Glaukos Corp (GKOS) 2022 Q4 法說會逐字稿

Welcome to the Glaukos Corporation's Fourth Quarter and Full Year 2022 Financial Results Conference Call. Copies of the company's press release and quarterly summary document, both issued after the market close today, are available at www.glaukos.com. (Operator Instructions) This call is being recorded, and an archived replay will be available online at the Investor Relations section at www.glaukos.com.

I will now turn the call over to Chris Lewis, Vice President of Investor Relations and Corporate Affairs. Please go ahead.

Thank you, and good afternoon. Joining me today are Glaukos' Chairman and CEO, Tom Burns; President and COO, Joe Gilliam; and 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. 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 forward statements or guidance we may make. This document is designed to be read by investors before the regularly scheduled earnings call. As such, for this call, we will make brief prepared remarks and transition into a questions-and-answer session. (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 sales, products, pipeline technologies, U.S. and international commercialization, integration and market development efforts, the efficacy of our current and future products, our competitive market position, regulatory strategies and reimbursement for our products, financial condition and results of operations as well as the expected impact of the COVID-19 pandemic on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements. Review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investors section of our website at www.glaukos.com.

Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaukos' ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release available on the Investor Relations section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure.

With that, I will turn the call over to Glaukos Chairman and CEO, Tom Burns.

Okay. Thank you, Chris. Good afternoon to everyone, and thank you for joining us today. Today, Glaukos reported fourth quarter net sales of approximately $71.2 million and full year 2022 net sales of approximately $283 million. We are also introducing a 2023 net sales guidance range of $290 million to $295 million based on the latest foreign currency exchange rates. Alex will discuss our financial results and outlook in more detail later in the call.

Overall, I am proud of our performance this past year as our results exceeded our initial expectations and reflects solid execution across our glaucoma and corneal health franchises in the face of reimbursement headwinds and a challenging macroeconomic environment. I'd like to recognize the continued dedication and resiliency of our teams around the globe who remain steadfastly committed to their work.

Take a minute to highlight some of the key accomplishments we achieved in 2022: one, we showcased the resiliency of our U.S. glaucoma combo-cataract franchise in the face of significant reimbursement headwinds; two, we strengthened our core franchises with the U.S. commercial introduction of several novel ophthalmic technologies, including iAccess, iPRIME and iStent infinite; three, we continue to grow and expand our international glaucoma and corneal health businesses; four, we advanced our near-term pipeline, most notably with the positive iDose TR Phase III top line data that will be the basis for an imminent NDA submission; five, we progressed earlier-stage R&D programs with 2 Phase II iLution studies and other preclinical program developments; and finally, we expanded our global operations and infrastructure to support our long-term growth goals with the build-out of our new headquarter campus in Aliso Viejo, our corneal innovation center outside of Boston and our state-of-the-art hybrid pharmaceutical and manufacturing facility based in San Clemente.

Our achievements in 2022 leave us excited about our prospects and well positioned for the next phase of our pioneering journey as we sunset CMS-related combo-cataract headwinds and position the portfolio for sustainable top line growth beginning this year and the years ahead. From a commercial perspective in 2023, we will continue to execute our strategies that fueled the resiliency of our U.S. glaucoma combo-cataract franchise in 2022. Alongside our combo-cataract efforts, we anticipate advancing iPRIME and iStent infinite, the latter pending the establishment of MAC coverage and payment.

In parallel, we're investing in our founding mission at Glaukos, which is to transform glaucoma therapy by driving earlier treatment intervention for glaucoma disease progression, which, in turn, will greatly increase our stand-alone market opportunity over time.

While we are bullish on the long-term prospects for these efforts, we have remained prudent in our initial 2023 guidance as it remains early and revenue contributions in 2023 versus 2024 and beyond remain uncertain. Within our international glaucoma and corneal health franchises, we plan to continue developing these important businesses by driving deeper penetration, adoption and access for our MIGS and iLink technologies around the globe.

While we execute upon these commercial and market development strategies for our core franchises, we also continue to successfully invest in and advance our robust pipeline of novel promising platform technologies that we believe have the ability to significantly expand our addressable markets and fundamentally transform our company over time.

Starting with iDose. Our clinical and regulatory teams have made great progress preparing our NDA, and we are on track for submission this month. Earlier this year, we were delighted to announce results for the iDose TR exchange trial, which included a second administration of iDose TR and the removal of the original TR implant. With the second iDose TR demonstrating a favorable safety profile over a 12-month evaluation period.

Additionally, no subject in the exchange trial exhibit a greater than 30% endothelial cell loss over the extended evaluation period of more than 5 years on average. We look forward to including this data set, which will augment the powerful Phase III data results, in our upcoming NDA to support the safety and tolerability of redosing iDose patients over time. This further adds to our market-leading body of clinical evidence supporting the best-in-class benefit-to-risk calculus of our microinvasive technologies over other competitive alternatives. In addition to our NDA preparation for iDose, we are also already well underway with the team of cross-functional leaders across our commercial and market access organization in the preparation and planning of the iDose TR commercial launch targeted for next year.

Shifting gears, we also recently announced positive clinical updates for several of our corneal health pipeline programs. First, we commenced subject enrollment in the second Phase III confirmatory trial for Epioxa, our next-generation corneal cross-linking therapy for the treatment of keratoconus and are targeting enrollment completion by the end of this year. As we advance our clinical plans for Epioxa, we remain well positioned to serve keratoconus patients with our first-generation corneal cross-linking therapy, Photrexa or Epi-Off, which remains the only FDA-approved treatment shown to slow and halt progression of keratoconus.

Second, we announced promising initial results from the first-in-human Phase IIa clinical trial for GLK-301, our iLution dry eye disease program. GLK-301 is a sterile ophthalmic topical cream to be applied to the eyelids for the treatment of the signs and symptoms of dry eye disease. Based on these encouraging observations, we are planning to commence a Phase IIb trial for GLK-301 later this year.

We are also evaluating the Phase IIa data for GLK-302, our iLution presbyopia program, while we continue to closely monitor the evolving market conditions associated with available presbyopic therapies.

Finally, in addition to these pipeline developments, we are -- we also anticipate several additional pipeline milestones over the course of 2023, including a now open IND for iLution Travoprost, a first-in-human retinal trial and an IDE label expansion study for iStent infinite. As you can see, we have a lot to be excited about when it comes to the significant potential value that we believe our pipeline programs may create.

So in conclusion, our mission at Glaukos is to truly transform vision by pioneering novel Glaukos platforms that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight-threatening chronic eye diseases. Innovation is at the core of everything we do.

Our mantra We'll Go First embodies our commitment and determination to take chances, to push the limits of science and to disrupt the legacy treatment paradigms in glaucoma, corneal disorders and retinal diseases through our pursuit of game-changing technologies. I believe our foundation has never been stronger and our prospects never quite as promising. I'm confident we have the right people, strategy, infrastructure, pipeline and balance sheet to execute our plans and deliver on our future aspirations.

And so with that, I'll open the call to Alex to briefly discuss our forward outlook.

Thanks, Tom. I'll now make a few comments on the state of our markets and opportunity today and how we believe things are unfolding for 2023. First, our initial 2023 net sales guidance of $290 million to $295 million takes into account the continued estimated impact on U.S. glaucoma volumes related to professional fee reimbursement cuts for combination cataract trabecular bypass surgery versus other more invasive alternatives. While January 1 marked the anniversary of when these initial cuts became effective, not all physician behavior changed at once. Second, we continue to expect combo-cataract MIGS competition globally. And third, while pricing dynamics remain largely stable across each of our major business areas, as Tom mentioned earlier, our ability to successfully bring to market and commercialize our newer technologies and interventional glaucoma strategy more broadly remain in the early stages, and therefore, we have assumed relatively modest contributions at this point of the year. While we continue to be bullish on our newer technologies and their market opportunities over time, our assumption is for these products' contributions to be more weighted towards the second half of the year.

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

(Operator Instructions) We'll take our first question from Ryan Zimmerman with BTIG.

Wow. I'm honored to have first question. So I want to just ask a couple of questions, particularly on the guidance, I think the Street is going to be really focused on this coming out of tonight's call. We're looking for something, I think, meaningfully ahead of where you guys guided for '23. And I appreciate that not all physician behavior changed, Alex, and I appreciate those comments. But you are coming into this year with stable reimbursement dynamics, easy comps from the past year. And so how -- I guess 2 components to this question. How much of the physician customer base do you think you're through in terms of behavior change, right? I mean how much more pain does the glaucoma market have to go through with these reimbursement cuts in your view?

And I want to also hone in on competition because competition has been here for a while, but admittedly, it's obviously gotten more material with the introduction of Hydrus from a major competitive player with a very large sales force. So how much is that weighing on your minds as you're thinking about guidance tonight?

Brian, it's Joe. Maybe I'll start off there and appreciate the question. I think -- you said it somewhat fairly in that if you look back on 2022, in many ways, as Tom alluded to, it may have been one of our best years, right? You think about the CMS cut, the related headwinds from that, the investor and even really our own expectations entering the year to finish 2022 nearly flat to 2021 on a constant currency basis, really, I think, speaks to the strength of our products, our commercial organization and our sales team specifically.

But as proud as we are of our performance in 2022, it may not come as a significant surprise to you and others that we want to really want to walk before we run as it relates to setting expectations for 2023 given everything that we faced. As I think about the next layer of kind of your question, the context of the customer base and competitive dynamics, we do expect those CMS cut-related headwinds to slow down in the combo-cataract setting. Obviously, not all physician behavior does change at once, but the economic-based selling of those more invasive alternatives isn't necessarily going to go away. But we do expect that to slow considerably.

And candidly, you've seen some of that, even though in trends that we saw over the course of the second half of last year, where those impacts were stabilized and slowing as we lap that going into 2022, we do expect those to slow. I think as you unpack that further, it's still there. I think the competitive dynamics are intertwined in that.

I think it's less about necessarily the Hydrus dynamic that you're describing. That product's been on for a while. We're battling against Hydrus and Alcon every day. We have in the past. We are today. I think it's more about the more economically advantaged procedures that are out there that we've experienced had a tailwind over the course of 2022 related to CMS cuts and how that will sunset over the course of this year. And I think we're trying to take a cautious stance as it relates to that activity as we enter into 2023, even though we have a fair amount of confidence as it relates to how we stand over the medium and long term.

Okay. Just want to ask a follow-up to that and 2 parts again. One, do you expect then the market to shift to -- you're referring to these procedures that are economically advantageous. I assume you're referring to canaloplasty. But do you expect a bigger shift in the market to canaloplasty this year? And then the second component of my question is -- I lost my train of thought. But let me start with that, and I'll come back, I guess.

Ryan, we're not going to let you go first anymore. You've got 2 2-part questions.

I really dropped the ball in the first (inaudible).

No. So as it relates to -- I think I'll lump it together in the more invasive, first, canaloplasty, goniotomy, et cetera. I think there's 2 pieces there that I would call out. The first one is similar to what I just said. I think it doesn't really matter what that technology is. Obviously, the relative impact in 2023, we expect to be quite a bit less than what we experienced in 2022 as we sunset the sort of initial dynamics associated with the CMS cuts and the economic disparity that resulted as a part of those.

But the second piece is even as we're successful ourselves, that being Glaukos, in maintaining those customers potentially with other technologies, right, whether that be iPRIME or iAccess. They come at obviously a lower price point as you know. And so in some respects, you have to factor all those things in when you're thinking about the dynamics as it relates to Glaukos specifically entering into 2023.

Okay. And then I remembered the second part of my question. So I'm just going to squeeze it in here. Chris, I apologize. But what are the -- when you think about the split between corneal health and glaucoma in terms of your guide. I mean if I think about corneal health in kind of the low teens or maybe even high single digits growth, it implies glaucoma sales for this year, essentially flat. And we can kind of split hairs to exactly where that lands. But is that the way you're thinking about the components of growth from a contribution standpoint amongst your 2 business segments?

Thanks, Ryan. I'll save some of the broader color for others when they ask. But to the point of your question, I'd say we have expectations. A reasonable place to start to estimate the corneal health business is probably for high single-digit type growth. On the international side of glaucoma, we'd expect low double-digit type growth. And then obviously, you can do the math on what that means for the U.S. glaucoma franchise being in and around a flat business [over the course of] 2023.

All right. We'll take our next question from Tom Stephan with Stifel.

I think I'll start off with infinite actually. Tom or Joe, if you can talk a bit about the progress you've made with establishing the MAC pro fees to date and maybe expectations for the remainder of the year. We picked up a bit from some MACs, I think, coming in with pretty attractive rates already, but would love your thoughts on, again, how those efforts are progressing and what that could mean for 2023 and maybe even 2024 if we think out a bit.

Thanks, Tom. It's Joe. I'll start off, and if Tom wants to add some color, he can. I'd break the infinite MAC-related conversation down largely to 2 pieces. The first is just the overall coverage of the procedure. And as we've talked about for some time now, that tends to be a 6- to 9-month process. And what I can say there is we're on track, thus far, and we're making a lot of progress. But it's still early. And as you probably know, there's no statutory time lines that you can count on there. So we're working hard every day to try to deliver that -- those coverage policies as soon as practically possible.

I think as it relates to the pro fee component of that specifically, you're right. I think you referenced there's been 2, we'll call it, early data points that have been in the $1,000 range for the pro fee. But again, those are early, and they can change over time, as you know, whether it's as the coverage policies are opened or ultimately as volumes grow. So I think we're encouraged by those early data points, but there's a lot of game we play there.

Great. That's helpful. And then I think my second one would just be sort of back to guidance. Joe or Alex, how should we be thinking about 1H versus 2H seasonality this year, FX likely a tailwind come 2H? And then you have new products with infinite and I think iPRIME being greater contributors on that front. In 2019, I calced it, but I think 1H sales were around 48%. But in '21 and '22, it was closer to 50-50. So for the splits, as we build out our models, do we go back to those 2019 type levels of maybe a little less seasonality in 1H or is even more pronounced, where 2H is kind of greater than that 52%, 53% level?

Yes. Thanks, Tom. I think, obviously, in the last couple of years, the normal seasonality trends have been pretty disrupted by COVID and COVID-related dynamics. So as we enter 2023, I would expect and we would expect that we should get back to something a little more normal from an underlying market seasonality perspective. You referenced some of those numbers, but we've said this a lot of times on prior calls. I think, typically, the market runs something like 22% to 23% in the first quarter, 25% in the second and third, and there could be a little variability there and 27% to 28% in the fourth quarter.

I think for Glaukos specifically, our product cadence may play a bigger driver for us specifically than just that underlying market seasonality. And quite frankly, if you think about the year, it may amplify that seasonality a little bit given our expectations for the second half versus the first half with iStent infinite in particular.

And then, Tom, I'll address the FX question for you. So we've kind of looked at that as well. And we think, again, overall, we think the FX rates will be relatively neutral on our overall sales for the year. However, we do believe there will be a headwind to us in the first half and a modest tailwind in the second half.

We'll take our next question from Larry Biegelsen with Wells Fargo.

Just one follow-up on infinite, which is the 2 MACs that have come out with physician fees. They've been about $1,000, which is 2x the cataract procedure. So the question is do you expect that to stick. And do you expect other MACs to pay about the same? And just any update on the iPRIME supply issues? And I had one follow-up.

Thanks, Larry. I'll start off on that. I don't think I would hazard a specific guess as to where the individual MACs will come out on their pro fees. We've said for some time, obviously, this is a stand-alone procedure. And so when you look at the various stand-alone procedures that are out there, you framed one end in terms of the cataract surgery, and obviously, there are glaucoma surgeries that go even above where we've seen these 2 early data points come out. So I think there's a lot of room in there for discussion with the MACs. And clearly, we believe that the fair outcome there is towards the higher end of that range.

I think on -- you asked about iPRIME. We've now been commercial with that product since last May. And we've been working through growing pains and really optimizing our supply chain over time, and that continues. But we really like the product as a part of our portfolio and see a growing opportunity with our customers over time.

And for my follow-up, Tom, on iDose. I'm just curious how you think the ramp will compare to derisk at the same time postlaunch. They were approved during COVID. According to AbbVie, they did about $35 million in 2021. Do you think the ramp will be slower or faster? And any thoughts on how you're thinking about pricing relative to DURYSTA?

Yes, I'd be happy to address it, Larry. I think as I said before, we'll have to go through the normal mechanics of establishing the reimbursement for the product, and that means establishing a professional fee under the Category 3 designation. It will get assigned an APC. And soon after launch, we'll be filing for a HCPCS code, which normally takes about 6 months. And so I said from the beginning, that we'll look to the second half of 2024, is kind of where we'll really pick up traction and see this product receive, what I believe, will be a strong adoption.

I don't believe I would use DURYSTA as a predicate in terms of adoption. I think these are such invariably different products when you look across the board, how they compare, I think, in almost every category. I think most objective observers would say that the balance would be tipped to an iDose. And so I guess that would give you some means of comparison just by that basis.

What I would say on the pricing is what I've said all along. In this case, Allergan has done a service to the company by establishing what they believe is a fair price for a 4-month biorotable implant. And I think given the fact that you've seen our 3-year data, Larry, you amongst others will believe that, that would be the absolute floor of what we think we would be able to achieve in our HCPCS code in the marketplace.

Again, I caution all investors on doing any kind of proportional analysis with pricing. I can assure you that we're doing multiple pharmacoeconomic studies behind the scenes, including Markov transitional probability analysis, burden of illness analysis, direct cost analysis, things that we've done before, I think done quite well, and we'll be in quite a prominent position to establish a fair price following the launch of the product.

Our next question comes from George Sellers with Stephens Inc.

I guess maybe to start, there's clearly been some changes in terms of the operating expenses that you may be expecting this year with the additional confirmatory study of Epioxa and the associated expenses with iDose. So I'm just curious if you could some help on maybe the cadence through this year as you invest ahead of iDose and then also subsequent to that expected approval, the investment required as you start to commercialize that device.

You bet, George. Happy to do that. And actually, I'll take the advantage to give you a little more for all the models. So if you think about 2023 and what to kind of model and think about in terms of OpEx and kind of the overall P&L, we've already talked about revenues. If you think about our margin, our margin profile should continue in the same 83% to 84% range that we've done historically. So you should feel confident to continue with that part of the model.

And then for operating expenses, the way I would guide you to think about that is if you take our normalized 2022 operating expenses, which, when I say normalized means pull out the $10 million IP R&D that was kind of the -- under the old rules, we would have excluded it anyways. And that leaves you with about a $313 million total operating expenses in 2022. And just assume about a 10% growth, and you'll be in the ballpark.

And then lastly, I'll just mention it right now while I've got you on the phone. If you think about CapEx for next year, we posted $30 million of CapEx in 2022. That number should come in a bit in 2023. It's probably going to come in around the range of $20 million. And that should help you as you model for next year.

Okay. Very helpful. And then maybe just as a quick follow-up. Turning back to the guidance a little bit. Is there any additional color you could give us on what that assumes in terms of contribution from the additional devices of iAccess, iPRIME and iStent infinite this year?

Yes. Thanks, George. It's Joe. We really haven't gotten that granular with respect to individual product contributions to the -- any one of our franchises, in particular, the U.S. glaucoma business. But I think it's fair to say a relatively modest contribution that grows over the course of 2023 and all the factors you can imagine that drive that. But in particular, it's really driven by iStent infinite and turning on those MACs.

Our next question comes from Margaret Kaczor with William Blair.

I wanted to follow up first on iDose. You referenced it a little bit, but maybe we can go a little deeper. Once it's commercialized, I guess, are you assuming that it's going to coexist with something like a DURYSTA? Or is it kind of a different patient profile -- for different patient profiles? Are they going to compete with each other? And then given the 505(b)(2) designation, do you expect, I guess, most surgeons to start off in the combo-cataract setting or eventually stand alone as they get more comfortable or maybe accelerate the stand-alone market?

Yes, Margaret, I'll be happy to answer it. So first of all, I think the patient demographics and the people that we'll be seeking to target the patient candidates will be similar to what DURYSTA is currently advocating. I do believe that we'll have some pronounced advantages entering the marketplace that I've talked about before. I think, again, any objective observation and with your channel checks, you'll find that as well.

I think when we do launch this product, I think we'll see some classic adoption. I think there will be a strong movement towards the use of this in combination with cataract surgery. I think it's a natural to be able to be able to place this in combination with cataract surgery, either alone or even perhaps in combination with a product like iStent if and where the surgeons deem medically necessary.

But I do believe that there will be a parallel adoption in the stand-alone marketplace. And as I said before, what we'll see typically is kind of a Pac-Man approach where people will look at being able to reduce drug burden in patients who are on multiple medications. They'll look for patients who are noncompliant to begin with as areas that they'll target to be able to provide a 24/7 option and a compelling treatment option for the treatment of glaucoma.

We'll look for patients that have underlying ocular surface disease. There's a huge comorbidity between ocular surface disease and glaucoma. And the last thing surgeons want to do or clinicians want to do is to exacerbate the condition by continuing to dose multiple preserved glaucoma drops on the surface of the eye.

We'll also see surgeons that will want to just reduce drug burden. Every time we can reduce drug burden from 3 to 2 or 2 to 1 medications or to make them medication free, we substantially increase the rate of compliance in those patients, which then leads to better IOP control and the arresting of glaucoma moving forward.

I suspect we'll see surgeons on the stand-alone side first. They'll want to look for pseudophakic patients. Those are patients that have already undergone a cataract surgery, and they'll want to be able to get their sea legs there first. And once they do -- and many will start there and then move quite quickly into phakic patients and in these patient groups that they believe we can have a superior or potentially superior treatment alternative.

Okay. That's very helpful. And then just a bigger picture macro question. We talked about the guidance and kind of the puts and takes there. But I don't recall you talking about staffing. So anything that you guys are seeing here recently? Are we in a more normalized environment now in '23? Or is it still a headwind?

No, Margaret, I think it's still very much a dynamic that's in play, right? And I think it's in probably our quarterly summary document there. We may not have referenced it in the prepared remarks. But throughout the practices, I think ophthalmology is not immune to what you're hearing probably from other folks in the health care industry, hospital staffing, administrator staffing across both ASC and the hospital setting, remains a challenge, both in terms of finding those folks as well as retaining them and not experience a turnover.

You think about the expertise that's required to successfully operate in an ASC or hospital and that turnover slows them down. So I think relative to what we've been through with COVID, we all feel much better going into 2023, but that dynamic absolutely remains.

We'll take our next question from Joanne Wuensch with Citigroup.

This is actually [Anthony] on for Joanne. First one I have is quick. Just are there any details you could provide on the IDE trial for infinite that's extending the label size? And like follow up, any details? And then I just had a follow-up after.

Sorry, the first question you had was on the infinite IDE, the expansion trial and that. Do you want to cover that, Tom?

Yes, I'll be happy to cover that. So what we're going to be looking to do is, in fact, we're planning on a meeting with the FDA in short order, and that will be to develop a treatment protocol under an IDE where we'll be able to expand the labeling claims of iStent infinite, which you know right now is labeled for adult patients who have failed on medical and surgical therapy. And we'll look to move to our earlier in the interventional treatment algorithm to patients with mild to moderate open-angle glaucoma.

So we have already prepared our approach to the FDA. We'll be meeting with them shortly, and we'll be looking to begin that trial later this year. I should mention, just to look at the kind of the prowess of our portfolio, I think it's important that I mention that just this year alone, not only we'll be looking at an iStent infinite mild to moderate IDE opening. We'll be moving forward with iLution with Travoprost. As you know, we have an open IND there. We'll be meeting with the FDA to open an IDE up for the PreserFlo device now that we've taken full command of the regulatory and clinical strategy for -- from Santen.

We'll be moving forward with the Phase IIb trial of the iLution dry eye product based on the significantly powerful and early results we achieved in the early Phase II design. We'll be moving forward with a Phase I design with our axitinib retinal program. And so there is so much under the hood here, so many good things going on, and we're going to start to see some of the fruit from this labor up here certainly during this planning period.

Great. That's helpful. And then just on corneal health in the quarter, came in stronger than we were modeling. I know last quarter, you called out some reimbursement headwinds. Can you just talk about maybe what drove that strength in the quarter and if reimbursement has improved?

Yes. I think we've talked about this for some time in the corneal health business in the U.S. in particular, where we had seen increasing volatility in the commercial payer landscape. And obviously, whenever you see that, customers tend to react and be a bit more conservative as they think about treating patients under these various plans.

So around the middle part of last year, we started to really put a lot more muscle into our payer relations effort and other investments in our market access organization that we talked about. And I think we've seen good early returns on those investments. And I think you saw that in the fourth quarter as we were exiting the year. It was a strong quarter, north of $18 million in sales, and I think record Photrexa sales of a little north of $15 million. So we were encouraged. It's still early as we deploy these efforts and the investments we've been making, but we were certainly encouraged by the results in the quarter.

And we'll take our next question from Matthew O'Brien with Piper Sandler.

This is Phil on for Matt. For starters, just on guidance, and I don't want to beat a dead horse or anything, but can you give your puts and takes from only including modest contributions from new products, and that's namely iStent infinite. I think in the past, you've expected to garner reimbursement through the first half of this year. But has securing PFS coverage and payments been a slower process than you had previously thought?

Well, yes, I could cover the infinite component when you talked about the broader questions on guidance, whatever you've got. I think as I said earlier, we've said for a while, this is a 6- to 9-month process. There really is no statutory time line that you can rely on. We can only rely on our experience historically with the products that we brought through the MAC process.

And so far, we're on track. We're making good progress, but it's still early in that process. And so we've talked about something that is in the midyear Q2, Q3 type time frame in terms of starting to really lock down the coverage there. And I hope we continue to be on track for that, which, as I said, as it relates to our guidance, sets us up to a more second half weighted performance, particularly out of iStent infinite and what it means for our U.S. glaucoma franchise.

Great. Great. And then just for my last one for iDose, do you still expect a 10-month time line here from when you've submitted to approval? Or could that approval, what I'm really getting at, could that approval kind of bleed into 2024 here. And I know it might be a bit too early to ask this as well, but the target label being so broad, so how should we think about that initial adoption? I think you're really targeting, what, early-stage ocular hypertension to late-stage disease. So how should we think about that initially?

Let me take the first part of your question first -- or second part first. The label is under the 505(b)(2) designation. It will be for the reduction of intraocular pressure in ocular hypertension and open-angle glaucoma. So the label is invariably wide, which we love for several reasons. It will allow us to segment the market and to target in a sophisticated way where we think we can achieve the earliest and best adoption for patients.

In terms of the filing for the NDA, we will be filing our NDA, as I said, imminently. It will happen this month. And typically, what the FDA will do is establish a PDUFA filing date, a statutory date in which they commit to finish the approval process for the FDA approval of your product. And we are targeting that approval, continue to target that to be before the end of the year. And things always change and move into 2024, clearly, that's always a possibility, but it's not one that we believe will happen.

We'll take our next question from David Saxon with Needham & Company.

Maybe I'll start with glaucoma. I mean, last year, you obviously lost a lot of share to canaloplasty and goniotomy cases. So I just wanted to ask how you're thinking about the opportunity to recapture that share given iAccess and iPRIME continue to ramp in the back half. Are there any reasons why docs you lost wouldn't come back to the platform, especially now that you have more products in the bag?

Yes. I mean as I said earlier, I think when we look back on this year, it's hard not to be proud of how things turned out relative to expectations as we were entering it. And as I said, I think it really speaks to the strength of our products and our commercial organization. I think those same things hopefully will benefit us as we continue on our journey here in 2023 and we continue to add more access to these products through iStent infinite and really providing what we think are best-in-class alternatives to customers that have been our customers for a long time. And so I think that, ultimately, we stand to benefit from that and the impact of that, we'll see not just in 2023 but hopefully 2024 and beyond.

Okay. Great. And then, I mean, we've heard some larger companies talk about a large cataract backlog, which I imagine you'd benefit from. So just wanted to hear your view on that. And maybe what's assumed in guidance in terms of potentially seeing above-normal mixed market growth in '23?

Yes. Well, it's always hard to predict how those things play out, when they play out, how much of that impact that has in any given quarter or a period of time. I think a lot of that ties back to the question that we received earlier around staffing and some of the constraints there. So we've certainly seen amongst a pretty large group of the practices that their backlog or their time of scheduling of procedures has continued to extend out. And a lot of that's because of staffing constraints, right?

So as they tried to get back to more normalized schedules, in many cases, staff turnover or lack of administrator or OR staff can slow them down and so they schedule out a little bit further. So I think it's certainly a potential tailwind. Exactly when that plays out to the marketplace is a little harder to predict.

Our next question comes from Steven Lichtman with Oppenheimer.

This is [Ron] on for Steve. Just wanted to ask if you guys are looking for any incremental headwinds from the last physician fee schedule reimburse cuts and staffing. I know you already gave some colors about that. But how are you thinking about that in terms of '23 guidance? And then I have a follow-up if that's okay.

Yes. I mean I think the question you're asking is largely centered around the U.S. glaucoma franchise. And I think we've tried to factor in pretty much all the dynamics, our expectations around any continued headwinds associated with the CMS pro fee cuts, staffing considerations, our new product launches and additional coverage and reimbursement for some of those.

So I think all those things are really wrapped into our expectations. I will repeat one thing I said earlier, which is that given all that we've been through and kind of what we see in front of us, we've taken a conscious effort here to try to really walk before we run as it relates to setting those expectations for 2023.

Okay. And if I can just follow up hopefully not exactly what people asked before but around the corneal health business, you guys have been -- it's been growing steadily for a while, and it's been really, really great. Just how are you guys looking at that in the future, looking at that taking maybe a much bigger chunk of your business? And how are you thinking about the second trial that's going on, the repeat trial for Epi-On? And what are your expectations for it in terms of how it's going with enrollment and when you finish it up?

Sure, [Ron]. I'll start off that. If Tom wants to add, he can. I think as we think about 2023 specifically in the corneal health franchise, it's reasonable to estimate high single-digit type growth for now. We talked earlier in the call about some of the investments we've been making and some of the early return we've been seeing on that certainly in the fourth quarter. And I think that should continue to benefit us in the coming year.

It probably will likely be offset a little bit in the short term by enhancements that we've been making to our co-pay assistance program, which is a gross to net adjustment and the diversion of some of our patients into that Epioxa trial that you've asked about. And as I think Tom said earlier and we've been pretty clear, we're now fully into that process of enrolling patients for the Epioxa clinical trial that's underway.

I think that's the only comment I'd make, is we found out from the FDA that they would require the second clinical study. I think it was in the late October time frame, and we moved heaven and earth. And we already began enrolling patients beginning in January. We have over a couple of dozen sites already committed and enrolling and looking at getting 40 up and running in short order. And we're moving to have this fully enrolled by the end of the year. And if we do the math from there, we'll look to target having a commercially approvable product in the U.S. by the end of 2025.

We'll take our next question from Allen Gong with JPMorgan.

I just had a quick one. I think a lot of the more pressing questions have been asked. But when I think about 2023 and beyond, Joe, you've definitely been putting a lot more emphasis on iStent infinite. When it comes to iAccess and iPRIME, the former, which is already contributing at least a little bit, why shouldn't we be expecting to see more contribution from those products in 2023, especially in the success we've seen from kind of similar products in the category?

Yes. I mean we've seen contribution from both iPRIME and iAccess, right, both in 2022 and as we move forward here in 2023, and I think each will continue to grow as the year goes on. I think it's just that, at this stage of the game, we don't want to get too ahead of ourselves as it relates to the trends and dynamics there as they go forward. But we do certainly feel confident that the portfolio of alternatives that we've got will serve us well as we make our way through 2023 and go into 2024 and beyond.

Sorry, just to slip in a quick follow-up. I'm sure you're tired of hearing about it, but the reimbursement landscape has continued to have a bit of noise here, especially when it comes to the more invasive techniques. Do you have any thoughts on that, how it may be impacting your competition and how it could impact your own portfolio going forwards?

I think we've been on the record for I don't know how long now, saying that there was going to be a lot of moving parts as it relates to the reimbursement landscape and whether that was obviously part of it with our own trabecular bypass codes going through the category 1 conversion or some of the evolution that's been happening with respect to whether it's canaloplasty or whether it's goniotomy or all the various alternatives in between.

I think that the reimbursement landscape and payers generally are continuing to refine their own algorithms around what they think is supportable from a reimbursement standpoint. When I look at it from our standpoint, that's the benefit of having the portfolio. And so we have all of the tools that are available to these surgeons, and depending upon the individual MAC or payer or hopefully, most importantly, the patient need, we have a solution that hopefully can meet those -- that patient's algorithm -- or the surgeon's algorithm.

All right. We'll move on to our next question from Anthony Petrone with Mizuho Group.

I'll start with a question on infinite and then a follow-up on iDose. And infinite, maybe just curious how we should think about stand-alone versus combo-cataract playing out over time. And certainly, if you -- if we do secure physician fees similar -- in line with where the first 2 MACs have come in, should we assume that combo-cataract dramatically gets cannibalized over the next few years in favor of stand alone? And would that actually improve your pricing? And then I'll have a follow-up on iDose.

Yes. Anthony, I don't know that, that is really a trend that I would call out as a significant one going forward. The expectations, at least for us, is that if a patient is being treated for cataract and they're como with glaucoma, the surgeon is much more likely still to treat both at the same time, handle that patient in one visit versus decoupling it, which I think is partially what you were suggesting may occur. There may be some of that, but I don't think that's really the primary trend that I would call out.

What I think we're more focused on with iStent infinite is really something you've heard Tom talk a lot about, which is since the founding of our company, the idea that we can truly drive interventional glaucoma mindset and start treating these patients in a stand-alone manner irregardless or irrespective of whether they've got cataracts or not. And that's where our focus is at, is providing what we think is a terrific solution for these surgeons to really intervene on behalf of the patients.

That's helpful. And then on iDose, should we expect an AdCom panel perhaps ahead of the PDUFA date? And when we think ahead to reimbursement, we look at DURYSTA. They have a direct physician office reimbursement channel, but they also leverage specialty pharmacy. So should we expect the same for iDose?

I think with reimbursement, I think you've seen how we handle these issues in the past. We have a comprehensive approach. We've got a really strong payer group and market access group that's available. I think you all know that this is going to be a buy-and-bill procedure in the marketplace. And you can expect that we'll have both options available for practices to purchase this and buy and bill directly or to go through specialty pharma. So we've already thought through those machinations. We'll have a full sophisticated plan up and ready, available to launch, and we expect again to have a very meaningful launch beginning truly again in the second half of 2024.

And then maybe on the AdCom, do you think you expect an advisory committee meeting?

I do not.

And that concludes the question-and-answer session. I'd like to turn the call back over to the company for any additional or closing remarks.

Okay. Well, want to thank you all for your time and attention today and for your continued support of Glaukos. We thank you for your interest, and wish you a good day. Thanks, and goodbye.

And that does conclude today's presentation. Thank you for your participation, and you may now disconnect.