Glaukos - Q2 2023

Transcript

Operator (participant)

Welcome to Glaukos Corporation's second quarter, 2023 financial results conference call. Copies of the company's press release and Quarterly Summary document, both issued after the market close today, are available at www.glaukos.com. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then one on your telephone keypad. To withdraw your question, press star one again. 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.

Chris Lewis (VP of Investor Relations and Corporate Affairs)

Thank you. Good afternoon. Joining me today are Glaukos Chairman and CEO, Tom Burns; President and COO, Joe Gilliam; and CFO, Alex Thurman. Similar to prior quarters, the company has posted a document on its investor relations website under the Financials and Filings Quarter Results section titled "Quarterly Summary." This document is designed to provide the investment community with a summarized and easily accessible reference document that details the key effects 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 transition 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, 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. Review today's press release, and our recent SEC filings for more information about these risk factors. You'll find these documents in the investor 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's ongoing results of operations, particularly when comparing underlying results from period to period.

Please refer to the tables in our earnings press release, available in the investor relations section of our website, for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos, Chairman and CEO, Tom Burns.

Tom Burns (Chairman and CEO)

Okay, thanks again, Chris. Good afternoon to all, and thank you all for joining us. Today, Glaukos reported record second quarter consolidated net sales of $80.4 million, up 11% versus the year ago quarter. These second quarter results reflected record sales and continued strong performance across our International Glaucoma and Corneal Health franchises, alongside the reemerging growth in our US Glaucoma Franchise, driven by the initial commercial launch of iStent infinite. I'd like to congratulate the dedication and performance of our teams around the globe, who remain committed to their work and to advancing our key initiatives. Given our solid second quarter and our latest forward outlook, we are raising our 2023 net sales guidance range to $304 million-$308 million, versus the $295 million-$300 million previously.

From a commercial perspective, strong execution of key strategies within each of our core franchises drove our record quarter. Within our US glaucoma franchise, where we delivered sales of $39.6 million, which grew 4% year-over-year and 13% sequentially, we continue to advance iStent infinite ahead of establishing formal MAC coverage and payment. On that front, five of the seven MACs have issued proposed LCD reconsiderations that, if finalized, would provide coverage for iStent infinite, consistent with FDA approval and based upon our coverage reconsideration requests. In total, all seven MACs have taken preliminary steps to assess iStent infinite coverage through either proposed LCDs or temporary LCA updates. Further, we continue to support expanding broad access to interventional glaucoma tools for physicians, and will closely monitor the various MAC policies and processes as they advance and are ultimately finalized in the future.

We were also encouraged to see, as part of the CMS's 2024 proposed rule, the CPT code used to cover iStent infinite in standalone procedures, 0671T, has been lifted to APC 5492 from APC 5491. We are pleased with this initial proposal and believe, as we have stated in the past, that it more appropriately reflects the cost of infinite and similar standalone procedures. Separately, CMS also proposed to move the APC assignment for combined cataract plus trabecular bypass procedures, 66989 and 66991, to a newly restructured APC 5493, which we also believe appropriately reflects the claim's history, as CMS stated in the proposed rule. If finalized, these changes will go into effect January 1, 2024.

As mentioned earlier, our international glaucoma franchise delivered record sales of $22.3 million on a strong, broad-based year-over-year growth of 25% on a reported basis and 27% on a constant currency basis. As we continue to scale our international infrastructure, we are increasingly driving MIGS forward as a standard of care in each region and every major market in the world. While we focus on our near-term execution, we are also accelerating efforts to support one of our founding missions at Glaukos, which is to advance glaucoma care by driving interventional therapies earlier in the treatment paradigm for glaucoma disease, and in turn, pioneering a new standalone market over time.

We continue to lead and work closely with surgeons and thought leaders globally to organically drive this broader evolution in the standard of care, including through numerous events at the ASCRS Annual Meeting in May, and more recently, at the World Glaucoma Society biannual meeting in Rome in June. Finally, our Corneal Health franchise delivered record sales of $18.5 million on 11% year-over-year growth, including for Photrexa record sales of $15.9 million on year-over-year growth of 18%, as key strategic initiatives implemented throughout the past year continue to take hold in support of this important business. Shifting gears to the development front, we continue to prudently invest in and successfully advance our robust pipeline of novel, promising platform technologies that we believe have the ability to significantly expand our addressable markets and fundamentally transform our company over time.

During the second quarter, we announced FDA acceptance of the previously submitted NDA for iDose TR, marking another important step in bringing this game-changing therapy one step closer to patients. We continue to be encouraged as we work closely with the FDA in their ongoing review process as we progress towards the agency's established PDUFA goal date of December 22, 2023. Alongside this, our teams continue to make nice progress with the preparation and planning of the iDose commercial launch, targeted for early next year, including a robust set of peer-reviewed literature expected to be published over the remainder of this year and into 2024. Turning to the corneal health pipeline, during the second quarter, we completed enrollment in the second phase III confirmatory trial for Epioxa, our next-generation corneal cross-linking therapy for the treatment of keratoconus.

This expeditious enrollment completion, which occurred in less than six months from trial commencement earlier this year, is a testament to the favorable risk-benefit profile of this next-generation therapy, as well as our team's hard work in bringing this important rare disease therapy one step closer to patients suffering from keratoconus, which is a sight-threatening corneal disease. We look forward to following these patients' outcomes as we target NDA submission for Epioxa by the end of 2024. As you can see, we have a lot to be excited about when it comes to the significant potential value that we believe our pipeline programs may create. At the same time, as we discussed last quarter, we continue to prioritize the cadence of our investments as we strive to strike the right balance of risk-based investments and our capital position now and in the future.

As evidence of that, our non-GAAP SG&A and R&D operating expenses in the second quarter, moderated to 6% year-over-year growth, reflecting some of the initial development adjustments, adjustments we've made in our earlier-stage pipeline programs as we continue to prioritize our resources ahead of the anticipated iDose commercial launch early next year. In conclusion, I'm very pleased with the record quarter and building momentum in our business as we continue to successfully advance our mission to truly transform vision by pioneering novel dropless platforms that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight-threatening chronic eye diseases. With that, I'll open the call for questions. Operator?

Operator (participant)

At this time, if you'd like to ask a question, simply press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question will come from the line of Tom Stephan with Stifel. Please go ahead.

Tom Stephan (VP of Healthcare Equity Research)

Great. Hey, guys. Thanks for the questions. First one, I'll start with iDose. I guess big picture, in your guys' minds, what does a successful launch in 2024 look like? The rest of you hear different numbers. I think $50 million has been cited as a year one number, but even if it's run rating more in the $30 million-$40 million range, is that a decent starting point, or benchmark as we try to refine our models? For year one iDose, now that we're getting much closer, to it hitting the market. Just any guardrails for how to think about 2024 iDose would be very helpful.

Joe Gilliam (President and COO)

Hey, Tom, it's Joe. I'll start, and Tom may wanna add some color commentary at the end, too. You know, as we think about iDose, and obviously I'm not gonna comment on the specifics of the guardrails of any given number, how will we define success? I think we're gonna define success in a couple different ways. First, the more broad theme of continue to drive the interventional glaucoma mindset, and really, the need and reason for intervening with these safe and minimally invasive technologies. Specific to the launch, you've been around the story long enough to know that our focus is on making sure that we deliver the right kind of training, and the right kind of outcomes for surgeons out of the gate.

We're gonna prioritize doing this the right way, and doing it the right way, both from the surgeon's perspective, as well as ultimately in, in achieving, you know, the optimal sort of reimbursement outcomes and everything else that go to drive long-term success over, you know, any particular, you know, quarter or, or target number for the year. Obviously, you know we're enthusiastic about what iDose means for our future, and we're gonna make sure we put the right building blocks in place to, to achieve that success.

Tom Stephan (VP of Healthcare Equity Research)

To pivot to Infinite, maybe a two-parter, but any trends you can speak of with Infinite to date and maybe even into 3Q? Just momentum with that product here in the U.S., any color you can provide would be very helpful. In terms of the facility fee proposal, really encouraging to see, you know, I think over a doubling of the ASC facility fee. Can you just talk about what that could mean in 2024 for the product? Maybe more specifically, do you think there's a good opportunity to take some price on that product? Thanks.

Joe Gilliam (President and COO)

Thanks, Tom. I, I think first, just in terms of the broader trends of iStent infinite, we continue to be really pleased with the momentum here. As we wind our way through the formal MAC and, and coverage process, both with... in the Medicare side, as well as the commercial side, payer side. To see the, the early utilization, and adoption the way we've seen it is, is, is really particularly encouraging when you put it in the context of where we're, where we're at on the reimbursement side, which, you know, with, with, as you know, five of the seven MACs having proposed draft, draft LCDs for coverage, that's largely aligned with, with our formal coverage request and the product's label, and the other two having addressed it via, you know, local coverage articles or LCAs.

We're making our way through that process, but it's still early. The, the, the, the momentum we're seeing around iStent infinite and its utilization speaks a lot to the potential, need for a product like this in the marketplace, even though we're still working our way through the, the formalities achieving proper, coverage from the various, MACs and commercial payers. I think as it relates to the facility fee 2024, you heard Tom reference in the, in the prepared remarks that we're obviously pleased to see the proposed rule, as it relates to the facility fee for Infinite and combo cataracts.

As you know, it's pretty consistent with what we've said historically we would expect, given on the data that, that we see, but sometimes it takes some, some time to work through the process. To, to be here with a proposed rule, we're obviously pleased in what that means for 2024. As you know, pricing, really getting to the heart of that second question, pricing a product is, it's multifactorial in terms of product attributes, your overall portfolio, competition, yes, reimbursement. What I can say is that I think the proposed changes, if they're finalized, will, will thankfully enable facilities that do these sight-saving procedures to receive appropriate reimbursement that, that makes the procedure economically feasible for them. I think, you know, patients end up benefiting in the end of that.

Tom Stephan (VP of Healthcare Equity Research)

Got it. Thanks, Joe.

Operator (participant)

Your next question will come from the line of Ryan Zimmerman with BTIG. Please go ahead.

Ryan Zimmerman (Equity Research Analyst of Medical Technology)

Hey, guys. Thanks for taking the questions, and nice results here. I, I guess I wanna ask first on guidance. You know, if you look at kind of where the guidance is going based on results, and Joe, you know where I'm going with this question, it implies it's kind of a step down on an absolute dollar basis in the back half of the year, relative to, you know, what is historically a strong seasonal fourth quarter? You know, any color here on kind of your thought process? The second part of the question is just what impact from the proposed LCDs and the other two MACs have you seen in numbers in this quarter, in the second quarter, and kind of what effect has that had kind of on physician behavior? I have a follow-up.

Joe Gilliam (President and COO)

Sure, Ryan. Obviously, expected it in that context. I think. Well, let me start first. Obviously, it was a high-quality first half, and the second quarter from an execution expect, you know, execution standpoint, it exceeded our expectations across the board. When you think about 2023, for us, it really remains all about building the strongest foundation possible ahead, ahead of what we think will be a pretty transformational period for our company going forward with Infinite, iDose, and Epioxa. A good start in the first half, but we have a lot of work in front of us as we continue to lay that foundation. I think at the outset of the year, we were pretty clear we wanted to walk before we ran as it related to guidance.

I think the update we're giving here today probably reflects of us starting to, to jog, to use the same analogy. What have we tried to reflect, and, and what's included in that? I'll, I'll try to give a little bit of color here. We've tried to reflect, obviously, the encouraging first half trends that you pointed to and, and what that can mean. We've also tried to factor in the fact that as we look across the landscape, and, and you all see this even more than we do, that healthcare procedure trends broadly feel pretty healthy and, and maybe even a bit elevated in the first half, as, as some of the staffing constraints that had, that had been an issue in 2022 started to ease a bit, and that enabled accounts to work through their backlog.

Our guidance that we're reporting for today assumes more of a normalization of that reality in the second half. It also assumes that we've really not included any material benefit from the finalized LCDs in 2023, particularly as it relates to iStent infinite. This ties a little bit into the second, you know, part of your question, which I'll get to in a second. What we've really assumed is that we remain in a steady state. We can talk about it more in the context of the LCD process, but there's no certainty in terms of exactly when those will be finalized. Once we know that, we can obviously better quantify the potential impact that has, especially as it relates to iStent infinite.

We have to factor in the summer seasonality, which we always do in globally, in Q3 in particular. You know, that's been more pronounced in recent years coming out of, out of COVID. Then the ongoing competitive dynamics, you know, including from Alcon as, as well as some of the more invasive, but profitable procedures. That really ties into your the second part of your question. I, I, I think the LCD that is proposed, I, I wouldn't say we've seen much of an impact at all from those in the context of what's happening here and now in the marketplace. They're, they're proposed, they haven't changed any of the coverage rules for these products.

Until they do, I would expect that surgeons largely continue to operate, as they have been, on the basis of the reimbursement and the coverage that exists today.

Ryan Zimmerman (Equity Research Analyst of Medical Technology)

Okay, very thorough on that. I'm going to squeeze in one more. Just, Tom, you, you talked about moderating spending, and I, I thought that was an interesting comment, given, you know, kind of we're about to prepare for what is, you know, arguably one of the biggest products in the company's history and, and a launch around that? So, you know, I think the earlier question kind of talked about what is a successful launch, but maybe on the other side of the P&L, I mean, what does moderating spending mean in terms of how you go to market and, and, you know, sell iDose in, in a, you know, from a commercial standpoint?

Tom Burns (Chairman and CEO)

Yeah, great question. Happy to answer it, Ryan. When I talk about moderating, we're talking about an extensive array of organic development programs that we've been really blessed to have in the organization as we're carrying these forward. That obligates me and compels me to prioritize and use our capital in the best way to establish benefits of risk and optimal return on investment for shareholders. That's what we're doing. I wouldn't be, draw the wrong conclusions. I would tell you that we have tremendous capital that we'll employ towards the significantly successful our target launch of iDose. That is a, is a question of timing. Expect some of that to occur, occur later this year and on into 2024.

We understand the order of magnitude that this launch could be for the company, and so I can assure you that we'll make the necessary capital and put the necessary capital behind this launch to make it a success.

Ryan Zimmerman (Equity Research Analyst of Medical Technology)

Understood. Thank you.

Tom Burns (Chairman and CEO)

Thanks, Ryan.

Joe Gilliam (President and COO)

Thanks, Ryan.

Operator (participant)

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

Charles Ellson (Senior Manager of Medtech Business Intelligence)

Hi, this is Charles. I'm for Larry. First, congrats on the nice quarter. First question, a quick follow-up on guidance. Wonder if you could give a little thoughts on the quarterly cadence of, of sales through the back half of 2023? I know you mentioned, I know you mentioned a little summer seasonality, so I don't know if that's implying that Q3 little, little lower and Q4 is a bit of a step up, but, maybe some thoughts on that? I have a quick follow-up on iDose.

Joe Gilliam (President and COO)

Yeah, Charles, I, I think that you, you hit it with really the way you asked the question. If, if, if you look, implied the guidance is that the second half looks somewhat like the first half, and that the, you know, I think the summer seasonality dynamic that we've seen in recent years plays itself out here in the third quarter. You know, the, the last month of the quarter tends to, to drive a lot, as people return back to doing procedures, you know, in, in a fulsome way on a global basis. We'll see how that plays out. At this point, yeah, I, I would expect that the Q3 sees a, a, a bit of a downtick from that summer seasonality, and then that recovers in Q4.

Charles Ellson (Senior Manager of Medtech Business Intelligence)

Great. Thank you. So do you still expect no restrictions on the repeat, repeat procedures upon approval? You said you plan to work towards reimbursement for iDose in the office setting. How long do you think that could take after launch? Do you think that's a, that's a big catalyst for adoption?

Tom Burns (Chairman and CEO)

Yeah, Charles, I'll be happy to take those. Your first question was on whether or not we expect to be restricted at all in exchange, we've answered this before and continue to express confidence that that won't be an imposition for us. If you, if you recall our exchange study that we did by re-consenting patients in the phase II-B study, we had 33 patients that we were following over five years, and we saw no, no real substantive differences between treatment and control. We feel confident that we will not have a restriction going into that study.

Now, with regards to how we will go to launch, again, it's important that we take this in a twofold way. One, I want to provide site of surface, offerings for surgeons to be able to do the iDose both in the office and certainly in the ASC. Recall that as we get to launch, we, we will be approaching MACs to establish an appropriate professional fee. There'll be an assignment to an APC, that will, that will then, typically, we'll see that over the first half of the year. On the drug payment side, you will call, we'll have a miscellaneous C-code at launch, and we'll file for a HCPCS code, which in my experience and others, typically takes two quarters to be able to get a former J-code. That J-code will apply to both ASCs and to in-offices.

When we talk about in-office use, which we believe will become an important part of the use of iDose over time, what we'll need to do is to establish non-facility payment, and that's done by approaching the MACs individually. We will need to get society specialty, society support, and KOLs. What we'll do is we'll develop a practice expense workup, which will be the basis for which these MACs will be able to consider what the professional fee will be for a non-facility payment in-office. As you recall, typically, that, that professional fee payment is higher in the non-facility because there is no... or in the non-facility because there is no facility payment. The professional fee we expect will exceed the professional fee on the ASC side. This is something that happens serially.

It happens case by case as we go forward with the MACs, so it'll be something that will occur over time. As I've said now, probably since we've had our IPO, this will be an important component longer term to give the physician, the physicians, the ability to use in-office as a site of service for what we believe will be a game-changing technology.

George Sellers (VP and Equity Research Analyst of Medical Devices)

Great, thank you.

Tom Stephan (VP of Healthcare Equity Research)

You're welcome.

Operator (participant)

Your next question comes from the line of George Sellers with Stephens. Please go ahead.

George Sellers (VP and Equity Research Analyst of Medical Devices)

Thanks for taking the question. Congrats on a great quarter. Sticking with iDose, you've obviously had some success with iStent infinite adoption, despite working through some of the reimbursement processes with the MACs. I'm just curious, as it relates to iDose, is there anything we can kinda take from that commercialization of iStent infinite and apply to the expected commercialization of iDose? I know we're still waiting on approval, and it's a little bit more complicated than Infinite in a lot of ways, but, you know, what could demand for iDose look like prior to reimbursement fully coming together? How do you expect that to sort of progress?

Joe Gilliam (President and COO)

Yeah, I mean, I, I think it's hard to draw a direct line between, you know, the experience with one product versus the next, given they have different labels and different indications and different, you know, patient populations that they're, they're, they're targeting. I, I think the thing that you can take from Infinite is, you know, our commitment to doing it the right way, to being methodical in the way we launch these products, and the way that we train our surgeons, and the way that we make our way through the reimbursement process. You know, over a couple of decades, we've, we've, we've earned a lot of experience in going through these processes of launching new products into white spaces. I think iDose, in some respects, will be another example of that as we go forward.

You know, I, I think we there's enough variables in play there that, you know, we'll address what we expect for 2024, for example, when, when we get to our guidance for that year versus getting ahead of that, now at this point.

George Sellers (VP and Equity Research Analyst of Medical Devices)

Okay, that, that makes sense. Maybe switching gears a little bit, you also recently announced an agreement with RadiusXR, and I'm just curious if you could give some additional details on that deal, any incremental costs you're expecting this year associated with that, and then also maybe what's assumed from that in the current guidance?

Joe Gilliam (President and COO)

Yeah. I'll start in reverse order. I think from a expense standpoint, it's pretty immaterial. I, I wouldn't call anything out. I think you agree, Alex?

Alex Thurman (CFO)

Correct.

Joe Gilliam (President and COO)

From a, from a guidance perspective, yeah, it's factored in there. I, I wouldn't call that as a particular material driver of, of the guidance at this stage. You know, but, but what really is behind RadiusXR and why we're doing it is, is, you know, we've talked about some time about our role in pioneering these markets and growing the markets, and part of that is trying to make sure that we're helping to democratize testing and screening in a way that identifies these patients and helps them, you know, wherever they're first presenting themselves from a site of service standpoint. Whether it be an optometrist, whether it be a retail optometrist, like a Walmart Optical, or, or ultimately, obviously in the MD, you know, setting, that, that they're getting access to technologies that can efficiently and easily test them for these site-threatening diseases.

Hopefully, identifying them more early, and getting them the kind of care that they, that they need and deserve, sooner rather than later. Today, as it stands, as you know, in many of these optometry centers in particular, alongside of even some ophthalmologists, they're, they're limited in terms of the diagnostic capabilities or when and where they actually deploy the diagnostic technology they have to, to really test these patients. Our hope is that by putting some incremental muscle behind a technology that we think is truly best in class in RadiusXR, that we can help democratize and really drive that, that screening and diagnostic side of the equation.

George Sellers (VP and Equity Research Analyst of Medical Devices)

Okay. That's really, really helpful. Thank you all for the time, and congrats again.

Joe Gilliam (President and COO)

Thanks, George.

Operator (participant)

Your next question comes from the line of Joanne Wuensch with Citi. Please go ahead.

Joanne Wuensch (Managing Director)

Good afternoon. Thank you for taking the questions. I'm curious about two things. One is, at what stage are you comfortable sharing with us what the ASP is for iDose? Because we've heard a number of different numbers tossed around. The second question I have is, your OUS MIGS is really strong, and I'm curious whether or not there's pent-up demand or a new region you opened up, any stocking, and would you be surprised if this didn't continue for the remainder of the year? Thank you.

Tom Burns (Chairman and CEO)

Thanks, Joanne. I'll take the first part of the question. With regards to iDose pricing, we are still contemplating what that price will be, and as I've said all along, we're being highly contemplative. We're looking at Markov transition probability analysis, burden of illness analysis. I'm factoring in what Durysta charge, you know, over $2,000 in a J-code for four months of therapy. I'm also looking at surgical pharmaceuticals, both on the anterior segment side and on the retinal side, which I think will guide me in the basis for what I think will be a fair and compelling price. I would expect you not to hear that price until we are FDA approved. We'll be contemplating that.

We'll take our time, we'll make sure we get it right, and then, and then, some short time after FDA approval, you will, you will hear, and we'll disclose the pricing for iDose.

Joe Gilliam (President and COO)

On the international side, it really was another standout record quarter. You know, 27% constant currency growth year-over-year, and 6%, I think, sequentially. It was broad-based, Joanne, across all of our regions, and really, I, I think, reflects that strong execution by our teams globally. If you think about it, we're really pioneering a change in standard of care in each of these markets, just like we've been doing in the U.S. for some time. All of the various markets that we're in today are in a little bit different stage of that. All the things that you know we've done here to build the MIGS marketplace as it exists today, in terms of the broader support, both from the community, the surgical treatment algorithms, the reimbursement dynamics in each of these.

All these markets are in a little different place, and so we're still making our way through really building. In virtually all of the markets we're in, we're still very much in the growth phase of that business. We didn't add any new regions or any, you know, unique drivers here. I think probably at the beginning of 2022, from a growth standpoint, there was still a little bit of lag effect. A couple of the regions still felt a little touch of COVID. They probably had those numbers a little depressed on a year-over-year growth standpoint. All in all, we couldn't be more pleased with the execution of the team.

I, I do expect that similar to what we talked about in terms of the macro guidance, you'll probably see a little bit more normalization. I, I think the same dynamics that have been playing true here in the, in the U.S. from a, you know, a staffing levels and getting back to business as normal and clearing some of the backlog. You know, inherent in our, our guidance is that we'll see a little bit of normalization there in the second half, not just in the U.S., but, but globally. We would expect that, that, that business, from a growth perspective, would come in a bit in the second half relative to what we've experienced thus far in the first.

Joanne Wuensch (Managing Director)

Thank you.

Operator (participant)

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

Phil Dantoin (Assistant VP)

Hey, this is Phil on for Matt. Thanks for squeezing us in at the end, congrats on another great quarter. Just for starters, I don't want to belabor the point here, but laying the groundwork for an early 2024 launch of iDose, how are those conversations with docs going as far as using the currently available miscellaneous J-code? What I'm really trying to get at is, that requires that pre-op process. Are, are docs aware of how that process works and, and what might early utilization look like there?

Joe Gilliam (President and COO)

Sure, Phil. I, I, I, I think a couple things first. You can imagine that, given iDose has not yet received approval, the, there really aren't conversations specific to iDose, as it relates to, to, to, the, the reimbursement and how the dynamics with miscellaneous codes, and all those various things go specific to the product. The vast majority of our customers have been through this before in some capacity. Some are better at that process than, than others, and all I can tell is that we're very prepared for that part of the launch and educating our customers as we go through that, getting them comfortable with how that will work. Ultimately, you know, as you can expect, many of them will want to see it, and see themselves do it successfully.

We do expect that they themselves will, will walk a bit before they run, as, as I like to say. It's something we're, we're prepared to take care of and educate at launch on a customer-by-customer basis. Getting ahead of it and their knowledge today is more based upon their broader experience in the industry than it is specific to iDose.

Phil Dantoin (Assistant VP)

That's helpful, and then just one follow-up on, on R&D. You know, I noticed. I, and I know you called out some initial development adjustments in some earlier stage pipeline programs, and I don't, I don't think I heard anything specifically called out there. I just wanted to, to check if there was any impact to iDose TRX.

Alex Thurman (CFO)

Hey, Phil, this is Alex. I'll just kind of comment on that. It goes kind of what Tom was earlier speaking about, which is, you know, we have sat down as we looked at our capital position, we looked at our pipeline, we looked at the iDose launch and what we needed to invest in for that activity. We've started to make decisions around, you know, allocating those resources appropriately in order to really fulsomely prepare for and invest in the iDose launch that's coming up. I don't think we've gotten much more granular than that.

Joe Gilliam (President and COO)

Yeah, I don't think we've said anything specific to any individual programs, but you can imagine that the iDose franchise remains a top priority for us, not just the first generation, but I heard you reference, you know, TRX and, and sort of the extended release portion of that, and we continue to move forward full steam ahead on that front.

Phil Dantoin (Assistant VP)

Makes sense. Thanks so much.

Operator (participant)

Your next question comes from the line of David Saxon with Needham. Please go ahead.

Joseph Conway (Equity Research Associate)

Hi, guys. This is Joseph on for David. Maybe one on iStent? In terms of, adoption for, for iStent infinite, are you seeing attraction from, from new docs to, to Glaukos, or is the adoption primarily centered around, you know, current iStent, inject users?

Joe Gilliam (President and COO)

Yeah, Joseph, I, I, I think you're always gonna see a little bit of that, but you have to put it in the context of the stage of where we're at. I, I think at this stage, the majority, if not the vast majority of that adoption, utilization, expansion, the standalone utilization, et cetera, is happening, happening within customers that have been Glaukos customers for some time.

Joseph Conway (Equity Research Associate)

Mm-hmm.

Joe Gilliam (President and COO)

That tends to be how you, you launch these things, anyway, and I think it's true with iStent infinite. Now, as we continue to move forward and establish reimbursement coverage, we certainly hope that it'll expand more, particularly in the glaucoma community, where this product should be, you know, well-received. For folks who may today be spending their time a little bit more in the late-stage procedures, you know, tubes and trabs and, and, and other devices that work at that stage, you hope that obviously they'll start to adopt iStent infinite as the coverage really picks up on the reimbursement side, and they're able to run free.

Joseph Conway (Equity Research Associate)

Okay. Fair enough. Makes sense. Maybe, maybe a bigger picture question. You know, with the products you have approved today, you know, what would you kind of say your long-term growth profile is? You know, what do you think the, the glaucoma business can, you know, grow longer term? You, you talked about corneal health growing, you know, 8%-12%. Is that still kind of your thinking, or, you know, as reimbursement starts to get more specific, could there be, you know, upside to that?

Joe Gilliam (President and COO)

Well, I think there's a couple different parts that, you know, within your question. You know, specific to the Corneal Health business, I think we, you know, we continue to think about that as a, at the moment, a high single dig- digit type growth franchise. We're encouraged by what we've seen so far in the first half. We'll need to see a little bit more from that business before we, we, you know, upgrade that, if you will, in terms of our growth expectations. I, I think more importantly, you know, the macro question that you're asking, to me, it's, it's, it's hard at our stage to put a, a, a number out there and say, "We think we can grow X."

The reality is, is that we've been operating in both sides of our business, US glaucoma, and corneal health, and for that matter, international glaucoma, inside of still relatively small markets versus what we're about to start embarking on. When you think about the size of the combo cataract opportunity relative to what we can potentially achieve as we drive the interventional glaucoma change in standard of care, if you will, and the sheer number of patients who can benefit from that mindset relative to the combo cataract setting, I think we're very excited about what this next chapter means for Glaukos and where we're gonna go. And I think in a similar fashion, Epioxa represents that same type of transformational moment, if you will, for us on the cornea side as we get closer and closer to hopefully that approval and launch.

We have a lot of reason for optimism about what that long-term growth trajectory looks like, where we're swimming in a much, larger and, and deeper ocean as we, as we move forward here, and I think that's gonna hopefully benefit, us and, and you all as shareholders.

Joseph Conway (Equity Research Associate)

Okay. Great. Thank you very much. Yeah, thanks for taking our questions, and congrats on a great quarter.

Operator (participant)

Your next question will come from the line of Steve Lichtman with Oppenheimer. Please go ahead.

Ron Feiner (Equity Research Associate)

Hi, guys. This is Ron on for Steve. Congrats on the quarter. Just wanted to ask you guys, in your earnings desk, you mentioned potential normalization of procedure volumes in the second half of the year, following what may have been a work down of the backlog in the first half. Can you guys talk a little bit about what you're hearing from the field on that front and, where you think we are in terms of the backlog?

Joe Gilliam (President and COO)

Yeah, Ron, I think in some ways it's what we're not hearing from the field. If you think about it last year, and we called this out on several of our calls, what we were hearing from doctors in the field was a fair amount of feedback around staffing levels and constraints, and the turnover, and the inability to hold and retain a fulsome staff that enabled, for example, doctors who have two OR bays to work in both simultaneously. You were pretty consistently hearing that theme. I think as we turn the corner into this year, and certainly as we've made it along, we've heard less and less of that, if at all, quite frankly. I'm sure it obviously still exists in pockets, but it's less pronounced. I think-...

The broader point around procedure trends and the backlog is almost more of a macro one. When we look across the landscape, and obviously, you cover a lot of different industries and companies, and we saw this in the first quarter, you see it again in the second, it feels like in general, procedure volumes have been pretty robust. I think that while I can't point to any specific, you know, number or item, in ophthalmology or within mixed procedures, in general, it feels like folks have been back to work, and they've been working their way through. Net-net, they're making their way through whatever backlog tended to exist.

It's impossible to know exactly when that will normalize, but we felt like it would made more sense to make the assumption that whatever elevation existed in the first half, that it may not continue in the second half, and if it does, obviously, that will accrue to all of our benefits.

Ron Feiner (Equity Research Associate)

Well, that's great. Just one small follow-up on iDose. Do you guys think there's any chance that a panel will be called for this, or is it already too late for that to happen? Thanks.

Tom Burns (Chairman and CEO)

Hey, Rob, I'm happy to take that question. This is, it's been asked a few times before, but happy to address it again. We, we currently do not believe that there'll be an advisory panel that will be requested. Yes, right now, we're moving towards our PDUFA date. Everything's on track, going very well. We just finished a pre-approval inspection, which we believe went very, very well and we'll expect to file a written confirmation of that in the next few weeks. As well, the FDA is meeting CDER and CDRH for a mid-cycle review, and we'll expect to receive some interim questions, which will hopefully put us in a really advantageous position going into the PDUFA date.

The short answer to your question is no, we don't expect that there'll be an advisory panel.

Ron Feiner (Equity Research Associate)

Thanks, guys. Congrats again.

Operator (participant)

Your next question comes from the line of Allen Gong with JPMorgan. Please go ahead.

Allen Gong (VP)

Hi, team. Congrats on the good quarter. You know, I think a lot of the questions have been asked already, so I'll just keep it to one. When I think about iDose, you know, I fully understand that it's kind of hard to predict the success. When I think about the competitive landscape, you know, the fact that there is a, you know, somewhat comparable product, the profiles are clearly very different, but a somewhat comparable product on the market already. How should we really think about, you know, maybe iDose benefiting from that as a secondary player, whether or not we might see competitive dynamics from that early, or if it is more just about expanding the market opportunity and kind of establishing iDose as a differentiated solution? Thank you.

Tom Burns (Chairman and CEO)

Well, I'm happy to take the first part of this, Joe, answer as, as you will. Alan, I would just tell you that I really don't see Durysta as something that I would take a lot of comparability towards. I mean, you've got a product that is a bioerodible, that is lasting a period of four months, relatively short period of time, has shown a relatively high rate of endothelial cell loss, which restricts its use to a one-time use, and throws off relatively high rates of hyperemia as well, due to its Gaussian profile of release.

Versus a product such as what we have, which is showing basically a safety profile where we have no endothelial or limited to minimal endothelial cell loss that we see, and a 3% rate of hyperemia, and a product that you've seen in the phase II-B clinical trial, that in 70% of patients is controlling glaucoma at three years. I don't see a lot of comparability between the two products. I don't take a lot of use Durysta as a predicate. I think where Durysta serves our interest is the fact that they did establish a J-code at $2,100 for four months of therapy. I think that will will serve us well going into the pricing for this product.

I will tell you this, given some of the limitations of Durysta, I might draw some high optimism that even with these limitations in place, there has been a relatively strong appetite, at least for the concept of intraocular drug delivery. Joe?

Joe Gilliam (President and COO)

Yeah, I'd, I'd just add, I think the two things that, that, that benefit us in the iDose launch, one specific to Durysta, one, one not. I think anything today, that's helping drive that interventional glaucoma mindset is a positive. You know, as we continue to think about, driving that change in standard of care, the fact that Durysta and Allergan and, and their reps have been out talking about that, alongside all of the efforts that we're in muscle, that we're putting behind that, as, as you know, I, I think that, that continues to hopefully turn the broader industry towards what we think is, is the optimal course of, of care for these patients. The, the second thing is, obviously, it's, it's less about, any competitor. I think it's more about just the state of the industry.

You think back to when Glaukos first launched MIGS, and with iStent, there were a lot of basic blocking and tackling, even in the combo cataract setting, that the company had to go through around, you know, reeducating and, and, and teaching surgeons surgical techniques that a lot of them hadn't done since their residency. So as we go into any of these things, whether it's iStent infinite or iDose, the good news is that now surgeons understand much more fulsomely the angle-based surgery and the various technical aspects. So it's much more about the features and benefits, the safety profile, as Tom's talking about, the individual product, and what that use case is for the appropriate patients that are on label. So.

I, I think that we enter into it with a far more educated marketplace in terms of interventionalism, and we're gonna obviously do our part to, to drive that forward even faster.

Operator (participant)

Our final question will come from the line of Anthony Petrone with Mizuho. Please go ahead.

Anthony Petrone (Managing Director and Senior Medical Devices, Diagnostics, and Therapeutics Equity Research Analyst)

Thanks. Congrats on a good quarter here. Maybe two quick ones. One is on the, on the core MIGS space, and just wondering if you have any views on, on how it could shape up into next year, if non-implantable MIGS procedures are become a non-covered procedure across certain MAC territories next year? How do you see the core space evolving if that scenario plays out? The second one, real quick, would just be on the iDose label. Is there anything of note, just on the latest views from Glaukos, on how you're thinking about duration of the implant? What can be included in the label for duration on iDose? Thanks.

Joe Gilliam (President and COO)

Okay, Anthony, I'll start, then Tom can, can jump in on the second part around iDose. I, I think, you know, as it relates to the proposed LCDs and outcomes, yeah, we're prepared for any scenario there that, that emerges, and I, I'm not sure I would hazard a guess at this stage, nor attempt to quantify it, because there's so many different factors that could play out as these things are finalized, hopefully in the coming months, if not, if, if not quarters. Yeah, our, our focus is on building a healthy and growing market that benefits patients. We think supporting surgeons making clinical decisions and not payers is optimal in that regard.

So, you know, it really, at the end of the day, if you take a long-term view, I, I think we would all agree that getting interventional glaucoma, iStent Infinite, and iDose right is probably far more material to our future than those near-term dynamics. While I understand and appreciate the, the, the question, I think that's where our focus is at.

Tom Burns (Chairman and CEO)

Anthony, I'm happy to address the second part of your question. With regards to the label, again, we are under a 505 B 2 regulatory path, and so the likely label that in our expectation would be that it would say something to the effect of, for the reduction of intraocular pressure in ocular hypertension and open-angle glaucoma patients. A significantly wide-open label, which will be based really on the three month non-inferiority primary efficacy endpoint that we established in the pivotal trial. We do not expect the label to specify our extended duration. For that, I think we've been prescient in extending the phase II-B study out to three years. That will become the important component.

That three-year, three-cohort study we did with the phase II-B will allow us to approach payers to be able to substantiate the need both for coverage and payment.

Anthony Petrone (Managing Director and Senior Medical Devices, Diagnostics, and Therapeutics Equity Research Analyst)

All right. Helpful. Thank you.

Tom Burns (Chairman and CEO)

You're welcome.

Operator (participant)

I'll now turn the call back over to the company for any closing remarks.

Tom Burns (Chairman and CEO)

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

Operator (participant)

That will conclude today's conference call. We thank you all for joining, and you may now disconnect.