Glaukos Corp (GKOS) 2024 Q2 法說會逐字稿

Hello, and welcome to Glauko's Corporation's second-quarter 2024 financial results conference call. A copy of the company's press release and quarterly summary documents, both issued after the market close today are available at www.glaukos.com. (Operator instructions) To note this call is being recorded and an archived replay will be available online in 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.

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 & Filings Quarterly Results section titled Quarterly summary. This document is designed to provide the investment community with a summarize in 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 quarterly conference call. As such, for this call, we will make brief prepared remarks and transitioned into a question and answer 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. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our sales, products, pipeline technologies and clinical trials, US 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, as well as the expected impact of general macroeconomic conditions, including foreign currency fluctuations 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. Reviewed today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investor Relations 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 reconciliation of these measures to the most directly comparable GAAP financial measures.

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

All right. Thanks, Chris. Good afternoon and thank you all for joining us. Today, Glaukos reported record second quarter consolidated net sales of $95.7 million, up 19% on a reported basis and 20% on a constant currency basis versus the year ago quarter. As a result of our strong performance, we are raising our full year 2024 net sales guidance range to $370 to $376 million versus $357 to $365 million previously.

Our second quarter record results were broad-based, with growth being driven by both our US and international glaucoma franchises, where we continue to accelerate efforts to expand access to interventional glaucoma tools for the benefit of physicians and patients.

Our goal to advance and improve our glaucoma care by driving earlier intervention continues to build momentum as we lead and work closely with surgeons and thought leaders globally to organically drive this broader evolution in the standard of care.

Within our US glaucoma franchise, we delivered record second quarter sales of $49.8 million and strong year-over-year growth of 26%, driven once again by strong growth within our overall iStent portfolio, led by iStent along with early, but growing contributions from iDose TR. Utilization of iStent infinite for glaucoma patients that have failed medical and surgical therapy continues to expand as our ongoing clinical education efforts and improving market access landscape takes hold.

Importantly, during the second quarter, five of the seven MACs issued draft MIGS LCDs that established coverage for iStent infinite that's consistent with our original reconsideration request. We have actively supported industry efforts to encourage areas of improvement in these draft LCDs and look forward to their finalization as we expect, it will be an important step in unlocking the remaining Medicare Advantage and commercial plan coverage, price and Infinity.

Turning to iDose TR, I'm 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 drug therapy for up to three years. Outcomes and feedback from early cases continue to be very positive and reaffirms our view that with the launch of iDose TR.

We are pioneering our brand new therapeutic category that has the potential to reshape glaucoma management as we know today. During the quarter, we successfully expanded access of iDose TR to all of our sales field personnel while continuing to target those surges facilities comfortable utilizing a miscellaneous drug covered.

In addition to our commercial efforts, the launch has been supported by a growing set of clinical literature, now consisting of seven different peer-review publications, highlighting iDose TR as a transformative new treatment alternative for patients suffering with glaucoma and ocular hypertension.

As you know, here a key element to the stage gating of our iDose TR commercial launch is market access. As scheduled unique permanent J-code for iDose TR, J7355 became effective earlier this month by July first, 2024. This now effective J code is expected to increase patient access and will allow us to expand training plans to future waves of surgeons and facilities.

We're also advancing efforts to secure professional fee coverage and payment with [banks] as well as established commercial and Medicare Advantage coverage, now the permanent J-code is effective. As noted in the past, we expect increasing adoption as reimbursement confidence gained by our customers over the remainder of 2024 and more specifically in the fourth quarter quarter heading into 2025.

Earlier this month, CMS issued their proposed 2025 facility fee and professional fee rules that has drafted largely maintained in 2024 reimbursement assignments and rates associated with our procedures. Finally, as promised, we have now engaged the FDA in a formal regulatory dialogue regarding the agreement illustration of iDose TR and beyond that remain on track to commence the Phase three clinical trial for iDose TREX, our next generation high-dose therapy by the end of 2024.

Moving on, our international glaucoma franchise delivered record sales of $26.1 million on a year-over-year growth of 17% on a reported basis, and 21% on a constant currency basis. The strong growth was once again broad-based as we continue to scale our international infrastructure and execute our plans to drive mix forward as the standard of care in each region and major market in the world.

During the quarter, we also finalized a new French CEPS agreement that provides for adjusted rebate tiers and successfully expanded the addressable patient population to reflect the growing adoption of iStent inject W in France. The net effect of this new agreement was favorable to our second quarter reported revenues and is expected to remain a tailwind for the remainder of 2024.

While we remain in the early stages of expanding our [IG] initiatives globally, our efforts are progressing well, evidenced by several recent international regulatory approvals, including for iStent inject W in China and stand-alone usage indication price that inject W in Japan, alongside the approvals of both iStent infinite and PreserFlo in Brazil earlier this year.

And finally, our Cornea Health franchise delivered sales of $19.8 million on 7% year-over-year growth, including Photrexa sales of $16.7 million. As discussed last quarter, our second quarter results reflect the impact of Photrexa realized revenues as a result of our entry as a company into MDRP.

Shifting gears, we continue to prudently invest in and successfully advance our pipeline of novel promising platform technologies that we believe have the ability to significantly expand addressable markets and fundamentally transform our company over time. This includes Epioxa, our next-generation cornea cross-linking therapy for which we continue to progress towards data readout in the second half of this year for the second Phase three pivotal study supporting our NDA submission that remains on target for the end of 2024.

Beyond Epioxa we also continue to make encouraging progress across our robust portfolio of clinical and preclinical programs focused in the areas of glaucoma, retina and rare disease, where our milestone targets and associated time lines remain on track and unchanged versus previous disclosures.

We remain excited about the significant potential value that we believe our pipeline programs may create. At the same time, as we've discussed, we continue to prioritize 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. On that front, during the second quarter, we opportunistically executed the transaction to exchange $230 million in principal amount or 80% of our convertible senior notes due 2027 for common stock, helping to further solidify our already strong capital position through deleveraging and de-risking of our balance sheet as well as significant reduction in future cash interest expense.

This convert originally issued in June 2020 during the height of the pandemic, has proved to be a beneficial financial instrument that provide us with the financial flexibility to continue investing in our pipeline through COVID and other reimbursement related uncertainties.

In conclusion, I'm pleased with the strong commercial development execution of our teams that demonstrated so far this year. We look forward to continue to build upon the growing momentum in our business over the course of the coming quarters and years. Our foundation is strong. And we are ideally positioned to continue transforming vision for the benefit of patients worldwide.

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

Tom Stephan, Stifel.

Great. Hey, guys. Thanks for the questions and congrats on a nice quarter. Maybe I'll start with iDose. Any comments on 2Q '24 sales contribution or instead maybe any color on the base is growth in US glaucoma, if you prefer to give that? And then if you could also comment on 3Q trends you're seeing with the J-code now in place, that would be fantastic.

Thanks, Tom, and thanks for the comments. It's not even a softball more about before we dive into iDose questions, but I'm happ to start there and that we can take it further as you guys deem.

I'll start with the overall US glaucoma performance. Obviously, Tom alluded to the strength there with growth once again, accelerating in the second quarter to 26% on a year-over-year basis. And that was driven both by mid teens growth yet again from our iStent portfolio and infinite stand-alone utilization in particular alongside better than expected contributions from iDose TR.

As I think the second part of your question, as we think about the third quarter with the J-code in place and now we've kind of worked our way through the first month of that. I think it's important to say, I mean, obviously, we continue to be positive about the progress we're making with our US launch in general, a ton of which happened in the second quarter. We make our way through July that continues.

In some respects, Q3, as we've said along, it's a bit of a I'll call it a reset moment as you get the J-code in place. And on the positive side, you'll have some accounts where their administration will now allow those first pieces once the J code has been established entering the quarter.

Frequently, though you also need to see that get billed and hopefully see reimbursement working before you're fully open that up and those same dynamics hold true for many of the accounts that did their first procedures on this latest code during the second quarter. So I think as we make our way through here, you hope to continue knocking down those hurdles and really see that momentum build from where we were at certainly in the first half of the year.

Got it. That's great. So just as a quick follow-up, if I dial in maybe 16%, 17% growth in the core US glaucoma business, I'm arriving at around, call it, $9 million of iDoses. Is that fair?

And then my follow-up would just be on profitability for breakeven on a cash flow basis is at some point in 2025 for total company, maybe a reasonable target as we think about high-dose accretion, really starting to take hold in a more meaningful way. Thanks for taking the questions.

Yes. Thanks, Tom. I'll start and then I'll turn it over to Alex for the profitability side of that. I don't think the math that you did there, I know you're trying to do it on the fly as we're doing that guys. I don't think the math quite shakes out that way. So you can redo that.

I am not going to comment and endorse specific number on it other than just to reiterate what we said when you kind of look at the overall growth profile of the business driven by mid-teens growth of the iStent portfolio and the rest being larger than expected contribution from iDose. Alex do you want to talk about profitability?

Yes. On profitability, Tom. It's obviously a great question and top of mind. And so as we look forward, we've always said that the company we look at profitability and on the other side of iDose, we're getting there. And to your point, you've talked about 2025, and that's going to be a key year for us and as far as iDose ramps up.

Our goal internally to be quite frank is to get back to a place where we are getting to cash flow breakeven and then starting to generate cash as opposed to having to focus on profitability in the near term. As Tom mentioned in his opening remarks, we've got a rich pipeline. There's a lot of value there. There's lots of investments to be made, but we really would like to get back to cash flow breakeven and then start to build up that cash flow over time. And I do think in 2025, we should start to see some of that occur.

Got it. Okay.

Larry Biegelsen, Wells Fargo.

Hey, good afternoon, thanks for taking the question and congrats on a nice quarter here. Joe, if I look at the midpoint of the guidance range, it appears the growth rates are pretty similar in the first half and second half. Why wouldn't growth be higher in the second half, given the ramp of iDose ?And I guess is your commentary on the J-code earlier, the iDose sales you're not expecting to go up sequentially in Q3?Thanks.

Yes. Thanks Larry. A couple of things to unpack there as it relates to the guidance and the seasonality. I mean, obviously, as you alluded to, we're super pleased with how the first half of 2024 shaped up. And then we were able to raise our full year guidance by even more than the Q2 outperformance.

As you look to translate that into, I'll call it our growing momentum into the second half. I want to point to a couple of key things. The first, the normal considerations around Q3 seasonality, which I'm happy to elaborate on more and FX headwinds that we called out as a part of our press release. You are also fairly aware of the continued impact of the MDRP is a headwind to our Corneal franchise with the most significant of that impact likely expected in the fourth quarter.

When you think about iDose TR and the growing focus on our commercialization there, we want to be a little bit cautious that as we clear the expected market access headwinds and hurdles, if you will. It may dampen some of the performance we've seen out of the iStent portfolio in the first half as our sales organization leads further and further into obviously the iDose launch.

And the last thing really is kind of what I alluded to with Tom's question, which is the third quarter being a bit of a J-code transition quarter. It's really hard to pinpoint in such a small and precise period of time, Larry, when you're in a launch like this. The reality is that the sooner some of these things start to play their way through from a payment standpoint on the J-code.

In the quarter, we will include more benefit in this quarter, but it's hard to nail that down in the context of such a precise period of time. All I can really say is that as we look at the overall launch thus far, we're increasingly confident in where we're headed with this product and what it's going to mean certainly as we get into the fourth quarter and translate that into 2025 and beyond.

That's helpful. I hate to do this, but a math question, Joe, another way of looking at it. US glaucoma sales were up about $4 to $5 million sequentially in Q2 last year and the year before, this year, US glaucoma sales are up about $8 million sequentially. Should we just assume the difference this year versus prior years is primarily iDose or roughly $3 to $4 million sequential increase in iDose? Thanks for taking the question.

Yes, sure. I mean, I think there's a handful of ways that you can try to back into this specific number that's there. I think that where you're headed on that is probably closer to reality than I think the early math that was suggested before.

But most importantly is that we made significant progress in the second quarter with iDose. And tha's while having obviously the position of miscellaneous C-code in that environment there. So again, that combined with the continued clinical feedback that we've been receiving, really drives that confidence we've got and how that translated into an increased guidance that we gave today.

Thanks for taking the question.

Alright.

Ryan Zimmerman, BTIG.

Hey, guys. I'll keep the fast balls go and then not give any softball there. So Tom, I want to ask about your conversations, your early feedback on the re-administration potential with iDose. Do you know, at this point whether you needed a trial for that kind of where do they stand on your existing data? It did include obviously re-administration. Anything that you can kind of share with us at this point that maybe sense of your outlook on that potential?

Yes, I'd be happy that, Ryan. So as you know, we've talked about we've submitted the reconsideration request. We will begin an active dialogue with the FDA, which I presume will be over the next several months. They don't have a statutory obligation to respond to us in a specific period of time. And so they're not bound by typical in positions that we may go back and forth as we look at this over time.

I think as I talked about before, it was kind of a late stage in our mind, the decision by the FDA to restrict this to a single administration. So we didn't have the opportunity to make the full sum case at the tail end of the NDA adjudication prior to our successful approval. So now we have that opportunity. So the short answer is no, we don't need any additional clinical trial information or clinical trial performance to be done.

I think what we need to do and what we are doing is presenting the narrative of a compelling case, given the data that we've already been able to up to outperform and have available, and I think we have a strong case. Having said that, we know that the over conservatism of the FDA, we suspect drew the initial decision.

So I have been conversing in both investors, analysts to let's not get over our skis here. We're hopeful we be able to make progress, but we're not counting on. So we'll make every successful effort to apply for re-administration of the iDose device.

And what I've said before and I believe is that we have a belt and suspenders approach here. If we're successful moving forward with iDose TREX, which we're on track to begin the clinical trials by the end of the year. If you do the chronology, I suspect we'll be in a position to become a de facto device and procedural pharmaceutical re-administration component for those patients that have served the full term of their initial iDose device.

So I like where we're at. I like how we're approaching this. I think we will make a strong case. And then we'll see. I mean, I clearly will keep both you and the investment community informed once I have received a final decision from the FDA.

Okay. And then my second question is just around what you're seeing today with adoption of iDose. And what I want to understand is, are you seeing competitive switches from [Turista]? Are you seeing the adoption of iDose either before drops, after drops, before SLT? Can you just kind of talk about where iDose is shaping up in kind of that treatment paradigm. Thank you for taking the question.

Yes, Ryan, I'll start and Tom may want to add color on this, too. From our standpoint, I think a little bit early to be making grand calls around exactly when and where it's being adopted it. But I'll comment a little bit on where we expected to be adopted in. And from that standpoint, when you think about the labels that exists with iDose, we would expect that to be a early option for intervention in stand-alone patients regardless of their disease severity going forward.

And to your point, I think each surgeon will have a different view on the algorithm which they deploy it. Some will likely follow SLT, some will follow (inaudible), some will put it in front of that. But I think in general, what you're seeing with the overall interventional glaucoma shift is a mindset towards more proactive therapy for these patients and not relying on disease progression following years of increasing drop therapy. And I think all parties will benefit from that in particular iDose TR and Glaukos.

Thanks, guys.

Matthew O'Brien, Piper Sandler.

Hey, this is Phil on for Matt. Thanks for taking our questions and congrats on the record quarter. Just for starters, I think Q1 saw 15 total implanting surgeons with about six weeks total of rollout. Any update on the implanting surgeon base in Q2.

And just to keep the quick math train rolling here, I think we triangulated about just under one iDose per surgeon per week in Q1. Is that the right way to think about things and especially in Q2?

Yes. So I think, Phil, what I would say there is that as we, pretty much everything with the launch has gone exactly as we planned and exactly as we told you we intended to execute. Of course, anything can happen, but so far, so good from that standpoint. Across the board on the market access related items, we've seen that facility be turn obviously in Q2, the J-code in Q3, we're making professional fee progress. We saw the first of which to the schedules in the Noridian region come out this past quarter. So the wheels of progress can be to grind on each of those fronts.

As you think about it from a commercial sales standpoint, we opened up our early access program is what you were referencing when we had a plan sort of launch with the top 10 to 15 surgeons in the first quarter. We've opened that up to our entire US glaucoma sales force in the second quarter, as you heard Tom reference.

And we saw a lot of progress as a part of that as referenced or as seen in our evidenced by our early results, you still have the headwind of practices that are comfortable with the gymnastics required with executing in the miscellaneous drug code and so I wouldn't underestimate that. And I just think that taking a step beyond that in the context of how many surgeons have been trained and the average procedures per week and I guess it's a little premature for that. That's something that we'll start to get a much better handle on the trending of and decide how we communicate with that to you all as we kind of make our way through the year and start getting into 2025.

Makes sense. Thank you. And then just my follow up on iDose. As the excitement grows beyond it, call it, friends and family and the broader glaucoma, Glaukos user base. Any competitive mix switches pulled over by iDose adoption from competitors and thoughts on maybe a core spend halo effects that you might see as iDose adoption grows?

Yes. I mean, I think that in general, we've invested an awful lot of capital and time to generate exceptional amount of data that surrounds all of our products. And whether that be the legacy iStent, iStent inject in combination with cataract or iStent infinite, now iDose, I think the totality of that portfolio is pretty compelling to practices.

They think about the evolution of their care for these patients. And I certainly hope that we're benefiting from that. And as you referenced the sort of halo effect, the ability to treat patients first and foremost with iDose and ultimately as the disease progresses with iStent infinite is a pretty compelling value proposition that I think we're just now beginning to capitalize on.

Thanks so much.

Allen Gong, JPMorgan.

Hi, this is actually Rohan on for Alan. Thanks for taking our question. I was hoping that you could elaborate a bit more on what you meant by a reset in third quarter. Obviously, I understand the J-code transition, but in light of that, when do you kind of expect to get to a full launch for iDose? And what are kind of expectations around run rate exiting 2024 and into 2025?

Yes. It's Joe. I think first, I'll start to elaboration on it. I think a launch like this, there's rarely a single black and white event that creates the unlocking. I think the J-code, as we've always alluded is an important component of that. I think as you get into fourth quarter and you have the J-code with the published ASP, that's an important component of that.

As the pro fees continue to be established and become more solidified, that's an important component of that. And I think as you continue to move forward, quite frankly, as I said earlier, we're going to have more accounts, I think start to open up we've already seen that where they're just more comfortable operating the J-code environment than a C-code.

But they are still going to want to see a payment or two before they really allow the surgeons to run and do what they want clinically. So you have to kind of overcome that first basic hurdle and established reimbursement confidence, whether that's through the payment of the miscellaneous C-code, and those claims are outstanding or is the payment of the J-code as we get going.

Sitting here today, obviously, for those folks who have done procedures in the month of July, they'll have just now been submitting those and those things will start to be adjudicated and paid over the course of the quarter and it gets very difficult for us to then translate how quickly that also translates into increased surgical volumes and clinical adoption based on the clinical merits of the product versus the, I'll call it the reimbursement confidence piece.

And that's why you've heard us consistently say, that the third quarter is a positive step in the right direction, but it is a transition into what we think will translate into a growing momentum in the fourth quarter going into 2025.

I'd probably stop short of quantifying that specifically, but as you think about your models and you're working on our guidance and what we've implied through the commentary for the third and fourth quarter. I think that certainly give you a sense of what that means for iDose as we exit the year and into next.

Great. Thank you.

Harrison Parsons, Stephens.

Hi, good afternoon. This is Harrison on for George and thanks for taking the questions. I wanted to start on your guidance and specifically the domestic glaucoma revenue segment of that. I was wondering it for the remainder 2024, if the base stenting business, we should expect that same mid teens growth and then whatever is incremental that should be from iDose, is that the way we should be thinking about it?

Well, Harrison, I think it might be a slight tweak to what you just said. I think it was asked a little bit earlier. One of the things that we're anticipating or at least preparing for as a part of providing guidance today is that as our team increasingly focus on the iDose TR commercialization, that could create some growth headwinds, if you will, relative to what we experienced in the first half in our broader portfolio in the US glaucoma.

So a different way. I think we've seen obviously a strong pattern emerge in the first half of mid teens type growth in our Stent portfolio. And I'm not sure that we're counting on that. Obviously, as we make our way through the second half and the attention increasingly turns to iDose TR. I do think I can provide a little bit more color in terms of the directional growth by franchise to healthier.

I think as we think about it for the full year and the revised guidance. I would expect, the Corneal business to deliver low single digit growth for 2024 and I'd expect international glaucoma business to continue along the strong trajectories has had and to ultimately deliver low to mid teens growth for the year, reflecting the strong first half performance.

And if you do that math, it implies US glaucoma year-over-year growth of sort of the high 20s to approaching nearly 30% on a year-over-year basis when it's all said and done for 2024.

Okay. Got it. Yes, that's helpful. So I wanted to move towards the sales force strategy. I know you've talked about a phased launch there. I know all of your reps are calling on surgeons now, but could you give any more color on how many surgeons each rep is going after? Is it just their top one or two? And I guess what I'm really asking is when are we going to be at a full sprint there with all of your sales force going out to all of their accounts?

Yes, sure. And every member of our sales team will find themselves in a slightly different part of their own trajectory as it relates to the launch. But the way I would characterize it is what we said on last call, you start off by by enabling the first handful for summits one or two for others. It's a couple of more surgeon targets, getting comfortable with that, getting the [C legs] associated with launching a product like iDose.

And then ultimately, as we get into the third quarter, you start to open that up in waves. Again, I'm at this point, it's a little less focused on the exact number of surgeons that we're enabling with the sales force. And I think the unlocking, if you will, has a lot more to do with when they start to see the payment flow through on the J-code and for those who have already done the new this lens of C-code environment, the C-code.

Great. Thanks for taking the questions.

Margaret Kaczor, William Blair.

Hi, guys, good afternoon. Thanks for taking the questions. I am going to keep on the iDose train at least for the first one. As we think about the number of accounts that have implanted iDose on the doc training that you've done on the back end, you're sort of referencing the J-code and all these catalysts that should hopefully unlock more of those.

I guess, a, do you expect a meaningful increase in implanters versus kind of what we saw in the Q2 pace? And then at what point do you hit a consistent quarter run rate product trainings or you've got kind of internet capacity on intended where that can go?

Thanks, Margaret. I'm going to sound a little bit like a broken record, I think here, but in many ways, the gating item here to that consistency, I'll call it of the ramp and the number of doctors being trained in any given quarter, et cetera, is really based upon when we start to see the consistent and recurring and predictable payment of the J-code.

And we expect that in relatively short order, let me be clear. But from that standpoint, as you enter into the third quarter, it's a normal grinding of the process, if you will, as the MAC for example, bring the J-code online as they start to adjudicate these things and pay them in a more typical payment cycle that the account can count on.

At that point, administrators stopped becoming the ones who are dictating access the product and it becomes adopted from the clinical side and the things that we all know the benefits that we all know exist for utilization of iDose TR.

And that's the reason why I think when you all do your surveys, you see such positive feedback from the surgeons who are thinking about it from a clinical standpoint, how they would adopt that. And I think as we get ourselves through the third quarter and certainly as we enter into the fourth quarter and exit the year, I think we're going to start to see a lot more clinical adoption versus, I'll call it, market access or reimbursement related conservative.

Okay. And then I'll switch over to infinite because you keep referencing the success of that. Is it fair to assume that infinite still remains larger than iDose at this point or not? And then as we think about what's driving that interest for infinite at this point, can you talk to types of accounts, number of accounts that have adopted and how or what is in your guidance over the course of the year that's implied? Thanks.

Absolutely. I mean, I think first, absolutely, our stent portfolio and iStent infinite remain the dominant component of our overall portfolio. If you just think back to what I said earlier in the call with mid teens growth on a year-over-year basis, that it implies that it's obviously the largest chunk of our US glaucoma revenue base as it exists today.

Now I do expect and we all do expect that we'll ship pretty quickly here as iDose continues to ramp. But as we sit here today, Infinite is still the largest contributor to the overall portfolio in the US glaucoma side. What's driving it? I think it's exactly what it's intended for. As the, as we entered into this year and coverage was there and established in a much more predictable recurring way.

Our customers start to focus on the intended use case of the product, which is for those patients who failed surgical medical therapy. And if you think about it, for those patients that just makes sense to intervene first with infinite before moving on to more invasive procedures is what you want for your family member in the same situation. And I think as our sales force is able to have that clinical conversation with these customers, you see more and more adoption of our surgeons utilizing exactly as it was intended.

Okay. Thank you, guys.

David Saxon from Needham.

Hey, guys. This is Joseph on for David. Two questions, I guess on the iDose, and I'll just ask them together. In the quarter gross margin improvement, how much of that was maybe driven by iDose? And then looking just like towards launch throughout the rest of the year, is there any plans on hiring on the back of the iDose launch? You had mentioned maybe that the broader portfolio could see some headwinds from retention there. So I was just wondering if that was contemplated in the plan.

Okay. Hey, Joseph, this is Alex. I'll take the first question on the margin. So we did have a little bit of a modest year-over-year increase in margin. It fell within our expected range of 82% to 84%. And so I wouldn't say iDose was a major driver of that.

In fact, quite honestly, the iDose facility that we turned on tends to be right now a headwind to our margin as we intend to see these inefficiencies in manufacturing as you scale up production on these product launches. So at this point, we expect to see the margin accretion continue to expand over the course of next year on the back of the items as it fully launches.

And as it relates to the sales force and hiring plans. I think we've always been consistent in how we look at this and we're going to stick stay true to the same approach we've had for a long time now, which is we're always evaluating territories and opportunities where territories get to a scale that it makes sense to grow our sales force.

We have no plans as it stands here today to make wholesale changes to the size of the structure of our force. But I would expect that over time organically, we'll be adding folks to support the needs of the glaucoma business.

Okay, great. That's all from us and congrats on the record quarter.

Thank you.

Joanne Wuensch, Citibank.

Good afternoon and thanks for taking the question and congrats on the quarter. I want to shift gears just a little bit to OUS MIGS. I'm curious what is going on there that's driving know, let's call it XFX, 20%-plus kind of growth. And also, if my memory is correct, when you gave an initial 2024 revenue guidance it was for that segment to be up low to mid teens. Seems like that may need to be updated or the second half is really a problem. Thank you.

Yes. Hi, Joanne. I'll start on the latter first. When we started the year, what we said at least on the last call was that you should expect low to mid double digit growth from that international business. And on this call today, I reference the low to mid teens growth. So in fact, for the year that does imply a step up in the overall growth profile.

I can point to a couple of things. You heard Tom reference, obviously the French agreement, but I think the biggest thing there continues to be the blocking and tackling of our teams across the markets out there. We're still in the relatively early innings of changing the standard of care in the combination cataract market in many of these areas.

And we're just now starting to turn on new product introductions and approvals that you heard Tom reference as well as beginning to follow that with increasing focus on the interventional glaucoma opportunity in stand-alone care of these patients proactively just as we're doing here in the US. So I think we continue to be enthusiastic about the opportunity outside of the United States and in these international markets.

Having said that, you've always got currency considerations there. We have competitive launches. We've been dealing with that for the last couple of years. We continue to see that now and that takes time to work through as folks try and trial and hopefully ultimately come back to products they know and trust in the Glaukos portfolio. So we feel confident about where we're headed with that franchise, and I think the increased guidance in that area reflects that.

Thank you for that and the time line for bringing iDose outside the United States, what would that be? And have a great evening.

Thanks, Joanne. Yes, from an iDose standpoint, you have the first thing you do is get the approval in the United States, and that was the focus of that from there, you shift your attention in our case to evaluating various markets internationally.

That's a complex environment as you know, in the context of the world where reference pricing and things like that exist. And so I think we'll be cautious about how we approach iDose TR and the timing of any market entries outside the US for now, but we'll keep you updated as we continue to make progress on that evaluation.

Rich Newitter, Truist Securities.

Hi, thanks for taking the questions. Maybe just going back over the component of the bridge of the guidance range from old to new. You gave some color there. I want to make sure I'm getting all the pieces correct. It sounds like international glaucoma has a bit of a call up. You just said, low double digits to low to mid teens.

And obviously your US glaucoma is now high high 20% to low 30%, and that's a call up too, but it sounds like that you're getting some of the, maybe the incremental iDose contribution masked by commercial sales, not distraction, but time trade off from the rest of the glaucoma portfolio. Is there anything else in there? Did I get the pieces right? Can you put any quantification around those?

Yes. So I think taking a step back, just to confirm the first part of what you said. I think the punch line is in the revised guidance. It's guiding up on the international side. It's guiding up on the US glaucoma side. And from a macro standpoint, if you think about it, we beat the quarter, I think by something like $7 million. And when you look at the midpoint, we raised our guidance by $12 million. And so all of that is incremental as we think about the overall growth profile of the business.

From the Cornea side, the low single digit is probably a tick down from where we were at on our prior calls, all really related to our entry to the Medicaid Drug Rebate Program, which we've talked about on previous calls, I think from a US standpoint, you largely captured that right. What I said was as you can imagine, our sales force is going to be increasing leading into the iDose TR launch is going to take an increasing amount of their time and are turning on and training surgeons as we make our way through the second half.

And while I hope this doesn't happen. We're preparing for financially in our guidance, some dampening of the growth profile that we saw in the first half in our Stent portfolio.

Got it. That's really helpful. And I appreciate you're not giving us a specific iDose number for 2Q, but whatever that number it is, you call it [4], whatever million, whatever it may be. In an ideal world, if you were in our shoes, would you ideally like to see the consensus modeling roughly flattish kind of sequential and then a big uptick in 4Q or break it out a little bit slight uptick, 3Q, bigger uptick for Q2. Can you just any kind of directional help there, it might help calibrate consensus relative to where you might want it?

Yes. I mean, I think it's a good question. So if you just focus and zero-in on seasonality, not with any specific product in mind, but just seasonality of the business. As you know, the underlying procedure demand tends to favor Q2 and Q4 over Q1 and Q3 in ophthalmology in general. In recent years, we've seen a sequential Q2 to Q3 step down of several million dollars.

And I think we would expect that at least to be the starting trend line again this year. As you've heard me say the relative next leg up from an iDose growth standpoint, it's likely to be weighted more towards Q4, as we've indicated for some time.

As I also mentioned, it's really hard with your, the way that the launch lines up to be quite so precise in the context of exactly what will accrue the third quarter versus the fourth. And so I think from that standpoint, it makes sense for us to be a little bit conservative, while we're obviously planning for a more optimistic outcome, both for the third quarter as well clearly in the fourth.

Okay. Thanks. Congrats on the quarter.

Thank you.

Steve Lichtman, Oppenheimer.

Thank you. Evening, guys. I want to actually ask on just on US Corneal health. I appreciate all of the full year guidance. How should we be thinking about that business after you anniversary the MDRP? Do you anticipate it picking up or you have some device-related headwinds as we get closer to it beyond, just how you think about that as we move past this?

Yes, it's a good question, Steve. I think from the corneal health side, you set it up correctly. I think first thing you have to do is sunset some of the Medicaid Drug Rebate Program entry headwinds. some of those could persist into 2025, as well as that adoption in the Medicaid arena continues to grow and the rebates grow alongside of them.

But as we get past that from a I'll call it, a gross-to-net adjustment standpoint, our expectation is that the underlying business ex that dynamic should be returning back to or exceeding the kind of growth that we've expected in the past from that franchise and what you saw in 2023.

Ultimately, a lot of the activities that we are doing and will do would be in anticipation OF preparation for a very important launch in the Epioxa products as we exit 2025 and enter into 2026.

That's helpful. And then I apologise if I missed it, but how are you thinking about OpEx growth now exiting here in 2Q for the year? Thanks.

Steve, it's Alex. I'll take the OpEx question. And again, our OpEx is trending along exactly how we were trying to guide it for the year. If you recall, we had said to expect OpEx to grow this year around 10% and up a base of about $360 million from last year.

That puts you at a full year OpEx around $400 million. Through the first half, we have spent $192 million. So if you just sequentially take a little modest step up over the next two quarters, you can get to the $400 million and that's what we'd expect for the year.

Got it. Thank you, guys.

Thanks, Steve..

Anthony Petrone, Mizuho.

Thanks. I'll stay on the high dose theme here. First question will be on the strategy for the 20% Medicare fee-for-service patients out there just doing some checks and there is a little bit of, obviously, a sticker shock with the out of pocket for those patients in the instance where you have to use two stents. So is there a balance sheet strategy to sort of close that donut hole in that 20% Medicare fee-for-service?

And then just as we look out in terms of iDose getting into the S-curve with its product launch, you mentioned potentially some sales force adds the $400 million. But could there, is this a scenario once we get to '25 and certainly into '26, the sales force additions sort of level off and you really start to see that leverage benefit in the middle of the P&L? And is that sort of the right timeframe for that? Thanks.

Yes. Thanks, Anthony. I think first, let's take a step back, something, I think we've talked about on prior calls around the payer landscape. And obviously, all of this was factored into the significant amount of work we did in arriving at that price point for iDose TR and looking at it from an access standpoint in that context.

You have to break it down into the three constituent parts. For traditional Medicare fee-for-service, I think that's what you're referencing with the 20% comment. For those patients, the vast, vast majority of them actually have low to no out-of-pocket because of secondary insurance coverage. So from that standpoint, access for the vast majority of those patients really shouldn't be limited based upon the price point that you're talking about.

The second group that I'll focus on is the commercial payer, commercial pay patient population. And for that, I think where you were referencing the balance sheet, et cetera, you would should expect that, yes, we will have a co-pay assistance program like all drug companies have similarly priced drugs to take that burden off the table for those patients that have commercial insurance.

So from that standpoint, the access to that will be gated much more by the policies and coverage of those payers and not so much the out of pocket dynamics that you're referencing. The last group will be the Medicare Advantage that's not unusual to us versus any other pharmaceutical or device companies out there, where a significant portion of those patients, both will be subject to the burden of policy restrictions as well as relatively high deductible plans.

And for those patients, you tend to see them get treated more often not in the later stages of the years when they've actually eaten through their out-of-pocket maximums through other procedures earlier in the year. And so we'd expect for that patient population to wait more towards the back half of any given fiscal year.

As it relates to iDose sales force. I think maybe I want to clarify something there. When I talk about organic ads for us and there, I really do mean nothing wholesale. Ophthalmology in general and certainly Surgical Ophthalmology, there's quite a bit of leveragability in that.

So while we'll continue to be smart and prudent about supplementing that resource where it's needed throughout the country. We're not talking about something that scales infinitely or that overnight rapidly changes alongside items launch. So our expectation would be that you'd start to see the leverage, if you will. I think the way you asked the question sooner rather than later as it relates to the iDose of the launch in our sales force.

Very helpful. Thank you.

All right. I would now like to turn it back over to our team at Glaukos for closing remarks.

Okay. I want to thank everybody. Thank you all for your time and attention today, and thank you for your continued interest and support in Glaukos. Thanks and goodbye.

That concludes today's conference call. Have a pleasant day.