Q4 2021 Glaukos Corp Earnings Call
Welcome to glaucoma Corporation's fourth quarter and full year 2021 financial results conference call a copy of the company's press release issued after the market close today is I've got the ball that triple double you talked quite Copa Com.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask the questions. You can just press star followed by the number one on your telephone keypad if.
You should like to withdraw your question Press Star one again.
This call is being recorded and an archived replay will be available online in the Investor Relations section at Triple double you, Doug glaucoma Dot Com I will now.
I'll turn the call over to Chris Lewis, Vice President of Investor Relations and corporate Affairs. Please go ahead.
Thank you and good afternoon, Julien joining me today are <unk>, Chairman, President and CEO , Tom Burns CFO , Joe Gilliam, CLO, Chris Calcaterra, and Vice President of Finance, Alex Thurman following our prepared remarks, well open the call to questions to ensure ample time and opportunity to address everyone's questions.
Costs 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.
Include statements about our plans objectives strategies and prospects regarding among other things our sales our products our pipeline technologies, our U S and international commercialization integration and market development efforts, the efficacy of our current and future products, our competitive market position reimbursement for our products.
<unk> financial condition and results of operations as well as the expected impact of the COVID-19 pandemic on our business and operations.
These statements are based on current expectations about future 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 reviewed it.
<unk> press release, and our recent SEC filings for more information about these risk factors you'll find these documents in the investors section of our website at Www Dot Guaco Dot Com. 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.
Facilitated more complete analysis and greater transparency into glaucoma is ongoing results of operations, particularly when comparing underlying results from period to period.
These refer to the tables in our earnings press release available on the investors relations section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure with that I will turn the call over to Gulf Coast, Chairman, President and CEO Tom Burns.
Okay. Thank you Chris good afternoon, and thank you all for joining US today, we hope everyone is staying safe and doing well.
Our mission at glucose is to truly transform vision by pioneering novel drop was platforms that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight threatening chronic eye diseases or.
Our mantra will go first and bodies, our commitment and determination to take chances to push the limits of science and to disrupt the legacy treatment paradigms in glaucoma corneal disorders and retinal diseases.
Today, <unk> reported fourth quarter net sales of $73 2 million flat versus the year ago quarter for 2021, net sales rose, 31% to $294 million from $225 million in 2020.
Both the fourth quarter and full year 2021 results were up versus comparable 2019 periods on a pro forma basis.
We're also providing our 2022 net sales guidance range of 265 million to $275 million.
Joe and Alex will discuss our financial results and outlook in more detail later in the call.
These results exceeded the top end of our guidance range and reflects solid execution across our glaucoma and corneal health franchises amidst both continued COVID-19 related volatility and headwinds globally and use combination cataract glaucoma dynamics associated in particular with the 2022 CMS proposed rules regarding reimbursement.
Rates that were not adjusted and finalized until November 2021.
Within our U S glaucoma franchise, our commercial team continues to successfully trained and educated our current and prospective surgeon customers on the favorable long term risk benefit profile of our Istent family of technologies and advanced Migs towards the standard of care for glaucoma.
We remain focused on maximizing the access to our sites saving technologies and overall care for glaucoma patients here in the United States.
While we acknowledge that we may face headwinds in combination cataract glaucoma domestically based on the cuts and professional fee reimbursement that despite improving in the CMS final rule remained substantially below the more invasive alternatives. We have been preparing for this potential scenario and we are focused on executing our strategy.
At the same time, we will remain prudent as it relates to forward guidance as we navigate the year ahead.
Our international glaucoma franchise year over year growth during the fourth quarter was broad based but similar to the United States.
We continue to experience intermittent COVID-19 disruptions in many of our global markets that accelerated toward the end of the fourth quarter of 2021 and in early 2022.
We remain in the early stages of our international penetration and we are continuing to invest in our expanding teams in new markets as we drive broader adoption of migs around the globe.
One such new market is in India, where we have commenced initial commercial launch activities for Istent inject.
Corneal health growth during the fourth quarter was driven by record U S. Foot trucks are sales of $13 5 million and continued healthy momentum in new U S. Accounts starts moving forward our focus remains on executing our commercial and market development strategies and building upon the strong momentum we are experiencing with within this emerge.
<unk> growth franchise for glaucoma.
It is clear that the pandemic and subsequent global recovery continues to pressure labor markets, the global supply chain and at times Commerce in general.
We and our customers are not immune to these realities and risks as we move forward. We have been pleased with our ability to navigate the supply chain challenges associated with our commercial products thus far.
While we continue to experience longer lead times higher cost and intermittent disruptions with third party partners and suppliers associated with our manufacturing operations and R&D pipeline broadly.
Further the impact of the Omicron variant as we entered into 2022 is worth noting its impact is varied by geography with more strict government driven lockdowns in markets like Australia versus the U S where hospitals have at times had to restrict elective procedures and all sites have dealt with the impact of increased numbers of staff members.
Testing positive given how pervasive this wave of Covid has been globally.
Overall I am proud of our performance this past year and we'd like to recognize the continued dedication and resiliency of our teams around the globe, who remain steadfastly committed to their work in the face of continued COVID-19 disruptions and other unforeseen external circumstances, we are optimistic as things move forward here in 2022.
Two.
Our ability to execute our plans illustrates not only our effective ongoing response to the current market environment, but also reflects the progress we continue to make towards our broader strategic vision <unk>.
Consider our key 2021 accomplishments.
We successfully executed in our current core franchises by driving new adoption and deeper penetration globally for our transformative Migs in Ireland solutions, realizing considerable improvement in the CMS 2022 final rule for the new category, one combo cataract mix codes versus the proposed rule and deliver.
A favorable IP settlement outcome.
Two we advanced our near term pipeline, bringing a number of promising investigational therapies closer to becoming commercial realities with favorable data announcements for Idose TR Istent infinite and beyond in addition, we completed patient enrollment and randomization in our ongoing phase III clinical program for Idose TR.
And advanced several other important products, including high prime and the pressure flow micro Sean.
Three we progressed our earlier stage pipeline programs of the newly established licensing agreements with adults encouraging R&D progress on preclinical programs, such as Idose T Rex and Idose rock and most recently the commencement of two phase III clinical trials in dry eye disease and presbyopia.
And four we grew our global teams and infrastructure.
<unk> the implementation of our global systems upgrade and we've completed our visual integration ahead of schedule. Despite the pandemic.
We believe the strong financial profile and capital position. We built has allowed us to remain on offense. When it comes to successfully investing for our future, leaving us well positioned for the next phase of our pioneering journey as we target several clinical regulatory and commercial milestones this year and the years ahead.
As I look forward to 2022, we hope to one evolve our combo cataract mix franchise through new product offerings, while entering into the Standalone glaucoma market and expand our international glaucoma and corneal health franchises to deliver our near term pipeline with the recent FDA clearance of <unk> Prime.
Targeted FDA clearance of Istent infinite and the first half of this year and targeted NDA submissions for Idose TR and beyond by the end of this year.
Three to advance our early stage pharma platforms, including for the two phase III <unk> trials in dry in presbyopia that commenced last month and several planned IND and IV.
Applications for our next generation therapies, and finally to continue to grow our global organization and infrastructure to support future growth.
While we execute commercially we continue to self fund and successfully advance our robust pipeline of novel promising platform technologies that we believe have the ability to significantly expand our addressable markets and fundamentally transform our company over time.
Our novel platforms are designed to disrupt conventional treatment paradigms advanced the existing standard of care and enrich the lives and treatment alternatives for patients worldwide suffering from sight threatening chronic eye diseases. These.
These platforms and body ambitious big ideas aimed at addressing large and chronically underserved eye diseases, including glaucoma corneal disorders and retinal diseases.
One such big idea that is underlying each of our platforms to date is the disruption of conventional topical eye drop therapies through drop was alternatives.
It is worth reminding investors that topical therapies are frequently the mainstay of ophthalmic treatment.
Are often effective for many patients when taken properly and thus will always have an important role. However, our primary issue. The industry has been grappling with for decades of patient non adherence. This problem is ubiquitous rapid well understood and well documented and.
And even when patients may be compliant that can be subject to a host of local side effects, such as hyperemia, hypochromia carryover, lowfat atrophy, and corneal and causing title changes as well as preservative toxicities, which can exacerbate underlying ocular surface diseases.
With our novel Droplet platforms, we are taking differentiated approaches to address these well known issues in order to improve patient outcomes.
Our key five technology platforms designed to disrupt traditional treatment paradigms and generate cascades of future innovation are as follows.
Number one <unk> micro scale surgical devices to the Idose sustained release pharmaceuticals, three the <unk> link bio activated pharmaceuticals.
For illusion, transdermal pharmaceuticals, and five retinal biodegradable sustained released pharmaceuticals.
Let's take some time to dive in each of these platforms beginning with our foundational istent micro surgically device platform, which primarily involves the insertion of a microscale device designed to reduce intraocular pressure by restoring the natural acreage humor outflow pathways for patients suffering from glaucoma.
We believe our portfolio is the industry's most comprehensive offering of minimally invasive tissue sparing glaucoma solutions supporting our goal to provide a full range of options to fit surgeons individual glaucoma treatment algorithms that offer the best short and long term benefit to risk calculus at every stage of disease progression for Micah.
Hypertension through refractory disease, and in both combo cataract and Standalone procedures.
We are proud to be the corporate pioneer and global market leader in mix with our family of Istent technology supported by more than 200 peer reviewed publications 20, plus years of clinical and commercial experience and nearly 1 million istent devices implanted worldwide since our inception.
Today within the U S market, our offering of Istent and Istent inject W are FDA approved for the treatment of mild to moderate primary open angle glaucoma in combination with cataract surgery after years of investment and strategic planning. We are excited to be on the cusp of expanding <unk> market availability into the Standalone glaucoma population with Tom.
<unk> FDA clearance of Istent infinite in the first half of this year.
Yes.
As a reminder, istent infinite strong pivotal data results showed profound efficacy and safety outcomes for patients with open angle glaucoma, who have failed prior surgical therapy.
Outcomes also reinforce our confidence that this technology may also effectively serve as an earlier intervention for the treatment of glaucoma.
We were delighted to receive to recently announce FDA clearance for <unk> Prime a highly complementary new physical delivery device designed to be a truly minimally invasive <unk> system to further support the needs of physicians and patients. We are planning for controlled commercial launch of <unk> Prime in the second quarter.
Regarding the pressure for Microsoft's the FDA is gathered and is evaluating the additional input provided by select glaucoma surgeons to ensure a complete evaluation of the clinical data submitted in the PMA.
In the meantime, we have successfully commenced initial commercial launch activities for pressure flow in Canada and are preparing for a controlled commercial launch in Australia.
Moving onto our Idose sustained release pharmaceutical platform, which consists of a targeted minimally invasive injectable implant designed to deliver a therapeutic levels of medication from within the eye for extended periods of time, Idose TR, which is comprised of Travoprost, a well known prostaglandin analog is our first investigational candidate <unk>.
<unk>, leveraging our Idose platform technology.
We recently announced 36 month analysis of our phase <unk> trial that showed compelling results with roughly 70% of idose subjects still well controlled with the same or fewer IOP lowering topical medications at 36 months versus screening compared to only 46% of subs.
And the terminal control arm further in this responder group average IOP reductions from baseline observed to 36 months, where substantial approximately $8 three millimeters of Mercury and $8 five millimeters of Mercury and the fast and slow release Idose TR arms, respectively.
Importantly, a single Idose implant is being compared to Timolol control arm that received twice daily drops or 2190 eyedrops per eye per protocol over the 36 month evaluation period.
As a reminder, idose TR is implanted into the trabecular meshwork to avoid migration through a very facile procedure is designed so the surgeon can safely exchange the idose TR with a new implant when the original therapy has fully depleted its pharmaceutical payload.
The most recent phase II data readout demonstrated a favorable safety profile with no clinically significant corneal endothelial cell loss no serious cornell adverse events and no adverse events of conjunctiva hyperemia reported to date in either Idose solution arm.
These latest phase II results further underscore the potential of Idose TR to safely provide multiple years of sustained drop off therapy and $24 seven compliance to tackle the significant problem of patient non adherence and chronic side effects associated with topical glaucoma medication regimens. These.
These powerful data reaffirm our excitement about the potential commercial prospects of Idose TR and Mark another critical step forward in the advancement of this potentially game changing innovation.
We completed patient enrollment in our phase III clinical trials for Idose TR on June 2021, randomized and 1100 50 subjects with open angle glaucoma.
Or ocular hypertension.
The 12 month Idose TR phase III trial results are expected to support glaucoma is targeted NDA submission by the end of this year and targeted FDA approval by the end of 2023 <unk>.
Given our development <unk> success to date with Idose TR, we continued to invest resources to expand our pharmaceutical development capabilities and to develop future Idose solutions.
These investments include our next generation Idose extended release implants also known as Idose T. Rex, which is similar in a similar size and form factor to the original Idose TR, but is designed to provide nearly twice the drug capacity to extend efficacy durations, even longer and additional drug classes such as rock inhibitor.
<unk>, where we have seen encouraging rabbit model data and are establishing prototype implants for lead candidates.
Next is our island bio activated pharmaceutical platform, which consists of novel single used drug formulations that are bio activated by a proprietary systems through the delivery of ultraviolet light to the cornea to induce a biochemical reaction called corneal cross linking that is designed to strengthen stabilize and reshape the cornea.
Our first generation Island therapy, known as island Abbvie off uses a novel drug formulation called <unk> for the treatment of keratoconus, a sight threatening degenerative disease in which the cornea progressively thins and weakens leading to vision loss.
Even though keratoconus is a serious sight threatening disease and a leading cause of full thickness corneal transplants in the U S. We believe it remains vastly undertreated, primarily due to under diagnosis and the historical lack of an effective solution to.
Today, approximately 20% of carrier Kronos patients ultimately require cornea transplant, a costly and invasive procedure with high failure rates. In fact literature suggests 72% of corneal grafts fail within 20 years and 98% fail within 30 years.
Sadly as the disease onset is often diagnosed in teenage years keratoconus patients may may require multiple transplants over their lifetime.
In order to maximize the availability of this important for trucks with therapy for patients. We have made substantial investments and executed upon a number of strategies designed to expand our commercial organization.
Lower the barriers for adoption by practices increase awareness of keratoconus across the Optum metric in ophthalmic community streamline their referral patterns and trained cornea health professionals on our island procedure.
Looking ahead, we are advancing our next generation of high link therapy known as beyond that utilizes our proprietary novel drug formulation called at the OXXO.
Stronger Uva irradiation protocol and the ability to to deliver increased levels of supplemental oxygen.
The previously announced positive phase III results were at beyond underscore our view that this therapy may provide the ophthalmic therapy and keratoconus patients with the first truly noninvasive bio activated drug treatment alternative designed to reduce procedure times improve patient comfort and shorten ultimate.
Recovery times.
Yes.
Beyond positive phase III results are expected to support a U S. NDA submission in 2022, and we are targeting FDA approval for <unk> in 2023.
As we do with all of our platforms. We continue to drive subsequent generations of future innovation and we are targeting the commencement of clinical trials for a third generation <unk> therapy later this year.
Moving on to our illusion transdermal pharmaceutical platform, which consists of patented cream based drug formulations that are applied to the outer surface of the eyelid for droplets transdermal delivery of pharmaceutical active compounds for the treatment of eye disorders.
We believe <unk> differentiated delivery approach on the island may offer significant advantages over traditional topical therapy, including the potential for easier administration faster onset of action and fewer side effects, such as reduced preservative induced corium and conjunctiva sequela all.
All of which can help contribute to better compliance and improve patient outcomes.
Last month, we announced commencement of patient enrollment in two phase II clinical trials, including GL, Keith <unk> 301 for the treatment of signs and symptoms of dry eye disease and <unk> for the treatment of presbyopia.
These are the first two investigational drug candidates utilizing our illusion platform, both of which utilize pilocarpine as as active pharmaceutical ingredient.
The commencement of these phase III trials represents a significant milestone in the development of our Aleutian platform and for our company and we are excited to have the opportunity to explore what these drug candidates can do for these respective large and underserved patient populations.
We're also progressing preclinical programs to research and development investigational pharmaceutical compounds that target the eradication of Demodex mites, leveraging our Aleutian platform Demodex Midas or the root cause of Demodex blepharitis and are often associated with my <unk> gland dysfunction, a leading cause of dry disease along with.
Several other related ophthalmic diseases.
Finally, I will also briefly touch on our <unk> sustained release pharmaceutical platform known as retina XR designed to treat retinal diseases. The largest market in ophthalmology today estimated to generate 13 billion in worldwide revenue and expected to grow to nearly 10%.
<unk> annually through the year 2023.
Our retinal R&D teams are actively engaged to develop multiple micro invasive bio erodible drug delivery programs designed to treat age related macular degeneration, diabetic macular edema and other retinal diseases.
Our two primary sustained release development projects in our retina platform include our triamcinolone acetonide steroid targeting dnb and a small molecule multi kinase inhibitor targeting AMD dnb and retinal vein occlusion.
The goal of these preclinical programs is to provide retinal specialists and their patients with novel sustained pharmaceutical treatment options that offer a meaningfully longer duration of effect than the current standard of care dominated by short lasting biological injections that often imposed tremendous treatment burdens on patients because of the high frequency.
We have the required treatments, we're aiming to advance at least one of these programs into the clinic over the next 12 months.
As you can see we have a lot to be excited about when it comes to the significant potential value that we believe our pipeline programs may create.
As a testament to this we are continuing to successfully invest in and advance our fulsome pipeline of core novel platforms supported by over $300 million of self funded investment into our R&D programs since 2018 alone.
We anticipate and are planning for a robust cadence of new platform and product introductions over the coming years that have the potential to fundamentally transform glaucoma overtime or.
Our plan is to utilize our established best in class commercial organization and global direct sales infrastructure to drive future scale and sales rep productivity and what we view as a very leverages <unk> global ophthalmic sales channel.
So in conclusion, we believe glucose is different we are change agents were pursuing game changing innovation in glaucoma corneal health and retinal diseases. Our platforms are disruptive or D. Our ideas are big and our mission is ambitious.
I am confident we have the right people the right strategy infrastructure pipeline and balance sheet to execute our plans and to deliver on our future aspirations.
So with that I'll turn the call over to Alex Thurmond to discuss our fourth quarter and full year 2021 financial results Alex 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 in the Investor Relations section of our website.
<unk> global consolidated net sales for the fourth quarter of 2021 were $73 2 million, which is flat versus the comparable prior year quarter and up slightly compared to the fourth quarter of 2019 pro forma for the acquisition of <unk>.
Our fourth quarter performance reflects continued pandemic related volatility as we experienced global headwinds due to COVID-19 that strengthened at the tail end of the quarter and accelerated in the early part of 2022.
Now turning to our U S glaucoma franchise, specifically, our fourth quarter U S. Glaucoma sales were $41 2 million down year over year, which we believe reflects a combination of pandemic related dynamics and the impact of the 2022, CMS combination cataract reimbursement and customer ordering patterns.
And competitive trialing activities, which occurred in advance of the final rates being implemented on January one 2022.
Internationally, our glaucoma franchise delivered fourth quarter sales of $15 9 million representing year over year growth of 8% and 31% growth compared to the fourth quarter of 2019.
This performance reflects growing demand globally, partially offset by a pandemic headwinds that reemerged in a few key European and Asia Pacific markets in particular.
In corneal health fourth quarter, net sales were $16 2 million representing year over year growth of 9% and 30% growth compared to 2019 pro forma for the <unk> acquisition.
The fourth quarter performance was driven by U S. <unk> record sales of $13 5 million on year over year sales growth of 8%.
44% versus pro forma 2019, along with a continued trend of healthy new U S. Attracts account starts partially offset again by COVID-19 related headwinds.
Shifting gears towards the towards the remainder of our P&L, our non-GAAP gross margin in the fourth quarter was approximately 85% versus approximately 83% in the same quarter of 2020.
It is worth noting that our non-GAAP adjustments to Cogs include substantial amounts related to acquisition accounting for Pedro.
Our overall non-GAAP operating expenses were $72 $3 million in the fourth quarter of 2021 at 3% sequential increase versus the third quarter as we continue to restore expansionary spending as the recovery warrants a trend that we would expect to continue moving forward.
Our non-GAAP SG&A expenses in the fourth quarter were $46 7 million up 13% sequentially compared to the third quarter, reflecting increased commercial spending and administrative costs.
Our non-GAAP R&D expenses in the fourth quarter were $25 $5 million down.
<unk> <unk> compared to the third quarter, which was primarily due to lower pilot operation spending associated with our <unk> and <unk> programs.
We finished the fourth quarter with a non-GAAP operating loss of $10 3 million and non-GAAP net loss of $14 3 million or <unk> 31 per diluted share.
Our GAAP net loss was $21 9 million or <unk> 47 per diluted share for the fourth quarter of 2021.
We invested in approximately $9 3 million of capital expenditures in the fourth quarter, which as expected remains elevated versus historical levels. As we have advanced through the construction phase of the enhancement and expansion of our facilities in southern California and Boston.
Create a best in class infrastructure to meet our growing innovation and operating needs at <unk>.
And that we expect to continue in 2022.
For moderating to levels more consistent with historical norms.
As of December 31, 2021, we had cash cash equivalents short term investments and restricted cash of approximately $423 million compared to $414 million at the end of 2020 and $438 million at the end of the third quarter 2021.
For the full year 2021 global consolidated net sales were $294 million, an increase of 31% versus 2020.
non-GAAP gross margin was approximately 85% and non-GAAP operating expenses for the year were $271 7 million.
With that I'll turn the call over to Joe to discuss our forward outlook Joe.
Alright, Thanks, Alex looking forward first as it relates to COVID-19, we are not immune from the incremental global headwinds that emerged during the fourth quarter and strengthened in the January situation remains fluid and we could caution conservatism as you consider any potential impact. This may have on elective procedure markets in the first quarter and potentially more broadly in 2022.
Regarding CMS reimbursement for our combination care accurate products here in the U S. While we were pleased with much of what improved in the final rule the physician fee in the final rule remains at a significant disadvantage to several more invasive alternatives and we expect it to have an ongoing impact on Ice's family combo cataract volumes in 2022.
We also expect to face heightened competition and combo cataract mix globally in 2022, but as Tom mentioned earlier, we have been preparing for these dynamics for some time now and look forward to potential early revenue contribution from <unk> and other new products in 2022.
As we put this all together in the context of our expectations going forward, our full year net sales guidance of $265 million to $275 million takes these headwinds and potential new products into account and we would remind investors to also factor in our typical underlying seasonality patterns and COVID-19 related trends and risks that are outside of our control.
I also wanted to let investors know that change and how we plan to handle our quarterly earnings disclosures and calls starting with the first quarter of 2022.
You will notice a new section on our Investor Relations website under the title financials and filings quarterly results titled Quarterly summary.
We have posted our first report there this afternoon for the fourth quarter and fiscal year 2021.
Our objective is to provide investors with a quick and easily accessible reference documents that details the key facts associated with the quarter. The state of our business at any forward statements or guidance, we may make.
Going forward, we will provide this document after the market closed alongside our earnings release make very brief prepared remarks, if any during our earnings call and then transition quickly to answering analyst questions.
Our hope that this change will make our quarterly process more efficient and impactful for investors and the analyst community going forward.
With that I'll now turn things back to Tom for a few closing remarks.
Alright, Thanks, Joe So before we close I'd like to highlight several executive leadership changes, we announced earlier this month as.
As a reminder, the following changes will become effective on April one.
Joe Gilliam will assume the new role of President and Chief operating Officer.
Chris Calcaterra will assume the new role of executive Vice President Global commercial operations.
Alex Thurman, our current vice President of Finance will succeed Joe to become our new CFO .
And Tomas <unk>, our current senior Vice President of R&D will assume the new role of Chief Development Officer.
On behalf of the entire <unk> organization I'm delighted to congratulate Joe Alex until loss on these well deserved promotions and pledge our full support to them in their new roles.
Our outstanding improving leaders and I am confident they will successfully drive our organization forward in the next phase of our pioneering journey.
At the same time I want to extend my sincere congratulations to my friend and colleague, Chris Calcaterra and as requested transition into his new role Chris has been instrumental in the growth and development of <unk> since joining our management team nearly 14 years ago.
I am confident he will continue to play an integral role in our success in his new position that will provide christy opportunity to step back from day to day administration of responsibilities and spend more time with his family while continuing to focus on our global commercial operations is deep customer relationships built over the past 35 years.
And ongoing strategic counsel to our executive and commercial leadership teams.
So in closing I'd like to reiterate our conviction in our long term vision, we are continuing to invest in glaucoma to scale, our team and to advance our mission to transform vision with disruptive droplets game changing platform innovations. We are truly excited about our prospects, we're confident in our ability to execute our plan.
And we believe we are entering into a transformative period for our company in the years to come.
So with that I'll open the call to questions operator.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from Andrew <unk> from William Blair. Please go ahead.
Hey, guys good afternoon, and thanks for taking the questions.
Chris just wanted to say congrats to you and your family on this next step really impressive what you've been able to build here and hopefully this means more more football games in your future.
But maybe just to start maybe just to start here guys. Certainly appreciate the commentary on the outlook and guidance for the year, but maybe just get a bit more granular. There can you just sort of walk through in more detail some of the assumptions around key variables in that guidance and maybe just elaborate a bit on some of those assumptions youre putting into play here.
Sure Hey, Andrew It's Joe I'll start off and his team want to add something they can they can jump in.
And the forward guidance, we were talking about $265 million to $275 million. It really kind of takes into account.
Four five key variables and we can talk in more length in any of these that you deem necessary. The first one is obvious right with the change in the reimbursement landscape in particular, the professional fee and the disadvantage that has relative to some of the more invasive competitive procedures. We had a factor in what we thought that would mean for volumes.
You're lying our U S glaucoma combo cataract mix business.
And second I would say is the competitive dynamics associated obviously with the acquisition of the hydrus device what that means both domestically where its been available for some time now but also internationally I think where folks have said there are a lot of the focus is going to be around expanding the access to that particular product.
In corneal health, we have to continue to think about the blocking and tackling associated that business right. We're really pleased with how things have gone since acquiring.
Avi drove that we've got a lot of work ahead of US and we're also starting to come up against the period, where we'll be thinking about the transition from <unk> beyond certainly some of our customers well.
I'd also mentioned Covid from.
From an <unk> standpoint it.
It was pretty clear that emerged at the very end of last year I'll call. It. The last couple of weeks of December really peaked in January and started to while still relevant start to subside as we made our way through February and it remains an unknown risk I think for everybody us us no different than that and then the last thing I point to is just the typical season.
<unk>, which we mentioned so as you recall in a normal year most of our businesses operate where the first quarter is about 22%.
Full year sales, and then 25%, 25% and 28 in the fourth quarter. So I think those are the key variables. We're.
We're keeping in mind as you think about the model.
Okay. Thanks for that I am sure others may have questions on that but maybe I guess this is my second question here and maybe this one's more for Tom, but I think obviously as we sort of laid out well again here today in 2022 sort of a massive year for the pipeline with several milestones expected. So can you just sort of talk about it as a sort of high level youre.
<unk> for preparing the organization for this broader evolution that you talk about and I guess moving forward here what sorts of other.
Pieces of infrastructure do you think that youre going to need in order to really compete against across these different end markets here.
Yeah happy to answer to Andrew So we've obviously have contemplated these changes for some time, we've expanded our R&D capabilities vastly by drawing a number of top executives from really key industry leaders like allergan into the mix.
I think that's given us a strong basis and depth to be able to pursue and to make this change as we talked about earlier.
A more parochial medical device company into a hybrid medical device and pharmaceutical company. So thats been a been a massive focus as we built the business over time.
And we continue to look at infrastructure changes as you know we've gone from 2017.
We were literally in two markets the U S and Canada and we now have expanded into 17 international markets and so we've had to put the back office support behind all of those different entities and we have obviously already gone through an ERP ERP transition.
Moving onto an oracle platform to give us the ability to to be able to provide back office support to these different these different entities.
We have expanded commercially we brought a be drawn to the business that that approach has been seamless and I think they have been well integrated into the overall business. So our approach now is to say how do we take the.
The wealth of experience and talent, we bring in and how do we effectively play some over the a new mobile number of programs that we have and thats going to be both a challenge and an opportunity for us moving forward, but if you look at our track record and look what we've done.
Can assure you I'm confident we're going to be able to move forward. These programs youll.
Youll notice that I called 2022 of the year of the catalysts, we have a number of catalysts both in terms of regulatory and commercial milestones, which youll be seminal for the business. We're actively pursuing those but I think we have the pieces in place and I'm confident of what we have and what we're building going forward.
Great. Thanks, guys.
Okay.
Your next question comes from Chris Cooley from Stephens. Please go ahead.
Good afternoon, everyone and congratulations on a strong finish to the year.
Chris.
The best to the senior statesman of Ophthalmology on your next step and Joe and Alex Congratulations as well look forward to continuing to work with you guys actively.
Just two quick ones for me if I may.
When we think about just the coming year.
Wanted to maybe follow up on Andrew's question, there a little bit.
Help us think Joe about the Opex line because this is probably the most prolific the pipeline has ever been.
You've clearly invested in advance of this and Thats growth investment, but help us think a little bit about kind of that historical opex bogie that you had with.
With this kind of a pipeline spend I'm, assuming 22 should be somewhat elevated relative to that in addition to or is it still in line as you have some offsets from restrictions.
Associated with Covid, and then I've got a follow up question thereafter.
Sure. Thanks, Chris It's Joe so.
Ended the year in the fourth quarter with a little north of $72 million in I'll call. It non-GAAP opex.
If you annualize that put you at $2 90 number if you just think about the inflation.
Makes a second that all of US are experiencing that gets you certainly north of $300 million of Opex spending and then you factor in some reasonable expansion from there obviously the SG&A line will be more leveraged dependent upon what is going on in the topline of the business, but on the R&D side. As you said, we would expect to continue our March forward in accelerating that.
Investment there as we as we continue to mature that pipeline and deliver on the in the goals that Tom has talked about.
Understood and then maybe just as a quick follow up.
We'd love to focus on the pipeline, but obviously trying to just level set the model as we start in here.
Okay.
Guidance looks favorable but also when we think about.
I think you've characterized it as a number of cross wins in the past that we could see coming forward with FDA approvals potentially.
With the acceleration in these into these newer markets.
Can you help us kind of think maybe core versus new products in terms of contribution.
Or maybe.
Maybe more broadly corneal health.
Versus glaucoma, just as we're thinking about first half versus second half. Thank you.
<unk>.
Yes.
Happy to take a stab at that Chris I guess.
Characterize the guidance, we gave I think hopefully as prudent in the face of everything that we're looking.
We're looking at here at both some of the considerations as well as some of the potential positives.
I think there's a couple of different ways. We can take this the first is when you consider.
From a macro perspective omicron COVID-19 .
And normal seasonality and then you overlay what we hope is a successful new product cadence here. It clearly that lines up to a second half it probably is.
A more balanced are weighted towards the second half than the first half that's generally true in our business anyway, but I think the additional dynamics around COVID-19 and the new products, probably amplify that a bit.
When it comes to the individual businesses I gave some of that obviously, what we've tried to factor in.
From a U S reimbursement perspective in the combo cataract franchise International Glaucoma, I think corneal health for US. We hope is more blocking and tackling I want to be cautious and conservative around how far would you take that and then in light of Covid and just our continued.
Building this business in a post Covid world.
But we feel good about where that franchise is at and where it's headed.
Beyond that I'll, probably stop a little bit short because I think we're evolving as a company and I don't think it makes much sense for us strategically to get too far into the weeds on the individual components when really our goal is to drive the overall top line of the business.
Thank you.
Your next question comes from Larry <unk> from Wells Fargo. Please go ahead.
Hi, This is Charles on for Larry.
A quick question about the reimbursement headwinds so it looks like.
Those headwinds.
Destocking in competitive Trialing in Q4.
<unk> might have looked a little bit better than expected.
Is that fair to say you guys are active and how has that looked so far you've had almost almost two months.
Reimbursement level or and if you can give any qualitative detail on how that's shaken out versus your expectations. So far.
Yeah sure. So I think Charles first as it relates to Q4.
As we were looking into the end of the year there was considerations around exactly how the extent of that Destocking and what would occur all the dynamics around the shift in reimbursement provided a fair amount of uncertainty and so I think it's fair to say that overall in the quarter things performed better than we expected I think when you do your models.
You'll see that a significant part of the outperformance in the fourth quarter came from.
Our U S glaucoma franchise.
As you think about the beginning of this year.
I think it's a little early right I mean, I guess, what I would say is there's a bit of cloudiness given the dynamics around omicron in January in Britain. In particular is it's difficult to sort of separate that from whatever elements. We're seeing as it relates to the U S reimbursement and and the volume impact there.
But I have no doubt that we are seeing some of that and that's expected and now <unk>.
To continue to try to mitigate that as we move forward here.
Great. Thank you.
Your next question comes from Jon Block from Stifel. Please go ahead.
Hey, guys. This is Tom Stefan on for John Thanks for the questions just wanted to start off on guidance.
First on U S glaucoma.
I'll take a stab here Budd.
With what Youre willing to share is there any color around price and market share in that business that we should be thinking about.
I understand if you don't want to get into too. Many details so qualitative commentary would be very helpful as well.
Then I have a follow up.
Sure Tom I think I can I'll start here as it relates to the U S. Glaucoma business I think with the one element of the final rule that we were obviously more pleased within the other was the final facility fee and so I think we said on the last call that that got us back roughly in line with where reimbursement was in 2020.
So heading into 2022, we expect relative stability in the pricing environment in U S combo cataract mix.
I think as it as it relates to.
The other dynamics there.
Volumes et cetera.
Market share.
Inherent obviously when you when you Peel back the model.
<unk> is an expectation that a combination probably to a lesser extent competition, but more to a larger extent that the impacts from the professional fee on U S volumes were obviously expecting some pullback in procedures and we'll see how sustainable that is and how things play out over the course of the year, but underlying the model and the guidance. We gave is.
Certainly that assumption.
Got it that's helpful. And then just to pivot to I Prime you talked about the controlled launch in <unk> 'twenty, two I think the label or the indication of use seems to check all the boxes are there any hurdles in areas like reimbursement billing et cetera or.
Or is it pretty much all systems go and then can you help us at a high level with how we should think about this product in the context of guidance.
When we can maybe expect a full launch thanks guys.
Hey, Tom This is Chris and we were excited about getting approval for prime as early as we did and we are planning for a Q2.
Launch.
In terms of how that will be used that will be up to the physician in terms of how he or she wants to utilize it when he or she wants to utilize it and that'll determine how it will be reimbursed.
And then I think as it relates to the numbers I mean, obviously as I mentioned it was included.
Overall forecasting we did to come to the $2 65 to 275 guidance.
It's not a significant contribution obviously given what we've described in terms of the initial launch activities and as we progress through the year.
We will keep you updated on that.
Great. Thanks, guys.
And your next question comes from Ryan Zimmerman from BTG. Please go ahead.
Hey, thanks for taking the questions.
Couple of things for me and sorry to kind of hamper on some of the U S glaucoma dynamics.
Obviously important right now so.
Reimbursement dynamics for combo cataract, Joe you kind of talked a little bit about this.
How pervasive do you think.
Known in the community and maybe Chris do you have thoughts on this to how pervasive is.
The current reimbursement rates for U S combination cataract.
Our stance, but also for stance plus does go dilation and the reason I ask is because some of the diligence with suggests that physicians are thinking about kind of using both stance and I prime in combination.
Where they can maybe offset some of those reimbursement dynamics.
Thank you.
Hey, Brian I would say that it's very pervasive.
Zinc.
Physicians as well as administrators have a very good understanding of what the new dynamics are from a reimbursement standpoint.
Both on the facility and on the protein side of things and in terms of.
Combination therapy.
Most are looking at that more from the focus of what's best for the patient.
But most are also.
We're of the financial implications of combining therapies.
Got it okay.
And I just wanted to ask also so.
You talked about.
Contribution from high Prime Theres contribution potentially from Amphenol in guidance this year.
What's assumed.
And I know youre not going to be missed their number Joe but whats.
What's assumed for pressure flow and and when should we think that that can start to contribute at the worst case scenario I guess in your mind.
Yes.
Yes.
I think a fair question Ryan.
Inherent in the guidance, we haven't included pretzel flow of pressure flow revenues.
I think we wanted to see given the situation with the FDA and approval before we start really thinking about including that in the U S guidance.
As Tom mentioned in his remarks, we are commercial now in Canada.
And launching in Australia. So there is some pressure flow revenues that are.
Obviously built into the international side of the franchise, but.
Look we'll continue to keep you all apprised as we hopefully make progress here with the FDA and have more certainty around timelines and what it could mean for the business.
Okay, Let me squeeze one more in and then I'll hop back in queue.
You can assume for royalties from hydrous in terms of revenue.
That guidance.
That is factored into the guidance.
Okay. Thank you.
Your next question comes from Matt O'brien from Piper Sandler. Please go ahead.
Hi, guys. This is drew on for Matt. Thanks for taking the questions and congrats that everyone on the new roles.
I wanted to start off on an infinite area, so I'm pretty confident in our clearance in the near term.
Any updates on conversations with the agency focus of label still on the advanced refractory population.
And I know you are still doing some work to improve the facility reimbursement side of things, but can you just remind us what needs to be done.
That physician rate set once you have declared <unk> NAND.
Yes drew I'll be happy to take this so as you know we've already filed for approval for Istent infinite we've negotiated with the FDA.
And it is likely our label will be certainly for late stage patients and those patients on a standalone basis with glaucoma that have failed on ophthalmic surgeries and so a sizeable population as we've talked about before about 125000.
<unk> annually have either trabeculectomy.
Or.
Or aqueous shunts and so that appears to be what we will have going forward and then just to remind investors.
Cause of the superlative nature of the results of Istent infinite.
Have moved that into discussions with the FDA to be able to advance in a new IV for earlier stage patients and this istent infinite will take the place of the Istent SA that we've talked about previously and so we have committed and we are executing on our plan from the beginning which was to begin to approach the.
Following the conclusion of the Idose recruitment of the trials. So we're excited our position as if istent infinite is working so well even in these late stage patients. We're confident that it's going to be able to deliver in earlier stage glaucoma and that will be the position going forward in terms of Istent infinite.
Reimbursement side as you recall.
This happens to be a power alley for us will approach Max when we receive FDA approval and if we look at historical context and predicate is any guide it took us probably about nine months before we were able to fully get kind of a universal approach to the Max across the country and so in your.
<unk> you should be looking for that and again this won't all come at one time, we'll be approaching Max and typically they fall.
It really singularly overtime until we actually then invest the time to have all of the Max turn and have a fair price set for for the professional fee for Istent infinite now on the facility side as you recall.
The CMS has given us a underwhelmed facility fee payment so much like we approach the draconian cuts like we did with the professional fee proposed changes. This past year, we were able to gain considerable ground will be meeting with the FDA again over the course of 2022 to be able to persuade them.
To be able to place this APC in its rightful place, which really it has been over the last 10 years I believe the APC was $5 92.
That's our intent and Thats our target if were successful that will be effective January one in 2023, and so we'll keep you posted and apprised as we go forward there'll be the normal commentary period and as you know the CMS will weigh in.
The fourth quarter of this year, whether or not were successful in moving that if we're unsuccessful. Then we always have the opportunity. This next campaign in 2023 to go at it again.
We intend to be tenacious and resilient and to make the appropriate changes there.
Okay very helpful. Thank you.
And then you just you mentioned it a little bit earlier in the call here, but I just wanted to get your thoughts about how you're thinking about.
I've asked this alcon combination it sounds like youre, incorporating a little bit of impact into your guidance, but.
You can speak to as far as what Youre seeing so far I guess about a month in here.
What impacted glaucoma that youre baking into that guidance. Thank you.
Hey, drew this is Chris and it's really too early.
To say that we've seen.
Much of an impact if any.
Alcon.
We've competed with them before.
We have the highest regard and respect for them.
We were expecting this acquisition and we're prepared for.
And we will be prepared and.
We'll see how it goes but we have dialed that into.
Our guidance in terms of what.
Joe is presented in terms of our year loan guidance.
Okay. Thank you.
And your next question comes from Joanne Wuensch from Citigroup. Please go ahead.
Good evening and thank you for taking the question I have just a couple.
First question has to do with gross margins in 2022.
Assumed are being pressured versus 85% you just did in the fourth quarter, but is there any way to quantify that for the full year.
Yes, Hi, Joanne I think we've for a little while now been kind of pointing you all to an 83%, 84% gross margin and I think it's been encouraging obviously the trend line that we've seen in the last couple of quarters, but I would still probably point in that direction. As you think about 2022, I think there's a number of variables in play as you are describing.
Fibbing.
Competitive.
So I think it's probably more about mix is.
As international becomes a more significant percentage of our business. Obviously, there is a little bit of margin impact there and we'll see how much that is offset by the receipt of royalty revenues from from Alcon.
And is there a way to quantify two different things.
The first one is what may have happened in terms of Destocking in the quarter and then the second one is how much revenue you have and your.
Forecast for things like my.
Prime or Istent infinite.
Yes, I think first it is pretty difficult, but I think a lot of those destocking dynamics or happening as you kind of exited third quarter and going into the end of the fourth.
Obviously, some accounts chose the reordering normal patterns towards the end of the year, but not all as they were probably waiting to see how folks reacted to the new rules. When they came into play so it's hard to get any sort of quantification of that.
And then as.
As you think about <unk>.
Going forward here.
I think we've covered that pretty much it at length already.
Okay. Thank you very much.
And your next question comes from Allen Gong from J P. Morgan. Please go ahead.
Hey, guys a lot of my questions have already been asked so I'll just leave you with a quick one when we look at your guidance range, you kind of already highlighted a normal sort of normal level of seasonality with all the puts and takes taken into account, but when we look at your peers. It seems like there is some variance in terms of what they are assuming for COVID-19 .
<unk> dynamics, especially in the back half of the year, some are saying that failure will be.
Maybe like a flu like impact of fall winter and some are even factoring in that potential new variant. So is that contemplated between the low end and the high end of your guidance or is there kind of flat.
Flat level of COVID-19 impact baked in there for the back half of the year. Thank you very much.
Hey, Alex Joe I think one thing that COVID-19 has taught us over these last two years as did not make any assumptions.
In terms of what the path forward will look like with any high degree of certainty. So what we've done is try to take into consideration specifically, what we saw in January coming into February for a moment, Brian and what that would mean to the first quarter.
Like others, I think have an assumption that things should improve here as we head out of the winter months and into the summer.
But what lies beyond that in the fall and winter is very difficult to predict so hopefully we built in a little bit of conservatism.
For that.
But I think relative to everything else, it's probably a bit of a rounding error.
Your next question comes from Steven Lichtman from Oppenheimer. Please go ahead.
Hey, guys. This is David.
<unk>.
I just wanted to follow up on the gross margin question from earlier.
You talked about guiding towards that 83%, 84% does that contemplate any inflationary pressures.
For like labor and raw materials.
I just had a quick follow up on the pipeline.
For the Idaho.
Idose TR phase III.
Trials should we expect that data readout this year.
Okay I'll take the first one yes, I mean, the answer is yes, I mean, when we think about the 80, 384% we're trying to factor in all the variables that we know today, which includes what we expect our cost of goods sold to be in this.
Certainly higher inflation environment.
And the question on Idose TR as we've said before.
We are tracking to file our NDA by the end of the year and it's our position that will seek to be able to present the data when it's available, which we're hoping will be the tail end of this year or or early next year.
Great. Thank you.
And your next question comes from Zach <unk> from Jefferies. Please go ahead.
Hey, Thanks for taking the question just one from me on Covid I guess.
Yes, you made comments on Covid impacting <unk> and impacting us at the beginning of the first quarter.
Patient through locked in or is that more staffing related issues and then with the COVID-19 headwinds.
Are you seeing any backlog and then I guess the last one would be.
If there is any backlog when you expect to recapture that.
Yeah, well I'll start if Chris or Tom want to add anything and they certainly can I think well first the COVID-19 impact. We saw was at the very end of December I mean, obviously with ties straight to when we started to see a lot more of the case.
Increased post Christmas and as we went into the new year. It clearly peaked in January I think it's a combination of all of the above I mean, the reality is in a in a stretch where we had as many patients testing positive as they were youre going to have increased patient cancellations and disruption to the schedule. You're also going to have doctors nurses administrative staff testing.
Positive themselves and usually when that happens.
Center can be shut down for a day, a week or two weeks, depending upon the extent of the outbreak. So I think all of those things create disruption that.
It puts those patients back into the funnel to be treated here in the coming.
Months and quarters as things hopefully.
Turn a little closer to normal.
And there are no further questions at this time I will turn the call back over to the company for closing remarks.
Okay. Thank you all for your time and for your attention today, and we certainly hope that everyone is staying safe.
And I also want to thank you all for your continued interest in <unk> Corporation Goodbye.
This concludes today's conference call you may now disconnect.
Yes.
Okay.
Yes.
Yes.