GKOS 10-Q

GLAUKOS Corp (GKOS)

10-Q 2021-08-05 For: 2021-06-30

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Delaware	33-0945406
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

229 Avenida Fabricante San Clemente, California	92672
(Address of registrant’s principal executive offices)	(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		GKOS		New York Stock Exchange


		Page
PART I: FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II: OTHER INFORMATION		38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 6.	Exhibits	53

SIGNATURES		54


	June 30,		December 31,
	2021		2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	118,296	$	96,596
Short-term investments		300,265		307,772
Accounts receivable, net		37,569		36,059
Inventory, net		17,500		15,809
Prepaid expenses and other current assets		16,905		13,206
Total current assets		490,535		469,442
Restricted cash		9,416		9,566
Property and equipment, net		54,380		24,008
Operating lease right-of-use asset		19,551		20,009
Finance lease right-of-use asset		50,232		51,443
Intangible assets, net		345,237		357,693
Goodwill		66,134		66,134
Deposits and other assets		8,240		7,207
Total assets	$	1,043,725	$	1,005,502

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,957	$	4,371
Accrued liabilities		63,181		45,331
Convertible senior notes		279,339		-
Total current liabilities		349,477		49,702
Convertible senior notes		-		189,416
Operating lease liability		20,139		20,704
Finance lease liability		72,905		60,690
Deferred tax liability, net		8,298		10,512
Other liabilities		8,581		7,029
Total liabilities		459,400		338,053

Commitments and contingencies (Note 12)

Stockholders' equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding		-		-
Common stock, $0.001 par value; 150,000 shares authorized; 46,497 and 45,275 shares issued and 46,469 and 45,247 shares outstanding as of June 30, 2021 and December 31, 2020 respectively		46		45
Additional paid-in capital		933,328		976,590
Accumulated other comprehensive income		652		1,004
Accumulated deficit		(349,569)		(310,058)
Less treasury stock (28 shares as of June 30, 2021 and December 31, 2020)		(132)		(132)
Total stockholders' equity		584,325		667,449
Total liabilities and stockholders' equity	$	1,043,725	$	1,005,502


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	78,093	$	31,558	$	146,061	$	86,894
Cost of sales		17,759		21,668		34,392		54,197
Gross profit		60,334		9,890		111,669		32,697
Operating expenses:
Selling, general and administrative		45,300		38,116		87,221		88,662
Research and development		24,256		18,971		45,475		43,844
In-process research and development		5,000		-		5,000		-
Total operating expenses		74,556		57,087		137,696		132,506
Loss from operations		(14,222)		(47,197)		(26,027)		(99,809)
Non-operating expense:
Interest income		342		590		725		1,286
Interest expense		(3,306)		(1,872)		(6,535)		(2,753)
Other (expense) income, net		(88)		1,201		(1,627)		(510)
Total non-operating expense		(3,052)		(81)		(7,437)		(1,977)
Loss before taxes		(17,274)		(47,278)		(33,464)		(101,786)
Income tax provision (benefit)		208		(7,384)		487		(7,834)
Net loss	$	(17,482)	$	(39,894)	$	(33,951)	$	(93,952)
Basic and diluted net loss per share	$	(0.38)	$	(0.90)	$	(0.74)	$	(2.13)
Weighted average shares used to compute basic and diluted net loss per share		46,306		44,335		46,011		44,078


						Accumulated
				Additional		other
	Common stock			paid-in		comprehensive		Accumulated		Treasury stock			Total
	Shares	Amount		capital		income		deficit		Shares	Amount		equity
Balance at December 31, 2020	45,275	$	45	$	976,590	$	1,004	$	(310,058)	(28)	$	(132)	$	667,449
Effect of adoption of ASU 2020-06	—		—		(81,553)		—		(5,560)	—		—		(87,113)
Common stock issued under stock plans	741		1		17,034		—		—	—		—		17,035
Stock-based compensation	—		—		8,748		—		—	—		—		8,748
Other comprehensive income	—		—		—		124		—	—		—		124
Net loss	—		—		—		—		(16,469)	—		—		(16,469)
Balance at March 31, 2021	46,016	$	46	$	920,819	$	1,128	$	(332,087)	(28)	$	(132)	$	589,774
Common stock issued under stock plans	481		—		4,525		—		—	—		—		4,525
Stock-based compensation	—		—		7,984		—		—	—		—		7,984
Other comprehensive loss	—		—		—		(476)		—	—		—		(476)
Net loss	—		—		—		—		(17,482)	—		—		(17,482)
Balance at June 30, 2021	46,497	$	46	$	933,328	$	652	$	(349,569)	(28)	$	(132)	$	584,325


	Six Months Ended June 30,
	2021		2020
Operating Activities
Net loss	$	(33,951)	$	(93,952)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		2,313		2,188
Amortization of intangible assets		12,456		12,456
Amortization of lease right-of-use assets		2,287		2,577
Amortization of debt issuance costs		687		557
Deferred income tax benefit		(48)		(8,254)
Loss on disposal of fixed assets		-		15
Stock-based compensation		16,732		28,073
Change in fair value of cash settled stock options		-		(3,172)
Unrealized foreign currency losses		827		-
Amortization of premium (discount) on short-term investments		516		33
Other liabilities		1,551		2,324
Changes in operating assets and liabilities:
Accounts receivable, net		(1,679)		11,556
Inventory, net		(1,863)		21,396
Prepaid expenses and other current assets		(3,758)		(1,606)
Accounts payable and accrued liabilities		15,324		1,998
Other assets		175		(211)
Net cash provided by (used in) operating activities		11,569		(24,022)
Investing activities
Purchases of short-term investments		(97,233)		(60,883)
Proceeds from sales and maturities of short-term investments		103,692		45,011
Purchases of property and equipment		(28,542)		(3,509)
Proceeds from disposal of property and equipment		3		-
Investment in company-owned life insurance		(1,217)		(658)
Net cash used in investing activities		(23,297)		(20,039)
Financing activities
Proceeds from convertible senior notes		-		287,500
Payment of convertible senior notes transaction costs		-		(9,614)
Purchase of capped calls related to issuance of convertible senior notes		-		(35,679)
Proceeds from exercise of stock options		22,824		6,590
Proceeds from share purchases under Employee Stock Purchase Plan		1,549		1,278
Payment of employee taxes related to vested restricted stock units		(2,812)		(2,013)
Principal paid on finance lease		(453)		-
Proceeds from tenant improvement allowance		12,668		-
Net cash provided by financing activities		33,776		248,062
Effect of exchange rate changes on cash and cash equivalents		(498)		543
Net decrease in cash, cash equivalents and restricted cash		21,550		204,544
Cash, cash equivalents and restricted cash at beginning of period		106,162		71,756
Cash, cash equivalents and restricted cash at end of period	$	127,712	$	276,300
Supplemental disclosures of cash flow information
Taxes paid	$	220	$	294


	At June 30, 2021
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government bonds	less than 2	$	9,973	$	6	$	-	$	9,979
U.S. government agency bonds	less than 3		173,030		62		(54)		173,038
Bank certificates of deposit	less than 2		19,800		6		(3)		19,803
Corporate notes	less than 3		65,897		152		(35)		66,014
Asset-backed securities	less than 2		13,614		110		-		13,724
Municipal bonds	less than 3		17,725		15		(33)		17,707
Total		$	300,039	$	351	$	(125)	$	300,265

	At December 31, 2020
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		206,704		223		(3)		206,924
Bank certificates of deposit	less than 1		20,700		8		-		20,708
Commercial paper	less than 1		1,500		-		-		1,500
Corporate notes	less than 3		54,866		308		(1)		55,173
Asset-backed securities	less than 2		13,290		205		-		13,495
Municipal bonds	less than 3		9,954		21		(3)		9,972
Total		$	307,014	$	765	$	(7)	$	307,772


			At June 30, 2021
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	June 30,		identical assets		inputs		inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds ⁽ⁱ⁾	$	17,849	$	17,849	$	-	$	-
Available for sale securities:
U.S. government agency bonds ⁽ⁱⁱ⁾		173,038		-		173,038		-
U.S. government bonds ⁽ⁱⁱ⁾		9,979		-		9,979		-
Bank certificates of deposit ⁽ⁱⁱ⁾		19,803		-		19,803		-
Corporate notes ⁽ⁱⁱ⁾		66,014		-		66,014		-
Asset-backed securities ⁽ⁱⁱ⁾		13,724		-		13,724		-
Municipal bonds ⁽ⁱⁱ⁾		17,707		-		17,707		-
Investments held for deferred compensation plans		6,548		-		6,548		-
Total Assets	$	324,662	$	17,849	$	306,813	$	-
Liabilities
Deferred compensation plans	$	6,555	$	-	$	6,555	$	-
Total Liabilities	$	6,555		-	$	6,555	$	-


Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases ^(a)		Leases ^(b)
Remainder of 2021	$	1,260	$	—
2022		3,158		—
2023		2,628		12,310
2024		2,412		5,184
2025		2,444		5,340
2026		2,498		5,500
Thereafter		20,789		107,533
Total lease payments	$	35,189	$	135,867
Less: imputed interest		13,535		62,962
Total lease liabilities	$	21,654	$	72,905


	Estimated	As of June 30, 2021						As of December 31, 2020
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200		(35,439)		216,761		252,200		(24,393)		227,807
Customer relationships	5.0		14,100		(4,524)		9,576		14,100		(3,114)		10,986
Intangible assets subject to amortization			266,300		(39,963)		226,337		266,300		(27,507)		238,793

In-process research and development	Indefinite	$	118,900		—		118,900		118,900		—		118,900

Goodwill	Indefinite	$	66,134		—		66,134		66,134		—		66,134

Total		$	451,334	$	(39,963)	$	411,371	$	451,334	$	(27,507)	$	423,827


	Amortization Expense
Remainder of 2021	$	12,456
2022		24,912
2023		24,912
2024		24,618
2025		22,092
Thereafter		117,347
Total amortization	$	226,337


	Three Months Ended
	June 30,
	United States				International				Total
	2021		2020		2021		2020		2021		2020

Glaucoma	$	46,313	$	18,251	$	16,411	$	6,697	$	62,724	$	24,948
Corneal Health		13,218		5,918		2,151		692		15,369		6,610
Total	$	59,531	$	24,169	$	18,562	$	7,389	$	78,093	$	31,558



	As of
	June 30,
	2021
Convertible Notes	$	287,500
Less: Unamortized debt issuance costs		(8,160)
Carrying amount of Convertible Notes	$	279,340


	Three Months Ended
	June 30,				% Increase
(dollars in thousands)	2021		2020		(decrease)
Statements of operations data:
Net sales	$	78,093	$	31,558	147	%
Cost of sales		17,759		21,668	(18)	%
Gross profit		60,334		9,890	510	%
Operating expenses:
Selling, general and administrative		45,300		38,116	19	%
Research and development		24,256		18,971	28	%
In-process research and development		5,000		-	NM
Total operating expenses		74,556		57,087	31	%
Loss from operations		(14,222)		(47,197)	(70)	%
Total non-operating expense, net		(3,052)		(81)	NM
Income tax provision (benefit)		208		(7,384)	NM
Net loss	$	(17,482)	$	(39,894)	(56)	%


	June 30,		December 31,
	2021		2020
Finished goods	$	5,843	$	5,346
Work in process		5,246		3,584
Raw material		6,411		6,879
	$	17,500	$	15,809


		Incorporated by Reference
Exhibit No.	Description	Form	File No.	Exhibit	Filing Date
2.1	Agreement and Plan of Merger, dated as of August 7, 2019, by and between Glaukos Corporation and Avedro, Inc.	8-K	1-37463	2.1	8/7/2019
3.1	Restated Certificate of Incorporation of the Registrant	8-K	1-37463	3.1	06/30/2015
3.2	Amended and Restated Bylaws of the Registrant	8-K	1-37463	3.1	11/20/2020
10.1*	Form of Director and Executive Officer Indemnification Agreement
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	XBRL Taxonomy Schema Linkbase Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Definition Linkbase Document
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101.PRE*	XBRL Taxonomy Presentation Linkbase Document
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GLAUKOS CORPORATION

By:	/s/ THOMAS W. BURNS
Thomas W. Burns
Chief Executive Officer and President (Principal Executive Officer)

By:	/s/ JOSEPH E. GILLIAM
Joseph E. Gilliam
Chief Financial Officer and Sr. Vice President, Corporate Development (Principal Accounting and Financial Officer)