Glaukos Corporation (NYSE: GKOS) — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial amounts are in U.S. dollars; statements are unaudited. Glaukos develops and commercializes ophthalmic therapies for glaucoma, corneal disorders and retinal disease. It began a controlled U.S. launch of iDose TR in February 2024 following FDA approval in December 2023.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Net sales | $85.6 million | $73.9 million; up 16% |
| Gross profit / gross margin | $65.4 million / 76% | $55.8 million / 76% |
| Operating expenses | $104.4 million | $88.8 million |
| Operating loss | $(39.1) million | $(33.0) million |
| Net loss / diluted loss per share | $(40.8) million / $(0.82) | $(34.6) million / $(0.72) |
| Cash used in operating activities | $(33.9) million | $(30.8) million |
| Cash, cash equivalents and short-term investments | $272.9 million at March 31 | $295.4 million at December 31 |
| Working capital | $316.4 million | $321.4 million at December 31 |
| Convertible notes | $287.5 million principal; $283.1 million carrying value | Due June 2027 |
Cash, cash equivalents and restricted cash declined by $51.0 million during the quarter to $48.4 million. Restricted cash was $5.9 million. Short-term investments increased to $230.4 million from $202.0 million at year-end. The company also reported $70.3 million of finance lease liabilities and $30.1 million of operating lease liabilities.
Revenue and changes versus prior year
- Glaucoma sales were $67.2 million, up from $56.2 million. U.S. glaucoma sales rose 20% to $42.0 million, primarily on higher iStent volumes and early iDose TR sales; international glaucoma sales rose 20% to $25.2 million.
- Corneal health sales increased 4% to $18.4 million. U.S. growth, including higher Photrexa prices and customer sales, was partly offset by Medicaid rebates and lower international sales.
- Gross margin remained 76%. Cost of sales increased 12% to $20.3 million, broadly in line with sales growth, with new iDose TR launch manufacturing costs affecting the period.
- SG&A rose 16% to $62.0 million, reflecting commercial infrastructure, compensation and operating support costs. R&D declined 13% to $30.7 million, partly because Q1 2023 included a one-time $3.2 million iDose TR NDA payment and elevated related costs.
- Q1 2024 included $11.7 million of acquired in-process R&D expense, with no comparable charge in Q1 2023. The company’s net loss widened 18% year over year.
Outlook, management commentary and risks
- Management expects cash and investments, together with available cash flows, to fund operations and known obligations for at least the next 12 months and the foreseeable future. It cautions that sustained profitability and positive operating cash flow are uncertain; no specific full-year revenue or earnings guidance is provided in the supplied filing text.
- Management expects operating expenses to continue growing as it expands commercial and R&D activities. Capital expenditures are expected to be modestly lower for the remainder of 2024 as facility expansion winds down.
- Supply challenges and elevated costs for certain components and raw materials are expected to continue during 2024. Further disruption could delay shipments or pipeline development; the company relies on limited or sole suppliers for some products and components.
- Reimbursement and competitive conditions remain important risks. Medicare physician-fee reductions have affected customer ordering and U.S. iStent volumes; the company says 2024 facility-fee increases do not remove the expected adverse impact of lower physician fees. iDose TR received a permanent J-code effective July 1, 2024; coverage and reimbursement remain dependent on payors and individual MAC decisions.
- iDose TR’s commercial success depends on physician adoption, adequate supply, patient outcomes, pricing and reimbursement. The product was being launched in a controlled manner, so early sales do not establish its eventual uptake.
- Convertible-note holders became eligible to convert from April 1 through June 28, 2024 after the stock-price conversion condition was met. Glaukos may settle conversions in cash, shares or a combination at its election; cash settlement could pressure liquidity. The notes bear 2.75% interest and mature in 2027.
- On March 7, Glaukos acquired a clinical-stage ophthalmic biopharma company’s assets, paying approximately $5.1 million in cash and issuing $5.0 million of stock. The filing records $11.7 million of acquired IPR&D expense and a $1.4 million contingent consideration liability. Potential future terms include up to $51 million in development milestones, up to $150 million in sales milestones and royalties up to a low double-digit rate.
- The Celanese supply and Drug Master File agreement for iDose TR carries $6.3 million in minimum payments over four years and potential sales-based royalties. A Celanese director also serves on Glaukos’s board.
- Other disclosed risks include ongoing operating losses, foreign-exchange exposure, regulatory and clinical-development uncertainty, competition, product quality, cybersecurity and data privacy. Management reported no material market-risk changes and no material changes in internal control over financial reporting; disclosure controls were assessed as effective.
Investor verification points
- Track iDose TR adoption, product supply, patient outcomes, reimbursement coverage and the effect of its J-code once effective.
- Monitor operating cash burn, cash and investments, and any cash-versus-share settlement of convertible-note conversions.
- Assess whether glaucoma sales growth can persist despite physician-fee pressures and competition, and whether gross margin holds amid launch and supply costs.
- Review the acquired ophthalmic technology’s development progress and potential milestone and royalty exposure, alongside the Celanese supply agreement economics.
- Compare subsequent results with management’s stated expectation of sufficient liquidity for at least 12 months, while noting the filing provides no specific full-year financial guidance.