Glaukos Corp (GKOS) 2018 Q1 法說會逐字稿

Welcome to the Glaukos Corporation's First Quarter 2018 Financial Results Conference Call. A copy of the company's press release issued after the market closes today is available at www.glaukos.com. (Operator Instructions) This call is being recorded, and an archived replay will be available online in the Investor Relations section at www.glaukos.com.

I would now turn the call over to Mr. Chris Lewis, Director of Investor Relations and Corporate Strategy and Development. Please go ahead.

Hello, everyone. Joining me today are Glaukos' President and CEO, Tom Burns; CFO, Joe Gilliam; and COO, Chris Calcaterra. Following our prepared remarks, we will open the call to questions. (Operator Instructions) Please note that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our products, our pipeline technologies, our U.S. and international commercialization efforts, the efficacy of our current and future products, and our competitive market position, 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. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements.

Review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investors section of our website at www.glaukos.com.

With that, I will turn the call over to our President and CEO, Tom Burns.

Well, good afternoon, everybody, and thank you for joining us. Today, Glaukos reported a strong start to the year with first quarter net sales of $40.1 million, up 12% versus the year-ago quarter. We're also reaffirming our 2018 net sales guidance range of $160 million to $165 million. Joe will discuss our financial results and outlook in more detail later in the call.

We continue to make progress towards our aspirational mission of transforming glaucoma therapy worldwide. Our portfolio of micro-invasive surgical devices and sustained pharmaceutical therapies are capable of providing an optimized treatment solution at each stage of glaucoma disease stage severity, from the earliest manifestation to the most severe and in both combo cataract and stand-alone procedures. In addition to our current iStent device, Glaukos is advancing a cascade of 5 distinct pipeline products targeted for U.S. commercialization over the next 5 years.

In this context, let me provide an update on the progress being made to achieve 4 of our key 2018 objectives, which are, one, to obtain FDA approval and commence the U.S. commercial launch of iStent inject; two, to begin the patient enrollment of key pivotal studies; three, to drive increased penetration in our international markets; and four, to expand our pharmaceutical capabilities through continued investment.

Beginning with iStent inject, as announced previously, we achieved our goal to submit the final clinical module of our iStent inject PMA to the FDA by the year-end 2017. Recall that the iStent inject is a 2-stent combo cataract product that allows the surgeon to enter the eye once to inject stents into multiple trabecular meshwork locations in a facile click-and-release motion. We remain hopeful for approval in the latter part of this year and are moving ahead with preparations for U.S. commercial launch later in 2018.

These actions include scaling manufacturing and building necessary launch inventories, finalizing our marketing campaign and preparing the sales force to implement surgeon training and launch activities.

Results of the iStent inject prospective multicenter clinical trial, which included 41 investigational sites and 505 randomized open-angle glaucoma subjects were recently presented at the American Society of Cataract and Refractive Surgery or the ASCRS meeting by Tom -- Dr. Tom Samuelson, an ophthalmic surgeon at Minnesota Eye Consultants. In the study, 387 subjects were randomized to iStent inject in combination with cataract surgery and 118 subjects were randomized to cataract surgery only. Subjects were followed through 24 months with annual medication washouts. We are delighted that the iStent inject met its primary and secondary efficacy endpoints with an overall favorable safety profile. Particularly, we're pleased with the analysis of the primary efficacy endpoint showing roughly 75% of the iStent inject treatment arm achieved a 20% or greater reduction in unmedicated IOP at 24 months despite our study's treatment arm having a lower preoperative mean baseline IOP than comparable MIGS pivotal trials and therefore, less runway to lower IOP as the percentage change.

At 24 months observed data showed that the iStent inject cohort achieved a 31% mean reduction or 7.7 millimeters of mercury in unmedicated IOP from an unmedicated mean baseline of 24.8 millimeters of mercury to 17.1 millimeters of mercury.

While cross-trial comparisons are difficult, we believe the iStent inject final IOP is comparable to or lower than this reported efficacy measure from all other MIGS pivotal studies. In addition, at 23 months, observed data showed that the iStent inject cohort achieved a 75% reduction in the mean number of medications, representing a 50% greater reduction versus the control group.

Finally, the safety profile of iStent inject appears to be exceptional. Through 24 months, the overall rate of adverse events for the iStent inject in combination with cataract surgery cohort was similar to the cataract surgery only cohort. We are confident in the real-world clinical performance of this product. We now have 9 peer-reviewed clinical publications on iStent inject and numerous studies that have been presented where seasoned iStent inject surgeons are achieving results that appear to outperform those obtained in pivotal studies. 2 recent studies presented at last month's ASCRS meeting that evaluated iStent inject in combined cataract procedures testified to this clinically trend.

First, Dr. Fritz Hengerer of Germany presented a case series study of 81 eyes implanted iStent inject in combination with cataract surgery showing a mean IOP reduction of 37% to 14.3 millimeters of mercury and a 68% reduction in med burden at 3 years post implantation. Secondly, Dr. Paul Harasymowycz presented a case series of 179 eyes with mild-to-severe glaucoma implanted with iStent inject in combination with cataract surgery that achieved mean IOP of 13.8 millimeters of mercury and a 43% reduction in med burden at up to 1 year post implantation. Finally, Dr. Ike Ahmed and colleagues presented a case series study earlier this year at the AGS showing subjects implanted with iStent inject, in combination with cataract surgery achieved IOP at or below 15 millimeters of mercury, while reducing medications at 1 year. This study further concluded that iStent inject may be more efficacious in reducing medication burden versus 2 Generation-1 iStent implants.

Given its stellar clinical safety and efficacy results, the elegance and the facility of the implant procedure, the product's predictable performance, rapid rate of adoption in international markets where over 30,000 iStent injects have been implanted and industry surveys demonstrated profound surgical awareness, appetite and interest, we believe the iStent inject will be a compelling treatment option for U.S. ophthalmic surgeons to reliably manage their comorbid cataract glaucoma patients.

Beyond iStent inject, Glaukos continues to build an enviable product pipeline that advances the cascade of novel products targeted for U.S. commercialization over the next 5 years. We believe this expanding product portfolio can facilitate our evolution into a hybrid pharmaceutical and surgical company while potentially delivering a sevenfold increase in our current U.S. addressable market opportunity, allowing us to penetrate more deeply and more fulsomely in this growing global glaucoma market.

We continue to make progress on this development plan during the first quarter of 2018, beginning with the iDose Travoprost. Our initial iDose drug delivery platform product aimed at addressing the ubiquitous problem of patient noncompliance with topical medications. Preparations for the Phase III iDose Travoprost trial remain on schedule and we expect to meet our goal to begin patient enrollment by mid-2018. This prospective randomized double-blind pivotal trial will be similar to Phase II, but will enroll approximately 1,000 ocular hypertensive or open-angle glaucoma subjects at U.S. and international clinical sites. Our efforts to seek regulatory approvals for iDose Travoprost in European markets and Japan are also progressing as planned. At the recent ASCRS annual meeting, Dr. John Berdahl presented the iDose Phase II 12-week and longer-term study results to the clinical community for the first time and the feedback was very positive.

Recall that these results showed that in an interim cohort of 74 subjects followed through 12 months, the fast-eluting and slow-eluting versions of iDose Travoprost achieved average IOP reductions from baseline of 8.2 and 7.9 millimeters of mercury, respectively, compared to 7.6 for topical timolol.

In additions, patients required 31% more medications on average in the timolol controlled group compared to the iDose groups. This most recent Phase II data readout also showed a favorable safety profile with no adverse events of hyperemia reported to date in either elution group and a low overall rate of adverse events.

If ultimately, FDA approved, we believe the iDose Travoprost will not only be instrumental in addressing the challenges of patient noncompliance with topical glaucoma medications, but also pave the way for a new treatment algorithm where surgeons use iDose alone or in combination with other therapies to more effectively manage patients' intraocular pressure.

What's more, we believe the powerful iDose Travoprost data available thus far underscores the potential of our iDose drug delivery platform to produce future generations of sustained therapies for glaucoma and other ocular diseases.

Moving on to our next generation surgical pipeline products. I'm pleased to report that we recently enrolled the first patient in the IDE pivotal trial for the iStent SA, achieving an important milestone in line with our previous timing expectations. This multicenter randomized trial will have a primary efficacy endpoint of noninferiority to SLT at 1 year postoperative.

Similar to the iStent SA is our most recent addition to the pipeline, the iStent Infinite, a 3-stent stand-alone procedure for severe or refractory glaucoma patients. Following submission of our IDE application to the FDA at the beginning of 2018, we continue to be in productive discussions with the FDA around the study design and protocols for a prospective multicenter single-arm clinical trial.

The concept for the iStent infinite was borne out of Glaukos-sponsored dose-response study offered by Dr. Katz at all that revealed the potential for incremental IOP reductions with 3 stents. Dr. Richard Lewis presented the latest findings from the study at ASCRS, which continue to show favorable performance and durability of our 3-stent approach. At 4.5 years postoperatively, patients who received 3 trabecular bypass stents achieved a 33% reduction versus unmedicated mean IOP and 91% of subjects achieved IOP reductions of greater than or equal to 20% without medication versus pre-op unmedicated baseline IOP.

Finally, the 2-year patient follow-up in the pivotal trial for iStent Supra, our suprachoroidal shunt, progresses through early 2019. As we've said, given the benefit-to-risk profile, we continue to see the suprachoroidal space as a viable second line MIGS enhancement treatment option for more moderate and progressive open-angle glaucoma patients.

An important aspect of building such a robust pipeline is the ability to protect our propriety inventions with a formidable portfolio of intellectual property. To that end, we've retained a leading patent litigation firm Irell & Manella and filed a patent infringement lawsuit against Ivantis, alleging that their Hydrus Microstent infringes our core glaucoma technologies. This lawsuit reflects our unwavering commitment to protect our proprietary inventions for the benefits of patients, customers, shareholders, employees and others who rely on us.

We believe that the iStent, the iStent inject, iStent SA, iStent infinite, iStent Supra, and iDose Travoprost combine to represent the most comprehensive portfolio in the global glaucoma landscape. A portfolio capable of meeting the needs of the entire disease stage continuum from ocular hypertension to refractory glaucoma. We believe our pipeline platforms, if approved, will significantly expand our market opportunity at a solid cadence over the next several years and uniquely position Glaukos for growth and leadership well into the next decade.

To put this in context, using our treatment algorithms and combination therapy expectations, we estimate our U.S. addressable market opportunity to expand sevenfold from the roughly 600,000 procedures available today to a pool of over 11 million diagnosed and treated eyes, of which we believe over 4 million can be treated annually.

Our third key objective for 2018 is to drive deeper into our international markets. Momentum continues to build in our direct international markets as evidenced by first quarter 2018, O.U.S. sales growth of 62% year-over-year. Brazil, Germany, Japan and the U.K. drove the international year-over-year growth this quarter. We currently have direct sales operations in 16 countries outside the U.S. including 13 that were fully established in 2017. Our O.U.S. focus is on building quality, experienced surgical sales teams, while working to establish favorable reimbursement, train surgeons and leverage our compelling clinical data to grow MIGS awareness and adoption.

Our fourth key objective is to expand our pharmaceutical capabilities through continued investment. Our team of over 30 seasoned scientists, chemists and other experts, most of whom have extensive prior experience at leading pharmaceutical companies, remain actively exploring novel sustained pharmaceutical treatment options and pathways.

In addition to organic growth, we're beginning to evaluate in-licensing products and technologies that can augment our device and pharmaceutical growth and sustain our leadership position in the coming decades. To that end, we're pleased to announce the recent addition of Jane Rady as Senior Vice President of Corporate Strategy and Business Development. Jane is a seasoned and highly respected medical device and pharmaceutical business executive within ophthalmology who has served in a variety of senior roles at AMO, Abbott Labs and most recently, Johnson & Johnson Vision, where she led the business development efforts for the ophthalmic surgical business. We are privileged to have her to join our team to help lead and implement the strategic vision for our company.

To assist us in advancing our fulsome pipeline to commercialization, we have also made some significant new investments in people and capability.

I'm pleased to announce the recent hiring of Nick Tarantino as a Senior Vice President of Global Clinical Medical Affairs. Nick is taking over the responsibilities of Jeff Wells who served Glaukos with distinction as Senior Vice President, Clinical, Regulatory and Quality Affairs, and recently retired in late March. Jeff made so many positive contributions to Glaukos and was integral to helping us build one of the richest pipelines in ophthalmology.

We're grateful to Jeff for his many years of distinguished service and we wish him all the best in retirement. Nick comes to Glaukos after a long-standing leadership positions within Allergan and AMO, where he had global responsibility for the Clinical Research and Development, Medical Affairs and Medical Operations, and most recently, AcuFocus, where he served as Chief Clinical and Regulatory Officer and Head of R&D. Nick has earned a sterling reputation in ophthalmology over his 30-plus year career span, and we're excited to have him join Glaukos to deliver on the opportunity presented by our robust and accruing pipeline.

So with that, I'll turn the call over to Joe for a summary of the first quarter financial results. Joe?

Thanks, Tom. As noted earlier, net sales for the first quarter of 2018 were $40.1 million, a year-over-year increase of 12%. The U.S. represented 84% of our sales in the quarter and international 16%. In the U.S., first quarter 2018 sales were $33.6 million, an increase of 5% from the same period a year ago. Year-over-year U.S. sales growth was impacted by modestly higher ASPs and the introduction of competition.

Outside the U.S., first quarter sales were $6.5 million, an increase of 62% from the same period a year ago. This quarter Brazil, Germany, Japan and the U.K. drove the majority of the year-over-year increase, led by growing iStent inject sales.

Our gross margin in the first quarter was roughly 86%, consistent with the same quarter in 2017. We continue to expect our gross margins to remain in the mid-80s percent range going forward as we may incur inefficiencies during the scaling of our inject manufacturing infrastructure and inventory ahead of and in the months following a potential U.S. launch.

SG&A expenses in the first quarter rose 26% to $27.2 million versus $21.5 million in the year-ago quarter. This rise reflects higher personnel and other costs related to ongoing expansion of our domestic and global infrastructure, primarily in our commercial and international operations. R&D expenses rose 22% in the first quarter to $10.9 million versus $8.9 million in the same year-ago period. This rise reflects primarily the cost of additional personnel as we expand our pharmaceutical R&D capabilities and within clinical affairs, where we are managing an increasing number of clinical studies and associated investigational sites and study investigators as we commence key pivotal trials over the course of this year.

We finished the first quarter with a net loss of $2.7 million, or $0.08 per diluted share compared to net income of $900,000 or $0.02 per diluted share in the first quarter of 2017.

As of March 31, 2018, we had cash and cash equivalents and short-term investments of $113.8 million, compared to $119 million at the end of 2017, reflecting the timing of several key expenditures that shifted from the fourth quarter of 2017 into the first quarter of 2018 as we previously discussed on our fourth quarter earnings call.

As we've said before, it is important to remind you that as we progress through 2018, our primary focus remains on long-term growth as we prudently invest to build the MIGS market, drive increased penetration of our iStent and iStent inject platforms globally, and advance our robust pipeline initiatives through necessary clinical studies and programs.

Finally, as Tom indicated earlier, we are reaffirming our 2018 net sales guidance of $160 million to $165 million. This guidance outlook takes into account the 2018 considerations we outlined on prior calls, including the full year impact of an evolving competitive landscape, the iStent inject launch and broader U.S. reimbursement dynamics as well as expansion of our international sales, which we expect to be towards the high end of the range of $23 million to $26 million for the full year.

With that, I will now turn the call back to Tom.

All right. Thanks, Joe. So to recap, Glaukos is off to a strong start in 2018 as we continue to advance our aspirational mission to transform glaucoma therapy. We believe Glaukos' robust pipeline of 5 distinct products targeted for introduction to the U.S. market over the next 5 years is capable of truly changing the glaucoma treatment algorithm, setting a new standard of care and positioning Glaukos for sustained competitive advantage in an expanding global market that will enable us to drive shareholder value for years to come.

So with that, I'll open the call to questions. Operator?

(Operator Instructions) Your first question comes from the line of Robbie Marcus from JPMorgan.

I was hoping you could give us your thoughts coming out of the ASCRS conference where we had the inject data presented. How are you thinking about inject impacting 2018, especially with other competition in the market? And how should we think about the cadence through the year? How long will it take to train reps? How long will it take to bring it to market and move on to training new doctors?

I'll take the first part of that question, Robbie. I think you were there and were present to see the reaction of the clinical surgical groups. And I think we're beyond delighted with the presentation of the data, and the data that we were able to show in full. So we showed data that showed observed intraocular pressure decreases of over 30% from a baseline of 24.8 preoperative means down to an unmedicated baseline after terminal washout of 17.1. To us, that was comparable and, in some cases, better than the data that we'd seen from competitors. And in addition to that, when we looked at again, the elegance of the procedure, the facility of the procedure, backed by additional supplemental papers that you saw, I mentioned a few of them here, Dr. Fritz Hengerer, Dr. Paul Haramenovic (sic) [Harasymowycz] as well as Dr. Ike Ahmed where overall we're very, very pleased with how we came out of the meeting. Now with respect to introduction, I'm going to ask Joe and Chris to weigh in.

Sure, Robbie. I think I would just add that as we've said we continue to expect inject approval and commercial launch in the latter part of this year.

And as we, I think, said now consequently that we will have a controlled launch of that product and Chris can elaborate on that further. But all of those dynamics as well as the surgeon training dynamics that we've talked about in the past, all continue to be in play as we think about the inject launch.

Robbie, this is Chris. And some of that what we did with iStent, we're going to follow the same blueprint for launching iStent inject, where we will have superlative training of the sales reps. We'll have a new marketing campaign and then we'll focus on that skill transfer to the surgeons and we'll do that in a very controlled manner, so that we can ensure the outcomes that we've been seeing with this product abroad.

Okay, great. And as I think about the rest of the year, can you help us think about the cadence, is second quarter going to be up from first quarter? And then how do we think about -- maybe what's baked into your estimates for market growth for the year? And how competition is going to impact you in 2018?

Sure. Thanks, Robbie. It's Joe. Maybe I'll start with the quarterly cadence part of your question. I think as you unpack the 2018 key drivers that we've spent a fair amount of time talking about on prior calls. The impact that you should expect is really a less pronounced seasonality for our business in the U.S. for 2018 than we've seen in prior years over that the overall cataract market typically experiences. That what do you say it less pronounced or muted is sort of how we think about the quarterly cadence over the course of 2018. From a market growth perspective, that's not an estimate that we intend to provide quarterly. But I can't say we continue to feel good about the approximately 20% market growth estimates that we had out there for the year. And I think it's worth noting that implied in our Q4 call commentary regarding 2018 is an expectation that growth will be a little faster at the start of the year versus the second half, especially when you consider doctor training dynamics in and around the iStent inject launch.

Your next question comes from the line of Bob Hopkins from Bank of America.

Just 2 quick questions. First, I want to just talk a little bit about the quarter. And then a question on iStent inject. First, maybe I'd start with Joe, a few questions on just on Q1. In the U.S., your comments on price, was that maybe 1% to 2% benefit from price? And then the other part is sort of the guidance question is, what's implicit in your guidance for expectations on local MACs? What are -- just any update on local MACs and what you're hearing there.

Sure. Bob, it's Joe. So first with respect to the contribution to grow, I think, we -- what I can say is that ASPs have remained stable from Q4 through Q1. And I think when you do that math, you'll conclude it's somewhere similar to what we suggested which is you have a little bit of impact from price but not a substantial impact from price in the first quarter given that we did have some pre-price increase loading activity in the first quarter of 2017. Regarding the reimbursements, I think we said in the fourth quarter call, it continues to be true here that our expectations around reimbursement and the way we think that investors assume that will probably continue to see the potential for MAC changes to reimbursement in the physician fee area. And we assume in our guidance, that, that can happen. And as long as it happens in the ZIP code that we've suggested is less impactful, the $300 to $500 range that that's all contemplated in our guidance.

Okay. And then more important question on iStent inject. So I guess, 2 quick things. You mentioned a marketing campaign. Can you just highlight what are maybe the one or 2 most important things that you will be sort of aggressively pushing when it comes to marketing campaign around iStent inject? And then you mentioned also success outside The United States with iStent inject. What sort of a single best example you can give us of success in a territory outside of United States? Really if you can quantify that'd be great. It could kind of get us encouraged for the U.S. launch?

Bob, this is Chris. And as it relates to the marketing campaign, as you can imagine this is something that is work in progress and we're not quite ready to disclose what the key things that we'll be focusing on. However, many of the things that we've done in the past will continue with a launch of this product and things that we've done internationally, which is superlative physician training and skill transfer to the surgeons, making sure that they're identifying the right patients, making sure that they're using proper surgical technique, and so forth because with good outcomes comes good utilization. In terms of examples, there is a lot of them. Certainly, Australia has been a big success for us, Germany. And more recently, the U.K., where we introduced iStent inject earlier this year. There's been a significant uptick in the utilization of iStent inject in the U.K. And then as we've talked about in the past, Australia, Canada, Germany. Their percentage of our utilization of iStent inject compared to iStent is in the low to mid-90s. And it's helped to expand the market. So we're quite excited about the prospect of launching iStent inject in the U.S.

Okay. Well, getting this in a lot more detail next week. Look forward to seeing you next week.

Your next question comes from the line of Larry Biegelsen from Wells Fargo.

It's Adam Maeder on for Larry. I guess, I just want to start with litigation. I know you're somewhat limited in what you can say there. But can you help us better understand next steps and timelines with the Ivantis litigation? And then I have a follow-up.

Yes, sure could. So as we said our press release this lawsuit reflects our commitment and obligation to protect our proprietary inventions. And further as we outlined in our complaint, we do believe that Ivantis infringes our patents. So we've asserted 2 primary patents each of which contains dozens of claims. And so we believe at this time this is an appropriate and efficient approach to addressing Ivantis' infringement. So in our complaint, I think as you're aware, we've requested a judgment of infringement, a judgment for damages and an injunction preventing further infringement. So our expectation is after we file this complaint that Ivantis will respond sometime in the late May, early June time frame. And, as you know, their response could consist of a host of different defenses, which includes things like seeking to invalidate the patents that we've asserted in the court and at the patent trademark office. These are kind of predictable chess moves that happen in this infringement proceedings. And we do expect their response in late May, early June.

Okay. That's helpful. And then maybe just 2 quick ones on competition. One related to CyPass and one related to Ivantis. So on CyPass, anything new to share there and how do you expect CyPass Ultra to impact adoption? And then with Hydrus, would you expect the uptick to be faster than CyPass? I think they're going to use the 0191T code. So basically our understanding is that they won't have to go through same headaches and heavy lifting with the MACs.

All right, Adam. Thanks. And this is Chris. As it relates to CyPass, the competitive dynamics that we've laid out in the past remain largely the same. Alcon is training docs, who are implanting 5 to 10 stents that are typically given as samples. They're gaining some traction with MACs and with some commercial payers. We expect that they'll have a full MAC coverage by the end of the year. We do expect that over time it will help to expand the market. But at this time, they're really focusing on our customers. And I think that many of the things that we have talked about in terms of the high-risk profile associated with this type of device going into the suprachoroidal space are coming to fruition. I think that people are seeing that there is a high risk of benefit with this product and we continue to educate the marketplace on this. As it relates to Ivantis and the ability for them to have perhaps a faster start because of the fact that they'll use our code 0191T for trabecular bypass, that is true, that they will get quicker coverage. We've taken this into account with our guidance. We think that they'll, similar to Alcon, will do a fair amount of trialing free product to get them started and we are prepared for that.

Your next question comes from the line of Brian Weinstein from William Blair.

This is actually Andrew on for Brian today. Tom, I appreciate you going through the different studies that were shown at ASCRS. I was wondering if you could also some provide comments on the head-to-head between the 2 generation-1 iStents and the Hydrus? And as a follow-up to that, do you guys plan on going any head-to-head trial as well?

Yes. So what I would say there, as you know, Andrew, I've been doing this for 30 years, beating different ophthalmic companies and never once have I seen a comparative control study sponsored by a competitor that shown data that's either inferior or comparable to the controller to the competitive product that they are facing. So this is not a surprise. We expected this data to come out and largely expected to see what we saw. What is kind of a surprise, I think, and I think you should talk when you do your channel checks with surgeons, is the fact that the sponsor of the study changed the efficacy endpoint very, very late in the trial. And that's an aberration. Something I haven't seen in a long time. And sometimes when that happens, you are in search of a p-value. And I think that's something that troubled some surgeons that I've talked to. But what I'd ask you to focus on is just the depth and the bench that we have in the study. So as I mentioned in our opening remarks, we have 9 peer-reviewed studies on iStent inject that are published to-date. We have another 16 additional studies that are multiple stents. These studies all show very, very marked reductions in intraocular pressure and in reductions in drug burden. And much like with the iStent, I suspect that we'll see in the real-world data that comes out of these surgeons who use these products with good facility that are far better than we see in the pivotal studies. And so, as you do your channel checks and as you really look at the mass of bench data that we've produced, I'm very comfortable as we go head-to-head with really any competitor, that we're going to do quite well.

Great. And then do you guys plan to do any head-to-head studies as well?

Yes. I would say that, that always remains an option for us. And I don't want to be equivocal, but I just want to say we continue to look at that. We may or may not undertake that. We will keep you posted.

Your next question comes from the line of Joanne Wuensch from BMO Capital Markets.

This is Steve Plachtyna on for Joanne. Could you guys give us an update on where you are in resolving the private payers issue? Are you still on track to fully resolve these issues in the first half of '18? Was there any upside to the numbers as these payers adopt the newer ASC pricing?

Steve, it's Joe. Yes, I would just say it we're on track. Nothing's changed there. I think the team continues to make excellent progress in knocking down those issues one by one. And so it's still status quo with respect to that.

Okay, great. And just as a quick follow-up. Could you maybe share what you've learned about the iStent SA trial so far? And then further we've heard some positive things about a new feature -- a new insertion feature that sort of self-seal. Will this pivotal trial include this design update or be part of the broader iStent SA commercial launch or are we still in the development phase there?

Yes. So as I mentioned before, Steve, we have begun the clinical trial for iStent SA in line with our expectation and what we've communicated. And yes, as I've mentioned to many, the iStent inject SA has an outer sleeve component that is capable of making the initial paracentesis or the initial incision into the cornea such that the fluid inside the eye will not leave. It's called dehiscence. And that will keep the intraocular pressure in the chamber at such a state where you will able to -- we hope and we're targeting at some point to be able to have a self-sealing introduction in a closed chamber procedure that really will incorporate some of the most beneficial features of injection therapy. So our goal is to really create an injectable prosthetic, and we think we have the current product and prototype and development, which is part of the clinical study, which will allow us to get there.

Your next question comes from the line of Matthew O'Brien from Piper Jaffray.

Just a couple from me. Some of the assumptions I've had to build in my model here on pricing in the U.S. But when I look at the volume number that I calculated, it's actually down a little bit year-over-year, again, some assumptions I have that are probably not accurate. But I'd love to hear if you can maybe, Joe, just deconstruct if that's sure, that's flat, where that pressure on a year-over-year basis comes from given the market growth? Be it the buy-in last year that you saw and from the price increase competition, reimbursement. Because what I'm really trying to get at is, are you starting to see any of the CyPass users come back to you? Are you starting to see things loosen up in areas where reimbursements changed, et cetera?

Sure. Maybe I'll start and then Chris you can add any commentary on that last part. So I think some of those assumptions that you put in there, I think are a bit off with respect to the growth. I mean, as we've said, and I think we've sort of have been consistent around the ASP assumptions. We've had stability now for at least 3 straight quarters in terms of that pricing assumption. It's there. When you think about the broader market growth dynamics or the dynamics for growth for us, yes, we're obviously benefiting somewhat from as the commercial payer issue is resolved, as we've suggested. And I think we -- Chris can talk more about the CyPass dynamic as he has before. But clearly we're continuing to, I think, hold our own in that competitive dynamic. Chris, anything?

Matt, as it relates to the CyPass and the success that they're having out there and have any of these customers come back to us, I'll just say that we continue to see validation of what we've said all along about the CyPass device in the suprachoroidal space, that the efficacy is going to be similar to trabecular bypass and that the adverse event profile is more significant than the trabecular bypass. And we've also mentioned that this is going to be a product that's likely to be more prominently used by glaucoma specialists, and we continue to see that. I think that the myopic shift challenge that this product has presented for many physicians has started to become a bigger problem. And as we've said all along, it's a bigger problem for the cataract refractive surgeons than it is with the glaucoma specialists who are used to working in that space. This is really a procedure that's similar to 100-year-old procedure, cyclodialysis cleft, where now they're putting in a tubular implants and it's getting many of the same responses that, that procedure has had. So yes, we've had some successes with people who have tried this product and utilized this product and coming back to a product such as iStent that is less variable in the outcomes, more consistent, and certainly safer.

Matt, one last thing from me, just to help you a little bit on that. I think, while we don't get into the specifics of ASP versus volume drivers of growth, I can say that we are continuing to see volume growth.

Got it. And then there's one follow-up I talked. On the investment side, you're getting close to kind of providing leverage on the SG&A line versus growth. Last quarter, it's flipped here again. I know it's Q1, you spend a little bit more money on folks, but can you talk a little bit about where those investments are going just qualitatively, domestic versus O.U.S.? And then kind of buried within that question what I'm trying to get at is what kind of growth outlook do you think we should think about for the O.U.S. business over a multiyear period? I know Japan is a huge market. Germany seems like it's a pretty big opportunity for you as well. Can you just frame that up a little bit?

Yes, so I -- this is Joe. I think I'll start with your question around the operating expansion and sort of where that's coming from. On a year-over-year basis, the overall operating expenditures were up about 25%. That really did come from a balance of kind of all 4 key drivers, if you will. The international infrastructure and the people that we added over the course of 2017, obviously, we're now seeing that in the first quarter of 2018. Yes, we did continue to expand the broader commercial infrastructure in the U.S. Some of the behind-the-scenes resources more so than the direct field representatives. And then within R&D, as you know, we expanded the team around sort of the core pharmaceutical research activities. And we're now starting to see the team expansion to support the pivotal trial activities that we'll have over the course of 2018. So I think the way to think about operating expenditure over the course of this year is it should trend down slightly from a growth -- year-over-year growth perspective versus the 25% we saw in the first quarter. And in R&D, should probably exceed SG&A growth in that context. Then on your second question, which it was a little bit different around the sort of longer-term international growth dynamics. We've really not commented more broadly than to suggest that when you look at mature markets, the U.S. versus O.U.S. mix in ophthalmology tends to be about 50-50. But that's something that we don't expect to achieve anytime soon given the sheer number of products that we'll be introducing into The United States in the near term.

Your next question comes from the line of Jon Block from Stifel.

I'm actually juggling calls. I really apologize if I'm asking something that was previously addressed. But maybe 2 questions. Joe, the first one, just any market growth commentary. On the last call you talked about expectations for 20% MIGS market growth in 2018 we're sort of 4 to 5-ish months into the year. Do you believe we're tracking accordingly, above or below? Would love your thoughts there. And then I've just got a follow-up.

John, we did actually answer that a little bit earlier on the call. And so I'll repeat it. It's not an estimate that we're going to provide quarterly. But we continue to feel pretty good about the 20% estimate for the year. And I added that, I think it's worth noting that when you think about the commentary we had on the Q4 call regarding the 2018 kind of market drivers, there is an expectation that in that, that growth will be a little faster than that 20% estimate at the start of the year versus the second half when you factor in the doctor training dynamics we've talked about in and around the inject launch.

Got it. Got it. Helpful. And then just to pivot any high-level thoughts on competition and Ivantis being a stent that's obviously placed in the trabecular meshwork. If they are approved in trial, I guess, what I'm trying to get at, do you think the trialing would sort of to be more of a one-for-one replacement of iStents until it would be trabecular-for-trabecular swap, if you would? Or do you think any share in-roads from Ivantis would be somewhat split between you guys and the other existing player, CyPass?

John, this is Chris. Given that it is a trabecular bypass stent, I would think -- and given that our sheer market share it's certainly going to impact us more than CyPass, but I don't think it excludes CyPass either. We continue to be very bullish on our position with the iStent inject, the overall efficacy, the safety profile and the elegance of the procedure. So we do expect them to have trialing. We do expect them to have an impact on our results in the third and fourth quarter, whenever they were to get approval. But we've prepared for that, and we've given that and stated that in our guidance.

And I'm showing currently no other questions at this time.

Okay. So with that, thank you, everybody. Thank you for your time and your attention today. And for your continued interest in Glaukos. Thanks very much. Goodbye.

This concludes today's conference call. Thank you for your participation. You may now disconnect.