Glaukos Corporation (NYSE: GKOS) — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Glaukos develops and commercializes ophthalmic medical technology and pharmaceutical therapies, principally for glaucoma and corneal disorders, with programs targeting retinal diseases. Financial amounts below are in U.S. dollars; millions unless noted.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Net sales | $73.9 million | $67.7 million; up 9% |
| Gross profit / margin | $55.8 million / 76% | $50.6 million / 75% |
| Operating expenses | $88.8 million | $40.8 million, including a $30.0 million settlement credit |
| Operating income (loss) | $(33.0) million | $9.8 million |
| Net income (loss) | $(34.6) million; $(0.72) per diluted share | $5.4 million; $0.11 per diluted share |
| Operating cash flow | $(30.8) million | $9.8 million provided |
| Cash, cash equivalents and short-term investments | $317.8 million | $352.7 million at December 31, 2022 |
| Working capital | $353.5 million | $371.5 million at December 31, 2022 |
Q1 investing cash outflow was $13.8 million, including $6.9 million of property and equipment purchases; financing provided $1.2 million. Cash, cash equivalents and restricted cash declined $43.1 million to $83.5 million. The company reported $7.1 million of restricted cash in addition to cash and investments.
At March 31, 2023, convertible notes had $287.5 million principal and a $281.7 million carrying amount; they bear 2.75% interest and mature in 2027. The filing reports $72.0 million of finance lease liabilities and $29.5 million of operating lease liabilities.
Revenue mix and changes versus prior period
- Glaucoma sales were $56.2 million, up from $51.5 million. U.S. sales rose 4% to $35.1 million; international sales rose 20% to $21.1 million in reported dollars, or 28% in local currencies.
- Corneal Health sales were $17.7 million, up 10% from $16.1 million. Growth included higher U.S. Photrexa sales and international sales growth.
- SG&A increased 22% to $53.7 million, reflecting commercial infrastructure and activity, higher employee-related costs, stock compensation, IT and facilities expenses. R&D increased 31% to $35.2 million, including a $3.2 million payment associated with the iDose NDA.
- The sharp year-over-year operating result deterioration partly reflects the absence of the $30.0 million Ivantis settlement payment recorded as a reduction of operating expenses in Q1 2022. Q1 2023 also had higher SG&A and R&D spending.
Outlook, management commentary and risks
- No specific 2023 revenue or earnings guidance is provided. Management said cash and investments, together with available cash generation, are expected to fund operations, capital expenditures and known obligations for at least the next 12 months and the foreseeable future; it also cautioned that profitability and future operating cash generation are not assured.
- Management expects operating expenses and capital expenditures to continue increasing, including investment in sales, marketing, R&D, clinical programs and manufacturing capacity. It expects supply challenges may continue through the remainder of 2023.
- Reduced CMS reimbursement rates for procedures using iStent with cataract surgery have disrupted customer ordering and contributed to competitive product trials and lower U.S. procedural volumes. The company expects this pressure to continue in 2023; reimbursement for standalone iStent infinite procedures may also be inadequate or uncertain.
- Other cited risks include inflation, higher interest rates, supply shortages and delays, labor constraints, foreign-exchange movements, competition, seasonality, clinical and regulatory uncertainty, and dependence on key manufacturing sites and suppliers. The company noted that Photrexa’s orphan drug exclusivity expired in April 2023.
- The iDose NDA had been submitted to the FDA. The filing also notes that Glaukos planned a second pivotal confirmatory study for Epioxa following FDA feedback. No material impairment indicators were identified for goodwill or indefinite-lived intangible assets as of quarter-end.
- The company reported no legal proceedings in the filing’s Legal Proceedings section. Management concluded disclosure controls were effective at a reasonable assurance level as of March 31, 2023.
Important facts for investors to verify
- Whether CMS reimbursement and competitive dynamics continue to affect U.S. glaucoma procedure volumes, particularly iStent use with cataract surgery.
- Whether revenue growth translates into improved operating performance given rising SG&A and R&D costs, and the prior-year settlement comparison.
- Cash burn, capital spending and liquidity trends, including the terms and potential conversion or cash-settlement effects of the 2027 convertible notes.
- Progress, FDA feedback, timing and funding requirements for iDose, Epioxa and other clinical and regulatory programs.
- Whether supply constraints, inflation, foreign-exchange changes and the expiration of Photrexa exclusivity materially affect sales, margins or product availability.