Welcome back. I'm Larry Biegelsen, the MedTech analyst at Wells Fargo, and it is my pleasure to host this fireside chat with the management team of Glaukos. With us, we have Joe Gilliam, President and COO, Alex Thurman, CFO, and Chris Lewis, Vice President of Investor Relations. Gentlemen, thanks for being here.
Thanks for having us, Larry.
Thanks for having us.
Let's start with corneal health. Joe, Epioxa contributed about $11 million in Q2, which, by our math, is about 180 paid eyes. Help us understand the funnel behind that. How many patients are in the EpioxaCareConnect, awaiting approval? How long is approval taking? That kind of stuff, please.
Yeah. Well, first, let me say, it's nice to start one of these conferences and talk about corneal health first. I think it's a nice shift for us and for investors. Obviously, you referenced the second quarter results. We were pleased, obviously, with the start there, but it really was just that. You're talking about the first full quarter of commercial availability and a lot of just miscellaneous J-code cases that managed to sneak through before the end of the quarter. But to be able to produce an incremental $11 million of revenue from Epioxa was a good outcome for the second quarter, for sure. Today, now, as you make your way into the third quarter, as we've talked about coming into it, you have the J-code that went effective July 1st, and that's effectively a reset for all of those claims and the processes around those.
Any time you're dealing with what is predominantly a major medical-based claim adjudication, you're going to look at processes that, at best case, are kind of 60-ish type days to get through once it gets to the pharmacy side of the equation and seeking the approvals on that J-code. So we're now in the early days of September, and you're kind of just getting past that, and we're seeing, obviously, the claim processing start to make its way through. We're identifying where we've got now outlying situations, whether it's information that's being requested or payer logistical hitches or all the things that inevitably come up that slow you down, and we're knocking those and trying to tackle those one issue at a time.
But we're making progress, and I feel good about the building blocks that are there in place and the things that we've talked about on the second quarter call in terms of our site of care network, in terms of our payer access, if you will, and the coverage from that perspective. It's about the less fun stuff, just the blocking and tackling on a day-to-day basis, and getting these patients access to the therapy.
That's helpful. You are removing Photrexa from the market. What's the status?
Yeah. We did announce our intention to sunset Photrexa in the third quarter, and we've done just that. That doesn't mean there's not some inventory still either in the channel or a small portion that remains to be allocated. We do continue to have the drug available for a limited access program where a physician determines that the epi-off based procedure is warranted for a handful of reasons. We want to make sure we still have a limited supply to support that, and we'll continue to do that. But otherwise, it is sunset commercially.
That's helpful. What are you hearing from payers regarding the price? You talked about $60,000, kind of a net on the Q2 call. What are you hearing?
Yeah. I think I misspoke on that.
You did.
too. Sorry. I will clean that up here for the public record. I think we have historically said 65%-70% is kind of the place, and I do not see anything that would deviate from that for right now. It is a combination of our copay assistance programs as well as the mix between Medicare and, or sorry, Medicaid and 340B hospitals. We are not really seeing anything in context from that perspective, payer requests or other things where we have to have more significant gross to net deductions.
Candidly, the focus right now, we have got general payer acceptance, as we talked about. Even on the second quarter call, we were north of 120 million lives commercially that had access pathways. That has only continued to grow. It would not surprise you. A growing base of Medicaid-covered lives. We will talk more about that in the coming quarters as that metric becomes more relevant. Price is not really a substantial part of the conversation within that. It is much more about making sure that clinically they understand what Epioxa does, how it relates to Photrexa from an epi-on versus epi-off procedure, and then working through the minutiae of getting those patients on therapy.
That is helpful. We have heard that from some docs that if Epioxa payment takes longer than, call it, 8-12 weeks, you will make the product available for free. I guess the question is: Is there a timeframe after which you will provide free product if it takes a really long time?
Yeah. I think that probably is a bit of a misunderstanding or connecting dots in different ways from that physician. There is no program like that available. We obviously have a free product, our patients assistance program, to provide product for financially qualified individuals. We have had that from the beginning. That is very common across any pharmaceutical launch like this. We definitely, where that is the case, where they do not have coverage or a variety of reasons, and they financially qualify, we do everything possible to make sure they get access to the therapy. There is no sort of if you are not approved for Epioxa in 8-12 weeks or something like that automatically puts you into that camp.
You don't expect the review time to be so long that a physician's patients will wear out?
No. Ultimately, where review times take long, and for those payers that are more problematic in their processes and different things like that's where provider or even patient advocacy alongside of our payer relations teams have to go and do their job in that setting. You can't ultimately give them an out, if you will, by simply not adjudicating the claim or the situation. You really have to drive that to a conclusion. If ultimately, for any number of reasons, a payer's not covering that, and the patient's financially qualified, then in that case, we would certainly seek to use our free product.
Really, what I'm trying to understand is when you get back to that 18,000- 20,000 eyes, right?
Yeah.
Even higher, you think you can go over time.
Ultimately, yes.
You're taking Photrexa off the market, right? At some point, you have to get back there, otherwise patients are not getting treated, right?
Absolutely.
How do we think about even the ramp to that? If I look at consensus next year, I think consensus has $28 million for corneal health in Q4, $173 million in 2027. That's like 3,000 or 4,000 eyes next year. It's a lot of untreated patients.
Yeah.
How do you bridge that?
You always try to get me to set guidance on this at this meeting. I am not going to do it. Look, I think that the facts associated with what you are describing, where you have 10,000 patients, 18,000 - 20,000 eyes that are being diagnosed and seeking to access care, that is unchanged. For the way we sit here, I am not going to prognosticate or predict exactly how that will shift at any given point in time, but what I will say is, that is our job is to try to drive that as fast as humanly possible for that reason. We have a major role in that, but so do the providers and, in some cases, the patients in terms of advocating for that. Again, I go back to the things that you can control.
Our site of care network provides access to virtually all of the U.S. now. Our payer access pathways, where they have given us there is a path, is now very large and growing to the vast majority of at least relevant American citizens. Now it is about breaking the initial logjam that exists with that. How fast that happens in the coming months and quarters and even years at that point, I think we have to continue to evaluate and monitor before we put any stake in the ground around 2027 or otherwise. Right now, I am 60 days post J-code, and we are fighting like hell to make sure that we are actually getting as many of these folks through and pulled through to therapy here and now, to make sure that folks are not missing out on that care.
But you are 60 days post J-code, but you have removed Photrexa from the market or almost have. So my concern is if you do not get close to the 18,000 - 20,000 relatively quickly, you are going to either have a lot of unhappy doctors who are just waiting, or you are going to have a lot of leakage to off-label.
Yeah, I think there will be a little bit of all of that. So the question becomes, over time, how much do you get on therapy? How much do you have unhappy doctors because they want to treat these folks? How much leaks either to your own free product program and/or off-label? It is not really off-label because no approved other therapy over time. But that is exactly the equation that we are playing with. And we knew that going in. If you talk to physicians right now, which I know you do, Larry, there is varying degrees of understanding of the way the process works. But they want to get patients treated.
Right.
We want that too. It is collectively working together, making sure where they create narratives in their head that are not actual, and focusing it back to the patient, making sure that we are doing everything we can to drive that advocacy with the insurance company. Because at the end of the day, we know, on the other end, the insurance company has actually already said, for most of these patients, that clinically, they are going to support Epioxa. It is literally about their adjudication processes and things that they put you through when you have a new drug code and a new J-code that they technically deny and then ultimately force you through that process. It is keeping our focus on the payer in that sense and driving that.
If we do a great job on that, I hope that we are back to those numbers that we are confident we will sooner rather than later.
Okay. That is helpful. Competition. I think everybody knows there is a competitor out there that is going to present data in October. Maybe talk about the clinical data. Are their endpoints different from yours? What should we focus on when we see the data?
Yeah. Well, first, we have not seen the data ourselves, nor obviously they are released in that sense, so it is a little premature for me to comment with too much specificity on that. I think they took a different approach with the FDA. We believe, obviously, in the Kmax endpoint. It is the most objective endpoint out there. But ultimately, we wish them luck. I think we are so far away from an environment where it is really about competition with a capital C. I think multiple participants here can help grow the market. We fundamentally believe this is not a 10,000-patient market. I agree with the physicians when they say, "I do not know if it is a rare disease. It may just be rarely diagnosed." We are going to make the investments to find that out.
Ultimately, if they're along for that as a part of a responsible participant in helping to drive that awareness and detection and access to care, then I think both of us can win when they come to market and they've got everything going in 2028, 2029, whenever that may be. Ultimately, we're a long way away from where market share relative to market growth will matter all that much. We'll see where the data comes out, but even when it does, they're still quite a ways away from actually being on the market commercially.
You'll have, call it, an 18-month first-mover advantage, at least with the Epi-on treatment.
Yeah. With Epioxa, yeah.
With Epioxa. There's some differentiation. They bilateral treatment, they don't need the oxygen. Couple of differences. What do you think the most important competitive moats are for Epioxa besides the first-mover advantage?
Yeah, I don't think I'm going to get into litigating that here in this forum. I think that there's multiple paths for winners to exist in the marketplace. We feel very good about Epioxa clinically. Commercially, we're seeing effectivity of the results that are the first and foremost, the most important thing, patients are getting treated and they respond to the therapy in halting the progression of that sight-threatening disease. I think in the context of and quite frankly, oxygen is a critical component of that. I think as we move forward here, we'll be prepared to obviously do that when we're actually having those conversations with physicians more so than necessarily with investors.
That's helpful. So you've talked about launching a handheld KC or keratoconus screening device later this year. How impactful could that be?
Well, it's not impactful in the context of a revenue line item. It's another area in which we're making a significant investment with our own both hardware and software development teams to try to help drive increasing detection. So alongside of what I hope you'll see is a significant expansion around driving awareness in the coming months and certainly over the next year, we want to make sure that we have the ability with as many of these placed throughout the country to screen for the disease. Today, one of the great challenges, if you know somebody who has keratoconus, is that they'll often go through four, five, six different visits across optometrists, maybe even ophthalmologists, before they're actually finally diagnosed as having keratoconus.
It's often just general visual acuity challenges that they're being diagnosed with, and they're being prescribed glasses or some cases, contact lens, and then adjusting that prescription while the actual eye is getting worse. Our job is to try to democratize that, get these patients found, screened and treated far earlier in their life. I think the tech system will help do that.
Got it. All right. Let's transition to iDose.
Okay.
iDose grew about $20 million sequentially in Q2. How much was driven by the expanded professional fees with NGS and Palmetto versus just ramping commercial and Medicare Advantage cases?
I think it's a little bit of all of the above. There's also, as you know, you've covered us for a long time, there's a seasonality impact in that the first quarter tends to be a little bit slower, and the second quarter tends to pick up both in terms of procedure volumes overall, but then for those folks who are on Medicare Advantage or commercial insurance, that you start to get through where those approvals start to come through. So you see that. But when you really dissect the growth factors, we grew across all, including all the MACs, but it was led by exactly what you said, NGS, Wellpoint, Palmetto Region, and a pretty significant uptick in commercial Medicare Advantage utilization, which is aligned with exactly where our priorities were coming into the year.
The guidance of $275 million- $280 million for iDose implies essentially no sequential growth in the back half. Why is that?
Well, we try to be thoughtful around, obviously, as I said on the call, I think I can remember who asked about it, but Q2 was definitely a surprise upside even for us in the context of the progress that our teams and our customers made in utilizing it. So number one, we would make sure that we're thoughtful and accountable, that there's not anything that was a little bit of a, I'll call it a positive, non-recurring tailwind in the second quarter. Second, you tend to have seasonality that works against you a little bit in the third quarter, and then you exit the fourth with hopefully strength. We just try to factor all those things in in setting that overall view.
The LCD. Do you have any visibility at this point on whether we're going to see a final LCD?
We really don't. It's a somewhat opaque process, as you know. At this point, really nothing that we can report. No real visibility from our standpoint. We know what you all know as investors in the context of the timelines that are typical with these things. I think if we were going to hear something, we'd expect to hear it in the next couple of months.
Okay. Is there any back and forth with the company or medical advisors? Anything like communication that would kind of give you a sense that something's coming or what might be coming?
Sometimes you get that type of thing where there's different questions, different things that are going on there. I am not sure I would comment on that in the context of this. But as I said, we have really nothing at this point that would inform us that something is coming or not coming, that adjustments are coming or not coming. We are not at that stage of the process.
Based on your comments on the Q2 call, it sounds like if there is a final LCD, you would expect there would be some changes from the proposed LCD.
I am never confident on anything when it comes to reimbursement or whatever it might be. All I am confident is that we are going to continue to put one foot in front of the other, and I am confident no matter what transpires, that the long-term view of iDose is unchanged in our mind. But when I look at it from an objective standpoint, what was proposed clinically really does not work for patients. So where if we have any confidence in change, it is more because almost no matter what the philosophical view is of the MACs, they still need to have a policy that actually works for patients. And there are too many patients who it is just not appropriate, whether topical drop-based therapies are not appropriate, SLT is not appropriate. You combine those two, there are a lot of patients it is just not appropriate.
It leaves a huge hole for a large swath of patients that need access to a therapy like iDose. So I think at a minimum, they have to do that kind of cleanup activity in and around it to make it a viable coverage determination.
You said it wouldn't change even if the proposal stayed as is. It wouldn't change the long-term opportunity, I think you said a minute ago.
Yeah.
Would it change kind of some short-term dynamics?
Absolutely. As it was proposed, I think we talked about it at the time, when it first came out and we said, "Look, we're still confident in the overall kind of 2027 number as it stood there." That was born in much, and you'll remember saying this, it was because as much about the fact that investors didn't necessarily know what our views are, where we would land for 2026. So I think as I said at the time, you don't know how long of a putt that'll be in that context. But forget about that for a second. No matter what, there's will be a disruption in the context of the near-term dynamics around that. Ultimately, we would expect to overcome that. Even in an SLT world, there's a lot of patients out there, both prevalence and annual incidents that we'd be targeting.
But adjusting our targeting efforts, our marketing, our TTC, our sales force efforts around that doesn't happen overnight. Clearly there could be some disruption versus what would've otherwise been the revenue for 2027 for iDose TR.
Got it. But 2027, you said it was a relatively short putt to get to the consensus, which is about $336.
Yeah. Well, you are seeing that now, right?
Right.
You just got done talking about what the sort of revised guidance implies. I forget at the time, but it was more like $100 million worth of annual growth that was the putt. Now with the revised guidance and the trajectory we are on, et cetera, you see that that is becoming much shorter and potentially much more navigable in the context of any of the headwinds that may emerge from an LCD should they emerge.
Any update on the two phase IV studies, when we are going to see the data?
We said 2027, so at some point next year we'll have both of those come out.
The core MIGS business, anything new there? It seems to be back to growth.
Yeah. For a little while there, I think I would say pretty consistently let us show a trend. I think we've now had enough of a momentum in the core MIGS business to say that we've got that trend where it's back to growing. Obviously we'll continue to watch that in context of any LCD that may or may not emerge. But it's nice to see that alongside of that broader iDose growth.
International was still strong despite-
I know
every quarter you're saying it's going to slow.
I'm going to go spend this weekend with our international team in ESCRS, and I'm going to give them that feedback from you, that you're better at forecasting it than they are. But, no, I think it's been durable in the context that it's across virtually all of our geographies. We continue to sort of absorb competitive dynamics where, whether it's Hydrus going into France or Japan or other competitive dynamics that are around there. I've been incredibly pleased with the durability of that growth. But you do continue to see some slowing. Clearly, we've had some FX related tailwinds that should start to abate a little bit here, in the second half. So you continue to expect that to come in. But I've been very pleased with execution on a global basis.
Clinical readouts in 2027?
Yeah, a lot of great work going on from a pipeline perspective. Just to remind everybody, 13 disclosed programs there and a number more under the hood. As you think about the next 12-18 months, obviously we've talked about the iLution demodex blepharitis phase II program. Expect to have data in hand by the end of this year on that. You mentioned the KC Screening Device, planning to launch that by the end of this year. So, in line with our expectations there. Then you think about next year, iDose TRIO, expect to get that submitted and approved by the end of 2027. We'll have iStent infinite mild to moderate, that PMA pivotal trial data at some point next year. Then you think about the commencement of certain trials, whether it's the third-gen iLink, the iLution blepharitis, assuming that phase II data looks good.
And the continued retina programs that we're working on. We're pretty excited about all the progress being made there.
One of the things I love is that while understandably we spend a lot of time focusing on the near-term dynamics around whether it's iDose launch or now Epioxa as a part of it, is that that pipeline just continues to mature one quarter at a time. Phase II moves into phase III, pre-clinical moves into these phase I studies and phase II, and we're seeing a lot of really incredible data around that. I think as you think about the time horizon that's more, 2028, 2029, 2030 and beyond, we've got a lot of interesting things that are coming down.
Maybe it's time for another Investor Day.
We hear that occasionally.
Once a year.
On the demodex blepharitis program, how is that differentiated from the competitor out there today?
Well, I think overall we're really encouraged with what Tarsus has been able to do there from a pioneer in that market and building that in terms of finding patients and the DTC work they've done. I think for us, we're excited about our program and hopefully the ability to come in and help grow that market alongside them. I think for ours, we're encouraged with what we've seen thus far in terms of the approach being a transdermal cream, and we think that could be a nice patient-friendly option, again, to help grow that market and capture more of those patients over time.
We have a ton of respect for them and their management team and what they've done in building that market. It's an impressive team.
Joe, this is the time when you get to give some guidance for 2027.
Fair enough. This should be a short session.
The Street's at $847, up 23%. Maybe talk about some of the puts and takes next year.
Well, in some respects, we've already been talking about it. I think at this point, and it doesn't surprise probably anybody in the investment community, I think the most significant bid ask in terms of what 2027 can look like is exactly where you started some of your conversation on Epioxa and exactly how quickly can we get an increasing number of those patients onto the therapy and back to something that resembles the run rate that we were at before. That is the most material driver, bar none. Beyond that, clearly we continue to focus on unlocking both access as well as growing the overall opportunity for iDose, interventional glaucoma being the tailwind to that, and driving that as fast as we can and taking into consideration any of the LCD-related considerations that might be there.
I think the biggest put take is going to be exactly what transpires with Epioxa.
Okay. Any reaction to where consensus is?
Not at this point, no.
Maybe we can get Alex involved. He is chomping at the bit here. Consensus is modeling EPS, I think positive EPS in Q4 through 2027 and beyond. What is the right way to think about operating leverage versus reinvestment next year?
Yeah. Let me answer it this way, and thank you for the question, as always, Larry. I think we are in a super fortunate position right now. We have got two really exciting commercial launches that are going on. Both of those products have super high gross margins, and we can continue to see our gross margin accrete as those products become a bigger mix of the pie. We have seen leverage in the model, right? Revenue is growing faster than our operating expenses, while we continue to reinvest in the business. And we have seen now for a couple quarters some cash generation, right? And so as we look forward in the near term for sure, profitability is out there. We cannot deny it. It is coming. We can see it coming.
But at the same time, our focus as a company, as a management team, is to continue to drive these commercial launches and reinvest in the business to make sure that patients can get treated, and these interventional glaucoma things that we have talked about continue to expand, as well as the pipeline that Chris and you were talking about, as well as the other programs that we have not publicly announced yet to continue to get fed, and we continue to really drive within the business those things that will ultimately result in high growth on the top line. So in the near term, that is how we look and we are excited about what is coming.
Yeah. I am trying to figure out what you are trying to communicate.
Yeah. I'm being very coy.
Because, yeah. Maybe it just comes down to, Joe Gilliam, what you were talking about, it depends just on how big Epioxa turns out to be next year, or maybe you're going to continue to spend and maybe profitability doesn't come next year. I don't know.
Well, I think there's an element of that, and it is difficult because in some ways, the answer to his question hinges on the prior question you asked, right?
Right.
Whenever you're growing 30%, 40%, 50% with high margin products, even with all the ambition that we have in terms of our development paths and things that are there, that has leverage with it. So exactly where you view the revenue trajectory for next year can drive somewhat different answers for him in terms of the magnitude of the profitability. But I'll just reiterate the thing that I think just philosophically so we're all on the same page is that you heard Alex Thurman say it. Our number one priority is to drive growth, to drive it as fast as humanly possible in the quarters ahead, and to drive our R&D pipeline as quickly as we can through that.
Profitability will inevitably come alongside of that because of that overall growth and the margin profile, but our reason for being is to try to really bring new products to market and drive as much top line growth as we can.
I've heard secondhand that you've talked about peak operating margin of 40%.
Yeah. With the gross margin profile that we have, there's no reason at scale that this business shouldn't be 30%-40%, I think is what we've said, operating margin, that still allows us a best in class reimbursement rate on the R&D line.
What is a revenue scale that would get you to 30%-40%?
I don't know that we're going to break news or talk about that.
Okay, Joe?
No. I think we've always been comfortable saying it's hard not to see a path to 30%. As you scale up from there, obviously some of those other numbers start to come into play. I would say it this way, Larry, it goes back to what we've been talking about a little bit. There's clearly two franchises here, before you talk about any of the pipeline contribution, that have the potential to drive multiple billions of dollars of revenue each in the context of over the overall opportunity. The faster we can get there, I think the faster we can realize some of those profitability targets that you're talking about.
Joe, now that you have the experience with Epioxa as kind of an orphan drug, that's the skill set-
Yeah
that's unique to you. How are you thinking about bringing other drugs like that into the portfolio?
Absolutely. I think rare disease is its own unique category. I think about medical device and medical technology, I think about pharmaceuticals, even biotech within that. Rare disease, in the context of the way your market access operations, the way your support for patients, all the things around it are just a little bit different. Having built this infrastructure and invested as much as we have in that, it certainly is no surprise that we'd be thinking about what else can we bring within that. We have multiple programs already within Glaukos designed to hopefully target additional rare diseases within ophthalmology, and we continue to think about that both organically and elsewhere around opportunities to take advantage of obviously what we've built here to support Epioxa.
We got four minutes left. Any questions in the audience? Anyone else want to take a stab at the Epioxa ramp or 2027? No. Joe, thanks for being here. I want to give you the last word. Anything you want to add to the conversation or any closing remarks?
No. Well, first of all, we appreciate it. We appreciate the forum, the great investor dialogue throughout the day today. I'll just say, I think that we're at a fortunate place in our trajectory right now. It's a result of two decades worth of innovation and hard work. I have no doubt that within that, like we've proved in the past, whenever you're pioneering new categories, you're going to have things that create volatility and different things in and around it. If it was easy, it'd be a different game. But within that, I think we feel increasingly confident about the diversification of our revenues, the diversification of our growth, both in terms of franchises, but within those franchises, and then what that's funding in the context of our next generation of these products and the pipeline around it.
There is a lot of confidence within our organization around what the next five and 10 years look like, so it is an exciting time for us, and we appreciate all your support and investor support along that way.
All right. Thank you. Thanks for being here.
Thanks, Larry. Thanks.