Glaukos Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Glaukos develops and commercializes ophthalmic medical technology and pharmaceutical products for glaucoma, corneal disorders, and retinal disease. Unless stated otherwise, financial amounts below are in U.S. dollars.
Financial highlights
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Net sales | $67.7 million | $68.0 million; down 0.4% |
| Gross profit / margin | $50.6 million / 74.8% | $51.3 million / 75.5% |
| Operating expenses | $40.8 million | $63.1 million; includes a $30.0 million settlement credit in 2022 |
| Operating income (loss) | $9.8 million | $(11.8) million |
| Net income (loss) | $5.4 million; $0.11 per diluted share | $(16.5) million; $(0.36) per share |
| Cash from operations | $9.8 million | $4.2 million |
| Cash, cash equivalents, and short-term investments | $415.4 million | $414.1 million at December 31, 2021 |
| Working capital | $435.6 million | $422.8 million at December 31, 2021 |
Business performance and changes
- U.S. glaucoma sales fell 15% to $33.9 million. Management attributed the decline principally to lower 2022 CMS physician reimbursement for trabecular bypass stent procedures performed with cataract surgery, customer trials of competing products, and COVID-related volatility early in the quarter.
- International glaucoma sales rose 28% to $17.6 million, reflecting stronger procedure demand as markets normalized, partly offset by unfavorable foreign exchange.
- Corneal health sales increased 13% to $16.1 million, including higher Photrexa sales and realized average selling prices.
- R&D expense increased 27% to $26.9 million, reflecting greater investment in clinical and development programs. SG&A increased 5% to $43.9 million.
Cash, debt, and liquidity
- Cash and cash equivalents were $106.2 million and short-term investments were $309.2 million at March 31, 2022. Restricted cash of $9.4 million was also reported; total cash, cash equivalents, short-term investments, and restricted cash were $424.8 million.
- Operating activities provided $9.8 million. Investing activities used $5.9 million, including $6.6 million of property and equipment purchases; financing activities provided $1.4 million.
- The company had $287.5 million principal amount of 2.75% convertible senior notes due 2027, with a $280.4 million carrying value, plus $72.6 million of finance lease liabilities and $29.3 million of operating lease liabilities.
- No note-conversion conditions were met as of March 31, 2022. If conversion conditions are met, cash settlement could affect liquidity; the company also disclosed possible current-liability reclassification under applicable accounting rules.
Outlook, risks, and unusual items
- Guidance: The filing provides no quantified revenue or earnings guidance. Management expected 2022 and near-term results to reflect competition, reduced CMS reimbursement, and continuing COVID-19 disruption; it also expected operating expenses and capital expenditures to increase as investment and facility expansion continued.
- Settlement: Glaukos received the second $30.0 million payment under its Ivantis patent-litigation settlement in Q1. It was recorded as a reduction of operating expenses, materially affecting the reported year-over-year improvement in operating income. Ivantis also owes quarterly royalties of 10% of specified Hydrus sales through April 26, 2025, subject to a per-unit minimum.
- Regulatory development: On April 14, 2022, after quarter-end, the FDA issued a Non-Approvable determination for the PRESERFLO MicroShunt premarket approval submission. Glaukos, its exclusive U.S. licensee, said it was evaluating alternative regulatory pathways.
- Reimbursement and competition: Management said lower 2022 physician fees affected U.S. iStent procedure volumes and could continue to pressure U.S. glaucoma revenue, gross profit, and net income. Facility reimbursement for the not-yet-approved iStent infinite was also lower than anticipated; the relevant physician fee was undetermined.
- Operating risks: COVID-19 and staffing shortages may disrupt elective procedures and clinical development. Suppliers continued to face raw-material and staffing constraints, higher costs, and delayed or partial deliveries, which could affect product shipments and pipeline timelines.
- Profitability and controls: The company reported an accumulated deficit of $359.8 million and cautioned that sustained profitability is uncertain. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the lower CMS physician reimbursement and competitive-product trials continue to reduce U.S. glaucoma procedure volumes and sales.
- How much of the Q1 operating-income improvement reflects the one-time $30.0 million settlement credit, and the amount and timing of subsequent Ivantis royalties.
- Whether supplier constraints, COVID-related procedure volatility, and clinical-trial disruption affect shipments, costs, or product-development timelines.
- What alternative U.S. regulatory pathway Glaukos pursues for PRESERFLO MicroShunt after the FDA determination, and the resulting timing and costs.
- Convertible-note conversion triggers and potential cash-settlement or liability-classification effects on liquidity.