10-Q 1 gkos-20220930x10q.htm 10-Q
0.580.131.430.6000GLAUKOS 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37463 

GLAUKOS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

33-0945406

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer Identification No.)

One Glaukos Way

Aliso Viejo, California

92656

(Address of registrant’s principal executive offices)

(Zip Code)

(949) 367-9600

(Registrant’s telephone number, including area code)

229 Avenida Fabricante, San Clemente, California 92672

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

GKOS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 2, 2022, there were 47,703,276 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

GLAUKOS CORPORATION

Form 10-Q

For the Quarterly Period Ended September 30, 2022

Table of Contents

Page

PART I: FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II: OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

34

Item 6.

Exhibits

49

SIGNATURES

50

We use Glaukos, our logo, iStent, iStent inject, iStent infinite, iPrism, iDose, iPRIME, iAccess, Avedro, Photrexa, iLink, KXL, Epioxa, iLution, Retina XR, PRESERFLO Microshunt and other marks as trademarks. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

References throughout this document to “we,” “us,” “our,” the “Company,” or “Glaukos” refer to Glaukos Corporation and its consolidated subsidiaries.

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

September 30, 

December 31, 

2022

2021

    

(unaudited)

    

 

Assets

Current assets:

Cash and cash equivalents

$

104,018

$

100,708

Short-term investments

257,600

313,343

Accounts receivable, net

34,766

33,438

Inventory

34,182

23,011

Prepaid expenses and other current assets

18,275

15,626

Total current assets

448,841

486,126

Restricted cash

9,078

9,416

Property and equipment, net

87,307

68,969

Operating lease right-of-use assets

26,049

28,142

Finance lease right-of-use asset

47,206

49,022

Intangible assets, net

314,097

332,781

Goodwill

66,134

66,134

Deposits and other assets

9,756

9,108

Total assets

$

1,008,468

$

1,049,698

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

11,465

$

7,333

Accrued liabilities

49,150

56,027

Total current liabilities

60,615

63,360

Convertible senior notes

281,056

280,026

Operating lease liability

29,129

29,650

Finance lease liability

72,319

72,699

Deferred tax liability, net

7,301

7,318

Other liabilities

9,494

9,494

Total liabilities

$

459,914

$

462,547

Commitments and contingencies (Note 12)

Stockholders' equity:

Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding

-

-

Common stock, $0.001 par value; 150,000 shares authorized; 47,693 and 46,993 shares issued and 47,665 and 46,965 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

48

47

Additional paid-in capital

985,407

952,432

Accumulated other comprehensive (loss) income

(3,823)

15

Accumulated deficit

(432,946)

(365,211)

Less treasury stock (28 shares as of September 30, 2022 and December 31, 2021)

(132)

(132)

Total stockholders' equity

548,554

587,151

Total liabilities and stockholders' equity

$

1,008,468

$

1,049,698

See accompanying notes to condensed consolidated financial statements.

3

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

 

Net sales

$

71,269

$

74,710

$

211,635

$

220,771

Cost of sales

16,861

15,370

51,757

49,762

Gross profit

54,408

59,340

159,878

171,009

Operating expenses:

Selling, general and administrative

47,149

44,470

140,998

131,691

Research and development

28,870

28,846

87,459

74,321

In-process research and development

-

5,000

10,000

10,000

Litigation-related settlement

-

(30,000)

(30,000)

(30,000)

Total operating expenses

76,019

48,316

208,457

186,012

(Loss) income from operations

(21,611)

11,024

(48,579)

(15,003)

Non-operating expense:

Interest income

744

291

1,415

1,016

Interest expense

(3,481)

(3,413)

(10,311)

(9,948)

Other expense, net

(2,981)

(1,470)

(9,792)

(3,097)

Total non-operating expense

(5,718)

(4,592)

(18,688)

(12,029)

(Loss) income before taxes

(27,329)

6,432

(67,267)

(27,032)

Income tax provision

247

202

468

689

Net (loss) income

$

(27,576)

$

6,230

$

(67,735)

$

(27,721)

Basic and diluted net (loss) income per share

$

(0.58)

$

0.13

$

(1.43)

$

(0.60)

Weighted average shares used to compute basic net (loss) income per share

47,614

46,737

47,346

46,255

Weighted average shares used to compute diluted net (loss) income per share

47,614

49,320

47,346

46,255

See accompanying notes to condensed consolidated financial statements.

4

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

 

Net (loss) income

$

(27,576)

$

6,230

$

(67,735)

$

(27,721)

Other comprehensive (loss) income:

Foreign currency translation gain

342

369

1,500

548

Unrealized loss on short-term investments

(450)

(34)

(5,338)

(565)

Other comprehensive (loss) income

(108)

335

(3,838)

(17)

Total comprehensive (loss) income

$

(27,684)

$

6,565

$

(71,573)

$

(27,738)

See accompanying notes to condensed consolidated financial statements.

5

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

income (loss)

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2021

46,993

$

47

$

952,432

$

15

$

(365,211)

 

(28)

$

(132)

$

587,151

Common stock issued under stock plans

124

1,515

1,515

Stock-based compensation

6,923

6,923

Other comprehensive loss

(3,402)

(3,402)

Net income

5,377

5,377

Balance at March 31, 2022

47,117

$

47

$

960,870

$

(3,387)

$

(359,834)

 

(28)

$

(132)

$

597,564

Common stock issued under stock plans

331

 

1

 

237

 

 

 

 

 

238

Stock-based compensation

 

 

10,539

 

 

 

 

 

10,539

Other comprehensive loss

 

 

 

(328)

 

 

 

 

(328)

Net loss

 

 

 

 

(45,536)

 

 

 

(45,536)

Balance at June 30, 2022

47,448

$

48

$

971,646

$

(3,715)

$

(405,370)

(28)

$

(132)

$

562,477

Common stock issued under stock plans

245

4,350

4,350

Stock-based compensation

9,411

9,411

Other comprehensive loss

(108)

(108)

Net loss

(27,576)

(27,576)

Balance at September 30, 2022

47,693

$

48

$

985,407

$

(3,823)

$

(432,946)

(28)

$

(132)

$

548,554

Accumulated

Additional

other

Common stock

paid-in

comprehensive

Accumulated

Treasury stock

Total

    

Shares

    

Amount

    

capital

    

income

    

deficit

    

Shares

    

Amount

    

equity

Balance at December 31, 2020

45,275

$

45

$

976,590

$

1,004

$

(310,058)

 

(28)

$

(132)

$

667,449

Effect of adoption of ASU 2020-06

(81,553)

(5,560)

(87,113)

Common stock issued under stock plans

741

1

17,034

17,035

Stock-based compensation

8,748

8,748

Other comprehensive income

124

124

Net loss

(16,469)

(16,469)

Balance at March 31, 2021

46,016

$

46

$

920,819

$

1,128

$

(332,087)

 

(28)

$

(132)

$

589,774

Common stock issued under stock plans

481

 

 

4,525

 

 

 

 

 

4,525

Stock-based compensation

 

 

7,984

 

 

 

 

 

7,984

Other comprehensive loss

 

 

 

(476)

 

 

 

 

(476)

Net loss

 

 

 

 

(17,482)

 

 

 

(17,482)

Balance at June 30, 2021

46,497

$

46

$

933,328

$

652

$

(349,569)

(28)

$

(132)

$

584,325

Common stock issued under stock plans

395

 

1

 

3,969

 

 

 

 

 

3,970

Stock-based compensation

 

 

6,189

 

 

 

 

 

6,189

Other comprehensive income

 

 

 

335

 

 

 

 

335

Net income

 

 

 

 

6,230

 

 

 

6,230

Balance at September 30, 2021

46,892

$

47

$

943,486

$

987

$

(343,339)

(28)

$

(132)

$

601,049

See accompanying notes to condensed consolidated financial statements.

6

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30, 

    

2022

    

2021

 

Operating Activities

Net loss

$

(67,735)

$

(27,721)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation

4,710

3,475

Amortization of intangible assets

18,684

18,684

Amortization of lease right-of-use assets

3,378

3,519

Amortization of debt issuance costs

1,030

1,030

Deferred income tax benefit

(17)

(72)

Gain on disposal of fixed assets

29

(3)

Stock-based compensation

26,873

22,921

Unrealized foreign currency losses

4,219

1,836

Amortization of premium on short-term investments

601

773

Other liabilities

-

1,951

Changes in operating assets and liabilities:

Accounts receivable, net

(3,121)

494

Inventory

(11,881)

(4,257)

Prepaid expenses and other current assets

(3,355)

(5,039)

Accounts payable and accrued liabilities

(1,847)

11,666

Other assets

(515)

102

Net cash (used in) provided by operating activities

(28,947)

29,359

Investing activities

Purchases of short-term investments

(47,256)

(191,756)

Proceeds from sales and maturities of short-term investments

97,494

182,356

Purchases of property and equipment

(22,044)

(38,458)

Proceeds from disposal of property and equipment

96

3

Investment in company-owned life insurance

(166)

(1,505)

Net cash provided by (used in) investing activities

28,124

(49,360)

Financing activities

Proceeds from exercise of stock options

2,871

24,383

Proceeds from share purchases under Employee Stock Purchase Plan

5,630

4,817

Payment of employee taxes related to vested restricted stock units

(2,399)

(3,670)

Principal paid on finance lease

(380)

(555)

Proceeds from tenant improvement allowance

-

12,668

Net cash provided by financing activities

5,722

37,643

Effect of exchange rate changes on cash and cash equivalents

(1,927)

(1,257)

Net increase in cash, cash equivalents and restricted cash

2,972

16,385

Cash, cash equivalents and restricted cash at beginning of period

110,124

106,162

Cash, cash equivalents and restricted cash at end of period

$

113,096

$

122,547

Supplemental disclosures of cash flow information

Taxes paid

$

372

$

307

Interest paid on convertible senior notes

$

3,953

$

3,953

Other interest paid

$

3,350

$

2,983

Supplemental schedule of noncash investing and financing activities

Purchases of property and equipment included in accounts payable and accrued liabilities

$

3,258

$

2,244

See accompanying notes to condensed consolidated financial statements.

7

GLAUKOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.  Organization and Basis of Presentation

Organization and business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. The Company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a rare corneal disorder, keratoconus, that was approved by the United States (U.S.) Food and Drug Administration (FDA) in 2016. The Company is developing a portfolio of technologically distinct and leverageable platforms to support ongoing pharmaceutical and medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of glaucoma, corneal disorders such as keratoconus, dry eye and refractive vision correction, and retinal diseases such as neovascular age-related macular degeneration, diabetic macular edema and retinal vein occlusion.

The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the U.S. for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. As permitted under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted.  In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2021 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements.  These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2021, which are contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 28, 2022. The Company’s results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period.

Recent Developments

iVeena License Agreement

Effective June 9, 2022, the Company entered into an exclusive licensing agreement (iVeena License Agreement) with iVeena Delivery Systems, Inc. (iVeena) under which iVeena granted Glaukos a global exclusive license to iVeena’s proprietary technologies, including certain compositions that may be utilized in the treatment of keratoconus. Under the iVeena License Agreement, the Company has the exclusive global right to manufacture and commercialize products incorporating certain of iVeena’s owned or controlled technologies, including certain chemical compositions, for the treatment of keratoconus. Pursuant to the terms of the iVeena License Agreement, the Company made a one-time upfront payment to iVeena of $10.0 million, which is included in in-process research and development expenses within the condensed consolidated statement of operations. The Company accounted for the transaction as an asset acquisition as the set of acquired assets did not constitute a business. The Company may have ongoing milestone and royalty payment obligations depending on the success of the development, approval and commercialization of the proprietary technologies.

8

Settlement of Patent Litigation

On September 14, 2021, the Company entered into a settlement agreement (Settlement Agreement) with Ivantis, Inc. (Ivantis), pursuant to which the Company and Ivantis agreed to terminate the patent infringement lawsuit the Company had filed against Ivantis on April 14, 2018 in the U.S. District Court for the Central District of California, Southern Division. Pursuant to the terms of the Settlement Agreement, Ivantis was required to pay the Company a cash payment of $60.0 million, $30.0 million of which was paid to the Company during the year ended December 31, 2021, and $30.0 million of which was received by the Company during the quarter ended March 31, 2022 and is included in litigation-related settlement as a reduction of operating expenses on the condensed consolidated statements of operations for the nine months ended September 30, 2022.

Additionally, Ivantis began making quarterly royalty payments to the Company in the amount of 10% of Ivantis’ Hydrus Microstent U.S. sales and any international sales supplied out of the U.S. beginning in the fourth quarter of 2021 through April 26, 2025, subject to a per-unit minimum payment.

Note 2.  Summary of Significant Accounting Policies

There have been no significant changes in the Company’s significant accounting policies during the nine months ended September 30, 2022, as compared with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, this process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022 reflect the Company’s estimates of the impact of the macroeconomic environment, including the impact of inflation, higher interest rates, foreign exchange rate fluctuations and the COVID-19 pandemic. The duration and scope of these conditions cannot be predicted; therefore, the extent to which these conditions will directly or indirectly impact the Company’s business, results of operations and financial condition is uncertain.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the nine months ended September 30, 2022 (in thousands):

September 30, 

December 31, 

2022

2021

Cash and cash equivalents

$

104,018

$

100,708

Restricted cash

9,078

9,416

Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows

$

113,096

$

110,124

9

Recently Adopted Accounting Pronouncements

The Company has not adopted any recent accounting pronouncements that had a material impact on its condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

Note 3.  Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

At September 30, 2022

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

  

U.S. government bonds

less than 2

$

76,785

$

$

(960)

$

75,825

U.S. government agency bonds

less than 3

88,530

7

(2,834)

85,703

Bank certificates of deposit

less than 2

5,500

(22)

5,478

Corporate notes

less than 3

 

48,301

 

 

(1,191)

 

47,110

Asset-backed securities

less than 2

 

25,980

 

1

 

(406)

 

25,575

Municipal bonds

less than 3

18,421

(512)

17,909

Total

$

263,517

$

8

$

(5,925)

$

257,600

At December 31, 2021

 

Maturity

Amortized cost

Unrealized

Unrealized

Estimated

 

    

(in years)

    

or cost

    

gains

    

losses

    

fair value

 

U.S. government agency bonds

less than 3

123,803

8

(540)

123,271

U.S. government bonds

less than 1

$

76,765

$

$

(240)

$

76,525

Bank certificates of deposit

less than 1

12,500

1

(9)

12,492

Commercial paper

less than 1

 

2,998

 

 

(1)

 

2,997

Corporate notes

less than 3

 

55,178

 

37

 

(183)

 

55,032

Asset-backed securities

less than 2

 

23,761

 

44

 

(31)

 

23,774

Municipal bonds

less than 3

19,350

(98)

19,252

Total

$

314,355

$

90

$

(1,102)

$

313,343

As of September 30, 2022 and December 31, 2021, the total amortized cost basis of the Company’s available-for-sale securities exceeded its fair value by $5.9 million and $1.0 million, respectively. Unrealized losses on these investments were primarily due to changes in interest rates. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis. Accordingly,