Q3 2022 Glaukos Corp Earnings Call
Okay.
Welcome to the Glaucoma Corporation third quarter 2022 financial results conference call copies of today's press.
Press release and quarterly summer in summary document both issued after the market closed today.
Yeah.
Www dot glaucoma dot com.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer section.
Please if you would like to ask a question simply press Star and then the number one on your telephone keypad.
If you would like to withdraw your question again press Star and then the number one on your telephone keypad. This call is being recorded and an archived replay will be available online in the investors relations section at Www Dot golf coast Dot com.
I will turn the call over to Chris Lewis, Vice President of Investor Relations and corporate Affairs.
Thank you and good afternoon, joining me today are glucose chairman and CEO , Tom Burns, President and C. O O, Joe Gilliam and CFO , Alex Sherman similar to last quarter. The company has posted a document on its investor relations website under the financials and filings quarterly results section titled Quarterly summary, there.
Document, it's designed to provide the investment community with a summarized and easily acceptable referenced document that details the key a key facts associated with the quarter. The state of the company's business objectives and strategies and any forward statements or guidance, we may make.
This document has been and will continue.
<unk> to be provided alongside the company's earnings press release and is designed to be read by investors before the regularly scheduled quarterly conference call.
For this call we will make brief prepared remarks and quickly transition into a question and answer session. It is our goal that this format will make our quarterly earnings process more efficient and impactful for the investment community going forward to ensure ample time and opportunity to address everyone's questions. We request that you limit yourself to one question and one follow up if you still have dish.
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.
This includes statements about our plans objectives strategies and prospects regarding among other things sales product 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, our regulatory strategies in reimbursement for <unk>.
Our products financial condition and results of operations as well as the expected impact of the COVID-19 pandemic on our business and operations.
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.
And therefore, they may cause our actual results to differ materially from those expressed or implied by forward looking statements.
Today's press release, and our recent SEC filings for more information about these risk factors you'll find these documents in the investors section of our website at Www Dot Glafkos 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.
Believes these financial measures can facilitate a more complete analysis and greater transparency into glad because it'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.
Okay. Thank you Chris good afternoon, and thank you all for joining us today.
Today glaucoma reported third quarter net sales of approximately $71 3 million down one 6% year over year on a constant currency basis.
I'm pleased with our team's ongoing commitment to advance our key strategic priorities and execute our plans, while navigating a challenging macroeconomic environment.
As a result, we are updating our 2022 net sales guidance range to 278 million to 280 million versus $2 $75 million to $80 million previously.
From a commercial perspective, we continue to be encouraged 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.
At the same time, we remain focused on innovating and expanding the site saving tools available to surgeons to improve overall care for ophthalmic patients.
Over the course of this year, we have continued to successfully expand our comprehensive best in class product offering for our customers with the introduction of several novel Ophthalmic technologies, including I access a novel instrument with features that allow customers to perform goniotomy procedure and I Prime and innovated new.
Elastic delivery device.
More recently in the fourth quarter, we commenced U S. Initial commercial launch activities for Istent infinite our novel <unk> injectable system designed to provide foundational 24, seven IOP control for glaucoma patients uncontrolled by prior medical and surgical therapy.
While this launch remains in its infancy. It represents a significant milestone for glaucoma and the migs market as the first ever microphone base of the implantable device indicated for use as a standalone glaucoma treatment.
We believe Istent infinite will spearhead our long held mission to create a new interventional glaucoma marketplace that seek an alternative treatment paradigm to topical medications to advance patient care and to halt the progression of this chronic sight threatening disease.
We are bullish on Istent infinite long term prospects, but would caution conservatism as you think about near term contributions as we navigate the ordinary course and process of securing professional fee coverage and payment from the various Max through the first half of 2023.
Our international Glaucoma franchise, once again delivered strong operational year over year growth of 24% on a constant currency basis, as we execute our strategies to drive deeper penetration and broader adoption of migs around the globe.
On a reported basis international glaucoma sales grew 9% year over year in the face of continued significant and growing foreign currency exchange headwinds.
And within our corneal health franchise, we are pleased to deliver a quarterly record for overall sales of $17 5 million in U S for trucks with sales of $14 4 million <unk> sales grew 12% year over year as we continue to focus on access for keratoconus patients suffering from this rare.
Disease.
While it remains early we've been pleased with the initial signs of improvement following the investments we've been making to address sporadic reimbursement issues.
Speaking of investments, let's shift gears to the development front, where we continue to advance our deep pipeline.
During the third quarter, we were delighted to announce positive top line data for both phase III pivotal trials of Idose TR that successfully achieve the pre specified primary efficacy endpoints through three months and demonstrated excellent tolerability and a favorable safety profile through 12 months the power.
<unk> phase III results also demonstrated that 93% of slow release Idose TR subjects remained well controlled at 12 months, an encouraging trend that is fully further supported by the three year results observed in our phase <unk> clinical study in which 73% of patients.
Well controlled on a single injection of Idose TR uses the same or fewer baseline medications.
These results Mark a major milestone for our company and powerfully reaffirm our view that Idose TR can be a transformative novel technology able to fundamentally improve the glaucoma treatment paradigm for patients.
Our clinical and regulatory teams are hard at work preparing an NDA submission for Idose TR and we continue to target FDA approval by the end of 2023.
As for <unk> R. R.
Our next generation corneal cross linking therapy for the treatment of keratoconus.
Following our recent pre NDA meeting with the FDA. The agency has recommended that we run a second confirmatory pivotal trial to support an NDA submission.
Agency did confirm that the completed phase III study, which met the Prespecified primary efficacy endpoint would support submission and be accepted for a review of an NDA in conjunction with the second study.
Our understanding is that the Fda's request for a second study, which was unexpected to US was driven by earlier stage clinical studies associated with other companies on proven therapies that generated less than favorable efficacy data.
In response, we plan to commence patient enrollment for the second phase III confirmatory study by early 2023 with targeted enrollment completion by the end of next year.
Fight this delay to our previous timeline for <unk>, we believe we remain well positioned with our first generation corneal cross linking therapy for <unk> or <unk>, which remains the only FDA approved treatment shown to slow and halt the progression of keratoconus.
We are now in the midst of several new product launches 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 glaucous overtime and meaningfully advance the standard of care and improve outcomes for patients suffering from sight threatening diseases.
While we continue to monitor and feel the impact from extraordinary and faced inflationary pressures and foreign currency exchange headwinds. We believe we are well positioned with an increasingly diversified business and strong balance sheet to successfully navigate these and other potential macroeconomic uncertainties as we.
<unk> continued to deliver on our near term objectives, while advancing our longer term mission to transform vision.
We are and remain excited about our prospects and are confident in our ability to execute our plans in the years to come.
So with that I'll open the call to questions.
Operator.
Our first question comes from David Saxon from Needham and company.
Yes, hi, good afternoon, and thanks for taking the questions maybe.
Maybe just start just on the guidance in the quarter.
You beat by 3 million and it seems like a lot of the strength at least relative to my model came from U S glaucoma, despite the reimbursement dynamics.
But you only took the guide bye bye.
<unk> by $3 million at the low end. So just wanted to ask are there any new challenges you are facing maybe istent cannibalization from I primer I access or are there any other headwinds that are just becoming more severe.
That's preventing you from raising the top end.
And I guess related to that how should we think about trends as we go into 'twenty three.
Okay. Thanks, Thanks, David It's Joe here I'll cover most of that and if Tom wants to add some color. He can I think totally fair perspectives with respect to guidance. What I'll say is we've been really pleased with our performance through the first three quarters of this year.
I'm proud of our team that has executed incredibly well as you noted in the face of the CMS headwinds here in the U S and really competition globally.
You know what I can say that our U S. Glaucoma franchises has really remained quite stable with very little fluctuation. Our daily sales from really July all the way through October here sitting here today, and and really the biggest driver at this moment, which probably doesn't come as a huge surprise us currency when youre thinking about the remainder of the year.
We took a look back and we estimate that FX will probably cost us between eight 9 million of revenues.
2022, and when it's all said and done and that suggests we would've been nearing almost 290 million in sales. This year ex ex FX, which is pretty impressive when you consider all that we faced coming into the year.
As it relates to fourth quarter of that impact, we estimate somewhere in the neighborhood of $3 to $300 million of headwind in the fourth quarter related to currency, which is another big step in the wrong direction sequentially.
And then beyond currency really it's a mix of smaller items, which include perhaps less contribution from from my prime given ongoing supply chain challenges, there and an infinite as the Mac calendar turnoff coverage is effectively close for the remainder of the year and then the list of things that you are probably used to hearing in terms of macroeconomic stuff that.
Staffing constraints in Covid variance resurgence all things that we're we're certainly not immune to but big picture I think we enter the quarter.
With quite a bit of stability with exception of one thing we can't control, which is which is foreign currency.
Okay. That's helpful and then I wanted to ask on Idose.
Youre nearing NDA submission maybe can you can you put a finer point on when when specifically do you expect to have.
That in and then you know I guess.
<unk> asked a lot about the margin profile of that I know, it's an unknown just given that we don't know what the pricing could be like so maybe can you talk about what the Cogs profile, where the relative to the istent.
Cogs is it kind of in line or.
Are there any aspects that would make it material area higher thanks for taking my questions.
Yes, David I'll be happy to address the first part of your question, which talks about our preparation for an NDA submission for Idose and really we're on track. So we've talked about having it at the tail end of this year into early next year and it appears we will be filing for that NDA.
In early part of next year that puts us in a great position with the Purdue for filing of typically 10 months from the time, we file to achieve our objective our long standing objective of have approval of <unk> by 2023.
So I, probably won't get into the Cogs and the issues of pricing I've been resistant to do that for obvious reasons and competitive reasons, but I will assure the community of investors on the line.
In a great position with a novel product that really creates an arcane in innovation and the first long truly longstanding sustained treatment for glaucoma and in this case a highly respected company by me Allergan has set a predicate price of around 2000 $2100 for a therapy that.
Approximately last four months and so any way you constitutes the.
Order of magnitude difference and our sustained release over that predicate implant gives us a lot of room to be able to fairly priced this product in the marketplace and you can imagine the margins will follow and so I'll just say that we expect healthy margins, we expect a healthy position as we move forward and more importantly, we expect it.
Highly innovative products at <unk>.
Transform the treatment of glaucoma for patients and for this company as well.
Our next question comes from Ryan Zimmerman with <unk>.
Hi, guys. This is Sam on for Ryan and Thank you for taking my question.
Given the changes taking alloplasty reimbursement proposed and finalized for 2023, how do you expect this to shape physician behavior in terms of product usage, and then I have a follow up too.
Okay.
Thanks, Dan It's Joe.
Yes, I think theres been a lot of moving parts, obviously over the last 12 to 18 months as it relates to reimbursement.
Another one that on the margin obviously.
Net net probably helped the other categories around it.
But certainly is relevant when we think about our own product I prime and launching that more fulsomely in 2023, So we never welcome.
Adjustments downward as it relates to reimbursement regardless of the category.
But but in this case clearly, it's a fairly sizable adjustment in something that I think all of them.
<unk> and practices will take into consideration.
Thank you Dan another question I have is what youre growing portfolio of products in the U S. Glaucoma franchise, how will this impact forward margins as price varies among the products.
I think in general what we said for a while is that the totality of our product portfolio shouldnt significantly alter our.
Our margin profile I know.
Alex you want to add anything and I think I'd say down yes, that's exactly right. We continue to target and we as we've seen historically that 80, 384% range and nothing in our portfolio. It lead us to change that answer at this point.
Our next.
Question comes from Thomas Besson with Stifel.
Yes.
Great everyone. Thanks for the questions.
With 2023, I think street consensus sales points to roughly 12% to 13% year over year growth not going to ask for guidance, but.
Can you guys help us with sort of the key fundamental puts and takes that we should be mindful of maybe in each of your three segments.
Sort of as we head into next year.
Yeah, Tom I am happy to do that it's Joe you know obviously as you noted we typically provide.
Guidance on our fourth quarter call and as of now we would expect to do that the same way for this cycle as far as puts and takes and maybe actually I'll start off with a slightly different variation which is.
What may be an obvious statement for most but I want to make sure that the street models kind of reflect the following it is so.
Dial them in for 2023, even in advance of guidance right. The caution on most prominent which is what I mentioned earlier. The current the current FX environment reflected obviously as we continue to see the fed make moves in the dollar strengthen.
We're not immune to the impact of that as you saw in this most recent quarter, we had operational growth internationally of 24%.
And that translated only into 9% reported growth given the significant FX headwind that we're actually growing as they entered the fourth quarter because.
So as we sit here today I think that we have to take a fresh look at what all that means in terms of the environment heading into 2023 again, nothing we can control on that front, but something that that all companies are facing.
The second one is I think there are some where there's been varying degrees of idose inclusion.
And the revenues for 2023, you deferred Tom talk about the timeline, which is unchanged and it's been that way for some time, where we're targeting an approval in late 2023. So I think it's unrealistic to expect the contribution from Idose in 2023 revenues or certainly not that we would guide to come the call of the fourth.
Quarter call in early 2023.
And the third thing I'll mention is istent infinite.
Given as we've talked about for a while the six to nine months Mac process for establishing coverage. The prophage et cetera, you know I think that people need to be thoughtful about the way they integrate that into their 2023 models and understand there'll be a more meaningful contributor in the second half.
<unk> 23 versus the full year aside from that.
I think the puts and takes are around the sort of core combo cataract franchise, how you think about that from a stenting.
Uh Huh I Prime perspective, I access perspective.
And and none of.
The cornea side, it's more about blocking and tackling and hopefully continued progress that we're making in and dampening the noise around some of the commercial payer dynamics that we talked about in the last couple of calls.
Got it thanks, Joe that's that's great color.
If I can switch to idose.
Yes up until I think you guys are targeting full data publication of the phase III sort of at the time of I believe approval you were hoping but can we expect any updates in the form of additional top line sort of data along the way.
And then what about the strategy ahead of potential launch just from an operational perspective I'm curious if you guys can give us a flavor for any initiatives sort of.
Ahead of the potential launch thank you.
Yes, I'd be happy to address that so as I said before I think it's best serves the company to have really a strong peer review data set that will come out in an in or around the time of launch and so we'll be publishing the full data series sets of our phase <unk> data.
And our phase III data I want to see those in combination.
Wanted to season hits again sometime around the time of launch. This is the strategy I think will serve us well and again I think it's important we reserve that for the time when it's going to have the biggest commercial impact and not give.
By introducing it to early our competitors several months to counter detail, where we don't have a field force active to be able to to counter maybe.
Some of the information that that won't be construed the appropriate way. So it's the right thing to do it will be deep it will be thorough it will be compelling and it will be coordinated with our launch now.
Clearly as we go forward there'll be several conference conferences, and there may be opportunities, where it will benefit the company and investors to see a little bit deeper into the data I'm not opposed to that quite open and we'll look for the right opportunities and the right data to share what I do like is that I believe I have given the inverse.
<unk> really powerful indices and responder analysis, which to me are the most important criteria upon which to the value of this product showing that 93% of patients at one year are well controlled.
This new device, 81% are well controlled on no medications.
Think about that over 20% of patients in the in the entry criteria.
We're on tour more medications.
And so this to me is exciting data extraordinary is definitely.
Beyond what we what we were anticipating in the marketplace and again, we have the phase <unk> data out of three years, which we will use to our advantage with payers to be able to ensure that we get appropriate coverage and payments, both with Max and at the commercial level.
Our next question comes from Margaret Paxton with William Blair.
Hey, guys. This is Mike on for Margaret today, Thanks for taking the question.
Just wanted to ask a quick one on the core <unk> franchise I just wanted to ask one.
When do you guys see as far as the resiliency of the franchise right now maybe with some of the commodity.
Thailand and reimbursement changes.
Or your thoughts on.
Market positioning right now can you return to growth in that core franchise in 2023.
Thanks, Mike.
Yes, I mean as I mentioned.
A bit earlier I think.
The right way to characterize the stent business the U S glaucoma franchise overall as it's been.
Incredibly stable really over the course of the year.
And certainly exceeded our expectations coming into it in the face of the CMS.
Cut from the Prophage and even so much as in recent months the last three or four months July through October we continue to see that stability. So I think that sets up a nice base as we exit 2022 and enter into 2023, certainly we're not going to face the same type of changing environment.
As we turn the corner this year as we did last.
But I'll I'll stop short of commenting on that in the context of whether that will precisely deliver.
What amount of growth in Hawaii, I think you have to think about it in totality.
Both the combo cataract segment, where we've got the core stent, but also increasingly hopefully I prime as well as I access an istent infinite driving those results both the combo cataract and Standalone, there's a lot of opportunity there for us, but we've got a lot of execution, both on the reimbursement side as well as in the field side to ultimately deliver in 2023.
Okay.
Got it and then just wanted to ask on <unk> and just as a quick update are you guys still expecting to share that phase II data in early 2023, and then maybe on the presbyopia size specific.
Quickly what can you tell us on market activity for similar products in the past.
How can this compete versus others in the crowd to the MDM market.
Okay, well, let me give you an update first of all dilution. So as you know we've been running two parallel trials in dry eye.
And in presbyopia using different concentrations that are normal phase III study and I'm really pleased to say we've completed the.
The enrollment for both of those studies.
In fact with dry eye, we've actually clean and lock the data in and we're in the process of assessing that data as we speak.
And in the case of Presbyopia, we've completed the trial and we're currently cleaning the data and so why this is important is because if you looked at the clinical trials Dot Gov. We gave ourselves some headroom, but we said we would have really.
Data available by the.
The clinical's done by May of 2023, so we've significantly overachieve there. So to answer your question, we have the data and I would expect that in the early part of 2023, we'll be in a position to to be able to share that with you.
Presbyopia is a market we continue to look at and we're monitoring viewed very very clearly and very specifically.
And I think it.
Their performance will lead us.
Two to determine how we how we look at and how we assess the data that comes out of our trial and how it will be.
Viewed both from a safety and efficacy standpoint versus beauty to give us the ability to to move forward with confidence that we will have a product that we can show has a significant safety and efficacy advantages.
Our next question comes from Larry <unk> with Wells Fargo.
Hi, This is Charles on for Larry.
A couple more on Idose.
First.
Early data you shared looks promising but we obviously haven't seen at all can you talk a little bit about the occurrence at some of the less frequent adverse events in the phase III studies like.
And that's the latest cataract formation or lack of anchoring and if any of those can be and could be an issue from a regulatory standpoint.
A couple of follow ups.
Yes, I'm happy to do that and I. Appreciate the question Charles I mean, the data is prolific.
From a safety standpoint for men from any objective measure when we looked at the phase III data, we had a 3% rate of hyperemia.
Versus rates that you see with topical prostaglandin on the order of 30% to 50% and with more recent.
Products that have been introduced.
With rates that exceed 50% rates of hyperemia, we had zero cases.
Orbital fat atrophy in this study, which has been kind of a.
Headwind to the use of these prostaglandin analogs, which leads to these shallow lower lids.
<unk> had a superlative record.
The issue of endothelial cell counts that's been shown in our phase <unk> data, where we followed these patients for three years and we found no clinical variation between the treatment and control in fact, they were virtually nearly identical in terms of how we assess the two treatment patterns of endothelial cells.
<unk>.
We are seeing to my knowledge.
No sce's within the pivotal trial of the phase III data, so youre going to see data that not only is compelling from an efficacy standpoint, but from a safety standpoint is going to grant.
Clinicians the assurance that they should be looking at entering earlier in order to treat patients who are progressing. Despite the fact that they are on topical therapies.
Thank you and then just a quick follow up on the Idaho label first what are your expectations for the Idose label in terms of duration and repeat usage.
Do you think combo cataract ob broader off label and.
Ernie.
Economic barriers to adoption in that setting.
Yes, so I really appreciate that question because it's good we have the opportunity to say with certainty what we're seeking we're seeking under a 505.
<unk> designation, a very broad and highly favorable label and the label. We seek is for the reduction of intraocular pressure in patients with open angle glaucoma or OHP or ocular hypertension.
This is a profoundly broad label and the label is undefined by the sustained course of therapy. So that's important so we're not seeking to be able to pinpoint.
<unk> during the label of how long or how long this lasts that.
That in a sense has already been assessed and demonstrated with respect to length of therapy. We already have conducted this robust phase <unk> clinical study, which demonstrated that 73% of patients were well controlled on idose therapy, using the same or fewer medications at three years.
So this study when published along with our phase III pivotal data I think will be the basis for primary justification for coverage and payment by ophthalmologist of sustained drug efficacy or by ophthalmologist and the sustained drug efficacy performance of the Idose implant. So.
That answers the first part of your question. The second part is we were I think both prescient in negotiating with the FDA to do a small exchange study as part of our phase looking at phase <unk> patients that we were able to call and we've been able to do an exchange study to demonstrate the safety and effectiveness and the.
<unk> to retreat these patients using idose.
<unk> implants.
So I can't say with certainty because we are still in the process of unmasking the data, but I can tell you that we will submit this data part of our NDA submission and our target is to have the full wherewithal to be able to to be able to.
Use and use the idose implant and debates exchange them. Once they are depleted of their medication. So that will have an ongoing annuity with the process.
Our next question comes from Georgia Sellers.
With Stephens Inc.
Congrats on the quarter and thank you all for taking the question.
So.
I guess I wanted to just start by asking about the launches of the eye access prime an istent infinite devices.
How are those launches progressing in terms of physician adoption and traction youre seeing in the market and also are there any additional hurdles such as in relation to reimbursement for instance that we should keep in mind.
Thanks George.
And welcome to the call in your new role. This is Joe let me start off with.
With IAA access so you know I access as you know we launched earlier this year from that standpoint, I think everything is pretty clear in terms of its utilization.
And how it's reimbursed based upon the procedures.
The surgeons.
Utilized with it.
And from that standpoint, it continues to sort of be one of the tools and tool kit for our sales force going forward.
It has been a nice and consistent contributor to our results certainly in the second and the third quarter and we'd expect that as we as we move forward here on.
On I Prime it's still early I'd say.
As it relates to high Prime very little contribution in the third quarter minimal contribution in.
And we'd expect a relatively minimal contribution here in the fourth quarter as we continue to iron out some of the supply chain challenges that we faced over the course of the year and trying to stand this product up.
Less about sort of the broader market dynamics or macro dynamics more about supply chain. There, we'll get through that and ultimately we hope that that will be a meaningful contributor to 2023 as we move forward on.
When Istent infinite as you know we most recently received clearance there.
Initiated beta launch activities as a part of that approval.
More clearance.
And really.
Reimbursement play the key role here as I mentioned earlier, we've got to get through the sort of six to nine month process that is navigating the Max to turn on coverage and establish the proceeds.
And so we're in the middle of that process now we've got our peer reviewed publication behind us.
And our teams are working closely with the Max to establish that over the course of the first half of 2023 at the point, where we've got those all established we would expect to start be able to drive more meaningful contribution from Istent infinite really in the second half of 'twenty, three and going forward from there.
Okay. Thank you that's that's helpful and then.
Could you just give us some additional color on why the FDA, suggesting a second confirmatory study and I apologize if I missed this but.
How should we think about the updated timeline for FDA submission and approval there and how should we also think about the <unk>.
Cadence for any incremental costs associated with.
With this second study thank you.
Yes, Great question and this is Tom Im happy to address them. So during a very recent pre NDA meeting with the FDA. The FDA communicated that due to what I'll call. The uncompetitive efficacy results for companies, who are practicing <unk>. Unlike procedures. They would now request that we can.
Dr Confirmatory phase III pivotal trial for our <unk> drug in Ireland procedure.
Now it's important to note that RPM procedures very different from those that the FDA sites because our procedure includes a continuous profusion of oxygen across the cornea during the procedure, which yields greater production of oxygen free radicals.
Thus stromal penetration and that results in more extensive cross linking and leads and variably to the efficacy results that we've demonstrated in our phase III pivotal study.
But nevertheless, the FDA subsequently held firm to the position of requiring the second phase III trial, but they did agree that our completed phase III clinical study, which met the Prespecified primary efficacy endpoint would be accepted so that's powerful as one of the two validated in pivotal studies supporting our upcoming.
<unk> NDA submission and clearly we continue to build the business on the excellent safety and efficacy results of our <unk> product and our <unk> clinical design, which I'll just remind the community is the only FDA approved cross linking procedure that's available today. So.
With respect to costs I guess I'll ask my colleague Alex the way, Yeah, Hey, George the way to think about the cost is that we will we will build the cost of that second trial into our normal R&D operating expense spend and cadence and it will be absorbed in.
It's not going to stick out or or be increased over what we normally would spend as we move forward through those.
This period.
I'll make one final comment.
Since I've made this decision to basically.
Move forward with the second study, we're moving extremely quickly and we may be able to open up a clinical trial as early as January .
Coming up in the next couple of months fully fully qualified investigators ready to go and if you think about then the time course for this given the fact that we will we should.
Recruits in an expedited fashion, we'll probably be targeting a new FDA approval in around late 2025.
Our next question comes from Matthew O'brien with Piper Sandler.
Hey, this is Phil on for Matt. Thanks for taking the question and congrats on the great quarter I guess just for starters and then in terms of the Opex I know you've discussed in the past being off 300, or maybe three and Opex company do you expect that moving into 2023 here as well and is that still your expectation.
And then how should we think about gross margins in this high inflationary environment.
At 84% a good run rate moving forward, how should we think about this as we as we approach 2023 here.
Yeah, Hey, Phil This is Alex Thanks for the question. So on the operating expense you are right, we talked about that <unk> 10, or so range for this year in 2022, one thing I'll point out that maybe wasn't as clear on the last call is that we had the $10 million licensing payment last quarter that needs to be incorporated into that.
Number because we don't call it out anymore, it's part of our non-GAAP expenses pursuant to the SEC New rules. So you should think about the operating expense levels for 2022 to be kind of coming in in the $3 15 to $3 20 range, which includes that $10 million upfront license payment in Q2.
As far as the gross margin outlook I guess you'd asked about 23 really quickly you should think about probably some growth in the operating expense profile as we go into 2023.
Some sort of sequential growth.
By quarter.
As we think about 10% and not an unreasonable way to think about that but we'll probably be able to give you more color around that in the fourth quarter call. When we talk about 2023 in more detail and then lastly on the gross margin detail Youre exactly right that targeted range of 83% to 84% will be also.
In play and continue on in 2023 and will stay that way until we see some sort of.
Trend that would lead us to conclude otherwise.
That's great. That's it for me thanks, so much and congrats on the quarter again.
Thanks, Phil.
Your next question comes from Allen Gong with J P. Morgan.
Thank you and congrats on the quarter. So I just had a quick one on what youre seeing so far.
The fourth quarter. It clearly it seems like your wedding reimbursement and competitive dynamics pretty well.
I think about just broader trends around staffing capacity we've heard.
From adjacent spaces that challenges have improved or maybe being a bit more durable than expected. So how does that impact your own business and is that part of why you are taking a bit of a more conservative perhaps with the guide.
Yeah.
Yeah, Alan it's Joe.
Youre spot on on that right I mean entering in and really through the month of October .
The U S franchise has remained quite stable.
And so we've been pleased with that but as I mentioned earlier really the big dynamics that we're trying to the biggest dynamic that we're factoring in is the continued headwinds from foreign currency right and what that means in terms of our international business and translating it back to consolidated results.
And that you hit on on on some of the more macroeconomic dynamics or macro factors and we're not immune to that right. So there are certainly risks as some of the COVID-19 variance seem to be.
A little bit more concerning.
Entering into the winter season here.
And the resurgence potential around those staffing constraints, we hear about it.
Almost every time, we talk to our customers, they're challenged still with with maintaining adequate staff adequate skilled staff that impact us both on the commercial side as well as on the clinical side as we recruit.
I'm a little more limited.
In the meantime, once we get F. D. A approval will seek a quarterly hicks picks paddle and we'll submit for approval at the at the projected right that we Wanna charged for the implant and then typically what I would expect it's a one to two quarter and I would say the two quarter.
Lag to get the final J code approved when we have that J code. Finally approved you can imagine we will have everything fully prepared locked and loaded and we'll be able to come out of the gate very very strong and so I would see traction really starting significant tracks and starting in the second half.
Of the year.
We have no further questions at this time I will turn the call back over to the company.
Okay. Thanks for all the great questions and thanks to the investors for your time and attention today.
Hope everyone Saint Safe and again always thank you for your continued interest in glasses.
Goodbye.
This concludes the clock house third quarter 20, twenty-two financial results conference call. Thank you for attending today's presentation you may now disconnect.
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