Glaukos : Q1 2024 Earnings Transcript

QUESTION AND ANSWER SECTION

Operator: [Operator Instructions] Our first question will come from the line of the Tom Stephan with Stifel. Please go ahead.

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Great. Hey, guys. Thanks for the questions. Maybe I'll start on the guide. Can you maybe talk about what the changes are to the construct of the full year revenue outlook, if we can begin there? And then is there any more color or, I guess, parameters you'd be willing to provide on what's baked in for iDose?

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Sure, Tom. It's Joe. Thanks for the questions and I'll start off with the guidance. Obviously, we had a stronger- than-expected start to the year and we were pleased to be able to raise the full year guidance accordingly here just a couple of months after setting it for the year. I'll call out a couple of key considerations I think that are worth highlighting and then kind of hopefully draw some conclusion in terms of expectations by the franchise.

First, it obviously is very early in iDose launch with the vast majority of the contribution expected in the latter part of the year. That hasn't changed. Everything that we've been doing so far in the first quarter is on track and on target and we can, I'm sure, talk about that more later. Some of the stent growth that we saw in the first quarter, which was very strong from a year-over-year basis, is partially driven by the timing of the infinite launch activities last year, which really accelerated in the second quarter. So, I think as we move into the second and third quarters, the comp from a stent standpoint starts to get a little bit more difficult.

Third, obviously, we all know that FX rates and the strengthening dollar have been moving against many of us from a US reporting standpoint. So, we see an incremental 200 basis points of growth headwind on the international side as we move forward throughout the year, based on the spot rates as they exist today. And then lastly, as Tom mentioned in the prepared remarks, we do expect the MDRP entry-related headwinds to persist for our Corneal Health franchise throughout the year.

So when you put all that together, I think we're landing in place where we our expectations for the Corneal franchise are low- to mid-single-digit growth for the year. The international glaucoma business, we tick-up a little bit. I think the expectations there should be low- to mid-double-digit percentage or teens growth for the year. And that'll land you somewhere for the US glaucoma business in that high-teens to maybe in the top end 20% type growth year-over-year. So, hopefully, that gives you a sense of kind of the drivers of where we're at.

On your second question around iDose TR, I think at this point, we're obviously quite early. We were very pleased to see that in mid-February, as we told you, we were - we get going. And so in the second half of the quarter, we were able to get kicked off with the early access phase of our iDose launch. And as Tom mentioned, really pleased to see our initial 15 surgeons be able to complete their cases in Q1 in coordination with our sales and training and market access teams.

And that's how we'll continue to methodically launch and slowly expand in Q2 ahead of, obviously, the J-code being established in Q3 and the ASP publication in Q4, where we start to expect a meaningful acceleration in the iDose-related activities and volumes.

That's great color. Thanks, Joe. And then maybe switching to the pipeline. Tom, you alluded to this a bit, but we did see in your proxy that the company is developing iDose TRIO, which appears might be an in-office version of the implant. If you're willing to share, can you elaborate a bit product, maybe the key details, sort of the portfolio fit, I guess, and then any timelines or milestones? Thanks.

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Yeah, I'll be happy to address that, Tom. And so, I think it's inevitable as we look at the evolution of the pipeline that we'll continue to figure out ways and develop ways to have an even more minimally invasive and facile procedure. So having said that, I think it's incumbent upon us to develop a product that will be able to be even more micro-invasive than the current iDose design and have an applicator that will be able to - to really be able to put the iDose product through an incision [ph] side (00:16:54) that's going to be able to be in the range of a 1.2 to 1 millimeter incision, which really gives us then the opportunity to create a self-sealing construct or a temporal clear corneal incision. And that will be important, particularly as surgeons move to in-office procedures, which we know that they will do and which is a compelling part of our strategic plan over the course of the planning period.

So, we are in the process of developing an applicator that will accomplish and achieve those goals. I would say, in the timing, we'd be looking forward, be probably in late 2025 for a potential introduction. And I think that will then be timely with the effect of how we'll be moving forward to give surgeons the opportunity to be able to exercise the site of service, in-office as well as the ASC.

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Operator: Your next question comes from the line of Ryan Zimmerman with BTIG. Please go ahead.

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I want to follow-up on Tom's questions that I'm sure a lot of people will be asking about iDose. But you gave us a little detail here on 15 surgeons kind of completing initial iDose TR cases. Now, many of us have been diligencing this, and it would seem as though there may be more surgeons out there, or at least there's a lot of excitement out there. Just to confirm, have you put iDose in the hands of more than the 15, number one? And then two, kind of how do you think about expanding that beyond that initial wave of the 15 in the second quarter until kind of that J- code is effective? And are you gating adoption in any way, or kind of holding demand before that J-code is effective?

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Sure. Thanks, Ryan. I think the answer to the number of surgeons who have had access, I think a little bit you're reacting to, number one, the overall enthusiasm for iDose TR and some of the pent-up demand for folks to get trained and get going with it over the course of the year. But the direct answer is, yeah, now that we're sitting here

on May 1, of course we continue to expand. We're past that. The 15 number from a surgeon training perspective was as of the end of first quarter. So, you would expect us to continue to be slowly expanding that and providing more access to folks.

At the same time, we're going to do so methodically. As we've talked about from the outset, I think even back to the iDose call in December, the way we will launch this product is those early access physicians expanding that very slowly and methodically over the course of the second quarter, and then really starting to open that more broadly as we get into the second half of the year with the J-code being established.

At the same time and in parallel, we are working with these accounts. And so, simply because the surgeon maybe

• they haven't completed their first case does not mean that they're not in the funnel, or if you're doing channel checks, expressing their enthusiasm, because they're being trained, their back office or administrative staff are being trained. And so, we're continuing to make progress really on all those fronts as we move forward into what we think will be a pretty exciting certainly second half and, most notably, fourth quarter for this year with iDose.

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Okay. Very helpful. And then kind of dovetailing off that, Joe, I mean, if you are in those accounts, I'm curious what impact or pull-through are you seeing as a result of the iDose efforts on the base business? And if you could kind of tie it to this infinite growth, particularly in the US. I mean, I would venture to guess that the market is not growing anywhere near 20%. And so, are you taking share? Is the market growing faster now because you are spending more time in accounts? Just maybe you could elaborate on kind of the core MIGS business and the resulting impact from your efforts on iDose?

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Yes. It's a great question. So, I'll provide a little bit of color, I think will help you triangulate in around the breakdown of the results of the first quarter for the US glaucoma business. We did see our overall stent portfolio, including iStent infinite, grow in the mid-teens on a year-over-year basis. So, the majority of what you're seeing now - obviously, we did have iDose TR and some of those early launch activities, but the majority of the growth that you're seeing, the tune of mid-teens growth, is coming from our stent portfolio. I think it's, of course, very hard to dissect that down to individual percentage breakdown. But I do think it's a little bit of all of those things that you mentioned, Ryan.

I think that we are growing the market because of, as Tom mentioned, we put a lot of muscle and effort into the interventional glaucoma paradigm shift that's not something new. We've been working on that hard over the course of the last 15 to 18 months in particular, and I think you're starting to see some of the benefit of that in terms of growing the overall market certainly faster than it would be if it was still restricted to the combination cataract setting.

But at the same time, I also do think we're taking a little bit of market share. And I think the fact that we're in there with multiple new exciting technologies that help expand the portfolio of alternatives for these surgeons, you can't help but benefit a little bit from that in the context of a halo, obviously, associated with the overall portfolio. And so, I think that that is playing out a little bit as we make our way through the year so far.

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Thank you.

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Operator: Your next question comes from the line of Larry Biegelsen with Wells Fargo. Please go ahead.

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Good afternoon. Thanks for taking the question and congratulations on a really strong quarter here. So, Joe, you raised the guidance at the midpoint by, I think, the amount of the beat. Why not more? And the Q2 to Q4 growth implied or implied growth is actually below the Q1 growth, I think, at the midpoint. Just lastly on the [indiscernible] (00:23:08), how should we think about Q2? Are you comfortable with consensus of, call it, $88 million?

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Yeah, Larry. So, I think in the - I'll try to take in the order in which you asked it, but the context of why not more than the beat. Well, over the course of the two months, I'm not so sure since our original guidance that things have changed markedly versus the expectations and what we saw coming into the year. We've executed on everything we expected to and done a little bit better than that. And so, we want to make sure that that was reflected in the raised guidance.

But when you think about getting ahead of that, so much of that obviously is driven by expectation around iDose in particular. And as I've said and we've said for some time now, that's for the most part a second half phenomenon that we expect to play out. So, I'm not sure sitting here today, we would make a significant change to our expectations around iDose and what it will do in the second half, but we certainly continue to execute against realizing that opportunity at that point in time.

As you think about Q2, I alluded to this a little bit in the question around the guidance. Our first quarter did benefit a bit from two things. One, on the international side, currency was a little bit more favorable than it's going to be going forward. We see an incremental 200 basis points or 2% of headwind on that international growth number as we enter the second quarter than what we experienced in the first given the strengthening of the dollar. And second, we really more [ph] fulsomely (00:24:48) launched iStent infinite in the second quarter of last year. So, from a year-over-year comp standpoint, it gets a little bit more challenging as we enter the second quarter and beyond than it was in the first, from a growth standpoint. So, I think you put those things together and you'll see why and where we landed.

The last thing I'll say on that is, from a seasonality standpoint, when you kind of think about the overall guidance, as you know, we expected our typical seasonality patterns to be a bit disrupted this year by the growing iStent infinite stand-alone and, of course, iDose utilization in the second half. And the net effect of that is, obviously, to shift a bit more the contribution of the year to the second half and, in particular, the fourth quarter. And if I were trying to put percentages around that, I might do something like the following: 23%, 24% in Q1; 24% to 25% in Q2 and Q3; and 26% to 28% of the year in Q4. I think if you follow that, you'll get to a pretty good place in the context of the seasonality expectations that we have for 2024.

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That's helpful. And Joe, just a follow-up on the iDose ramp. I mean, how should we think about the ramp and what's going to cause that inflection in Q4? Is it the J-code coming into effect July 1 until we'll see an inflection in

Q3? It sounds like the contribution in Q1 was relatively small. What's going to drive the adoption through the year? Thanks.

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Yeah. I mean, obviously our expectations, I think, would be that the contribution in the first quarter was relatively small. I mean, we launched it in mid-February and gave early access, and we're on schedule for all that. I think we'll continue to expand that over the course of Q2. But to the heart of your question, there are really two significant unlocking events, if you will, from an adoption perspective. The first happens on July 1, when you have the J-code come into place. There's obviously a lag effect there in terms of procedures being scheduled and the execution towards that J-code.

But then as you get into the Q4 and the ASP is also published, at that point, you have a much more, I'll call it, automated payment system from a Medicare standpoint, when you have the established J-code and a published ASP, it really enables a much more normalized process for reimbursement at the account level. And we expect that to be pretty important in the unlocking, obviously, of surgeons really being able to run and do iDose in all the patients that they think are appropriate for the technology.

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Operator: Your next question will come from the line of Matt O'Brien with Piper Sandler. Please go ahead.

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Afternoon. Thanks for taking the questions. Maybe just to follow-up a little bit on Larry's question there on the performance of iDose in Q1, and yes, you're going to get 1 million iDose questions on the call. But if I think about the base business maybe growing somewhere in the mid-teens, if I back that out, I'm looking at somewhere around something like a seven-figure performance in the first quarter, said another way, over $1 million. Is that about the right number and that's just on 15 docs, right, just kind of trialing it, trying to figure out the J-code, is that in the ballpark?

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I'm not going to get too specific endorsing any one number, but obviously you've got the overall growth of the US glaucoma franchise and you've got the stent portfolio grew in the mid-teens from a year-over-year standpoint. So, as you've done, you can do the applied math on that. I'll just reiterate what we said. I mean, at the end of the day, there were 15 implanting surgeons in the first quarter. They had about a half of a quarter to do those, based on the timing of our launch. And I think it was encouraging to see both, most importantly, the enthusiasm for the outcomes for those patients after they've done their initial implantations of iDose. And they managed to provide us exactly what we need, the kind of [ph] pearls (00:28:57) and information that help us dial in our training and ultimately establish confidence with our sales force as they execute on a growing basis over the course of the next several quarters.

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