Welcome to Glaukos Corporation's Second Quarter 2020 Financial Results Conference Call. A copy of the company's press release issued after market close today is available at www.glaukos.com. This call is being recorded and an archived replay will be available online in the Investor Relations section at www.glaukos.com. I will now turn the call over to Chris Lewis, Director of Investor Relations and Corporate Strategy and Development.

Thank you and good afternoon. Joining me today are Glaukos' President and CEO, Tom Burns; CFO, Joe Gilliam; and COO, Chris Coppin. 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 US 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 Investors section of our website at www.glaukos.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 Glaukos' ongoing results of operations, particularly 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 a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos' 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 Glaukos 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 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 a 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 as 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 Glaukos, 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, an 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 the patients while returning for ophthalmic interventions, and we shall follow up alongside them. While we're encouraged that many of our field-based sales professionals are beginning to re-engage with our customers in person, the complementary 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've expanded the use of remote online training modules, regional conference calls, virtual interactive case-based tutorials, and various other customer support programs. We've identified opportunities to collaborate with ophthalmic practices to manage ongoing cases based on a variety of digital platforms to help train new surgeons and virtually proctor ongoing cases to ensure procedure 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 continued 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 an increase in the deferral of cataract and keratoconus procedures and global sales trends that troughed 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 to our second-quarter net sales, we were pleased by the financial discipline exhibited by the organization in the quarter and encouraged by an increasing month-to-month recovery in our sales trends in May and June as US states and global markets began to reopen and providers began to restart elective procedures. These sales trends were experienced across our US 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 Glaukos. 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 and 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 could 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 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 Photrexa solution for keratoconus is primarily performed in the physician's office. Third, a key element of our ability to grow the market is new doctor training in our glaucoma franchise and new Photrexa starts in corneal health. While the costs 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 the 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 for me, it is 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 capped 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 iStent infinite, Epi-On, and iDose 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 iStent infinite and Epi-On 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 2020, respectively. For iDose, where COVID-19 led to a temporary pause on new patient enrollment, our focus has been to reignite the enrollment momentum that we built prior to the pandemic shutdown. We're encouraged that the majority of investigator sites are now reopening in 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 US commercial launch of the Santen Pharmaceuticals PRESERFLO MicroShunt, an ab-externo surgical implant for late-stage glaucoma management. We have already begun ramping up our commercial preparations in this promising opportunity following Santen'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 are excited to announce that we recently received US FDA supplemental PMA approval for iStent inject W. The iStent inject W builds upon the proven foundation for our two-stent trabecular micro-bypass technology. Feature enhancements such as a wider stent flange make iStent inject W 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 deliver procedural predictability. We're excited about the US commercial prospects for iStent inject W based upon the positive market receptivity and surgeon feedback garnered in select international markets where iStent inject W 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 commence initial commercial launch activities in the US later this year. We are also planning to commence a broader European commercial launch of iStent inject W later this year. This adds to a number of recent accomplishments. In our international markets that position us for long-term growth including iStent inject regulatory approval in Japan, standalone indication approval in Australia, and continued progress across many of our key market access initiatives. On the corneal 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 commercial integration plans through cross-functional training, key account targeting, and market segmentation deployment, and we are seeing benefits from these efforts. With end-market access, our team in conjunction with our customers has made considerable progress as they work with providers and payers to optimize the Photrexa reimbursement landscape, training office staff on claims and contractual processes and expand our ARCH claims program. While we remain in the early stages of unlocking the combined organizations' full potential, we are encouraged by the markets' 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 and navigated 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, corneal 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 will turn the call over to Joe to discuss our second quarter 2020 financial results.

Thanks, Tom. As a reminder, I'll be discussing our financial performance on a non-GAAP or pro forma basis and will summarize our GAAP performance later in my prepared remarks. I encourage each of you to review our GAAP to non-GAAP reconciliation, which can be found in today's press release as well as the Investor Relations section of our website. Similar to last quarter, I will attempt to provide brief perspectives on our second quarter, estimates of our current operating performance, and where possible, build upon Tom's views on how we expect things to unfold as we progress over the remainder of 2020. Glaukos' net sales for the second quarter of 2020 were $31.6 million. As we discussed on our prior call, procedures came to a virtual halt in nearly all of our major direct markets globally as we entered April, where we experienced a performance trough that was approximately 10% of our pre-COVID levels. We were encouraged with month-to-month recovery trends in May and June, exiting the second quarter with a revenue run rate that was approximately 80% of pre-COVID daily averages. Now turning to our US glaucoma franchise specifically, our second-quarter US glaucoma sales were approximately $18.3 million. To put this in the same context as the overall business, our US glaucoma revenues troughed in April at approximately 3% of our prior daily averages, before recovering in May and June and we exited the second quarter at approximately 80% of our pre-COVID daily averages. Internationally, our glaucoma franchise delivered second-quarter sales of approximately $6.7 million. The COVID-19 impact on our international glaucoma business has varied by market. But our overall performance reached an April trough of approximately 25% of our pre-COVID daily averages. During the quarter, we experienced the most stability in Japan and the recovery we experienced in May and June was broad-based with the exception of Brazil, where the COVID situation remains challenging. Our international glaucoma revenues exited the second quarter at approximately 65% of our pre-COVID daily averages. In corneal health, second-quarter net sales were $6.6 million. The corneal health business, which we believe benefits from a younger patient population and physician office-based therapy, experienced an April trough of about 20% of pre-COVID daily averages. The second-quarter performance was almost entirely driven by US Photrexa sales of $5.2 million, but we were also very pleased to see continued strength in new US starts late in the second quarter, an early but continued sign of the synergistic benefits of our Avedro transaction. Our corneal health revenues also recovered in May and June and we exited the second quarter at approximately 85% of our pre-COVID daily averages. Going forward, we are encouraged by the recovery trends in virtually all of our key geographies and therapeutic areas. Having said that, we recognize the present environment remains fluid and uncertainties exist. As such, we remain cautious on the magnitude and pace of the near-term recovery from here. As Tom mentioned, the environment and logistics for our customers from a new patient consultation and surgery perspective may have an impact, and some patients, particularly the elderly, may continue to wait as long as possible. Our non-GAAP gross margin in the second quarter was approximately 78% versus 87% in the same quarter in 2019, which largely reflects the impact of fixed overhead costs that are not absorbed into inventory and the lower revenue base achieved in the second quarter. It is worth noting that our non-GAAP adjustments to COGS include substantial adjustments related to Avedro acquisition accounting. Our overall non-GAAP operating expenses were approximately $52.3 million in the second quarter of 2020, down 18% sequentially compared to the first quarter. As noted in our prior call, we moved quickly in late March as the COVID-19 situation unfolded to implement significant temporary cost savings initiatives. Our leadership and employees responded globally and displayed strong financial discipline throughout the quarter. These savings are a combination of discretionary and variable expenditures and are not necessarily meant to be permanent, but were designed to preserve jobs and core R&D programs during this period. Going forward, we expect our operating spend levels to tick back up over the remainder of this year as we remove some of the temporary cost-cutting initiatives and restore expansionary spending. Our non-GAAP SG&A expenses in the second quarter were approximately $36 million, down 18% sequentially compared to the first quarter, and our non-GAAP R&D expenses in the second quarter were approximately $18.6 million, down 19% sequentially compared to the first quarter. We finished the second quarter with a non-GAAP operating loss of $27.6 million and a non-GAAP net loss of $27.0 million or $0.61 per diluted share. Our GAAP net loss was $39.9 million or $0.90 per diluted share for the second quarter of 2020. We invested approximately $2.7 million of capital expenditures in the quarter, lower than our initial plans as we temporarily deferred a significant portion of our planned 2020 spend, particularly those related to facilities expansion and consolidation. Looking ahead, we expect our capital expenditures to increase substantially over the next four quarters as we move forward with those facilities' plans. As of June 30, 2020, we had cash, cash equivalents, short-term investments, and restricted cash of approximately $404 million, which includes total net proceeds of approximately $242 million from our senior convertible note offering and capped call transactions, compared to $173 million at the end of the first quarter 2020. As Tom mentioned, during the second quarter, we completed an offering of senior convertible notes and capped call transactions. The 7-year notes will bear interest at a rate of 2.75% per year and mature on June 15, 2027, unless earlier converted, redeemed, or purchased. The initial conversion price for the notes is approximately $56.10 per share of Glaukos' common stock. However, in connection with the pricing of the notes, we entered into capped call transactions at a cap price of $86.30, which represents a premium of 100% over our $43.15 closing price at the time of the transaction. Finally, we have tried to provide insights where possible and how we are thinking about the range of potential outcomes for the third quarter and the remainder of 2020. But we will not be providing updated guidance today as the specific extent or duration of the impact of the COVID-19 outbreak on our future financial and operating results remains unknown.

All right. Thanks, Joe. The progress we're making to advance our key strategic priorities reflects the commitment of our teams to rapidly adjust during the COVID-19 pandemic and to ensure we are moving our company, customers, and communities forward. While the extent and duration of the current challenges are difficult to predict, I am confident we will manage through the current situation with the same resiliency and effectiveness as we manage through past challenges, leaving us well positioned for a strong recovery going forward. We continue to advance our vision to establish Glaukos as a unique strategic vision care leader with tremendous potential for long-term growth and profitability. So with that, I'll open the call to questions.

Your first question comes from the line of Brian Weinstein with William Blair.

Thanks for taking the questions. Good afternoon. I'm curious - what have you seen as far as competitive dynamics post kind of reopening here? Have the dynamics in the field changed either in glaucoma or corneal health, and are there any different tactics that are being used or what is the basis of the competition? How has that changed and is pricing changed at all as a result of potentially some additional competition as well?

Brian, this is Chris. As it relates to competition, you know, it's really stable and unchanged since the last time that we spoke, more of the same. And from a pricing perspective, really similar answer over the course of the quarter; we've seen very little change in pricing versus the prior period.

Great. And then just to confirm a comment that you guys made on iDose in trying to, I think you said, reignite the momentum in the enrollment there. Can you talk just about where you guys were in the enrollment process prior to COVID-19? And I think you made a comment about analyzing trends and thinking about what that might mean for FDA approval in 2022. Is there a possibility that then is going to get pushed out a bit as a result of this or do you think you can make up these loss patients?

Brian, this is Tom. And so, what I've said before and I'll repeat here. I mean we were rapidly moving toward concluding the clinical trial really ahead of our expectation, before the transient disruption caused by COVID-19. Clearly, that shut down the momentum. We now have reengaged with most of our clinical investigators. They're facing a little bit of a headwind, as you can imagine, a patient's reluctance to return as well as serving our own needs by doing pent-up cataract procedures going forward that have been in the queue. So we're monitoring closely, and we're working hard to reestablish the momentum that we had prior to COVID-19. We clearly are moving hard to be able to establish ourselves, put ourselves in a position to meet that 2022 timeline and we're going to continue to try to reignite this to move this forward as fast as we can. I will be watching this closely over the next couple of quarters and I will keep investors more than adequately informed.

Your next question comes from the line of Robbie Marcus with JP Morgan.

Hi guys, this is actually Allen on for Robbie. I had a question kind of on trends going forward and a little bit of color on the quarter itself. One of the dynamics we've seen play out at some other med-tech peers is a decent amount of strength in the quarter being driven by procedures that may have been deferred from late in March or even from earlier in the quarter. So is there any color or like qualitatively or directionally, they can provide on how much of the outperformance in the quarter came from those kind of deferred procedures versus natural growth?

Allen, it's Joe. Yes, I'll take that. If Chris wants to add, I think he can. I think part of the qualitative caution that you hear from us in the prepared remarks around the path forward from here is really born from the question you're asking. I think the mix over the course of the quarter, not surprisingly, was weighted towards the backlog of patients that had existed heading into COVID, more than the new patient flow, which makes sense, of course, when you think about it, given the trends for primary vision care visits at optometrists and ophthalmologists. So while we've been encouraged by the continued week-over-week and month-over-month recovery in new patient levels, the quarter still saw a lot more of that backlog contribute to it than new patient volumes.

Got it. And I guess, like when we look at the results that you've got from the TREX, obviously looked like a very strong quarter from them. When we look forward, how has COVID-19 really kind of delayed, I guess, your ability to really integrate that sales force or what do you say that other than kind of reduced physician demand, the integration has largely gone as planned or were there delays to that, and should we expect kind of better results or like more integration benefit in the back half of the year and into 2021? Thank you, guys.

Allen, this is Chris. I'll address that question. We are very pleased with the integration and if anything COVID has given us the opportunity to really solidify that integration. It gave us an opportunity to really train up all the sales reps, both the corneal health sales managers as well as the Glaukos' representatives. It helped us from a planning perspective in terms of targeting and mapping out our strategy. And then on the customer side of things because that patient base tends to be younger, it's done in the clinic versus in an ambulatory surgery center or a hospital. That business has been less impacted in the glaucoma business. So physicians were able to continue to do corneal crosslinking on keratoconus patients and I think you've seen that in our numbers. So, in short, that business is doing well and we believe that we've integrated that business to meet our needs and in fact, maybe even exceeding our needs from an integration standpoint; we're quite pleased.

Your next question comes from the line of Matt O'Brien with Piper Sandler.

Hi, good afternoon guys. This is Drew on for Matt. Thank you for taking the questions. I just wanted to follow up a little bit on your comments on the diagnosis in the backlog. Do you have a sense for whether the routine eye appointments where you diagnosed glaucoma, whether those have started to come back at a similar pace to the deferred procedures, which have immediately bounced back a little bit quicker than we were anticipating? And then I guess I understand your comment that most of these procedures were coming from the backlog. So do you have a sense of how much of that backlog has been worked down at all at this point?

Hi Drew, it's Joe. So I'll start by saying I think first of all, with respect to the backlog, that’s what you would expect, of course, right? I mean I don't want to minimize the fact that the surgeons in these practices were going to prioritize the backlog first given those patients were already either on the books or they present themselves to be put on the books for surgery. So that component of the overall quarter isn't a huge surprise to us. I can't tell you exactly where they're at in terms of working through that backlog because candidly, that continues to be a moving target as we go forward here. Right? I mean I think every day that goes by, the patients are in need of treatment. So that will probably continue to persist for some period of time here going forward. And so the comment really was just that underneath that we watch very closely and in conversations with practices and physicians in our sales force, what is that trend of new patients walking in the door to have vision correction or diagnosis performed. And with that, we were encouraged over the course of the quarter, similar to what you'd expect and probably what you're seeing from other companies who would have exposure to optometrists of the primary care channel. I think the trends are all positive there, but they're not yet to a place where they're driving the overall demand for the procedures that are getting done.

Okay, that makes perfect sense. And then on the reimbursement front, there are some updates out this week with the outpatient rule and physician. I'm well just curious if you feel anything's changed from your perspective or any of the competitive products, maybe some of those tissue displacement products in this space? Thank you.

Drew, this is Tom. I'd be happy to respond to that question. So if you've seen the agenda, we're actually really pleased by the agenda that's coming out for the October RUC committee meeting and their decisions coming out of that meeting that could substantially aid the business. I think the first is the fact that there will be consideration for an independent standalone Category III code for our trabecular bypass product line. And if the decision is made in October, that Category III code should become effective in 2021, which would be prior to the potential launch of our iStent infinite, so its timing could be quite fortuitous for us. I think the important thing there too is that because it's an independent standalone Category III code, it will be based on the full perioperative procedure and as you know in the past, we haven't driven towards the transition to a Category I because we didn't want the reimbursement to be based more on the ancillary replacement of the trabecular bypass device alone. We wanted the full perioperative procedure. So this is another major opportunity if the RUC committee moves forward with an independent standalone code. Likewise, and perhaps even more importantly, you'll see as well there's consideration for an independent standalone code for iDose. This is something that we have had as a major target for us to establish an independent code on the CPT side of the Category III code that then eventually would be consigned or joined with a HCPCS code, a J-code for the payment on the device and this action fulfills our target of creating a separate CPT code if it's approved and what really put us in a strong position moving forward for the commercial launch of iDose, and importantly too by having two separate codes, this initiative that outcome of this RUC will be able in the future to enable surgeons to do combinatorial treatments of using iStent inject prosthetic devices with iDose in combination for the treatment of more moderate to advanced glaucoma. So this is where we've been headed for some time. You can imagine we're pleased with that. And in addition to it, there'll be a formalization. It appears the decision made on a Category I code for combination cataract procedures. If that goes forward as well that will assure even more predictability and reimbursement from payors moving forward, and you can be assured of that being supported as well. We'll be working with CMS and with the American Academy of Ophthalmology to really establish and assure fair professional facility payments over the course of the next several months. So all in all, remains to be seen. I like what's on the agenda. I think our prospects are fortuitous. I'm hopeful for some very positive outcomes for the company.

Thank you.

Your next question comes from the line of Larry Biegelsen.

Good afternoon, this is Kevin on for Larry. Thanks so much for taking the questions. Two follow-ups on reimbursement as well. So in the outpatient proposed rule, you actually have cataract cut about 10%. I was curious how you're thinking about the implications of that on the glaucoma business. You know - it could actually be incremental for adoption of MIGS as some of these facilities and docs tried to offset the cut. And then I have just one follow-up. Thank you.

Sure. Kevin, this is Chris. This is similar to the 2020 proposed rule, where cataract went down and combination cataract plus trabecular bypass went up. So we're pleased that in the ASCs, the proposal went up 4% and in the hospital market, it went up 2%. I would categorize that in terms of the play with cataract versus deployment cataract plus trabecular bypass is neutral to positive. It certainly doesn't hurt us and it certainly makes a compelling argument for adoption of MIGS.

Thank you, Chris. That's helpful and then you guys have both infinite and MicroShunt launching in the US, hopefully in 2021. Do you expect both of those products to be reimbursed as soon as they're approved and is there one product where the reimbursement is more favorable amongst the two? And then lastly, do you plan to kind of provide some more updated economics on MicroShunt now that we have that visibility? Thank you very much.

Okay. So, Kevin, this is Chris. I'll start with the first part. We don't see the infinite and the MicroShunt as being very complementary to each other. And we see the infinite being used prior to utilization of the MicroShunt. The MicroShunt in terms of reimbursement, there's already an established code for that. It's a healthy reimbursement and it is a Category I. As it relates to the infinite, as Tom alluded to in his comments to the prior question, that is something that is now on the agenda for a Category III code for the infinite, so that remains to be seen as to what that code will be and what will be paid. And then with respect to the economics, I think as we said before, we'll continue to work with Santen around the decreased specificity that they're comfortable with us sharing. What I will say or reiterate based on past comments is that we are taking control of the product for the US market, which typically will lead to booking the revenues fully and then underneath that, there is a typical transfer price as well as some economic sharing around activities that they are performing in the US market. So, we're hopeful that we've designed it in a way that it will look like a product that we would have developed on our own from a P&L perspective with us looking at the entire revenues.

Thank you. Appreciate it.

Your next question comes from the line of Jon Block with Stifel.

Good afternoon. First one for me, maybe Tom or Chris. Just on inject W, is there anything there on pressure drops to improve the IOP or is it strictly just more toward ease of use? I guess as a follow-on to the same question, what does it entail? In other words, is there retraining of the docs? And I guess also, is there a pricing opportunity specific to inject W?

Okay. John, this is Chris. This was approved on the heels of iStent inject. So we can't really claim that there is any IOP drop. What this is an enhancement to iStent inject. It is a product that will eventually replace iStent inject and the product itself gives you better visibility and more predictability. And that is because of, in large part, a larger flange which is the portion of the stent that sits in the anterior chamber and some enhancements to the injector itself. So we're looking for an even better experience for the ophthalmologists beyond what they already experienced with iStent 10 inject and so it's just basically a product improvement and as such, it will be priced at the same price as iStent inject.

Got it. Very helpful and the second question which might have two questions. Joe, I thought I heard a 16.5 US glaucoma number, which is down roughly 65% year-over-year. Yes, it's tough to gauge, but you guys have the best line of science, so maybe your thoughts on the market, was the market down 65% or essentially how do you do with share, do you believe, and then Tom for you or maybe for you just on a jury to step back on the label, your thoughts, if that's a future opportunity for you if it's really just sort of one-time use only? Thanks guys.

Hi, Jon. It's - I couldn't quite understand the number you gave. But just to clarify on the US glaucoma business, I think is what you were asking about. That was $18.3 million in the second quarter and - and so the math, maybe a little bit different than what you were saying in terms of the sequential or year-over-year performance. But having said that, I think tying back to what Chris had earlier - our sense is that through this period of time, the market share dynamics have remained pretty stable. So that would imply that obviously the - what we're seeing here from a performance perspective should be pretty representative of what is happening in the overall market.

And John will be happy to take the juristic question. So, as you know, they've been approved and they're in a kind of a soft launch here in the United States. Again with respect and in respect to the product, I like the fact that the product validates the intracameral use of a prostaglandin to be able to treat glaucoma. I think that's exceedingly important for us moving forward. I think because it is a bioerodible matrix, it can only pack so much API into that matrix in order to deliver the product over a period of time. So it's limited, generally 2 to 3 to 4-month duration of activity. The fact that it's not anchored as you all know, has been troubling from the perspective of some surgeons and the rates that they've seen in terms of endothelial cell loss, and obviously that transpired into a more limited label from the FDA, which restricts its usage to a single-use only. So these are things that I think are going to be objectively problematic for any company to handle moving forward. I think what's important is, one, you've got validation of the concept. There clearly is an appetite for a longer duration product intracamerally, we're seeing that in space in the marketplace. That's very important. I think most important right now there is a miscellaneous J-code which is governing their pricing. The prices that I'm seeing out there are fairly robust. I don't want to quote them here until they actually have their J-code - their final J code in place in October. But you can imagine that will be a powerful predicate for us moving forward and how we price our product and the value proposition we can create for this company. So for all those reasons I like our position a lot - I'm pleased that they've launched the product. I think we're in an excellent position to be able to commercialize our product coming here in the next several months.

Thanks, Tom.

Your next question comes from the line of Chris Cooley with Stephens.

Good afternoon. Thank you for taking the questions. If you will just shift gears a little bit and focus on corneal health for a moment. Could you give or pass some additional color there around the installed base and then some - maybe give some examples of what you're seeing as admittedly it's COVID-19 restricted, but what you're seeing in terms of the accounts - existing MIGS users and also had the Avedro system in place. Just looking at the 5.2 Photrexa number, 6x, obviously you don't assume that there are that many systems being absolutely sold, but I'm not sure how many are being placed on some type of utilization standpoint. So some color there would be helpful. And then I've got one quick follow-up.

Sure, Chris. Hi, it's Joe. I'll start and then Chris can jump in here. We obviously as a part of that we stopped giving the specific number of new starts in any given period of time, but as I indicated in my prepared remarks, we actually were pleased to see that activity rebound really at the end of the quarter in June and quite frankly continue to July where - as our accounts were in our commercial organization was getting accessed again to the customer base. We did start to see new starts play a role again towards the end or part of the quarter - and end of the quarter. But beyond that, we haven't given much - much more specific granular color.

And Chris, this is Chris. And I'll add a little color to that. I'm very pleased with how this is playing out early on when we announced the Avedro acquisition. We talked about eliminating the boxes, an impediment to the sale. That's not to imply that we gave or are giving the equipment away. It's just to imply that we were more focused and still are more focused on the procedural component itself in the sale of Photrexa. It's a fairly inexpensive boxed manufacture and we are taking the position of being aggressive in getting those boxes placed through a variety of options to the practitioner. Anecdotally, the doctors are increasing their utilization because we're knocking down the barriers and challenges that come with a newly implemented J-code; the reimbursement is much more stable. Right now, we've got 96% of the lives out there covered and that is becoming much smoother. Our outreach programs to optometry are going very well, and we believe that that's leading to more patients being referred into practices that are doing this procedure. So all in all, we feel very good about the acquisition and we feel good about the synergies of Glaukos and Avedro together.

I really appreciate the color, and then I also apologize if this was covered earlier - jumping between a couple of calls here but believe you mentioned that you had a trough of basically down 97% versus pre-COVID levels back in April, for the US glaucoma franchise and you exited the quarter at about 80% of pre-COVID levels to that. May have missed this, but if not, I'll try - any directional commentary you can provide there on the month of July and what you've seen transition into August. I'm assuming it's continuing to improve or stable, but any color there on the domestic glaucoma franchise would be appreciated. Thanks.

Thanks. Yes, Chris, it's Joe. It actually hadn't been asked. So we'll add that in there. I think the trend is positive in the quarter, so in July, and into the very beginning part of August, have been stable to positive overall. The progress has probably been more weighted towards that continued recovery internationally, but in all of the businesses we've seen stability to positive overall trends. So, of course, be careful when you think about extrapolating that. You've heard our caution with respect to the COVID-related dynamics going forward but we've been pleased with the stability of the trends that came out of the quarter and have existed thus far.

Your next question comes from the line of Ravi Misra with Berenberg Capital Markets.

Hi guys, this is Iris on for Ravi. Thanks for taking the question. So just a few follow-up questions in terms of recovery. So we've talked about the backlog when we think about patients, especially new patients. So, how comfortable are they coming into the office and schedule a surgery based on your conversation with physicians? Any color on that would be helpful.

Iris, this is Chris Calcaterra. You know that - that is a concern. Let's talk about glaucoma first where the majority of these patients are elderly and they are more susceptible to COVID-19 and so it is fair to say that some of these patients are concerned about coming in. This is a procedure they can be delayed although they'll need to do it, but some of them are choosing to stay at home. Many of them come back - and are coming back and we're encouraged by that. But we want to be cautious, as we look to the future in terms of this recovery. As it relates to the corneal health side of things, we would say that that is a - is not as concerning in that the patients seem to be coming back because of the age dynamics, the majority of these patients being younger are more willing to come into the practice to get the procedure done.

That's helpful. So a follow-up question on competition. So this week we saw that you cleared the joint venture formed by Verily and Santen. So - and the joint venture focused on developing ophthalmology license. I'm just wondering if you guys can talk a bit about your view on competition in general and how you think the competition - the competitive landscape will evolve and how Glaukos would stay competitive in the long run. Thanks.

Yes, I think from a competitive standpoint in the transaction you're mentioning I think is much earlier stage in Europe. We've been on record - we obviously - we talked a lot about the near-term competitive dynamics associated with some of the devices that are playing within glaucoma surgery. I think we've talked about on the corneal health side, the sort of free-running that we have there at the moment. The good news is when you look from a macro standpoint competitively, the process to bring a new product to market is a long and expensive one, right. And so we have a fair amount of visibility to what is downstream from the products that are currently on market and we feel pretty confident about both our current product portfolio as well as what we've got in the pipeline to continue to drive our business into the future.

Your next question comes from the line of Matt Hendrickson with Citi.

This is Matt Hendrickson. I'll start with the Ivantis litigation. Are there any updates or commentary that you may have?

I'm happy - I'd be happy to answer. This is Tom. And so, just to give an update. Many of you are probably aware that our trial date, which was previously scheduled for July 28 of this year due to COVID-19 was deferred until March of next year. So we're prepared - fully prepared to go to trial in July. We'll be fully prepared to go to trial in March of next year. What I would say is that we've had - I'd ask you to check the 10-Q for the second quarter, which will be coming out momentarily. You will see that there have been several motions that recently have been adjudicated by the judge in the case. We believe that these have been substantially favorable to Glaukos and continue to validate our confidence in our approach to this trial and to its outcome and so I'd ask you to review those to see kind of where we are at this stage, but again the trial has been deferred now until March of next year.

Great, thanks for that update. And then my last question just is a confirmation question. You talked about for the iDose trial that you're reigniting momentum, investigator sites are open and they're re-engaging the patients, but could you confirm if any new patients have been enrolled since those sites have been reopened?

Yes. I certainly can. We certainly have enrolled new patients. And so what we're really monitoring, Matt, is the pace of how we can create and reach the inflection point which we had generated prior to COVID-19. So our clinical team is prolific at recruiting and making this happen. We are facing, as we talked about, the headwinds you'd expect, patient reluctance to engage in a new trial or to return. And obviously, this backlog and pent-up demand as surgeons seek to be able to clear this. So, I am encouraged as to how the number of clinical investigators that have reengaged. I'll continue to watch the slope of that reengagement and again keep everyone adequately informed over the next couple of quarters how we're proceeding.

That's great, thanks for taking the questions.

You're welcome.

Your next question comes from the line of Ryan Zimmerman with BTIG.

Good afternoon and thanks for taking the questions. So just a couple from me. On the iStent infinite, Tom, you talked about - I think you can check, correct if I'm wrong, but being on the market, I think potentially late 2021 and if I recall the trial has a 12-month endpoint. So I'm just trying to understand the incremental time from now, the follow-up period, submission, and then the market being on the market. Do you have an adequate window I guess in terms of the FDA's review for that product to get to that 2021 timeline. And you can correct me if I'm wrong on some of my assumptions there on the timing?

Yes, that's okay, Ryan and so we have stated that we are targeting approval for late 2021 and - obviously, fully understanding the chronology of what it takes to get that right. So we finished enrollment of this trial as you recall in October of last year, then fast forward 12 months, which is the primary endpoint for our adjudication of the trial. We'll need to lock the database down and prepare the submission. We'll do so in an expedited fashion and we'll submit. So we're hopeful the FDA as well sees the gravity of treating these late-stage patients and the urgency of approval and we remain convinced that we can hit a target of late 2021 with iStent infinite.

Okay. And there is no potential for that to come earlier. I guess my question is, what are you assuming for the review of that right now?

Well, I think you can - if you just look at the numbers that are on the front of you, it's pretty easy to see. But typically, if you look at past transactions, the FDA typically will look at these and approve a product after a formal submission anywhere in the 6 to 12-month time period. And just for basis, we had, yes, we had, I think we were 6 or 7 months or so following the PMA submission for the approval for iStent inject.

Okay, so there might be some potential there and because you had some pretty quick approvals, so. Okay and then. The next question is around, you had I think a couple of MACs last quarter, raised I think it was Noridian if I'm not mistaken. And so one, what impact - maybe this is best directed for Chris - what impact did that have on utilization in the midst of all this noise in the pandemic and where have others followed suit or any commentary around the pro-fee rates from some of the MACs.

Ryan, this is Chris and you are correct. Noridian, which is out here on the West Coast primarily, raised their pro-fee from roughly $225 up to $325, roughly a 44% increase, and that happened in late March. So right in the midst of COVID it's really been difficult given all the dynamics of COVID to determine what kind of impact that has had. Having said that, we believe that that will help to initiate particularly new starts for surgeons who are interested in iStent inject and make surgery, but it is far too early in too dynamic of a situation to determine what kind of impact that had since it was announced.

Okay, all right, fair enough. I'll hop back in and thanks. Thanks for taking the questions.

Thank you.

Your next question comes from the line of Anthony Petrone.

Thanks, and good afternoon. Couple for you here, one on procedure location. Just trying to get a sense of generally high level in the US, what percent of iStent inject procedures today are ASC versus hospital inpatient? So just trying to get a sense of if COVID continues here and folks are staying out of the hospital, what that presents in terms of the headwind. And then on iStent inject W, you have the approval in the UK, in April. It looks like the label there is standalone and cataract combo. So I just want to confirm if indeed that is the case, and is that what we should expect for the US as well.

Okay. Anthony, this is Chris. As it relates to procedures in the United States, the breakdown is roughly 80% of those procedures are done in ambulatory surgery centers and 15% are done in hospitals, which given the current situation bodes well for us. In terms of W, it is CE marked. So it was not only approved in the UK, but all across Europe and that indication that approval that CE mark is for standalone and in combination with cataract surgery. It's difficult to assess what percentage is done as a standalone and what's done as a combination with cataract surgery, and it varies by country, but we're quite pleased with the launch of W. We have not released it in all of the countries in Europe, but we have begun to launch it in countries beyond Germany. And just to make sure a bit more clear in the last part of your question, Anthony, I think in the US, the approval is for use in combination with cataract surgery, unlike in Europe where the CE Mark covers both.

Very helpful and last one from me would just be, just looking at InnFocus MicroShunt in Europe. Is that a good analog for what we should be thinking about for the US launch and where is the share of InnFocus versus trabeculectomy and other MIGS, just trying to get a sense of how that launch has gone for Santen. Thanks.

Yes, Anthony. This is Chris. There are a number of differences there. One, that's being launched by Santen themselves in Europe. Two, that market in Europe is very different than it is here in the United States. So, I'm not sure that you can formulate direct comparisons to the launch in Europe to what we'll be doing here in the United States. It's going to be a bit different. And thirdly, we do not have access to what their numbers are in Europe to even be able to comment on that.

Fair enough. Thanks, again.

And now back to you, Chris for closing remarks.

Okay. This is actually Tom, and I just want to thank all of you again for your time and attention today. We hope everyone is staying safe, and thank you for your continued interest in Glaukos Corporation. Thanks, and goodbye.

This concludes today's conference call. You may now disconnect.