Glaukos Corporation (GKOS) Q3 2019 Earnings Report, Transcript and Summary

Welcome to Glaukos Corporation’s Third Quarter 2019 Financial Results Conference Call. A copy of the company’s press release issued after the market closed today is available at www.glaukos.com. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] 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, Director of Investor Relations and Corporate Strategy and Development. Please go ahead.

Thank you and good afternoon. Joining me today are Glaukos President and CEO, Tom Burns, CFO, Joe Gilliam and COO Chris Calcaterra. Following our prepared remarks we will 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 efforts, the efficacy of our current and future products, our competitive market position, financial condition and results of operations in the proposed acquisition transaction with Avedro. These statements are based on current expectations about future events affecting us in our subject to risks, uncertainties and factors relating to our operations and business environment and the proposed transaction; 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 releases and our recent SEC filings for more information about these risk factors. You'll find these documents in the investor section of the website at www. Glaukos.com. Glaukos issued a press release on August 7th announcing their proposed acquisitions transaction with Avedro. Comments we make today about the proposed transaction with Avedro do not constitute an offer to sell or the solicitation of an offer to buy any securities nor solicitation of any vote with respect to the proposed transaction. Glaukos will file the registration statement on Form S-4 with the SEC that will include a prospectus of Glaukos and a proxy statement of Avedro. Security holders are urged to read the proxy statement, prospectus and other relevant documents filed with the SEC because they contain important information. In addition, please note that Avedro, Glaukos and respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Avedro stockholders in connection with the proposed transaction. Information about Avedro's directors and executive officers is included in its Form 10-K filed with the SEC on March 21, 2019 and in its form S-1 registration statement filed with the SEC. Information about Gluakos' directors and executive officers is included in its definitive proxy statement filed with the SEC on April 17, 2019. Additional information about the participants in the solicitation of proxies are contained in the proxy statement, prospectus and other relevant materials to be filed with the SEC regarding the proposed transaction. Copies of these documents can be obtained for free on the SEC's website at www.sec.gov. 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 great transparency in the Glaukos' ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release as well as the Investor Relations section of our website for reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos President and CEO, Tom Burns.

Okay. Thank you, Chris. Good afternoon and thank you for joining us today. As I'm sure you're aware by now, we announced the definitive agreement to acquire Avedro in conjunction with our last earnings call. The transaction is progressing in line with our expectations and we continue to expect the deal to close in the fourth quarter of this year. Earlier today, Avedro issued a press release with their strong third quarter financial results. But we will focus today's prepared remarks and our Q&A discussion primarily on Glaukos's third quarter results and full year plan given the transaction has not yet closed. Glaukos today is pioneering new market opportunities across glaucoma, corneal health and retinal disease. We are building these disruptive and durable franchises in large and growing areas of ophthalmology by leveraging our core competencies in microscale and hybrid pharmaceutical research and market development. We believe our proven strength and building new ophthalmic segments with disruptive technologies that address important unmet clinical needs of practitioners and patients paired with our continued investment to drive new innovation leads us ideally positioned to deliver near and longer-term sustainable growth. Our solid third quarter performance is a reflection of the progress we continue to make towards this goal. Consider our key accomplishments this quarter; one, we delivered third quarter net sales of %58.5 million, up 33% versus year ago quarter, allowing us to increase our full-year 2019 revenue guidance to $229 million to $232 million. Two, we fortified our U.S. market leadership position as our Webster began to shift the primary focus back to driving utilization and training new surgeons following the conversion of installed base for iStent, iStent inject, our next generation Trabecular Micro-Bypass device. Three, we drove robust constant currency international growth of 55% year-over-year as we continue to see the benefits of the international investments we've made over these past several years. Four, we advanced our industry-leading proprietary glaucoma pipeline that now addresses the full range of disease states and progressions. Five, we continue to expand and strengthen our pharmaceutical R&D capabilities to advance more than 10 internal preclinical initiatives across glaucoma, corneal health and retina. And six, we executed financially not only with continued revenue growth and outperformance but also with strong gross margins, discipline operating investments and positive net cash flow. Let's first focus on our strong commercial performance both in the U.S. and abroad. Thanks to our teams solid execution with the conversion of our installed base of trained surgeons for iStent to iStent inject over this past year. Our U.S. reps are beginning to shift focus back to driving utilization of existing accounts and training new surgeons who have yet to adopt MIGS, while remains early in the process we're encouraged with the level of interest for iStent inject and surgeons who have yet to adopt MIGS. Among U.S. surgeons who are utilizing iStent inject feedback and real-world results remain very positive and give us high confidence in iStent inject's potential that fuel meaningful U.S. sales going forward. This on full display at recent Societal Annual Meetings including the European Society of Cataract and Refractive Surgeons in September and the American Academy of ophthalmology last month, with the performance of our technologies including iStent inject were highlighted in numerous ophthalmic surgeon presentation and symposium. These data add to our robust body of clinical evidence that is unparalleled in the MIGS category and now consist of 128 clinical peer-reviewed studies supporting the performance of the technologies that have been performed at numerous global clinical investigational sites including a total of 49 studies on iStent inject or multiple iStent therapy. We're also please to report another quarter of strong performance in our direct international markets, driven by broad-based core market growth. Going forward, we plan to continue support and to grow our quality experienced U.S. surgical sales teams. We're working to optimize the reimbursement coverage and payment landscapes, train surgeons and leverage our compelling clinical data to grow MIGS adoptions and drives deeper penetration. In addition to the 16 international countries where we have a direct market presence today and continue to add resources, we're also evaluated in making initial investments in potential future direct and hybrid markets where favorable market opportunities and reimbursement pathways exist. While we remain bullish about a long-term U.S. growth opportunities, it's important to remember, it takes time to pioneer completely new market in each of these international countries and potential unforeseen setbacks may arise through these early market building phases. With respect to our existing glaucoma pharmaceutical and surgical pipeline that is designed to address all stages of disease severity and has the potential to significantly expand our addressable market opportunities over time we are executed according to a plan. Our iDose Travoprost, Phase 3 trials is progressing on schedule bringing this breakthrough technology closer to becoming a reality for the benefit of patients by addressing the ubiquitous problem of noncompliance with topical glaucoma medications. We continue to target a filing an FDA approval in late 2021 to 2022. In addition to the Phase 3 clinical trial enrollment progress in the Phase 2b follow up data we announced on our last earnings call that showed favorable performance and durability through two years, we're also in late stage development with finalized designs for next generation iDose extended-release implants that in a similar size and form factors to the original iDose are designed to provide nearly twice the drug capacity to extend efficacy durations even longer. We are encouragement with the continued progress in our collaboration with the Western on a potential ROCK inhibitor to further leverage our iDose platform, and on the surgical side that we recently announced the achievement of an important milestone with the completion of patient enrollment in the standalone iStent infinite clinical study to support a filing an FDA approval by 2021. For iStent Supra we'd contemplate – we've completed an initial examination of the pivotal data set. While we have not yet seen the level of safety concerns that led to the recall of the CyPass product, we have established an enviable track record for micro invasiveness and safety as a company and therefore believe it is prudent to follow the patients inner study for an extended period of time since the CyPass issues did not emerge more fully until later stages of patient follow-up. Accordingly, for this reason, as well as other benefits to risk assessments and changing market dynamics we have decided not to pursue a PMA filing of this time. Please note that this change has no material impact on our financial outlook for 2019 or beyond. In addition, we are in early preparations for the potential U.S. commercial launch of Santen Pharmaceuticals MicroShunt add external surgical implant device assuming FDA approval in 2020. The MicroShunt is not only a compelling treatment alternative for late stage glaucoma management, but also marks the capstone to our glaucoma treatment algorithm. We are poised to deliver a truly comprehensive portfolio of micro invasive surgical devices and sustain pharmaceutical therapies capable of providing optimized treatment solution at each stage of glaucoma disease severity from the earliest manifestations of the most severe in complicated and standalone procedures. We believe our glaucoma pipeline platforms if approved will create a sevenfold increase in our U.S. opportunity extending our reach to over 4 million eyes during the next several years. We are delighted with the current performance of our glaucoma business and its potential to deliver long-term growth. In addition to our abiding focus on glaucoma we will remain ambitious and seek to improve the treatment alternatives and quality of life for people suffering with corneal disorders and retinal diseases. To accomplish this we are expanding the size and depth of our R&D teams, investing in state-of-the-art technical equipment, forming strategic partnerships and making targeted acquisitions that complement our organic initiatives and core strengths. First, let's talk about the cornerstone of our new corneal health franchise which is intended to be Avedro. This proposed transaction peers to highly complementary hybrid pharma and device organizations combining Avedro's disruptive bio activated pharmaceutical solutions and R&D capabilities with Glaukos's global commercial scale, proven market building and shared reimbursement expertise, robust pharmaceutical and medical device, R&D capabilities and extensive clinical and regulatory infrastructure. By leveraging our core strengths we see tremendous opportunity to accelerate Avedro's growth potential and pipeline programs while also strengthening our own R&D expertise to propel organic development programs going forward. We believe Avedro is an ideal strategic fit for Glaukos and we look forward to fueling Avedro's momentum to create a durable synergistic global corneal health franchise that should serve as a powerful growth engine for our company going forward. Our experienced team is prepared to execute a fulsome integration plan upon closing, which we continue to anticipate in the fourth quarter of this year. Also on the corneal health front Glaukos is developing a patented noninvasive transdermal drug delivery platform designed for use in the treatment of dry disease glaucoma and corneal disorders such as blepharitis, conjunctivitis and related conditions. Early human studies of this novel delivery system have demonstrated efficacy while limiting the side effects often associated with drugs delivered as topical eyedrops. This novel drug delivery platform adds to several organic corneal health R&D initiatives that we already have in place. And moving on the retinal, are retinal R&D teams are developing multiple micro invasive bio roadable drug delivery platforms designed to treat age-related macular degeneration diabetic macular edema and other retinal diseases. We have three primary sustained-release development projects we're advancing that include an anti-VGF protein, a small molecule multi-kinase inhibitor and a steroid. The goal of these preclinical programs is to provide retinal specialist and their patients with novel sustain pharmaceutical treatment options that offer meaningful -- a meaningfully longer duration of the fact than the current standard of care. as a result of the noble progress we're making on all fronts of our business and as we turn the corner towards 2020 we remain committed to the key investments we're making across the business notably with the build out of our new headquarters facilities, implementation of global enterprise systems and continued expansion of our pharmaceutical R&D capabilities. Most importantly, we've been fortunate to attract top-tier leadership talent with deep expertise across various specialties and will continue to invest in our people to enhance our internal infrastructure and capabilities. So we believe these investments will help fuel our continued growth and solidify the foundation from which our franchise can significantly expand over time as we transition into a global ophthalmic hybrid pharmaceutical and surgical leader. So, with that, I'll turn the call over to Joe to discuss our third quarter financial results. Joe?

Thanks Tom. Beginning this quarter, I will be including non-GAAP or adjusted basis metrics to describe the highlights of our financial performance given our potential acquisition of Avedro and other nonrecurring items. I will also summarize our GAAP performance later in my prepared remarks. I encourage you to review the GAAP reconciliation of these non-GAAP measures which can be found in today's press release, as well as the Investor Relations section of our website. As noted earlier, net sales for the third quarter 2019 were $58.5 million, a year-over-year increase of 33%. The U.S. represented 81% of our sales in the quarter and international 19%. In the U.S., third quarter 2019 sales were $47.6 million, up 31% from the same period a year ago. U.S. sales in the quarter primarily benefited from continued market growth, the launch of iStent inject and the competitive market development that occurred late in the third quarter of 2018. Outside the U.S., third quarter sales were $10.9 million, an increase of 46% in the same period a year ago or 55% on a constant currency basis. Our international business continue to outperform expectations driven by broad-based growth. Our gross margin in the third quarter with 86.8% versus 86.3% in the same quarter in 2018, gross margins benefited from elevated iStent inject production level associate with the U.S. launch and initial inventory built. We continue to expect our core gross margins to remain in the mid 80% range going forward. Non-GAAP SG&A expenses in the third quarter rose 17% to $36.2 million versus $31 million in the year ago quarter. This rise reflects higher personnel and other costs related to the ongoing expansion of our domestic and global infrastructure and investment associated with iStent inject launch. R&D expenses rose 31% in the third quarter to $17.3 million versus $13.2 million in the same year ago period. The rise in R&D expenses reflects primarily the cost of additional personnel as we expand our pharmaceutical R&D capabilities development programs and within clinical research where in particular the direct cost associated with the iDose trial enrollment continues to increase. During the quarter, we also incurred a $1.5 million in process R&D charge associated with the licensing agreement with Intratus. We finish the third quarter with a non-GAAP net loss of $3.8 million for $0.10 per diluted share, compared to a non-GAAP net loss of $5.9 million or $0.17 per diluted share in the third quarter 2018. I will now summarize our GAAP results. GAAP net loss was $13.5 million or $0.37 per diluted share for the third quarter of 2019, compared with a GAAP net loss of $6.6 million or $0.19 per diluted share in the third quarter of 2018. The adjustments between GAAP and non-GAAP net income are outlined and quantified in our earnings press release issued today and include cost associate with our enterprise systems integration, patent litigation and related matters, Avedro acquisition and integration related costs and in process R&D charges. As of September 30, 2019 we had cash, cash equivalents, short-term investments and restricted cash of $161.8 million compared to $137.8 million at the end of the third quarter 2018 and $149.3 million at the end of 2018. We are increasing our 2019 net sales guidance to $229 million to $232 million compared to $226 million to $231 million previously. This guidance outlook takes into account the 2019 considerations we have outlined on prior calls including our expectations for organic growth, the mix market landscape and competitive dynamics, the new doctor training dynamic associated with our inject launch and the expansion of our international sales, which we now expect to be at least $41 million for the full year based on our current foreign currency exchange rate compared to our previous range of $38 million to $40 million. Please note this revised guidance does not include any assume contribution from Avedro. With that, I'll now turn things back to Tom for a few closing remarks.

Okay. Thanks Joe. I'll wrap up by reminding everybody that our goal at Glaukos is to build durable disruptive franchises enlarging growing opportunities where we can leverage our core competencies and microscale surgical, sustained pharmaceutical and hybrid platforms across glaucoma, corneal health and retinal disease. Our promising organic initiatives peered with our strategic expansion plans combined to create a hybrid pharma and device ophthalmic leader which we believe is ideally positioned to deliver sustainable long-term growth and to create meaningful shareholder value for years to come. We're confident that the investments we're making today will drive new innovation of disruptive therapies to serve the vision care needs of physicians and their patients for many years to come. So with that, I'll open the call to questions. Operator?

[Operator Instructions] Our first question comes from Brian Weinstein with William Blair. Your line is open.

Hey, guys. Sorry for the background noise. I'll try talk quickly here. So the guidance -- on the Q4 guide, I think you sized about $1 million sequential bump. That's a little bit different than we're sort of the guidance was set after last call. So can you just talk if there's anything that was maybe stronger in Q3, maybe little weaker in Q4, just kind of the back half dynamics there? And then I'll ask the follow-up here in the second. Thanks.

Sure. Brian, it's Joe. I'll start that off and if Tom or Chris want to add anything they can do that. So when we think about the fourth quarter, really the second half as you can imagine we're working our way through the year. I can say kind of the following; first, from a pricing standpoint things have remain pretty stable over the course of the year and nothing really change in terms our expectations there for the fourth quarter. Second, when we think about the overall kind of market development and growth that we're experiencing, nothing switching there either from what we've suggested over the course of the year and as we think about the fourth quarter we're still solidly on track for mid-teens market growth. I think one thing that would probably be is shifting pieces and it’s a small relative number here is we have to take into account our latest assumptions around the trying and trialing of Hydrus, the timing of the reps gradual shift back treating new surgeons. How much that will impact the fourth quarter versus 2020 et cetera and as we dial that in we obviously landed on the guidance we did both for the overall company's performance as well the U.S.

Got it. And then I know your guide in February, but can you just give us a little more detail about some of the factors that we should be considering when we're adjusting our model for next year for standalone Glaukos and also the combined entity? Thanks.

Yes. Sure. Thanks Brian. So, I mean, you said it, in the context of 2020 obviously we'll give that guidance more formally when we get to the Q4 call in late February. As we think about the primary puts and takes if you will, the big buckets here Avedro and the Avedro integration. I'll come back to that in a second. Obviously the timing of Santen and the MicroShunt launch, probably most importantly in combo cataract glaucoma, I think we expect a fair amount of more the same continued international growth, sitting here today we'd had expectation of continued stable pricing certainly the reimbursement come out for 2020 would suggest that should be the backdrop for the market. And then, I think in the U.S. specifically while there is the competitor trying trialing as we sit here today which is still in the early days of our reps getting back to playing often, I think we do believe that the U.S. mid market growth of at least mid-teens and 2020 should be achievable for us. So, I think that's big, the big picture. As you think about Avedro and again we'll get a lot more detail on this when we get to the fourth quarter call. I think that if we're successful in closing that transaction I would just suggest that folks are conservative when thinking about it you know, Tom has pretty clear some adjustments we'll make to go-to-market strategies specially on the capital equipment side and what that means remodeling standpoint. So I would just encourage hope not to get ahead of us on that. We will give a lot more education when we get in to that fourth quarter call.

Okay. Thanks guys.

Thanks Brian.

Our next question comes from Robbie Marcus with JPMorgan. Your line is open.

Hey, this is actually Alan on for Robbie. I had a quick one. You kind of alluded to the competitive disruption that kind of start playing on at the end the third quarter. And I guess given that this for the foreseeable future is going to be kind of the situation, I was wondering if we should expect maybe a little bit of benefit in fourth quarter and maybe if it is bigger benefit in 2020 especially given the kind of read-through that might have to the Santen and MicroShunt? Thank you.

Yes. I assuming, Alan, are you referring to the Zen [ph] recall and how that – what that could mean for Santen and the MicroShunt?

Yes. And even just like kind of like a read through maybe to inject. I know there are not like apples-to-apples in terms of the patient population, but any potential benefit that you call out?

Hey, Alan, this is Chris and thank for your question. This indication for Zen is different than it is for iStent or iStent inject and we really don't view that product as a competitive threat or working in our space. There may be some small upside but for all intensive purposes we don't see that as an upside benefit for us.

Got it. And then I guess I had a follow-up on iDose. I know you reiterate that your timelines through kind of that approval on May 2021, early 2022 and that the trial on schedule. I guess when it comes to maybe seeing formal presentation or update on either the Phase 2 or the Phase 3 data, do you have any additional color on when we might have that?

Well, this is Tom. And my code would be consistent with my past statements and that as we really presented our fulsome review of the interim cohort data at the meeting of JPMorgan in January 2018 and I also gave a fundamental review of the top line data to your data that we had late-breaking analysis of the last quarterly earnings call. And I think what I said all long as that we're in the privileged position of being able to [Indiscernible] this data as we approach launch. And so for proprietary reasons and to make sure from competitive reasons we'll continue to evaluate, but it's our intention right now to up to not publish this data for the foreseeable time and we'll continue to wait on the a Phase 3 data which again is can be the most compelling and most important to the commercial launch of the iDose product.

Our next question comes from Larry Nicholson with Wells Fargo. Please go ahead. Your line is open.

Hi. This is actually Kevin for Larry. Good morning guys and thanks so much for taking the questions. The first one is I wanted to tease out a little bit more on the trialing headwind from Ivantis in 2019 and 2020. Is that in the prepared remarks that was always baked into 2019 guidance and you said that the company probably has 20 sales reps earlier this year. The question really is, any update on competitive dynamics in the field that you would call out different in Q3 versus what you're seeing heading into Q4 and 2020? And I have a one follow-up. Thank you.

Hey, Kevin, this is Chris. I'm going to address this upfront and then I think Joe will add some comments. Hydrus to the best of our knowledge – excuse me, Ivantis to the best of our knowledge is somewhere in the mid 20s to upper 20s sales reps, so they've added some. And as a result of that you're seeing more trying and trialing in the third quarter than you did in the first half of the year. Things are largely in line with what we expected, but because of this there was a bit more of a headwind from a competitive standpoint during the quarter and with more people I would expect to continue to the remainder of the year. With all that said, we continue to be very pleased with the performance of iStent inject. The fact that we're now moving through, our strategy of upgrading our existing iStent users to iStent inject and moving more towards adding new DOCS and increase -- increasing utilization within our existing accounts and playing more offense. We're very pleased with the results of this strategy and we continue to see new doctors who had been on the sidelines with MIGS coming in and trying iStent inject because of the elegance of the procedure, of the straightforwardness of the procedure and certainly the efficacy of the procedure.

And Kevin, I'll just add on there. If you think back to our -- some of our prior calls and our commentary here, and we said really in the first half that Ivantis or Hydrus had been a little bit behind what our expectations were coming into the year. I'd say that in the third quarter it really -- it appears they finally kind of got their sales force the size we were expecting them to have coming into earlier in the year. So, as Chris mentioned that does come with more trying and trialing inherently, but no real shift in how we view the dynamics in the context of the end of 2019 here 2020 or the long-term regarding the marketplace dynamics.

Okay. Excellent guys. That's super helpful. If I could shift actually to just squeezing in an international question. I wanted to gauge what you guys are seeing on volumes after the U.K. facility reimbursement cut, A, and then B kind of what are you doing to reverse these cuts if you are doing anything? And then you had mentioned on the last call that you were pretty early in France. Can you talk about what type of opportunity the French market represents, and if you got any bump from that this quarter? Thank you very much.

Okay. Kevin, this is Chris. I'm going to start this and I think Joe will had some commentary afterwards. We did see an impact of the cut in the tariff in the U.K. We see it as a modest headwind. But we would expect more of a pronounced headwind through the subsequent quarters coming up. In terms of what we're doing, we're working with the ophthalmic leaders in the societies and other organizations within the U.K. to try and get and secure a more appropriate tariff. And we're hopeful that that will happen, but you never know. These things can take some time. So, there is effort in place to try and get that tariff back to a more reasonable number. In terms of France, we're very excited about what's going on there. It's early stage. But we've been very pleased with the real results so far. We have expanded the team a bit. And we will continue to follow the same blueprint there that we've utilized throughout the rest of the world. And we'll continue to add resources as necessary to drive the business there. They were one of our top contributors in the international market. As Joe mentioned, it was broad based. But in terms of countries that were new to the growth, noticeable growth France certainly was one of those.

And I'll just add. From a financial perspective what Chris said, we definitely saw the headwind to growth emerge in the U.K. over the course of third quarter and would expect that to persist at least through the end of the year and into the beginning of next. But thankfully in the third quarter as you see from our results we were able to overcome that through the contributions of most of our established countries in particular with the addition now of France and Japan in a more meaningful way.

Perfect. Thank you so much guys.

Our next question comes from Matthew O'Brien with Piper Jaffray. Please go ahead. Your line is open.

Hi guys. It's Adam on for Matt. Congrats on the quarter and thanks for taking the questions. My first question is just on the Q3 performance in the U.S. I was just hoping to get a better sense for what drove the U.S. growth in the quarter between utilization at existing centers and a new account adds. And I think you've talked about some pricing benefit from the conversion to iStent inject. So I just was hoping to frame all that up? And then I had a follow up.

Sure. Hi Adam. It's Joe. I'll start off the guys could add in any additional color. When it comes to third quarter, candidly it was a lot more of the same from what we've seen over the course of this year, right? Sort of market development side of things continue to be kind of in-line with where we expected them in that mid teens range. Pricing dynamics remain pretty stable. I'd say if anything there might have been a very modest sequential headwind in pricing in the U.S. primarily because of pricing dynamics around the legacy iStent normalizing, some contracting efforts, competitive dynamics on the margin et cetera, but a very modest. I think when you think about what's contributing or driving that, it's sort of what you'd expect. It's a shift from what was probably more of a same store sales driven exercise heading into the year and into the first half to now more of a volume mix that's driven by both. The reps getting back out there and playing offense and adding new doctors combined with same store sales growth. Having said that as I said earlier it's still early days right. I mean, the reps are out there doing it. We're encouraged by the funnel. We're encouraged by their activities. You'd expect to see more of that benefit play out in 2020 than 2019. But we are encouraged by what we're seeing out there in the field.

That's really helpful, Joe. Thanks. And then for my follow-up just a question on MicroShunt, I was hoping to get your thoughts on the top line results from the U.S. pivotal trial where the safety and efficacy data in line with expectations. And then just from a timing standpoint Santen I think released quarterly results today and from what I can tell the company has not yet made the PMA submission. So is that correct? And I think I heard you say on this call launch time in 2020, should we be thinking about the back half of the year? Thanks for taking the questions guys.

Yes, I'd be happy too. And this is Tom. So let's talk first of all about the top line results from Santen and I'll give you our perceptions and not Santen. But we really like the data that we saw with MicroShunt. So if you think about it the FDA required them to be able to compare MicroShunt against Trabecular acme which really is a Herculean predicate. But Trabecular acme is the gold standard and it is the obligation of the sponsor to comply with the FDA rules. And so they chose to go forward on the basis to conduct the clinical study. When you look at the data I like what I see. We're looking at really deep reductions in inter ocular pressure on the order of eight to nine millimeters from pretreatment means. We're looking at baseline post-operative pressures of 14.2 millimeters, 33% reductions and inter ocular pressure and significant reductions on the order of 81% in medication burden. So when I look at these and I compare them to the nearest kind of cousin in terms of competitors Zen, I get very bullish about what the opportunity is in the marketplace. And so when you look at the data I think you have to look at it from a dual standpoint not only in terms of efficacy versus the predicate of Trabecular acme, but also in terms of safety. And in terms of safety I think the results for MicroShunt were stellar. If you look at the results there the rates of hypotony and corneal bleb, leaks and other sequelae were really de minimus compared to what we see with Trabecular acme. So I think that will benefit to risk will be what comes under the contemplation of the FDA. And we're hopeful that these data become the basis for an FDA approval. In terms of timing, again Santen has said, they're looking to file this PMA by the end of this year. But I think by every expectation what I've guided the Street to is to not expect say in approval any earlier than late next year. So I would continue to stay with that as the guidance. But we remain very bullish. And again as you do your channel checks and I would encourage every investor on the phone to do so. Get a hold of some glaucoma specialist and ask him about this MicroShunt product. We really do believe it's going to be a compelling alternative for late-stage refractory patients.

That's very helpful. Thanks Tom.

You're welcome.

[Operator Instructions] Our next question comes from Jon Block with Stifel. Please go ahead. Your line is open.

Great. Thanks. Good afternoon guys. I think maybe I'll just start off because this one might be for you. But this year in 2019 price was part of the equation due to like the late 2018 roll out of inject and I'm not asking for the amount but just when I think a step back curious if price is going to be a component to the overall 2020 equation as we start to sort of sharpen our pencils and think about our models for next year?

Yes. Jon, it's Joe. Yes, I think as we've said all along from a price perspective it was a very modest premium. There's puts and takes in that, right, so some of that comes with expense of some price degradation potentially on the iStent side, right? So when you think about it on a blended basis you have to have to look at that and factor that in. As you think about the remainder of 2019 and even into 2020 I think price plays at a much lower and potentially not really a driver of the overall growth. I mean I think sitting here now our expectations in the fourth quarter would be that prices are in a relatively stable place from a year over year perspective. And as I mentioned there's a handful of things that are contributing that. But primarily it's that normalization of the legacy iStent pricing on a year over year basis, as well as contracting and competitive dynamics that would put us there.

Okay. And next time, I'm going to stick with the P&L. Tom, we didn't get a hold of those glaucoma guys and they certainly are excited for MicroShunt for what that's worth. But I'll stick to the P&L. And Joe, I'm doing sort of real time math which is always dangerous. I'm backing into a fourth quarter U.S. red number of about 49 to 50 ml which is up 10% year over year. It would be about 26% of your overall U.S. number for the year which is a bit below 27%. I guess where I'm going with it is the 10% grow than the 26% instead of 27%. I guess first is in the right ballpark. And two, it is slightly below that 27% just due to some of the competitive dynamics that you alluded to earlier? Thanks guys.

Yes. Thanks Jon. I mean, I think couple of things. First, you did unpack a fair amount there. So let me try to go through it. The first thing when you look at it from a year over year growth perspective in the fourth quarter of 2019 you have to factor in that if you recall we indicated previously that we saw at least a $1 million benefit in the fourth quarter of 2018 from restocking associated with the inject launch. But other than that I think as we -- as I alluded to earlier, everything continues to be pretty much ordinary course for us in the context of pricing, in the context of market development activities and the overall kind of expectation for mid teens market growth. The one thing that I alluded to or we talked about in more detail earlier is that -- now slightly larger commercial organization at Ivantis trying and trialing associated with that want to make sure we continue to be cautious with respect to what that means in terms of the near-term dynamics even if it doesn't really change our view over the medium or long term.

Fair enough. Thanks for your time, guys.

Thanks Jon.

And our next question comes from Ryan Zimmerman with BTIG. Please go ahead. Your line is open.

Hi. Thanks. This is Sam on for Ryan. First question on something is rolling out at ESCRS with a iStent inject. Can you comment at all on plans to bring that to the U.S.? And what impact you're seeing on the European business from that?

Hey Sam, this is Chris. And thank you for your question. We're just in the early stages of rolling that out in a controlled manner in Europe. Our plans are to hopefully gain regulatory approval in the U.S. and other countries sometime next year and it would launch it sometimes thereafter. So it's really too early to say on how things are going in Europe. We just started. But our approach would be to file with the FDA and other agencies across the world and launch sometime thereafter.

But I wouldn't really consider this to be a material item in the context of how we view 2019, 2020. This is this is an ordinary course product enhancement that we've been planning for some time. Not something significant. We'll be thinking about it from a forecasting or modeling standpoint.

Exactly.

Great. Thanks. And then just with the reps going back on offense, could you're going to characterize what percentage of your target doc population. You see utilizing injector iStent right now and how much longer of a ramp do they have before you're getting close to penetration? Thank you.

So as we target new physicians almost always that's going to be with the iStent inject versus iStent. As that's the product that most of them would like to try for all the reasons that we've described before, the straightforward nature of the procedure. A lot of these doctors who have not jumped on the mix bandwagon are looking for that product because it does have a higher ease of use, better efficacy because there's two stents. So the majority if not almost all of the new starts are iStent inject.

And I think Chris has been on the record quite a bit that ultimately in the market in the U.S. being no different, we would expect 80% to 90% of the volume to come from inject. We're not there yet but we are getting pretty close making considerable progress.

There are no further questions at this time. I will now turn the call back over to the presenters for closing comments.

Okay. I want to thank everyone for your time and attention today. And thank you for your continued interest in Glaukos. Goodbye and have a good day.

This does conclude today's conference call. Thanks again for participating and you may now disconnect.