Glaukos Corporation (GKOS) Earnings Call Transcript & Summary

All right. Hi, everyone. Thanks for joining. I'm Lili Lozada, I'm on the medtech team here at JPMorgan, and I'm happy to have the Glaukos management team with us here today. I'll pass it over to CEO Tom Burns for a presentation, and then we'll jump into some Q&A afterwards.

Okay. Thank you very much, and good evening. And thanks, everyone, for joining here tonight. I'm delighted to give you an update on Glaukos Corporation, and then after this presentation, myself, Joe and Alex are happy to answer any questions that you may have. At Glaukos, we're in the business of creating entirely new marketplaces within ophthalmology. We've embraced this culture of We'll Go First, and innovation is at the core of everything that we do. And that innovation is largely directed on the creation of dropless therapies, to change the convention and the practice of medicine against these anterior segment disease to revolutionize it and be able to advance patient care. Once we have approved products, these go into the hands of highly capable global sales and marketing teams that have already proven that they can develop and create new marketplaces. We're focused on 5 different platforms: iStent, iDose, iLink, iLution, and Retina XR. And these are then going to be transposed against 4 different therapeutic areas: glaucoma; rare disease, led by keratoconus; anterior segment pharmaceuticals and posterior segment pharmaceuticals. When you think about these platforms already are working well on our behalf. They're spawning generations of growth. So if you think about iStent, iStent has already spawned iStent inject, iStent inject W, iStent infinite. iDose TR already has a [indiscernible] behind it called iDose TREX, with which we began a clinical trial just in December and has a third generation behind it. iLink Photrexa, Epioxa will be approved at the end of next year, and we have a third generation behind there. iLution has 4 different APIs that we have in this cream to be able to advance transdermal treatment of ocular disease. And finally, Retina XR, if we're able to create that bioerodible, we think that it has legs as well. And so we've spent $700 million just since 2018, and that's yielded 14 different disclosed pipeline programs. So think about that: 14 programs, many others that are under the hood that have yet to be disclosed, and we only had 4 of these just a decade ago when we went public. But our key opportunity is exploiting the commercial opportunity that's in front of us today, and that's how we'll build value in the corporation. So we're going to be principally focused on creating this interventional glaucoma marketplace and exploiting the opportunity, the revenue opportunity between iDose TR, iStent Infinite, and then next year, with the launch of Epioxa, moving into this iLinko2n and exploiting that new treatment as well. We are into disrupting the status quo and we've done so already. We were the company that pioneered, created, built and currently lead the global MIGS marketplace. We're going to do the same thing as we build this interventional glaucoma marketplace. And interventional glaucoma in and of itself addresses the drawbacks that are associated with topical drop therapy. And mainly is that, while topical drops work in clinical trials, they don't work very well if patients don't take them. And we know from multiple prospective and retrospective studies that the rate of noncompliance is ubiquitous. Some studies show as great as a 90% non-compliance rate with directed therapy. 50% of patients discontinue therapy after 6 months. What that leads then is to the progression of glaucoma and leads to blindness. And there are several studies that show that even patients that are diagnosed and under treatment with topical drops go blind. When patients do manage to get them into their eyes, they cause a number of different sequelae: hyperemia, periorbital fat atrophy, ocular surface disease and hyperchromia. And so there has to be a better way. And yet, the current standard algorithm is based on these topical medications. They dominate the treatment of glaucoma in the marketplace. Surgeons and clinicians start with a single med, they add serial meds as they go, and then they'll turn to typically laser procedures and more draconian end-stage filtration procedures like trabeculectomy and aqueous shunt. So we are advancing the concept of having the surgeons cross the Rubicon and to start to do these procedures far earlier in the intervention of glaucoma, where they can shut off the progression of the disease and do so typically in a 24/7 manner, where they don't have to worry about noncompliance interrupting patient care. We think that the principal catalyst behind this will be products like iDose. iDose is a really remarkable product, 15 years of development to get this product into the marketplace. Many of you who've followed us and tracked us have been watching us for some time, as have we, we were able to take an uberconcentrate of travoprost, place it in this tiny device and get it to elute at a constant micro-elution rate to achieve therapeutic index in the eye and be able to effectively treat patients with minimal side effects and provide 24/7 compliance, a huge undertaking and a phenomenal success. One of the things we did, which we were -- high advocacy against, was to anchor this several years ago, because we worried about a bioerodible bouncing around in the angle and causing endothelial cell damage, and we happened to be a little bit prescient there when we look at the current bioerodibles that are available. Our product is anchored and we see really de minimis amounts of endothelial cell loss. iDose will be the workhorse. So one of the reasons that I'm excited about this product is we were able to get a 505(b)(2) designation. It has the same label as topical eye drops. So you can use the iDose with ocular hypertension patients -- these are patients with high pressures that don't yet have any parametric damage -- all the way through late-stage glaucoma. So it will be our principal workhorse and a foundational therapy for us. And then, of course, it's anchored by the mechanisms of iStent infinite, for patients who failed on medical and surgical therapy, and as well as iStent inject, which has a labeling claim for use in mild to moderate open-angle glaucoma in conjunction with cataract surgery. These products will form the basis for how we change this paradigm -- and I'll get into this as we go further -- get surgeons to cross the Rubicon, do SLT. SLT in many cases will become -- will fail after a number of years. These products become principal to advocates of next-stage therapy in the long-term treatment of glaucoma. We've done, I think, a reasonably great job with iDose TR since we've had it. We got approval in December of 2023, we launched it early in 2024, and we were able to commit and to achieve a J code in July and we've been working hard with the MACs and making some significant -- moving the down markets and getting reimbursement for a professional fee and for facility fee as well as for the drug. And our opportunity in the second half will be to be able to -- opening up reimbursement and being able to go into commercial payers and Medicare Advantage payers. Once we start to get true traction both in training surgeons and getting reimbursement, we will then be able to put a tremendous resource of marketing behind this to be able to drive adoption. Likewise, iStent infinite, we were able to get an approval to move up to APC5493. That was done through tremendous work in establishing a geometric mean that allowed us to go into a whole new different APC level, far more profitable for facilities to use this product, and we established all professional fees at [ MACs ] by the end of the year. I think one of the important things is in the course of 2025 you'll see we've done a Level 1 comparative control study comparing iStent infinite with Hydrus, and we came up with some supremely favorable results in support of iStent infinite. One of the concepts that we're trying to drive is this concept of IG and the Forever Patient. And as you know, glaucoma, once diagnosed, is a disease that will take you through the end of your life. And most averages when we do studies show that patients who are on -- either have ocular hypertension or glaucoma, live 20-plus years with the disease. So our concept is to take these patients, convince surgeons that they can have these patients stick with them through the continuity of their patient journey, and to use a continuous application of these microinvasive injections to be able to liberate patients from these drugs and to prevent them from having these draconian end-stage procedures. We think we can flatten the trajectory of what happens with the progression of glaucoma and improve patient quality of life. And one of the things we've found, that if patients do these procedures, surgeons do these procedures, patients are sticky. They tend to engage a lot more in the therapy and to stick with the practice. And in doing all of this, I think we're going to create such demand that the capacity constraints on ASCs will be overwhelming. We hope they become that. And that's why you've heard me talk about moving these principal injections into the office over time. So we're not only coming up with different devices and applicators to get us there, but we're also going to be doing the hard work of working with MACs to make sure we get reimbursement for in-office procedures. In this concept, the OD becomes increasingly important. He becomes -- he or she becomes the principal caregiver, works up the patient and follows the patient. I think one of the things I wanted to leave you with is that for some time, surgeons in ophthalmology have spent their time, resources and efforts trying to attract cataract patients and refractive patients into their practice. It's the lifeblood of their practices. And yet in doing so, these are one and done procedures. And so this is kind of a catch-and-release mentality that I think needs to change. And think about if surgeons were able to turn their turrets to the hundreds, perhaps thousands in many cases, glaucoma patients that they have in their practice, and started to treat them consecutively with these microinvasive procedures, not only are they raising the level of care in preventing progression of disease but it becomes a principal and an important and paramount financial opportunity for surgeons. I think we're going to drive this concept, and I think this will carry and resonate with surgeons as we go forward. So watch what happens over the next 10 years. Of course, you need good data to make that happen, the confidence of the surgeons. And you've seen some of this data. This is the data from the Phase IIb where we showed that almost 70% of patients at 3 months were controlled on the same or fewer medications. We then validated that with our Phase III data, 1,150 patients, showing at 12 months that 93% were controlled on the same or fewer meds, 81% on no meds, even though 23% started at baseline on 2 or 3 more medications. And so we just released today some highly validating evidence of the pivotal trial, the 2 pivotal trials that we did, that showed that 70% of those patients were controlled at 3 years. This is fabulous data. This will resonate with surgeons. As you do your channel checks, this will be highly regarded, particularly when we see how superior this is versus timolol therapy, which in many cases has been the standard of care over the period of time. I think what's exceedingly important as well is because you're behind the iron curtain of the cornea and you're delivering micro-elution rates, you also have principally minimally side effects. And so at the 3-year time point, we found no adverse events of periorbital fat atrophy, very low rates of conjunctival hyperemia. We found no adverse events of corneal endothelial cell loss and very low incidence of iris color change. And so you look on the right of what happens with topical PGAs and this is an insurmountable difference of being able to put this tiny micro-elution rate product inside the eye. The power of combined therapy has already been embraced by clinicians. When you think about it, when they do topical medications, over 50% of patients are on 2 or more medications. And that's because surgeons believe that by combining mechanisms, they can lower target pressures to be able to principally prevent the progression of disease. And so to me, it just makes entire sense that as we launch iDose over time, surgeons will start to pair it with different MIGS procedures, it's going to happen. Many surgeons as they enter are going to say, "Look, Winston, I'm placing this in your eye. It makes sense that I'm going to place this plus another device in your eye to give you low target pressures and prevent the progression of disease." They're also pairing it with procedures. And so been a lot of comments about will iDose be used with cataract surgery. There's no doubt that it will. And so we've done a study outside the United States where we looked at iDose in combination with cataract surgery, and at the 6-month time point we're seeing 44% reductions. These are phenomenal reductions in intraocular pressure at 6 months, 11.3 millimeter reductions from baseline. Again, this will resonate with surgeons as we bring this out and publish this data. So how big is this market going to get? Well, it's even hard sometimes for us to try to computate where this market is going. But if you think about it, we've built a business on the left hand of this slide, looking at MIGS plus cataract with 0.5 million procedures per year. So it bodes very well. We've become highly optimistic, if we're looking at patients in a 12 million number of eyes of patients with diagnosed and treated glaucoma, that we could do exceedingly well, and the world is our oyster. If you look at these different patient groups, each one of these patient groups, that I think you would argue is a palpable reason to use an eye dose, each 1 of these is a robust TAM in and of itself. So we have high prospects for where this will go over time. And of course, we've created a road map which allows us to get there. You've heard me talk about for some time how we wanted to be able to control and present products that would represent the full range of glaucoma disease stage severity, and we've done so. You see this map here. A couple of points. iStent infinite, we continue to enroll. The clinical trial to expand its label in stand-alone open-angle glaucoma with mild-to-moderate patients will begin by the third quarter, a study with PreserFlo, which is kind of the end cap for refractory procedures. And as we talked about, we were able to, on time, begin our clinical trial with iDose TREX. Importantly as well, we finished the trial second phase clinical trial with the iLution travoprost, and we're assessing the data as we speak. So this portfolio commands at every level the ability to provide the best benefit-to-risk ratio for patients at every stage of disease, stage severity of glaucoma. So we're going to build this interventional glaucoma marketplace, and we will over the next 10 years. And in doing so, we're going to induce change. So this is our prescription and prognostication of where we go forward. First, I believe and we believe the majority of ophthalmic surgeons will choose to adopt the IG algorithm in some form during this 10-year period, where now it's just a fractional amount that currently are using this. We believe that iDose therapies will continue to and will increasingly compete with SLT for first-line therapy. SLT will always be the first-line therapy where they turn to as they go and as look at cross the Rubicon to do interventional glaucoma, but we think that iDose will increasingly command a representative portion of that position. Combination therapy will and has the potential to become a preferred form of therapy over time. It's just commonsensical. And if you talk to surgeons, they're already going. They're independent of Glaukos. I think consistent reimbursement, surgeon confidence, patient preference and new innovations will drive in-office therapy. So I've talked about this for some time. This is not going to happen overnight, but during the planning period we'll start to drive intervention of glaucoma therapy in the office, and we're already working up scale up provisions to approach MACs to seek reimbursement. These new therapies and sustained release drug products, such as TREX, are going to continue to fuel this marketplace, it just makes sense. The more I can give you with a single injection, I think it's going to be attractive for patients to have this procedure. Private equity groups who are continuing to command a larger portion of the landscape are likely to gravitate to interventional glaucoma therapy, not only for the significant clinical benefits, but this is a powerful and paramount financial advantage for PE groups over time. And finally, I think most -- I think a new breed of specialists, IG specialists could emerge that will primarily conduct injection therapy with vertically integrated ODs and OD referral networks providing [ prefatory ] patient services. Why wouldn't this happen? This is happening already on the retinal side, where retinal surgeons are spending all day long getting carpal tunnel syndrome injecting patients with anti-VEGF proteins. I think this will happen as well in glaucoma, where surgeons say, "Look, I do my glaucoma procedure or my cataract procedures on Mondays and Wednesdays, and on Tuesdays and Thursdays I do my iDose and iStent infinite injections. On Fridays I see patients. In the meantime, my ODs are working these patients up and following the patients, okay?" Mark my words, that's where we're headed. And finally, if you think about it, right now there's 4.5 million estimated cataract procedures that happen every year. Dwarfs the number of interventional glaucoma procedures. And I believe at the end of this 10-year period that we could be doing as many interventional glaucoma procedures as cataract procedures. The math works. And that statement 2 years ago would have been heresy. And today, it's merely controversial. I think 5 to 7 years from now, it will be self-evident and inevitable. So in addition to glaucoma, we're also focusing in on rare disease, and we've been very pleased with the seamless acquisition and steady growth of our iLink product with the acquisition of Avedro Corporation in 2019, but we're excited moving forward with Epioxa. Epioxa is the next generation, where you don't need to debride the cornea to be able to arrest the progression of keratoconus. And because of that -- or that's due to the fact that there is a higher irradiation rate and the fact that there's a proprietary formulation that has a surfactant. And then most importantly, we have supplemental oxygen that's perfused on the surface of the eye during the course of the procedure. By reaching this goal, this is a game changer for the treatment of keratoconus. It's going to improve patient comfort dramatically and increase visual rehabilitation and also shorten the procedure time for surgeons to be able to maximize their opportunities within the office. And again, the importance of supplemental oxygen can't be diminished. It causes a type Tier 2 reaction, which is far more efficient, throws off oxygen-free radicals and causes this cross-linking bioconversion. Now what if we took that same concept and we use biomechanical modeling and corneal topography and customize the treatment of keratoconus for every patient? This is done all day long with LASIK, where we look at corneal topography and aberrometry to be able to dictate and how the laser dances across the eye, we have that opportunity to do that as well here, and we're doing this in a Phase II study as we speak, to be able to create the ultimate spherical cornea, which will reduce any aberrations and allow us to perhaps even improve visualization in addition to shutting down the progression of keratoconus. So exciting stuff, and this will be a generation that will come right behind Epioxa. So we have a full pattern developed in the rare disease spectrum as well, Photrexa, Epioxa, third generation of iLink. And we also have in iVeena -- we acquired a company called iVeena, which has copper sulfate topical medication, and we're interested in to see where this would play in the marketplace. But I think this could have a huge impact with optometry, which can't currently do, in most cases, the cross-linking procedure, and certainly internationally, where we have the ability to have a presence. And so we think we're covering, much like we've done in glaucoma, we're covering all angles here and creating barriers to any competitive entry. iLution has been a very, very predominant form with this transdermal elution of active pharmaceutical ingredients. You've seen the data that we've presented with pilocarpine in dry eye, where we're able to increase visualization and tear film stability. I think one of the great opportunities we have moving forward is this area of Demodex mites. So Tarsus has done a good job creating this marketplace. It's a condition that affects 25 million people in the United States. These are mites that hang out in the follicles of the eyelashes and create tremendous irritation and crusting of the lids, which is found on blepharitis. And so what we've done is in-licensed and is a very, very powerful aceticalanesterase inhibitor called physostigmine -- and think about the opportunity to take physostigmine and put it into a cream and put it into a cream that will go right on top of these critters as they are husband for their nocturnal sleeps and be able to make a meaningful difference in the treatment of this condition. And so we think we can make a meaningful difference when and if we're able to bring this to the marketplace. And then finally, there's been game changing, as you know, anti-VEGF proteins that have been introduced into the retinal space for retinal pathology. And the problem with these -- as extraordinary as they are, the problem with these anti-VEGF proteins is that they don't last very long, as we know, 3 to 4 months. And so this imposes a tremendous barrier on patients. 40% of patients within 2 years are lost to follow-up. So once again, we've taken an incredible contrarian approach. We're looking at small molecules that will go into a bioeluting matrix that can be implanted into the back of the eye that could last for months or well longer than months. And so you see data on the right-hand bottom portion here. We're tracking out past 3 years the use of these bioerodible devices, which elude axitinib, a powerful TKI, into the eye for the treatment to reduce the leakage associated with age-related macular degeneration. So we think this is powerful. We think once we have this in, we'll be able to tailor the duration by the size and configuration of the device. So that data we have in a Phase II study right now. We have an ongoing study of axitinib outside the states, and we're anxious to see if this can truly be a game-changing device within clearly the biggest marketplace within ophthalmology. So think about how we're building the business. We're almost to maturation with interventional glaucoma, as you can see. We've been building that since 2012. We now are embarked and building a significant basis and business within the rare disease segment led by keratoconus. You've seen the collateral products I'm bringing for that. And then we'll have a catalyst of an additional jolt of revenue, potential formation, as we bring together a coalition of products that are produced from the transdermal use of iLution. We'll need to hire a separate sales force. That's a very special breed of retail pharmaceutical, and that will be happening at the end of this decade. And then finally, if we're successful -- again, terribly exciting, terribly early -- if we're successful with axitinib, we're going to need to have a specialized sales force to compete actively in this marketplace, which again is the most powerful marketplace within ophthalmology. So you've seen the list of products that we have. It's formidable. I think it's -- I put this up against any company within ophthalmology. And for purposes of this next year, I've talked about glaucoma, but what I'd expect investors to see is we'll be moving forward, opening up a clinical trial with the iLution blepharitis product by the end of the year. And then I expect you'll see data as well from that, what I believe will be, a game-changing third-generation iLink device, which is we call sphere, which is meant to change the surface of the cornea to eventually improve patient vision. From an operating standpoint, I personally couldn't be more proud of the people that are to my left and what they've accomplished here, 30% compound average growth rates over a 10-year period. From a standing start, we're now vertically integrated in 17 countries around the world. We have over 300 global sales personnel. We've established prolific and maintained prolific margins of 82%. We've built a facility to make these nanotechnology by dose in San Clemente. And then as you know, we've talked about as well, we're building a very huge secondary facility in Huntsville, Alabama, which is going to give us increased capability to do aseptic filling. It will give us the ability to fill these creams and to take on additional products for in the future. I think I've spent a considerable amount of time diversifying our risk as well. And so nearly 50% of revenue is generated both by international glaucoma and by cornea. And then finally, we've maintained a very, very, I think, powerful balance sheet moving forward. So we have gone first. We'll always continue to go first, and I hope by doing so we'll become the next major strategic player within ophthalmology. Thank you.

Great. Maybe just starting with iDose. We saw today 3-year data for the product from your 2 Phase III clinical trials, which looked really similar to the Phase II data you already have going out to 36 months. So is there any desire to formally have 3 years on the label, or are doctors basically prescribing total already given the Phase II data?

Yes, I'll take that one. So the answer is no. There will be no movement to get a labeling claim, because we don't believe we need it, right? When people see that the data carries out to 3 years, if you talk to any of your ophthalmologists with channel checks, they will tell you that this product works exceedingly long, many even beyond 3 years in their hands. I love the fact that we are treated similar to a topical medication right now because that means that our primary efficacy endpoint is at 3 months, which makes it particularly facile for us to get to marketplace. We'll prove that this lasts longer through Phase IV data, but I don't need to prove that in a Phase III regulatory pathway.

If you think about it inherently, some of the leading surgeons in the world have been involved in our studies and they've seen it themselves, to Tom's point. So you're really not trying to prove that, they've seen it over and over again in those clinical studies.

The safety profile remains strong as well. So any updates on reimplantation?

Yes. The only update is it's going exactly the way I thought it would. We've appealed the reimplantation restriction from the FDA, and we're in that process. And as I mentioned some time ago, this is going to be a several month process. If it turns out I'm correct, it will be. We're hopeful. But as I've said all along, we are not counting on it. And so that's kind of where we're at. I think we have a sophisticated approach. We've made a powerful argument. Again, from the very beginning, there was no reason why we should have been limited. We think part of that was just the precedent of DURYSTA, which kind of forced the FDA's hand in their mind. So I think we have the opportunity to change that. But again, I would say that we are not counting on it. If it happens, it will be a very, very strong upside for us.

You had talked to having facility fees and the J-code processes in a good place with the MACs entering 2025. So did you accomplish that goal?

Yes. I think every day we continue to make progress there. What I would say today is that we separate this between sort of the J-code facility versus the professional fee, which we can talk about separately. On the J-code, we've made considerable progress. We've talked about Noridian in the past being in a good spot. We've made the similar progress with Novitas and First Coast. We're increasingly seeing similar behaviors out of Palmetto and WPS. So we're really down to sort of the last 2 MACs, if you will, and trying to see that consistent and reproducible J-code payments. And we'll get there in relatively short order.

So that isn't the last step needed, though, with physician reimbursement also important given common ownership stakes in the ASC. The last we talked, you had it on the schedule with one MAC and another reimbursing consistently. How much progress have you made? And how much of a barrier to adoption will this be? And are you on track to have this done in the first half of the year? Or is it too hard to know?

No, you're absolutely right. professional fee is an essential component of the overall reimbursement paradigm, especially with growing interest from private equity and the like. You have a lot more of the physicians that operate today operating from more of an employee mindset, and the professional fee is the way they're compensated. So we've been hard at work at that. You have to establish the drug first. With that, you're able to drive the volumes that ultimately turn the facility -- or sorry, the professional fee over. We've seen that in Noridian where we've got an established prophy schedule. We're seeing increasingly consistent payments out of several other MACs, not professional fee schedules yet. They don't always publish these schedules on a timely basis, but what you try to see is that consistency. And across the country, we've now started to see a consistency in terms of the amount that's being paid. What we want to see is the pace in which they get paid and the more automated nature of that, and we're still in the process of doing that. But I continue to think with the progress we've made on the J-code and facility, we should be on the doorstep of turning over some of those on the professional fee side as well.

Commercial and Medicare Advantage are 2 opportunities that you haven't targeted yet. So how should we think about your plans to start unlocking those markets this year?

Yes. So we've targeted the concept that our payer relations team has been hard at work since the day we got approval and they've made tremendous progress. If you go out and do a survey of commercial and Medicare Advantage plans, you'll find pretty robust coverage policies that are quite consistent with DURYSTA, for example, today. What we haven't done is really turn that on for our customers quite the same way. They're obviously more than welcome to pursue those patients on their own, but we really want to establish their confidence within the Medicare fee-for-service arena before we started expanding out. Obviously, the commercial and Medicare Advantage arenas come with a whole lot more complexity in terms of the execution from an HCP perspective, and we want to be able to support that. So going into this year, we'll start turning that on slowly and methodically with those customers who are best prepared to handle that, and then expand that from there as the year goes on.

Do you have a sense for if you're mostly seeing stand-alone or combination usage? And do you think the reimplantation limitation is affecting physician willingness to adopt?

Yes. Well, I don't think the reimplantation is impacting at all. I mean, actually, we've heard very little about that. Again, I think it comes back to something Tom said earlier, it's pretty self-evident to those who've been involved that it's safe and effective. And from their perspective, it's pretty long-acting. So they'll handle that in the future. From a commercial and Medicare Advantage standpoint -- sorry, the second part of your question was what -- from the...