Glaukos Corporation (GKOS) Q1 2016 Earnings Report, Transcript and Summary

Welcome to Glaukos Corporation’s First Quarter 2016 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 [Operator Instructions] Thank you, this call is being recorded and achieved and an archived replay will be available online in the Investor section at www.glaukos.com. I’ll now turn the call over to Sheree Aronson, Vice President of Investor Relations. Please go ahead.

Hello, everyone. Joining me today are President and CEO, Tom Burns; Chief Financial Officer, Rich Harrison; and Chief Commercial Officer, Chris Calcaterra. Following prepared remarks by Tom and Rich, all three gentlemen will take your questions. Before we begin, let me remind you 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 planned objectives, strategies, and prospects, regarding among other things, our iStent product, our pipeline technology, our U.S. and international commercialization efforts, the efficacy of our current and future products, and our competitive market position, financial condition, and results of 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 SEC filings for more information about these risk factors. You’ll find these documents in the Investor section of our website at www.glaukos.com. With that, I’ll turn the call over to President and CEO, Tom Burns. Tom.

Good afternoon and thank you everybody for joining us today. We are pleased to report the Glaukos is off to an exceptional start in 2016 with first quarter net sales of $23.1 million up 57% versus the year ago quarter. Primary drivers were strong, same-store sales growth and successful conversions of high volume cataract practices in the later part of 2015. And so far in 2016 which contributed the higher unit volumes in the quarter. To a lesser extent a milder winter in parts of the country may have led to a higher than usual cataract volumes, which intern may have lifted iStents volumes. Our first quarter result suggest a healthy organic growth continue to mask traditional cataract seasonality in which quarter one revenue is typically the softest of any given year. As we have stated previously, we expect these cataract seasonality patterns to emerge at some point in our iStents product sales results. In light of our recent performance, we are raising our 2016 full year guidance to a range of $100 million to $102 million, representing the significant increase from prior guidance of $90 million to $93 million. The first quarter results demonstrate not only our continuing progress forging an entirely new treatment class in the $5.1 billion global glaucoma market, but also the skill demonstrated by our global team and executing against a set of clearly defined growth objectives. As outline in our last investor conference call, these objectives are, one, leveraging our seasoned sales team and compelling clinical evidence to drive U.S. iStent adoption in combination with cataract surgery. Two, to fortify our MIGS leadership position and expanding the market with next generation iStent flow devices for combination cataract and standalone procedures. Three; to advance our novel iDose injectable drug delivery platform designed to overcome the longstanding challenge of patient non-compliance with topical medications. And finally four, to enter and/or expand our presence in the high-value international markets. I’ll speak briefly about each of these objectives beginning with the driving U.S. iStent adoption. In the first quarter, the average number of U.S. Glaukos sales representatives was 49 up about 20% versus the same year ago period, with our domestic sales organization largely in place and more fully tenured we are beginning the have stride in terms of training and converting new surgeons to the iStents procedure and also helping existing practices increase utilization rates. Our cadence is focused on the roughly 5,500 ophthalmic surgeons, who perform the lion share of the estimated 3.8 million annual U.S. cataract procedures. Now have trained more than 30% of that target universe with each ramp up pace to complete training on average of one doctor per month. We have recently sharpened our focus on higher volume cataract practices and as I said at the top of the call this strategy is helping us to drive iStents volumes even higher. To increase awareness and knowledge among youngsters is entering the practice of ophthalmology, we recently held the industry's first ever MIGS fellowship course here in Orange County. The response really was outstanding with the majority of U.S. glaucoma clinical fellows in attendance for the two day session that included interactive didactic sessions by leading glaucoma surgeons and expense of hands on web lab training. Progress on additional iStents awareness building programs, we highlighted on the call last quarter such as new professional consumer marketing campaigns and initiatives to engage the optometric community remain on-track and are moving forward. An essential components achieving broad base surgeon utilization is reliable reimbursement that accurately reflects the procedures value for both patients and practice. Glaukos dedicated considerable time and resources long before we received FDA approval to ensure the attractive reimbursement was in place to support the iStent launch and adoption ramp. Consequently iStent is now fully reimbursed by Medicare and most private payers. We continue to work diligently to further expand private insurance coverage and recently learn that Humana which represents almost 10 million covered lives is now including combined iStent cataract procedure in the glaucoma surgery policy. With this position we estimate that we have secured iStent reimbursement for approximately 90% of individuals covered by private insurance and 92% of iStent total target patient population. The most powerful growth engine for iStent is it's excellent clinical performance in the real world, these results just now are beginning to be publish in professional journals and presented at the podiums of major scientific meetings show marked improvement over the clinical performance we saw in our 2008 pivotal trial. What’s more of a strengthen the view that as iStent surgery has become more proficient implanters they achieve better efficacy. The breadth of this real world clinical validation continues to expand and add strengths to be clear consistent and compelling message that a single iStent provides physicians and patients significant IOP lowering potency and an excellent safety profile. Right now, many of you have seen the results of Dr. Tobias Neuhann just published in the Journal of Cataract and Refractive Surgery. This data showed mean IOP below 15 millimeters through three-years post-operatively and 39 patients receiving iStent with cataract surgery. Over the same period, these patients also experienced an 86% reduction in the mean number of topical ocular hypertensive medications used. In addition, data on 38 patients from Dr. [Jacobs] (Ph) that was recently publish in Clinical Ophthalmology showed that 65% of patients achieved un-medicated IOPs at or below 15 millimeters of mercury with the single iStent at 12-months. Importantly this result was achieved with [Indiscernible] the IOP lowering benefit of concomitant cataract surgery. Dr. Katz will present a 30-month read out of the study at the upcoming American Society of Cataract and Refractive Surgery Annual Meeting, which begins Friday in New Orleans. This is one of the number of surgeon presentation schedule that the ASCRS meeting that highlight the clinical performance of the single iStent. For example Dr. Michael Styles will present data from an ongoing interventional case series that 50 eyes receiving iStent and cataract surgery. Pre-operative mean medicated IOP was 18.6 millimeters in these eyes with 48% is in two or more glaucoma meds. At one-year post-op mean IOP dropped to 15.4 millimeters of mercury with 63% of the eyes requiring no medicine at all. We understand Dr. Styles will present recent data through three years and Dr. Mark Gallardo will represent his initial experience with 72 eyes following combined iStent and cataract surgery. Based on Dr. Gallardo's and medium abstract he has followed 40 eyes through six months and his a results show mean post-op IOP of 12.9 millimeters of mercury with medications eliminated in 55% of eyes. This compares to pre-operative medicated IOP of 15.3 millimeters in mercury with 75% of those eyes on two to four glaucoma medications. We understand Dr. Gallardo will share updated data through one-year on a larger set of patients. In all of these studies, the procedure has maintained its excellent safety profile. As these and other results confirmed the iStent works by forming a patent opening through the trabecular meshwork, with a majority of resistance to aqueous outflow occurs. This opening allows aqueous humor to flow into Schlemm's canal through collective channels episcleral veins and then into the bloodstream. A pressure gradient between the anterior chamber and the episcleral veins drives the flow of aqueous fluid and episcleral venous back pressure acts as the safety valve to prevent hypotony. Clinical studies have shown a lower end studies of encapsulation, inflammation edema and other complications in the trabecular meshwork. These factors combine to create a low risk high reward profile that is attractive and comforting the broad spectrum of glaucoma and cataract surgeons. International clinical studies have shown that two stents implanted a few clock hours away from each other can further reduce IOP. We designed our next generation Trabecular Bypass device the iStent Inject to allow surgeons to accomplish this placement in a straightforward click and release motion. U.S. IDE in the clinical trial are underway to evaluate two versions of the iStent Inject. The trail for the first version design for use in conjunction with cataract surgery is fully enrolled and the two-year follow up will be completed in mid 2017. Enrollment continues in the initial trail for the second version of iStent Inject which makes it owns self-serving needle penetration so that can be used as an injectable standalone procedure [indiscernible]. This broader indication has the potential to address roughly 3.5 million people in the United States who have glaucoma but aren’t undergoing cataract surgery. The iStent Inject is already available in certain markets outside the U.S. where it is being well received by surgeons for its IPO lowering capability, favorable safety profile and ease of use. At the ASCRS Dr. Richard Lindstrom will present results from an international study showing that in 57 eyes undergoing iStent Inject standalone procedures mean unmedicated IOP was at or below 50 millimeters of mercury through 18 months postoperatively with a high safety profile. We continue enroll patients in the U.S. IDE pivotal trial evaluating the iStent Supra, which accesses as secondary fluid outflow of pathway in the suprachoroidal space. We believe suprachoroidal stents are best suited to play an adjunctive role in the glaucoma treatment algorithm and may someday be used in combination with Trabecular Bypass Stent, where surgeon seek a lower IOP target pressure to treat progressive glaucoma. The suprachoroidal stent creates a cyclodialysis cleft in the severe ciliary muscle attachment and enters into a highly vascular states to enhance outflow. The cyclodialysis cleft glaucoma procedure has been in use with mixed results for several decades and is associated with squally including hyphema or bleeding, hypotony, post-cleft closure, pressure spikes and suprachoroidal fusion and hemorrhage. While suprachoroidal stenting can provide demonstrable reductions in IOP, the reduction appear to be variable and that they a subject patient to risk of transient hypotony and IOP pressure spikes. Unlike the conventional outflow pathway through the Trabecular meshwork in Schlemm's canal, there is no episcleral pressure safety net in the suprachoroidal phase to prevent hypotony. Moreover, cleft closures maybe responsible for dramatic IOP spikes we have seen in the published literature. In a study presented by Dr. Jonathan Myers at recent American Glaucoma Society Meeting, 72 patients with prior Trabecular Lectomy received two iStents, one iStents Supra and one topical medication. At 36-months patients mean IOP was 12.6 millimeters of mercury with 96% achieving IOPs at or below 15 millimeters of mercury. Given these compelling results and the higher risk to benefit profile of suprachoroidal, we can tend and expect that a majority of ophthalmic surgeons will continue to rely on Trabecular stents to treat their mild to moderate glaucoma patients and reserves suprachoroidal stents for use as an ancillary device in progressive to glaucoma patients who need greater IOP control. Turning now to iDose, the Phase 2 IND clinical trial got underway in the first quarter and it is now enrolling patients. The iDose is the micro-scale implant that is injected to a corneal incision and secured in the anterior chamber where it elutes therapeutic levels of a special formulation of travoprost for an extended periods of time. When depleted, the iDose can be removed and replaced in a subsequent procedure. We believe iDose, if approved has the potential to dramatically disrupt the glaucoma treatment paradigm, because it offers an alternative to chronic daily prescription eye-drop treatments, which are subject to high noncompliance rates as multiple side effects that may cause ocular surface damage overtime. We are encourage by results in the 12-months international iDose study which show that patient who received iDose achieved mean IOP levels at or below mean IOP levels of patients on topical travoprost. We believe that surgeons who use iDose alone or in combination with iStent Flow devices to manage IOP target base on each patient’s individual disease stage and progression, granting surgeon the ability to customize treatment regiments for the full range of open-angle glaucoma disease from naïve glaucoma to a refractory glaucoma. Turning now to our international expansion affords, we were very pleased to announce recently that the Japan MHLW approved the iStents for use in conjunction with cataract surgery for the reduction of IOP in mild to moderate glaucoma patients. We are now in the process of securing reimbursement podium coverage for the procedure and we estimate that this will take at least six-months. We will launch the iStent once reimbursement is finalized. In the mean time, our team in Japan is working with various professional societies and organization to build awareness. They have also begun training in Japan Glaucoma Society Board Members along with other KOLs and targeted surgeons. The Japanese team represent our fourth inspiration of a direct Glaukos sales organization outside the U.S. recall that we transitioned to a direct model in Australia and Canada to start a 2016 when we launch iStent Inject into these markets. In the first quarter, Australian and Canadian teams delivered sales ahead of expectation, indicating solid demand for MIGS platform. We also continue to be pleased with our sales growth in Germany, where we've had a direct selling models since late 2014. With recent iStents approvals in Chile, Columbia, Costa Rica and Mexico were also in the process of increasing our presence in Latin America. We are pursuing approvals and additional Latin American countries including Brazil. Ophthalmic distributors currently serve customers in the other international markets where iStents is available and we continue to evaluate possible conversion to direct selling models where favorable reimbursement and market dynamics exist. All right, with that, I’ll pass the call on to Rich for a summary of our first quarter financial performance. Rich.

Thanks Tom. Good afternoon to everyone on the call. And as Tom reported earlier our net sales rose by $8.4 million or 57% to $23.1 million versus $14.7 million in the same year ago quarter. the growth was driven primarily by strong U.S. sales which represented 94% of that $8.4 million increase. U.S. sales represented 93% of total net sales in the first quarters of both 2016 and 2015. Increased unit volume worldwide was primarily responsible for the rise in first quarter net sales as we grew our trained surgeon base and increased overall iStent utilization. For the first quarter of 2016, our gross margin was 86% of sales versus 81% of sales in the first quarter of 2015, increasing sales relative to our fifth manufacturing cost and intangible asset amortization continue to benefit our gross margin percentage and beginning in 2016 there was no medical device excise tax in cost of sales due to the suspension of the tax for 2016 and 2017. And lastly sales of our iStent inject in Australia and Canada in the 2016 quarter has not associated cost of sales because the manufacturing has been charged to R&D expense in 2015 prior to commercial launch in these countries. Beginning in Q2 or the second quarter of this year these manufacturing cost will be fully reflected in cost of sales. But we do not expect this benefit to reoccur. In the first quarter of 2016, SG&A expenses rose 57% to $12.3 million versus $7.8 million in the year ago quarter due to primarily higher personnel, travel, and other costs related to our ongoing efforts to build a global infrastructure and sales organization that can continue to drive and support our growth. In the first quarter of 2016, R&D expenses rose 35% to $7.1 million versus $5.2 million in the first quarter of 2015. The rise primarily reflects the cost of additional clinical affairs personnel required to manage the increased number of clinical studies and the associated investigational sites and study investigators. We finished the first quarter of 2016 with net income attributable to common shareholders of $897,000 or $0.03 per diluted share, compared to a net loss attributable to common shareholders of $966,000 or a loss of $0.40 per diluted share in the first quarter of 2015. While we are very pleased with achieving a measure of profitability for the first time. I want to caution you that we may not remain profitable in the short-term as we are primarily focused on expanding the market penetration of iStent globally and rapidly progressing our deep and diverse pipeline which will require further investment spending. At the end of the first quarter of 2016 our combined cash, cash equivalents, and short-term investments stood at $88.2 million compared to $91.1 million at year-end 2015. And lastly, as Tom indicated we have revised our 2016 net sales guidance to a range of $100 million to $102 million. This is about $10 million higher for the year than our prior guidance. The prior guidance implied a revenue growth rate for 2016 in the range of 26% to 30% while our revised guidance implies a substantially higher revenue growth rate of 39% to 42% over 2015 net sales. And now I would like to turn the call back to Tom.

Alright well thanks, Rich. So to recap. We’re very pleased with our start to 2016 and we’re confident in our ability to meet or exceed our goals for the year. U.S. iStent same-store sales our showing positive momentum and our sales teams is achieving strong double digit growth in the iStent surgical base with special emphasis on high volume cataract practices. Our international expansion strategies are on-track and delivering sales at or above or internal targets. And the breadth of our clinical evidence confirming iStent potent IOP lowering capability and excellent safety profile continue to grow. Solidifying our leadership position in this versioning mix market. And finally, we are making significant strides towards our goal to transformed glaucoma therapy by advancing our pipeline of micro-scale and injectable flow devices and drug delivery implants. So with that, I'll open it up to questions. Operator.

[Operator Instructions] And your first question comes from the line of Mike Weinstein from JPMorgan. Your line is open.

Good morning guys. First off congratulations on obviously a very, very strong quarter. : I would love to maybe peel the onion a little bit and try and understand what you guys saw over the course of the quarter. As you noted, you initially guided to 26% to 30% revenue growth for the year. You raised that today by 13 points at the low end and 12 points on the high end. So that's obviously a very big increase in the outlook for the Company. It grew 57% percent this quarter. So we'd love just to get better sense of what you see happening, talk if you could about training as well as utilization and rep productivity. Thanks.

Mike this is Rich. Let me kind of address the guidance part of your question and then I think Chris will maybe give you a little bit more color on what we're seeing in the quarter that's leading to this. When we gave guidance it was in early January, we were at the very, very beginning of our quarter, we just closed the year at 57% or so growth and we had a fourth quarter with about 44% growth. And quite honestly while we were really pleased with the growth we achieved in the fourth quarter, the market may have shown signs that they weren’t as bullish on it as we were as seen in our stock price. But nonetheless we felt that given our position at that time not really having the visibility coming forward knowing of the potential for seasonality to appear for the winter and having come off of a quarter at 44% growth. We just felt it was conservative and appropriate to maintain that 26% to 30% type of growth that we had always planned on and accepted for calendar year 2016. Chris.

Hey Mike it's Chris and just to add some color to what we saw in the first quarter. It's a primitive execution, we have focused on the two primary key strategies which are same-store sales growth and adding high volume cataract surgeons. All our key metrics including number of facilities, number of doctor's trained and so forth ASP are all in line with where we want them to be. So in short, it just a good execution of what we have been focusing on over the course of last couple of years.

And Chris, are you altering at all your plans for either rep hires this year or promotional spending in light of how strong the business was in the first quarter?

For domestic on reps not really, for promotional spending yes, and for international growth spending yes.

And can you spend a minute on the international piece, where you are starting to invest? Obviously Japan is one you want to lay the ground work for. Could you talk about Europe as well?

Yes, Europe, we're initiating plans there to continue to invest in the business both from the personal standpoint as well as promotional standpoint. It's a key area of opportunity for us and we want to invest there. Secondly, Tom mentioned in his notes Latin America, we have recently gotten approvals in several of the country down there. We are looking at our opportunities and what we want to do in Brazil and we will invest down there accordingly and that will be a key driver of our international growth as well.

Let me switch gears if I can for a minute, and I want to just catch up on the pipeline. So iDose, you did start your Phase II clinical during the first quarter. I assume there has been no early issues with the implants. Otherwise we would hear about it. Is that safe to assume? And then the second question is, given - you're a couple months into it and you've got maybe a little bit better visibility on the pace of enrollment, could you update us on your expectation and when we might see some headlines on how the data looks?

Yes, we would be happy to Mike. This is Tom. So one, we are extremely pleased where we are with the iDose program and as I mentioned before we had indicated in our S1 when we went public that we look to file in IND in 2016. And we were very fortunate and I think executed very well bringing that forward into 2015, not only filing the IND, but getting approval from the FDA to move forward and granting clearance for the clinical trial. So that was something that we accelerated our position substantially in the very, very short-term. And then we moved very hard from the time we last talked to be able to bring our clinical sites and begin this clinical trial. So we have begun enrolling. It's very far too early to be able to predict with any certainty, what our adoption rate is or how quickly we will enroll. What we said in the past, is that we aren’t giving specific guidance on completion of enrollment of these studies. I think what I can say with some certainty is that I would expect us to have unmatched data available at the earliest in 2017.

Okay. Let me come back to this one topic, which you brought up in your prepared remarks, Tom. You were just talking about the different approaches, and I don't if you saw the piece that we put out Monday, talking just a little bit about the superchoroidal space and the comparison of the two approaches and data we have so far on the superchoroidal approach. One of the things you have advocated is the idea that the high stent approach through the trabecular meshworks is - people already know the safety profile there, and the efficacy has gotten obviously a lot better as clinicians have climbed the experience curve. And we are seeing that in the outcomes data that we keep getting, it seems like every quarter here. If you are getting outcomes below 15 millimeter for everybody, below 15 millimeter of mercury, if you are getting more and more patients below 15, which is really kind of everybody's target, is there a role for a second device? And I don't mean a second iStent. Is there a role for a second approach here?

Well I think there is, I mean one, we are completely gratify with the results that we are receiving, Mike did read you a report and it did state and highlight a lot of the excellent results we are seeing with the use of the Trabecular Bypass Stents. Now and relatively long-term clinical study, so we have an appreciation for the efficacy of a single iStents both the efficacy and the safety. And so we are becoming quietly confident that that will become the standard-of-care in the MIGS environment. Having said that glaucoma is a aggressive disease, it's a entirely complex disease and no product is a [fantasia] (Ph) and so we do think that in the future particularly with patients who show progression, who show despite therapy and use Trabecular Bypass Stent and again as well as they are working endurably as they bring pressures below 15. There are patients who still need supplemental either medication and/or supplemental treatment. So I do think that there will be a role for a second line device like a suprachoroidal stents that’s why we are investing there. And I think the data shows that so you've seen the latest data that we have coming out of the MIGS study group in Armenia where we took really the train wreck patients, patients who failed on refractory or started refractory open angels glaucoma patients who had failed on Trabecular Lectomy. They were on three medications pre-operatively, we took them off of two of the medications, we put in two G-1 iStents and a suprachoroidal stent and were seeing pressures in literally that 13 millimeter range and that is really what we see the most optimal results from the two versus trap studies. So rather than putting a hole in the eyes, I think we have a real opportunity to use these stents in combination for patients who are progressive despite therapy either Trabecular Bypass or drug therapy.

Tom, I can go back and forth with you, but I want to let some others jump in to ask some questions. Again, congratulations on a really nice quarter. .

Thank you so much Mike.

Your next question comes from Bob Hopkins from Bank of America. Your line is open.

Hey, good afternoon. And thanks for taking the questions. No worries. I only have 23 questions today. So I guess a couple things. I just want to follow up on the competitive questions that Mike was asking there. Correct me if I’m wrong, but in my view by the time competition has approval and reimbursement in the United States, we are probably talking about mid-2017 at the earliest. And in my view at that point, you are probably maybe six, nine months away from iStent inject being approved in the United States. Do you have any problem with that line of thinking there?

Well, I had no problem with it. But I certainly wouldn’t validate it. What I would tell you is that we all have the data with iStent Inject. We know that we finished enrollment we announced in July of last year and those data are baking as we speak and we will need to have two-year data available before we follow TMA. So it's very easy to do the estimates of when we think we will have approval. I do think the if we not only have a formidable product as we speak, first mover advantage, we do have competition that will come on and they will go through all the hard ach pattern to get reimbursement and get to the ceilings as they launch. And the way that I view that is that there will be a time following the competitions arrival on the scene where iStent Inject will be available and as you've done your due diligence it's very hard to argue that iStent Inject won't command the vast majority of patients for mild to moderate glaucoma. That's how we had our position that's how we drew it up on the chart board when we developed these products and I think that's how it will happen in the commercial marketplace.

Okay, I appreciate that. So it doesn't sound like there's any changes to your thinking on the timelines that we should be assuming for iStent inject. Sounds like everything was the same as last quarter?

That's correct.

So the thing that really impressed me with your numbers is the sequential growth. Because you didn't have - without the benefit of any new sales reps, you had significantly higher revenues, 14% sequential increase in revenues in a typically seasonally weak period. So I guess some of the questions I would like to ask is just, did you have any price increases in the quarter? And could you give us a sense for kind of the number of docs trained over the course of the quarter and how that might have changed sequentially?

Hey, Bob. This is Chris. So there wasn’t a significant price increase, we look at the reinvestment rates that come through every year and based on that that once they were published in October 31 of last year we adjust our pricing, but there wasn’t the significant price increase or material price increase I would say. We just continued to execute well with the blocking and tackling strategies that we put forth, we train our reps so that they are experts in the OR, we spend a lot of time with doctors to make sure that they are comfortable with the procedure and they get good outcomes and then we move forward. And at the same time we spend a lot of time in the office working with the staff and the physician to increase and identify patients for increase utilization of iStent. This is the formula that we are stuck with, we've attracted top tiers sales reps, I will also say that because we haven’t added a lot of reps in the course of time or the most previous timeframe. 90% of our sales reps at this point have six-months or more of tenure with us. And that’s kind of that magic number six to nine-months are where reps really start to have an impact and I think we're seeing the effects of that as well.

Great, well I appreciate the time. Thanks.

Thanks so much Bob.

Your next question comes from the line of David Roman from Goldman Sachs. Your line is open.

Thank you, and good afternoon, everybody. I wanted just to come back to some of the prepared remarks, Tom, that you made trying to explain some of the up-side that you realized in the quarter, relative to your initial expectations. And certainly understanding the time frame when your provided it, within the context of sort of historical patterns in cataract surgeries, but just going through some math, it looked like you did an additional 5,000 or 6,000 procedures in the quarter relative to expectations, which would almost have to come from more than just weather or extra selling days. Maybe you should talk about what you think is happening from a penetration standpoint in the market and how that built throughout the course of 2016, and what you are seeing maybe even through today?

Yes, we are happy too David.

Okay David this is Chris. So again back to what I said before the same-store sales growth and the target on high volume cataract surgeons, I think what I would like to focus on here is the high volume cataract surgeons. We have had a number of conversions in Q4 and Q1 that I think a very attributable to these results. And with the success that we are having with these doctors, I think that that is part of the reason why saw the significant rise in sales in Q1.

And that would imply that that's the early days of that right? So that contributes to the de-increase in guidance, but it would seem like the targets that you've put out here still offer room for over-performance, assuming that that conversion, we are sort of seeing the early stages of that? Is that a fair representation?

I think that’s a fair representation. We put our best thinking forward but we also come and with a conservative forecast, this is still an emerging market there lots of things that evolving overtime, and so we want to give a number that we feel really good about but we are quite pleased with what we accomplished in Q1.

And then maybe lastly, Rich, can you just quickly walk through profitability dynamics? I think you reference in remarks that you wouldn't necessarily expect to keep the profit, which understandable given the investments in growth, but how much of a benefit to gross margin was the iDose dynamic outside the US, and then how should we think about that through the rest of the year?

I am not sure about the iDose dynamic outside the U.S.

Well you said you didn't book any cost of sales because you had booked in R&D last year. So how does that - how much did that add to the gross margin in Q1, and then what would sort of be the normalized gross margin?

I understand now. And just to clarify it wasn’t iDose outside the U.S., it was iStents Inject.

Oh I’m sorry.

That’s where I was getting confuse there. Yes, I mean that was just one piece of it. I wouldn’t point to anyone particular thing on the gross margin, I would say all the regions that we described play the part, certainly with the clients of increase in sales that we had over the first quarter of 2015 that causes a lot of overhead absorption. So certainly, we had comparatively a much greater absorption of our fixed cost that was probably one of the largest contributors to the improvement in the gross margin and certainly the absence of the medical device excise tax help too. But I wanted to point out the things that Australia and Canada, because that’s not going to recur and while I haven't given you specific quantification of that I think we need to keep our gross margin expectations inject and not get too far ahead of ourselves. So if the question doesn’t come from you now, it probably will from another analyst. So we would still maintain that we think the load of mid-80s is the right way to think about our gross margin for this year.

Okay. That's all very helpful. Thank you.

Thank you David.

Thanks David.

Your next question comes from the line of Brian Weinstein from William Blair. Your line is open.

Hi good afternoon. This is Matt Larew in for Brian. Thanks for taking my question. The first one here, circling back on the competitive landscape. Obviously, no one is selling against you here in the US, and the other folks aren't necessarily targeting the exact spot that iStent is. But you know, it's sort of in conferences and now for you guys ahead of ASCRS. Have you noticed change in the positioning of the products, or at least how other companies might be counter detailing against current and future product portfolio now that those companies are in different hands?

This I Chris Matt. No we haven't and given the fact that they are not approved they are really restricted on what they can say, so I wouldn’t expect them to be prepositioning the product, but we do know that there will be some papers presented at the ASCRS that we will be therefore to listen to their results.

Okay, Chris. And then you had referenced obviously the sales force productivity here now with a nice percentage, tenured sales force on - can you give maybe an update of what the expectation would be for trained surgeons per quarter moving throughout the rest of the year? Is that something that we can expect to increase?

Yes, consistent with what we gave guidance on before, which is about 40% increase year-over-year and we are tracking to that, that’s something that we monitor very closely and we will continue to do that.

Okay. Thanks. I will let others get in here.

Thanks Matt.

Thank you Mat.

Thanks Matt.

Your next question comes from the line of Matthew O'Brien from Piper Jaffray. Your line is open. Matthew O’Brien: Afternoon, guys. Thanks for taking the questions. Just a couple for me. To focus on the high volume guys that are out there, out of the 5,500 doctors you are targeting how many of those are high volume? And what was it this quarter that led to this inflexion that we are seeing within that group, or I guess in your surgeon group, specifically to accelerate utilization of iStent? I mean was it data, through the trialing period and then the more comfort level of using it in the broader patient population? Just some more on what exactly is going on there and the durability and the growth outlook for that group going forward.

Okay hey Matthew this is Chris. In terms of the number of high volume surgeons out of that 5,500 that's not a number that we've given out, it’s an internal number that we create in a target list that we create and are quite pleased with the conversion rate of those targets. In terms of what has changed and why there was an inflection point with these high volume buying cataract surgeons. I don’t think it's anyone thing, I think it's a combination of things including the data, the recent data that it's been published particularly the [indiscernible] data. I would also say it is the comfort level where doctors have seen the acceptance of this game changing and have been wooing to incorporate that into their practices. And I think our promotional spends around iStent which have been increased also attributed to the overall acceptance of this product and in the conversion of some of these key targets. Matthew O’Brien: Okay. Alright. That makes sense. And then kind of pivoting here on Japan. I know we probably shouldn't expect too much this year, but the approval was great to hear, putting feet on the ground, need to get through reimbursement process, how should we think about that evolving here in 2016? And then what kind of contribution do we anticipate out of Japan going forward? It's a pretty large market and I would anticipate a lot of surgeons are already aware of iStent and are eager to use the product.

Yes I would agree with you and we haven’t put a large into a our forecast for 2016, there the reimbursement comes after approval, where here in the United States you work in tandem to get both. But were quite excited about the team that we've put together and were going to utilize the time frame while were waiting on reimbursement decisions to train and educate and work with the key opinion leaders in Japan focusing primarily on the Japanese Glaucoma Society and the physicians there they are part of that group and key opinion leaders. So were going to use this time wisely and it is our hope that we will give reimbursement sometime in the fall of winter and then will begin to bill for product and then have a nice headwind and nice start into 2017. Matthew O’Brien: Should we anticipate ASPs in and around the U.S. levels or markedly higher in Japan?

Could you repeat that question please. Matthew O’Brien: Yes, the average selling price verses what you are getting here?

Okay, so we haven’t determined that, it really will be a function of what the reimbursement is of the category that we get into, but we’re hopeful that they will be similar to or higher than here in the United States. Matthew O’Brien: Great, thank you.

Thank you Matt.

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

Very good, thanks guys, good afternoon. I am still working through numbers, but I am getting an average utilization growth per doctor of about 10% year-over-year in Q1 2016. It's certainly a solid number, it's a big step up from what we saw in 2015. And I guess I am asking this question in a little bit of a different way than previously, but anything that you can give, any comment on the increased utilization? Anything from a sales rep perspective that you are doing to help get the docs up the curve quicker? Or is it also just a reflection of the bigger cataract practices that you said that have recently come on board?

It’s a function of both. Let's start with higher adoption rates with existing customers, we spend a lot of time training our sales organization on practice marketing initiatives to help practices identify these patients, recruit these patients and get these patients into the OR with an iStent. I would say two certainly the customers - the high buying cataract surgeons that we have converted as a strategic initiative and that we focused on, as a matter of fact they are at a higher volume will also be attributable to the higher number of stents being utilized.

Okay, great. And maybe one or two more for me. You know, profitable only after a handful of quarters as a public company, and less than $100 million run rate, obviously not too common overall in med tech. Anything, Tom that you can do with $88 million in cash to even accelerate the rate of adoption even further? I don't mean to imply that 57% year-over-year growth is tepid, but anything that you can do to step on the gas even further to accelerate overall adoption?

Yes so I think Chris mentioned earlier, one of the things we are pouring some consumer holding resources into Europe, we’re pouring them into Japan, we’re pouring them into Germany our direct markets outside the U.S. and clearly we’re fully funding the activities to exploit opportunity we have here in the United States. So first and foremost, we are fully funding and given the kind expediential growth we saw here in the first quarter, we’re committed to do so even in accelerated pace as we go forward. So that's one. Two we have this deep and rich pipeline and this takes some funding and effort to make this go John as you know and so we plan to put resources in place to make sure that we fully fund accelerated path to commercialization for a host of different products that we already have that our in approved IDE or IND clinical trials. So I think we are moving about as quickly and with as much of a formidable nature as we can to try to really drive top line growth for the business.

Okay. Perfect. And last one for me. You know, assuming the competitors there in and around mid-2017 with reimbursement, we have done a good amount of work showing the docs love iStent, but they also have least have shown an interest, if you would, in psypass or maybe with superchoroidal. But Tom, any high level thoughts fast forward to how share may shake out 12 or 24 months in if that competitor is successful getting to market? Thanks, guys.

Yes, I guess I saw your report in a survey you did and I guess I'm pleased that people are interested in using the superchoroidal stent, because we have one and it's been our position that we think that there is a place for that product. I think where we differ and I think I knew you are certainly getting go to the depth probably to understand where and how they would considering using it. We do believe that will be an adjunctive use primarily as surgeons understand the risk to benefit ratio of these products going forward, particularly in the mild to moderate category of open end glaucoma. As far as specific share I would be highly hesitant to give you that I think I'm giving you overall flavor of we think we are more than quietly confident that we will complete successfully and that we will continue to hold a substantial position in the marketplace.

Perfect. Very helpful. Thank you.

Okay John.

And your next question comes from the line of Chris Lewis from ROTH Capital. Your line is open.

Hello Chris.

Hey guys good afternoon, thanks for taking the questions and congrats on a great quarter here.

Thanks.

Wanted to start just piggybacking off the high-volume cataract practices commentary. You know, I was hoping you could just talk about if you feel there are more of those type of high volume practices out there that still need to be converted? At this point, I guess do you feel like most of the low hanging fruit with those conversions has been accomplished, or do you feel like there is still more room to go?

One thing there is more room to go. I do think the low hanging improved is gone just by that I mean there is no easy conversions out there, but I think that high volume cataract surgeons who imply themselves on a efficiency and routine and a system are now much more open minded to adopting iStent as part of their routine with cataract surgeries. So yes there is more of them out there, we have created a target list for 2016 the U.S. sales organization is executing against that target list and as I mentioned, we had good success in Q4 with that and Q1 of this year so it's a program that's ongoing I don’t continue to drive sales and were quite pleased with our result so far.

And I know it varies a bit from account to account, but anything you can provide or talk about perhaps to just help us understand what a typical utilization looks like with those higher volume practices, perhaps verses just a normal practice?

It's all over the board depending on the type of patients so they have within their practice so that would be a difficult one for me to address. But the average of what we look at is a 15% to 20% co-morbidity rate of glaucoma and cataract surgeries so that's the benchmark you can have people below that and you are going to people above that.

Alright And just one more for me. The Humana reimbursement win. Tom, can you elaborate on that? I am trying to understand is that policy effective now? Has pricing been set? And I guess in the past, how big a complaint from customers has that been, or potentially a barrier for adoption? Thanks.

That’s a great question. Humana is one of the larger private insurance companies out there. They have a large portioned of their businesses through the managed care - contracted managed care so this was a big win for us and just a little history Chris in that we have successfully converted all the max, we did that within seven months of launch and then we've methodically kicked off the commercial payers. Up until recently, we have three commercial payers who were not covering it Anthem, Tricare, and Humana. So getting one of those three to convert was the big deal and we’re quite pleased with that. In terms of barriers to sale yes it's tough the doctor have to look at the patient, assess what kind of coverage they have is it covered and in some cases it's not so they will do their patient. In other situation is that they can't remember they may not use it just for fear that it won't be covered. So the fact they were knocking of these insurance carriers is the big plus.

Okay. Very helpful. Thanks a lot.

So on behalf of Glaukos, I want to thank everyone today for joining us and for your continued interest in the company. For those of how you are planning to attend the ASCRS, we will be there and we look forward to seeing you this weekend. Thanks very much and good-bye.

And this does conclude today’s conference call. You may now disconnect.