On American. It's awesome.
That is awesome.
Hello.
He's just talking about me as an analyst. So, thanks to everybody for joining us this afternoon. My name's Matt O'Brien. I cover med tech here at Piper Sandler. Very excited, privileged, lucky, whatever adjective you want to use. We have Glaukos with us. From the company, you've got Joe, who's the President and COO. I got that right? And Alex is the CFO. And then, I think Matt's floating around somewhere in the audience as well. So, guys, thanks so much for coming all the way over here. I really do appreciate it.
Thanks for having us.
Of course. So let's start with the topic du jour. I'm not going to wait at all. The Street's modeling $100 million for iDose next year. Is that the right jumping-off point for that product? Yeah, I started early and then forget that I asked about it later.
We obviously wouldn't comment or endorse on any numbers. There'll be a time and a place for us to give our view on 2025. I mean, I think from a bigger picture perspective, you know, we just continue to try to block and tackle, and grow that. We're playing in an opportunity that's quite substantial. And I'm sure you'll ask about that. But, as we move forward here, we're pretty excited about the future as it relates to iDose and for the company overall.
Got it. Okay. 3,000 docs you work with, right? And when you came out with W, you were training about 150 docs a quarter, right? iDose has been out about a year now, and you said you do better than the W training. So is it fair to think you're maybe a third penetration to those docs in terms of how many you've trained? And how quickly can you train, you know, all the docs that want to use iDose?
Yeah. Well, I think first two things. I would say that the number, and this is not a metric we track as closely anymore as we did when we were obviously first building the MIGS category over those many years. And we obviously communicated at the Wall Street in terms of our progress in training doctors. I think the number of angle-based surgeons is probably closer to 5,000, maybe a little bit more, a combination of us and others in the industry. The vast majority of surgeons and ophthalmology, general ophthalmologists, have some degree of experience with angle-based surgery. And so I think we're in a pretty healthy place in the context of overall, you know, folks that are out there. As it relates to iDose, it's an interesting thing. You know, obviously, one of the things we've done well over the years is surgical skills transfer.
Anytime you're pioneering a new category, outcomes are essential. And part of the way we do that is by ensuring that these surgeons get the very best from us in terms of, you know, the pearls of any procedure that we're launching. But I will tell you, as it relates to iDose, I'm not sure that's the number one gating item. So clearly, that's a part of the process, onboarding, training, and making sure that these folks are doing it. But if they've done angle-based surgery, the procedure itself, as it relates to iDose, is pretty straightforward. I think the bigger and the heavier lift for us is the apparatus around that. It's about the training of the office staff in terms of patient identification, selection and making sure you're making it as easy on that surgeon as possible.
Ultimately, with our reimbursement liaison team, making sure that the revenue cycle people, the billers, etc., that they know how to do J-code and procedural pharmaceutical reimbursement well. That's a journey that you're on, not just with one office visit. That's that office visit plus follow-up training and really trying to make sure that they're excelling in that area. That's a long-winded way of saying I think that our gating here is not so much being driven by our ability to train doctors. That process, I think, is unfolding as well, if not better, than we would have expected in the context of bringing doctors into the fold. It's about getting that broader apparatus moving in the same direction as what the doctor wants to do clinically.
Got it. And then the staff, how familiar are they with the J-code process? Is it a big lift to get them used to the billing process or no?
It's very different for every practice. So we've invested substantially over the last 12 and 18 months in particular to make sure we've got the right field force and support organization to make that happen. But what you find is that if a practice has already been doing, for example, a lot of retinal injections over the years, or they've got experience with Durysta, for example, in that case, they've already got J-code and procedural J-code. There's nuances to those or office-based versus this. But they've got that experience. It's a bit more straightforward. And some are just more sophisticated in the way they approach the entirety of their administrative function. For others, it's a heavier lift in just making sure that they're doing all the little things right. I mean, just a simple example, you know, when you're billing an iDose, you bill it for 75 units, not one.
And so little things like that make a big difference in terms of the payment. You can always appeal that. You'll get it fixed. But just ironing those types of things out in the back office is essential.
Is it? Okay.
So how are you doing as far as coverage and getting the systematic reimbursement? I know that was something I think came a little faster than you expected in Q3. Are you still seeing that good progression in terms of getting it paid for every single time that the docs do in the case?
Yeah. And it's not so much that it doesn't get paid for. It's the process involved in it. And so we've been pleased with the continuum of sort of like knocking down those hurdles. And it's a journey. It's not a new one for us. It's the same thing we've gone through with every procedure. It just happens to be, in this case, with iDose. And what you're really trying to do is move past what I call the manual adjudication phase from the MACs where it's new to them. And so these things come in and they're assigned to case managers and there's a process and there's humans involved and there's a lot more just work, if you will, in trying to eventually get to the payment that's associated with it, whether that be the facility, the drug, or the professional fee.
But you eventually, once they've gone through their processes like they do with everything, they eventually get to a place where they put it into the system and it's much more systematic in terms of the way it's paid and the process it's paid and the timeline in which it's getting paid, as a result of certainty from that perspective for the practice. And what we've seen is, for example, in some of the larger MACs, like Noridian in particular, but Novitas as a fast follower, they're getting there. They've gotten there. They're getting there. And then some of the more mid-size and smaller MACs, it's a work in progress, but we're making substantial, you know, progress every day.
Okay. And so I think in Q3 you had two MACs, and Alex, I will get to, I promise, but you had two MACs that were systematically covering of the seven, two that were okay, and then three that really weren't great. How should we think about those MACs, you know, exiting 2024 in terms of how many are going to be covering systematically versus still work in progress?
I would amend that to say this. First, separate drug and facility from professional fee. And they have different, you know, obviously drivers in the context of your adoption and the pickup. On the drug and facility side, you know, we were at one and a half, two of the MACs. So Novitas was on the, has been sort of just then beginning to really automate the sort of adjudication, if you will, of the drug and the facility. Meridian was already doing so. And then the sort of next four being First Coast, NGS, WPS, and Palmetto were seemingly getting closer. You can't quite tell because it's not exactly a black and white moment. But it seemed like they were moving that direction on the facility and the drug side. And the CGS, which is the smallest MAC, is a laggard there.
Not uncommon for them just given the size of the MACs. And we'll get them there eventually. On the professional fee side, Noridian had established a pro fee schedule that was out there. And in the other six MACs, we'd seen sporadic, but not consistent in terms of the way that those things were being adjudicated. And we're making progress on that front. That tends to lag the facility and the drug. So once you've got that established, then the professional fee becomes front and center. And that's something we're certainly hoping to have ironed out as we make our way through the beginning parts of next year.
Okay. So you think maybe pro fee fully ironed out first half of next year?
That would be the hope and the goal. Again, I think if we can exit this year on a pretty good place in terms of the adjudication of the facility and drug across the majority of these MACs, I think then the professional fee should start to follow behind that because it enables you to start driving even higher volumes. And those volumes are ultimately, you know, what drive the adjudication on the professional fee side too.
Okay. Got it. And then I don't want to, you know, get too into the weeds here, but I just want to make sure the commentary on iDose in Q4 is fully understood here. But, you know, by our model, I think iDose grew about $4 million sequentially Q2- Q3. And then the growth in Q3- Q4 is a little less than that $4 million. So with the reimbursement getting better and more docs trained, I guess why would it be, you know, a little bit less in terms of the sequential growth in Q4? Is there something, I don't know, if it's hurricanes or pollution or what it is, but is there any reason for that?
Winter storms. No, I can't speak to your model specifically, Matt. And so there's obviously some nuances there in terms of the assumptions you've got around the Cornea franchise and the International franchise and the legacy stent business that would lead you to that. What we said was, you know, that we saw a doubling of the revenues, a near doubling of the revenues sequentially in the third quarter. And we continue to expect to have, you know, material progress in the growth in the fourth quarter. And then we gave obviously our overall guidance. So how that sort of sausage all got made in your model, I can't speak to. But I do think that, you know, we certainly expected when we gave that guidance that we continue to be headed in the right direction with iDose. And we're excited about where we're at.
And the pricing has been holding pretty, you know, close to what you expected, that 13.5-ish kind of range?
Yeah. So recall, I mean, we don't really, for all material purposes, we don't have any rebate programs or certain unique circumstances where you do things. But in general, there's not a rebate program. So the headline price is the price. When you model it, you have to factor in that there's a certain percentage of that get government discounts. So, you know, the Department of Defense, VA, Medicaid all come with 23% discounts. So when you realize the actual, you know, sort of net ASP, sometimes it'll be a little lower than that headline, you know, price that we've got.
Got it. Okay. Okay. Still a very healthy price though.
Yeah.
Okay. Just back to reimbursement for a second. On the patient side of things, I know there's the three buckets on the Medicare side of things. Just talk a little bit about the progress that you're seeing in terms of reimbursement for those three buckets, and then do you have programs in place that can help ease some of the copay burden that some of the patients may be facing next year?
Yeah. Well, think about it this way. So we spent a fair amount of time talking about the progress we've made on Medicare fee-for-service, which is obviously the largest and most important of those buckets. For those patients, you know, 95%-ish have little to no out-of-pocket dynamic. They either have supplemental or secondary insurance and/or they're dual eligible with Medicaid, and for almost all of those patients, they really don't have an out-of-pocket exposure associated with their care, and so from that standpoint, they're in a healthy spot, and we've talked about where the MACs are at and providing access and streamlined access is probably the right way of saying it. The second, you know, group of patients are around the commercial, you know, commercially covered lives.
And for those and Medicare Advantage for that matter, one of the things we haven't spent a lot of time with our customers yet on is the fact that we actually already have pretty robust coverage. You know, our payer relations team has been hard at work since the day of approval. And so bringing along the actual coverage policies has come quite quickly. Having said that, we have to turn that on for our customers. And you have to be prepared to support that. And the customers have to be there. And so you want to do that when they've got their feet underneath them, if you will, from a fee-for-service standpoint, you start to roll this stuff out because it's much more complex. There's a lot more involved, obviously, in dealing with these commercial plans.
Ultimately, for those patients, we'll have a full copay assistance, not dissimilar than most drug companies where for those patients, they won't have an out-of-pocket. So wherever that plan design is, whatever their out-of-pocket component is, we'll cover that. That'll be another factor in terms of the way the realized ASP looks because that is a gross to net. Correct, Alex?
Correct.
And so that'll be a factor in terms of how you do your modeling. But from a patient perspective, they won't have an out-of-pocket. The last bucket of those, that third bucket is Medicare Advantage. And for Medicare Advantage, you know, we said from the beginning that'll be the sort of last frontier. Unfortunately, the plan design for most patients covered by Medicare Advantage, only something 10, maybe 20% of those patients have a low out-of-pocket. The vast majority of them have traded off low premiums for higher out-of-pocket exposure. And so usually at the point where they come to a need for medical care, they find themselves with a choice between, you know, a more substantial out-of-pocket cost.
Usually where you see those patients emerge is in the fourth quarter when they've already had something that was more traumatic, a knee, a hip, you know, heart or whatever it might be where they've eaten up that deductible. They tend to show up in fourth quarter procedures for everything else. We'll see some of that dynamic as well.
Isn't the Medicare Advantage group typically a little bit more affluent though? Or is it something that they could just go ahead and pay for on their own?
I wouldn't say that. Yeah. I mean, I can't speak to it. You might be more well versed in the exact demographics of those folks. They tend to be a little healthier in terms of the mix and how they've been selected to be a part of the Medicare Advantage programs. So there will be some who will afford themselves to it. But a lot of the patients who are in Medicare Advantage have done so because they've been sold a plan that has a pretty low out-of-pocket cost in terms of the monthly premium and/or the other benefits that come with it. And then when you get down to it, eventually they're subject to the same kind of plan design as you see on the commercial side, out-of-pocket that you see on the commercial side, but we're not able to provide copay assistance because it's a government-affiliated program.
Okay. And so that's all interesting. How many, I don't know if this is the right way of framing it up, but how many covered lives do you have in the U.S.? Is it, you know, is it 80%, 90%? When can we get to 95% like I said?
Well, and there's different ways that companies speak to that number. And so the most common is the way we think about it is you either have a specific coverage plan or they're silent and they're being covered by, you know, you've gone through the process, you've got proof that through the prior authorization, et cetera, patients have been treated under a particular plan. So for that part, we won't know until we're really into that launch to do that. But what I can tell you is that today we have a very similar overall coverage as to what Durysta has after a couple of years of their launch. So now we've benefited from that. So they've obviously been out there developing those policies and those coverage plans. And for the most part, the insurers have followed what they already have established for Durysta in establishing coverage for iDose TR.
Got it. Okay. And I don't want to make too big of a point of this, but I just want to make sure I understand it. In certain situations where you're going to help with the copay, I'm just assuming that's an offset to the ASP. So is the ASP then like not going to be the 13.5 we should think about in total of maybe something in the 12.5 range because of that copay offset? But you're also going to trade that for the volume all day long, right?
Yeah. Yeah. So I mean, you price these things with that in mind and you know where the max out-of-pockets are and the various things. But I mean, kind of put simply, the way you'll see it in terms of you divide revenue reported by units, it'll have a degradation ASP. It's not that we're charging less on the drug. It's just simply that the way the gross to net works from an accounting standpoint ends up being that way. Anything we pay out in terms of a copay assistance program, like all drug companies, becomes an offset to revenue and gross to net.
Current period cost, not over like a two-year period because the thing lasts two years, right?
You basically do some estimates and you accrue a liability for that to pay that off and that goes through your gross to net.
I see. Okay. Okay.
He'll get a report that shows how many copay assistance we've done, and that becomes an offset to revenue.
Got it. Okay. Maybe a quick question for Alex. Just on the iDose side of things, and sorry, I know we're spending an inordinate amount of time on this, but the gross margin profile of this device, that ASP has got to be massive at some point. When do you think it'll be accretive to corporate averages?
Yeah. No, it's a great question, and as you can imagine, one of the things we had to do, Matt, and you know this, is we built a giant, you know, state-of-the-art facility, and so it's all a volume game with iDose, you know, getting the volumes up to a scale that covers those costs and that built-in kind of product margin starts to flow through. I have a line of sight, you know, we absolutely believe it will be accretive and we should see it in the near term start to come through in our results.
Okay. Okay. How do we think about the patients that you're getting right now in terms of iDose? Because, you know, we've heard all kinds of different Durysta numbers, 20,000, 40,000 last year. Is that the primary? Are you getting primarily replacement patients that have had something done before? You mentioned the injections before. Are you getting more de novo patients on iDose? I know it's a mix. Where do you think the majority are coming from?
Yeah, for me, I think you obviously have to ask AbbVie about the Durysta volumes. I've heard different numbers, but I'm not sure any of them are officially, you know, sanctioned out there by them. As it relates to the sort of, there's a synergistic effect. I mean, from a commercial perspective, everyone in ophthalmology that's playing a role in interventional glaucoma, whether that's us or AbbVie or Alcon or whoever, you know, you're really trying to change the standard of care in the context of how patients who historically would have been treated with drops are being treated today. And so I think all of us in some respects benefit from each other. And there's certainly a synergy between Durysta and Durysta users and iDose in terms of the early days. And the reason for that is pretty simple.
Those are doctors who bought in on the idea of interventional glaucoma, and so whether they're doing an SLT or whether they're doing a Durysta, the fact is that they're having that patient conversation. They're talking to the patient about the benefits of an interventional approach, and once they've gotten them in that paradigm, it turns out the patients like it, so, you know, if they've been on a Durysta in that sense and they've had that period of freedom from drops or in some ways the disease, irrespective of how long that freedom lasts, that patient wants the next standard of care. They want that next option, and so from that standpoint, if a patient's had Durysta, I think it's an obvious candidate for iDose TR for both that patient and that practice, and so we definitely have seen that for some of those practices, but it's not everyone.
I mean, we have folks who don't do Durysta at all that are doing it, or folks who don't do much SLT at all that are doing iDose. It's a mix. But some of the low-hanging fruit are those doctors who are already all in on IG. And in many of those cases, they might be doing Durysta.
Got it. Okay. All right. So maybe transitioning really quickly to the core eye stent business for a second. What are you seeing in terms of any kind of halo effect from iDose for the eye stent business? Are you seeing any of that? And then I know there's been some LCD adjustments recently. Is that an area where you could see a headwind next year?
It's really hard to know. I'd say because, you know, part, like for example, the LCDs, that's been playing out over the last 18 months now. So for a lot of practitioners, they've either already thought about this, maybe even adopted some changes to the way they think about multiple procedures or otherwise or what their preferred procedure is. I think there's no doubt that whenever, you know, you get a benefit whenever you have a new product. There's obviously a reason for being for that sales rep to be in the office and spending that time. And while they're there, shame on them if they're not also proactively discussing, you know, the right things around iStent infinite and the broader stent portfolio. So I think there is certainly, you know, that broader halo effect.
How you measure all of that relative to, you know, the various puts and takes is it's still a little bit early to make that call in the context of 2025. Clearly, in the context of 2024, we've been really pleased with how our stent business has performed, and as you know, coming into the year, it's really exceeded our expectations throughout the year, and I'm sure iDose plays a role in that.
Okay. Okay. Question for you, Alex. How do we think about the international business? I know there's some softness. Can you maybe walk us through what that is? And then is there a place for iDose, not necessarily across all of Europe or Asia-Pac, but is there a place for iDose in the future internationally?
I'll let Joe take that second part. But on the first part, I mean, really the competitive, there's two things that we think about. There's the competitive factor. You know, we've had, we have had competition internationally and we've dealt with it. But we have, you know, Alcon and Hydrus is coming into two of our more larger markets in 2025 or they've just got approval there. So we expect them to be competitive in those markets with us. And that could create a potential headwind for us. And then, like I think a lot of companies, you can anticipate the FX effects given the volatility in the FX markets today. And that could be a headwind for us as well next year.
Okay, and before I get to you, Joe, how aggressive do you think they could be on bundling it from a bundling perspective to really displace, you know, what you have in iStent in such an ease of use product? Sorry, I don't know if that's for you or not, but.
I'm happy to address it. I mean, I think we would expect, you know, we've seen plenty of competition commercially, both domestically and internationally, but pretty good sense of that. You know, the bundling aspects are a little bit more complex than it may seem superficially. It's not as easy to tie glaucoma products to cataract products and things like that. So I think, you know, it ultimately comes down to your point, the features and benefits, the risk and benefit calculation and all the other things that are going on there. And we feel good about the franchise we've got internationally. But you have to recognize that anytime someone comes in with, especially a competitor that we respect as much as we do Alcon, they're going to get trying and trialing and some adoption.
And so that can just be a little bit of a headwind to growth in that sense. Now, the offset to that would be, and it's hard to predict because now the approvals in Europe are not as straightforward as they used to be earlier in my career. But, you know, we've been in the queue for some time with iStent infinite. And so we would expect that some of other portfolio products to start to come both in Europe. And we have started to see that internationally in some markets like Australia, Canada, and now Brazil and others. So I think we've got things that can be, it's just a question of that exact timing of when some of those products come into market relative to the competitive dynamics that Alex was referencing earlier.
Finally, to address your iDose question, I think there's a time and a place for iDose internationally. We, like all drug companies, have to monitor what's going on in DC and how various things are evolving there and pick and choose our markets accordingly. You have to really assess on a market-by-market basis how they view reimbursement relative to benefit. That's work that's ongoing. But you could see, you know, certain select markets where we try to put our toe in the water with iDose. Then ultimately, as future generations of iDose come out, you could see where the legacy generation could play a role in those international markets over the, you know, the five and ten-year planning period.
Got it. Okay. I mean, multi-year growth engine here at iDose, things are fair.
Yeah. Absolutely.
Alex, talk a little bit, well, I guess I have a question. Is there any way you can rein in Tom in R&D spending?
Knowing that Tom's going to be able to read this on the transcript.
Yeah. I'm just kidding. No. I mean, look, your investments in R&D have worked obviously very well. How do we think about the profitability profile of the business, especially in a time when a lot of investors are like, "Give me profitability, give me profitability"? How do you balance the two? And then, you know, how do we think about the profitability of Glaukos over the next couple of years?
Now, it's a great question, and you're right, but we have, you know, Tom and Joe and I discussed this a lot, and we have large aspirations for the company, right? And we have a rich pipeline. We've disclosed 14 programs. There's many more, let's say, that haven't been disclosed yet, and, you know, we want to build this company to be a great player in ophthalmology in the future, and that depends on our pipeline development, so in the short term, in the near term, really, it's about getting back to what I call living within our means, cash flow break even on the back of the success of iDose, and then, you know, spending on those R&D investments as we can afford them.
Now, that being said, you know, there's going to be times and periods and quarters in the future where we think, you know, iDose is going to be very successful. We won't be able to spend it fast enough in R&D. And you'll have those quarters of profitability and you'll see that. But our philosophy in the near term is really just about living within our means, you know, getting to cash flow break even, starting to generate some cash and really developing those future assets in R&D.
Yeah. I think it's, I mean, our ambition is not going to change. You know, we are who we are. We take big bets and what we think are game-changing, you know, therapies and technologies in eye care. That's not going to change. We're built that way. We're going to continue. What our hope is, is that through the success commercially of iDose and the broader portfolio, that we can outpace what is realistically possible in terms of expanding and building on the development side of our apparatus. That's our goal. And we're all aligned on that.
Got it. Okay. All right. Well, I'm looking at the clock here. I think we're just about out of time. So we'll cap it there. Joe, Alex, thank you so much for all the feedback. Appreciate it.
Yeah. Thanks, Matt. Thanks for having us.
Thank you for having us.