Glaukos Corporation — Q3 2023 Form 10-Q
Business context and reporting period
Ophthalmic medical technology and pharmaceutical company focused on glaucoma, corneal disorders and retinal disease. This unaudited filing covers the quarter and nine months ended September 30, 2023; comparisons are with the same 2022 periods unless stated otherwise. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net sales | $78.0M | $71.3M | $232.3M | $211.6M |
| Gross profit / margin | $59.5M / 76% | $54.4M / 76% | $175.7M / 76% | $159.9M / 76% |
| Operating expenses | $87.5M | $76.0M | $265.7M | $208.5M |
| Operating loss | $(28.0)M | $(21.6)M | $(90.1)M | $(48.6)M |
| Net loss | $(30.4)M | $(27.6)M | $(97.9)M | $(67.7)M |
| Basic and diluted loss per share | $(0.63) | $(0.58) | $(2.03) | $(1.43) |
- Q3 revenue increased 10%; U.S. glaucoma sales rose 2%, international glaucoma sales 23%, and corneal health sales 12%. For nine months, revenue increased 10%; international glaucoma sales rose 22% in reported dollars and 25% in local currencies.
- SG&A and R&D grew as the company expanded commercial infrastructure and development programs. Nine-month R&D also included a $3.2M payment associated with the iDose new drug application.
- Operating cash use was $47.1M for the first nine months, versus $28.9M in 2022. Investing activities provided $27.0M, primarily reflecting net sales and maturities of short-term investments; financing activities provided $7.7M. Cash, cash equivalents and restricted cash declined $11.8M to $114.8M.
- At September 30, cash and cash equivalents were $108.9M and short-term investments were $191.9M; restricted cash was $5.9M. Working capital was $332.4M, down from $371.5M at December 31, 2022.
- Convertible notes had $287.5M principal and a $282.4M carrying amount; they bear 2.75% interest and mature in 2027. Finance lease liabilities were $70.8M. The notes’ fair value was $453.6M at quarter-end.
Material changes versus the prior period
- Nine-month net loss widened to $97.9M from $67.7M, while operating loss widened to $90.1M from $48.6M. Revenue growth did not keep pace with higher operating expenses.
- 2022 included a $30.0M Ivantis settlement payment recorded as a reduction of operating expenses; no comparable settlement benefit was recorded in 2023. Acquired in-process R&D expense was $3.0M in 2023 versus $10.0M in 2022.
- Cash used in operations increased by $18.1M year over year. Management attributed 2023 cash use principally to operating losses and working-capital movements.
Outlook, commentary and key risks
- Management said existing cash and investments, together with expected cash flows, should fund operations, capital expenditures and known obligations for at least the next 12 months and the foreseeable future. It expects capital expenditures to moderate over the next 12 months as manufacturing expansion nears completion. No numerical revenue or earnings guidance was provided.
- Lower Medicare physician reimbursement for certain iStent procedures continued to pressure U.S. combo-cataract glaucoma volumes. Proposed 2024 CMS rules included increased facility fees, but final rates and their effect were not yet known. Medicare contractor coverage decisions could benefit some products and restrict others.
- Management reported ongoing supplier challenges, higher costs for certain inputs and occasional delivery delays, which it expected could continue through the rest of 2023. Persistent disruptions could affect product shipments and pipeline timelines.
- Research, clinical and regulatory outcomes remain uncertain. The filing notes FDA review requirements for drug-device combination products, a second pivotal study for Epioxa, and reimbursement and approval uncertainty for products in development.
- Convertible-note holders became eligible to convert during October 1–December 29, 2023 after the stock-price conversion condition was met. Cash settlement could reduce liquidity; accounting reclassification of some or all principal as current could materially reduce working capital. The company may elect to settle conversions in cash, shares or a combination.
- On May 16, 2023, Glaukos acquired ophthalmic intellectual property for $3.0M in common stock, with potential future milestone and royalty obligations. It also agreed to fund Radius XR up to $5.0M under specified conditions; $0.5M was outstanding at quarter-end. A separate Stuart Therapeutics license and $2.0M upfront payment occurred after quarter-end, on October 16.
- The filing cites foreign-exchange and macroeconomic uncertainty, competitive pressure, reimbursement changes, manufacturing concentration and regulatory risks. Management reported effective disclosure controls; no legal proceedings were reported.
Important facts for investors to verify
- Final 2024 CMS reimbursement rules and subsequent Medicare contractor coverage decisions, including effects on iStent and other procedures.
- Whether noteholders convert, the company’s settlement choice and any resulting debt reclassification or liquidity impact.
- Revenue and procedure-volume trends by product and geography, particularly U.S. glaucoma and international sales.
- Progress, timing, regulatory outcomes and funding needs for iDose, Epioxa and other development programs.
- Whether supply constraints, planned capital-spending moderation and operating cash use develop as management expects.
- Potential milestone, royalty and funding obligations related to the intellectual-property acquisitions, Radius arrangement and Stuart license.