Q3 2020 Glaukos Corp Earnings Call
The speakers presentation, there will be a question and answer session to ask a question during the session. Please press star one on your telephone.
This call is being recorded and an archived replay will be available online in the Investor Relations section at Www Dot glucose dotcom.
I will now turn the call over to Chris Lewis Director of Investor Relations and corporate strategy and development.
Thank you and good afternoon, joining me today are black as President and CEO, Tom Burns CFO, Joe Galeon and COO, Chris Calcaterra.
In our prepared remarks, we'll open the call to questions to ensure ample time and opportunity to address everyone's questions. We request that you limit yourself to one question and one follow up if you still have 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 will or may occur in the future are forward. Looking statements. These include statements about our plans objectives strategies and prospects regarding among other things our sales our product.
Our pipeline technologies, our us and international commercialization efforts, the efficacy of our current and future products, our competitive market position financial condition and results of operations as well as the expected impact of the Cove in 19 pandemic on our business and operations. These statements are based on current expectations about.
Feature events affecting us and are subject to risks uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward looking statements review todays press release in our recent SEC filings for more in.
Information about these risk factors, you'll find these documents in the Investor section of our website at Www dot glucose dotcom.
Finally, please note that 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 Glaukos is ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release that is available in the investors section of our web site for reconciliations reconciliation of these measures to their most directly.
Comparable GAAP financial measure with that I will turn the call over to Glaukos, President and CEO Tom Burns.
Thank you Chris Good afternoon, and thank you to all everyone for joining us today.
I'm pleased to report third quarter net sales of $64.8 million that exceeded expectations across our glaucoma and corn in the whole franchises globally.
With momentum that continued into October.
Our performance this quarter reflects the resiliency dedication and resourcefulness solar customers and employees around the world who continued to steadfastly move forward during these unprecedented times.
Our strong third quarter performance not only illustrates our effective ongoing response to the current market environment.
But it is also a reflection of the progress we continue to make towards our broader strategic vision.
Consider our accomplishments this quarter. In addition to the solid revenue performance one we fortified our newest mix market leadership position with initial commercial launch activities for ice and inject W. The next generation of our market leading inject platform.
The franchise experienced a strong recovery during the third quarter, where practices continue to improve our operational efficiency and new patient demand increased as the COVID-19 dynamic stabilized and related restrictions east.
Things are not yet back to normal from a market perspective, but the trends were encouraging throughout the quarter into October.
Our field sales professionals are slowly regaining access into accounts and we continue to supplement these activities with well received virtual tools and training for our sales force in physician customers.
We've even identified opportunities to collaborate with Osama practices to manage ongoing cases by virtually proctor an ongoing surgeries is part of our commitment to ensure procedural proficiency and optimal outcomes.
As expected in early October the AMIA hosted a CPT editorial panel meeting where three items related to our business were discussed and approved to move forward, including the creation of new category.
Three new CPT codes for high dose and Standalone mix and the creation of a new category one CPT code for mix in combination with cataract surgery.
We look forward to working closely with the AMIA CMS NAO as we navigate each of these processes going forward.
I'm pleased to announce that in mid August we successfully launched the ice then to inject W. In the us to select customers.
Followed by an official Fullscale launch and there'll be October.
It is our plan for this next generation product to supersede the current istent inject device globally as regulatory approvals permit.
We've also begun to launch Istent inject W. More broadly in many of our key international markets, including various European countries, Japan and Australia. This.
This adds to a number of recent accomplishments in our international glaucoma franchise that positions us well for long term growth, including Standalone indication approval in Australia, I sent a nice sense inject regulatory approval in Japan in India.
And continued progress across many of our key market access initiatives.
Similar to the United States, We also experienced strong recovery our revenue recovery trends in our international glaucoma franchise during the third quarter driven.
Driven by a broad based recovery in key European and Asia Pacific markets.
Looking ahead, we have seen the more recent emerging restrictions related to COVID-19 across Europe and are monitoring these developments closely.
Nevertheless, we are continuing to invest in our international infrastructure from a sales marketing market access and product development perspective.
Within our corneal health franchise, we also experienced strong revenue recovery trends during the third quarter as we continue to execute on our corporate integration milestones commercial strategies and market development initiatives.
We are ahead of plan on the cost savings targets, we announced at the time of the deal.
But more important is our progress commercially.
We've continued to successfully stabilize the reimbursement dynamics associated with for tractor drive increased awareness of keratoconus broadly across the optometric in ophthalmic community advanced the diagnosis of this important the ability to build trading condition.
And train Kornya health professionals on our piling procedure.
As evidence of our progress the third quarter saw record highs and for Trex, the sales and number of new for trucks to starts in the United States and encouraging sign that our strategies and programs. We've introduced are resonating.
While we remain in the early stages of unlocking the combined organizations full potential we are encouraged with this performance and excited about the opportunity ahead of us as we approach the one year mark of the acquisition.
Moving on to our pipeline, we anticipated on our planning for robust cadence of new product introductions over the coming years that we believe has the potential to significantly expand our addressable market opportunities and drive long term sustainable growth over time. These.
These programs include our previously disclosed FTC approval targets for the Presser flow micro shots in the first half of 2021 ice that incident in late 2021, and beyond and I dose TR in 2022, respectively.
We have discussed at length on prior calls the initiatives, we implemented in response to Covance and the considerations for our fully enrolled versus active actively enrolled clinical trials.
We continue to navigate these unique circumstances and we're encouraged by strengthening enrollment trends in September and October, but we are continuing to monitor and analyze timeline experts expectations for high dose in particular as the COVID-19 situation evolves here in the United States.
We also remain an early preparations for the potential us commercial launch of Santana Pharmaceuticals, Presser flow, Microsoft and elegant as external surgical and planned for late stage glaucoma management.
We advanced our commercial preparations for this promising opportunities during the third quarter ahead of an anticipated approval and commercial launch in the first half of 2021.
In addition to the exclusive distribution agreement with Santander US were excited to announce we recently expanded our agreement with San Tan to secure exclusive sales and distribution rights for the pressure for micro Sean in Australia, and New Zealand.
We look forward to commencing commercialization plans in these markets following appropriate regulatory approvals over the coming years.
Beyond these near to medium term opportunities. We also continue to invest in and advance our key earlier stage R&D programs, including in dry in retina. While these opportunities remain in preclinical development stages. We are excited with the initial progress we're demonstrating within these programs.
Our pipeline has the ability to fundamentally transform block flaw coast supply significantly expanding our addressable markets over time.
To enable this we have built a strong balance sheet to provide us with the financial flexibility to remained calm offence as the coated related dynamics play out by expanding our global infrastructure strengthening our pharmaceutical expertise upgrading our enterprise systems advancing our core R&D programs and supporting.
Our clinical programs as they progress towards commercial realities.
In summary.
The progress we are making to advance our key strategic priorities reflects the commitment of our teams to rapidly adjust during the COVID-19 pandemic and ensure we are executing on our plans. We are confident that the investments, we're making today will drive glaukos forward as a unique strategic vision care leader with tremendous potential.
Actual for long term growth and profitability.
So with that I'll turn the call over to Joe to discuss our third quarter 2020 financial results Joe.
Thanks, Tom as a reminder, I will be discussing our financial performance on a non-GAAP or pro forma basis and will summarize our GAAP performance later in my prepared remarks.
I encourage each of you to review our GAAP to non-GAAP reconciliation, which can be found in today's press release as well as the Investor Relations section of our website.
Glaukos net sales for the third quarter of 2020 were $64.8 million, representing sequential growth of 105%, which reflects the continued recovery versus prior quarters. Despite ongoing koby 19 related headwinds.
Overall, we exited the third quarter with a revenue run rate that was approximately 95% of pre covert daily averages versus approximately 80% exiting the second quarter and approximately 10% during the April trough.
Now turning to our U.S. glaucoma franchise, specifically, our third quarter U.S. glaucoma sales were approximately $39.2 million, representing sequential growth of 114%, which we believe reflects a combination of cobot related dynamics, a stable competitive landscape and stable pricing.
Internationally, our glaucoma franchise delivered third quarter sales of approximately $12.8 million representing sequential growth of 91%.
The Cobi 19 impact or international but from a business has varied by market, but our overall recovery in the quarter was led by Europe broadly and Australia.
And corneal health third quarter, net sales or $12.9 million, representing sequential growth of 95%.
The third quarter performance was driven by record us for Treximet sales of $10.4 million and a quarterly record for new use for Trex of starts.
As Tom noted earlier, we continue to see progress in October commercially across each of our franchises. While the overall market appears to still be facing headwinds in terms of new patient consultation visit and the ability of surgical practices to operate at full capacity. We are encouraged by the fundamental performance of our business.
Having said that we recognize it as we prepared for this call. Many of our key markets are now unfortunately experiencing a real time code resurgence and as such we remain cautious on the near term ahead of a widely available vaccine or therapeutic solution.
Shifting gears towards the remainder of our PL, our non-GAAP gross margin in the third quarter was approximately 85% versus 87% in the same quarter in 2019 and 78% in the second quarter of 2020 the.
The sequential improvement reflects the benefit of increased production associated with the overall recovery and initial inventory build device that inject W. As well as favorable corner corneal health margins driven by revenue mix.
It is worth noting that our non-GAAP adjustments to Cogs includes substantial adjustments related to vitro acquisition accounting.
Our overall non-GAAP operating expenses were approximately $57.5 million in the third quarter of 2020 up 10% sequentially compared to the second quarter.
We remain disciplined in the third quarter, but continue to reverse temporary cost saving initiatives and restore expansionary spending as a recovery warranted a trend that we would expect to continue going forward.
Our non-GAAP EPS Una expenses in the third quarter were approximately $37.4 million up 11% sequentially compared to the second quarter and our non-GAAP R&D expenses in the third quarter were approximately $20.1 million up 8% sequentially compared to the second quarter.
We finished the third quarter with a non-GAAP operating loss of $2.4 million and non-GAAP net loss of $4.1 million or nine cents per diluted share.
Our GAAP net loss was $15.7 million or 35 cents per diluted share for the third quarter of 2020.
We invested in approximately $1.3 million of capital expenditures in the quarter and looking ahead, we expect our capital expenditures to increase substantially over the next three to four quarters as we move forward with our facilities plant.
As of September Thirtyth 2020, we had cash cash equivalents short term investments and restricted cash of approximately $398 million compared to $404 million at the end of the second quarter 2020.
Finally, we believe the range of potential outcomes for the fourth quarter and heading into 2021 remain more sensitive to the extent and duration of any COVID-19 resurgence that does the boat business fundamentals for which we have a degree of control and as such we will continue to keep our guidance suspended as the path forward for this pandemic remains uncertain.
With that I'll now turn things back to Tom for a few closing remarks. Thanks Joe.
I'd like to conclude by acknowledging how proud I am.
Of the actions of our organization has taken throughout the COVID-19 pandemic, while advancing our key strategic priorities in a rapidly changing environment.
While it is possible that this pandemic may well persist into 2021, leaving the near term uncertain. We are prepared as a company I am confident that the response plans we've executed over the past several quarters have.
I have only helps strengthen our relationships with customers clinical investigators suppliers and employees.
And we will leave us well positioned to execute on our plans going forward.
Okay, Great and then as a follow up shifting gears, maybe a little bit to Idaho, some recognizing you're still a coupla years away from that launched can you just sort of level set us on how you're thinking about that opportunity still a coupla years out uhm around sort of initial market penetration reimbursements efforts and then commercial scale up ahead of that lunch. Thanks.
Yes, I'll be happy to answer that one Andrew so.
We continued we're really pleased with the continued reengagement of our clinical invest investigators.
And the favorable traction we've we've seen in September and October and recruiting and we will monitor the trial as we look at recruitment in these uncertain fall and winter months with the resurgence of COVID-19, and certainly we'll keep investors fully informed.
We remain.
Now, which is showing capability of providing sustained release on the order of four to six months, depending upon what clinical study to you see you can imagine when you see a product like I dose, which presumably may promise orders of magnitude difference in sustained release over that initial product from derisk.
We think that we have a very very opportune ability to to price and to realize.
A revenue generating New addition into the marketplace.
So what I'm very encouraged by two coming out of the CPT Committee is that we were able to shepherd and sanction a formal.
Okay.
That sounds great. Thanks for taking the question.
For for trucks on the corneal health side. So I think the things there were trending fairly well obviously in a much more kobin.
Stable environment that perhaps were going into here in the coming months, but certainly over the course of the third quarter. We were pleased with where we were trending.
Great just.
Just a quick follow up.
Clarity on how.
Competitive trends might have evolved through the quarter as these volumes pickup.
Seeing anything in terms of.
Let her views our doctors trying new products right now.
You started this is Chris calcaterra.
And I, just would say that largely large.
Large part things are stable.
Maybe slightly positive for us from a competitive standpoint, everything that we said in the past remains true for this quarter as it was in Q2.
Got it thank you.
And your next question comes from the line of Larry Biegelsen with Wells Fargo.
Okay.
Now when you think about that for us what I said on the on the quarter was we we exited at 95% of the March pre Covid levels I think as we get closer.
To those levels it probably makes a little bit more since to think about the trending from a year over year perspective, and and break it down in between the three sort of areas of our business in.
In the U S glaucoma franchise over the course of the third quarter the growth was actually down 18%, but as we went in to October we were essentially flat year over year for the month of October versus 2019, now there is some confounding variables there the most noticed notably that W.
To gauge battery actually do a couple of.
Pieces of that landscape. So the first piece is kind of you know have you seen less headwind from omni since the reimbursement change. The second is this recent Palmetto LCD conference call.
Do you have any sense for a timeline there and what you know any expectations in the third is kind of the event this trial.
Opportunity for comments, but the extended the commentary period to this Saturday seven.
Because of the coated pandemic, we're not really sure when they'll come out with the final draft.
But we remain debt.
Diligent and following this theres not much that we can do at this point.
But it's not surprising that.
Mac, such as Palmetto, which.
Guys good afternoon.
Joe some real time that here, but you know the initial use cloud coma guidance for you guys was.
Around 195 million, you've done 90 million year to date. So, let's just say 2020 ends up being a $135 million to $140 million is obviously my numbers.
The $55 million, so that gets pushed for co bid this year can.
Can you help us think about the recapture rate and over what period of time you guys have talked about how these procedures. Obviously they don't go away they might get deferred but you can't put them off forever. So maybe just help us with that.
Hi level that math and do we think about that $55 million of a true number is the vast majority onboarded onto European now in 21 or a little bit into 22.
Hi, John It's Joe I think I may need you to send me your Microsoft Excel for that before I can really go through all that and address it directly.
The 2023, and then also if you don't mind, giving us some clarity is another prophy or pro in facility. Thanks, guys.
Yes, John this is Tom I'm actually going to take that question and so.
We were pleased with what came out of the CP Ti Committee meeting in October and there were a number of favorable developments that we are able to usher in conjunction with working with the upcoming society. So.
For this for the surgery to do what clinically we believe is the more robust most robust treatment for patients who are and the more monitor advanced categories.
Effects that pull through and I've got a quick follow up.
Hey, correct, it's Joe maybe I'll start in reverse and then let the guys build upon the sort of broader beyond fundamentals and diagnostic trends and all the things there.
In the in the quarter, Yes, we were we were pleased obviously with the results and if you think about it.
We've been building to this place now for a while really since taking over the business in late 2019, we continue to see the benefits of the synergy of our combined sales organization and what that's driving in terms of new <unk>.
Home depot.
Based upon the environment, we find ourselves in on the top line.
I think it would be very appreciative.
Yes, I'd be happy to Ryan I mean.
As I said before what what you may not be picking up is kind of the pull sit in the marketplace and the appetite for the use of a sustained release drug delivery system that to me has gone to the nascent to readily apparent and I can feel that in the marketplace and get many many calls from clinicians asking about our eventual approval fry dose because.
I think the pent up demand for that is is truly emerging what I would tell you is that there is no question. There is a need there is no question that the risk. The Arista has some advantages, but as you mentioned before I would have to say and I point you to your channel checks that the fact that there is a pretty significant labeling restriction.
So that we think will be in great position to be able to go to payers with that data in hand, as we do seek.
Commit commercial approval Likewise, Ryan you should know too that with this space to be study running with a significant number of patients will have data out.
To three years of which will be able to countenance and show Payors, what the true potential durability of this product is and then having said that remind investors that hopefully we've been prescient and coming up with this second generation product the idose TR extended or Idose T Rex, which is going to hold.
Nearly twice the amount of medication as the current idose product and so if we're successful in an expedited path to approval on the heels of in Idaho scare launch.
Think we're going to be an incredibly enviable position to be able to have a truly.
Set of long term duration activities firm for surgeons to choose from.
Took patients up to treat patients with with glaucoma.
Okay. What's very helpful. And then just lastly for me and I'll hop back in queue.
Joe one of the things you've talked about I think at least.
Let me go back with the launch of and Jacked was using the original I spent.
Is it more of a value oriented product right.
And I'm somewhat spit balling here, a couple of months to get up and going before you are running.
You'll recall that when Vidro was a public company they talked about the sort of average utilization they were in that two and a half to three treatments per month per start if you will but it takes a while to get there and what I will say is theres, a pretty significant delta underneath that from those early days.
Customers to those who have been around and are really up and running fully.
On on for Trex, and general Keratoconus treatments and the Covance Yep.
Okay.
Okay Thats helpful. And then just kind of sticking on with cold is that.
We are seeing second wayne's resurgence.
However, you want to call it.
How are you seeing ophthalmologists.
Prepare themselves differently. This time around than when back in April knowing was prepared for what the horse was.
So it's just all the procedures in the things that they have in place to try and ensure the safety of the patients and their employees.
The protocols that they have in the large and in their offices so that.
They are less hopefully less inclined to to have to shut down but that remains to be seen.
It's all across the board I am aware of a surgery center that shut down because one of the nurses came down codes. So given that she was in contact with everybody else to shut down the surgery center. So there is going to be these fluctuations and it's hard to predict where and when and how and what people will do but I do think.
Did.
To answer your question directly.
Physicians and surgery centers and health care professionals are better prepared because there were taken precautionary steps that they didn't otherwise to back in November through through March Yes, I think I would just add I mean, as Tom said, we're adding we're encouraged and Chris here that we're encouraged by where.
Their preparedness for this relative to obviously what was an unexpected.
A series of events as we entered into late March having said that you clearly you can't control if patients, particularly elderly patients decide to more proactively shelter in place amid a resurgence and you can't control surgery cancellations that result from that too. So there is still a fairly high degree of elasticities.
Between co bid and.
And procedures like ours, it's a temporary deferral deferral not a permanent but it's something we have to factor in is we as we go back in these early days here now of a potential resurgence.
No I appreciate the color thanks very much.
Thanks.
And your next question comes from the line of Anthony Petrone with Jefferies.
Thanks, Ken I'll, everyone is doing well two quick questions here.
On market opportunities and one on Vidro, one would be on Standalone cataract, maybe just two.
So obviously, unlike in mix and as a team had glaucoma built a mixed category over time, where you were teaching a new way of treating a patient when it comes to late stage glaucoma management.
Doctors are already very familiar with intervening with surgical solution. So there's less convincing there to be done in the context of how you treat those patients.
Having said that there are fewer of them until you have to get out with your salesforce and and and train. These doctors on your procedure and and the like so I think it's the way we look at as there'll be we do things in a methodical way we train the right way is Chris often says and we'll be focused on getting the right outcomes as we bring some of these late stage procedures.
To market in the Standalone opportunity. So that obviously includes both the presser flow micro shunt as well as Iceland incident is that comes out if you think about the broader standalone opportunity and you start moving into the more mild to moderate standalone Migs opportunity that we've said that our best.
Since our that provides another probably 500000 potential procedures a year here.
Here in the in the U S and obviously, that's a little bit longer term down the line, but but something that we're obviously enthusiastic about over the planning period.
Tom or Christy want to talk about it beyond earned keratoconus, yeah, I'd be happy to do it and so if we think about again that's worth looking at the long term in the larger market, which is the keratoconus market again, the prevalence for that when we look at Triangulating. The number of epidemiology studies is around 600000 patients here in the US we're looking.
At about 1.1 million is 17000 patients newly diagnosed with three incidents each year at around 30000 eyes that are potentially treatable.
That is the clear large market that we're we're approaching and we'll we'll be able to penetrate with both EPPY often it beyond it's an interesting question on corn on occasion I've seen some of the numbers and it's interesting you ask because we are in the process of meeting with the number of refractive surgeons as we speak.
It provides some insight in that it's off to the races kind of for it or is it more of a measured type of launch and then maybe my second one is a little bit more of a philosophical question. You guys are putting done a good job at kind of converting the business from a single slot product mix company into a more comprehensive eyecare port.
Portfolio, just looking forward, if you're talking to investor.
Hey, this is what's in our pipeline around the retinal area, just maybe talk about some some of the areas that you are really excited about kind of some of the catalyst and time timings on when we expect that data again. Thank you.
Hey, Ravi this is Chris I'll address the first one and then turn it over to Tom for the second one.
In terms of presser flow that will require a lot of training.
The I said as I said, a gen 10 inject W. Lots of similarities there in terms of the training, it's all lab internal.
Theres not a lot of cutting of tissue.
Becoming a full scale purveyor both in in.
In glaucoma in corn in health and retina, so with specific regard to retina. We're very excited about our work with a try and stand alone implant as you know this marketplace we assume.
It would be for the treatment of diabetic macular edema. This marketplace right now is being served by a product called Osher decks, primarily from our again silver $400 million worldwide marketplace, and we have an implant that we've been able to extrude, which is already showing some very very good pharmacokinetics with zero order drug delivery.
Over over a six month period, and then does what its advertised goes away.
Very shortly afterwards.
It's with a very potent steroid try and send loan, which we feel strongly about and we think with this kind of delivery we may have both.
Manages and strengths to be able to to have a meaningful entry into this marketplace. So in preclinical development as you know and moving forward and we hope to be moving.
Moving forward into the clinic late next year or early in 2022.
In terms of the work we're looking at for long term treatment of age related macular degeneration, we're looking at crosslinked, Hydrogels, which we'll be able to sequester. The use of really demonstrated anti VEGF compounds for the treatment of age or age related macular degeneration, and we're making some significant headway there and understanding that.
Pharmacokinetics, the release of the product and the potency overtime as I've described in previous meetings that work is early.
The the efforts to get to this our herculean and yet we're undertaking them and one of the reasons why we feel that we have heard such a promising position as we've been able to recruit some top talent from Allergan pharmaceuticals with some of the balkanization Thats happened with that company.
And so we think we have some of the best minds, they're looking at some of these problems.
And these if we get there these are exciting opportunities and the final area would be in the area of working in a small molecule for the treatment of age related macular degeneration.
And we're looking at on multi kinase inhibitor, which is showing.
Really strong a release.
Good pharmacokinetics over over an extended period of time and both the multi.
Multi kinase inhibitor, an anti VEGF products are showing really promising results and persist persistent retinal vessel leakage models, which are a strong indicator of potency. So for all these reasons. We're a company that as I've said, we're moving to become a hybrid medical device.
Pharmaceutical company, we're on the throes of doing that we're aspirationally, we're making good progress in these promising areas.
Great. Thanks.
It's Robert.
There are no further questions at this time I will now turn it back to the company for any closing remarks.
Okay. Thank you very much and thanks to everybody for all your time and attention today, we hope everyone is staying safe and again. Thank you for your continued interest in Glaukos Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
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