and the integration of key IP systems.
And facility planning.
Also on the Kornya, how front, we're developing a patented noninvasive transdermal drug delivery platform designed for use in the treatment of dry disease, and potentially glaucoma and corneal disorders.
Early human studies of this novel patient friendly delivery system have demonstrated efficacy, while limiting the side effects often associated with drugs to deliver it as topical eye drops.
We are currently optimizing the lead product candidate for use in future clinical trials.
This novel drug delivery platform ads to several organic corneal health R&D initiatives, we already have in place. We see this platform has an excellent opportunity to potentially enter into the $4 billion dry disease market with a highly differentiated approach while also exploring opportunities in glaucoma.
In other corner disorders.
Finally, our third area of focus is in retinal diseases largest market in ophthalmology today estimated the 13 billion worldwide and expected to grow nearly 10% annually through 2023.
Our retinal R&D teams are harder work developing multiple micro invasive bio erodible drug delivery platforms designed to treat age related macular degeneration, diabetic macular edema and other retinal diseases.
We have three primary sustained release development projects were advancing that include a triumphs analyst cnine steroid targeting DMV and an anti VEGF protein and a small molecule multi kinase inhibitor targeting wedding MD.
The goal of these preclinical programs as to ultimately provide retinal specialist and their patients with novel sustained pharmaceutical treatment options that offer a meaningfully longer duration effect than the current standard of care.
So in summary.
We're creating a unique vision care leader prepared to drive a robust cadence of new innovation that can significantly expand our market opportunities and drive sustainable growth and profitability over the next decade.
Strong foundation and team we've built leaves me confident in our ability to execute on our plan and realize the significant value creation opportunities that do lay ahead for glaukos.
And with that I'm going to turn the call over to Joe to discuss our fourth quarter and full year 2019 financial results. Joe. Thanks, Tom as a reminder, I will be including non-GAAP or adjusted basis metrics to describe the highlights of our financial performance given our recent acquisition of a vitro and other nonrecurring items.
I will also summarize our GAAP performance later in my prepared remarks, I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's press release as well as the Investor Relations section of our website.
In addition, my comments today will reflect contribution from a vidro starting with the acquisition close on November 20, Onest unless otherwise noted.
Telcos net sales for the fourth quarter of 2019 were $65.8 million on a reported basis a year over year increase of 22%.
Fourth quarter performance was primarily driven by global glaucoma sales of 59.8 million, which increased 11% compared to the fourth quarter of 2018.
Growth was driven by U.S. volumes and continued strength internationally with broad based growth across all key international regions and countries.
In corneal health, which includes the former a vitro business fourth quarter net sales were 6 million Standalone vitro sales for the full fourth quarter of 2019 would have been approximately 12.4 million an increase of 52% compared to the fourth quarter of 2018.
The corneal health performance was almost entirely driven by us for Treximet year over year sales growth of 57% to $8.9 million, which was offset by a modest year over year decline in international revenues.
Our non-GAAP gross margin in the fourth quarter was 85% versus 87% in the same quarter in 2018, which reflects largely consistent glaucoma gross margins and the inclusion of a vitro results in our fourth quarter of 2019.
Non-GAAP Escan a expenses in the fourth quarter rose, 24% to 38 million versus 30.6 million in the year ago quarter.
Yes, Hey expenses grew approximately 8% year over year, excluding the impact of Vidro, which was approximately 5 million on a non-GAAP basis in the fourth quarter of 2019.
R&D expenses rose, 55% in the fourth quarter to 20 million versus 13 million in the same year ago period, R&D expenses grew approximately 42% year over year, excluding the impact of vitro, which was approximately 1.5 million in the fourth quarter 2019.
Beyond the vitro the increased spending reflects the direct costs associated with the I dose clinical trial as enrollment continues to increase.
Our expanding development programs across glaucoma, corneal health and retina and the cost of additional personnel as we expand our pharmaceutical R&D capabilities.
We finished the fourth quarter with a non-GAAP net loss of 2.4 million or six cents per diluted share compared to non-GAAP net income of 3.3 million or eight cents per diluted share in the fourth quarter of 2018.
GAAP net income was 36.6 million or 84 cents per diluted share for the fourth quarter of 2019, compared with GAAP net income of 1.8 million or four cents per diluted share in the fourth quarter of 2018.
The adjustments between GAAP and non-GAAP net income are outlined in quantified in our earnings press release issued today. These adjustments are primarily the vitro acquisition related accounting integration costs, and a onetime tax benefit as well as our ERP integration costs patent litigation expenses and in process R&D charges.
As of December 30, Onest 2019, we had cash cash equivalents short term investments unrestricted cash of 183.3 million compared to 161.8 million at the end of the third quarter 2019, and 149.3 million at the end of 2018.
As Tom referenced earlier, we are introducing our 2020 net sales guidance of 290 to 300 million.
This guidance outlook takes into account the continued expansion of our new corneal health franchise, our us glaucoma, new Doctor training and overall market growth expectations. The full year impact of the competitive landscape dynamics. The continued growth of our glaucoma franchise internationally and the impact of our integration activity.
We currently expect Q1 revenues to account for roughly 20%, 21% of full year 2020 sales, which reflects the normal procedure seasonality the impact of glaucoma promotional activities in the latter part of 2019 and the expected near term impact from our integration activities across the U.S. glaucoma and corneal health franchises.
We anticipate 2020, non-GAAP gross margins of 83% to 84%, reflecting the growing contribution from corneal health in our international glaucoma business.
We also expect 2020 non-GAAP operating expenses of approximately 300 million, which reflect the full year contribution to the vitro are growing global infrastructure and expanding R&D programs across glaucoma corneal health and retina.
Finally, we expect capital expenditures of approximately 35 million over the course of 2020. These expenditures are primarily nonrecurring investments associated with expansion and consolidation of our facilities and with that I'll now turn things back to Tom for a few closing remarks, alright. Thanks, Joe.
Our strategic vision for Glaukos is now clearly in view as we leverage our strong foundation and our core competencies to build disruptive franchises in glaucoma, Kornya Hall, and retinal retinal franchises.
We are focused on near term execution and excited about our long term future. We're in just the next two years, we expect to have four major new product introductions with presser flow.
The an infinite.
Beyond and I dose TR.
Beyond that we have a fulsome portfolio a pipeline opportunities with ice that dessay.
Hi dose T. Rex.
Most rock pixel dry eye therapy, retinal pharmaceuticals, and the IP sensor.
We are confident these opportunities should allow us to become a formidable comprehensive eye care company uniquely positioned to deliver sustainable long term growth and create meaningful shareholder value for years to comp.
So with that I'll open the call to questions operator.
As a reminder to ask a question you will need to press star one on your telephone keypad.
Again that is far wanted to ask a question to withdraw your question press the pound key.
Please standby, while we compiled next Monday roster.
And your first question comes from the line of Robbie Marcus with Jpmorgan.
Hi, This is actually Allen on for Robby I wanted to start off with the US makes market. When we look at your performance. This quarter I don't think against broke it out on the color in the press release, but could you give some color on how fast the market grew David maintain that kind of teens rate that we've seen so.
So far this year and as we look out to 2020.
Obviously, there's dynamics of competition, but how should we think about market growth next year as well.
Sure. Thanks, Alan It's Joe I'll start off with that in the fourth quarter. Our US revenues were just shy of $48 million, which was.
Approximately 5% growth year over year really all driven by.
Volume.
Above that to the part of your question was what was sort of happening in the market and the market in the fourth quarter.
Our best estimates are they continue to grow as we expected in the mid mid teens and really for the full year as we look back in 2019, we really saw mid teens market growth.
As we think about 2020 and looked at our operational Brent plans around new Doctor training and same store sales initiatives.
The current expectation is for market growth of.
Double digits too low teens, and that's really driven as we've talked in the past by a combination of new Doctor training, which we expect this year to be somewhere north of 500, new doctors that we would add to the roster of of Migs trained surgeons.
And same store sales, which we continue to expect will expand the overall market on the heels device didn't checked.
But perhaps not quite at the same rate we saw in 2019, where our reps were very focused internally at existing accounts.
Got it so I think we were expecting a pretty market deceleration.
Relative to our expectations at least it looks like it was a little market deceleration, but competitive disruption in the quarter. It looks like it was a little bit more severe than we were modeling personally as we look to the kind of the growth in 2020 should we expect like kind of if the markets growing like low teens will you guys being that similar mid size.
Michael digits range and then.
How do we think about growth beyond 2020, and do we see you getting back to market growth and how do you really.
Start competing against the kind of aggressive efforts being made by your competitors.
Sure again this is Joe I'll start and Chris May want to comment on this is well.
Implicit in our guidance for the year of 290 to 300 million is a couple of things and you focused on the U.S. market, but I'll touch on the sort of full picture.
Our expectation there is that that will be high teens growth.
For both the corneal health and international glaucoma franchises and low single digit to mid single digit growth for the us glaucoma business, we obviously impacted the under the line drivers in each of those.
Additional questions.
But as we think about then more broadly going forward.
I think that that low single digit to mid single digit combo cataract growth is probably the appropriate way to think about that part of our franchise of course is Tom commented on in the prepared remarks. There. There we expect on top of that as we move into the Standalone markets, both with the presser flow Microsoft.
I, just an infinite high dose and beyond that we can drive growth beyond that in the broader franchise, but for combo cataract I think this is an appropriate way to think about.
Things going forward.
Your next question comes from the line of Larry Biegelsen with Wells Fargo.
Hey, guys. Thanks for taking the question.
Joe one on the guidance and one on vitro.
On the Q1 guidance, if I'm doing the math right. It looks like on a pro forma basis, you're guiding to slightly.
Down slightly year over year on a pro forma basis again.
So so why is that and kind of what gets better it looks like your.
Turning to about 6% to 10% pro forma for the full year and I had a follow up.
Sure Hi, Larry It's Joe So as you know when we talk about the sort of year in the quarterly cadence, we've often referenced the cataracts seasonality, which we've talked about a lot right 22% in the first quarter 25 in Q2 in Q3 in 28 in Q4.
When you think about the Korean health franchise, clearly, it's still early in that lifecycle to draw a definitive conclusions, but but what I can say is our expectation is that the Q1 is certainly the lightest of those quarters just from a seasonality perspective, given the fact that you're treating younger patients who at least with the FDR procedure, we expected to be treated a little bit more in the summer.
Months, and then of course with reimbursement dynamics towards the end the year. So from that is in the starting basis point, Larry and getting to the 20% to 21% that I talked about the prepared remarks for the first quarter. There's a handful of things there I'll touch on it at a high level.
And we go from there.
Typical seasonality there is a reference in the prepared remarks, there is some impact from integration activities as we bring the sales organizations together, we make the adjustments we expected to make.
In the corneal health organization as well as the overall management.
Of the broader commercial organization there are some customer oriented programs. If you will in corneal healthier Tom referenced that are designed really to to lower barriers of adoption for in the corneal health business as well as make sure that for those affected by the J code, there's a variety of initiatives there to make sure that there.
Good position going forward.
And then finally I would say the combination of the domestic glaucoma competition dynamics and really some promotional activities that we had in the latter part of 2019, you put all that together and that's what gets us to that that slight deviation from the typical 22% first quarter two something it looks more like 20, 21%.
Joe Thats helpful. Just for my follow up.
Tom mentioned, some growing pains with the J code. So we've also heard about some variability in the payment in reimbursement.
For for FFO tracks, so it sounds like maybe.
Maybe you would agree with that how carrier dressing that and do you guys have plans to pursue a category one code for all four owed to T. Thanks for taking the questions guys.
Hey, Larry it's Chris.
You know whenever you have a J code, there's always going to be some growing pains associated with that.
We feel really good about our approach to it in 2020, we now have a market access team that's twice as big as would it be drew add in 2019.
These are unusual.
Challenges to be faced with the fact.
As an organization early in.
2012 or exceed yet 2012 in 2013, we faced similar.
Issues like that but J codes are unique we put together a number of programs to help address it to make them more.
Customer friendly and we're hopeful that we will get these through the system quicker.
With the additional manpower and programs that we put in place and while that's been an impediment a bit to the growth in 2019 were hoping to resolve that in 2020.
And I'll take the question the category three code.
For two to you were talking about Larry and just tell you that were actually really quite pleased with what we're seeing from the commercial payers as we've said before and to be dress that previously we're seeing in the range of $2000 are so professional fees, which are being fairly metered out for for this procedure.
Current category three code continues as you know into 2021 and I think we'll we'll take a similar position here like we did with Migs, we're able to extend that favorable code for another five years.
I think that will put us in a good position put customers in good position to be able to reap a fair.
Professional remuneration for for this procedure.
Thank you for taking the questions.
You're welcome.
Your next question comes from the line of Matthew O'brien with Piper.
Afternoon, Thanks for taking the questions just again on the guidance I just given.
The number coming in lower than most of us, we're expecting especially on the.
The U.S. glaucoma side of things just the dynamics that are going on within that space. Now I think you have a couple of pretty well.
Notable competitors there.
Just.
With all the investments they are doing all the new.
Surgeons are expected to add I'm surprised this year that is so low. So can you just that the outlook is still though as far as the growth rate goes. So can you just talked about what's going on in that category as far as losing clinicians or.
Just the level of trial and you're seeing.
A lot more trial.
Together.
The other offerings or.
Finally, coming back to you guys and you're just expecting a fair fair amount of that this year, maybe next year and then hopefully get back closer to.
More like market rates couple of years from now.
Hey, Matt This is Chris and I hope, we do get back to those rates. What we're seeing is a more fulsome competitor who is more fully staffed in terms of sales organization, who is continuing to do a fair amount of training and Trialing, which includes free product or heavily discounted product.
We also are seeing more of activity.
From the tissue destructive procedures more specifically the omni procedure in the KDB.
These are primarily driven.
By economics for the surgeon.
And given the cataract reimbursement decline this becomes even more significant.
I would say that despite the.
Increase in trailing and and training of the product.
The of the activity in the.
Pickup a business on the Identive side is in line with what we expected let me say on the tissue destructive side of things I was greater than we anticipated and again I think it's primarily being driven by economics.
Okay, great sorry to push a little bit here, but.
I think the pressure reduction that you're seeing.
With omni with advances are pretty meaningful I.
I know, they're harder procedures to do versus inject but.
Is there a way to combat that for you guys. Because you know again the pressure reductions we've seen some of the clinical studies for those products are pretty getting a little bit better then.
Inject so is there way for you guys to.
Actually had an office esensor preset perspective, or something along those lines sort of start to mitigate some of those pressures going forward.
Yes, I'm going to start with the advantages.
And the highest product the pressure reductions are very similar.
Theres only one study out there that's a company sponsored sponsored study that would.
Claim otherwise, but when you look into pivotal trial.
Pressure reductions are very similar and then the safety profile for extended jet.
Is superior and we believe that ease of use in the elegance of the procedure is superior so while there is trying and trailing out there in the long run we feel that we will prevail as it relates to omni.
That is a procedure this typically done more moderate late stage.
Those pressure reductions may be a transient in nature and may be more significant upfront, but over the long run.
I don't see it that way and.
It's also as I mentioned tissue destructive it's not in our minds a good long term solution and again I think it's being primarily driven the utilization there of.
By the economics of the proceeds.
Okay, I'll I'll leave it at that thank you.
Thanks, Matt Smith.
Your next question comes from the line of Bob Hopkins with Bank of America.
Well thanks for taking the question can you hear me okay.
Yes.
Great great.
Joe I just wanted to make sure I heard some of the numbers right.
So for the for the fourth quarter. The U.S. makes business was up about 5% is that correct.
That's correct.
Okay, and then you're guiding to for that same business in 2020 up low to mid single digits for the U.S. makes business.
That's correct.
Okay and then since this is kind of the first quarter, where we got a cleaner look at the U.S. makes business given the anniversary of.
ALCANZA issues.
I was wondering I'm, just curious that 5% number in the fourth quarter.
Roughly what was the growth rate of your business us makes in Q3.
I have that offhand.
And when you kind of on.
Apples to apples basis with that would that 5% if that's possible number to get.
Yes, I don't have that number off hand could you sort of asking me to unpack between what was the I'll call. It organic growth relative to the share recapture of Cypass, if I understand the question right Bob.
I think it's fair to say so if you just take the competitive dynamics over the course of the year.
Which we talked about on every every quarter and sort of that the pickup.
Whether it's in the context of advances commercial organization in the trying and trialing its or that initial launch that they had.
Or the the tissue destructive dynamics the Christmas alluding to that was obviously over the course of the year slowly picking up steam as both those organizations increase their size and some of what they're doing so I think its inherent underneath the reported results that you probably saw a somewhat linear stepdown in kind of the organic.
Growth that you're you're asking about Bob.
Okay, and then last question, Joe and again as you might or might not have is but I'm just curious for the fourth quarter.
In the United States didn't do you have a sense is too.
What share of the market those other two competitors that you've mentioned might have or what your share is in the fourth quarter of that.
US makes market.
Yes, I mean, we obviously have all of our internal analyses that we run and look at that's not something that weve comment on publicly bobbing and there is a fair amount of of of noise in that in any given period given.
The lack of publicly available information on those competitors both of them, we're all of them being privately held.
Okay.
Thats helpful. Thank you very much.
Thanks.
Your next question comes from the line of Jon Block with Stifel.
Thanks, Good afternoon, guys and sort of similar line of questioning I guess, but Joe that in the 2020 market growth of call. It 10% to 13% that you sort of alluded to is below the mid teens.
I think you called out last quarter, so why that revised rate of market growth. Considering you guys are the ones sort of driving it I'm just trying to figure it out as it is training going slower our new docs coming into the fold a little bit slower than you thought maybe if you can just elaborate there.
Sure John It's a good good question ill start off here and of course wants to add something he can at the yen.
So when we in the time since we were on third quarter call I guess in early November a couple of things first actually our fourth quarter. You know training certifications. We were quite pleased with we definitely saw the kind of rebound after a pretty anemic period.
We had hoped for and expected in the fourth quarter.
But as we work together the commercial organization laying out their plans for 2020 over the course of November December January.
And looking forward.
That's where we landed it training plant plans that were probably a little bit less than what we had originally hoped.
And that is I mentioned the prepared in one of the other questions a little north of 500 that we'd expect to train in 2020.
And what really drives that is an expectation and we'll see how it emerges, but an expectation that as you get in this part of the training curve. If you will that it will take a little bit more time to train your average dock.
And that as we've all known on average the productivity or benefit to Glaukos from the average trading the doctor is a little bit less right not a market shift but over time. We've we've seen this and we continue expected that there'll be a little bit of a decline. There. So I think it really has more to do with us getting to the places a part of our 2020 planning where we were much.
More laser focused obviously on what operationally, we think we can achieve in terms of new Doctor training.
Yes, John I'll add to that we are the primary drivers of the growth.
And so when you add to that with Joe just talked about with the types of doctors now other in the training funnel and some of the.
Activities that we have to do in terms of.
Addressing competition I think thats.
Good understanding of why we.
Landed on the numbers were okay, and just a quick follow up to that same question 500 on a base. What are you willing to give us an approximate number of where you where you are before entering the additional 500 sort of where you exited 19 goal.
Yes, I mean I appreciate the question John you, obviously, we stopped giving that level of granularity sometime ago. The intensive telling you the 500 as at least at Orient.
Investors relative to what we had seen it kind of the highs right I mean, I think back in 2016 2017, we were treating docks at a clip of 700, plus a year and we want to give a sense of the orientation of that for 2020 relative to those those time periods. Okay. So very helpful. And then last one is just other competitor and you.
Called about financial advantage, so I think the initial thought.
Chris What was hey, you have the potential traction for those guys is largely confined to glaucoma specialist as tricare procedure that high volume cataract surgeons are comprehensive guys don't want to take on that additional risk. So maybe you can talk about what you're seeing in the field is it still largely confined to that glaucoma specialist channel or have you seen to leak into yeah.
Other areas, thanks very tough.
Yes.
So I would say is a generalization they've had much more success with the glaucoma community and they have some success with the.
Comprehensive ophthalmologists sure Theres been some cases that.
And I expect there will be but in large part of the majority of their success has been in the glaucoma community because they are more prone to dealing with the challenges that that device presents.
More.
It's more acceptable for them to take the time to deal with that so it's a generalization, but yes, there is still very much.
Focused on the glaucoma community.
Your next question comes from the line of Chris Cooley with Stephen.
Good afternoon, and I appreciate you taking the questions, maybe just a little bit different talked to start than I have one quick follow up can you look at.
The guidance there kind of mid teens for.
The.
They drove portfolio.
Just kind of looking at where that business exited the fourth quarter.
Can you speak broadly to whats your expectations are for capital versus volume.
And maybe any changes as it pertains to.
The pricing of that offering the for Texas specifically.
Bundle back into these new practices as you continue to scale from that I've got a quick follow up.
Sure. Thanks, Chris It's Joe I'll start off.
Implicit in the guidance as I've mentioned earlier for the corneal health franchise expectations of high teens growth.
Clearly.
Step down from what was experienced over the course of 2019, a handful of things that are are driving that.
All of which quite frankly from our perspective were expected.
As you referenced we do expect to lower the barriers for adoption right and part of that is something we've been alluding to for since really the outset of announcing the transaction and that that relates to the capital equipment side of of the business. We do intend to pursue operating lease options and other things to really drive.
I have down those barriers for the adoption. If you look back on 2019, a little bit shy of 10% of Vitaros revenues on the full year.
Represented by capital equipment. So clearly that's that's a component of headwind going into the year.
The other pieces that we've alluded to and Chris may want to expand on here.
Related more of the integration side of what we're doing again expected Theres theres any great integration component here certainly in the first quarter, maybe in the first half.
And then some of the programs that we're putting in place to make sure that these customers.
Our in the right place with respect to the Jayco dynamics have been playing out Chris If you want to add anything Yeah, Hey, Chris How're you doing.
Right.
Yes.
So Joe really handled the our philosophy on the capital and I'm, making it an impediment to the sale.
In terms of the integration of the business and moving forward. We just came off of our sales meaning couple of weeks ago. There has been a lot of shall we say transient disruption in terms of who the colonial health specialists are reporting too.
That's all changed there theyre moving to more of a regional commercial management program.
The glaucoma folks they had been fully trained to large majority of the.
Sales meeting was spent on cross training those folks and we really putting our model into place where.
The.
Lakos Representatives are now glaucoma representatives will can serve as the hunters there'll be out there.
Prospect Dean calling on people getting them interested in the business.
The in the simplest of turns the corner you specialists will be focused more on same store sales growth integration.
Reducing the barriers to.
Utilization working with the Odcs referral patterns et cetera. So in short same store sales growth. So that'll take as Joe mentioned, some time to get that completely wired up I think like we've done in the past we've done a good job mix.
In regards to execution and we'll continue to do that but we expect some minor disruption in Q1 and potentially into Q2.
I appreciate additional color and then just quickly for my follow up can you think about the domestic mix guidance.
Or whats implied for domestic mix growth.
Coming year 2020.
Can you speak to us about your thoughts on pricing historically, you've benefited from price increases as we started each year for the original I stand today, obviously with the inject.
With your being at a competitive disadvantage in terms of reimbursement versus omni in a few more.
Aggressive approaches that are out there are more trialing from Avana's is slower growth predicated upon this year loss volume or is it also assuming some degradation on pricing as well. Thank you.
Sure. Thanks, Chris.
I think from numerical perspective.
We saw relatively stable pricing in the fourth quarter very modest headwind related some of the promotional activities et cetera. As we think about 2020 expectations. There are for the continuation of relatively stable pricing environment. So not really a significant benefit and certainly not really has.
And to the expectations, it's really all related to volumes and volume growth yes.
And Chris to your point, yet there are pricing pressures out there and we'll have to look at each one of these situations.
As a standalone items, but our intention is to continue to be a premium priced product because we are a premium.
Product.
So that's that's our stance as we sit here today.
Thank you.
Your next question comes from the line of Ryan Zimmerman with BTI team.
Alright. Thank you couple of questions for me just want to ask one.
Maybe I want an eye dose. So I think we're expecting the matter process are kind of midway through this year, maybe a little sooner I'm, just curious kind of what feedback you've had you've seen from physicians around that product and kind of how its informing your view on I dosing.
Just a solid.
Did you say it was more closer to 520 22.
I think previously you said wait for 21 in the F 22, So just what changed.
Slide pushback there.
Couple other follow ups. Thank you.
Now I'd be happy to I don't think anything's changed we've said consistently for many years that we were looking at either late 2021, 22 and have basically.
We'll be adhering to our base case for approval right as we continue to move forward with the high dose clinical trials. So nothing's changed there what I would tell you is in the Bimatoprost MSR I've been consistent all along I think it's a good product I think the drawbacks of the product as it has to be injected in the clinical trials that they've done it's designed to last about.
Four months.
So they've done injections every four months to be able to achieve the the reductions and pressure that they have seen and that's largely because it's a by roadable and as I've talked about before Biodel bowls.
Only allow a certain amount of of CPI that can be placed into the matrix in order to achieve the type of zero order solution that they're seeking and typically that's about 20% to 25% of the drug. So I think there so theres a significant drawback what I do like about the product is that it appears that it does lower pressure that validates the energy.
Cameral use of of prostate gland, then going behind the cornea with a very low aleutian rate be able to achieve really a.
The nominal reduction intraocular pressure.
Well I love about the high doses, we said before is and as I've alluded to as of a couple of calls ago I continue to look at the late breaking data the data that I did talk about openly was a two years at two years. It looked like there was still a very marked reduction in intraocular pressure and reduction in drug burden.
These will will be highly imports into when we do launch the product into the marketplace. When we start to see these kinds of sustained.
Intraocular pressure reductions and relief of drug burden with a single injection and Thats why we intend to present this to the marketplace. So I remain.
In intensely and highly excited about the launch of up the impending launch of the ideals product and then we talked about the high dose T. Rex if we're able to take the same form factor and be able to increased twice the amount of apiay in that form factor with the same de minimis.
Minimally invasive injection I think that just portends, a really a breakthrough product in a game changing and paradigm changing product for glaucoma.
How long for my view, while there'll be some uptick that I'll see in howl again goes with the adoption and I think what it will help to is how eller Dan prices.
Been asked several times, what our approach to pricing is going to be we continue to do markoff transition probability analysis and quality of life analysis and other things you'd expect us doing sophisticated pharmaco economic programs, but a lot of what we'll see I will be interested to see how well again prices and how they justify their.
Pricing and rationale, which will then help inform us of how we go forward with our product in the marketplace.
And can we see rescue rates.
From.
High dose data.
At some point and if so.
Yes, so what I've said, all along and been very consistent is that we've given obviously very fulsome interim cohort data, which shows the promise of the device and obviously I've commented on two year late breaking results what I do plan to do is to be able to show when we have phase three data will have the ability.
The show the three month data, which will be the primary basis for approval will be able to show the one year data, which will show than a combined approach. After one year in terms of safety and efficacy and then as we extend that date over time I'll be happy to share that with the community I Havent totally closed on the option of presenting please.
Phase to be data at some point, but I continue to like our position to husband that I think it gives us more benefits than risk for the institutional investors that I'm, representing by not informing the competitor many months prior to approval on how they might counted promote against us and so while it's somewhat frustrating sometimes for.
Sure.
I guess the analyst that we'd like to see the data I think it's I think on benefit to risk calculus for us I think it it really implores me to husband that date as long as I can before I give divulge more on the phase Twob data.
Okay Fair enough and then micro Sean I think originally were expecting kind of late 2000.
Well potentially the 21, so now you're thinking about 21.
Some perspective, maybe Joe on the contribution from micro shawnte or size of the opportunity and how fast can you get in the hands here Salesforce as we're thinking about it and 21.
Sure ill start off and then if Chris once their time when adding they can.
Obviously, the timing with respect to the micro Sean remains largely in our partner sentence hands. Their most recent commentary is that we should be expecting filing I think they said by the end of their fiscal year, which is here in March so.
The filing should be coming soon the timing of the FDA review, there obviously can be somewhat variable, hence the what we've said around easily 20 or early 21, a timing from a contribution perspective, I mean, it's a little too early for us to get.
Too granular on that I think the reality is we think about that is it's a category that's that's well understood but.
And we think it's a great product to serve the needs of that category.
But at the same time, we have to get out obviously to the blocking tackling training surgeons.
And getting them them going and so those will factor into our thinking ultimately when we we give a view on the numbers for 21, but it's still too early for that.
Okay. Thank you.
And there are no further questions at this time I will now turn the call back to Glenn Cohen for any closing remarks.
Okay, well. Thank you all for your time and attention today and for your continued interest in Glaukos.
Goodbye and have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participating.
And now disconnect.
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