Glaukos Corporation

Welcome to Glockhouse Corporation's second quarter 2020 financial results conference call. A copy of the company's press release issued after market closed today is available at www.glockhouse.com. If you'd like to ask a question in a session, you may press the star, then a number one on your telephone keypad. This call has been recorded and an archived replay will be available online in the investor relations section at the www.glockhouse.com. I will now turn it over to Chris Lewis, Director of Investor Relations and Corporate Strategy and Development.

Thank you, and good afternoon. Joining me today are Glauco's 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, our products, our pipeline technologies, our U.S. and international commercialization efforts, the efficacy of our current and future products, our competitive market position, financial condition, 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 actual results to differ materially from those expressed or implied by forward-looking statements. Review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the investor section of our website at www.gloukos.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 Glaucos' ongoing results of operations, particularly in comparing underlying results from period to period. Please refer to the tables in our earnings press release that is available on the investor section of our website for reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I will turn the call over to Glaucos President and CEO, Tom Burns.

Okay, thank you, Chris. Good afternoon, and thank you for joining us today. I hope you and your families are staying healthy and safe during these unique times. Before we talk about our second quarter performance and the current trends in our business, I want to provide an update on what we've been doing at Glockos in response to this rapidly changing environment and how we're applying the lessons we've learned to advance our key priorities and to best serve our customers going forward. The response plans we've prioritized and implemented over the past several months including protecting the health and safety of our employees and their families, supporting our customers, preserving jobs globally, protecting core research and development projects, and maintaining our strong financial and operating position following the pandemic have allowed us to stay focused and advance our key strategic priorities. As a result, our underlying fundamental prospects remain strong, and we are well-positioned to emerge an even stronger more efficient and more capable company as a result. I want to recognize the resiliency, the dedication and the resourcefulness of our employees around the world who make up the strong foundation of our disruptive franchises in glaucoma, corneal health and retinal disease. Our employees have risen above and beyond the moment in new and creative ways to maintain their important work and move the company, their families and their communities forward. One example that exemplifies this effort was the successful implementation of our new Tier 1 ERP system during the second quarter. Thanks to the creativity, hard work, and sacrifice of many employees throughout Glaucos, we successfully went live on Oracle across the entire company while operating in a virtual work environment during a pandemic. This was an essential step in our ongoing preparation for future growth and important achievement for our organization during these unique times. I also want to express our gratitude to our customers around the world who remain dedicated to serving their patients. It's clear providers are committed to adapting their practices through enhanced safety measures to ensure the safe and effective treatment of their patients who are returning for ophthalmic interventions, and we've evolved alongside them. While we're encouraged that many of our field-based sales professionals are being allowed back into accounts to re-engage with our customers in person, the complimentary virtual engagement of physicians and practices will endure. With this in mind, we have invested in customer-oriented webinars hosted by well-respected ophthalmic surgeons designed to support doctors as they navigate this ongoing crisis. We have developed and implemented new training and educational programs using virtual platforms that provide valuable education resources through many peer-to-peer virtual settings. We have expanded the use of remote online training modules, regional conference calls, virtual interactive case-based tutorials, and various other customer support programs. We have identified opportunities to collaborate with ophthalmic practices to manage ongoing cases by using a variety of digital platforms to help train new surgeons and virtually proctor ongoing cases to ensure procedural proficiency and optimal outcomes. And we have held numerous virtual clinical investigator meetings to help assure patient compliance with clinical trial protocols and drive enrollment efforts where applicable. I'm confident that these efforts have helped deepen our customer relationships and prepare us for the future well beyond COVID-19. During this time, we have also maintained operational resiliency through streamlined manufacturing and assembly processes in order to consistently provide product to our customers who depend on us. I am 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. Moving on to our financial performance, net sales in the second quarter were $31.6 million, reflecting the material disruptions to our business discussed during our last call, as healthcare systems shifted resources to the treatment of COVID-19 and government restrictions on elective procedures and therapies were implemented throughout the world. These restrictions led to the increasing deferral of cataract and keratoconus procedures and global sales trends that dropped in mid-April at approximately 10% of levels achieved prior to the COVID-19 outbreak. Despite the challenges associated with the ongoing pandemic and the material impact our second quarter net sales, we were pleased by the financial discipline exhibited by the organization in the quarter and encouraged by the increasing month-to-month recovery in our sales trends in May and June as U.S. states and global markets began to reopen and providers began to restart elective procedures. These sales trends were experienced across our QS glaucoma, international glaucoma, and corneal health franchises And we exited the second quarter with a revenue run rate that was approximately 80% of pre-COVID averages. Joe will provide additional details on the spending and recovery trends later in this call. But I want to spend a few minutes on how we see the near-term market dynamics and opportunity for Glaucos. Not surprisingly, we continue to see a variety of potential scenarios over the remainder of 2020 that are highly dependent on the virus itself within our key geographies. While the worst is behind us in the vast majority of these scenarios, it is important to note that for elective procedures, local market dynamics continue to matter. Resurgence and spikes lead many patients to shelter at home regardless of government mandates and lead to an increase in scheduled surgery cancellations and can even result in the temporary closure of facilities. The absolute level of recovery that can be achieved during the ongoing pandemic is also impacted by several downstream considerations. that we are monitoring closely. First, primary care visits to optometrists and ophthalmologists are key to diagnosing cataracts, glaucoma, and keratoconus. New patient demand headwinds may persist as primary vision care visits are delayed or deferred. Secondly, the sustainability and efficiency of procedural volumes can be impacted by the site of service, site restrictions, and operating protocols. In general, we are seeing the physician office and ambulatory surgery center settings recovering at a faster clip than hospital-based procedures, as you might expect. But social distancing and other enhanced safety procedures create a modest headwind across all sites, on average. 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 ambulatory surgery centers. And our Fertrexa solution for keratoconus is primarily performed in a physician's office. Third, a key element of our ability to grow the market is new doctor training in our glaucoma franchise and new Fertrexa starts in corneal health. While obstacles exist, we have been pleased with the trends in recent weeks as our commercial organization is beginning to deliver again on all fronts. As you put all this together, we continue to expect that multiple COVID-related headwinds and tailwinds will drive a modest recovery from here over the remainder of 2020 that may not ultimately materialize into more normalized levels for cataract and keratoconus procedures until a vaccine or therapeutic solution is in place. But setting these COVID-19 dynamics aside, I am certain that our foundation has only strengthened in recent months. At the end of the day, Our commercialized ophthalmic solutions address chronic diseases that only worsen as patients are left untreated. Given the medical necessity of these interventions, we remain confident most of the deferred procedures will ultimately be performed in the future as the pandemic subsides, even if it remains difficult to predict the specific timing and slope of this recovery curve. As a testament to the confidence in the future, we want to reassure our stakeholders that we are continuing to invest in our future. We continue to prioritize and advance our near-term clinical pipeline, dry eye and retinal programs during the second quarter, and we are gradually restoring many of our other earlier stage initiatives. Our capital position has never been stronger to support these investments. During the second quarter, we successfully completed an offering of convertible senior notes and cap call transactions, raising total net proceeds of $242.2 million. This successful raise fortifies our already strong capital position and fuels us with the financial flexibility to remain on offense, to invest in our near and longer-term growth initiatives, expand our global infrastructure, strengthen our pharmaceutical expertise, upgrade our enterprise systems, advance our core R&D programs, and support our clinical programs as they progress towards becoming commercial realities. As you know, we believe we have one of the most comprehensive pipelines in ophthalmology, which consists of 13 publicly disclosed programs in various development and clinical stages, and another 10 yet to be disclosed development programs also underway. We believe these pipeline programs are robust and will support a healthy new product launch cadence with the potential to significantly expand our addressable market opportunities over the coming years. A number of these pipeline programs are in active, pivotal clinical trials, including ISTEN Infinite, Epion, and IDOS-TR. For these trials, we continue to work closely with our clinical investigators and the FDA to mitigate any potential impacts due to COVID-19 disruption. Clinical trials for ISTEN Infinite and Epion have already been fully enrolled, although COVID-19 has caused some modest disruption in patient follow-up plans We believe the initiatives we've implemented to ensure study viability are effective. We continue to believe that these product candidates are on track for our previously discussed FDA approval targets of late 2021 and 2022, respectively. For high-dose, where COVID-19 led to a temporary pause on new patient enrollment, our focus has been to reignite the enrollment momentum that we had built prior to the pandemic shutdown. We're encouraged that the majority of investigator sites are now reopening and treating patients, and we continue to analyze enrollment trends and our timeline expectations for potential FDA approval in 2022. We also remain in early preparations for the potential U.S. commercial launch of the Santan Pharmaceuticals Presser Flow Microshunt, an elegant ab-external surgical implant for late-stage glaucoma management. We have already begun ramping up our commercial preparations for this promising opportunity following Santan's successful US PMA submission announced earlier this quarter. In addition to these new technologies that we aim to commercialize over the coming years, we're excited to announce that we recently received US FDA supplemental PMA approval for iStent InjectW. The iStent Inject W builds upon the proven foundation for our two-stent trabecular micro-bypass technology. Featuring enhancements such as a wider stent flange, iStent Inject W is designed to offer ophthalmic surgeons the same established safety and efficacy of iStent Inject with the added benefits designed to optimize stent visualization while maintaining a truly micro-scale footprint, streamline implantation, and delivering procedural predictability. We're excited about the U.S. commercial prospects for iStent InjectW based upon the positive market receptivity and surge in feedback garnered in select international markets where iStent InjectW has already been launched, including in Germany and in Australia. This next-generation product will supersede the current iStent Inject device globally, and we intend to commercialize initial commercial launch activities in the U.S. later this year. We are also planning to commence a broader European commercial launch of iStentInject W later this year. This adds to a number of recent accomplishments in our international markets that position us for long-term growth, including iStentInject regulatory approval in Japan, standalone indication approval in Australia, and continued progress across many of our key market access initiatives. On the colonial health front, I am extremely pleased with the integration progress as we execute on our corporate milestones and commercial strategies. We continue to execute on our commercial integration plans through cross-functional training, key account targeting, and market segmentation deployment, and we are seeing benefits of these efforts. Within market access, our team, in conjunction with our customers, has made considerable progress as they work with providers and payers to optimize the FITREXA reimbursement landscape, train office staff on claims and contractual processes, and expand our ARCH claims program. 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. In summary, I am proud of the actions we've taken as an organization to navigate through the COVID-19 pandemic and support our customers, clinical investigators, and employees over these past several months. These actions leave us well-positioned for a strong recovery going forward, and I am 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, cornea health, and retinal disease with novel therapies that do disrupt conventional treatment paradigms, improve patient outcomes, and create new robust markets and opportunities. So with that, I'll turn the call over to Joe to discuss our second quarter 2020 financial results. And Joe.