Business context and reporting period
Glaukos Corporation filed this Form 10-K for the fiscal year ended December 31, 2021. The ophthalmic medical technology and pharmaceutical company develops and sells therapies for glaucoma and corneal disorders, with retinal disease programs in development. It reports one operating segment. Its commercial portfolio is led by iStent glaucoma devices and iLink/Photrexa corneal therapies.
Financial results and key metrics
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Net sales | $294.0 million | $225.0 million |
| Gross margin | 77% | 59% |
| Operating expenses | $260.3 million | $256.8 million |
| Operating loss | $32.9 million | $123.6 million |
| Net loss | $49.6 million | $120.3 million |
| Cash from (used in) operating activities | $24.7 million | $(23.0) million |
| Cash, cash equivalents, short-term investments and restricted cash | $423.5 million | $413.9 million |
| Working capital | $422.8 million | $419.7 million |
FY 2021 sales increased 31%. U.S. glaucoma sales were $170.8 million, international glaucoma sales $61.2 million, and corneal-health sales $62.0 million. iStent technologies contributed approximately 79% of net sales and iLink therapies approximately 21%; 76% of sales were in the U.S. The higher gross margin chiefly reflected sales recovery and the completion of amortization of the Avedro acquisition inventory fair-value adjustment.
In Q4 2021, sales were $73.2 million, essentially flat with Q4 2020 ($73.2 million). Gross profit was $56.4 million versus $53.6 million, an approximately 77% gross margin versus 73%. Operating loss was $17.9 million versus $11.4 million; net loss was $21.9 million versus $10.6 million, and diluted loss per share was $0.47 versus $0.24.
At year-end, convertible senior notes had $287.5 million principal outstanding and a $280.0 million carrying value. The notes bear 2.75% interest and mature in 2027. Total liabilities were $462.5 million. The company reported no substantial doubt about its ability to continue as a going concern for at least one year from issuance of the financial statements.
Material changes versus the prior comparable period
- Sales rebounded from pandemic-affected 2020, rising 31%; glaucoma sales increased in the U.S. and internationally, and corneal-health sales grew 36%.
- Operating cash flow improved to positive $24.7 million from a $23.0 million use of cash. Capital expenditures increased to $47.8 million from $6.9 million, primarily reflecting facility and capacity investment.
- R&D expense rose 18% to $101.0 million; SG&A rose 5% to $179.3 million. The 2021 net loss included $10.0 million of in-process R&D license costs and a $30.0 million litigation settlement credit against operating expenses.
- Ivantis paid $30.0 million in 2021 under a patent-litigation settlement, with a further $30.0 million received in January 2022. The agreement also provides for quarterly royalties of 10% on specified Hydrus sales through April 2025, subject to a per-unit minimum.
Outlook, management commentary and risks
- Management said 2022 revenue and near-term performance were expected to reflect competitive pressures, lower CMS physician reimbursement for iStent procedures and continuing COVID-19 disruption. The filing gives no numerical revenue or earnings guidance.
- CMS’s 2022 rules significantly reduced physician fees for trabecular bypass stents used with cataract surgery. The change contributed to disrupted ordering and competitive-product trials in the third and fourth quarters of 2021; management warned of possible adverse effects on 2022 U.S. glaucoma volumes, revenue, gross profit and net income.
- COVID-19, staffing shortages and supply-chain constraints may affect elective procedures, product deliveries, clinical-trial enrollment, costs and regulatory timelines. Management noted higher costs for some raw materials and delayed or incomplete component deliveries.
- Pipeline milestones were targets, not assurances: iStent infinite 510(k) clearance was estimated for the first half of 2022; iDose TR NDA submission was anticipated in 2022 with potential approval in 2023; and iLink epi-on NDA submission was anticipated in 2022 with potential approval in 2023. PreserFlo’s U.S. approval and launch timing remained unknown; initial launches in Australia and Canada began in Q4 2021.
- Other material risks include dependence on iStent and Photrexa, reimbursement uncertainty, clinical and regulatory setbacks, competition, reliance on key suppliers and manufacturing sites, and the company’s history of losses. Management expects substantial ongoing R&D and clinical investment and said sustained profitability is uncertain.
Investor verification priorities
- Track the effect of 2022 CMS physician and facility reimbursement rates on iStent procedure adoption, customer ordering, and U.S. glaucoma sales.
- Verify subsequent clinical, regulatory and commercialization progress against the stated iStent infinite, iDose TR, iLink epi-on and PreserFlo timelines.
- Assess whether revenue growth and gross margin persist after the one-time inventory-adjustment benefit and $30.0 million settlement credit; distinguish recurring operating performance from these items.
- Monitor cash burn, capital spending, debt and potential conversion or cash-settlement obligations on the 2027 notes, alongside the second Ivantis payment and continuing royalties.
- Check whether pandemic-related procedure volatility, supply constraints and raw-material cost increases affect product availability, clinical programs or financial results.