Glaukos Corporation

Welcome to Glockos Corporation's First Quarter 2020 Financial Results Conference Call. A copy of the company's press release, issued after the market closed today, is available at www.glockos.com. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. This call is being recorded, and an archived replay will be available online in the Investor Relations section at www.glacos.com. I will now turn the call over to Chris Lewis, Director of Investor Relations and Corporate Strategy and Development. Please go ahead.

Thank you, and good afternoon. Joining me today are Glacos President and CEO Tom Burns, CFO Joe Gilliam, and COO Chris Calcaterra. Following our prepared remarks, we'll open the call to questions. To ensure ample time and opportunity to address everyone's questions, we request that you limit yourself to one question and one follow-up. If you still have additional questions, you may get back into the queue. Please note that all statements other than statements of historical facts made on this call that address activities, events, or developments we expect, believe, or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies, and prospects regarding, among other things, our sales, products, pipeline technologies, our U.S. and international commercialization efforts, the efficacy of our current and future products, our competitive market position, financial conditions, and results of operations, as well as the expected impact of the COVID-19 pandemic on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties, and factors relating to our operations and business environment. all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our results to differ materially from those expressed or implied by forward-looking statements. Review today's press release and our recent SEC filings, including the risk factor section on our most recent form, 10-K, for more information about these risk factors. You'll find these documents in the investor section of our website at www.cloudcoast.com. Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glauco's ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release that is available in the Investors Relations section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I would like to turn the call over to Glaucos President and CEO, Tom Burns.

Thank you, Chris. Good afternoon, and thank you for joining us today. The coronavirus global pandemic has created an unprecedented time for all of us in different ways, both professionally and personally. I want to start by saying on behalf of everyone at Glaucos that our hearts go out to all those affected by COVID-19. and we are especially grateful for the healthcare workers and first responders who are selflessly serving on the front lines. Before we talk about our first quarter performance and the current trends in our business, I want to provide an update on what we have been doing at Glockos in response to this rapidly changing environment. I have been thoroughly impressed with the response and resiliency of our employees around the world who make up the strong foundation of our disruptive franchises in glaucoma, corneal health, and retinal disease. Despite negative personal and professional impacts induced by COVID-19, our employees have initiated a new fundraising campaign through the Glauco's Charitable Foundation that allows them to contribute money to charitable organizations providing relief for those affected by this pandemic. I want to especially thank them for their dedication and commitment in maintaining their important work to move the company, their families, and their communities forward during this challenging time. I am confident we will get through this together and emerge an even stronger, more efficient, and more capable company. We are also building upon our longstanding mission to offer product donation and patient assistance programs, providing access to our technology for those who lack access to care or insurance, including those who have lost insurance benefits due to the COVID-19 pandemic. As the current situation emerged, we immediately developed and implemented business contingency and continuity plans beginning in the first half of March and executed on several key initiatives as the current crisis began to unfold globally in mid to late March. Our response plans were guided by several key priorities. First, to protect the health and safety of our employees and their families. Second, to support our customers. Third, to preserve jobs globally. Fourth, to protect core research and development projects. And finally, fifth, to maintain our strong financial and operating position following this pandemic. As many of you know, a safety first mantra is at the core of our company's foundation and our patient-centric mission Yet these past few months have greatly expanded the importance of that commitment in really an entirely different way. Our top priority has been to protect the health and safety of our employees and their families, our customers and their patients, our clinical investigators, our suppliers, and the communities in which we operate. While the majority of our employees have been required to work from home, we have maintained streamlined manufacturing and assembly processes in order to consistently provide the product to our customers who depend on us. LACOS employees involved in such operation-critical processes have been organized into a number of small shifts designed to minimize the time any one individual is required to be on site. We've implemented numerous health and safety protocols at our sites following CDC guidance and local regulations, and we'll update those as needed going forward. I'm pleased to say that both of our main sites continue to operate during this period, albeit differently. and our supply chains have experienced minimal disruption to date. In order to sustain us through this period of uncertainty and maintain jobs in our strong capital position as we come out of this pandemic, we have implemented a number of cost containment measures. These include substantial reductions in discretionary spending and capital expenditures, temporary salary reductions for our executive team, senior leadership, and many others throughout the company, as well as other employment actions. And Joe will elaborate on these later. While we are not immune from the economic impact from COVID-19, we did elect to forego pursuing the CARES Act PPP funding so that this important source of capital could be directed to the truly small businesses in our communities that need it for survival. We believe our cost-saving initiatives paired with our strong balance sheet leave us well-positioned to ultimately provide our essential ophthalmic therapies to customers and their patients who will return for treatment as we move past the peak of this current crisis. We were pleased with the strengthening business trends experienced as we progressed into late February and early March, but as healthcare systems shifted resources to the treatment of COVID-19 and government restrictions on elective procedures and therapies were implemented throughout the world, We experienced material disruptions to our business. By late March, these restrictions led to increasing deferral of cataract and keratoconus procedures and global sales trends that were less than 15% of levels achieved prior to the COVID-19 outbreak. Although our near-term sales have been temporarily disrupted, our commercial focus is not, as we remain committed to deepening our customer relationships in new and creative ways. We have sponsored customer-oriented webinars hosted by well-respected ophthalmic surgeons to provide our customers with value-added insights into relevant hot topics such as the CARES Act, the current state of electric procedures, key business and operational considerations for an ophthalmic practice during this time, and planning guidelines for reopening. Our sales professionals remain hard at work maintaining close engagement and dialogue with their customers, through remote online training modules, regional conference calls highlighting the performance of our technologies, interactive case-based tutorials, and various other customer support initiatives. Within market access, our team, in conjunction with our customers, continues to work with providers and payers to optimize the Petrexa reimbursement landscape, train office staff on claims and contractual processes, and expand our ARCH claims program. Internally, we continue to execute on our commercial integration plans through cross-functional training, key account targeting, and market segmentation deployment. While many of our customers' practices have been largely shut down during this time, our commercial focus and customer dedication remains strong. The enduring partnerships we have built over the years with our customers are more important than ever. We are proud to partner with them as they navigate through these unprecedented times. Our commercialized ophthalmic solutions address chronic diseases that only worsen as patients are left untreated. Given the medical necessity of these interventions, we believe most of these deferred procedures will ultimately be performed in the future as the COVID-19 pandemic subsides. but it remains difficult to predict the specific timing and slope of this recovery curve. I am encouraged by the recent indications of plateauing and even declining infection rates and deaths from COVID-19 in many areas of the world, along with many U.S. states that have begun the reopening process. At the same time, we recognize the challenges and risks and the potential for unpredictable spikes in COVID-19 infection rates that remain ahead of a vaccine or therapeutic solution. We continue to analyze both the COVID-19 drivers of return to treatment and customer input regarding their restart plans and processes. Not surprisingly, we see a variety of potential scenarios for our business as ophthalmic practices begin to reopen and elective procedures return. From a high level, we currently expect a phased and deliberate return beginning slowly in May and June to increasingly more normalized levels for cataract and keratoconus procedures by later 2020, subject to any resurgence of COVID-19 in the fall and winter months. The rate of return for elective surgery may also be driven by site of service, site restrictions, and type of care with the physician office and ambulatory surgery center settings recovering before hospital-based procedures. As a reminder, all of our glaucoma technologies are used in outpatient surgeries, 80% of which in the United States are estimated to be performed in ASCs. And our Fortrexa solution for keratoconus is primarily performed in the physician's office. The reopening process will include heightened safety protocols with ophthalmic practices to ensure the safety and instill patient confidence. We will closely support customers as they bring capabilities back online. and follow the reopening guidelines and recommendations from the CDC, Coronavirus Task Force, the American Academy of Ophthalmology, and other key societies detailing specifically how to approach and manage some of the key decisions in reopening more normal practice in the post-COVID-19 era. We know our customers are eager to get back to work to treat their patients and we're ready to support them. Moving on to our pipeline, which consists of 13 publicly disclosed programs in various development and clinical stages, and another 10 yet to be disclosed development programs also underway. A number of these pipeline programs are in active pivotal clinical trials, including iStent Infinite, Epion, and iDoseTR. For these trials, we're actively assessing potential impacts due to COVID-19 disruption. Our top priority within clinical operations is to protect the health and safety of our clinical field personnel, investigators, and participants currently enrolled in our clinical trials. And in addition, we've implemented a number of measures to maintain the integrity of these trials in a manner to fully satisfy regulatory requirements. We've worked with clinical investigators to closely monitor and to help assure patient compliance with clinical trial protocols, and are also planning numerous virtual investigator meetings over the coming weeks. We're encouraged with the FDA's recent communication and position on these clinical trial matters during the COVID-19 pandemic, and we'll continue to collaboratively work with the agency to advance our clinical programs in a safe and timely manner to ensure study viability. The clinical trials for iStent Infinite and Epion have already fully enrolled, and although they may experience some modest delays in patient follow-up plans, we continue to express confidence in our previously disclosed FDA approval targets of late 2021 and 22, respectively. For I-DOS, where we have been rapidly progressing to patient enrollment completion, the temporary closure of ophthalmic practices and deferral of elective procedures caused by COVID-19 has led to a temporary pause on new patient enrollments. As investigator sites begin the process of reopening to more normal ophthalmic practice, we will work with our clinical partners to reignite the enrollment momentum that we previously built. While the situation remains fluid, as of now, we believe that iDose may continue to be impacted well beyond the current shutdown as doctors focus on clearing their patient backlog over clinical trial enrollment. We plan to provide further updates on this front as we gain additional visibility in future quarters. Importantly, despite this transient disruption, we maintain a high degree of confidence in the integrity and viability of our high-dose clinical program, given the trial's design and protocol. We also remain in early preparations for the potential U.S. commercial launch of Santan's Pharmaceuticals Presser Flow Microshunt, an elegant ab-external surgical implant for late-stage glaucoma management. During this time, we want to reassure our stakeholders that we are continuing to invest in our future. We have prioritized the investments we are making to focus on our near-term pipeline programs that we believe may drive significant value creation for our company over the coming years, balanced by earlier stage development projects where costs may be deferred. That said, we continue to advance our development efforts on our core clinical stage development programs, as well as our dry eye and retinal R&D programs. One such investment priority is within our expanding Corneal Health franchise, where I'm extremely pleased with the integration process and progress as we execute on our corporate milestones, commercial strategies, and cost synergy goals. While we remain in the early stages of unlocking the combined organization's full potential, we are encouraged with the market's receptivity to our fully integrated, expanded commercial organization and the customer-friendly initiatives we've introduced, which help drive more than triple the number of capital placements in the U.S. during the first quarter of 2020 versus the prior year period. These initiatives are also producing tangible results within market access, where we continue to solidify consistent payment for Trex's product-specific J-code, which is now covered for 96% of commercial payer lives. We're also making substantial progress across a number of other business fronts, with key accomplishments that include iStent Inject regulatory approval in Japan, a standalone indication approval in Australia, a tariff increase in the United Kingdom, and an average increase of 44% to over $300 on professional fee, 0191T professional fee from Meridian. a Medicare administrative contractor with jurisdiction in 13 western U.S. states. In summary, while we continue to actively monitor COVID-19 and its business disruptions, I remain confident that the longer-term fundamental prospects of our business remain strong as we seek to create a unique strategic vision care leader, building thriving franchises in glaucoma, corneal health, and retinal disease with novel therapies that disrupt conventional treatment paradigms, improve patient outcomes, and create new robust markets and market opportunities. So with that, I'll turn the call over to Joe to discuss our first quarter 2020 financial results. Joe.