Q3 2024 Glaukos Corp Earnings Call
Speaker Change: Welcome to Glau Post Corporation's third quarter 2020 24-fifth of the results conference call. Copy the company's press release in Quarterly Summary Document, both issued after the market close today, are available at www.glauco.com.
Speaker Change: 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 would like to ask a question during this time, simply press star, follow by the number one on your telephone T-Pet.
So would like to withdraw your question, press star, one again.
Speaker Change: This call is being recorded and an archived replay will be available online in the best-year relation section at www.glauco.com. I will now turn the call over to Chris Lewis, Vice President of Investor Relations and Corporate Affairs. Please go ahead.
Chris Lewis: Thank you and good afternoon.
Chris Lewis: Join me today our glucose chairman and CEO Tom Burns, President and CEO of Jo Gilliam in CFO Alex Thurman, similar to prior quarters, the company has posted a document on its investor relations website under the financials and filings, quarterly results section titled Quarterly Summary.
Chris Lewis: This document is designed to provide the investment community with a 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 board statements or guidance we may make.
This document is designed to be read by investors before some regularly scheduled quarterly conference call. As such, for this call, we will make brief prepared remarks and transition into a questions and answers session.
To ensure ample time and opportunity to address everyone's questions, we request that you limit yourself to one question and one follow-up. If you still have additional questions, you may get back into the queue.
Please note that all statements, other than statements of historical facts made on this call that address activities, events, or developments we expect, believe, or anticipate will or may occur in the future are forward-looking statements.
Chris Lewis: These include statements about our plans, objectives, strategies, and prospects regarding, among other things, our sales,
Chris Lewis: Products, Pipeline Technologies, and Clinical Trials.
U.S. and international commercialization, market development efforts, the efficacy of our current and future products, competitive market position, regulatory strategies and reimbursement for our products, financial condition and results of 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.
Speaker Change: Therefore, they may cause their actual results to differ materially from those expressed or implied by forward-looking statements.
Speaker Change: Review today's press release and our recent SEC filings for more information about these risk factors.
Speaker Change: Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis.
Speaker Change: We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaucose's ongoing results of operations.
Speaker Change: particularly when comparing underlying results from period to period. Please refer to the tables and earnings press release available in the investor relations section of our website for a reconciliation of these measures to their most directly comparable gap financial measure. With that, I will turn the call over to GLACO's Chairman and CEO, Tom Burns.
Tom Burns: Okay, thanks, Chris. Good afternoon and thank you all for joining us.
Tom Burns: Our third quarter record results were primarily driven by both our U.S. and international glaucoma franchises where we continue to accelerate efforts to expand access to interventional glaucoma tools for the benefit of physicians and patients.
Speaker Change: Our goal to advance and improve glaucoma treatment by driving earlier intervention continues to build momentum as we lead and work closely with surgeons, plot leaders globally, to organically drive this broader evolution in the standard of care for the benefit of patients.
Speaker Change: These efforts were on full display at the AAO Annual Meeting last month, where the interest and excitement levels for interventional glaucoma and our technologies were high.
Speaker Change: driven by early but growing contributions from IDOS-TR, along with continued strong growth within our overall ISTEDD portfolio, led by ISTEDD Infinite.
Speaker Change: On the latter, utilization of ISN-Infinite for glaucoma patients that have failed medical and surgical therapy continues to expand as our ongoing clinical education efforts in improving market access landscapes takes hold.
Speaker Change: It is also worth noting that during the third quarter, five of the seven MACs issued final MIGs LCDs that largely aligned with their proposals as they established coverage for ISTN Infinite that is consistent with our original reconsideration request.
Speaker Change: We look forward to their effective dates later this month, as we expect it will be an important step in unlocking the remaining Medicare Advantage and Commercial Plan coverage for Iceman Infinite.
Speaker Change: That said, I should also note that with any coverage policy change, we may experience some transient turbulence as providers navigate any potential impacts associated with these LCDs.
Turning to our Procedural Pharmaceutical Franchise at Ito's TR
Speaker Change: I am pleased to report that we successfully advanced execution of our detailed launch plans for this first-of-its-kind intracameral procedural pharmaceutical that was designed to deliver glaucoma therapy for up to three years.
Speaker Change: More importantly, outcomes and feedback from a growing number of cases and trained surgeons continue to be very positive.
Speaker Change: and reaffirms our view that with the launch of IDOS-TR we are pioneering a brand new therapeutic category that has the potential to reshape glaucoma management as we know it today.
Speaker Change: As you know, a key element to this initial stage gating of our IDOS-TR commercial launch is market access milestones and reimbursement confidence.
Speaker Change: where we remain focused across a number of areas.
Speaker Change: First, our team has been hard at work partnering with our customers to ensure a smooth, efficient transition from the Miscellaneous Drug Code to the Permanent JCOM or iDOS-TR J7355, which became effective July 1, 2024.
Speaker Change: As a reminder, this now effective J-code is expected to increase patient access and will allow us to expand training plans to future ways of surgeons and facilities over time.
Speaker Change: While there is certainly more work to do here, particularly as we expand efforts into the commercial arena over the course of 2025 and beyond, we are encouraged by the overall progress our teams are making to support increased reimbursement confidence,
Speaker Change: through more streamlined and consistent J-code coverage and payment in several of the MACs to date with more to come.
Speaker Change: Second as anticipated.
Speaker Change: J7355 was included in CMS's latest HOPD and ASC quarterly update addendums, appropriately establishing pricing of J7355 at ASP plus 6% effective as of October 1st.
Speaker Change: And third, we are advancing efforts to secure professional fee coverage and payment with MACS.
Speaker Change: as well as establish commercial and Medicare Advantage coverage now that the Permanent J Code is effective.
Speaker Change: As noted in the past, we expect increasing adoption as reimbursement confidence is gained by our customers as we enter 2025.
Speaker Change: In addition to commercial efforts, the launch has been supported by a growing set of clinical literature now consisting of eight different peer-reviewed publications highlighting IDOS-TR as a transformative new treatment alternative for patients suffering with glaucoma and inocular hypertension.
Speaker Change: We also continue to advance our dialogue with the FDA regarding the re-administration of IDOS-TR, and beyond that, remain on track to commence a Phase III clinical trial for IDOS-T-REx, our next-generation IDOS therapy, by the end of 2024.
Speaker Change: Finally, I should also note CMS issued its final 2025
Speaker Change: Facility Fee and Professional Fee rules last Friday that largely maintain the 2024 reimbursement assignments and rates associated with our procedures and are consistent with the proposals from earlier this year.
Speaker Change: Moving on, our international glaucoma franchise delivered sales of 24.5 million on year-on-year, year-over-year growth of 21%.
Speaker Change: The strong growth was once again broad-based as we continue to scale our international infrastructure and execute our plans to drive MIGS forward as the standard of care in each region and major market in the world.
Speaker Change: Consistent with prior quarters this year, our new French CEPS agreement was favorable to our third quarter reported revenues.
Speaker Change: We remain in the early stages of expanding our IG and product portfolio initiatives globally ahead of anticipated new product approvals and expanding market access in the years to come.
Speaker Change: In the interim, we expect the trialing of new competitive products in our major international markets may become an increasing headwind as we enter 2025.
Speaker Change: And finally, our corneal health franchise delivered sales of $20.6 million on a 5% year-over-year growth, including Vertrex and NET sales of $17.9 million.
Speaker Change: As discussed last quarter, our third quarter results reflect the impact of Protrexum realized revenues as a result of our entry as a company into MDRP.
Speaker Change: Going forward, we continue to focus on expanding access for keratoconus patients suffering from this rare disease.
Speaker Change: Staying on corneal health but shifting gears to our pipeline, we were pleased to recently announce positive top-line outcomes in the second phase 3 pivotal study for epioxa.
Speaker Change: our next generation corneal cross-linking therapy.
Speaker Change: that met the study's primary efficacy endpoint and once again demonstrated the potential of epioxin to halt or reduce the advancement of keratoconus, a progressive site-threatening corneal disease.
Speaker Change: These results further underscore our view that epiaxa may provide the ophthalmic community and patients with the first FDA-approved, non-invasive corneal cross-linking therapy that does not require the removal of the corneal epithelium, the outermost layer of the front of the eye.
Speaker Change: We recently completed a successful clinical pre-NDA meeting with the FDA in which the agency agreed that our clinical data package is sufficient to support an NDA submission and review.
Speaker Change: As such, results from this second Phase III Confirmatory Pivotal Trial together with the already completed first Phase III Pivotal Trial are expected to support our anticipated ND submission for epioxa by the end of 2024.
Speaker Change: We remain encouraged with the progress our teams are making across our robust portfolio of clinical and preclinical programs focused in the areas of glaucoma, retina, and rare disease.
Speaker Change: At the same time, as we've discussed, we continue to prioritize the cadence of our investments as we strive to strike the right balance of risk-based spending and our capital position now and in the future.
Speaker Change: In support of this, last month we issued Notice of Redemption for the remaining $57.5 million, in principle, amount outstanding of our convertible senior notes due 2027.
Speaker Change: Pursuant to the notice, we anticipate these notes to convert to common stock before the redemption date of December 16, 2024.
Speaker Change: In conclusion, I am pleased with the strong commercial and development execution of our teams.
Speaker Change: that have continued to demonstrate this year.
Speaker Change: We look forward to continuing to build upon the growing momentum in our business over the coming quarters and years. Our foundation is strong and we are ideally positioned to continue transforming vision for the benefit of patients worldwide.
Speaker Change: So with that, I'll open the call for questions. Operator?
Speaker Change: At this time I'd like to remind everyone in order to ask a question press star then the number one on your telephone keypad.
Speaker Change: Our first question comes from the line of Tom Stephen with Stifle. Please go ahead.
Tom Stephen: Great. Hey guys, thanks for the questions. Nice quarter. I wanted to start with IDOS. I'll actually ask...
Tom Stephen: both my questions up front. First question, maybe for Tom or Joe to start, you know, we're coming up a year post-approval of EIDOS. So first question, you know, can you guys talk about what sort of the top two or three learnings or discoveries during the launch, just when you think back over the past
Tom Stephen: Yeah, I guess almost almost 12 months since approval And then my second question is kind of a follow-up to that maybe Joe or Alex for you, you know, can you talk about key qualitative?
Tom Stephen: sort of puts and takes looking ahead on IDOS when we think about the fourth quarter of this year in 2025 and try to dial in our models on IDOS revenue. Thanks.
Tom Stephen: Sure, thanks Tom. It's Joe. Maybe I'll start off and the others can jump in with any incremental thoughts on your two questions.
Tom Stephen: Yeah, if we think back on the last year of ITOS, I have to say
Tom Stephen: Whenever you enter into something of this magnitude, it's a challenge to forecast all the variables that are in front of you.
Tom Stephen: Whether those are variables from, you know, the training of your commercial organization to them ultimately leading that out to the field The market access components and all the key milestones that are there
Tom Stephen: And I have to say, we're quite proud of now looking back at where we're at, having done a really good job of executing against that plan.
Tom Stephen: You know, if you think about the most
Tom Stephen: important thing from a long-term driver perspective, it really is clinical outcomes.
Tom Stephen: And most importantly, we've been really pleased with the results on this front so far.
Tom Stephen: as well as kind of the overall clinical receptivity of surgeons towards iDOS-TR and what that means in terms of potentially changing the paradigm as we go forward.
Tom Stephen: I think that's number one.
Tom Stephen: You know, I think the second thing you've heard us talk about is...
Tom Stephen: We knew going in, but the importance of reimbursement confidence to ultimately getting past the, I'll call it initial launch phases, into really the broad clinical adoption phase. And from that standpoint, we continue to be ahead of progress as well, but we still have a fair amount of wood to chop as we move forward.
Tom Stephen: And I think that's probably the best transition into the second part of your question, which is the puts and takes as we enter into next year. I think we sit here today very confident about the team's ability to execute and continue to drive clinical adoption and interventional outcome overall, as well as with IDOS at the center of it.
Tom Stephen: and alongside of that, the big things there are just opening up from a market standpoint.
Tom Stephen: the various, you know, I'll call it key milestones that are in front of us.
Tom Stephen: The first one is getting all of the MACs operating in a way or manner that's similar to the way several of them are today.
Tom Stephen: The second thing is establishing consistent professional fee, you know, payments so there's confidence for the surgeon in terms of the economics for them associated with the procedure. And then third will be the methodical long-term deployment of, you know, the commercial and Medicare Advantage coverage.
Tom Stephen: that we ultimately expect to start, you know, over the course of 2025. So plenty of wood to chop, but we're really pleased with where we're at today and as we enter into the fourth quarter and certainly into 2025.
Tom Stephen: That's great, Collin. Thanks, Jeff.
Speaker Change: Our next question comes from Lawrence Beagleson with Wells Fargo. Please go ahead.
Lawrence Beagleson: Good afternoon. Thanks for taking my question and congrats on a nice quarter here. Joe, I'll ask the IJOS question just to back into the numbers here. We're getting to about seven and a half million this quarter in applied Q4, about ten million. Are we in the right ballpark?
Tom Stephen: Joe, it looks like you raised by the amount to the beat for 2024. Why did you raise by only the amount to the beat and have one follow-up?
Speaker Change: Sure, of course, thanks Larry. We agree it was a strong quarter.
Tom Stephen: one where we continue to see the acceleration in the overall business as well as specifically
Tom Stephen: U.S. glaucoma and as I think you're highlighting it was it was driven in large part by by IDOCR. I guess what I can say here is that with with that overall growth exerting out of 35% on a year-over-year basis
Tom Stephen: That was driven by really a doubling of our Eidos TR sales versus the second quarter.
Tom Stephen: and alongside of that continued strong double-digit spend portfolio growth.
Tom Stephen: So the latter's probably slowed just a touch on a year of your basis as our commercial intensity started to focus increase in I-S-T-Rs as we told you it would. But overall really strong performance across both of those key drivers within the U.S. about Kuma franchise. [inaudible]
Tom Stephen: As it relates to the guidance side of things, I think it's probably easier to answer that question in breaking it down. So as you think about...
Tom Stephen: modeling out our fourth quarter, I'd probably point to a couple key things. The first one is in corneal health, you know, we had previously mentioned that the MDRP, you know, headwind was expected to peak in the fourth quarter from a year-over-year impact perspective.
Tom Stephen: So it's worth noting that we expect that this franchise will most likely be down on a year-over-year basis in the fourth quarter as we then lap those more difficult comps, if you will, entering into 2025 where we expect to get back to the growth side of the equation for that franchise.
Tom Stephen: You know, I think you probably have heard this from others, certainly that have announced their results more recently.
Tom Stephen: We've seen currency move pretty materially against the U.S. dollar entering October. And you combine that with some growing competition in the key markets, I think we'll see growth a bit more tepid in the fourth quarter than what we've seen over the course of the year.
Tom Stephen: And finally, in U.S. glaucoma, I think we expect to see continued acceleration for this franchise versus where we've been.
Tom Stephen: We expect to see continued strong stent growth.
Tom Stephen: Maybe some modest headwinds continue to grow there from the LCDs and the overall commercial focus on Eidos, but certainly continue to see the expansion of both Eidos as well as the overall U.S. glaucoma business. And really, you put all those together, and those are factored into the guidance that we gave for the fourth quarter of the year.
Speaker Change: That's helpful. Just lastly for me, the types of patients using iDOS, has anything changed standalone versus combo cataract, you know, Medicare fee-for-service, you know, form of Dorista patients, etc. Any changes? Thank you.
Speaker Change: I wouldn't call out any specific changes relative to where we've been. I think as you get further into the launch, you continue to see increased utilization across all of those categories. So, you know, as you know, we really prioritized and focused on
Speaker Change: driving standalone utilization of IDOS and the overall IG message. But having said that, certainly surgeons are doing it in combination with cataract surgery as well. And from a utilization standpoint, in terms of prior procedures, we see it being done after DRISTA, after SLT.
Tom Stephen: We've seen it being done in fakie guys, pseudofakie guys, really across the full gamut.
Tom Stephen: which is what you'd expect, and clearly, you know, there'll be a lot more of that to come as we continue to move forward.
Tom Stephen: From a market access or reimbursement perspective, virtually all of these are being done in Medicare and fee-for-service patients. There are probably maybe a couple of exceptions to that, but we really aren't in the position yet where we're greenlighting or driving the expansion into that broader patient arena. We'll do that over the course of 2025 in a methodical fashion.
Speaker Change: Thanks Joe.
Speaker Change: All right, our next question comes from Ryan Zimmerman with BTIG. Please go ahead.
Ryan Zimmerman: Good evening and nice quarter. I want to appreciate Joe the call you just gave on Larry's answer. You know as I do the math on it I'm getting kind of a you know low double-digit growth rate just in kind of the the surgical glaucoma segment of the business.
Speaker Change: you know, one, am I thinking about that correctly? But as I think about, you know, some of the reimbursement.
Tom Stephen: dynamics that we just saw Friday from Medicare
Speaker Change: Do you see stent usage shifting in 2025 or maybe set in another way, you know, given what we saw for goniotomy and canalplasty versus what was proposed, would that dampen usage of those technologies in favor of stents in your view in 2025?
Speaker Change: Thanks, Ryan. I think what you were asking in the context of low double digits was with respect to the Stint franchise in the third quarter, and I think that's pretty accurate and consistent with what I said in response to Larry's question.
Speaker Change: You know, as you think about moving forward,
Tom Stephen: There are always, in recent quarters and years, been a fair number of puts and takes on this stuff.
Tom Stephen: And, you know, I think from our standpoint, we were obviously pleased to see the affirmation of the, you know, payments and methodologies and amounts associated with it.
Speaker Change: Al Fowler Court Procedures
Tom Stephen: There are puts and takes here, and so when you think about it from a professional standpoint...
Tom Stephen: and we'll just have to see how that plays out over the course of the year. I think, in totality, our focus is on growing the overall market as fast as we can towards a more interventional approach in a much larger patient population.
Tom Stephen: versus necessarily worrying as much about the puts and takes associated with combo cataract utilization versus goniotomy or canaloplasty for that matter.
Tom Stephen: Okay.
Speaker Change: Very helpful. And then both you and your competitor.
Tom Stephen: struck
Chris Lewis: licensing agreements I believe with Ripple Therapeutics this past quarter which was interesting to see and I'm just wondering maybe Tom if I don't know if you want to comment on this but kind of how does that play into the development and timelines for next generation iDose products given what they offer versus maybe what you're working on internally?
Tom: I'll take the first part of your question or the latter part first and that's we're going to be entering the clinical trial for T-Rex, prioritized T-Rex by the end of this year.
Chris Lewis: So, I think that puts us in a very powerful position to potentially have a commercial product that's available before really any alternative glaucoma product is available in the marketplace. We're both investing in this technology, but really for principally different reasons.
Chris Lewis: AbbVie has taken the position that they would like to have a product that's really an antecedent of the Dorista product.
Chris Lewis: It's a biorotable that's placed in the front of the eye, and as you know, that's always going to have potential for endothelial cell loss. We've always taken the position that we want it to be anchored in the front of the eye, and have done so with IDOS and with its subsequent generations.
Chris Lewis: Our position with Ripple is to look at Ripple as an opportunity to really reach the back of the eye.
Chris Lewis: for proliferative retinal diseases, potentially for neural protection in glaucoma. And we also have rights in cornea. So we see this as a broad-based opportunity for the intravitreal implants, which have been established by Ilea and Lucentis and others.
Chris Lewis: We propose to move in that vein and so there really is a bifurcation of how we're looking at this technology
Speaker Change: That's helpful, Tom. Thank you.
Speaker Change: You're welcome.
Speaker Change: Our next question comes from Matt O'Brien with Piper Sandler. Please go ahead.
Matt O'brien: Good afternoon. Thanks for taking the questions.
Matt O'brien: or Tom, which you're willing to share here. But just you're talking about now opening up IDOS to your entire Salesforce. Can you give us a sense for how that group is?
Chris Lewis: has queued up doc training for Q4 and then how that may...
Chris Lewis: expansion. I won't get into the specific numbers, but what I can tell you is obviously with the establishment of the JCODE, that picked up pretty meaningfully in the third quarter, combined with the fact that we really opened up to our entire sales force. And so pretty much now, over the last several months, we've seen a pretty consistent trend of opening up new docs and new accounts.
Chris Lewis: Clearly the next leg of that will be as we continue to establish, you know, broader, I'll call it reimbursement confidence across all of the MACs.
Chris Lewis: versus the handful that today are in an optimal place.
Chris Lewis: followed by really the establishment of those professional fees. Remember a significant number of these docs
Chris Lewis: are tied to, you know, facilities where they may not have an economic stake. And so from that standpoint, they like what they see from a clinical perspective, but ultimately are going to want to make sure that they're being appropriately compensated for their time and effort as well.
Chris Lewis: Where we've been getting to here, this is our third or fourth consecutive quarter, I believe, of accelerating growth in the U.S. glaucoma franchise. I think that portends pretty well for, obviously, hopefully, a very positive outcome for 2025.
Speaker Change: Got it. Appreciate that. And then I did want to ask Alex about the leverage in the quarter, but I'll save that for later. I was curious about the commentary on reimplantation. I think everybody's just kind of expecting T-Rex to be
Chris Lewis: The next iteration in terms of, you know, second implantation, but any, any updates from your discussions with the agency in terms of what they're looking for on the re implantation side. And is that something that potentially could be, you know, we get some kind of update here over the next several months. Thank you.
Speaker Change: Yeah, man, I'll be happy to take that question. So as we've talked about we think we have a sophisticated approach and a reason
Speaker Change: why we should be enabled and allowed to have re-implantation. Not only our approach, but also the fact that, as you know, we've already done a clinical trial where we were able to do 30-odd patients.
Matt O'brien: where we showed a safe re-implantation of the device with really no significant material endothelial cell loss versus control. So all the basics are there, and as just a reminder to the investment community, this is a conversation that we wish to have with the FDA in the final innings.
Chris Lewis: They said they were happy to have it, but we have to move the PDUFA date back probably several months, which obviously was a non-starter. So we're re-approaching. So we have re-engaged with them.
Chris Lewis: We put this approach in front of them. I expect that there will be several consecutive series of dialogue over the coming months.
Chris Lewis: I would say we remain hopeful, but as we've said all along, we are not counting on this. And so that's why I like the belt and suspenders approach of having I-dose T-Rex available in the chamber starting with our clinical trial by the end of this year.
Speaker Change: Thanks, Tom.
Tom: Thanks for that.
Speaker Change: Our next question comes from Alan Gong with J.P. Morgan. Please go ahead.
Alan Gong: Hi, thanks for the question. You know, I have one on IDOS and then one moving on from that, but I guess, you know, piggybacking off some of the other questions that have been asked.
Alan Gong: Just looking at the guide and kind of the implied of, you know, say $100 million in fourth quarter, you know, you talk to some of the challenges you're going to be facing OUS and corneal health.
Alan Gong: but you also pointed to continued kind of sequential growth from the core, or maybe not sequential, but core strength inside of ISENT and IDOS.
Speaker Change: So I guess, you know, you've given us some direction on what IDOS did in second quarter and how that grew in the third quarter. How should we think about what's contemplated in your fourth quarter guide? How much of that sequential growth is coming from IDOS versus ISTN?
Speaker Change: Thanks, Alan. I tried to address it a little bit earlier, but maybe I'll reiterate a couple points around, you know, the fourth quarter and specifically on the U.S. glaucoma franchise.
Speaker Change: And underneath that, we continue to expect strong stint growth.
Speaker Change: To continue, it may have some modest headwinds versus what we've experienced in recent quarters, including the third, driven by some volatility associated with the LCDs coming into effect later this month, as well as the just general overall commercial focus that we have growing on IDOS.
Speaker Change: And I think when you do all of that calculus, you'll see that it implies continued expansion for ITOS-TR as a part of the overall launch dynamics in the fourth quarter.
Speaker Change: Got it
Speaker Change: And then kind of moving on to the epioxide data that you got, you know, if we were to compare it to the results of the first phase three, the outcomes, at least numerically, look pretty similar. So how should we think about your confidence in getting that approved? And then ultimately, you know, once you lap the MDRP headwinds, and once you have the full portfolio, how should we think about the growth outlook for that business once you have both products approved? Thank you.
Speaker Change: and I'll be happy to answer that and so let's take a step back and and really talk about FDM which we think is a significant advancement and really the result of years of innovation work and investment by us and
Speaker Change: The procedure is designed to be truly non-invasive. It's designed to be reduced procedural times for the physician.
Speaker Change: It should improve patient comfort and it should shorten the visual rehabilitation and recovery time of the patient.
Speaker Change: And the reason is we don't have to remove and debride the corneal epithelium.
Speaker Change: in order to be able to get a product into the stroma where it can cross-link the collagen fibrils and arrest the progression of keratoconus.
Speaker Change: So, in the case of epiaxa...
Speaker Change: It truly is a proprietary formulation. It has a surfactant in it, which will allow us to penetrate through the corneal epithelium. It uses a stronger UVA irradiation protocol.
Speaker Change: and it has a perfusion of oxygen through these oxygen goggles which are consumed as part of the procedure. They throw off oxygen-free radicals.
Speaker Change: Those are the key to reorienting and stiffening.
Speaker Change: that he found to be beneficial to the college and it was phenomenal.
Speaker Change: I love the data we were able to achieve with this product. We achieved the primary efficacy endpoint.
Speaker Change: by demonstrating K-Max treatment effect of 1-Diopter prospectively defined mean K-Max change versus epioxy treatment arm versus the sham control. And I think these results are indicative of what we'll want to see in the marketplace. The product works.
Speaker Change: It shuts off and arrests the progression of Keratoconus.
Speaker Change: and because it does offer these advantages to the patient.
Speaker Change: of minimizing pain.
Speaker Change: and Increasing Visual Rehabilitation and Recovery.
Speaker Change: and offers advantages to the clinician.
Speaker Change: by shortening the procedure time is, in some cases, as much as a third of what you need to do a Phytrexin procedure. I think this has a really strong value proposition to really receive rapid adoption in this rare disease category. So, I've said this before, I think this will markedly change.
Speaker Change: the adoption rate and our ability to penetrate the ranks of this rare disease over time. We're excited about it. We're on track. We'll file our NDA by the end of this year. And by the way, as we reported in the script...
Speaker Change: The FDA has seen our data and we had a meeting with them. The purpose was to obtain agreement from them on the content of the proposed NDA.
Speaker Change: and would it be sufficient or not to support an NDA submission? And we came affirmed and validated as an outcome of this meeting that the FDA would accept the proposed clinical package as significant, or sorry, as sufficient to support our NDA submission review.
Speaker Change: So, a long answer to your question, but this is something that I think will take us in and be a catalyst for growth, certainly in 2026 and beyond.
Speaker Change: All right, I think we'll go to the next caller. Our next question comes from Margaret Kazor Andrew with William Blair. Please go ahead.
Speaker Change: Hey everyone, it's Macaulay on for Margaret tonight. Thanks for taking our question and congrats on the quarter Heading into the quarter you mentioned the potential for a reset in the reimbursement dynamics Obviously as you shifted to that J code so just wondering how that has trended over the last few months whether that be in terms of
Speaker Change: a reduction of some of those catch up payments that you've mentioned in the past or other metrics you're looking at. And just as a quick follow up to that, would you say you you're through the majority of that potential coverage denial period or or how should we think about that is, as you continue to knock down some of these
Speaker Change: Reimbursement Dynamics.
Speaker Change: Thanks, Macaulay. I'll try to address both of those. I think first, yeah, going into the quarter, we certainly expected a bit of a reset. We saw it for sure. I mean, as you enter into July and August, even those folks who had done earlier procedures under the C code environment and been paid, they wanted to make sure that the machinery was working appropriately in the J code environment. As the quarter
Speaker Change: you know, were moved on, you saw these pavements coming through. I think the way I would...
Speaker Change: characterize where we're at today is really to kind of break down from a MAC perspective.
Speaker Change: And this is subjective, but I would say we currently have two MACs that are
Speaker Change: We have two MACs that are nearly there, but I'd like to see a little bit more evidence before I call it.
Speaker Change: and 3MAX where the process remains more manual and time-consuming.
Speaker Change: Obviously, that's the way the wheels of progress grind on. It's consistent with our expectations.
Speaker Change: We continue to make progress, the pacing of which
Speaker Change: you know, will remain to be seen over the course of the quarter. But as we had said, I think, from the very beginning, you know, the goal here really was to make sure that as much of this was ironed and smoothed out heading into 2025 as possible, and I think we'll remain on track for that.
Speaker Change: That's great. Thanks again.
Speaker Change: Our next question comes from David Saxon with Needham. Please go ahead.
David Saxon: Great. Good afternoon, everyone, and congrats on the quarter.
David Saxon: I'll start with IDOS. Maybe can you talk about the utilization trends you're seeing for doctors using IDOS?
David Saxon: I've heard docs take varied approaches, some starting slow and some seeming to jump all in. How does it look across the cohort and has anything surprised you to either the upside or downside? And then I'll have one follow-up for Alex.
Speaker Change: But but I think a couple of anecdotes worth noting as you think about the broader opportunity You know almost all of these docs or accounts start off slow
David Saxon: So to your point, I mean, nearly all of them start with a handful of cases.
David Saxon: to establish reimbursement confidence. The question is how quickly they move to that next phase where they're starting to think about it clinically. And one of the most encouraging things we've seen, both evidence in the results of the third quarter as well as certainly what we've experienced thus far in the fourth quarter, is that as that reimbursement confidence is established,
David Saxon: In particular, in the MAC regions where there's more normalized behavior today.
David Saxon: We're seeing a growing number of surgeons adopting it into their routine clinical practice and that expansion of utilization that you would expect.
David Saxon: And so for now, it's, you know, for those MACs where we're seeing normalized, you know, payment schedules, et cetera, it's all about driving that increased utilization day-to-day out while we're still achieving that reimbursement confidence and early expansion in some of the other MAC regions.
Speaker Change: Great, thanks for that. And then for Alex, just on the P&L specifically for IDOS, I think it's Banadrag, so...
Speaker Change: OpEx growth in 2024, and then given the leverage potential of IDOS and, you know, and how that launches ramping, can you give us any early color on how to think about OpEx growth in 2025? Thanks so much.
Speaker Change: You bet, David. And thanks for the questions. So I'm going to try to hit them all. There was a lot there going back. But let's start with the gross margin.
Speaker Change: And to your point, yes, I mean, we continue to, you know, work our way through with IDOS and the manufacturing burden that it comes with. It's still a modest headwind on our gross margin, but regardless, it's improving. You know, every quarter I look at it and see what is happening with the IDOS revenues and that associated COGS.
Speaker Change: burden and it is improving as as those units start to and volumes start to ramp up.
Speaker Change: My, our expectations are that, you know, we should start to see accretion in the margin by the end of next year. And it's really all dependent upon those IDOS unit volumes and manufacturing volumes.
Speaker Change: is as simple as that. So we do expect that, but we were pleased to see our margin for the quarter come right in the range that we expected, which was 82-83%.
Speaker Change: And the second question around OPEX for the remainder of the year, I think 10% is exactly the right number that we've been guiding to the whole year, you know, if you think about
Speaker Change: Seasonally we've traditionally had a little bit of a step up sequentially in our fourth quarter operating expense.
Speaker Change: So if you look at our year-to-date number, we're sitting at a place of I think it's 290 year-to-date. And if you just take a little bit of a step up from this quarter, you'll get right in that 10% growth rate for the full year zone. And then next year's operating expense, we'll cover that.
Speaker Change: Thank you.
Speaker Change: okay great thanks so much guys
Speaker Change: Our next call comes from Mike Cercone with Jefferies. Please go ahead.
Mike Cercone: Hey, good afternoon and thanks for taking the questions. Just a follow-up on Epioxa.
Mike Cercone: Can you talk about what the reimbursement pathway would look like there once you get clearance and you start to commercialize? And I believe you could also get a J-code for this. Could you speak to some of those factors?
Speaker Change: Yeah, Mike, this is Tom. I'm happy to take that question. So let's first deal with the professional fee.
Speaker Change: and the good news is we were able to extend the the T-code for the professional fee 0402T by another five years. I think that takes us to the end of 2029 which means that
Speaker Change: The epiaxia will be covered, that procedure will be covered under the existing T-code 0402T, which is by and large paying over $2,000 per procedure.
Speaker Change: On the ability of a J-code, yes, we'll have a new J-code that we'll establish.
Speaker Change: for this premium technology.
Speaker Change: that if we're successful in getting a PDUFA date in the fourth quarter of 2025, we'll look then to establish and apply for that J-code at the tail end of 2025. And if you follow what happened with IDOS,
Speaker Change: We've been looking at about six months to get a J code and get approval for that product now.
Speaker Change: The difference here, the J-code that we had established for I-dose, because of the Medicare fee-for-service patients that we were concentrated and focused on.
Speaker Change: We were able to enter early and to do preliminary cases under the C code prior to the J code and to seek and to gain a secure reimbursement.
Speaker Change: because the epioxid procedure is almost invariably going to be a commercial payer.
Speaker Change: We very well may wait until we have that J code in, let's call it July of 2026. We have that solidified.
Speaker Change: and that may be the beginning of the predicate for commercial launch. We're still contemplating several scenarios, but my bias would be to do so and to take that track.
Speaker Change: Okay, great. Thanks, Tom. And then, you know, my second one maybe for Alex. Could you just talk about the progress and targets toward cash flow break-even and maybe touch on how you think about profitability in the midterm?
Speaker Change: Yeah, I'd be happy to Mike so again you saw I mean this quarter We were pleased to see we actually generated a small modest amount of cash So that was that was a great result for the quarter But it was really around just some spending discipline and some other things
Speaker Change: You know, we've talked, you and I, and other investors around the fact that our near-term approach is not going to be with an eye to profitability, but rather cash flow breakeven.
Speaker Change: And we want to get back to the point where we live within our means, so to speak, and how we used to before we entered into a very meaningful investment period getting ready for IDOS.
Speaker Change: I will say that as we progress throughout the next several quarters, next year and even the year after that, there's a very strong possibility, given IDOS and its launch trajectory, you could see quarters of profitability happen, and that wouldn't be a surprise to us.
Speaker Change: But it's not a signal to the community that we are turning our focus towards profitability. Rather, it's just a matter of the ebbs and flows of our revenues and our expenses. But we have such a robust pipeline that we'll continue to invest in those R&D programs.
Speaker Change: and again, focus on the near term as we focus on cash.
Speaker Change: Understood. Very helpful. Thanks, Alex.
Speaker Change: Our next question comes from Joanne Wunsch with Citigroup. Please go ahead.
Joanne Wunsch: Oh, good evening and thank you so much for taking the questions.
Joanne Wunsch: I'll just sort of toss them right up front. I think you've previously talked about growth margins in 2024 in the range of 82 to 84%. I wanted to just make sure you're still feeling good about that. And then my second question is really about 2025. I recognize
Speaker Change: for a little early for you to be giving guidance, but in looking at the consensus estimates, could you just maybe comment if you feel good, bad, or indifferent about them? Thank you.
Speaker Change: Okay, you bet. Hey, Joanne, it's Alex. I'll take the gross margin question. So, I think we did start out thinking 82 to 84 percent, but I did narrow that range as we've gone throughout the year to 82 to 83, and we continue to feel very good about that range for this year in 2024.
Speaker Change: you know that narrowing of the range really had to do with what I was speaking about earlier just as we continue to launch IDOS and have to get over the manufacturing.
Speaker Change: if the inefficiencies that typically occur when you launch a product, that's kind of brought our margin a little bit. But we do expect accretion to happen, certainly in the future, and more likely sometime in the latter half of 2025, by the end of the year.
Speaker Change: And then, Joanne, you know, obviously it's early for us to get granular at 2025, as you suggested, and I wouldn't comment on the specific numbers that STREET has out there. I probably am comfortable commenting on some of the macro considerations, which...
Speaker Change: shouldn't come as a huge surprise, but internationally we think about continuing to build the overall markets outside the United States.
Speaker Change: anchored around interventional glaucoma and expanding the market there, hopefully achieving some key product approvals along the way as we take our pipeline abroad. And on the counter side, we expect to continue to see increasing competition in particular in some of our key markets.
Speaker Change: outside the United States.
Speaker Change: On the corneal health front, we would expect some continued headwinds associated with the Medicaid drug rebate program.
Speaker Change: ahead of an Epioxa approval and launch late in the year, as Tom indicated.
Speaker Change: Although, I think some of those headwinds will certainly be able to lap from a year-over-year perspective the impact that we've currently experienced in 2024.
Speaker Change: And then as it relates to our U.S. glaucoma franchise, you know, we really expect continued momentum that
Speaker Change: As I said before, predictable professional fees and our methodical expansion over the year into commercial Medicare Advantage covered lives and our sales force execution against that in terms of training doctors and expanding the utilization of IDOS and ISIN Infinite in that standalone patient population.
Speaker Change: Thank you so much.
Speaker Change: Our next question comes from Richard Nowitter with Truist Securities. Please go ahead.
Speaker Change: Hi, good evening. This is actually Robbie on for Rich. Can you hear me?
Robbie: Great, thanks. So just a question on going back to IDOS and, you know, part of the label is that IDOS is available in OHT patients as well.
Speaker Change: I was hoping you could maybe give a little bit more color around what kind of market addition these patients would represent to the TAM.
Speaker Change: what kind of reimbursement work maybe you need to secure to get at it and then should we factor that in potentially to our 2025 IJOS forecasts or if you're seeing any uptake right now?
Speaker Change: Thanks.
Speaker Change: Yeah, thanks Robbie. I'll start off and Tom may want to add some color as well. You know, if you think about the overall market
Speaker Change: and you specifically referenced Occohypertension, but I'll comment more broadly.
Speaker Change: There are approximately 20 to 21 million eyes in the United States that have...
Speaker Change: The good news, and I won't belabor the point around our prior studies, but we have a very large study that has significant data attached to treating all of those patient types up and down the disease spectrum.
Speaker Change: And so we would expect to utilize that as well as any incremental, you know, phase four type studies that we are or will do in the future to help make sure that we secure proper reimbursement coverage. I think a lot of that comes down to the individual, you know, payer types that are out there. Certainly, we have sufficient data to support this.
Speaker Change: within the traditional Medicare arena and have it be on label and supported by hard and significant evidence.
Speaker Change: Oftentimes with the commercial payer, even the Medicare Advantage, you know, payer types, you have to continue to chip away at that over time with incremental data and advocacy on behalf of those patients that would like to have access with IDOS up and down the disease spectrum.
Speaker Change: Great thanks and maybe just one more you know you kind of mentioned dialogue with FDA around re-administration. Love to get any more color beyond that if you're able to supply it. Thank you.
Speaker Change: Yeah, Robbie, I guess I would defer to my statement before is that, yeah, we have had initial engagement. They have looked at the sophisticated approach we put in front of them and we remain hopeful. I don't want to go into any prognostication other than that. We're not counting on the re-implantation. It certainly hasn't been a detriment in the marketplace.
Speaker Change: I'd like to have it, not counting on it, but again, I like the fact that we have ITERS-TR waiting the wings to become a de facto re-implantation product if we are unsuccessful in this early attempt.
Speaker Change: All right, our next question comes from Steve Lichtman with Oppenheimer. Please go ahead.
Steve Lichtman: Thank you, evening guys. You mentioned on the call today and in the past
Steve Lichtman: the shift in the focus of the sales force toward i-dose, you know, understandably. What is your latest thoughts on, you know, whether you'd look to make a bigger expansion of the rep footprint to sufficiently focus on, you know, Infinite as well as the core STEM business?
Speaker Change: Yeah, thanks, Steve. I don't think that our view on that has changed at all. You know, we've said for some time to expect...
Steve Lichtman: consistent organic expansion of our sales force.
Speaker Change: you know, commiserate with.
Speaker Change: with the growth in our individual territories, both from a volume and revenue perspective. I think we have a pretty good handle on that. We have a lot of experience in our commercial organization running larger businesses and ophthalmology and a pretty good vision for where the Salesforce ultimately might go to. But for now and in the foreseeable future, I see that to being a continued sort of organic expansion of where we're at today.
Speaker Change: Okay, great and then
Speaker Change: What is your latest outlook regarding timing of getting I-Dose PROFIs established across the MACs? How should we be thinking about this in the coming quarters?
Speaker Change: Please see the complete disclaimer at https://sites.google.com
Speaker Change: Yeah, that's a great question Steve. I think, you know, obviously we were pleased to see that the first
Speaker Change: Mac established that professional fee and we've been pleased to see, albeit inconsistent, but payments across really all the Macs that are consistent in the dollar amounts with what we saw in that professional fee schedule from in this case Meridian. Ultimately professional fees are a volume game and so as you get Macs
Speaker Change: providing more consistent normalized payment on the J code. You're able to drive volumes and those volumes ultimately drive the adjudication of the professional fee which drives professional fee schedules.
Speaker Change: You know, sometimes it will land in that professional fee schedule, and other times it will just be that they're starting to pay, on a consistent basis, a dollar amount that you can count on, even if it's not on a schedule.
Speaker Change: We've said for some time that our expectation would be that if we enter into 2025 that that'll become you know more front and center and I think that remains the case. Again it may not all be that they're on actual schedules but what we're looking for is consistent and dependable or predictable you know payments on the professional fee side across each MAC.
Speaker Change: Our next question comes from Eric Wood with Morgan Stanley. Please go ahead.
Eric Wood: Okay, so I think from a juristic perspective, I wouldn't read that much into it. Obviously, that's
Eric Wood: very unique to their product, and from their standpoint, I'll defer to Abbie around the considerations there. You know, we've obviously been cognizant from the beginning when it comes to IDO's or any of our products.
Eric Wood: that come after an administration of DRISTA to be mindful of any sort of...
Eric Wood: adverse event profile that may exist within that patient. But I don't think there's anything new there, we didn't learn anything from that, nor does it change sort of our go-to-market strategies in the U.S. or abroad.
Speaker Change: I'd be happy to. So as you know we have begun that phase one study of Exitinib and just to remind the investor audience this is a
Eric Wood: tyrosine kinase inhibitor, which is a small molecule which is to treat age-related macular degeneration.
Eric Wood: really gone on over two years. We really like what we see. The results have been rather extraordinary in terms of efficacy.
Eric Wood: We like that the precedence in the marketplace of people with or companies with similar TKIs are not showing inflammation.
Eric Wood: So this all bodes well on a product that may be able to radically change and disrupt a marketplace when and if it's available. So we have begun Phase I clinical work outside the United States and we are in the process of enrolling patients as we speak.
Eric Wood: Our goal would be to have some data, proof-of-concept data, available late in 2025, maybe going into 2026.
Eric Wood: and then we'll see where we're at. With a positive response I think this becomes a major catalyst and opportunity for the business.
Speaker Change: Thanks guys.
Speaker Change: All right, our final question comes from Anthony Patron with Mizzou. Please go ahead.
Anthony Patron: Thanks. Maybe one on the Medicare Advantage policies you referenced earlier in the call. Maybe just a little bit on timing. Is it possible that we'll see a Medicare Advantage program for i-dose TR?
Speaker Change: And then just to revisit the idea of a patients are still Medicare fee-for-service and does the company have a strategy to deploy the balance sheet to address the donut hole for those patients? Thanks.
Speaker Change: Sure, Anthony. I think when it relates to Medicare Advantage, I want to separate between sort of policy establishment or coverage and our sort of commercial support for that in the marketplace.
Eric Wood: If you went and searched today, there is quite a bit of actual coverage for IDOS-TR, both in the commercial arena as well as in the Medicare Advantage arena. Our payer team has been hard at work since the product approval and done a great job of establishing coverage across that entire landscape.
Speaker Change: What we're really talking about here is our ability to deliver that to the marketplace.
Speaker Change: support that the complexities associated with dealing with commercial payers and Medicare Advantage prior authorization.
Speaker Change: standpoint as well as some of the other things that come along with with those payers. It's something we want to make sure that we've established
Speaker Change: It's a solid footing with Medicare fee-for-service before we enter into it. So, as I said earlier, we'll really start to turn that on in 2025.
Speaker Change: Over the course of the year, and we'll do so very methodically, we don't want to get ahead of ourselves in this part of the payer landscape. We want to make sure that we do it the right way for the long term on that.
Speaker Change: As it relates to, you know, rebate programs, which I'll say are actually more co-pay assistance or out-of-pocket, you know, programs.
Speaker Change: Those are really relegated, like all pharmaceutical companies, to the commercial patients out there that you can't do anything about federally insured patients Medicare or Medicare Advantage.
Speaker Change: When you talk about the donut hole, I think we have to think about that as more of a Part D issue. For Part B patients...
Speaker Change: The vast, vast majority, 90 plus percent, have supplemental or secondary insurance that covers their out-of-pocket expenses on procedures like Ida. So we do plan on having an out-of-pocket program, but it'll be oriented towards those commercially covered lines.
Speaker Change: Thank you.
Speaker Change: All right, I will now turn the call back
Speaker Change: Okay, I want to thank you all for your time and attention today and thank you as well for your continued interest and support of Law Cups. Goodbye.
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