GLAUKOS Corp 10-Q for FY2020 Q3

GLAUKOS Corp (GKOS)

10-Q 2020-11-05 For: 2020-09-30

Added on April 12, 2026

About this 10-Q

GLAUKOS Corp filed this 10-Q on November 5, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $64.83M; up 10.8% from $58.51M a year earlier
Net loss: $15.75M; compared with a net loss of $13.51M a year earlier

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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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II: OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 6.	Exhibits	62

SIGNATURES		63


	September 30,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	80,994	$	62,430
Short-term investments		307,441		111,553
Accounts receivable, net		32,885		38,417
Inventory, net		19,890		42,578
Prepaid expenses and other current assets		13,235		7,900
Total current assets		454,445		262,878
Restricted cash		9,326		9,326
Property and equipment, net		23,408		22,056
Operating lease right-of-use asset		18,760		15,704
Finance lease right-of-use asset		51,975		54,048
Intangible assets, net		363,921		382,605
Goodwill		66,134		66,134
Deposits and other assets		6,545		5,649
Total assets	$	994,514	$	818,400

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,774	$	5,781
Accrued liabilities		39,919		51,919
Total current liabilities		46,693		57,700
Convertible senior notes		186,676		-
Operating lease liability		18,734		14,195
Finance lease liability		60,702		58,435
Deferred tax liability, net		14,164		9,632
Other liabilities		5,982		5,166
Total liabilities		332,951		145,128

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; 44,855 and 43,530 shares issued and 44,827 and 43,502 shares outstanding as of September 30, 2020 and December 31, 2019, respectively		45		44
Additional paid-in capital		959,186		861,740
Accumulated other comprehensive income		1,874		1,330
Accumulated deficit		(299,410)		(189,710)
Less treasury stock (28 shares as of September 30, 2020 and December 31, 2019)		(132)		(132)
Total stockholders' equity		661,563		673,272
Total liabilities and stockholders' equity	$	994,514	$	818,400


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net sales	$	64,831	$	58,509	$	151,725	$	171,135
Cost of sales		17,932		7,703		72,129		22,684
Gross profit		46,899		50,806		79,596		148,451
Operating expenses:
Selling, general and administrative		38,947		44,443		127,609		117,024
Research and development		20,304		17,278		64,148		48,277
In-process research and development		-		1,500		-		3,745
Total operating expenses		59,251		63,221		191,757		169,046
Loss from operations		(12,352)		(12,415)		(112,161)		(20,595)
Non-operating (expense) income:
Interest income		595		780		1,881		2,368
Interest expense		(5,732)		(1,028)		(8,485)		(2,041)
Other income (expense), net		852		(656)		342		(508)
Total non-operating expense		(4,285)		(904)		(6,262)		(181)
Loss before taxes		(16,637)		(13,319)		(118,423)		(20,776)
Income tax (benefit) provision		(889)		187		(8,723)		381
Net loss	$	(15,748)	$	(13,506)	$	(109,700)	$	(21,157)
Basic and diluted net loss per share	$	(0.35)	$	(0.37)	$	(2.48)	$	(0.58)
Weighted average shares used to compute basic and diluted net loss per share		44,706		36,831		44,302		36,507


						Accumulated
				Additional		other
	Common stock			paid-in		comprehensive		Accumulated		Treasury stock			Total
	Shares	Amount		capital		income (loss)		deficit		Shares	Amount		equity
Balance at December 31, 2019	43,530	$	44	$	861,740	$	1,330	$	(189,710)	(28)	$	(132)	$	673,272
Common stock issued under stock plans	589		—		4,220		—		—	—		—		4,220
Stock-based compensation	—		—		17,176		—		—	—		—		17,176
Other comprehensive income	—		—		—		689		—	—		—		689
Net loss	—		—		—		—		(54,058)	—		—		(54,058)
Balance at March 31, 2020	44,119	$	44	$	883,136	$	2,019	$	(243,768)	(28)	$	(132)	$	641,299
Common stock issued under stock plans	459		1		1,633		—		—	—		—		1,634
Stock-based compensation	—		—		13,062		—		—	—		—		13,062
Equity component of convertible senior notes, net of transaction costs of $3,267 and taxes of $12,891	—		—		81,554		—		—	—		—		81,554
Purchase of capped calls related to issuance of convertible senior notes	—		—		(35,679)		—		—	—		—		(35,679)
Other comprehensive income	—		—		—		448		—	—		—		448
Net loss	—		—		—		—		(39,894)	—		—		(39,894)
Balance at June 30, 2020	44,578	$	45	$	943,706	$	2,467	$	(283,662)	(28)	$	(132)	$	662,424
Common stock issued under stock plans	277		—		5,821		—		—	—		—		5,821
Stock-based compensation			—		9,659		—		—	—		—		9,659
Other comprehensive loss			—		—		(593)		—	—		—		(593)
Net loss			—		—		—		(15,748)	—		—		(15,748)
Balance at September 30, 2020	44,855	$	45	$	959,186	$	1,874	$	(299,410)	(28)	$	(132)	$	661,563


	Nine Months Ended September 30,
	2020		2019
Operating Activities
Net loss	$	(109,700)	$	(21,157)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		21,981		2,674
Amortization of lease right-of-use assets		3,836		2,405
Amortization of debt discount and issuance costs		3,234		-
Deferred income tax benefit		(9,340)		-
Loss on disposal of fixed assets		287		26
Stock-based compensation		37,733		23,923
Change in fair value of cash settled stock options		(3,172)		-
Unrealized foreign currency losses		22		469
Amortization of discount on short-term investments		229		(298)
Other liabilities		3,343		3,666
Changes in operating assets and liabilities:
Accounts receivable, net		5,629		(5,828)
Inventory, net		22,578		414
Prepaid expenses and other current assets		(4,329)		(2,326)
Accounts payable and accrued liabilities		(6,141)		(60)
Other assets		218		(86)
Net cash (used in) provided by operating activities		(33,592)		3,822
Investing activities
Purchases of short-term investments		(273,798)		(63,556)
Proceeds from sales and maturities of short-term investments		78,084		61,870
Purchases of property and equipment		(4,790)		(3,530)
Investment in company-owned life insurance		(1,097)		(1,170)
Net cash used in investing activities		(201,601)		(6,386)
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		10,258		14,005
Proceeds from share purchases under Employee Stock Purchase Plan		4,025		3,388
Payment of employee taxes related to vested restricted stock units		(2,607)		(5,002)
Net cash provided by financing activities		253,883		12,391
Effect of exchange rate changes on cash and cash equivalents		(126)		(8)
Net increase in cash, cash equivalents and restricted cash		18,564		9,819
Cash, cash equivalents and restricted cash at beginning of period		71,756		38,596
Cash, cash equivalents and restricted cash at end of period	$	90,320	$	48,415
Supplemental disclosures of cash flow information
Taxes paid	$	418	$	96


	At September 30, 2020
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		206,294		137		(51)		206,380
Bank certificates of deposit	less than 1		16,900		25		—		16,925
Commercial paper	less than 1		2,997		3		—		3,000
Corporate notes	less than 3		62,828		417		(1)		63,244
Asset-backed securities	less than 5		17,627		265		—		17,892
Total		$	306,646	$	847	$	(52)	$	307,441

	At December 31, 2019
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
Bank certificates of deposit	less than 1		12,999		7		—		13,006
Commercial paper	less than 1		7,475		8		—		7,483
Corporate notes	less than 3		65,354		295		(10)		65,639
Asset-backed securities	less than 3		25,333		99		(7)		25,425
Total		$	111,161	$	409	$	(17)	$	111,553


			At September 30, 2020
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	September 30,		identical assets		inputs		inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds ⁽ⁱ⁾	$	7,936	$	7,936	$	-	$	-
Available for sale securities:
U.S. government agency bonds ⁽ⁱⁱ⁾		206,380		-		206,380		-
Bank certificates of deposit ^(ii)(iii)		18,925		-		18,925		-
Commercial paper ⁽ⁱⁱ⁾		3,000		-		3,000		-
Corporate notes ⁽ⁱⁱ⁾		63,244		-		63,244		-
Asset-backed securities ⁽ⁱⁱ⁾		17,892		-		17,892		-
Investments held for deferred compensation plans		4,608				4,608
Total Assets	$	321,985	$	7,936	$	314,049	$	-
Liabilities
Deferred compensation plans	$	4,530	$	-	$	4,530	$	-
Total Liabilities	$	4,530		-	$	4,530	$	-


Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases ^(a)		Leases ^(b)
Remainder of 2020	$	577	$	—
2021		2,700		—
2022		3,245		—
2023		2,230		3,156
2024		2,023		5,184
2025		2,050		5,340
2026		2,110		5,500
Thereafter		18,521		107,522
Total lease payments	$	33,456	$	126,702
Less: imputed interest		13,207		66,000
Total lease liabilities	$	20,249	$	60,702



Avedro shares of common stock outstanding at closing		17,670,003
Exchange Ratio		0.365
Right to receive shares of Glaukos		6,449,551
Glaukos closing stock price on November 21, 2019	$	63.07

Fair value of Glaukos common stock issued in the Avedro Merger, plus an immaterial amount of cash paid for fractional shares	$	406,776
Fair value of Glaukos common stock issued to replace certain vested Avedro warrants	$	189
Fair value of Replacement Awards attributable to pre-combination services	$	30,786
Total Merger Consideration	$	437,751



Assets Acquired:
Cash	$	49,101
Accounts receivable		13,113
Inventory		33,339
Prepaid expenses and other current assets		2,522
Restricted cash		551
Property and equipment		1,489
Intangible assets		385,200
Goodwill		66,134
Liabilities Assumed:
Accounts payable		7,056
Accrued liabilities		6,776
Deferred revenue		1,389
Debt		22,496
Deferred revenue, non-current		43
Deferred tax liability		75,938
Fair value of net assets acquired	$	437,751


			Estimated
	Fair		Useful Life
	Value		(in years)
Intangible assets subject to amortization:
Developed technology	$	252,200	11.4
Customer relationships		14,100	5
Total	$	266,300
Intangible assets not subject to amortization:
In-process research and development (IPR&D)	$	118,900	Indefinite
Total intangible assets	$	385,200


	Estimated	As of September 30, 2020						As of December 31, 2019
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200		(18,870)		233,330		252,200		(2,301)		249,899
Customer relationships	5.0		14,100		(2,409)		11,691		14,100		(294)		13,806
Intangible assets subject to amortization			266,300		(21,279)		245,021		266,300		(2,595)		263,705

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	$	(21,279)	$	430,055	$	451,334	$	(2,595)	$	448,739


	Amortization Expense
Remainder of 2020	$	6,228
2021		24,912
2022		24,912
2023		24,912
2024		24,619
Thereafter		139,438
Total amortization	$	245,021


	September 30,		December 31,
	2020		2019
Finished goods	$	6,305	$	32,108
Work in process		4,316		3,884
Raw material		9,269		6,586
	$	19,890	$	42,578






Convertible Notes	$	287,500
Less: Unamortized debt discount and debt issuance costs		(100,824)
Carrying amount of Convertible Notes	$	186,676


		Nine months ended
	September 30, 2020

Balance at beginning of period	$	4,096
Total restructuring accrual charges		1,131
Employee separation payments		(4,921)
Balance at end of period	$	306


	Three Months Ended
	September 30,				% Increase
(dollars in thousands)	2020		2019		(decrease)
Statements of operations data:
Net sales	$	64,831	$	58,509	11	%
Cost of sales		17,932		7,703	133	%
Gross profit		46,899		50,806	(8)	%
Operating expenses:
Selling, general and administrative		38,947		44,443	(12)	%
Research and development		20,304		17,278	18	%
In-process research and development		-		1,500	NM
Total operating expenses		59,251		63,221	(6)	%
Loss from operations		(12,352)		(12,415)	(1)	%
Total non-operating expense, net		(4,285)		(904)	NM
Income tax (benefit) provision		(889)		187	NM
Net loss	$	(15,748)	$	(13,506)	17	%


		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	3.2	06/30/2015
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
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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)