Welcome to Glaukos Corporation's 2nd Quarter 2021 Financial Results Conference Call. A copy of the company's press release is issued after the market close today is available at www.glaukos.comorhttppcolon/
www.glaukos.com.
At this time, all participants are in a listen only mode. After the speakers' presentation, This call is being recorded and an archived replay will be available online in the Investor Relations section at www.glaukos.comorhttppcolon forward slash www.glaukos.com. I will now turn the call over to Chris Lewis, Senior Director of Investor Relations and Corporate Strategy and Development. You may now begin your conference, sir.
Thank you, and good afternoon. Joining me today are Glaukos' President and CEO, Tom Burns CFO, Joe Gilliam and COO, Chris Calcutera. Following our prepared remarks, we'll open the call to questions. To ensure ample time and opportunity to address everyone's questions, we request that you limit yourself to one question and one follow-up. If you still have additional questions, you may get back into the queue.
Please note that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our sales, our products, our pipeline technologies, our U. S. And international commercialization, integration and market development efforts, the efficacy of our current and future products, our consistent market position, reimbursement for our products, financial condition and results of operations as well as the expected impact of the COVID-nineteen pandemic on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control.
Therefore, it may cause our actual results to differ materially from those expressed or implied by forward looking statements. Review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investors section of our website atwww.galapkos.com. Finally, please note that during today's call, we will also discuss certain non GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into CloudCrafters' ongoing results of operations, particularly when comparing underlying results from period to period.
Please refer to the tables in our earnings press release that is available in the Investors section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos' President and CEO, Tom Burns.
Thank you, Chris. Good afternoon, and thank you all for joining us today. We hope everyone is staying safe and doing well. Pioneering new markets the right way as we've done the mix with transformative technologies that disrupt conventional treatment paradigms and improve the standard of care for the benefit of patients is not easy and often requires herculean efforts. Since launching our original iStent flagship product in 2012, we have overcome many obstacles along the way, including navigating often complex and changing regulatory and reimbursement environments.
Thankfully, since those early days, we've grown from a one product glaucomacentric, primarily domestic organization into a global diversified hybrid drug and device ophthalmic leader with 4 FDA approved products, a robust near and long term pipeline of promising novel therapies across our glaucoma, colina health and retinal disease franchises, a significantly larger global infrastructure and a strong balance sheet, and we have attracted incredible people to our team along the way. We are unapologetically ambitious and confident in our future. We continue to execute on the things within our control, but before we discuss our record Q2 and overall progress, I will spend some time addressing the Centers for Medicare and Medicaid Services or CMS's proposed rules for calendar year 2022, including some background and detail of plans during the ongoing open comment period and what it means for Glaukos should the proposed rules remain unchanged. On July 13, 19, CMS published its proposed calendar year 2022 Medicare physician fee and facility fee schedules, respectively. These proposed 2022 rules update the payment policies, physician fee and facility payment rates and other provisions for services furnished under the Medicare physician fee schedule in both the HOPD and ASC settings.
The issuance of these proposed rules is followed by a 60 day public comment period, which will culminate in CMS's release of the respective final rules by November 2021 for implementation in the U. S. On January 1, 2022. Therefore, the proposed rules are subject to change. Let's start with a quick background of our current procedural terminology for CPT process to date in the U.
S. In 2008, with the approval of the American Academy of Ophthalmology, we applied for and received a temporary Category 3 CBT code, 0191T, to describe the insertion of devices such as the iSPENT using MIGS procedures. Since then, we've extended our Category 3 code successfully, but it was scheduled to expire in 2023. With this in mind, we have been anticipating and preparing for the conversion of 0191T into a Category 1 CPT code for some time. In October 2020, the conversion process was made official when the American Medical Association CPT editorial panel approved the creation of 2 new Category 1 CPT codes for 2022, 669x1 and 669x2 to cover the insertion of aqueous drainage devices such as ours when used in combination with cataract surgery.
The CMS 20 22 proposed rules include physician fee and facility fee payment rates for these 2 new Category 1 CPT codes, including 669x2 for non complex cataract extraction in combination with the insertion of an aqueous drainage device and 669x1 for complex cataract extraction in combination with the insertion of an aqueous drainage device. CPT code 669x2 and 669x1 will replace Category 3 code 0191T as the primary code that physicians, hospitals and ASCs will use to seek reimbursement utilizing Glaukos' trabecular micro bypass technologies, including for iStent, iStent inject and iStent inject W devices when used as approved in combination with cataract surgery. Starting on the physician fee, often referred to as the professional or pro fee, which is the rate surgeons are paid directly for doing a procedure. The proposed rule indicates the 2022 physician fee for CPT code 669x2 of approximately $5.65 representing an incremental physician fee payment of approximately $34 above non complex cataract surgery alone. This compares to a median physician fee today for OMA-nine twelve of approximately $3.50 which as a Category 3 CPT code is priced independently by each Medicare Administrative Contractor or MAC.
Moving to the facility fee, which is the payment that a facility receives to cover the cost of a procedure, including the cost of the devices used. The proposed rule indicates a 2022 facility fee payment rate in the ASC setting for CPT codes 669x2 and 669x1 of $2,516 compared to the combined ASC facility fee under existing Category III code today of $3,353 a proposed reduction of $8.37 We estimate that approximately 80% of procedures utilizing intravascular micro bypass devices in the U. S. Are performed in the ASC setting. For the remaining 20% of procedures performed in the HOPD setting, the proposed rule indicates the 2022 facility payment rate for CPT code 669x2 and 669x1 of $4,019 an increase of $101 over today's current HOPD facility fee of $3,918 We are extremely disappointed with CMS' proposed 2022 rates for the new Category 1 code to cover our site saving trabecular micro bypass technologies when used as approved in combination with cataract surgery.
While we had expected the professional fee under the new Category 1 code to most likely decrease versus Category 3 levels given the procedure is valued as ancillary to the primary cataract procedure, the proposed 2022 levels are well below our expectations and the ranges that were contemplated in our internal and external generated analyses. For the facility fee, we had expected and communicated a wider range of potential scenarios, including positive, neutral or negative potential outcomes, and the proposed 2022 ASC facility fee represents the downside scenario. Clearly, these proposals are unexpected, unwelcome and are the latest example of a current system that often seems to devalue and discourage innovation. We believe CMS' proposed rates do not appropriately consider the associated pre and post operative work, training component, time nor surgical skill required for implanting our micro bypass technologies, which as a reminder are the smallest medical devices ever approved by the FDA and supported by approximately 200 peer reviewed publications that highlight the technology's favorable safety profile and efficacy outcomes. In fact, one could argue the proposed rule economically incentivizes the utilization of less efficient and more invasive procedures that we believe lack robust long term safety and efficacy clinical data.
In many ways, we believe the proposals punish ophthalmic surgeons who utilize our elegant facile technologies through a proficient implant procedure and will inevitably cause a reduction in patients' access to these site saving technologies. So where do we go from here with CMS? We will organize and prepare for downside scenarios heading into the proposed ruling, and our efforts are already well underway. These efforts include a comprehensive and coordinated response in partnership with key societies, patient advocacy groups, ophthalmic surgeons and lobbying groups. We are well into engagement with leading ophthalmic and ASD societies, including the American Academy of Ophthalmology, the American Society of Cataract and Infractive Surgeons, the American Glaucoma Society, the Ophthalmic Outpatient Surgery Society and the Ambulatory Surgery Center Association.
We are encouraged by the full commitment these societies have made in advocating for change to CMS's proposal in order to protect patient access and to enable surgeons to provide the highest quality of care. As you might expect, in our situation, there are several key issues that we will need to tackle in our response to CMS, both in the professional and facility fee size. While we cannot guarantee we cannot make any guarantees regarding the final outcome, we can say that we are fully committed to exploring every option during the public comment period and hopes that medical providers and facilities across our network are paid appropriately for conducting these types of procedures and ensuring their collective voice is heard by CMS. Regardless of the final rule outcome, we must plan strategically for scenarios where the proposed rates are finalized, which could result in headwinds to our U. S.
Combo cataract mid business, both from a volume and pricing perspective. Joe will provide more details here later in the call. If I've learned anything since the outset of COVID, it's that our employees and teams at Glaukos are resilient. We have an unwavering commitment to doing things the right way, supported by real science, robust clinical evidence and an unrelenting focus on patients. We do remain steadfast in our commitment to advance our long term mission to transform the treatment of chronic eye diseases for the benefit of patients worldwide.
Our people, balance sheet and diversified growth drivers position us as we move forward to take on this challenge as well as those we will face in the future. Shifting gears to our 2nd quarter results. We are pleased to report 2nd quarter net sales of $78,100,000 up 147% versus the year ago quarter and 15% sequentially. Fueling our strong second quarter results with solid execution on our key strategic initiatives across our glaucoma and corneal health franchises globally, paired with the continued strong recovery trends in the market overall and our business specifically through the Q2 and into July. We remain focused on our near term execution as we drive new adoption and deeper penetration globally for our transformative MIGS and ILINK solutions, along with advancing our market expanding robust pipeline and R and D programs.
Given the significant negative impact COVID had on demand for elective medical procedures last year, comparing sales versus pre pandemic levels in 2019 provides one of the more relevant measures of performance. On this comparison and adjusting to include Avidro sales in the prior comparable period, our total net sales grew more than 13% in the Q2 of 2021 compared to pro form a 2019 levels, driven by strong growth in international glaucoma of 56% and corneal health of 49%. These two franchises accounted for roughly 41 percent of our total Q2 of 2021 net sales, up from approximately 30% prior to the pandemic in the Q2 of 2019. We are pleased with the strong momentum and increasing growth contributions we are experiencing from both of these emerging franchises. International glaucoma growth during the Q2 was broad based across the European and Asia Pacific regions.
We are continuing to invest in our expanding teams around the globe as we drive deeper penetration and broader adoption of MIGS around the world. Corneal health growth during the Q2 was driven by record U. S. Vitrexa sales of $12,600,000 and continued healthy momentum in the new U. S.
Account starts. We continue to opportunistically expand our U. S. Corneal Health commercial team to fuel the execution of our commercial strategies and market development initiatives that are being well received. It's also worth noting that the strong capital position we have built allows us to remain on offense when it comes to investing in our future.
As a testament to this, we continue to invest in and advance our fulsome pipeline based on our core novel platforms, where we anticipate and are planning for robust cadence of new product introductions over the coming years that have the potential to significantly expand our addressable market opportunities and fundamentally transform Glaukos over time. We are hard at work preparing for an iSpent infinite regulatory submission and continue to target FDA approval around the end of this year. As a reminder, CMS' 2022 proposed rule includes an ASC facility fee payment of $25.16 for the new Category 3 CPT code, OX-1-2T, which we anticipate will be used in the future to cover standalone MIGS technologies such as iStent infinite, if approved. We also continue to advance our late stage development of I Prime, a highly complementary new visco delivery device designed to be truly minimally invasive system to further support the needs of our physicians and patients. Regarding the presser flow MicroShunt, we announced a new licensing agreement with Santander in the second quarter that increases our responsibilities in the United States and expands our territories to include the U.
S, Canada, Latin America, Australia and New Zealand. FDA discussions regarding the U. S. Submission remain ongoing. And at the moment, the FDA is obtaining additional input from glaucoma surgeons to ensure a complete evaluation of the clinical data submitted in the PMA.
In the meantime, we are preparing for future commercial launches in Canada and Australia given the recent regulatory approvals in both geographies. During the Q2, we also completed patient enrollment and randomization in both of the 2 pivotal clinical studies that make up the iDose TR Phase 3 clinical program. The 12 month Phase 3 trial results are expected to support our anticipated NDA submission for iDose TR in 2022 and we can continue to target FDA approval for this promising technology in 2023. For Eption, we successfully completed the transition to our newest TMO partner and continue to target a U. S.
NDA submission in 2022 and FDA approval in 2023. Beyond these important near to medium term pipeline programs, we also continue to invest in advance our key earlier stage R and D programs, including in dry eye, retina, glaucoma and additional undisclosed projects. While these opportunities remain in pre clinical developmental stages, we are encouraged with the initial progress we're demonstrating within these platforms and associated programs and are hopeful to advance a number of these programs into the clinic over the next 12 months. In conclusion, I'd like to reiterate our commitment to challenge the conventional way of thinking by driving meaningful innovation for the benefit of patients as we aspire to build a world class company. I am confident we have the right people, strategy, infrastructure, pipeline and balance sheet to execute our plans and deliver on our future aspirations.
So with that, I'm going to turn the call over to Joe to discuss our Q2 2021 financial results. Joe?
Thanks, Tom. As a reminder, I will be discussing our financial performance on a non GAAP or pro form a basis and will summarize our GAAP performance later in my prepared remarks. I encourage each of you to review our GAAP to non GAAP reconciliation, which can be found in today's press release as well as the Investor Relations section of our website. Glaukos global consolidated net sales for the Q2 of 2021 were a record $78,100,000 representing year over year growth of 147% and sequential growth of 15%. As a reminder, our sales were materially impacted in the Q2 of 2020 due to COVID related restrictions.
As Tom mentioned earlier, on a pro form a basis, our Q2 2021 net sales increased 13% compared to the Q2 of 2019. We were encouraged with the continued COVID related recovery trends in many key markets globally, including the U. S. During the Q2. Having said that, we're monitoring closely the recent developments with the Delta variant that have created isolated, but growing disruptions in the U.
S. And abroad. We acknowledge the risk that poses to the overall market recovery dynamics, but we remain cautiously optimistic as to the magnitude of this latest potential global pandemic development. Now turning to our U. S.
Glaucoma franchise specifically, our Q2 U. S. Glaucoma sales were approximately $46,300,000 representing year over year growth of 154% and a sequential growth of 16%, which we believe reflects a combination of pandemic related dynamics, a stable combination cataract competitive landscape and pricing environment and underlying seasonality trends. Internationally, our glaucoma franchise delivered 2nd quarter sales of approximately 16,400,000 dollars representing year over year growth of 145 percent, sequential growth of 19% and 56% growth compared to Q2 of 2019. This performance reflects growing demand in many key markets throughout our European and Asia Pacific regions, which were offset by the ongoing pandemic impact in Latin America in particular.
In Corneal Health, 2nd quarter net sales were $15,400,000 representing year over year growth of 133% and sequential growth of 8%. The 2nd quarter performance was driven by U. S. OTREXZA record sales of $12,600,000 on year over year sales growth of 143% and sequential growth of 11%, along with a continued trend of healthy new U. S.
Botrexa account starts as our commercial integration strategies continue to deliver. Our Q2 2021 Corneal Health net sales were up approximately 49% on a pro form a basis compared to the Q2 of 2019 net sales of $10,300,000 Shifting gears towards the remainder of our P and L, our non GAAP gross margin in the 2nd quarter was approximately 84.4% versus 78.2% in the same quarter in 2020 and 83.8% in the Q1 of 2021. This reflects continued strong gross margin performance in Corneal Health and Glaucoma versus prior periods
that had been impacted by pandemic headwinds.
It is worth noting that our non GAAP adjustments to COGS include substantial amounts related to Avidro acquisition accounting. Our overall non GAAP operating expenses were approximately $67,800,000 in the Q2 of 2021, an increase versus the Q2 of 2020 and Q1 of 2021 as we continue to restore expansionary spending as the recovery warrants, a trend that we would expect to continue moving forward. Our non GAAP SG and A expenses in the 2nd quarter were approximately $43,600,000 up 7% sequentially compared to the Q1, reflecting increased commercial spending offset by lower administrative costs. And our non GAAP R and D expenses in the 2nd quarter were approximately $24,100,000 up 14% sequentially compared to the Q1 as we continue to restore our core R and D spending, earlier safe pipeline programs and human capital investments across the organization, offset in the quarter by lower clinical development costs. We also recorded a one time in process R and D charge of $5,000,000 in the Q2 associated with the intradix licensing transaction for apresbyopia.
We finished the 2nd quarter with a non GAAP operating loss of 1,800,000 dollars and non GAAP net loss of $5,100,000 or $0.11 per diluted share. Our GAAP net loss was $17,500,000 or $0.38 per diluted share for the Q2 2021. We invested in approximately $11,400,000 of capital expenditures in the Q2, which as expected remains elevated versus historical levels as we've advanced through the construction phase of the enhancement and expansion of our facilities in Southern California and Boston to meet our growing development and operational needs, trend that we would expect to continue for the remainder of 2021. As of June 30, 2021, we had cash, cash equivalents, short term investments and restricted cash of approximately $428,000,000 compared to $414,000,000 at the end of 2020 $417,000,000
at the end of
the Q1 of 2021. As we look forward, I will first make a few comments on the state of our markets and opportunity today and how we believe things are unfolding for the remainder of 2021. As it relates to COVID-nineteen, we were encouraged by the overall trends during the quarter, which I discussed earlier, But the situation remains fluid given the emerging potential challenges associated with the Delta variant. We remain optimistic, but would caution conservatism as you consider any potential this may have on electric procedure markets throughout the remainder of 2021, particularly as we head towards the fall and winter months. Beyond COVID, we believe the competitive landscape and pricing dynamics have remained stable across each of our major business areas as evidenced by our 2nd quarter results.
As we put all this together in the context of our expectations going forward, we are providing 2021 net sales guidance of $285,000,000 to $290,000,000 including our expectation for Q3 net sales to be in the range of $72,000,000 to $74,000,000 This guidance takes into account our typical underlying seasonality competitors seeking to opportunistically capitalize now on the relative economics associated with CMS' 2022 proposed ruling and the potential impact in the Q4 should those proposed rules be finalized in early November. As you look beyond 2021
and into next year, I
will note that we continue to refine detailed assessments on our end to analyze the potential volume and pricing impacts to our combo cataract U. S. Glaucoma franchise assuming various scenarios, including if the proposed rules are finalized. We will continue to monitor the trends and provide more specific commentary once the final rule is available and analyzed. In the meantime, there can be no guarantee that these proposals will change and we are aware of the initial diligence, surveys and estimates of the potential impact of volumes and pricing that many of you in the research community have already performed and published in some form, which based on the research we've seen would imply a 2022 U.
S. Combo cataract glaucoma sales range of $90,000,000 to $110,000,000 To be clear, this is not formal guidance, but rather us acknowledging these perspectives directly or indirectly exist based on your own publications and is an attempt by us to accurately translate that diligence into a potential 2022 U. S. Combo cataract glaucoma sales range for investors. With that, I'll now turn things back to Tom for a few closing remarks.
Okay. Thanks, Joe. So in closing, I'd like to reiterate our conviction in our long term vision. We are resolutely committed to building Glaukos into a leading company in ophthalmology. We will continue to invest in this vision in order to scale our team and to drive innovation, which we believe are foundational pillars to long term value creation for all stakeholders.
We understand the difficulty of forecasting our U. S. Combo cataract glaucoma business with precision in the short term. There are many unsettled variables that may influence performance in significant ways. While we are highly disappointed in the initial CMS proposals and we understand that the resulting uncertainty can be concerning for investors who want to take this opportunity to underscore our continued confidence in our future.
We pioneered the MIGS market and are going to fight hard for it, but our ambitions go well beyond this category. The funding from our U. S. Combo cataract iStent franchise has enabled us to build a pipeline with a breadth of magnitude that may be unmatched in this industry. And while swing factors in U.
S. Reimbursement may significantly impact our existing U. S. Combo cataract glaucoma business, we believe that our foundation remains strong and that our pipeline has game changing potential. We believe that this near term noise gives us the opportunity to again focus your attention on our near and long term vision and would encourage investors to evaluate closely our U.
S. Glaucoma commercial execution thus far in 2021, the growth and scale of our international glaucoma and corneal health franchises and study the pipeline, and we are confident that many of you will come to the same conclusions and enthusiasm we have for the future of Glaukos, irrespective of the final U. S. Combo cataract reimbursement outcome from CMS. So with that, I'll open the call to questions.
Operator?
And our first question is from the line of Andrew Brackmann with William Blair.
Hey, guys. Good afternoon. Thanks for taking the questions. So I guess to start, certainly appreciate all the commentary that you provided on the reimbursement side of things, I think your thoughts there. But I guess just to take a step back with all of the sort of different variables that play there, you maybe just talk about sort of your thought process on why now is the right time to provide some initial thoughts around what 2022 might look like?
And I guess related to that, can you maybe just elaborate a bit on some of the assumptions that you're putting into play there for those figures? Thanks.
Hi, Andrew. It's Joe. Thanks. I think it's a fair question. I'll start with the why 2022 now.
I think we certainly understand that a situation like this creates uncertainty for investors. And we acknowledge that many of you in the research community have done a lot of hard work and preliminary diligence on the potential impact and surveys, doc calls, etcetera. And as a result, we also know that these obviously these perspectives exist. But in many cases, they haven't been translated accurately or maybe at all into numbers because it's difficult to do so. So candidly, you want to be helpful and at least provide some accuracy and certainty around the implied map and implications from The Street's initial work on the CMS proposal.
When you think about the numbers that we shared in the prepared remarks, the $90,000,000 to $110,000,000 it really utilized a range of volume impact from the surveys and doc calls and the observations that you all published. And it combined with a range of ASP impact scenarios from those same data sources. So we applied that then to the Medicare and ASC portion of both our combo cataract volumes and the ASPs. And really the majority of the resulting, I'll call it, bell curve of outcomes is what yielded $90,000,000 to $110,000,000 of U. S.
Combo cataract revenues in 2022 and as a result of the comment that we included in the prepared remarks.
Got it. That's helpful. Thank you for that. Then I guess shifting gears a little bit here to the pipeline, but still sort of around this reimbursement situation. I Prime was highlighted again here.
Can you maybe just sort of talk about that product and sort of offset the investor base on where you see that product competing, when it's
going to be available and
how that might be able to help out that U. S. Platform of business and if it fits to market? Thanks.
Hey, Andrew, this is Chris. We're still in the same position that we have been for a while and it's in late stage development. It's a visco delivery system. There has been a trend of physicians utilizing visco delivery along with trabecular bypass looking for the short term benefits of VSCO delivery system and the long term benefits of Trabecular Bypass. So with that trend, it's something that we have been looking at for some time.
Thanks.
And your next question is from the line of Chris Cooley with Stephens.
Good afternoon and thank you for taking the questions. And greatly appreciate all your color about the efforts to reverse or to improve the proposed rates going into 2022. Just for me, if I could maybe here in the immediate short run and then one longer term question. Joe, I'm just kind of curious if implicit in your guidance for the full year, if you're assuming any type of deceleration in your domestic MIGS business here in the back half as surgeons potentially start to transition or as you alluded to, I believe in your prepared comments, some type of more aggressive marketing there? And if so, if you could just maybe help us better quantify that versus kind of the volume growth that was clearly a record quarter here in the 2Q?
And I have just one follow-up after that. Thank you.
Yes. I'll start, Chris, and then let you turn it back for the other questions you've got. So I think it's a good question when you think about a really strong second quarter and the trend lines from that and implications from that strong second quarter and what it would normally mean for the second half. And clearly, the guidance of $2.85 to $2.90 including the Q3 of $72,000,000 to $74,000,000 is really I'll put 2 big buckets of assumptions. The first one is a bit of COVID conservatism in all of our franchises, both in the Q3 as we progress and certainly as we move into the Q4 given the moving parts and the unknowns around the delta variance and what that could mean for the business going forward.
But more importantly, it's within the U. S. Combo cataract glaucoma segment and what I said during the prepared remarks. I think our assumption is that sitting here today, the competition is already out and will continue to be marketing against the 2022 proposed economics. And that's going to create some degree of headwind as we move forward through the second half of the year.
But in particular, we also see a more significant impact in the Q4 if the proposed rules are finalized. And that comes from a combination of net destocking of the channel in the later part of the year and potential pricing concessions that would have to be made ahead of that January 2022 effective date. So you put all that together and you landed at $285,000,000 to $290,000,000 number with the biggest deceleration component of that happening in the 4th quarter.
I appreciate that. That's helpful. And then just as we look ahead, again, you've got a very prolific new product pipeline in development as we speak today. Just curious about one, your thoughts on the iStent infinite and how the positioning and the uptake of that device might either mirror or differ from the initial adoption of, let's say, iStent or iStent inject based upon this proposed reimbursement code and the data behind INFINIT? And similarly, if I could add kind of a 2 part there.
I was intrigued by your commentary on Entratus there with the $5,000,000 IPR and D charge there in the quarter. I don't recall that being the timeline previously and just would appreciate maybe just a mental reminder there of when that's supposed that timeline for the ENTRATA Presbyopia correction? Thanks so much.
So Chris, this is Chris. I'm going to handle the first part and Joe will handle the second part. As it relates to Infinite, that, as you know, is a standalone product that we have stated that we are looking to get approval sometime by the towards the end of the year. That, in terms of reimbursement, we don't feel will be affected by what's been published as a proposed rule for trabecular bypass in combination with cataract surgery. By it being a standalone product, it will be evaluated as such.
It It will not be seen as an ancillary product. And therefore, we expect we'd have more wholesome reimbursement. In terms of how doctors use that, that will be up to the doctors. We are expecting a label that's likely to be advanced glaucoma or refractory glaucoma. We will be conducting Phase 4 studies for that product that will be for mild to moderate.
Payers will have the ability or the decision to make in terms of how they pay for that based on the data, but we won't be able to market it beyond what the label is, which we think will likely be advanced or refractory glaucoma. Does that answer your question?
Yes. Yes.
Thank you.
And I'm happy to take the second part of the question. So we look at this Folsom pipeline that we talk about and you can all see it kind of unfold for you. And one of the things that we find most promising is this proprietary pilocarpine and caffeine as a vesiculating agent. And when you combine these together, we see great promise in early pilot studies when we use this transdermally just by placing on the eyelid for the treatment of dry eye. And then when you see what we've done, we've already expanded the use of that product with the further licensing of the presbyopia claim.
And so we expect using this combination in the proprietary claim that we may have the opportunity to open up INDs in this product really towards the end of this year or certainly in the early part of next year. So already this test date unfolds before year. And make no mistake, we are as good as we think we can be with this technology. We'll be looking for other opportunities to treat anterior segment disease, envisioning a cream that we think will dramatically improve patient compliance We can have good pharmacokinetic release, which may provide for a deep learning in the lab, which could give us extra hang time as we approach some of these disease states. So this is just one of the novel platforms that we're investing in, which we think can command a very, very promising future for the company.
And Chris, I'll finish that off with on the $5,000,000 reference. So that's an in process R and D write off charge associated with the upfront amount that we paid to Atratis associated with the expansion of the license into presbyopia as I mentioned.
And your next question is from the line of Matt O'Brien with Piper Sandler.
Hey guys, this is Drew on for Matt. Thank you for taking the questions and appreciate the transparency on all aspects of business here. I do want to start off on the proposed ASC reimbursement. There's another mid tech company out there who also moved to a new code and was assigned a default 31% device offset as well. And they've said publicly that they helped increase that rate by providing CMS with invoices.
So I guess the question is, 1, is that a pathway forward for you? And then 2, should your decision to incorporate this current rate into your guidance reflect any indication of the likelihood of that rate will be higher in the final rule?
So we're not going to be able to comment on what the likelihood of that is. We're planning for the worst case scenario. And that being what the proposed rules would be, the really irresponsible of us to predict the likelihood of that happening.
I think what we could say is that we're working with the societies to come up with a comprehensive program to be able to improve both the professional fee and the facility fee. And it's clear that we don't want to give new tactics now on how we might do that, but we think that these proposed rules are not only unanticipated, but they're unwarranted and unwelcome. And you can imagine the amount of efforts that we'll put in, fierce effort to be able to modify, remedy and to improve our position both in the professional fee side and on the ASG facility side.
Okay. Very helpful. And then I understand you said
you used the range of outcomes under
that $90,000,000 to $110,000,000
scenario. But maybe you could expand a little bit on how deep some
of those pricing cuts would have to be if
those rates weren't increased in the
final rule, maybe relative to some
of your competitors? Thank you.
Yes, Drew, it's Joe. I guess a couple of things. In the $90,000,000 to $110,000,000 as we indicated, that really assumes the proposed rules that have been put out by CMS last month are confirmed in November as the primary case underneath that $90,000,000 to $110,000,000 With respect to the pricing scenarios, you have to think about it in the ASC setting and the pricing associated within the ASC for those Medicare patients. As we said, the proposal decreases the reimbursement versus 2021 levels by I believe $8.37 significant portion of which we would expect to potentially impact our pricing.
Very helpful. Thank you.
And your next question is from the line of Robbie Marcus with JPMorgan.
Hey, guys. This is Alan on for Robbie. Just taking
a step away from reimbursement for a second. I guess just diving into kind of what you're seeing in COVID, as you highlighted, there's a little bit of conservatism that you are baking into numbers, which I is definitely appropriate. But how much like upside do you think there could be from deferred patients coming back? How much of a benefit did you see from the Vets in the quarter? And how much do you think it's still kind of like a less unstable?
Yes. Hi, Alan. It's Joe. I think there's a couple of things implicit in that question. The first one is I think the backlog remains and physicians and practices are working their way through that.
I think that was certainly part of the 2nd quarter dynamic. And as we've said in the past, I think something that all else being equal would play out over many quarters of time and perhaps even years as these physicians work their way through it. I think the secondary component of that is what we saw in the quarter was more stability and recovery in the U. S, in Europe, in Asia. And while Latin America continues to struggle as they navigate the pandemic, we certainly saw encouraging progress towards, I'll call it, normalization versus the 2019 levels.
We may not have been perhaps fully back yet. We obviously noted commentary from others that Tarek Holdings still were below the 2019 levels, but we were encouraged by the trend within the Q2 and how that translated into our results. I think if you go forward, the second half all comes down to the variance and I'll call it human and public health response to them both in the U. S. And globally.
And as we've all learned along the way, that's fairly hard to predict. Some of what we've been seeing in recent weeks is not virtually encouraging, yet we've been we have been encouraged by the continued momentum in the business.
Got it. And then just kind of looking towards the pipeline, I think probably not alone here, I think that Idos is looking at even more important as to kind of the forward looking outlook for your company.
So how should we really think about what you need to do to lay the groundwork for
a successful launch there once you have the data, once you have the approval in hand? And just in terms of the competition that's on the market, how successful can we really think to see iDose become in the future? Thanks.
Yes. I'd be happy to address that. So iDose, as you know, you've seen the Phase IIb data. And the Phase IIb data shows demonstrable reductions in pressure using iDose of 7 millimeters to 8 millimeters all the way out to 2 years. And we continue to track that data now in that Phase 2b data out to 3 years.
And so we're hopeful that we'll see COMT made even beyond 2 years. And as you recall, I said from the beginning that we needed to have a 6 month implant, sustained efficacy implant to provide a commercially viable product. And if I had a year, I thought that would be ideal. So think about the benefits of what we have now available for patients. Given the data we've seen in the Phase IIb, which has to be obviously validated by our Phase III data, we have something that can be truly game changing for patients.
So what do we do in the meantime? Well, in the meantime, we prepare and we lay the groundwork for an injectable procedure that could provide months to perhaps years of therapy over time using this product versus using topical eye drops, which we know from both retrospective and prospective studies, patients are invariably disinclined to take or are of non adherence to therapy. So we put a big bullet in the issue of compliance by having a 20 fourseven control device that's placed in a very safe facile procedure into the eye. Those are game changing types of criteria to be able to move the marketplace. So in the meantime, we set this as a foundational therapy to move forward.
We expect, again, under 505(2) rules that the FDA will use in evaluating the NDA that will have a very open label, which will go all the way from ocular hypertension to late stage glaucoma. So we'll have an open field running to be able to promote this for all patients moving forward. In the meantime, too, we'll move forward. We already have and been pressured, I think, in establishing a code, CPT code or sorry, a device code that already has an APC assignment, which is now under kind of an E1 holding category. And we'll petition in the proposed rules coming up probably in 2022 to be able to look for a Category 3 code as well, which will provide a fulsome fair payment under similar circumstances that we did with iStent, and we'll do the same thing with iDose.
And then, of course, we'll have final economic data to support how we move forward. You can imagine we're already hard at work on mark off transition probability analysis, burden of illness scenarios, quality of life scenarios to be able to justify payment. And as I said before, it's a highly useful predicate that Veriska has established with Allergan, establishing nearly a $2,000 reimbursed payment for a product, an intercamoral bioerodible device that typically lasts 4 months to 6 months. So I like our ability to be able to operate from that to be able to establish a price, a fair minded price that we think can exact true value in the marketplace. So then we'll get into how we launched and how we bring it out.
And I think how we've done with MIGS and how we've built this entire category is testament to what we'll do here moving to a standalone drug device. So stay tuned, but I'm highly optimistic of where and how we will do with this procedure.
And your next question is from the line of Jon Block with Stifel.
Thanks guys. Good afternoon. The $8.37 decline at the ASC, you need a big magnitude of a reversal to get it all of it back. So what's good enough? In other words, if you were to get a $200 to $300 reversal and a $200 to $300 price discount, does that get you in your opinion where you need to be from a competitive standpoint?
Tom, you just talked about it, Lane. You got a safe device, it's got great risk reward, it's simple to go ahead and do the procedure from a doc perspective with good pressure drop. So, when you talk to the physicians and your customers, is there a threshold where the docs might look past a couple $100 and you feel like you can fight the fight without maybe not necessarily being exactly a parody?
Hey, John, it's Joe and Chris or Tom can also add in. I don't think we would set a bogey like that or determine a minimum threshold. I think obviously every equation, whether it's in the context of our pricing or getting different accounts over the transom on something like this. But I wouldn't draw a line in the sand that says this dollar amount is the specific target that we need to achieve.
Okay. Maybe just a pivot, and I'll stick with glaucoma broadly. But would you expect any sort of spillover effect and it might be an odd question, but spillover effect from the U. S. And the international and I get it, the reimbursement is clearly different.
But you look to the U. S. Market and thought is that the leader is a standard of care. And so when you think about an international glaucoma business that's done well and ramped strongly, do you expect any sort of spillover effect in that franchise? And if not, Joe, with a really strong balance sheet, what's the opportunity maybe accelerate investments on that side of the business?
Yes, John. I would say, just to answer the question directly, we don't see a spillover effect. Every market is unique. The reimbursement situations are unique. The clinical data and efficacy that we've generated and the experience we've got of surgeons in each of those communities continues to move forward positively irrespective of what reimbursement turn dynamics happen in the United States.
And accelerating investment, Joe, with the balance sheet that you have in some of these other franchises?
Well, I think we've been doing that, right, for some time. I mean, if you take a step back on international business, we were a small player in a couple of markets in 2017 and we made a very significant investment in a lot of countries over the course of '17 and 'eighteen. And we've never stopped since in terms of adding commercial personnel and marketing personnel and then attached to that in addition to that. And I think that will continue to move forward as we go forward here. Thanks for the time, guys.
Thanks, John.
Your next question is from the line of Ravi Misra with Berenberg Capital.
Hey, Deb and Sarabi. I appreciate you taking the question. I kind of want to stick to the pipeline discussion here as well. And you've given a lot of color into that. But in regards to, I guess, a few things.
So one, I'm just trying to get an idea of where your mindset is strategically on a few things in regards to capital allocation. If we think about the rest of 2021, obviously, there's focus on rebuttal to the reimbursement. But where are you thinking about kind of shifting? Is there any shifts to kind of R and D, leaning out on OpEx, anywhere else that we should think about? And then also looking forward to 2022 in regards to the pipeline, I know you talked about IFS and Infinit.
But is there any other strategic investments you're looking for, maybe in the corneal space, licensing, anywhere else? Just trying to get an idea of where you guys might sense that.
Yes, thanks. I guess I would say it this way. We have a compelling pipeline both near and long term when it comes to the spending that we're making in R and D. I think we will continue to drive that forward aggressively. Now we have a history of prudently reinvesting in our business based upon the scale.
But in a situation like this, the opportunity that is attached to our pipeline both over the short, medium and long term is just too great to ignore. And so I think obviously within reason, you would expect that we would continue to fulsomely invest in that and drive that forward across the board. As you think about some of the other areas, I mean, I think Tom in different calls and reiterated today, it talks about the areas where we're investing. And it's not just in Infinite, EyePrime, PressureFlow, iDose, Epione. It's in the transdermal delivery cream for corneal health.
It's in retina and all the other areas around it. So we've got a lot of efforts going on that we think individually and collectively are game changing for Glaukos, we're going to continue to invest in them.
Okay, great. And then just a quick follow-up to that. In regards to the impact of competition, I think you noted in guidance that it was contemplated for 2021. Just curious, is that from discussions that you're having currently with physicians that you're hearing about that? Because my other thought was that physicians might like to if they have interested patients kind of stuck in the pipeline for 2021 so they can get full reimbursement and get it done.
So just curious on that front.
Yes. I think we've taken the full range of scenarios into consideration when we think about the guidance that we set. That has some puts and some takes as it relates to both the 3rd and the 4th quarter, and I outlined those a little bit earlier. So I think we considered that what you're describing around the Q4 and taking that into consideration with the guidance we gave.
Okay, thanks. Thank you.
And your next question is from the line of Joanne Wuensch with Citi.
Hey, guys. This is Anthony on for Joanne. Thanks for taking our questions. I just have 2 quick ones and I'll put them upfront. First, is there any iStent Internet revenue baked into guidance for this year?
And then back to I Prime quickly, what's the is the timing for that still 2022? I think that was the last we heard, but I just want to to confirm that that's still the timeline. Thanks.
Sure. So first on the infinite question, that's not really at this point, given the timelines we've talked about around year end, we would not include that in any guidance for 2021. And it's also, by the way, not included in the combo cataract comments that I made around the $90,000,000 to $110,000,000 for 2022. As it relates to iPrime, I don't think we've ever said that. We've never said a specific timing on it.
What we said is we're in late stage development and we probably just leave it there.
Great. Thanks.
Your next question is from the line of Anthony Petrone with Jefferies.
Great. Thanks. And my question is going to be on the existing just MIG share landscape, 3 offerings out there now. And 1 of the competitors actually had a label expansion allowing for canaloplasty and trabeculotomy. It seems that that caused a little bit of share shift here in 2021.
So just an update on sort of the landscape and overall share, how you see sort of surges being allocated across the 3 offerings? And a quick follow-up would be, if we assume all unchanged on CMS proposals, how seamlessly do you think there could be a switch to standalone from combo? Thanks a lot.
Hey, Anthony. This is Chris. I'll address the first part in terms of one of the competitors having a expanded indication on their label. We really haven't seen any change in behavior from either the physician or the facilities in that regard.
They are out
there. And as we mentioned before, many of those cases are being done in combination with the trabecular bypass. And I'd probably just add that I'm not so sure in that same vein that there's been a share shift as you suggested. I think we've seen a pretty stable combo cataract market environment. You got to remember when you're thinking about canaloplasmic reticoid dilation that number one question, how much that's being done in combo cataract versus standalone, but number 2, in combo cataract, how much is being done in combination with stents like our iStent inject or iStent inject W.
So I think it's a little bit of an apples and oranges comparison sometimes when you look at those results. As you think about moving forward in 2022 and your comment around the shift from combo cataract to standalone, I think that's a bit more difficult than may seem. I'm guessing that what you're saying there is the ability to sort of decouple the procedures and do a cataract surgery and then a subsequent MIGS procedure. And I think we feel that's relatively unlikely.
Thanks. That's helpful.
And the next question
So Tom or Chris, I think back to your comments about the term tissue destructive for some of the previous Cisco delivery devices. It certainly carried a more negative connotation, but now that I Prime has kind of moved up to one of the prime positions in the pipeline, I guess, how is your view changing around the tissue destructive procedure space separate from Vistra Deliberate and what you may or may not contemplate for the treatment of glaucoma with those types of devices?
Hey, Brian, it's Chris. And I think there's a clear distinction here. When we're talking about this delivery or dilation, we're not talking about the second component of what Omni has, which was the goniotomy portion of their procedure. We view a goniotomy procedure as a tissue destructive procedure, not we do not see visco dilation as a tissue destructive procedure.
Okay. Just a follow-up to that. I mean, appreciating that, but has your view of tissue destructive procedures changed in terms of maybe your interest in being a part of that or having that in combination with some of your existing products?
Ryan, this is Tom. I guess I would say that if anything, it confirms our position from the very beginning, which is high benefit to risk calculus, micro invasive technologies. And so here, we do see that there probably will be by adding to the armamentarium of surgeons to be able to visco dilate the canal either alone ethanol or in combination with our iStent, we think that gives a very micro invasive non tissue destructive kind of purity of message that will best serve patients, both from a safety and an efficacy profile. So if anything, how we're moving forward with the fact that we are using visco dilation, we think the appropriate way, independent of the goniotomy tissue destructive procedure, really confirms our philosophy from the start.
Okay. I appreciate that, Tom. And then just lastly, I think it was kind of asked before, Joe, but understand the 90 to 110 is indicative of combo. The key question I think people are going to ask for 2022 is what percentage of physicians do you guys anticipate or get your comments is it converts to stand alone, whether it's decoupled or not, just the interest level in positions in doing stand alone and how you think about that conversion or ability to convert your existing customer base to that methodology?
Brian, I think they're 2 completely different concepts when you think about them. It's really not about that conversion of the combo cataract market into a standalone market. The combo cataract market will be what it will be as we move forward here. But part of your question around the standalone market, obviously, we're enthusiastic about the long term opportunity associated with standalone procedures led by iStent infinite. And we've said in the past, when it comes to 2022 or a post approval period, there's going to be a stretch where we're going around and securing the professional fee payments with the max 1 by 1.
And we're we've obviously seen the facility fee proposal from CMS around it. So as those things all come together and we're able to train the surgeons on the standalone procedure, on the heels of that, we're very encouraged by what it can be for our business in the years to come.
All right.
I'll leave
it there. Thanks for taking the questions. Appreciate all the color,
Nate. Thanks, Ryan.
Your next question is from the line of Steve Lichtman with Oppenheimer.
Hi. Thanks for taking my questions. This is David on for Steve. Just on iDose, when can we expect to see clinical data for that? Do you still expect to publish any 3 month efficacy results around sometime this year?
Yes. So just to update that and speak to kind of validate what I've said before is we're looking to probably disclose some additional data in the first half of next year, and that would be in really two forms. 1 would be the recurring data from the Phase IIb study, which will be out for 3 years, and so we would expect to be able to disclose that to investors. We also have the opportunity to disclose the 3 month data in the pivotal study. Now having said that, I will tell you that we're currently in constitutions with the FDA and we may take no guarantee there.
It's something we're consulting with the FDA on. No guarantee there. It's something we're consulting with the FDA on. And so if that does transpire, then clearly we would be offering data on the IGROS pivotal trial at a later date. Okay.
Got it. That's helpful. And then just on PEPION, can you talk about to what degree this product will be market expanding given your position as more of an earlier intervention product? Well, I can give you the color and just say, if you look at that beyond, I mean, we have a product that is designed to reduce procedure times, really improve patient comfort and really shorten recovery times for patients. And for those on the phone, it utilizes a proprietary novel drug formulation, stronger UVA radiation protocol.
And as part of this procedure, we deliver oxygen directly to the eye, which has resulted in these profound results where we see halting of progression of keratoconus versus control and where we met the primary endpoint moving forward. So I won't be able to quantify for you, but I think it's fairly intuitive that when this is introduced, this will become a very appealing component for patients to be able to undergo the procedure really with a drug that's catalyzed on the surface of the eye that can arrest the progression of a site for any disease. So I think it will be kinetic. I think it will be powerful over time. And we're very, very much looking forward to the introduction of Epione in 2023.
Okay, great. Thank you.
And there are no further questions.
I will
now turn the call back over to Glaukos Corporation.
Okay. Thank you, Tabitha. Thank you all for your time and attention today. We hope everyone is staying safe, and thank you again for your continued interest in Glaukos. Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.