Q1 2022 Glaukos Corp Earnings Call
Good afternoon, My name is Julian and I will be your conference operator today.
At this time I would like to welcome everyone to Cockleshell first quarter 2022 financial results conference call.
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 a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question. Please press star one again Chris.
Chris Lewis Vice President of Investor Relations and corporate Affairs, you May begin your conference.
Thank you and good afternoon, joining me today are glucose chairman and CEO , Tom Burns, President and C. L O, Joe Gilliam and CFO , Alex Thurman before we begin we want to remind you of a change in the way we plan to handle our quarterly earnings disclosures and calls starting with this one the company has posted a document on our investor relation.
Web site under the financials and filings quarterly results section titled Quarterly summary. This document is designed to provide the investment community with the summarized and easily accessible reference document that details the key facts associated with the quarter. The state of the company's business objectives and strategies and any forward statements for guidance, we may make.
This document has been and will continue to be provided alongside the company's earnings press release, and it's designed to be read by investors before the regularly scheduled quarterly conference call assets. Beginning this quarter, we will make very brief prepared remarks and quickly transition into a question and answer session.
It is our goal that this change will make our quarterly earnings process more efficient and impactful for the investment community going forward.
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 products.
Pipeline technologies U S and international commercialization integration and market development efforts.
You can see our current and future products, our competitive market position, our regulatory strategies and reimbursement for our products 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.
Review today's 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 glucose 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 can facilitate a more complete analysis and greater transparency into glad because there's ongoing results of operations, particularly when comparing underlying results from period to period.
Please refer to the tables in our earnings press release available on the Investor 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 glaucoma, Chairman and CEO Tom Burns.
Yeah.
Alright, Thanks, Chris Good afternoon, and thank you all for joining us today, and we certainly hope everyone is safe and doing well.
Today, <unk> reported first quarter net sales of approximately 68 million flat versus a year ago quarter and up 1% on a constant currency basis.
Our first quarter performance reflects solid execution across our global glaucoma and corneal health franchises amidst continued COVID-19 related volatility and headwinds globally in U S combination cataract glaucoma dynamics associated in particular with the 2022 CMS final physician fee.
When rates that'd be became effective on January one 2022.
From a commercial perspective, we've been very pleased with the execution of our strategies and the resiliency of our U S combo cataract franchise in the face of the reimbursement headwinds thus far in 2022.
The latter part of this first quarter, we launched our I access device that has both minimally invasive and tissue sparing features that will allow customers perform goniotomy procedures.
We also look forward to bringing I prime to customers soon as well and our international glaucoma and corneal health franchises continued to deliver strong results as we develop these important businesses.
We are raising our 2022 net sales guidance range to 270 million to 275 million versus $265 million to $275 million previously given our better than expected first quarter results and latest forward outlook.
On the development front, we continue to advance our pipeline.
Following the recent clearances of eye access and I Prime the F. D. A five 10-K review of Istent Infinite is continuing and we remain focused on our potential mid year clearance for this important product.
T R and M P OXXO ore at beyond activities remain on track for NDA submissions and targeted FDA approvals in 2023.
Dilution phase III clinical trials for dry eye and presbyopia are well underway.
Finally, the FDA did recently notify and focus a fantastic company that its pressure flow of Microsoft's PMA submission is non approval.
The micro shot is not a material potential driver of our near term business. This outcome is disappointing given our early positive commercial experience with this product in Canada and Australia.
Encouraging surgeon feedback globally as they seek alternatives for late stage glaucoma treatment, we intend to engage with the FDA to determine optimal clinical and regulatory next steps.
Before we open it up to questions I'd like to reiterate our conviction in our long term strategic vision.
We anticipate and are planning for a robust cadence of new droplet platform and product introductions over the coming years that have the potential to fundamentally transform glaucoma overtime.
And meaningfully advance the standard of care and improve outcomes for patients suffering from sight threatening diseases.
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.
So we are excited about our prospects and confident in our ability to execute our plans in the years to come and so with that I'll open the call to questions operator.
Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Our first question comes from Andrew Backman from William Blair. Please go ahead. Your line is open.
Hey, guys afternoon, and thanks for the questions I like this new format, so congrats to Chris and the team for putting all this together.
Maybe I can start here and how do you sort of address the elephant in the room on multiple procedure reimbursement obviously, the stock has been sort of under pressure to a degree because of that investors are certainly sort of.
Any questions around that so can you just sort of talk to us sort of about your thoughts on that topic, specifically, how you are viewing the landscape there is not a problem.
And just what it means for your business.
Okay.
Thanks, Andrew and Chris pass along as certain tier thanks as well.
Well, there's a lot in that obviously theres been a lot of I think an investor related activity on this so I'll try to cover.
The sort of core topics and if you've got follow ups. We can we can handle it I think as it as it relates FERC maybe to I access.
And just as a reminder for investors you know reimbursement is determined by the procedure performed and not the device itself.
And we believe by excess has features that allow surgeons to perform a goniotomy procedure that would meet the definition of CPT CPT code $65 20, if they deem it medically necessary and reasonable.
As you think about <unk> prime.
Currently we believe surgeons can use the high prime device to perform procedures that meet the definition of CPT code six 674, if they deem it to be medically necessary and reasonable at their own discretion.
And to the heart of your question as it relates to the pairing of procedures.
They are was really already weighed in formally on the subject of pairing these procedures, where a surgeon feels its medically necessary to maximize clinical benefit for patients in March 2022, They put a savvy coder bulletin out that stated epic now plus he has performed in conjunction with Istent and cataract then you should build six 674% and six 6%.
99, one.
As being appropriate and.
More recently in April of this year. They also released.
Our bulletin that if a goniotomy has performed in conjunction with what's been in Cataracts. Then you should build 65820, plus 6691 as is appropriate. So I think at the end of the day when you put all of that.
Together it appears many surgeons are increasingly turning to multiple procedures.
They have the tools to do so and to provide the Max benefit to their patient given this is a sight threatening disease.
Ultimately our goal is to provide certain with truly minimally invasive alternatives to maximize the overall patient benefit and hopefully grow the overall market as well while doing so so I think hopefully that provides a little more clarity to some of the information flow thats been been running in the investment community.
Certainly thanks for that Joe and then maybe if I can just sort of switch topics here for a second I hate to be so sort of near term focus but as it relates to the guidance. So you beat the quarter you beat the street by its pretty handedly $7 million or so in the quarter, but only raising the full year range I think it's $2 5 million. So can you just sort of talk to us about.
And give us sort of any additional detail with respect to the process or changes and assumptions with an updated range. Thanks guys.
Yeah sure. Thanks, Andrew.
I think.
Well look first we provided guidance for the year and not the quarter.
And while it's fair to say, we were pleased with the first quarter results and how it turned out versus our expectations coming into the year.
And I really acknowledge that and also to state is largely that performance was without the benefit of new products I think on the positive side as we think about the setup for the remainder of the year, but having said that it's still early in the context of the risks that we described entering this year, namely the U S. Profi cuts the impact of those and.
Global globally.
And change doesn't happen all in a single quarter. We know competition will continue to get their sea legs as the year goes on and we have other factors we have to think about the FX considerations here some of the macroeconomic dynamics that are playing out there and as much as we don't like to admit it COVID-19 risks still remain as we move forward here. So.
If you put all that together I think we were pleased to be able to raise the bottom end by 5 million to two months. After the initial guidance given everything that was.
Facing is coming into the year.
Makes sense thanks, guys.
Thanks, Andrew.
Our next question comes from Chris Cooley from Stephens. Please go ahead. Your line is open.
Good afternoon, and thanks for taking my questions. Congrats on a great start to the new year and let me just briefly also echo Andrew's sentiment great job, Chris and his team on this as such such a better way to do a call. So thanks you guys. Just in terms of my two questions could we kind of unpack the growth.
Little bit that you saw in particular I should say go to 15% decline you saw in the U S.
Glaucoma franchise help us think a little bit there about.
How much of that was volume related versus price and then as we think about stepping back up through the year kind of what you're assuming in terms of the contribution from both I access and Prime and then I've got a quick follow up.
Alright, Thanks, Chris.
This also thank you for the kind comments at the beginning of your question on the.
On the first part I would I guess I would answer this way pricing remained stable in the first quarter largest stable. So what youre seeing there is from our performance overall in the U S. Glaucoma segment is largely translated to volume dynamics.
Over the course of the first quarter now there is probably two things going on there as Youll recall co.
Covid was still a reality globally at the beginning of the quarter in January and early February and then of course on top of that we have the dynamics around the changes in the professional fee reimbursement.
What was your second question.
No not that I just was thinking about the second part of that was supposed to go into moving ahead kind of the contribution from access and prime.
That helps to bolster the overall domestic glaucoma franchise, but I can follow up with that online.
No.
That's fine Chris I can I can answer that I think look as it relates to going forward.
We mentioned when we gave the guidance for the year to $65 275 that we would include some contribution, albeit modest from I access and I Prime in an istent infinite under the expectation that we would see product launches from those over the course of the year and I think that remains the case, so I wouldn't.
Get too far ahead of your contribution from those products at this stage.
Ultimately, we will have a lot more I think to say as the year progresses around how they are being adopted and utilizing what it's doing in terms of driving our bahar topline.
Okay, great and if I could just squeeze a quickie in gist and thoughts here you clearly have a very strong cadence with prime.
To access in a controlled launch here in the second quarter moving forward, we have F. B on an idose coming as well, but how are you thinking about dilution platform, how will we start to see data and kind of milestones.
Across the board there for both dry eye in presbyopia.
Trying to think about some markers we can put out there just to kind of track the progress. Thanks again.
Yeah, you're welcome and thanks, Chris This is Tom and so I'll answer the question on the foundational platform, we have with dilution.
We're excited about this as a new platform to be able to provide not only depot effect of the cream itself, but that as it penetrates. The island. We think the tissues itself will act as the depot, which gives an opportunity for four different Apis to travel using either the Alibaba.
Conjunctiva or through square diffusion to be able to get into the front of the eye and treat anterior segment disease.
So with that we have launched as you know two phase III clinical studies.
One the 200 patient <unk>.
Clinical study evaluating twice a day I Lucian pilocarpine.
Versus a placebo to be able to determine safety and efficacy looking at dry eye signs and symptoms.
What we've said.
Clinical the clinical reports.
Clinical golf Dot Com I guess is that we'd look to complete that clinical trial by mid 2023, and I think we're tracking to be able to beat that up pretty substantially. Likewise, we are also looking at a another.
Proprietary formulation of pilocarpine in dilution cream to treat presbyopia and as you know presbyopia nearly 100 million patients in the U S. With the disease, we plan to make a difference there. If this product is proved safe and effective we also have counseled.
Completion of that clinical trial of May of 2023.
And I see that our progress leads me to believe that we'll beat that as well so that should give you some indication of what we'll be looking at obviously, we'll be looking at dose ranging at various concentrations in order to determine what would be appropriate to take into a phase III clinical trial, and we hope to make a difference in the treatment of dry dock.
These in presbyopia.
Thank you.
Thanks, Craig next question. Our next question comes from Larry Base Olson from Wells Fargo. Please go ahead. Your line is open.
Hi, This is Charles Elson on for Larry I had a first congrats on a nice quarter I had a question on Idose. So I think.
The one year follow up if I have this right for the phase III study.
<unk> completed in June this year.
Do you have a plan for disclosing the topline results in the full data.
Do you think you'll be able to present that.
At a medical conference before approval.
Yeah.
Yeah, Charles we will and as I've stated before what we'd be looking at doing is probably be looking at releasing the phase III pivotal trial.
Both data sets in the latter part of this year, let's call. It a tailwind this year or certainly by early next year. So that should give you. Some strong indications that we're on track and that and we'll have those results available.
Okay. Thank you.
Our next question comes from Ryan Zimmerman from <unk>. Please go ahead. Your line is open.
Hey, this is Phil dense one on for Ryan can you hear me alright.
We can.
All right Great I just had two quick questions here.
Number one there's not really consistent coverage of Goniotomy combined with stents for Max across the U S. So what is your expectation that LCD is could change both positively or negatively.
Yeah.
Thanks, Phil.
I'll start off and if Tom what's adding he certainly can I think anytime you go through new product launches you have a variety of things that you work through that's no different than what we've gone through over the years with the MX devices with Istent inject in Iceland and its original launch. So we'll continue to work through those dynamics as it relates to the.
Max and and <unk>.
Keep you advised we move forward.
Yes.
I would just say great what's the what's the what's been powerful lately is the releases disclosure by the Academy, which has taken a position that if surgeons deem it medically necessary and reasonable that goniotomy and can be used and they qualify.
Six five <unk> and the 66991 as the measures for how surgeons would use the codes to be able to to code for these procedures and so to me that's a very forceful arbiter and gives us kind of a powerful way to approach. These macs to be able to to be able to influence them in a positive way going.
Forward.
Awesome. Thanks for that color and then just on my second one.
As far as you have a line of sight on this what should we expect at the upcoming <unk> meeting on Cal Plasty now why are they discussing this what risk does this potentially present the high prime.
Yes, Thanks, Phil I think theres been a little bit of a misconception around this upturn upcoming A&P Ama's CPT editorial panel.
No.
We believe it is expected to discuss the simple addition of a of an example in a parenthetical to six 674 of the code basically clarify.
What that coach we used for for example can alloplasty.
Oh asked for this given provider questions about proper terminology.
And ultimately that parenthetically will become effective in January of 2024.
It makes sense and thanks, guys and congrats again on this.
This transition to better format I'll echo everyone else. Thank you.
Thank you.
Our next question comes from Matt O'brien from Piper Sandler. Please go ahead. Your line is open.
Okay.
Hi, guys. This is drew on for Matt Thanks for taking the questions.
I guess just to start off maybe an update on alcon in hydrous any changes so far with how that device is being marketed or anything you can speak to is seen as far as the impact of glucose that youre baking into your guidance.
Yeah. Thanks, Thanks drew obviously.
Start with the latter and say, we've obviously factored that in originally all competitive dynamics, including <unk> acquisition of <unk>, we set our guidance for the year and we factored in as we thought about the raising of the bottom line of the guidance. This time, so we factored that in.
Financially in our expectations for the year I would say that as you've heard us say before we have a tremendous amount of respect for alcon as an organization and.
And they obviously now have full control of the of the.
Hydrous stent.
And we see them in the marketplace like we have for several years now so I would expect to continue to get their sea legs over the course of the year and we'll continue to see them from a competitive standpoint.
Not just here in the U S, but globally, but I would say, it's it's continued sort of more of the same.
Okay, Okay that makes sense.
And then just thinking about that 15% decline in the U S.
Sounds like that's largely related to volumes I assume some of that earlier in the year here would be temporary competitive trialing.
So just any sense for how some of those trailing activities have gone for glaucoma.
Surgeon try other devices and come back to <unk> and when do you expect.
Some of that temporary trailing third began to wind down thank.
Thank you.
Yeah. It's a fair question hardwood answer I mean, I think anytime you go through a situation like the adjustment in the professional fee reimbursement youre going to have some disruption.
Ordering patterns customer Trialing and trying.
Some of which has come back some of which will some of which will potentially be continue to be losses as physicians become aware of it. So I think it remains a fluid dynamic.
We're encouraged by what we saw in the in the first quarter and.
And that's all reflected in the guidance we gave.
Thank you.
Our next question comes from Tom Steffen from Stifel. Please go ahead. Your line is open.
Great Hey, everyone and thanks for the questions.
If I can just sort of start big picture, you know a lot of things happening in 2022 with Migs.
New products, obviously reimbursement changes.
We kind of pick up in our checks a lot, but there just seems to be a bit of confusion in the marketplace among doctors so.
So I guess would love to hear your perspective, just on sort of the state of the U S. Migs market today, and how you believe the longer term I guess competitive dynamics may ultimately play out.
Yes, Thanks, Tom.
I'll start off and then Tom do you want to add comments you can add to it I think it is true that there has been a fair number of new product introductions in recent years, including some of our own here as we navigate 2022 and whenever you do that or go through that surgeons.
We're going to be evaluating what their optimal algorithm with the products that are available in the patients in the state of disease that they have so I think it's natural that there would be some of that here and now as we go through all of this I think you've heard us say for a long time that the part of the mission at glaucoma.
To provide the full portfolio of alternatives for these surgeons as they move forward. So I think those are discussions that we look forward to engaging in with with these surgeons as they think about those algorithms and how our product portfolio may made map against that ultimately our goal is to provide the most minimally invasive alternatives and to hopefully.
Maximize the overall patient benefit and expand the market, while we do it.
And I would just add that as we look at this there are a number of alternatives that are entered in is that surgeons kind of grapple with that and get their sea legs as to how they want to build their own algorithms that probably leads to some of the near term confusion.
Over over what Youre hearing from the end market, what I am very encouraged by is the movement of surgeons independently of us to the use of paired procedures to be able to arrest. The sight threatening disease. Clearly there is a need to be able to drive to lower intraocular pressures through the use of procedures that may be either additive or.
Synergistic to be able to get them, there and because of that I think we've been perhaps a little prescient and put ourselves in a very very good position as we move forward in this marketplace.
Got it that makes sense, if I can quickly pivot.
Just to supply chain disruptions inflationary pressures.
Any updated view kind of as we sit here today or any moving parts in particular, we should be mindful of whether it's in relation to your core portfolio or the pipeline.
And then do you guys still feel comfortable with sort of that 83% to 84% gross margin range you've talked about recently thanks guys.
Yes, Tom It's Joe I'll, maybe I'll start with some of the macroeconomic points and then I'll turn it to Alex for the gross margin view.
We're certainly not immune right the world continues to navigate.
Our new supply chain challenges each in each and every day I would say that our we.
We couldnt be more proud of our organization and how they've responded to that required creativity and ingenuity and all the things you can imagine due to navigate that successfully and so far so good in the context of continued product supply of continued clinical trial supply and all the things that are going on there but.
Is a lot harder in that context than it was pre pandemic and some of the things that are going on and we've also seen obviously the.
Inflation dynamics that I think many are talking about is playing its self out in various ways, including with suppliers and associated partners.
Rates for our pipeline and then almost everything we do here from a human resource and other perspective, so there's a very real dynamics, but so far so good in terms of our ability to navigate them, Alex Yes, Hey, Townsend Alex so on the margin.
Range, 83% to 84%, we do believe that is still the appropriate margin for the business. We did 83 in the quarter and that was about 160 basis points less than fourth quarter. However that was primarily driven by geographic revenue mix and our international revenues being a much higher percentage of our overall revenue mix.
In the first quarter, which drove it down a little bit and as we've said historically, our international margins are a little bit.
Lower than our U S margins.
But given that fact pattern, we still believe and we still target internally and we would.
Expressed that same sentiment to you that the 80 384 range is the correct one.
Very helpful. Thanks, Alex Thanks, everyone.
Thanks, Tom.
Our next question comes from Allen Gong from J P. Morgan. Please go ahead. Your line is open.
Yes.
Hey, guys. Congrats on the good quarter I just had a few quick ones. The first one is you obviously had very strong trends in your core glaucoma business with any of that stocking dynamics earlier on in the quarter as physicians and practices really prepared for things to hopefully get back to normal and for them to give you getting back to normal levels of volumes.
I think it's a good question, but the answer is no I don't think there was really any stocking dynamics associated with the first quarter results. If anything you had a little bit more noise associated with Covid and just the general sort of <unk>.
Environment.
Got it and I think someone already asked something kind of along the lines of this but.
Glad to see the bottom end of our guidance range moving up but even if I just take the sales that you had in first quarter, you know and annualize it you're already at the very bottom of the range. So when we think about the sequential improvement and we should really be seeing us hopefully translate a little bit better as new products launch.
What are you assuming for competitive dynamics is it just assuming that as you said Alcon, maybe gets a little better a little bit more pressure from alcon and other competitors offset by these new products and hopefully just broader trends getting better and yes like I ask why isn't the top end of the range, where we should be off the bat.
It was such a strong first quarter. Thanks.
Yes, again, I think it's fair and we acknowledged that were we were pleased with the way the first quarter played out relative to our expectations entering the year.
But as I said earlier I just think it's still early in the context of the risks we face entering the year and that we still face right, namely the proceeds.
What dynamics and just in competition generally and then when you overlay some of the FX related considerations, the macroeconomic factors that COVID-19 risk et cetera.
Quite frankly, we came into this call quite pleased that we were able to raise the bottom end of the range by $5 million.
Over two months after giving our initial guidance.
Yeah.
Yeah.
Our next question comes from Steven Lichtman from Oppenheimer. Please go ahead. Your line is open.
Hi, This is David on for Steve. Thanks for taking my questions. I was wondering if you could provide any more color on the latest macro out like you are seeing through April relative to procedure volumes near patient flow and backlog.
Thanks, David.
But in general you have to when answering that question you have to think about it in terms of individuals individual geography, I think in the U S.
We've been pleased with the stability that we've seen in terms of those macro dynamics around COVID-19.
Procedure flow and the things that you would expect as we come out of the winter months and into the spring here in the U S. Internationally I put more market's been not into that same camp, but there are still.
Pockets of Covid resurgence that create sometimes temporary sometimes a little bit longer than temporary disruption and procedure volumes and I think that.
It's something that we've gotten used to for almost over two years now being that dynamic, it's a little bit less than what we've seen in the past, but it's still a relative relevant dynamic to call out.
Yeah.
Got it thanks, and then just one question on <unk>.
How should we should think about the opex spending trend.
Rest of this year is there any significant investments planned for additional sales reps our pipeline products that we should think about.
Hey, David This is Alex happy to take that question on the Opex. So as you saw we posted about a $70 million non-GAAP opex in the first quarter, which if you run that out for the year is about $280 million. However, Joe has said and the passion and we believe that still holds true that our business really justifies around a 300.
Million dollar run rate for the year, So we would.
I encourage you to think about that and to.
Kind of put that into your models, which which also.
<unk> said that youre going to see sequential increases over the over the year to get to that 300 level of opex.
Great. Thank you.
We have no further.
No further questions in queue I'd like to turn the call back over to management for closing remarks.
Alright, this is Tom and I want to thank you all for your time and attention today.
We again hope everyone is staying safe and we thank you for your continued interest in glaucoma corporations, so with that goodbye.
Okay.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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