Welcome to Glaukos Corporation's Fourth Quarter and Full Year 2021 Financial Results Conference Call. A copy of the company's press release issued after the market closed today is available at www.glaukos.com. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, 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, Vice President of Investor Relations and Corporate Affairs. Please go ahead.

Thank you and good afternoon. Joining me today are Glaukos Chairman, President and CEO, Tom Burns; CFO, Joe Gilliam; COO, Chris Calcaterra; and Vice President of Finance, Alex Thurman. 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 available on the Investor Relations section of our website for reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'll turn the call over to Glaukos Chairman, President and CEO, Tom Burns.

Okay. Thank you, Chris. Good afternoon and thank you all for joining us today. We hope everyone is staying safe and doing well. Our mission at Glaukos is to truly transform vision by pioneering novel dropless platforms that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight-threatening chronic eye diseases. Our mantra 'go first' embodies our commitment and determination to take chances, to push the limits of science and to disrupt the legacy treatment paradigms in glaucoma, corneal disorders and retinal diseases. Today, Glaukos reported fourth quarter net sales of $73.2 million, flat versus the year-ago quarter. For 2021, net sales rose 31% to $294 million from $225 million in 2020. Both the fourth quarter and full year 2021 results were up versus comparable 2019 periods on a pro forma basis. We're also providing a 2022 net sales guidance range of $265 million to $275 million. Joe and Alex will discuss our financial results and outlook in more detail later in the call. These results exceeded the top end of our guidance range and reflect solid execution across our glaucoma and corneal health franchises amidst both continued COVID-related volatility and headwinds globally and U.S. combination cataract glaucoma dynamics associated, in particular, with the 2022 CMS proposed rules regarding reimbursement rates that were not adjusted and finalized until November 2021. Within our U.S. glaucoma franchise, our commercial team continues to successfully train and educate our current and prospective surgeon customers on the favorable long-term risk-to-benefit profile of our iStent family of technologies and advanced MIGS towards the standard of care for glaucoma. We remain focused on maximizing access to our sight-saving technologies and overall care for glaucoma patients here in the United States. While we acknowledge that we may face headwinds in combination cataract glaucoma domestically based on the cuts and professional fee reimbursement that, despite improving in the CMS final rule, remain substantially below the more invasive alternatives, we have been preparing for this potential scenario and we are focused on executing our strategy. At the same time, we will remain prudent as it relates to forward guidance as we navigate the year ahead. Our international glaucoma franchise year-over-year growth during the fourth quarter was broad-based, but similar to the United States. We continue to experience intermittent COVID disruptions in many of our global markets that accelerated towards the end of the fourth quarter of 2021 and in early 2022. We remain in the early stages of our international penetration and we are continuing to invest in our expanding teams in new markets as we drive broader adoption of MIGS around the globe. One such new market is in India, where we have commenced initial commercial launch activities for iStent inject. Corneal Health growth during the fourth quarter was driven by record U.S. Photrexa sales of $13.5 million and continued healthy momentum in new U.S. account starts. Moving forward, our focus remains on executing our commercial and market development strategies and building upon the strong momentum we are experiencing within this emerging growth franchise for Glaukos. It is clear that the pandemic and subsequent global recovery continues to pressure labor markets, the global supply chain and, at times, commerce in general. We and our customers are not immune to these realities and risks as we move forward. We have been pleased with our ability to navigate the supply chain challenges associated with our commercial products thus far. But we continue to experience longer lead times, higher costs, and intermittent disruptions with third-party partners and suppliers associated with our manufacturing operations and R&D pipeline broadly. Further, the impact of the Omicron variant as we entered into 2022 is worth noting. Its impact has varied by geography with more strict government-driven lockdowns in markets like Australia versus the U.S. where hospitals have at times had to restrict elective procedures, and all sites have dealt with the impact of increased numbers of staff members testing positive given how pervasive this wave of COVID has been globally. Overall, I am proud of our performance this past year, and I'd like to recognize the continued dedication and resiliency of our teams around the globe who remain steadfastly committed to their work in the face of continued COVID disruptions and other unforeseen external circumstances. We are optimistic as things move forward here in 2022. Our ability to execute our plans illustrates not only our effective ongoing response to the current market environment but also reflects the progress we continue to make towards our broader strategic vision. Consider our key 2021 accomplishments. One, we successfully executed in our current core franchises by driving new adoption and deeper penetration globally for our transformative MIGS solutions, realizing considerable improvement in the CMS 2022 final rule for the new Category 1 combo cataract mix codes versus the proposed rule and delivering a favorable IP settlement outcome. Two, we advanced our near-term pipeline, bringing a number of promising investigational therapies closer to becoming commercial realities with favorable data announcements for iDose TR, iStent infinite and Epi-On. In addition, we completed patient enrollment and randomization in our ongoing Phase III clinical program for iDose TR and advanced several other important products, including iPrime and the PreserFlo MicroShunt. Three, we progressed our earlier-stage pipeline programs with the newly established licensing agreements with Attillaps, encouraging R&D progress on preclinical programs such as iDose TREX and iDose Rock, and, most recently, the commencement of two Phase II clinical trials in dry eye disease and presbyopia. And four, we grew our global teams and infrastructure, including the implementation of a global systems upgrade, and we completed our Avedro integration ahead of schedule despite the pandemic. We believe the strong financial profile and capital position we built has allowed us to remain on offense when it comes to successfully investing for our future, leaving us well-positioned for the next phase of our pioneering journey as we target several clinical, regulatory and commercial milestones this year and the years ahead. As I look forward to 2022, we hope to, one, evolve our combo cataract mix franchise through new product offerings while entering into the standalone glaucoma market and expand our international glaucoma and corneal health franchises. Two, deliver our near-term pipeline with the recent FDA clearance of iPrime, targeted FDA clearance of iStent infinite in the first half of this year, and targeted NDA submissions for iDose TR and Epi-On by the end of this year. Three, to advance our early-stage pharma platforms, including for the two Phase II iLution trials in dry eye and presbyopia that commenced last month in several planned IND and IDE applications for our next-generation therapies. And finally, to continue to grow our global organization and infrastructure to support future growth. While we execute commercially, we continue to self-fund and successfully advance our robust pipeline of novel, promising platform technologies that we believe have the ability to significantly expand our addressable markets and fundamentally transform our company over time. Our novel platforms are designed to disrupt conventional treatment paradigms, advance the existing standard of care, and enrich the lives and treatment alternatives for patients worldwide suffering from sight-threatening chronic eye diseases. These platforms embody ambitious, big ideas aimed at addressing large and chronically underserved eye diseases including glaucoma, corneal disorders, and retinal diseases. One such big idea that has underlined each of our platforms to date is the disruption of conventional topical eye drop therapies through dropless alternatives. It is worth reminding investors that topical therapies are frequently the mainstay of ophthalmic treatment. They are often effective for many patients when taken properly and thus will always have an important role. However, a primary issue the industry has been grappling with for decades is patient nonadherence. This problem is ubiquitous, rampant, well understood and well documented. And even when patients may be compliant, they can be subject to a host of local side effects such as hyperemia, hypochromia, periorbital fat atrophy and corneal and conjunctival changes as well as preservative toxicities which can exacerbate underlying ocular surface diseases. With our novel dropless platforms, we are taking differentiated approaches to address these well-known issues in order to improve patient outcomes. Our key five technology platforms designed to disrupt traditional treatment paradigms and generate cascades of future innovation are as follows: number one, iStent microscale surgical devices; two, the iDose Sustained Release Pharmaceuticals; three, the iLink bioactivated pharmaceuticals; four, iLution transdermal pharmaceuticals; and five, retinal biorotable sustained release pharmaceuticals. Let's take some time to dive into each of these platforms, beginning with our foundational iStent microsurgical device platform which primarily involves the insertion of a microscale device designed to reduce intraocular pressure by restoring the natural outflow pathways for patients suffering from glaucoma. We believe our iStent portfolio is the industry's most comprehensive offering of minimally invasive, tissue-sparing glaucoma solutions, supporting our goal to provide a full range of options to fit surgeons' individual glaucoma treatment algorithms that offer the best short- and long-term benefit to risk calculus at every stage of disease progression, from ocular hypertension through refractory disease and in both combo cataract and stand-alone procedures. We are proud to be the corporate pioneer and global market leader in MIGS with our family of iStent technology supported by more than 200 peer-reviewed publications, 20-plus years of clinical and commercial experience and nearly one million iStent devices implanted worldwide since our inception. Today, within the U.S. market, our offering of iStent and iStent inject are FDA approved for the treatment of mild to moderate primary open-angle glaucoma in combination with cataract surgery. After years of investment in strategic planning, we are excited to be on the cusp of expanding iStent's market availability into the standalone glaucoma population with targeted FDA clearance of iStent infinite in the first half of this year. As a reminder, iStent infinite's strong pivotal data results showed profound efficacy and safety outcomes for patients with open-angle glaucoma who have failed prior surgical therapy. These outcomes also reinforce our confidence that this technology may also effectively serve as an earlier intervention for the treatment of glaucoma. We were delighted to recently announce FDA clearance for iPrime, a highly complementary new viscodelivery device designed to be a truly minimally invasive system to further support the needs of physicians and patients. We are planning for a controlled commercial launch of iPrime in the second quarter. Regarding the PreserFlo MicroShunt, the FDA has gathered and is evaluating the additional input provided by select glaucoma surgeons to ensure a complete evaluation of the clinical data submitted in the PMA. In the meantime, we have successfully commenced initial commercial launch activities for PreserFlo in Canada and are preparing for a controlled commercial launch in Australia. Moving on to our iDose sustained release pharmaceutical platform, which consists of a targeted minimally-invasive injectable implant designed to deliver therapeutic levels of medication from within the eye for extended periods of time. iDose TR, which is comprised of travoprost, a well-known prostaglandin analog, is our first investigational candidate we're advancing leveraging our iDose platform technology. We recently announced a 36-month analysis of our Phase IIb trial that showed compelling results with roughly 70% of iDose subjects still well controlled with the same or fewer IOP-lowering topical medications at 36 months versus screening, compared to only 46% of subjects in the timolol control arm. Further, in this responder group, average IOP reductions from baseline observed at 36 months were substantial, approximately 8.3 millimeters of mercury and 8.5 millimeters of mercury in the fast and slow release iDose TR arms, respectively. Importantly, a single iDose implant is being compared to a timolol control arm that received twice daily drops or 2,190 eyedrops per eye per protocol over the 36-month evaluation period. As a reminder, iDose TR is implanted into the trabecular meshwork to avoid migration through a very fast out procedure designed so the surgeon can safely exchange the iDose TR with a new implant when the original therapy has fully depleted its pharmaceutical payload. The most recent Phase II data readout demonstrated a favorable safety profile with no clinically significant corneal endothelial cell loss, no serious corneal adverse events, and no adverse events of conjunctival hyperemia reported to date in either iDose or iLution arm. These latest Phase II results further underscore the potential of iDose TR to safely provide multiple years of sustained dropless therapy and 24/7 compliance to tackle the significant problem of patient nonadherence and chronic side effects associated with topical glaucoma medication regimens. These powerful data reaffirm our excitement about the potential commercial prospects of iDose TR and mark another critical step forward in the advancement of this potentially game-changing innovation. We completed patient enrollment in our Phase III clinical trials for iDose TR in June 2021, randomizing 1,150 subjects with open-angle glaucoma or ocular hypertension. The 12-month iDose TR Phase III trial results are expected to support Glaukos' targeted NDA submission by the end of this year and targeted FDA approval by the end of 2023. Given our development success to date with iDose TR, we continue to invest resources to expand our pharmaceutical development capabilities and to develop future iDose solutions. These investments include a next-generation iDose extended-release implant, also known as iDose TREX, which is in a similar size and form factor to the original iDose TR but is designed to provide nearly twice the drug capacity to extend efficacy durations even longer and additional drug classes such as ROCK inhibitors where we have seen encouraging rapid model data and are establishing prototype implants for lead candidates. Next is our iLink bioactivated pharmaceutical platform, which consists of novel single-use drug formulations that are bioactivated by our proprietary systems through the delivery of ultraviolet light to the cornea to induce a biochemical reaction called corneal cross-linking that is designed to strengthen, stabilize, and reshape the cornea. Our first-generation iLink therapy known as iLink Epi-Off uses a novel drug formulation called Photrexa for the treatment of keratoconus, a sight-threatening degenerative disease in which the cornea progressively thins and weakens, leading to vision loss. Even though keratoconus is a serious sight-threatening disease and a leading cause of full-thickness corneal transplants in the U.S., we believe it remains vastly undertreated primarily due to underdiagnosis and the historical lack of an effective solution. Today, approximately 20% of keratoconus patients ultimately require a corneal transplant, a costly and invasive procedure with a high failure rate. In fact, literature suggests 72% of corneal grafts fail within 20 years and 98% fail within 30 years. Sadly, as the disease onset is often diagnosed in teenage years, keratoconus patients may require multiple transplants over their lifetime. In order to maximize the availability of this important Photrexa therapy for patients, we have made substantial investments and executed upon a number of strategies designed to expand our commercial organization, lower the barriers for adoption by practices, increase awareness of keratoconus across the optometric and ophthalmic community, streamline their referral patterns, and train cornea health professionals on our iLink procedure. Looking ahead, we are advancing our next-generation iLink therapy known as Epi-On that utilizes the proprietary novel drug formulation called stronger UVA irradiation protocol and the ability to deliver increased levels of supplemental oxygen. The previously announced positive Phase III results for Epi-On underscore our view that this therapy may provide the ophthalmic therapy in keratoconus patients with the first truly non-invasive bioactivated drug treatment alternative designed to reduce procedure times, improve patient comfort, and shorten ultimate recovery times. Epi-On's positive Phase III results are expected to support the U.S. NDA submission in 2022, and we are targeting FDA approval for Epi-On in 2023. As we do with all of our platforms, we continue to drive subsequent generations of future innovation and we are targeting the commencement of clinical trials for a third-generation iLink therapy later this year. Moving on to our iLution transdermal pharmaceutical platform, which consists of patented, cream-based drug formulations that are applied to the surface of the eyelid for dropless transdermal delivery of pharmaceutically active compounds for the treatment of eye disorders. We believe iLution's differentiated delivery approach on the eyelid may offer significant advantages over traditional topical therapy, including the potential for easier administration, faster onset of action, and fewer side effects such as reduced preservative induced corneal and conjunctival sequela, all of which can help contribute to better compliance and improved patient outcomes. Last month, we announced commencement of patient enrollment in two Phase II clinical trials, including GLK-301 for the treatment of signs and symptoms of dry eye disease and GLK-302 for the treatment of presbyopia. These are the first two investigational drug candidates utilizing our iLution platform, both of which utilize pilocarpine as its active pharmaceutical ingredient. The commencement of these Phase II trials represents a significant milestone in the development of our iLution platform and for our company. And we are excited to have the opportunity to explore what these drug candidates can do for these respective large and underserved patient populations. We're also progressing preclinical programs to research and develop investigational pharmaceutical compounds that target the eradication of Demodex mites, leveraging our iLution platform. Demodex mites are the root cause of Demodex blepharitis and are often associated with meibomian gland dysfunction, a leading cause of dry eye disease along with several other related ophthalmic diseases. Finally, I will also briefly touch on our biorotable, sustained-release pharmaceutical platform known as Retina XR designed to treat retinal diseases. The largest market in ophthalmology today is estimated to generate $13 billion in worldwide revenue and is expected to grow nearly 10% annually through the year 2023. Our retinal R&D teams are actively engaged to develop multiple microinvasive biorotable drug delivery programs designed to treat age-related macular degeneration, diabetic macular edema, and other retinal diseases. Our two primary sustained-release development projects in our retina platform include a triamcinolone acetonide steroid targeting DME and a small molecule multikinase inhibitor targeting AMD, DME, and retinal vein occlusion. The goal of these preclinical programs is to provide retinal specialists and their patients with novel sustained pharmaceutical treatment options that offer a meaningfully longer duration of effect than the current standard of care dominated by short-lasting biological injections that often impose tremendous treatment burdens on patients due to the high frequency of the required treatments. We are aiming to advance at least one of these programs into the clinic over the next 12 months. As you can see, we have a lot to be excited about when it comes to the significant potential value that we believe our pipeline programs may create. As a testament to this, we are continuing to successfully invest in and advance our fulsome pipeline of core novel platforms, supported by over $300 million of self-funded investment into our R&D program since 2018 alone. We anticipate and are planning for a robust cadence of new platform and product introductions over the coming years that have the potential to fundamentally transform Glaukos over time. Our plan is to utilize our established best-in-class commercial organization and global direct sales infrastructure to drive future scale and sales rep productivity in what we view as a very leverageable global ophthalmic sales channel. So in conclusion, we believe Glaukos is different. We are change agents. We are pursuing game-changing innovation in glaucoma, corneal health, and retinal diseases. Our platforms are disruptive, our ideas are big and our mission is ambitious. I'm confident we have the right people, the right strategy, infrastructure, pipeline, and balance sheet to execute our plans and to deliver on our future aspirations. So with that, I'll turn the call over to Alex Thurman to discuss our fourth quarter and full-year 2021 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 in the Investor Relations section of our website. Glaukos' global consolidated net sales for the fourth quarter of 2021 were $73.2 million, which was flat versus the comparable prior year quarter and up slightly compared to the fourth quarter of 2019 pro forma for the acquisition of Avedro. Our fourth quarter performance reflects continued pandemic-related volatility as we experienced global headwinds due to COVID-19 that strengthened at the tail end of the quarter and accelerated in the early part of 2022. Now, turning to our U.S. glaucoma franchise specifically. Our fourth quarter U.S. glaucoma sales were $41.2 million, down year-over-year, which we believe reflects a combination of pandemic-related dynamics and the impact of the 2022 CMS combination cataract reimbursement on customer ordering patterns and competitive trialing activities which occurred in advance of the final rates being implemented on January 1, 2022. Internationally, our glaucoma franchise delivered fourth quarter sales of $15.9 million, representing year-over-year growth of 8% and 31% growth compared to the fourth quarter of 2019, these pandemic headwinds that reemerged in a few key European and Asia Pacific markets in particular. In corneal health, fourth quarter net sales were $16.2 million, representing year-over-year growth of 9% and 30% growth compared to 2019 pro forma for the Avedro acquisition. The fourth quarter performance was driven by U.S. Photrexa record sales of $13.5 million on year-over-year sales growth of 8% or 44% versus pro forma 2019, along with the continued trend of healthy new U.S. Photrexa account starts, partially offset again by COVID-related headwinds. Shifting gears towards the remainder of our P&L, our non-GAAP gross margin in the fourth quarter was approximately 85% versus approximately 83% in the same quarter of 2020. It is worth noting that our non-GAAP adjustments to COGS include substantial amounts related to acquisition accreting expenses were $72.3 million in the fourth quarter of 2021, a 3% sequential increase versus the third quarter 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 fourth quarter were $46.7 million, up 13% sequentially compared to the third quarter, reflecting increased commercial spending and administrative costs. Our non-GAAP R&D expenses in the fourth quarter were $25.5 million, down sequentially compared to the third quarter which was primarily due to lower pilot operations spending associated with our Epi-On and iDose programs. We finished the fourth quarter with a non-GAAP operating loss of $10.3 million and non-GAAP net loss of $14.3 million or $0.31 per diluted share. Our GAAP net loss was $21.9 million or $0.47 per diluted share for the fourth quarter of 2021. We invested in approximately $9.3 million of capital expenditures in the fourth quarter which, as expected, remains elevated versus historical levels as we have advanced through the construction phase of the enhancement and expansion of our facilities in Southern California and Boston to create a best-in-class infrastructure to meet our growing innovation and operating needs, a trend that we expect to continue in 2022 before moderating to levels more consistent with historical norms. As of December 31, 2021, we had cash, cash equivalents, short-term investments, and restricted cash of approximately $423 million compared to $414 million at the end of 2020 and $438 million at the end of the third quarter 2021. For the full year 2021, global consolidated net sales were $294 million, an increase of 31% versus 2020. Non-GAAP gross margin was approximately 85% and non-GAAP operating expenses for the year were $271.7 million.

Alright. Thanks, Alex. Looking forward, first as it relates to COVID-19, we were not immune from the incremental global headwinds that emerged during the fourth quarter and strengthened into January. The situation remains fluid, and we could caution conservatism as you consider any potential impact this may have on elective procedure markets in the first quarter and potentially more broadly in 2022. Regarding CMS reimbursement for our combination cataract products here in the U.S., while we were pleased with much of what improved in the final rule, the physician fee in the final rule remains at a significant disadvantage to several more invasive alternatives. And we expect this to have an ongoing impact on iStent family combo cataract volumes in 2022. We also expect to face heightened competition in combo cataract mix globally in 2022. But as Tom mentioned earlier, we have been preparing for these dynamics for some time now and look forward to potential early revenue contribution from iPrime, iStent infinite and other new products in 2022. As we put this all together in the context of our expectations going forward, our full year net sales guidance of $265 million to $275 million takes these headwinds and potential new products into account. And we would remind investors to also factor in our typical underlying seasonality patterns and COVID-related trends and risks that are outside of our control. I also want to let investors know the change in how we plan to handle our quarterly earnings disclosures and calls, starting with the first quarter of 2022. You will notice a new section on our Investor Relations website under the title Financial and Filings Quarterly Results, titled Quarterly Summary. We have posted our first report there this afternoon for the fourth quarter and fiscal year 2021. Our objective is to provide investors with a quick and easily accessible reference document that details the key facts associated with the quarter, the state of our business and any forward statements or guidance we may make. Going forward, we will provide this document after the market close alongside our earnings release, make very brief prepared remarks, if any, during our earnings call, and then transition quickly to answering analyst questions. It is our hope that this change will make our quarterly process more efficient and impactful for investors and the analyst community going forward.

Alright. Thanks, Joe. So before we close, I'd like to highlight several executive leadership changes we announced earlier this month. As a reminder, the following changes will become effective on April 1. Joe Gilliam will assume the new role of President and Chief Operating Officer. Chris Calcaterra will assume the new role of Executive Vice President, Global Commercial Operations. Alex Thurman, our current Vice President of Finance, will succeed Joe to become our new CFO. And Tomas Navratil, our current Senior Vice President of R&D, will assume the new role of Chief Development Officer. On behalf of the entire Glaukos organization, I'm delighted to congratulate Joe, Alex, and Tomas on these well-deserved promotions and pledge our full support to them in their new roles. These are outstanding and proven leaders and I am confident they will successfully drive our organization forward in the next phase of our pioneering journey. At the same time, I want to extend my sincere congratulations to my friend and colleague, Chris Calcaterra, on his requested transition into his new role. Chris has been instrumental in the growth and development of Glaukos since joining our management team nearly 14 years ago. I'm confident he will continue to play an integral role in our success in his new position that will provide Chris the opportunity to step back from day-to-day administrative responsibilities and spend more time with his family while continuing to focus on our global commercial operations, his deep customer relationships built over the past 35 years, and ongoing strategic concepts to our executive and commercial leadership teams. So in closing, I'd like to reiterate our conviction in our long-term vision. We are continuing to invest in Glaukos, to scale our team, and to advance our mission to transform vision with disruptive, dropless, game-changing platform innovations. We are truly excited about our prospects, we're confident in our ability to execute our plans and we believe we are entering into a transformative period for our company in the years to come. So with that, I'll open the call to questions. Operator?

Your first question comes from Andrew Brackmann from William Blair. Please go ahead.

Hi guys, good afternoon and thanks for taking the question. Chris, I just wanted to say congrats to you and your family on this next step; really impressive what you've been able to build here. And hopefully, this means more football games in your future. But maybe just to start here, guys. Certainly, I appreciate the commentary on the outlook and guidance for the year. But maybe just to get a bit more granular there. Can you just sort of walk through in more detail some of the assumptions around key variables in that guidance? And maybe just elaborate a bit on some of those assumptions you're putting into play here.

Sure. Andrew, it's Joe. I'll start off, and if the team wants to add something, they can jump in. For our forward guidance, we are talking about $265 million to $275 million, which considers several key variables that we can discuss in more detail if needed. The first is the change in the reimbursement landscape, particularly regarding professional fees and how they compare to more invasive competitive procedures. This will impact the volumes related to our U.S. glaucoma combination cataract MIGS business. The second factor is the competitive dynamics surrounding the acquisition of the Hydrus device, both domestically and internationally, where efforts will focus on expanding access to that product. In corneal health, we need to continue addressing the fundamental aspects of that business. We are pleased with our progress since acquiring Avedro, but there is still much work ahead, including transitioning from Epi-Off to Epi-On for some of our customers. Additionally, COVID remains a factor—Omicron peaked in January and has since begun to decline. This continues to pose an unknown risk for everyone, including us. Lastly, I want to highlight the typical seasonality we mentioned. In a normal year, our sales distribution is around 22% in the first quarter, followed by 25%, 25%, and 28% in the fourth quarter. These are the key variables we are considering as we reflect on the model.

I'm sure others might have questions on that. But maybe this is my second question here. This one might be more for Tom. As you outlined clearly today, 2022 is a significant year for the pipeline with several key milestones anticipated. Can you discuss your strategy for preparing the organization for this broader evolution you've mentioned? Additionally, moving forward, what kinds of infrastructure do you think you will need to effectively compete across these different end markets?

Yes. Happy to answer it, Andrew. So we obviously have contemplated these changes for some time. We've expanded our R&D capabilities vastly by drawing a number of top executives from really key industry leaders like Allergan into the mix. I think that's given us a strong basis and depth to be able to pursue and to make this change, as we talked about earlier, from a more parochial medical device company into a hybrid medical device and pharmaceutical companies. So that's been a bit of a massive focus as we build the business over time. And we continue to look at infrastructure changes. As you know, we've gone from 2017 where we were literally in two markets, the U.S. and Canada and we now have expanded into 17 international markets. And so we've had to put the back office support behind all of those different entities. And we have obviously already gone through an ERP transition moving onto an Oracle platform to give us the ability to be able to provide back office support to these different entities. We have expanded commercially. We brought Avedro on to the business. That approach has been seamless. And I think as they have been well integrated into the overall business. So, our approach now is to say how do we take the wealth of experience and talent we bring in and how do we effectively place them over the numerable number of programs that we have. And that's going to be both a challenge and an opportunity for us moving forward. But if you look at our track record, you look at what we've done, I can assure you, I'm confident we're going to be able to move forward with these programs. You'll notice that I call 2022 the year of the catalyst. We have a number of catalysts, both in terms of regulatory and commercial milestones which will be similar for the business. We're actively pursuing those; I think we have the pieces in place. And I'm confident of what we have and what we're building going forward.

Great. Thanks, guys.

Good afternoon, everyone. Congratulations on finishing the year strongly. Chris, best wishes on your next step in ophthalmology. Joe and Alex, congratulations to you as well. I look forward to working with you both. I have two quick questions. As we consider the upcoming year, I'd like to follow up on Andrew's inquiry regarding the OpEx line. This pipeline is the most robust it has ever been, and you've clearly made investments ahead of this, indicating growth. However, could you help us understand the historical OpEx benchmark you previously mentioned? Given the current pipeline spending, should we expect 2022 to be somewhat elevated compared to that benchmark, or will it remain consistent due to offsets from COVID-related restrictions? I have another question after that.

Sure. Thanks, Chris. It's Joe. So we ended the year in the fourth quarter with a little north of $72 million in, I'll call it, non-GAAP OpEx. If you annualize that, that put you at a $290 million number. If you just think about the inflation dynamics a second that all of us are experiencing, that gets you certainly north of $300 million of OpEx spending. And then, you factor in some reasonable expansion from there. Obviously, the SG&A line will be more leveraged dependent upon what is going on in the top line of the business. But on the R&D side, as you said, we would expect to continue our march forward in accelerating that investment there as we continue to mature the pipeline and deliver on the goals that Tom has talked about.

Understood. As a quick follow-up, we would like to focus on the pipeline while trying to establish a clear model as we begin. The guidance appears to be favorable. However, when considering the various challenges you've mentioned in the past, we could anticipate FDA approvals that might expedite entry into new markets. Can you help us differentiate between core and new products in terms of their contributions, or perhaps provide a broader view on corneal health versus glaucoma as we compare the first half to the second half?

Yes, I'm happy to take a stab at that, Chris. I guess I'd characterize the guidance we gave, I think, hopefully, as prudent in the face of everything that we're looking at here at both some of the considerations as well as some of the potential positives. I think there's a couple of different ways we can take this. The first is when you consider from a macro perspective, Omicron, COVID, and normal seasonality, and then you overlay what we hope is a successful new product cadence here, clearly, that lines up to a second half that probably is more balanced or weighted towards the second half than the first half. That's generally true in our business anyway but I think the additional dynamics around COVID and the new products probably amplify that a bit. When it comes to the individual businesses, I gave some of that. Obviously, what we've tried to factor in from a U.S. reimbursement perspective in the combo cataract franchise international glaucoma. I think corneal health for us, we hope, is more blocking and tackling. I want to be cautious and conservative around how far you take that in light of COVID and just our continued building this business in a post-COVID world. But we feel good about where that franchise is at and where it's headed. I think beyond that, I'll probably stop a little bit short because I think we're evolving as a company. And I don't think it makes much sense for us strategically to get too far into the weeds on the individual components when really our goal is to drive the overall top line of the business.

Thank you.

Hi, this is Charles on for Larry. A quick question about the reimbursement headwinds. So it looks like those headwinds from the destocking and competitive trialing in Q4, the U.S. MIGS might have looked a little bit better than expected. Is that fair to say from your guys perspective? And how has that looked so far? You've had almost two months of the lower reimbursement level. I don't know if you can give any qualitative detail on how that's shaking out versus your expectations so far?

Yes, sure. So I think, Charles, first, as it relates to Q4, as we were looking into the end of the year, there were considerations around exactly how the extent of that destocking and what would occur. All the dynamics around the shift in reimbursement provided a fair amount of uncertainty. And so yes, I think it's fair to say that overall in the quarter, things performed better than we expected. I think when you do your models, you'll see that a significant part of the outperformance in the fourth quarter came from our U.S. glaucoma franchise. As you think about the beginning of this year, I think it's a little early, right? I mean I guess what I would say is there's a bit of cloudiness given the dynamics around Omicron in January in particular. And it's difficult to sort of separate that from whatever elements we're seeing as it relates to U.S. reimbursement and the volume impact there. But I have no doubt that we are seeing some of that, and that's expected. And now it's up to us to continue to try to mitigate that as we move forward here.

Hey guys, this is Tom Stefan on for John. Just want to start off on guidance. First on U.S. glaucoma and just going to take a stab here. But what you're willing to share, is there any color around price and market share in that business that we should be thinking about? I understand if you don't want to get into too many details. So qualitative commentary would be very helpful as well. And then I have a follow-up.

Sure. Tom, I'll begin by discussing the U.S. glaucoma business. We were pleased with one aspect of the final rule, particularly the final facility fee. As we mentioned in the previous call, this adjusted us back to roughly where reimbursement levels were in 2020. Moving into 2022, we anticipate relative stability in the pricing environment for the U.S. combo cataract mix. Regarding other factors like volumes and market share, when we examine the model, we expect that a combination of elements, especially the professional fee's impact on U.S. volumes, will likely lead to a decline in procedures. We'll monitor how sustainable this trend is as the year progresses. However, the underlying model and the guidance we provided are based on this expectation.

Got it. That's helpful. And then just to pivot to iPrime. You talked about a controlled launch in 2Q '22. I think the label or the indication of use seems to check all the boxes. Are there any hurdles in areas like reimbursement, billing, etcetera? Or is it pretty much all systems go? And then, can you help us at a high level with how we should think about this product in the context of guidance and when we can maybe expect the full launch?

Tom, this is Chris. And we were excited about getting approval for iPrime as early as we did, and we are planning for a Q2 launch. In terms of how that will be used, that will be up to the physician in terms of how he or she wants to utilize it, when he or she wants to utilize it. And that will determine how it will be reimbursed.

And then I think as it relates to the numbers, I mean, obviously, as I mentioned, it was included in the overall forecasting we did to come to the $265 million to $275 million guidance. It's not a significant contribution, obviously, given what we've described in terms of the initial launch activities. And as we progress through the year, we'll keep you updated on that.

Thank you for your questions. I want to revisit some aspects of the U.S. glaucoma landscape, which are currently quite significant. Joe, you touched on the reimbursement dynamics for combination cataract procedures. How well do you think this is understood within the community? Chris, do you have any insights on the current reimbursement rates for combination cataract surgery involving stents, as well as for stents combined with visco dilation? I'm asking because some of our findings indicate that physicians are considering using both stents and iPrime together to potentially mitigate some of the reimbursement challenges.

Brian, I would say that it's very pervasive. I think physicians as well as administrators have a very good understanding of what the new dynamics are from a reimbursement standpoint, both on the facility and on the professional side of things. And in terms of combination therapy, I think that most are looking at that more from the focus of what's best for the patient. But most are also aware of the financial implications of combining therapies.

Got it. Okay. I also want to ask about your contribution from iPrime. There’s potential contribution from Infinite in guidance this year. What is assumed for PreserFlo, and when do you think it might start contributing, in a worst-case scenario?

Yes, that's a fair question, Ryan. We haven't included PreserFlo revenues in our guidance. We want to see FDA approval before considering its inclusion in the U.S. guidance. As Tom mentioned, we are currently commercial in Canada and launching in Australia, so there are some PreserFlo revenues from the international side of the franchise. We'll keep you updated as we make progress with the FDA and gain more clarity on timelines and their potential impact on the business.

Okay. Let me squeeze one more in and then I'll hop back in queue. Anything assumed for royalties from Hydrus in terms of revenue in that guidance?

That is factored into the guidance.

Hi guys, this is Drew for Matt. Thanks for taking the questions and congrats to everyone on the new roles. I wanted to start off on infinite here. You sound pretty confident in a clearance in the near term. Any updates on conversations with the agency focus of label still in the advanced refractory population? And I know you're still doing some work to improve the facility reimbursement side of things. But can you just remind us what needs to be done to get that physician rate set once you have the clearance?

Yes. Drew, I'll be happy to take this. So as you know, we've already filed for approval for iStent infinite. We've negotiated with the FDA. And it's likely our label will be certainly for late-stage patients and those patients on a stand-alone basis with glaucoma that have failed ophthalmic surgeries. And so a sizable population, as we talked about before, about 125,000 patients annually have either trabeculectomies or aqueous shunts. And so that appears to be what we'll have going forward. And then just to remind investors, because of the superlative nature of the results of iStent infinite, we have moved that into discussions with the FDA to be able to advance a new IDE for earlier-stage patients. And this iStent infinite will take the place of the iStent SA that we've talked about previously. And so we've committed and we are executing on our plan from the beginning which was to begin to approach the FDA following the conclusion of the iDose recruitment of the trials. So we're excited. Our position is if iStent infinite is working so well even in these late-stage patients, we're confident that it's going to be able to deliver in earlier-stage glaucoma and that will be the position going forward. In terms of iStent infinite on the reimbursement side, as you recall, this happens to be a power alley for us. We'll approach MAX when we receive FDA approval. And if we look at historical context and predicate as any guide, it took us probably about nine months before we were able to fully get kind of a universal approach to the MAX across the country. And so in your expectations, you should be looking for that. And again, this won't all come at one time. We'll be approaching MAX. And typically, they fall really singularly over time until we actually then invest the time to have all the MAX turn and have a fair price set for the professional fee for iStent infinite. Now, on the facility side, as you recall, the CMS has given us an underwhelming facility fee payment. So much like we approach the Draconian cuts like we did with the professional fee proposed changes this past year and we're able to gain considerable ground, we'll be meeting with the FDA again over the course of 2022 to be able to persuade them to be able to place this APC in its rightful place, which really it has been over the last 10 years. I believe the APC was 5492. That's our intent; that's our target. If we're successful, that will be effective January 1 in 2023. And so we'll keep you posted and apprised as we go forward, there'll be the normal commentary period. And as you know, the CMS will weigh in, in the fourth quarter of this year, whether or not we're successful in moving that. If we're unsuccessful, then we always have the opportunity of this next campaign in 2023 to go at it again. So we intend to be tenacious and resilient and to make the appropriate changes there.

Thank you for the information. You briefly touched on it earlier in the call, but I'd like to hear your thoughts on the Alcon combination. It seems like you're factoring in some impact in your guidance. Could you share what you're observing so far, about a month in, and how the Glaukos fits into that guidance?

Drew, this is Chris. And it's really too early to say that we've seen much of an impact, if any. But Alcon, we've competed with them before. We have the highest regard and respect for them. We were expecting this acquisition. And we're prepared for them and we will be prepared, and we'll see how it goes. But we have dialed that into our guidance in terms of what Joe has presented in terms of our year-long guidance.

Good evening and thank you for taking the questions. I have just a couple. First question has to do with gross margins in 2022. I would assume they're being pressured versus the 85% you just did in the fourth quarter. But is there any way to quantify that for the full year?

Yes. Joanne, I think we've, for a little while now, been kind of pointing you all to an 83% to 84% gross margin. And I think it's been encouraging, obviously, the trend line that we've seen in the last couple of quarters. But I'd still probably point in that direction as you think about 2022. I think there's a number of variables in play. You're describing competitive dynamics but I think it's probably more about mix. As international becomes a more significant percentage of our business, obviously, there's a little bit of margin impact there. And we'll see how much that's offset by the receipt of royalty revenues from Alcon.

Is there a way to quantify two different things? The first is what may have happened regarding destocking in the quarter. The second is how much revenue you project for products like iPrime or iStent Infinite?

Yes. I think first, it is pretty difficult. I think a lot of those destocking dynamics were happening as you kind of exited the third quarter and going into the fourth. Obviously, some accounts chose to reorder in normal patterns towards the end of the year but not all as they were probably waiting to see how folks reacted to the new rules once they came into place. So it's hard to get any sort of quantification of that. And then as you think about going forward here, I think we've covered that pretty much at iLink already.

Hey everyone, many of my questions have already been answered, so I’ll just ask a quick one. Regarding your guidance range, you mentioned a typical level of seasonality considering various factors. However, when comparing to your competitors, it seems there’s some difference in their assumptions about COVID-19 dynamics, particularly for the latter part of the year. Some are predicting a flu-like impact this fall and winter, and others are even considering a possible new variant. Is that reflected in the range of your guidance, or is there a consistent level of COVID-19 impact included for the second half of the year?

Well, Allen, it's Joe. I think one thing that COVID-19 has taught us over these last two years is to not make any assumptions in terms of what the path forward will look like with any high degree of certainty. So what we've done is try to take into consideration specifically what we saw in January and coming into February from Omicron and what that would mean to the first quarter. We, like others, I think, have an assumption that things should improve here as we head out of the winter months and into the summer. But what lies beyond that in the fall and winter is very difficult to predict. So hopefully, we built in a little bit of conservatism to account for that. But I think relative to everything else, it's probably a bit of a rounding error.

Hey guys, this is David on for Steve. I just wanted to follow up on the gross margin question from earlier. When you talked about guiding towards that 83%, 84%-ish, does that contemplate any inflationary pressures in point for labor and/or material? And I just had a quick follow-up on the pipeline for the iDose TR Phase III trial, should we expect data readout this year?

Okay. I'll take the first one. Yes, I mean, the answer is yes. I mean, when we think about the 83% to 84%, we're trying to factor in all the variables that we know today, which includes what we expect our cost of goods sold to be in this certainly higher inflation environment.

And the question on iDose TR, as we said before, we are tracking to file our NDA by the end of the year. And it's our position that we'll seek to be able to present the data when it's available which we're hoping will be the tail end of this year or early next year.

Hey, thanks for taking the question. Just one for me on COVID. I guess you made comments on COVID impacting Q4 and impacting, I guess, the beginning of the first quarter. Is that patients' reluctance? Or is that more staffing-related issues? And then with those COVID headwinds, are you seeing any backlog? And then I guess, the last one would be if there is any backlog, when do you expect to recapture that?

Yes. Well, I'll start. If Chris or Tom want to add anything in, they certainly can. I think well, first, the COVID impact we saw was at the very end of December. I mean, obviously, it ties straight to when we started to see a lot more of the case increased post-Christmas and as we went into the new year. It clearly peaked in January. I think it's a combination of all of the above. I mean the reality is, in a stretch where we had as many patients testing positive as they were. You're going to have increased patient cancellations and disruption to the schedule. You're also going to have doctors, nurses, administrative staff, testing positive themselves. And usually when that happens, a center can be shut down for a day, a week or two weeks depending upon the extent of the outbreak. So, I think all of those things create disruption that puts those patients back into the funnel to be treated here in the coming months and quarters as things hopefully return a little closer to normal.

And there are no further questions at this time. I will turn the call back over to the company for closing remarks.

Okay. Thank you all for your time and for your attention today, and we certainly hope that everyone is staying safe. And I also want to thank you all for your continued interest in Glaukos Corporation. Goodbye.

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