Welcome to Glaukos Corporation’s Second Quarter 2021 Financial Results Conference Call. A copy of the company’s press release is issued after the market close today and is available at www.glaukos.com. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. 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, Senior Director of Investor Relations and Corporate Strategy and Development. You may now begin your conference, sir.

Thank you, and good afternoon. Joining me today are Glaukos 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, integration and market development efforts, the efficacy of our current and future products, our competitive market position, reimbursement for our products, 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 when comparing underlying results from period to period. Please refer to the tables in our earnings press release that is available in the Investors 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.

Thank you, Chris. Good afternoon and thank you all for joining us today. We hope everyone is staying safe and doing well. Pioneering new markets the right way as we’ve done with transformative technologies that disrupt conventional treatment paradigms and improve the standard of care for the benefit of patients is not easy and often requires herculean efforts. Since launching our original iStent flagship product in 2012, we have overcome many obstacles along the way, including navigating often complex and changing regulatory and reimbursement environments. Thankfully, since those early days, we’ve grown from a one product glaucoma-centric, primarily domestic organization into a global, diversified, hybrid drug and device ophthalmic leader with four FDA-approved products, a robust near- and long-term pipeline of promising novel therapies across our glaucoma, Corneal Health and retinal disease franchises, a significantly larger global infrastructure and a strong balance sheet, and we have attracted incredible people to our team along the way. We are unapologetically ambitious and confident in our future. We continue to execute on the things within our control, but before we discuss our record second quarter and overall progress, I will spend some time addressing the proposed rules by the Centers for Medicare and Medicaid Services, our CMS, for the calendar year 2022, including some background and detail, our plans during the ongoing open comment period and what it means for Glaukos should the proposed rules remain unchanged. On July 13th and 19th, CMS published its proposed calendar year 2022 Medicare physician fee and facility fee schedules respectively. These proposed 2022 rules update the payment policies, physician fee and facility payment rates, and other provisions for services furnished under the Medicare physician fee schedule in both the HOPD and ASC settings. The issuance of these proposed rules is followed by a 60-day public comment period, which will culminate in CMS’ release of the respective final rules by November 2021 for implementation in the U.S. on January 1, 2022. Therefore, the proposed rules are subject to change. Let’s start with a quick background of our Current Procedural Terminology or CPT process to date in the U.S. In 2008, with the approval of the American Academy of Ophthalmology, we applied for and received a temporary Category III CPT code 0191T to describe the insertion of devices such as the iStent using MIGS procedures. Since then, we have extended our Category III code successfully, but it was scheduled to expire in 2023. With this in mind, we have been anticipating and preparing for the conversion of 01921T into a Category I CPT code for some time. In October 2020, the conversion process was made official when the American Medical Association’s CPT editorial panel approved the creation of two new Category I CPT codes for 2022, 669X1 and 669X2, to cover the insertion of aqueous drainage devices such as ours when used in combination with cataract surgery. The CMS 2022 proposed rules include physician fee and facility fee payment rates for these two new Category I CPT codes, including 669X2 for non-complex cataract extraction in combination with the insertion of an aqueous drainage device and 669X1 for complex cataract extraction in combination with the insertion of an aqueous drainage device. CPT Code 669X2 and 669X1 will replace Category III code 0191T as the primary code that physicians, hospitals, and ASDs will use to seek reimbursement utilizing Glaukos’ trabecular micro-bypass technologies including for our iStent, iStent inject and iStent inject W devices when used as approved in combination with cataract surgery. Starting on the physician fee, often referred to as the professional or pro fee, which is the rate surgeons are paid directly for doing a procedure. The proposed rule indicates the 2022 physician fee for CPT code 669X2 of approximately $565, representing an incremental physician fee payment of approximately $34 above non-complex cataract surgery alone. This compares to a median physician fee today for 0191T of approximately $350, which as a Category III CPT code is priced independently by each Medicare Administrative Contractor or MAC. Moving to the facility fee, which is a payment that a facility receives to cover the cost of a procedure, including the costs of the devices used, the proposed rule indicates the 2022 facility fee payment rate in the ASC setting for CPT codes 669X2 and 669X1 of $2,516 compared to the combined ASC facility fee out of the existing Category III code today of $3,353, a proposed reduction of $837. We estimate that approximately 80% of procedures utilizing our trabecular micro-bypass devices in the U.S. are performed in the ASC setting. For the remaining 20% of procedures performed in the HOPD setting, the proposed rule indicates a 2022 facility payment rate for CPT Code 669X2 and 669X1 of $4,019, an increase of $101 over today’s current HOPD facility fee of $3,918. We are extremely disappointed with CMS’ proposed 2022 rates for the new Category I codes that cover our sight-saving trabecular micro-bypass technologies when used as approved, in combination with cataract surgery. While we have expected the professional fee under the new Category I code to most likely decrease versus Category III levels given the procedure is valued as ancillary to the primary cataract procedure, the proposed 2022 levels are well below our expectations and the ranges that were contemplated in our internal and external generated analyses. For the facility fee, we had expected and communicated a wider range of potential scenarios, including positive, neutral, or negative potential outcomes, and the proposed 2022 ASC facility fee represents the downside scenario. Clearly, these proposals are unexpected, unwelcome and are the latest example of a current system that often seems to devalue and discourage innovation. We believe CMS’ proposed rates do not appropriately consider the associated pre- and post-operative work, training component, time nor surgical skill required for implanting our micro-bypass technologies, which as a reminder, are the smallest medical devices ever approved by the FDA and supported by approximately 200 peer-reviewed publications that highlight the technology’s favorable safety profile and efficacy outcomes. In fact, one could argue the proposed rule economically incentivizes the utilization of less efficient and more invasive procedures that we believe lack robust long-term safety and efficacy clinical data. In many ways, we believe the proposals punish ophthalmic surgeons who utilize our elegant, facile technologies through a proficient implant procedure and will inevitably cause a reduction in patients’ access to these sight-saving technologies. So, where do we go from here with CMS? We were organized and prepared for downside scenarios heading into the proposed ruling and our efforts are already well underway. These efforts include a comprehensive and coordinated response in partnership with key societies, patient advocacy groups, ophthalmic surgeons, and lobbying groups. We are well into engagement with leading ophthalmic societies, including the American Academy of Ophthalmology, the American Society of Cataract and Refractive Surgeons, the American Glaucoma Society, the Ophthalmic Outpatient Surgery Society, and the Ambulatory Surgery Center Association. We are encouraged by the full commitment these societies have made in advocating for change to CMS’ proposal in order to protect patient access and to enable surgeons to provide the highest quality of care. As you might expect, in our situation, there are several key issues that we will need to tackle in our response to CMS both on the professional and facility fee side. While we cannot guarantee or make any guarantees regarding the final outcome, we can say that we are fully committed to exploring every option during the public comment period and hope that medical providers and facilities across our network are paid appropriately for conducting these types of procedures and ensuring their collective voice is heard by CMS. Regardless of the final rule outcome, we must plan strategically for scenarios where the proposed rates are finalized, which could result in headwinds to our U.S. combo cataract/MIGS business both from a volume and pricing perspective. Joe will provide more details here later in the call. If I’ve learned anything since the outset of COVID, it’s that our employees and teams at Glaukos are resilient. We have an unwavering commitment to doing things the right way, supported by real science, robust clinical evidence, and an unrelenting focus on patients. We do remain steadfast in our commitment to advance our long-term mission to transform the treatment of chronic eye diseases for the benefit of patients worldwide. Our people, balance sheet, and diversified growth drivers position us as we move forward to take on this challenge, as well as those we will face in the future. Shifting gears to our second quarter results, we are pleased to report second quarter net sales of $78.1 million, up 147% versus the year-ago quarter and 15% sequentially. Fueling our strong second quarter results was solid execution on our key strategic initiatives across our glaucoma and cornea health franchises globally, paired with continued strong recovery trends in the market overall and our business specifically through the second quarter and into July. We remain focused on our near-term execution as we drive new adoption and deeper penetration globally for our transformative MIGS and iLink solutions along with advancing our market-expanding robust pipeline and R&D programs. Given the significant negative impact COVID had on demand for elective medical procedures last year, comparing sales versus pre-pandemic levels in 2019 provides one of the more relevant measures of performance. On this comparison and adjusting to include Avedro sales in the prior comparable period, our total net sales grew more than 13% in the second quarter of 2021 compared to pro forma 2019 levels, driven by strong growth in international glaucoma of 56% and cornea health of 49%. These two franchises accounted for roughly 41% of our total second quarter 2021 net sales, up from approximately 30% prior to the pandemic in the second quarter of 2019. We are pleased with the strong momentum and increasing growth contributions we are experiencing from both of these emerging franchises. International glaucoma growth during the second quarter was broad-based across the European and Asia-Pacific regions. We are continuing to invest and are expanding teams around the globe as we drive deeper penetration and broader adoption of MIGS worldwide. Corneal Health growth during the second quarter was driven by record U.S. Photrexa sales of $12.6 million and continued healthy momentum in the new U.S. account starts. We continue to opportunistically expand our U.S. Corneal Health commercial team to fuel the execution of our commercial strategies and market development initiatives that are being well received. It’s also worth noting that the strong capital position we have built allows us to remain on offense when it comes to investing in our future. As a testament to this, we continue to invest in and advance our fulsome pipeline based on our core novel platforms where we anticipate and are planning for a robust cadence of new product introductions over the coming years that have the potential to significantly expand our addressable market opportunities and fundamentally transform Glaukos over time. We are hard at work preparing for an iStent infinite regulatory submission and continue to target FDA approval around the end of this year. As a reminder, CMS’ 2022 proposed rule includes an ASC facility fee payment of $2,516 for the new Category III CPT code OX12T, which we anticipate will be used in the future to cover standalone MIGS technologies, such as iStent infinite if approved. We also continue to advance our late-stage development of iPRIME, a highly complementary new viscodelivery device designed to be a truly minimally invasive system to further support the needs of our physicians and patients. Regarding the PRESERFLO MicroShunt, we announced a new licensing agreement with Santander in the second quarter that increases our responsibilities in the United States and expands our territories to include the U.S., Canada, Latin America, Australia, and New Zealand. FDA discussions regarding the U.S. submission remain ongoing and at the moment, the FDA is obtaining additional input from glaucoma surgeons to ensure a complete evaluation of the clinical data submitted in the PMA. In the meantime, we are preparing for future commercial launches in Canada and Australia given the recent regulatory approvals in both geographies. During the second quarter, we also completed patient enrollment and randomization in both of the two pivotal clinical studies that make up the iDose TR Phase III clinical program. The 12-month Phase III trial results are expected to support our anticipated NDA submission for iDose TR in 2022, and we continue to target FDA approval for this promising technology in 2023. For Epi-on, we successfully completed the transition to our new CMO partner and continue to target a U.S. NDA submission in 2022 and FDA approval in 2023. Beyond these important near- to medium-term pipeline programs, we also continue to invest in and advance our key earlier stage R&D programs, including in dry eye, retina, glaucoma, and additional undisclosed projects. While these opportunities remain in preclinical developmental stages, we are encouraged by the initial progress we’re demonstrating within these platforms and associated programs and are hopeful to advance a number of these programs into the clinic over the next 12 months. In conclusion, I’d like to reiterate our commitment to challenge the conventional way of thinking by driving meaningful innovation for the benefit of patients as we aspire to build a world-class company. I am confident we have the right people, strategy, infrastructure, pipeline, and balance sheet to execute our plans and deliver on our future aspirations. So, with that, I am going to turn the call over to Joe to discuss our second quarter financial results.

Thanks, Tom. As a reminder, I will 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. Glaukos’ global consolidated net sales for the second quarter of 2021 were a record $78.1 million, representing year-over-year growth of 147% and sequential growth of 15%. As a reminder, our sales were materially impacted in the second quarter of 2020 due to COVID-related restrictions. As Tom mentioned earlier, on a pro forma basis, our second quarter 2021 net sales increased 13% compared to the second quarter of 2019. We were encouraged with the continued COVID-related recovery trends in many key markets globally, including the US during the second quarter. Having said that, we’re monitoring closely the recent developments with the Delta variant that have created isolated, but growing disruptions in the U.S. and abroad. We acknowledge the risk this poses to the overall market recovery dynamics, but we remain cautiously optimistic as to the magnitude of this latest potential global pandemic development. Now turning to our U.S. glaucoma franchise specifically, our second quarter U.S. glaucoma sales were approximately $46.3 million, representing year-over-year growth of 154% and sequential growth of 16%, which we believe reflects a combination of pandemic-related dynamics, a stable combination cataract competitive landscape and pricing environment, and underlying seasonality trends. Internationally, our glaucoma franchise delivered second quarter sales of approximately $16.4 million, representing year-over-year growth of 145%, sequential growth of 19%, and 56% growth compared to the second quarter of 2019. This performance reflects growing demand in many key markets throughout our European and Asia-Pacific regions, which were offset by the ongoing pandemic impact in Latin America in particular. In Corneal Health, second quarter net sales were $15.4 million, representing year-over-year growth of 133% and sequential growth of 8%. The second quarter performance was driven by U.S. Photrexa record sales of $12.6 million on year-over-year sales growth of 143% and sequential growth of 11%, along with a continued trend of healthy new U.S. Photrexa account starts as our commercial immigration strategies continue to deliver. Our second quarter 2021 Corneal Health net sales were up approximately 49% on a pro forma basis, compared to the second quarter of 2019 net sales of $10.3 million. Shifting gears toward the remainder of our P&L, our non-GAAP gross margin in the second quarter was approximately 84.4% versus 78.2% in the same quarter in 2020 and 83.8% in the first quarter of 2021. This reflects continued strong gross margin performance in Corneal Health and glaucoma versus prior periods that had been impacted by pandemic headwinds. It is worth noting that our non-GAAP adjustments to COGS include substantial amounts related to Avedro acquisition accounting. Our overall non-GAAP operating expenses were approximately $67.8 million in the second quarter of 2021, an increase versus the second quarter of 2020 and first quarter of 2021 as we continue to restore expansionary spending as the recovery warrants, a trend that we would expect to continue moving forward. Our non-GAAP SG&A expenses in the second quarter were approximately $43.6 million, up 7% sequentially compared to the first quarter, reflecting increased commercial spending, offset by lower administrative costs. And our non-GAAP R&D expenses in the second quarter were approximately $24.1 million, up 14% sequentially compared to the first quarter as we continue to restore our core R&D spending, earlier-stage pipeline programs, and human capital investments across the organization, offset in the quarter by lower clinical development costs. We also recorded a one-time in-process R&D charge of $5 million in the second quarter associated with the Intratus licensing transaction for presbyopia. We finished the second quarter with a non-GAAP operating loss of $1.8 million and non-GAAP net loss of $5.1 million or $0.11 per diluted share. Our GAAP net loss was $17.5 million or $0.38 per diluted share for the second quarter of 2021. We invested in approximately $11.4 million of capital expenditures in the second quarter, which as expected remains elevated versus historical levels as we’ve advanced through the construction phase of the enhancement and expansion of our facilities in Southern California and Boston to meet our growing development and operational needs, a trend that we would expect to continue for the remainder of 2021. As of June 30, 2021, we had cash, cash equivalents, short-term investments and restricted cash of approximately $428 million, compared to $414 million at the end of 2020 and $417 million at the end of the first quarter 2021. As we look forward, I will first make a few comments on the state of our markets and opportunity today, and how we believe things are unfolding for the remainder of 2021. As it relates to COVID-19, we were encouraged by the overall trend during the quarter, which I discussed earlier. But the situation remains fluid given the emerging potential challenges associated with the Delta variant. We remain optimistic but would caution conservatism as you consider any potential impact this may have on elective procedure markets throughout the remainder of 2021, particularly as we head towards the fall and winter months. Beyond COVID, we believe the competitive landscape and pricing dynamics have remained stable across each of our major business areas as evidenced by our second quarter results. As we put all this together, in the context of our expectations going forward, we’re providing 2021 net sales guidance of $285 million to $290 million, including our expectation for third quarter net sales to be in the range of $72 million to $74 million. This guidance takes into account our typical underlying seasonality patterns, COVID-related trends and risks, and potential U.S. combo cataract glaucoma headwinds on two fronts, competitors seeking to opportunistically capitalize now on the relative economics associated with CMS’ 2022 proposed ruling and the potential impact in the fourth quarter should those proposed rules be finalized in early November. As you look beyond 2021 and into next year, I will note that we continue to refine detailed assessments to analyze the potential volume and pricing impacts to our combo cataract U.S. glaucoma franchise assuming various scenarios, including if the proposed rules are finalized. We will continue to monitor the trends and provide more specific commentary once the final rule is available and analyzed. In the meantime, there can be no guarantee that these proposals will change and we are aware of the initial diligence, surveys and estimates of the potential impact of volumes and pricing that many of you in the research community have already performed and published in some form, which based on the research we’ve seen would imply a 2022 U.S. combo cataract glaucoma sales range of $90 million to $110 million. To be clear, this is not formal guidance, but rather us acknowledging these perspectives directly or indirectly exist based on your own publications and is an attempt by us to accurately translate that diligence into a potential 2022 U.S. combo cataract glaucoma sales range for investors. With that, I’ll now turn things back to Tom for a few closing remarks.

Okay. Thanks, Joe. So in closing, I’d like to reiterate our conviction in our long-term vision. We are resolutely committed to building Glaukos into a leading company in ophthalmology. We will continue to invest in this vision in order to scale our team and to drive innovation, which we believe are foundational pillars to long-term value creation for all stakeholders. We understand the difficulty of forecasting our U.S. combo cataract glaucoma business with precision in the short term. There are many unsettled variables that may influence performance in significant ways. While we are highly disappointed in the initial CMS proposals and we understand that the resulting uncertainty can be disconcerting for investors, we want to take this opportunity to underscore our continued confidence in our future. We pioneered the MIGS market and are going to fight hard for it. Our ambitions go well beyond this category. The funding from our U.S. combo cataract iStent franchise has enabled us to build a pipeline with a breadth of magnitude that may be unmatched in this industry and while swing factors in U.S. reimbursement may significantly impact our existing U.S. combo-cataract glaucoma business, we believe that our foundation remains strong and that our pipeline has game-changing potential. We believe that this near-term noise gives us the opportunity to again focus your attention on our near- and long-term vision, and we encourage investors to evaluate closely our U.S. glaucoma commercial execution thus far in 2021, the growth and scale of our international glaucoma and Corneal Health franchises and study the pipeline, and we are confident that many of you will come to the same conclusions and enthusiasm we have for the future of Glaukos irrespective of the final U.S. combo cataract reimbursement outcome from CMS. So, with that, I’ll open the call for questions. Operator?

Operator Instructions. And our first question is from the line of Andrew Brackmann with William Blair.

Hey, guys. Good afternoon. Thanks for taking the question. So, I guess to start, certainly, appreciate all the commentary that you provided on the reimbursement side of things and your thoughts there. But I guess just to take a step back with all of the sort of different variables at play there. Can you maybe just talk about your thought process on why now is the right time to provide some initial thoughts around what 2022 might look like, and I guess related to that, can you maybe just elaborate a bit on some of the assumptions that you’re putting into play there for those? Thanks.

Hi, Andrew.

This is Joe. Thanks. I think it’s a fair question. I’ll start with why 2022 now. I think we certainly understand a situation like this creates uncertainty for investors and we acknowledge that many of you in the research community have done a lot of hard work and preliminary diligence on the potential impact and surveys, dot calls, et cetera. And as a result, we also know that these perspectives exist. But in many cases, they haven’t been translated accurately or maybe at all into numbers because it’s difficult to do so. So, candidly, we want to be helpful and at least provide some accuracy and certainty around the implied math and implications from the street’s initial work on the CMS proposals. When you think about the numbers that we share in the prepared remarks, the $90 million to $110 million, it really utilized a range of volume impact assumptions from the surveys and dot calls and the observations that you all published and it combined with a range of ASP impact scenarios from those same data sources. So we apply that then to the Medicare and ASP portion of both our combo cataract volumes and ASPs. And really the majority of the resulting, I’ll call it, bell curve outcomes is what yielded $90 million to $110 million of U.S. combo cataract revenues in 2022 and as a result, the comment that we include in the prepared remarks.

Got it. That’s helpful. Thank you for that. And I guess shifting gears a little bit here to the pipeline, that’s still sort of around this reimbursement situation. iPRIME, let’s highlight again here, can you maybe just sort of talk about that product and sort of where you see that product competing, when it’s going to be available and how that might be able to impact the U.S. Stockholm business when and if it gets to market? Thanks.

Hey, Andrew. This is Chris. We’re still in the same position that we have been for a while in that it’s in late-stage development. It’s a viscodelivery system. There has been a trend of physicians utilizing viscodelivery along with trabecular bypass, looking for the short-term benefits of viscodelivery system and the long-term benefits of trabecular bypass. So that trend is something that we have been looking at for some time.

Thanks.

And your next question is from the line of Chris Cooley with Stephens.

Good afternoon and thank you for taking the questions. I greatly appreciate, Tom, all your color about the efforts to reverse or to improve the proposed rates going into 2022. Just for me, if I could maybe here in the immediate short run and then one longer-term question. Joe, I am just kind of curious if implicit in your guidance for the full year, if you’re assuming any type of deceleration in your domestic MIGS business here in the back half as surgeons potentially start to transition or as you alluded to I believe in your prepared comments, some type of more aggressive marketing there and if so you could just maybe help us better quantify that versus kind of the volume growth that was clearly a record quarter here in the 2Q and I have just one follow up after that? Thank you.

Yeah. I’ll start Chris and then let you turn it back to the other questions you’ve got. So I think it’s a good question when you think about a really strong second quarter and the trend lines from that and implications from that strong second quarter and what it would normally mean for the second half. And clearly, the guidance of $285 million to $290 million including in the third quarter of $72 million to $74 million is really of two big buckets of assumption. The first one is a bit of COVID conservatism in all of our franchises, both in the third quarter as we progress and certainly as we move into the fourth quarter given the moving parts and the unknowns around the Delta variants and what that could mean for the business going forward. But more importantly is within the US combo-cataract glaucoma segment and what I said during the prepared remarks. I think our assumption is that sitting here today, the competition is already out and will continue to be marketing against the 2022 proposed economics and that’s going to create some degree of headwind as we move forward through the second half of the year. But in particular, we also see a more significant impact in the fourth quarter if the proposed rules are finalized and that comes from a combination of net de-stocking of the channel in the later part of the year and potential pricing concessions that would have to be made ahead out of that January 2022 effective date. So you put all that together and you land at the $285 million to $290 million number with the biggest deceleration component that happened in the fourth quarter.

I appreciate that. That’s helpful. As we look ahead, you have a very active new product pipeline currently in development. I'm curious about your thoughts on iStent infinite and how its positioning and uptake might compare to the initial adoption of iStent or iStent inject, considering the proposed reimbursement code and the data related to infinite. Also, I was intrigued by your comments on Intratus regarding the $5 million IP R&D charge this quarter. I don't recall that timeline being discussed previously, so I would appreciate a reminder about when the timeline for the Intratus presbyopia correction is supposed to be. Thank you.

So, Chris, this is Chris. I am going to handle the first part and Joe will handle the second part. As it relates to infinite, that as you know, is a standalone product that we have stated that we are looking to get approval sometime by the end of the year. That, in terms of reimbursement, we don’t feel will be affected by what’s been published, it’s a proposed rule for trabecular bypass in combination with cataract surgery. By it being a standalone product, it will be evaluated as such. It will not be seen as an ancillary product, and therefore, we expect we would have more fulsome reimbursement. In terms of how doctors use that, that will be up to the doctors. We are expecting a label that is likely to be advanced glaucoma or refractory glaucoma. We will be conducting Phase IV studies for that product that will be for mild-to-moderate. Payers will have the ability or the decision to make in terms of how they pay for that based on the data, but we won’t be able to market it beyond what the label is, which we think will likely be advanced or refractory glaucoma. Does that answer your question?

It does. Thank you.

Yeah. I am happy to take the second part of the question. So we look at this fulsome pipeline that we talk about and you can all see it kind of unfold before you and one of the things that we find most promising is this proprietary that we even license from, which contains kind of a proprietary blend of pilocarpine and caffeine as a speculating agent. And when we combine these together, we see great promise in early pilot studies when we use these transdermal agents by placing on the eyelid for the treatment of dry eye and then when you see what we’ve done, we’ve already expanded the use of that product with the further in-licensing of the presbyopia claim. And so we expect using this combination in this proprietary cream that we may have the opportunity to open up INDs in this product really toward the end of this year or certainly in the early part of next year, so already this cascade unfolds before you. And make no mistake, if we are as good as we think we can be with this technology, we’ll be looking for other opportunities to treat anterior segment disease using a cream that we think will dramatically improve patient compliance. You can have good pharmacokinetic release which may provide for which could give us extra hang time as we approach some of these disease states. So that’s just one of the novel platforms that we’re investing in which we think can command a very, very promising future for the company.

Chris, I’ll finish that off with the $5 million reference. So that’s an in-process R&D charge associated with the upfront amount that we paid to Intratus associated with the expansion of the license into presbyopia, as Tom mentioned.

And your next question is from the line of Matt O’Brien with Piper Sandler.

Hey, guys. This is Drew on for Matt. Thank you for taking the questions and appreciate the transparency on all aspects of the business here. I do want to start off on the proposed ASC reimbursement. There’s another med tech company out there who also moved to a new code and was assigned a default 31% device offset as well and they’ve said publicly that they hope to increase that rate by providing CMS with invoices. So I guess the question is, one, is that a pathway forward for you, and then, two, should your decision to incorporate this current rate into your guidance reflect any indication of the likelihood of that rate moving higher in the final rule?

So we’re not going to be able to comment on what the likelihood of that is. We’re planning for the worst-case scenario and that being what the proposed rules would be. It would be really irresponsible of us to predict the likelihood of that happening.

I think what we could say is that we’re working with the societies to come up with a comprehensive program to be able to improve both the professional fee and the facility fee. And it’s clear that we don’t want to get into tactics now of how we might do that, but we think that these proposed rules are not only unanticipated, but they’re unwarranted and unwelcome. And you can imagine the amount of effort that we’ll put in, fierce effort to be able to modify remedy and to improve our position both on the professional fee side and on the ASC facility side.

Okay. Very, very helpful. And then I understand you said you use the range of outcomes under that $90 million to $110 million scenario. But maybe you could expand a little bit on how deep some of those pricing cuts would have to be if those rates were increased in the final rule maybe relative to some of your competitors? Thank you.

Yes, Drew. This is Joe. Regarding the $90 million to $110 million range we mentioned, it reflects the proposed rules released by CMS last month and confirmed in November as the foundation for that estimate. When considering pricing scenarios, it's important to look at the ASC setting and the pricing dynamics for Medicare patients there. As we noted, the proposal reduces reimbursement compared to 2021 levels by $837, a significant portion of which we expect could influence our pricing.

And your next question is from the line of Robbie Marcus with JPMorgan.

Hey, guys. This is Allen on for Robbie. Just taking a step away from reimbursement for a second, I guess just diving into kind of what you’re seeing in COVID, as you highlighted, there’s a little bit of conservatism that you’re breaking into numbers, which I think is definitely appropriate. But how much upside do you think there could be from deferred patients coming back, how much of a benefit do we see from that in the quarter and how much do you think it still kind of left on the table?

Yeah. Hi, Allen, it’s Joe. I think there’s a couple of things implicit in that question. The first one is I think the backlog remains and physicians and practices are working their way through that. I think that was certainly part of the second quarter dynamic. And as we’ve said in the past, I think, something that all else being equal would play out over many quarters of time and perhaps even years as these physicians work their way through it. I think the secondary component of this is what we saw in the quarter was more stability and recovery in the U.S., in Europe and Asia, and while Latin America continues to struggle as they navigate the pandemic, we certainly saw encouraging progress towards normalization versus the 2019 levels. We may not have been perhaps fully back yet. We obviously noted the commentary from others, the cataract volumes still were below 2019 levels. But we were encouraged by the trend within the second quarter and how that translated into our results. I think as you go forward, the second half all comes down to the variants and I’ll call it human and public health response to them both in the U.S. and globally. And as we’ve all learned along the way, that’s fairly hard to predict, some of what we’ve been seeing in recent weeks is not particularly encouraging, yet we have been encouraged by the continued momentum in the business.

Got it. And then just kind of looking toward the pipeline, I think, probably not to rethink the iDose is looking even more important as to kind of the forward-looking outlook for your company. So how should we really think about what you need to do to lay the groundwork for a successful launch there once you have the data and once you have the approval in hand and just in terms of the competition out in the market, how successful we think the iDose become in the future? Thanks.

I’m glad to address that. As you know, the Phase IIb data for iDose indicates significant reductions in pressure, ranging from 7 millimeters to 8 millimeters, maintained over two years. We are currently tracking this data out to three years, and we are optimistic about its continuity beyond the two-year mark. From the beginning, I mentioned that we needed to achieve a sustained efficacy implant lasting six months to create a commercially viable product, with a year being ideal. Considering the data from Phase IIb, which must still be validated by our Phase III data, we believe we have the potential for a transformative product for patients. In the meantime, we are laying the groundwork for an injectable procedure that could provide therapy lasting months or even years, as opposed to topical eye drops, which studies show that patients often don't adhere to. By offering a 24/7 control device inserted safely into the eye, we address compliance issues effectively. This approach positions us to significantly influence the market. We anticipate that under 505b2 rules, the FDA will conduct an open-label evaluation of our NDA covering ocular hypertension to late-stage glaucoma, allowing us to reach a broad patient population. We have already worked on establishing a device code with an APC assignment currently in an E1 holding category, and we plan to petition in the proposed rules in 2022 for a Category III code that will ensure fair payment, similar to what we achieved with iStent for iDose. Additionally, we will gather pharmacoeconomic data to support our launch. We're conducting transition probability analyses, burden of illness scenarios, and quality of life scenarios to justify payment. Given what Arista has established with Allergan, which leads to nearly a $2,000 reimbursement for devices lasting four to six months, we feel confident about setting a fair price that reflects true market value. As we prepare for the launch, our experience with minimally invasive glaucoma surgery (MIGS) and the development of this category supports our strategy for introducing this standalone drug-device product. I am very optimistic about our prospects for this procedure.

And your next question is from the line of Jon Block with Stifel.

Thanks, guys. Good afternoon. The $837 decline of the ASC, even in the big magnitude of a reversal to get it all of it back? So what’s good enough? In other words, if you were to get a $200 to $300 reversal and a $200 to $300 price discount, does that get you in your opinion where you need to be from a competitive standpoint? Tom, you’ve just talked about at length, you’ve got a safe device. It’s got great risk reward. It’s simple to go ahead and do the procedure from a doc perspective with good pressure drop. So when you talk to the physicians and your customers, is there a threshold where the docs might look past a couple hundred bucks and you feel like you can fight the fight without maybe not necessarily being exactly at parity?

Hey, Jon. It’s Joe, and Chris or Tom can also add in. I don’t think we would set a bogey like that or determine a minimum threshold. I think obviously every dollar helps in the equation, whether it’s in the context of our pricing or getting different accounts over the trends on something like this. But I wouldn’t draw a line in the sand that says this dollar amount is the specific target that we need to achieve.

Okay. Maybe just to pivot and I’ll stick with glaucoma broadly. But would you expect any sort of spillover effect and it might be an odd question, but spillover effect from the U.S. and internationally, and I get it, the reimbursement is clearly different. But you look to the U.S. market and thought that the leader is the standard of care and so when you think about international glaucoma business that’s done well and ramped strongly. Do you expect any sort of spillover effect in that franchise, and if not, Joe, with a really strong balance sheet, what’s the opportunity to maybe accelerate investments on that side of the business?

Yeah, Jon. I would say just to answer the question directly. We don’t see a spillover effect. Every market is unique, the reimbursement situations are unique. The clinical data and efficacy that we’ve generated and the experience we’ve got of surgeons in each of those communities continues to move forward positively irrespective of what reimbursement dynamics happen in the United States.

And accelerating investments, Joe, with the balance sheet that you have in some of these other franchises?

Well, I think we’ve been doing that, right, for some time. I mean, if you see take a step back on the international business, we were a small player in a couple of markets in 2017 and we made a very significant investment in a lot of countries over the course of 2017 and 2018, and we’ve never stopped since in terms of adding commercial personnel and marketing personnel in addition to that, and I think that will continue to move forward as we go forward here.

And your next question is from the line of Ravi Misra with Berenberg Capital.

Hey. Deb in for Ravi. I appreciate you taking the question. I kind of want to stick to the pipeline discussion here as well. You’ve given a lot of color into that. But in regards to, I guess, a few things, so, one, just trying to get idea of where your mindset is strategically on a few things in regards to capital allocation. If we think about the rest of 2021, obviously, there’s focus on rebuttal to the reimbursement. But where are you thinking about kind of shifting, is there any shifts to kind of R&D leaning out on OpEx anywhere else that we should think about? And then also looking forward to 2022, in regards to the pipeline, I know you talked about iStent infinite. But is there any other strategic investments you’re looking for maybe in the corneal space, licensing anywhere else? Just trying to get an idea of where you get a sense that?

Yeah. Thanks. I guess so I would say it this way. We have a compelling pipeline both near- and long-term when it comes to the spending that we’re making in R&D. I think we will continue to drive that forward aggressively. Now we have a history of prudently reinvesting in our business based upon the scale. But in a situation like this, the opportunity that is attached to our pipeline both over the short-, medium- and long-term is just too great to ignore. And so, I think, obviously within reason, you would expect that we would continue to fulsomely invest in that and drive that forward across the Board. As you think about some of the other areas and I think Tom in different calls and reiterated today has talked about the areas where we’re investing. And it’s not just in infinite, iPRIME, PRESERFLO, iDose, Epi-on. It’s in the transdermal delivery cream for Corneal Health. It’s in retina and all the other areas around it. So, we’ve got a lot of efforts going on that we think individually and collectively are game changing for Glaukos and we’re going to continue to invest in them.

Okay. Great. And just a quick follow up to that, in regards to the impact of competition, I think you noted in guidance that it was contemplated for 2021. Just curious is that from discussions that you’re having currently with physicians that you’re hearing about that, because my other thought was that physicians might like if they have interested patients kind of stock the pipeline for 2021, so they can get full reimbursement and get it done, so just curious on that front?

Yeah. I think we’ve taken a full range of scenarios into consideration when we think about the guidance that we’ve set that has some puts and some takes as it relates to both the third and the fourth quarter and I outlined those a little bit earlier. So I think we considered that what you’re describing around the fourth quarter and taken that into consideration with the guidance we gave.

And your next question is from the line of Joanne Wuensch with Citi.

Hey, everyone. This is Anthony speaking on behalf of Joanne. Thank you for taking our questions. I just have two brief inquiries. First, is any revenue from iStent infinite included in this year's guidance? And regarding iPRIME, is the timing still set for 2022? I believe that was the last update we received, but I wanted to verify that timeline. Thanks.

Sure. So first on the infinite question, that’s not really at this point given the timelines we’ve talked about around year-end, we would not include that in any guidance for 2021 and it’s also, by the way, not included in the combo cataract comments that I made around the $90 million to $110 million for 2022. As it relates to iPRIME, I don’t think we’ve ever said that. We’ve never said a specific timing on it, what we said is we’re in late-stage development and we would probably just leave it there.

And your next question is from the line of Anthony Petrone with Jefferies.

Great. Thanks. And my question is going to be on existing just MIGS share landscape, three offerings out there now and one of the competitors actually had a label expansion allowing for canaloplasty and trabeculectomy. It seems that that caused a little bit of share shift here in 2021. So just an update on sort of the landscape and overall share, how you see sort of surgeries being allocated across the three offerings? And a quick follow-up would be if we assume all unchanged on CMS proposals, how seamlessly do you think there could be a switch to standalone from combo? Thanks a lot.

Hey, Anthony. This is Chris. I’ll address the first part in terms of one of the competitors having an expanded indication on their label. We really haven’t seen any change in behavior from either the physician or the facility in that regard. They are out there and as we mentioned before, many of those cases are being done in combination with the trabecular bypass.

And I’d probably just add that, I am not so sure in that same vein that there’s been a share shift as you suggested. I think we’ve seen a pretty stable combo cataract market environment. You have to remember when you’re thinking about canal/viscodilation that. Number one question how much is being done in combo cataract versus standalone. But number two in combo cataract, how much is being done in combination with stents like iStent inject and Inject W. So, I think it’s a little bit of an apples and oranges comparison sometimes when you look at those results. As you think about moving forward in 2022 and your comment around the shift from combo cataract to standalone, I think that’s a bit more difficult than it maybe seems. I am guessing that what you’re saying there is the ability to sort of decouple the procedures and do a cataract surgery and then a subsequent MIGS procedure and I think we feel that’s relatively unlikely.

Thanks. That’s helpful.

And your next question is from the line of Ryan Zimmerman with BTIG.

All right. Thanks for squeezing me in. So, maybe Tom or Chris. I think back to your comments about the term tissue destructive for some of the previous viscodelivery devices, certainly carried a more negative connotation. But now that iPRIME has kind of moved up to one of the prime positions in the pipeline. I guess how is your view changing around quote-unquote the tissue destructive procedure space separate from viscodelivery and what you may or may not contemplate for the treatment of glaucoma with those types of devices?

Hey, Ryan. It’s Chris. I believe there's an important difference to note. When we discuss viscodelivery or dilation, we are not referring to the second aspect of their procedure, which is the goniotomy part. We consider the goniotomy procedure to be tissue destructive, whereas we do not view viscodilation as a tissue destructive procedure.

Ryan, this is Tom. I guess I would say that if anything, it confirms our position from the very beginning, which is high benefit to risk calculus, micro-invasive technologies. And so here we do see that there probably will be, by adding to the armamentarium of surgeons to be able to viscodilate the canal either alone as a standalone or in combination with our eye stents, we think that gives a very micro-invasive non-tissue destructive kind of purity of message that will best serve patients both from a safety and an efficacy profile. So, if anything, how we’re moving forward with the fact that we are using viscodilation, we think the appropriate way independent of the goniotomy tissue destructive procedure really confirms our philosophy from the start.

Okay. I appreciate that, Tom. And then just lastly, I think it was kind of asked before Joe. But understand the 90 to 110 is indicative of combo. The key question I think people are going to ask for 2022 is, what percentage of physicians do you guys anticipate or data covenants, if converts to standalone, whether it’s decoupled or not, just the interest level in physicians in doing standalone and how do you think about that conversion or ability to convert your existing customer base to that methodology?

No. I think they’re two completely different concepts when you think about them. It’s really not about that conversion of the combo cataract market into a standalone market. The combo cataract market will be what it will be as we move forward here. But part of your question around the standalone market, obviously, we’re enthusiastic about the long-term opportunity associated with standalone procedures led by iStent infinite. And as we’ve said in the past, when it comes to 2022 or a post-approval period, there’s going to be a stretch where we’re going around and securing the professional fee payments with the max one-by-one. And we’ve obviously seen the facility fee proposal from CMS around it, so as those things all come together and we’re able to train the surgeons on a standalone procedure. On the heels of that, we’re very encouraged by what it can mean for our business in the years to come.

Got it. I’ll leave it there. Thanks for taking the questions. Appreciate all the color.

Thanks, Ryan.

And your next question is from the line of Steve Lichtman with Oppenheimer.

Hi. Thanks for taking our questions. This is David on for Steve. Just on iDose, when can we expect to see clinical data for that, do you still expect to publish any three-month efficacy results around sometime this year?

Yeah. So, just to update then, Steve, to kind of validate what I’ve said before. So we are looking to probably disclose some additional data in the first half of next year and that would be in really two forms. One would be the recurring data from the Phase IIb study, which will be out to three years. And so we would expect to be able to disclose that to investors. We also have the opportunity to disclose the three-month data in the pivotal study. Now having said that, I will tell you that we’re currently in consultations with the FDA and we may take an opportunity to unmask the data for iDose at one year, which would give us some opportunity to be able to establish a longer-term claim. There’s no guarantee there. That’s something we’re consulting with the FDA on. And so if that does transpire, then clearly we would be offering data on the iDose pivotal trial at a later date.

Okay. That’s helpful. And then just on Epi-on, can you talk about to what degree this product will be market expanding given your positioning as more of an earlier intervention product?

Well, I can give you the color and just say if you look at Epi-on, I mean, we have a product that is designed to reduce procedure times, really improve patient comfort and really shorten recovery times for patients. And for those on the phone, it utilizes a proprietary novel drug formulation, stronger radiation protocol. And as part of this procedure, we deliver oxygen directly to the eye which has resulted in these profound results where we see halting the progression of keratoconus versus control and where we met the primary endpoint moving forward. So, I won’t be able to quantify for you, but I think it’s fairly intuitive that when this is introduced, this will become a very appealing component for patients to be able to undergo the procedure really with a drug that’s catalyzed on the surface of the eye that can arrest the progression of a sight-threatening disease. So I think it will be kinetic, I think it will be powerful over time and we’re very, very much looking forward to the introduction of Epi-on in 2023.

Okay. Great. Thank you.

And there are no further questions. I will now turn the call back over to Glaukos Corporation.

Okay. Thank you, Kavita. Thank you all for your time and attention today. We hope everyone is staying safe and thank you again for your continued interest in Glaukos. Good-bye.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.