Glaukos Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone Q4 report; selected Q4 figures are included below. Amounts are in U.S. dollars unless noted.
Business context
Glaukos develops and sells ophthalmic medical technologies and pharmaceuticals for glaucoma, corneal disorders and retinal disease. Its commercial business is concentrated in glaucoma devices (including the iStent family) and corneal-health products (including Photrexa and KXL systems). In 2022, the iStent platform represented approximately 76% of net sales and iLink therapies approximately 24%. Sales were 72% U.S. and 28% international.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $282.9 million | $294.0 million | Down 4% |
| Gross profit / margin | $213.9 million / 76% | $227.4 million / 77% | Margin down 1 percentage point |
| Operating expenses | $296.2 million | $260.3 million | Up 14% |
| Loss from operations | $82.3 million | $32.9 million | Loss widened |
| Net loss | $99.2 million | $49.6 million | Loss widened |
| Basic and diluted loss per share | $2.09 | $1.07 | Loss per share increased |
| Cash used in operating activities | $33.1 million | Cash provided: $24.7 million | Cash flow declined |
- Q4 2022 net sales were $71.2 million, versus $73.2 million in Q4 2021. Q4 net loss was $31.5 million, versus $21.9 million.
- At year-end, cash and cash equivalents were $119.5 million and short-term investments were $233.2 million; restricted cash was $7.1 million. Working capital was $371.5 million, down from $422.8 million.
- Convertible notes had $287.5 million principal outstanding, $281.4 million carrying value and a 2.75% coupon, due June 2027. The company reported no conversion conditions met at year-end.
- Inventory rose to $37.8 million from $23.0 million. Capital expenditures were $30.3 million, primarily for facilities.
Material changes versus the prior period
- U.S. glaucoma product sales fell approximately 15%, to $144.7 million, mainly reflecting lower procedure volumes following reduced Medicare physician reimbursement rates that took effect in 2022 and customers trialing competing products.
- International glaucoma sales increased approximately 14%, to $69.6 million, while unfavorable foreign exchange rates reduced reported results.
- Corneal-health sales increased 11%, to $68.6 million, led by U.S. Photrexa growth and higher realized average sales.
- R&D expense increased 22% to $123.3 million; SG&A increased 8% to $192.9 million. Gross margin declined amid product mix and higher material costs.
- Operating cash flow shifted from a $24.7 million inflow in 2021 to a $33.1 million outflow in 2022, with the annual net loss and increased inventory among the drivers.
Outlook, commentary and risks
- Management expects continued investment in R&D, clinical studies, sales and marketing, and facilities; R&D and clinical expenditures are expected to increase. It anticipates additional losses and says sustained profitability and positive operating cash flow are uncertain.
- Management stated existing cash and investments, together with cash generated from operations if available, should fund operations and known obligations for at least 12 months from financial-statement issuance.
- The company expected the lower Medicare physician reimbursement rates to continue pressuring U.S. iStent procedure volumes, revenue, gross profit and net income in 2023. Standalone iStent infinite facility reimbursement was lower than anticipated; physician payment rates were still pending regional determination.
- Glaukos received FDA 510(k) clearance for iStent infinite in August 2022 and began commercial launch activities in Q4. It anticipated submitting an iDose TR NDA in 2023, with potential FDA approval by year-end, subject to regulatory review and other uncertainties.
- After FDA feedback, Glaukos decided to conduct a second confirmatory Phase 3 trial for iLink epi-on before a future NDA submission; enrollment began in Q1 2023. The FDA issued a non-approvable determination for the PreserFlo MicroShunt PMA in April 2022, and the U.S. approval timeline is unknown.
- Key risks include reimbursement uncertainty, competition, clinical and regulatory setbacks, supply constraints and inflation, reliance on a single U.S. iStent manufacturing site and limited suppliers, foreign-exchange exposure, and the company’s operating losses and debt obligations. No material legal proceeding was reported.
- Unusual items include $30 million settlement receipts recognized as reductions of operating expenses in each of 2022 and 2021, and $10 million of 2022 in-process R&D expense related to the iVeena license. The University of California product-payment obligation ended December 29, 2022.
Important facts for investors to verify
- Whether the Medicare reimbursement environment and competitive product trials continue to affect U.S. iStent volumes and margins.
- Progress, timing and outcomes for the iDose TR NDA and confirmatory iLink epi-on trial, including any FDA requirements or delays.
- Conversion, cash-settlement and potential dilution terms for the $287.5 million convertible notes, and liquidity under ongoing operating cash burn.
- Whether supplier constraints, inflation and higher inventory levels affect manufacturing capacity, delivery, costs or working capital.
- Underlying sales trends by product and geography, including the extent to which currency movements and prior-year settlement receipts affect period comparisons.