Good morning. This is the session for Glaukos. My name is Michael Sarcone. I'm an analyst on the U.S. Medical Supplies and Devices team. With us from the company, we've got Joe Gilliam, President, Alex Thurman, CFO, and we also have Chris Lewis here, who heads the IR function. Gentlemen, thank you for joining us today.
Thanks for having us, Mike.
I figured we could kick off on the interventional glaucoma opportunity that you talk about. Can you talk about the concept of interventional glaucoma? Can you walk us through how you're thinking where we stand today as it relates to the glaucoma treatment paradigm and where you think we're going?
Yeah, you know, in some ways, the path to this interventional glaucoma paradigm shift, if you will, has been a, I'll call it a 20-year overnight success story. You know, the founding of the company really was this idea that all patients could have a path to better care by proactively intervening earlier in the treatment paradigm, simply because the classic paradigm of treating with drops, while those drops work, patients don't take them. Time and time again, studies have shown this. Even the clinical data now we look at in EMRs at the practice groups, etc., validate that fact that with an asymptomatic, slowly progressing disease, patients can't be counted on to proactively manage themselves. As a result, the interventional glaucoma approach is pretty widely accepted from a clinical perspective.
You fast forward to today, and we've had, you know, numerous, numerous engagements around the world on this topic, as have others in the industry. What you hear consistently is positive feedback around the why clinically of intervening and using surgical procedures or sustained pharmaceuticals to manage a patient's disease proactively. When we sit here today, I think the primary challenges that we all face over the next decade in adopting that is really changing the actual operating behaviors at the practice level. Clinical adoption, that's a good start. Ultimately, you have to change the practice patterns as well: how they educate the referring OD networks, how they think about scheduling, how they think about all those blocking and tackling things that happen inside of a practice to really bring this to life. That's where our focus is at.
I can tell you, when we sit back and compare to the challenges of the early days from a Glaukos perspective of trying to pioneer the category in combination with cataract surgery and the inertia that existed, it's a very different feeling today. We're certainly, you know, pushing, I guess, a little less uphill on this one. Even with that, this will be a journey. This will be a 10-year journey of really changing the standard of care to a more interventional approach. I think that patients will benefit the most, and certainly we will by extension of that.
Got it. That's helpful. When you think about changing practice patterns, you know, on average, how receptive are doctors that you're speaking to? Is it a big lift to get them? You know, they may be very set in their ways. Like, how do you address that, and what do you typically see?
It won't surprise you that every doctor is a bit different in how they think about that journey and their pace of adopting it. I would say that the, again, the physician response and the clinical need and desire and recognition of that is not the most challenging part of that equation. It's turning that into action in the practice. It's changing for the rev cycle managers. It's changing for the administrators. It's changing for, again, how they think about educating their referral networks. It's that type of moving the office furniture around activities that take time. You'll get small wins, and in some cases, you get big wins where they will pretty quickly change their practice patterns to really adopt this fully.
That is what you then propagate amongst, you know, from the podium and the various places to continue to show the path towards adoption in the average practice group. I think it is much more that latter challenge that you go through. Sometimes that may take five visits. Sometimes that may take 10. Sometimes that may take a couple of years or a change in administrator or whoever it is for them to ultimately get it. We are definitely heading down that path of opening that up. I think the last year since really we have had iStent infinite, iDose approved, and Glaukos has been able to sort of really lean into this changing of the guard, if you will, in the standard of care, you have seen a real acceleration of those changes at the practice level.
Definitely. You often talk about the concept of blocking and tackling, and, you know, this is what you're talking about now. Are there any other kind of milestones or things that could catalyze more uptake, whether that be, are there any impediments from a reimbursement standpoint, guidelines? How do you think about that?
Anytime you're going through this, there's a list of dozens of things that you're trying to tackle. I mean, you can go all the way back to, you know, changing of academic standards and curriculum that these, you know, new residents and fellows are coming out with in terms of their background and how they think about that treating. That can be a long, you know, investment in terms of changing the way academic institutions think about their own curriculums. I mean, we've been doing combo cataract MIGS for 10 years, right? 10 years plus. It's really only been in the last couple of years they've adopted that as a part of their teaching curriculum. That's an example of the kind of thing that you're doing along that way.
There's a whole host of things from a medical affairs perspective and publication strategies and different things that you're doing alongside of that. There's a lot of industry-related activities. You know, at the recent ASCRS conference, on the first day, the ASOA hosted a Business of Interventional Glaucoma Symposium. That's important. That's, you know, sharing amongst the industry best practices on how to adopt this in the practice itself. That's more impactful than anything that a sales rep or someone from, you know, Glaukos might say. Investing in that kind of activity continues to be important as we go along the way.
Great. You know, we hear a lot about the resurgence of SLT. You know, we've heard some excitement about Alcon's new Voyager Digital SLT. You know, Bausch + Lomb recently acquired a laser-based glaucoma intervention product. I guess when you think about interventional glaucoma, you know, how do you think about the various treatment modalities and where iDose can fit in there? You know, understanding, you said it varies across, but are you seeing anything in particular in the physician community about how their treatment algorithms, you know, how they're adopting these different technologies?
Yeah, and I think that, and even going back to your prior question a bit, when you think about the things that are unlocking this opportunity, FDA approvals follow product innovation and really being able to find across the product spectrum tools or solutions that where the risk-benefit equation makes sense clinically from the physician standpoint. Drops obviously have a degree of side effects that come with them. Even with that, the surgeon wants to know that whatever they're doing and intervening is safe and effective, and they're not increasing the risk profile for that patient. I think that's where we're at today. The market access of reimbursement, there's a never-ending job of working to unlock this. As you do, and folks start then focusing more on the treatment algorithm that they've got in their practice, you'll hear a wide variety of answers.
That's not uncommon at this stage of changing standard of care. Today, you'll see more and more of these surgeons leaning into what I would say is either SLT or procedural pharmaceuticals as their desired first and second-line therapy. I think it's not uncommon, and advancements are part of that. The SLT system that Alcon acquired, I think, is another step forward in advancing that. You know, for all of these patients, the most important thing to us is that interventional is happening. Whether or not a surgeon is moving forward with SLT first line or procedural pharmaceuticals first line or whatever their algorithm may, what matters most is that they're engaging in the conversation with the patient and they're actually going down the path with that patient of an interventional approach.
If they're doing that, most roads at some point lead to the tools that we've got in our portfolio today and certainly as we move forward into the future. I think, you remember, with these patients, the average patient is in a practice over 20 years, 21 years on average. That will require multiple interventions to keep them off those drops and keep their disease controlled over that period of time. I think this is truly one of those paradigm shifts where everyone in the industry can win with multiple technologies and multiple solutions to meet that patient wherever they're at in their journey.
Sure. Makes sense. Maybe we can pivot to iDose. The launch has gone very well for you, and obviously the key area of focus has been reimbursement progress. Maybe with that said, you know, can you level set us on where we stand with MAC coverage on both the facility drug fee and professional sides of the equation?
Sure. I'll try to do it at a relatively high level. If you've got things you want to go deeper on, we can. I kind of break it into three primary tiers, if you will. The first tier, I think everybody knows fairly well. For Noridian, Novitas, and First Coast, where you've got established recurring and predictable payment on both the drug, the facility, and the professional fee now that they've got professional fee schedules. You know, as of the sort of end of the first quarter, really all three of those were paying and adjudicating those claims as they should be. I think from that standpoint, you can kind of put them to the side.
You focus on the stuff that I know our sales team really enjoys, which is having the clinical conversation around adopting iDose and driving both the hunting and farming activities, if you will, associated with growing the product in those areas. The second tier I would put Palmetto and WPS into. For them, you see a more regular recurring pattern of payment, timely payment of the drug in the facility. The real battleground, if you will, on that is the professional fee. With that certainty of payment on the drug, you can drive incremental volumes, obviously, in practice groups. There is less noise from the administrative suite now that they know that they are going to get paid on the primary product acquisition.
As you try to drive that, you try to drive the volumes that ultimately give the information to the MAC so that they're able to hopefully provide a professional fee schedule in, you know, a timely manner. There's no statutory timeline on that. You try to drive those activities through both advocacy as well as volumes. The last group I would put CGS and NGS. In both of those, we actually are seeing the payment on the drug side as well. It just may not be quite as predictable in the context of the timing. Some of the additional documentation requests that come alongside of that can be a little less predictable. We're making progress in both of those as well. The last thing I'll say, maybe two things. First, we are seeing professional fees in all of the MACs.
It is not as if you are not seeing those payments. It is just the amount of effort and work that comes with it in those early days when they are sending in those additional documentation requests and things like that. It is just fraught with complexity that can lead to mistakes, and mistakes lead to either underpayment or denials or whatever it might be. It is that process of getting through that that we are really in the middle of with these other, I will call it four MACs that are still going through that process. The last thing is, and I just think it is important for folks to understand that, you know, the MACs themselves, they actually want to pay this. It is not, you know, I think it is true in general.
You know, the mandate of the Medicare Administrative Contractors are to actually cover these things that are approved by the FDA and provide that. The process we were going through is normal and ordinary course. As frustrating as it can be for the providers at times, it's not new or unusual. It's really a data collection effort by the MACs to make sure that the product itself is being done on label, it's medically necessary, and that, you know, they can ultimately get enough information to calculate what those payments should be on the professional side. Which is why I say it's really a game of volume, and it's a matter of when, not if, things get streamlined, as we've certainly seen in the case of Novitas, Noridian, and First Coast.
Got it. That's very helpful. And, you know, over the past two quarters, three quarters, you've provided some data points around MAC reimbursement and iDose contribution. So I think you've said in Q4, Noridian was kind of the predominant piece of the volume. And then in Q1, you mentioned that was about 40% of the iDose volume. And so that means, you know, the other MACs are starting to layer in. So I guess just from a qualitative standpoint, can you talk about, you know, how you see the rest of those MACs layering into the contribution in 2025?
Yeah. I think just, you know, to add one additional data point on that, I think what we said coming out of the first quarter was that the combination Noridian and Novitas were about 75% of the volumes, just to give a sense, despite the fact that they're somewhere between 40%-45% of the covered fee-for-service lives. That gives you a relativity gauge on the impact that they're having versus the other MACs. Now, what I will say is that actually the chart, if you will, of volume growth in all of the MACs, maybe with the exception of CGS because it's so small, there's a little bit more noise in it, but for all of the MACs is actually moving up and to the right. There's growth consistently happening in all of them.
The difference is that when you do not have that streamlined reimbursement, the in is much smaller, which is what leads to that dynamic. I think as we continue to execute on the confidence side of the J code and the facility in these areas and hopefully get them into the place where the MACs have got it streamlined and they start adjudicating in the 10-20 day timeframe that they do on typical procedures, we can continue to see that growth and contribution in the coming quarters. I do not know. I mean, it is very difficult. There is a variety of scenarios if that how much that mix will shift in the coming quarters simply because, you know, obviously our teams in Noridian and Novitas are not slowing down either.
The fact they've got a little bit of a head start means they're going to continue to drive both on the hunting and farming, as I said earlier. That may or may not, you know, lead to different mixes as we move forward. I certainly do believe that the other MACs continue to grow in their volume. I would expect that to continue to accelerate as we make our way through the year.
Great. You know, we all understand there's an economic element as well, particularly for the implanters. I think you've been very strategic about how you're, you know, establishing professional fees at the MACs, maybe a focus on standalone iDose versus in the combo cataract setting. We do speak to multiple doctors who tell us the low-hanging fruit is in that combo cataract setting. Just wanted to get your thoughts on how you think about, you know, what's the volume that you're kind of, call it, leaving on the table by focusing on the standalone only? Could we start to see an increasing contribution from iDose in the combo cataract setting as you become more comfortable with, you know, the pro fees?
There is no question that we could have moved the adoption curve, if you will, or those early adopting volumes much faster than we chose to. We tried to signal this to everybody that, you know, when we launch products, we do it the right way for the 10-year timeframe versus any one quarter or even year in that regard. What I mean by that in this case, and you alluded to it to a certain extent, is two things. First, you know, when you think about changing the standard of care is where we started from an interventional perspective. If we just started with the product launch being focused on combination cataract surgery, you would not be changing the mindset of these surgeons alongside of that.
By forcing the standalone, you know, adoption, you're forcing some additional conversations and changing of practice patterns that is just a much larger market. I mean, when you think about interventional glaucoma, you're talking about a market that has 21, 22 million eyes, you know, 13 million of which are diagnosed and given 12 million of which are diagnosed and treated. That's two and a half times the size of the cataract market. From our standpoint, relative to the 500,000 or so, you know, addressable market size for combo cataract. From our perspective, it's imperative that we're leading with the standalone conversation because it's what's going to ultimately drive the results over the long term. Now, you know, within that, you referenced market access. From a reimbursement perspective, we wanted to make sure that the claims processing was clean.
The more things you add into that, the more things that they're doing as a part of that procedure, the more places where that claim adjudication can go wrong when the MAC's asking for additional information or whatever it might be. Our ability to get through that, execute, make sure the focus is on iDose and iDose procedures alone is an important step in that. As we move forward, you can imagine to that exact point, the lower hanging fruit for many of these folks is they don't have to change their practice patterns to adopt in combination cataract. If they've got glaucoma and they think that iDose is the right solution clinically and it fits where it's in their treatment algorithm, doing it in combo cataract is the same as doing it from a standalone standpoint.
I certainly would expect that as we move forward, more and more folks will be doing exactly that.
It seems like the strategy has been bearing fruit. I mean, the doctors that we speak to say they get reimbursed $800 or $850 versus $500 for a cataract.
Yeah. On the professional fee side, you know, what we've said is I'd say the wider band range is probably $600-$1,000. It depends upon the MAC and certainly the geography and the cost of living index that they've got within each of those MACs. But the sweet spot seems to be sort of in that $700, $750-$800, $850 range across the country, which is in line more broadly with glaucoma procedures. Not a huge surprise from where the MACs are landing as they calculate the value associated with the professional fee.
You know, I think this year you're starting to really address the commercial payers. Just wanted to get your sense of, you know, are there any strategic differences or structural differences that change how you kind of target commercial payers and making progress there versus, you know, on the Medicare MAC side?
Yeah. And you've heard this analogy from me before, but, you know, this is a crawl, walk, jog, run strategy. We're definitely going to take the crawl phase again slowly simply because you want to make sure that your customers are having success in the revenue cycle management side of the commercial book of business. To the heart of your question, it is very different. You know, the MAC and the Medicare process is one where there's an awful lot of this initial sort of effort to educate. Once they've got it and they know what's there, it becomes a more predictable payer, both in terms of what they pay and when they pay and the timing associated with the certainty that's there.
Inherent with the commercial and even Medicare Advantage by extension is the challenges that come with the complexity of that system in terms of prior authorizations, denials that come alongside of that, appeals of those denials. Even after you've got a prior authorization and you do the procedure, a certain percentage of the time you know you'll get a denial on the back end of the payment and going after the appeals and the process there. Having practice groups that are, from a rev cycle management standpoint, confident in how they execute that, similar to the way a hospital might be inside of their department. A big lift for us is supporting the customer from that standpoint, making sure they understand at a macro level and a micro level how that works.
There certainly are many practice groups out there who are fantastic at this and many others who it's an area of investment because maybe they haven't done as much of the pharmaceutical side. They've been relegated more to, you know, premium IOLs and cataract surgery or LASIK, which is a cash pay procedure. They may be great practice groups, but we need to really make sure we're investing in a bit of handholding in the upfront so that they're successful with that. Ultimately underneath that, and I think this is probably a lesser known or understood, you know, element is that our payer relations team has been out since the day of approval. Our coverage both on the commercial lives as well as on Medicare Advantage is quite robust. You know, we have over 50% covered in policies today.
Those policies look an awful lot like DURYSTA from AbbVie, Allergan. In many cases, they've just dropped iDose into the existing policy they had for that sustained pharmaceutical. For the other 50%, we're seeing prior authorizations go through to confirm that when it's medically necessary, you can get coverage for those procedures. I think we're in a good spot from a payer perspective on that. Our job now is to make sure that our customers and those HCPs are prolific at actually executing against it.
Okay. Great. I have one or two more on iDose, but I wanted to make Alex do some work. Maybe just, Alex, can you talk about, I believe you guys are still focused on free cash flow break even? Can you talk about where we stand there and what the priorities are?
Absolutely. In the short term, that's absolutely the goal to get back to cash flow, break even. If you look at our history prior to COVID, we generally, we call it lived within our means and generated either break even or just a small amount of cash and built that up. Then we went through a period of investment and a lot of it had association with iDose and getting ready for that launch and building a manufacturing facility, et cetera. Now we're back to that point where we should be, you know, able to live within our means as iDose, you know, continues to have success. That's our near-term goal for sure.
Got it. I guess can you speak to how you're thinking about iDose gross margin contribution?
Sure. No, we definitely expect that given the profile of iDose, that that product can be accretive to our overall gross margin over time as the product scales and we have more success with iDose over time.
Got it. I mean, have you shared at all how you're thinking about, you know, what kind of the dollar sales need to be or volumes before iDose gets to be accretive?
We haven't shared that, but let's just say it's in the near term for sure.
Okay. I guess, you know, one of the interesting things about this is you have a sales force already and you can just drop iDose in the bag. I guess how do you think about operating leverage, you know, as we go forward? I guess also if you can kind of weave in there in the context of you're still running some clinical trials, right? You're working on iDose TREX and some other things or actually a lot of other things. Yeah, how do you think about OpEx leverage?
Yeah, no, absolutely. The good news is that if you look at our first quarter results, we already are seeing it, right? We had 25% growth on the revenue line and the OpEx line was only growing at about 12%. So we're already starting to see leverage in the model. We expect to see that on the back of iDose and its success. Again, as you mentioned, the balance will always be, you know, the revenue and cash generation versus the investments we need to make both in the iDose launch and in the future launches as well as our pipeline.
That's always the balance that we're going to be playing and that Joe and Tom and I are always discussing and trying to make sure we just do that along with other episodic event investments that need to be made or that become available to us.
Okay. Maybe last one on this topic. When you think about the size of the rep base today, you know, where do you see it growing or what do you view as a sufficient number of reps?
Yeah, I think our sales force, actually the sort of the mainline sales team is in a pretty good place. That does not mean we will not continue to fill in geographic gaps as they emerge. That is more in ones and twos versus, you know, wholesale change. If you look at some of the larger established ophthalmic sales forces, they tend to peak out at 100, 125, at least for surgical procedures or in our case, surgical pharmaceutical procedures. So I think that we are in a pretty healthy spot on that. That does not mean, I think where the investment will come to Alex's point in the coming years will be much more around how we support that from a reimbursement perspective, from a site of care perspective, all the various things that are there to really help drive access for patients.
Ultimately, you know, the broader sort of marketing apparatus, the traditional, whether that's traditional marketing to HCPs or patients, et cetera, that's something that we plan to scale alongside for a period of time here, both with the iDose launch as well as with the Epioxa launch hopefully later this year.
Okay. Great. And, you know, back to iDose, you know, do you have any updates on the, or I guess what's the latest and greatest on the readjudication efforts to get the single use limit removed? I know we have the exchange trial. Just, you know, can you comment on anything else that the FDA would like to see beyond that or whatever you can share there?
No real updates there. I think what we said on the first quarter call was that the package, if you will, has been submitted to the FDA. They are in their review process and we hope to hear back obviously from them later this year. We will keep you apprised as we do versus sort of the play by play. As you know, and we have said in the past, the safety profile, we have got the data associated with the exchange of an iDose procedure that was collected as a part of the original iDose trials. Hopefully we will be successful in, you know, our efforts with the FDA on that front.
Okay. Great. And just last one on iDose, on the Trio, can you give us the latest and greatest there? I think you've said in the past you have to run a small safety study. So maybe, you know, what are timelines and, you know, KPIs we should be looking out for?
Yeah. From that standpoint, you're really talking about in-office administration, which I break into kind of both a reimbursement market access activity as well as the development. You referenced the development side. The Trio system, it's the same iDose implant. It's just an injector system that's designed to minimize the incision size as a part of an in-office procedure. From that standpoint, we do have to run a small safety trial, confirmatory safety trial, something that we're well underway and heading down that path. I would expect that, you know, that's a 2026 type activity to get that cleared. That doesn't mean that a practice or a doctor couldn't do an in-office procedure with the existing. They certainly could. It was done as a part of our iDose clinical trial.
I think the next level of adoption and willingness to adopt will come with the Trio system when we get that cleared. In parallel, as you establish both the facility and the professional fee in the MACs, you start to apply for in-office coverage. That is an activity that is well underway as well.
I think I've asked you this in the past, because you have the J code, you'd look to ideally price iDose the same in the in-office setting.
It would be priced the same. Yeah. From that standpoint, the process of billing and payment for the J code is quite similar. It is much more just about the site of service and the reimbursement attached to that site of service from the Medicare administrators.
Got it. And then I did in the last few minutes want to touch on the MIGS business. You know, we've seen the fallout across the board from multiple vendors from the LCD changes. And, you know, I think you've talked about the LCDs removed about 10%-15% of the MIGS market. So, you know, iStent Infinite has been growing for you in the standalone. Is there any way you can help us think about the differences in growth in the standalone business versus the combo cataract?
It's difficult because from our standpoint at a superficial level, when an account orders an iStent Infinite, we don't know whether it's being utilized in standalone or in combination with cataract surgery or otherwise. We just know that they're ordering it. It's somewhat anecdotal and obviously directional from the data we're seeing and the same things that you're seeing in terms of the performance certainly in the first quarter on a relative basis to some of the other technologies that are out there. I think we did quite well. I'm not so sure that really was because of combo cataract that somehow we've got more share in the combo cataracts. Maybe there's a little bit of that. I think it much more has to do with the continued increased utilization and standalone for iStent Infinite for those patients who failed medical and surgical therapy.
I think that is the delta. If you're going to do a calculation, you might look at how other trends are out there and say, well, if Glaukos is doing a little bit better, it's probably because of the standalone growth that's coming with iStent infinite.
That's fair. I guess when we move past or when these changes are fully adjusted and that's in the base, how do you think about, you know, MIGS market growth? How do you think about your MIGS business growth? Because is this a mid-single digit grower longer term? Can we get to high single digits? How do you think about that?
I think, you know, certainly as you lap this year and you've absorbed the impact of taking these procedures out of the market, the underlying dynamics around growing the number of patients getting access to MIGS technologies, that's not changing. I think from that standpoint in combination cataract, you're still in the mid-single digit type growth environment. You just can't see it because of obviously the mass game taking some of those procedures out in 2025. I have no reason to believe that that won't continue as we move forward. I think the path to mid-single digit and higher is back to a function of standalone utilization and the choice of tools. This comes a little bit into the Glaukos component of this.
It's a little harder for us to predict simply because, you know, from an iDose perspective and the results that you're seeing from that clinically and, quite frankly, selfishly, every iDose has a higher return on investment than an iStent Infinite, if you will. The adoption that we're driving may lean much more towards the iDose side of the equation than the stent side. It's hard to predict exactly how some of those algorithms will play out. Again, what our focus is on is driving that increased standalone utilization. As a result, how they choose between their technologies, iDose or iStent Infinite, we remain a bit agnostic to.
Okay. Great. I think we're at time.