GKOS - NYSE

Welcome to Glaukos Corporation's Second Quarter 2025 Financial Results Conference Call. Copies of the company's press release and quarterly summary documents, both issued after the market closed today, are available at www.glaukos.com. [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, Vice President of Investor Relations and Corporate Affairs.

Thank you, and good afternoon. Joining me today are Glaukos' Chairman and CEO, Tom Burns; President and COO, Joe Gilliam; and CFO, Alex Thurman. Similar to prior quarters, the company has posted a document on its Investor Relations website under the Financials and Filings Quarterly Results section titled quarterly summary. This document is designed to provide the investment community with a summarized and easily accessible reference document that details the key facts associated with the quarter, the state of the company's business objectives and strategies and any forward statements or guidance we may make. This document is designed to be read by investors before the regularly scheduled quarterly conference call. As such, for this call, we will make brief prepared remarks and transition into a question-and-answer session. 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, products, pipeline technologies and clinical trials, U.S. and international commercialization, market development efforts, product approvals, the efficacy of our current and future products, competitive market position, regulatory strategies and reimbursement for our products, financial condition and results of operations as well as the expected impact of general macroeconomic conditions, including foreign currency fluctuations on our business and operations. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements. Please review today's press release and our recent SEC filings for more information about these risk factors. You'll find these documents in the Investor Relations section of our website at www.glaukos.com. Finally, please note that during today's call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaukos' ongoing results of operations, particularly when comparing underlying results from period to period. Please refer to the tables in our earnings press release available in the Investor Relations section of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I will turn the call over to Glaukos' Chairman and CEO, Tom Burns.

Okay. Thanks, Chris. Good afternoon, and thank you all for joining us. Today, Glaukos reported record second quarter consolidated net sales of $124.1 million, up 30% on a reported basis or 29% on a constant currency basis versus the year ago quarter. As a result of our strong performance, we are raising our full year 2025 net sales guidance range to $480 million to $486 million compared to $475 million to $485 million previously. Our second quarter record results reflect a sustained growth acceleration in our business driven by growing iDose TR adoption and utilization along with our broader interventional glaucoma or IG initiatives globally. While we are in the early stages of these IG efforts, our focus remains on driving new stand-alone intervention therapies designed to slow disease progression and reduce drug burden for the benefit of physicians and patients. We continue to be encouraged with the increasing levels of clinical interest for this paradigm-changing evolution. Within our U.S. glaucoma franchise, we delivered record second quarter net sales of $72.3 million, a strong year-over-year growth of 45%, driven by growing contributions from iDose TR, which generated sales of approximately $31 million in the second quarter. iDose TR, a first-of-its-kind intracameral procedural pharmaceutical designed to continuously deliver glaucoma drug therapy for up to 3 years, continues to build commercial momentum supported by positive clinical outcomes and surgeon feedback that reaffirms our view that with the launch of iDose TR, we are pioneering a brand-new therapeutic category that has the potential to reshape glaucoma management as we know today. Operationally, our teams continue to make great progress in the execution of our detailed launch plans for iDose TR, including: first, growing universe of trained surgeons and accounts; second, expanding utilization of the installed active surgeon base; third, broadening and streamlining market access among MACs, commercial and Medicare Advantage payers; fourth, expanding the robust body of clinical evidence and accelerating marketing investments to support increased patient awareness and education. Shifting to our U.S. stent business. As anticipated, the 5 MAC LCDs implemented in the fourth quarter of 2024, continue to cause some transient turbulence in the market during the second quarter, as surgeons navigate restrictions when using 2 MIGS surgical devices in the same procedures. We expect this MIGS market headwind will continue to be over the course of 2025 as providers continue to navigate the impacts associated with these LCDs until it anniversaries later this year. As a reminder, our second quarter U.S. glaucoma results also reflect the expiration of royalty payments associated with the Hydrus Microstent, which concluded in late April. Earlier this month, CMS issued its proposed rules for 2026, which, as drafted, largely maintained the 2025 APC assignments and modestly increase facility fee rates associated with our procedures across both the hospital outpatient and ASC settings. In contrast, CMS has proposed reductions and physician fee reimbursement for several Category 1 CPT codes across ophthalmology, including for cataract and surgical MIGS procedures, specifically along with several other specialties. These stand primarily from a major revision in how CMS allocates indirect practice expenses within its RVU methodology, particularly impacting services performed in the facility and outpatient setting. We intend to support our customers and societies as they educate CMS on the proper assumptions associated with this proposed methodology shift. Beyond that, we believe these proposed changes further support a more diversified practice mix that includes intervention of glaucoma treatment and underscores the value of our stand-alone therapies such as iDose TR and iStent infinite, which as procedures covered by Category III codes are currently unaffected by this proposed physician fee role. Moving on, our international glaucoma franchise also delivered record net sales of $31.3 million, a year-over-year growth of 20% on a reported basis and 15% on a constant currency basis. This strong growth was once again broad-based as we continue to scale our international infrastructure and execute our plans to drive MIGS forward as the standard of care in each region and major market in the world. Last month, we were pleased to announce EU MDR clearance for iStent infinite along with several of our other leading trabecular micro bypass MIGS technologies. Of note, this clearance provides a broad label for iStent infinite indicated for patients with all stages of open-angle glaucoma in both combo cataract and stand-alone procedures. These important milestones, which mark our company's long-waited first approvals under the new EU regulatory framework will not only help us maintain and grow our presence in Europe, but also advance and accelerate our broader IG initiatives globally. We plan to commence commercial launch activities for iStent Infinite in our key European markets at the upcoming ESCRS Annual Meeting in September. As previously discussed, we continue to expect the trialing of new competitive products in some of our major international markets may become an increasing headwind as we progress through 2025. And finally, our Corneal Health franchise delivered net sales of $20.6 million on a year-on-year growth of 4%, including Photrexa net sales of $17.9 million. As discussed previously, our second quarter results reflect the continued impact to Photrexa realized revenues as a result of our entry as a company into the Medicaid Drug Rebate Program or MDRP. Shifting gears to our Corneal Health pipeline and FDA's ongoing NDA review for Epioxa, our next-generation corneal cross-linking iLink therapy for the treatment of keratoconus, a rarely diagnosed sight-threatening disease. During the second quarter, we completed several important review-related milestones including a successful pre-approval inspection or PAI at Burlington, Massachusetts facility, along with a protective post mid-cycle review meeting with the agency as we continue to progress towards the established PDUFA date of October 20, 2025. Alongside this regulatory review, our commercial and market access teams continue to make solid progress and the preparation and planning of the Epioxa commercial launch targeted for next year. As a reminder, this potential approval would provide keratoconus patients in the ophthalmic community with the first FDA-approved surgery-free, topical drug therapy that's catalyzed by pulse oxygen and light that does not require the removal of the corneal epithelium, the outermost layer at the front of the eye. And Epioxa approval would also provide us with the opportunity to launch this pharmaceutical therapy supported by the right long- term pillars to optimize patient access, a persistent and at times frustrating challenge for us historically with Photrexa. Because we believe Epioxa, which is designed to preserve the corneal epithelium, streamline the procedure, improve patient comfort and shorten recovery time represents a potentially breakthrough treatment advantage and advancement for keratoconus patients. We anticipate some potential transient disruption with our U.S. Corneal Health franchise as the market transitions from Photrexa to Epioxa following targeted approval, which is reflected in our latest full year guidance outlook. Beyond Epioxa, we continue to advance several other important clinical programs across our 5 novel therapeutic platforms. Within our iStent surgical glaucoma platform, we are advancing patient enrollment in a PMA pivotal trial for iStent Infinite in mild-to- moderate glaucoma patients as well as a 510(k) pivotal trial for the PRESERFLO MicroShunt. Within our iDose platform, we are advancing a Phase IIb/III clinical program for iDose TREX, our next-generation iDose therapy, with patient enrollment already underway and now expect an FDA decision regarding re-administration for iDose TR in early 2026. Within our iLink platform, in addition to the ongoing Epioxa NDA review, we are also advancing Phase II trials for our third generation iLink therapy. Within our iLution platform, we remain on track to file a U.S. FDA IND and commence a clinical trial for Demodex blepharitis later this year. And finally, within our retinal platform, we are matching its first-in-human clinical development program for GLK-401, our intravitreal multi-kinase inhibitor retinal program in wet AMD patients, where we now also have an open U.S. FDA IND. So as you can see, we have a lot to be excited about when it comes to the significant potential value that we believe our pipeline programs may create. At the same time, as we consistently discussed, we continue to prioritize the cadence of our investments as we strive to strike the right balance of risk-based spending while maintaining our strong capital position, both now and in the future. This disciplined approach has enabled us to stay active on the business development front with a focus on transactions that complement and enhance our existing organic growth initiatives. During the second quarter, we put this strategy to work with a small acquisition of Mobius Therapeutics, whose lead compound Mitosol is the only FDA-approved ophthalmic formulation of mitomycin-C or MMC, which is often utilized as an adjunct in late- stage glaucoma filtration procedures. This addition helps to solidify our supply chain as is being utilized alongside the PRESERFLO MicroShunt in our active 510(k) study. It will also support our broader late-stage glaucoma tertiary care efforts over time and further add to our deepening relationship within the glaucoma specialist community. We also continue to invest operationally to support our long-term growth plans with the purchase of an additional building at our Aliso Viejo headquarters campus during the second quarter. Excluding these 2 onetime investments, our underlying cash and equivalents grew by more than $4 million in the second quarter. So in conclusion, I'm very pleased with another record quarter and sustained strong momentum in our business as we continue to successfully advance our mission to truly transform vision by pioneering novel, dropless platforms that can meaningfully advance the standard of care and improve outcomes for patients suffering from sight-threatening chronic eye diseases. Our foundation is strong, and we are ideally positioned to continue transforming vision for the benefit of patients worldwide. So with that, I'll open the call for questions. Operator?

[Operator Instructions] Your first question comes from Tom Stephan with Stifel.

Nice quarter. One sort of near term, just on 2025 sales guidance, you beat Street in 2Q on revs by, I think, $8 million, $9 million. But on the guide you only raised by $3 million at the midpoint. Tom, you made some comments on OUS glaucoma and Corneal Health within the guide, but Tom or Joe, can you talk about the components of this year's revenue guide? And then maybe why more of the upside wasn't flushed through for the full year?

Yes, Tom, it's Joe. And if Tom wants to add something, he can. Obviously, you did the math pretty quickly there. The fact is we're pleased to be able to be in a position to raise guidance off the back of what was an exceptional second quarter, as you noted, and that was really driven by outperformance across the board, but largely by iDose in particular. And I think when you parse back some of the commentary from Tom and I'll elaborate a bit more, you'll find that really it was a full beat and raise in the context of iDose, which is obviously the core of the growth story as we sit here today. But several data points as you think about updating your models for the second half of the year. First, on the international glaucoma side, obviously, we continue to be off to a strong start this year and had some currency benefit in the second quarter. And we're now expecting that you'll have sort of low double-digit growth for the remainder of the second half on a year-over-year basis. So largely unchanged there in terms of our expectations of our growing scale and competitive products launching in key markets that present headwinds as we move forward relative to obviously the strong first half results. On the cornea side, Tom, I think, elaborated on this, but I'll repeat it. When we go into the second half here, we enter a period with, I'll call it, less visibility or predictability as we navigate the transition from Photrexa to Epioxa, assuming the latter is approved as expected in October. So our current expectations are for flat to low single-digit growth, if you will, in Q3, followed by a material disruption or headwind in Q4 as patients forego Photrexa in favor of Epioxa for all the reasons that Tom articulated. And that leaves you obviously on the U.S. glaucoma side where we continue to expect the same dynamics around the LCD headwinds and the Hydrus royalty expiration and the generation of probably a mid-single-digit decline for, I'll call it, the non-iDose revenues in the second half. And when you put all that together, it's going to imply continued sequential iDose expansion in Q3 and Q4 and an overall expansion of our expectations for the full year on the iDose front.

That's great. Appreciate that. And then pivoting a bit more kind of big picture just on interventional glaucoma, approaching 18 months into the iDose launch. So kind of just wanted to ask about the state of the union with interventional glaucoma. What are the learnings, the puts and takes around those broader IG efforts? And Joe or Tom, where does the bullishness -- your bullishness stand kind of in terms of the long-term opportunity with IG?

Well, I can start off here. I'm sure Tom will have some views as well. Obviously, as you think about this as being part of the kind of the birth right of us as a company over the years. But I'll start, Tom, by acknowledging some of the foundational work that you recently did on this paradigm shift. And I'm glad you asked the question. I think it was a good state of the state snapshot, but also a bit of an indicator of how far we've come over these last 18 to 24 months in terms of building the stand-alone market opportunity. Hopefully, you all have visibility and awareness of just how pronounced the shift and momentum towards interventional approach into glaucoma care has changed since we began our efforts in support of it 1.5 years ago. The underlying movement, if you will, largely led by Glaukos in partnership with physicians to be proactive on behalf of patients now that tools like iDose TR and iStent infinite really enable a risk-benefit equation that makes sense is rapidly gaining traction. And it's worth reminding investors what this means for, I'll call it, the next decade in ophthalmology as the 12 million to 13 million diagnosed and treated glaucoma eyes in the U.S. also increasingly seeking an interventional approach to care. I mean, if you compare that to cataract surgery, which is the mainstay of our industry today that does about 5 million procedures annually, it's hard not to see how bright the future is for Glaukos and our industry overall as we improve the standard of care for patients. And I have to give credit to our marketing team, our sales team and the numerous other folks here at Glaukos that are driving this rapid change from both the top down and the ground up every day has got us here.

Your question comes from Ryan

Congrats on the quarter. And I appreciate you giving us the iDose number and removing the guesswork on that one. Maybe just to start off with iDose for a second, you've made progress on certain MACs and others are still not fully there, I guess, is the best way to put it. Can you compare and contrast kind of the geographies in which MACs are fully covering iDose without any disruption or any slowness? And how is the utilization amongst that physician base compared to, say, a territory or a state that's in a MAC that may not be fully there and kind of your time lines and assumptions for when those ramp, Joe?

Yes. Happy to touch on that, Ryan. And as you commented, we did disclose the $31 million approximately sales of iDose in the second quarter, which was a significant step in the right direction. And the performance really was driven by a mix and a continued mix of both new starts and increasing utilization within those accounts who've been at it for a bit now. And really to kind of dive in, I think, the hardest one of your question, while we saw growth nationwide in pretty much every geography, the acceleration continue to be faster in those MAC regions where the professional fee has been established for a bit. And that's really driven again by widening surgeon adoption over the course of 2025 that began to translate into procedures, given the typical scheduling backlogs you see in ophthalmology, and I know you know well. And to put that into context, Novitas, Noridian and First Coast, which are the MACs who've had a professional fee schedule in place for a little bit, they represent a little over 50% of Medicare lives, those regions. But we saw over 80% of our iDose volumes come from those areas in Q2, and that's a growing percentage of the overall mix. And so I think that's a trend that bodes well for our business as these other MACs finalize their iDose and professional fee schedules here in the -- hopefully, relatively near future. The second part of your question was kind of where do we go from here is the way I would summarize it. And I would just say that all the MACs now appear to largely be paying the J-code properly, which is the first step in the journey, if you will, and continued progress that we've seen there. And as it relates to professional fee beyond Noridian, Novitas and First Coast, we believe that NGS has made considerable progress. We're seeing increasing momentum that makes us hopeful that in the relatively near term, we'll see a professional fee get established in what is the third largest MAC region in the United States. We continue to make slow and I'll call it, methodical progress with Palmetto and WPS. We've really accelerated our advocacy and education efforts, both at the account level, but also with the MACs themselves. And we started to see the earliest signs of positive pro fee payment flow, but there's still work to do in both of those important MACs. And then really, CGS, I would say, remains behind the others by a fairly considerable margin at this stage, and we are engaging directly with them and have been for some time. And eventually, as the smallest MAC of all, we do expect them, obviously, to come around -- alongside the other MACs.

That's very helpful, Joe. And just sticking on the topic of professional fees for a moment and turning to the legacy mix business. So we all saw the proposals. I remember many years ago, doctors were making, I think, close to $1,000 to implant them the MIG. We're now pushing around $100, maybe sub-$100. We'll see kind of where the proposals land. I guess my question is more of a bigger picture question, though, on that topic, which is, as the pro fees have come down, how do you think about legacy surgical glaucoma and the broader appeal to say non-glaucoma ophthalmologists? The comprehensive ophthalmologists who maybe was your marginal customer who was doing MIG, as that comes down, does that get offloaded to the glaucoma specialists. I'm just curious kind of how you're thinking about maybe some of those economic incentives?

Yes. I think, Ryan, so there's a couple of things to unpack in your statement. The first one is, in a large -- to a large extent, professional fees are about relativity in the context of the economics for that surgeon's time, whether that be in the context of cataract surgery, MIGS procedures, stand-alone procedures or the like. And as you heard Tom say and we know from the proposed rule, what you've seen across many therapeutic categories, not just ophthalmology, but many others and then certainly across the board in ophthalmology, if the wholesale shift in the way CMS is calculating the professional fee economics and the RVUs that drive them. And so I think there's an education process that has to happen led by the societies and the various groups that have a voice with CMS to help make sure that lands in the right spot. But where I -- where we land on it, I think was articulated by Tom in the prepared remarks. The reality of what we're seeing unfold only emboldens the move towards standalone glaucoma therapy as a pathway for the average practice to continue to remain financially viable as they move forward here and face that. I mean, to put that historical statement context, there was a point where cataract surgery pro fees were over $2,000 a procedure. And today, obviously, in the proposed rule, they are in the $400s. So -- and obviously, doctors continue to do cataract surgery as the ubiquitous standard of care for that disease indication. I think what you're going to see is more and more of those broader ophthalmologists leaning into what we've been talking about, which is interventional glaucoma paradigm shift and starting to really treat these patients proactively as a part of both doing the right thing for the patient and the right thing for the practice.

Well, I agree as well. And Ryan, this is Tom. If you look at the recurring changes and reductions in fees that are happening as we've now seen over the last several years in cataract surgery, and we believe that's going to continue going forward. And I think not only do we have the immunization here on the current CMS provisions of Category III codes are really high-paying stand-alone payments for iDose and iStent infinite. But I think as we go forward, these comprehensive ophthalmologists who right now are spending most of their time recruiting cataract patients for one-and-done procedures. This is catch and release, are going to start waking up to the value of looking at glaucoma as a long-term treatment pattern and what we're calling the forever patient. And with the forever patient now with a statutory time of 20-plus years from the time of diagnosis to life termination, there'll be multiple opportunities for these surgeons to reenter and to reimplant with procedural pharmaceuticals and with stents. And I think that will start to really resonate with these comprehensive ophthalmologists, not only as a more advanced standard of care for patients to stop the progression of glaucoma, but as an offset to the chewing that's happening on the professional fee side for their cataract surgery procedures.

Your next question comes from Allen Gong with JPMorgan.

This is actually Rohin, for. I just wanted to ask about the ramifications of the proposed reimbursement to start off, just a higher facility fee offsetting the lower physician fees. How are you thinking about that and the impact for that next year? And do you view it as more of a rising tide that lifts all MIGS boats? I just want to get a sense of how you're thinking about it?

Yes. I think, Rohin, you're talking about the proposed rule around the facility payments. And obviously, we are pleased to see those step up largely in line with the pace of inflation. So I think in general, that's positive across the board for those folks who own and operate facilities and the manufacturers that provide tools and technologies and therapeutics into those facilities. I'm not sure I would call it out as a particular driver as you think about the setup for 2026. It's more of a neutral to slightly positive event in the context of Glaukos and I think the other participants in the MIGS field.

And just a quick follow-up as well on SG&A. There was a fairly big step-up in the quarter. Just want to get a sense for what's driving that relative to expectations? And how are you thinking about SG&A growth for 2026? Is that 10% level still a good way to think about it? Or should we expect something a bit higher?

Rohin, this is Alex. Thanks for the question. And it is a great question. So you're right, there was a little bit of a step-up in both SG&A and total OpEx year-over-year and during the quarter. We want to point out that within that number, I'm going to speak to the total OpEx as predicate. So within the total OpEx number, there is about a $4 million onetime stock comp expense hit that occurred based on the triggering of certain performance awards that happened during the quarter. So if you exclude that and you look at that on an adjusted basis, the OpEx would have grown around 16%. And as we've guided in the past, we've always kind of set our OpEx this year would grow in kind of the mid-teens. So that's kind of in line with what we -- what we would have expected, excluding that stock comp expense. And then as you think about it on a go-forward basis, again, speaking of the total OpEx, we would expect that third quarter to be roughly flat to our reported second quarter number. And then the fourth quarter, maybe a sequential step up from there. When you put all that together, you're looking at something for the full year in kind of the $460 million range, which is more the top end of the range that we were thinking about previously. And that again translates to about mid-teens growth year-over-year.

Your next question comes from Larry Biegelsen with Wells Fargo.

This is Simran, on for Larry. Just 1 on guidance. Any finer point on the cadence of sales in the back half? As I think about the color that you've provided around iDose and the different reimbursement updates with regards to the MACs? Should we be thinking about sort of an incremental step-up in Q3 and something that's a little bit more Q4 weighted. And just sort of what would that exit rate imply for iDose beyond this year?

Simran, it's Joe. I've probably given sufficient color in the context of the second half in totality. Maybe the best way to answer the question around the, I'll call it, the cadence from Q3 to Q4 is to dial in a bit on what you typically see in Q3. And as you know, in ophthalmology and certainly in our business, Q3 tends to be a seasonally down quarter, just given the summer holidays on a global basis. And if I put a finer point on that in the context of our various franchises, the Corneal Health business tends to be kind of flat to up a touch, but I think with lower device sales and some potential Epioxa, obviously related as anticipation grows for that product approval, the way to probably think about that is sequentially being a bit flat to what we saw in Q2 out of the cornea business. And international glaucoma usually takes a couple of million dollar step down in Q3 relative to Q2. And then as it relates to the U.S. glaucoma business, the non-iDose related portion typically also takes a step down of a couple of million dollars from Q2 to Q3. But we would expect, obviously, some iDose offset there to put you back into kind of positive territory Q3 versus Q2 on the U.S. glaucoma. You put all that together, I think where your model will land is sequentially down a bit relative to Q2. And then as often is the case in ophthalmology Q4 obviously becomes the important -- more important of the 2 as we exit the year and a lot of procedures get done.

Okay. Great. That's very helpful. And just for my follow-up, so we do continue to hear from physicians and our surveys that a high percentage of iDose cases are done in combo cataract. Can you share a national percentage with us? And how is that trending versus your expectations?

Yes. I think there can be some noise in your sampling there, obviously, and it's not something that we track closely nor are we able to. As you know, when a facility orders iDose, at the end of that, there's no direct relationship to knowing whether or not they've done it in combination with cataract surgery or not. But having said that, we believe the largest utilization continues to be in stand-alone procedures. And as reimbursement gets solidified, surgeons naturally start to look at it in both settings, meeting the patient where they're at. If they've got elevated pressure and they're looking to control that, whether that patient has comorbidity with cataract or not, they're increasingly turning to iDose. So we would expect, certainly over the intermediate period, a little higher percentage being done in combination with cataract surgery, say, at the beginning or certainly as we think about it over the next 3-, 5- and 10-year period. But I wouldn't say that it's the dominant portion of what we're seeing today.

Your next question comes from David Saxon with Needham.

Couple for me, 1 on iDose and then I'll have 1 on Corneal Health. So first for iDose, specifically for the reimbursement, do you think we'll be at a place exiting the year where maybe 6 or all 7 of the MACs are paying out the J-code with an established pro fee? And is there anything that needs to be done outside of just getting cases submitted for the 4 that are lagging to kind of catch up?

Yes, David. So just -- I think first, on the J-code itself, we're already largely seeing all of the MACs increasingly paying those as they should. As it relates to professional fee, which I think is the heart of your question, it is in large part a volume gain because what the MACs do is educate themselves on the procedure, the cost and resource utilization associated with that. And as they get more data points, they're able then to arrive at the appropriate crosswalk and pricing of that Category III code, and that's when they'll publish it. I think we -- as I noted earlier in the call, we've made an awful lot of progress with virtually all the MACs probably with the lone exception being CGS. And so as I think about going forward, I certainly hope that, that would be the case. I can only say that we'll be doing everything possible from an advocacy and education and driving those required volumes to get the MACs to a place where they feel comfortable pricing it in a manner similar to what we've seen, obviously, already out of Noridian, Novitas and First Coast.

Okay. Great. And then on Corneal Health, so after Epioxa is approved, how are you thinking about rolling out the Epioxa cross- linking machine? I understand it's going to be a different machine. So is that a trade in? Is it a new purchase? And then over what period of time would you expect installed base to convert over to the new machine?

Yes, it's a good question, David. I'm not going to get too deep into the particulars, obviously, certainly in advance of an approval in hand. I think when we get to that point, we'll give a lot more context. But you raised one of many pertinent points around what will be the rollout and transition period from Photrexa as the standard of care today and what we expect with Epioxa. And as you heard Tom mentioned in the prepared remarks, we do expect an impact from those -- that transition over the course of certainly the fourth quarter and into early next year, part of which is driven by what you're describing around getting the new systems installed out there. But really, the biggest driver of this is going to be simply the fact that most patients who are educated on the relative differences of the noninvasive procedure alternative that exists with Epioxa are going to want to defer to the extent they can to get access to what is a superior procedure from a patient perspective. And so we do expect there to be a bit of that, I'll call it, warehousing of patients post approval until we're really fully up and running, both from a site of care perspective with the machines as you're describing as well as a patient access perspective from a reimbursement standpoint.

Your next question comes from the line of Joanne Wuensch with Citi.

I'm catching up here a little bit with others reporting, so forgive me. But did you comment on the full year guidance for iDose based on what you are seeing in the market at this stage? And then for my second question, as we think -- start to think about the Epioxa approval, how do you start to think about when that revenue may begin to ramp? And to your point, if patients are putting the procedure off until it is available, is there a wait list that's starting? Or is that too early?

Yes. So Joanne, first, on the iDose guide and a bit of a repeat, and you'll be able to see it in, I think, the remarks they become available. But really, the punchline on iDose is as you weave your way through the second half across the various franchises is that there's an implied -- obviously, it was the predominant part of the beat in the second quarter. And really on the heels of that, we've effectively raised our guidance for the full year around iDose, and we continue to see that growing momentum that you would hope for around the utilization of that, in particular, in those regions that -- where the professional fee has been established in Novitas and Noridian and First Coast. As it relates to the Epioxa approval, I think from a big picture standpoint, there's a series of things that have to take place to where you're really running with any new drug, certainly in a rare disease category like keratoconus. And as we make our way through 2026, we expect to methodically unlock some of those. An important moment along that journey is the establish of a J-code, which we would expect in midyear. But even through the course of the year, you're educating, in this case, commercial payers, you're updating policies, you're doing all the blocking and tackling to get access for patients to a therapy that clearly they're going to want over the prior standard of care in the form of Photrexa. And the last thing I think you referenced, no, there wouldn't be any formal wait list at this point. You don't have an approval process. And so those conversations aren't really happening, certainly not on behalf of Glaukos or our organization in any way, shape or form. It's possible that some surgeons just simply because of the public nature of the trial or their involvement in it, would be having some conversations with patients. But I'd say that's probably on the margin at this point. It is something we expect to be an important dynamic that will play out post approval. So as you make your way through into, call it, November and December in the fourth quarter, you can expect that an increasing percentage of those patients will be having exactly that conversation with their physician. And we expect a significant portion of who can will try to defer and get access to Epioxa, just simply given the pain and the recovery time associated with Photrexa versus Epioxa.

Your next question comes from Adam Maeder with Piper Sandler.

Congrats on the quarter. Two for me, both on iDose and I'll ask them upfront. So first, on the reimplantation decision from FDA, if I heard in the prepared remarks correctly, it's early 2026. I thought before it was potentially before year-end. So did we have a little bit of a wiggle there? And if so, why the change in timing? Then secondly, for iDose Trio and the in-office opportunity, can you just put a finer point on time line, say or kind of what needs to be done to unlock the office opportunity for iDose?

Adam, this is Tom. I'll be happy to take both those questions. So first of all, on the FDA's position with regards to iDose reimplantation, I guess the way that you'd call it there was the FDA recently classified our petition as an NDA supplement. And so with that gave us a PDUFA date, which followed the statutory guidelines that they've set, which is now January 28, 2026, which gives a certainty now for understanding what the position will be. And so while we believe we've made a compelling case for reimplantation, as I've said in the past, I just want to alert the investment community that we are not at all timing on positive outcome. That would be a very a very formidable upside if we were able to have a positive outcome on the iDose reimplantation discussions. Secondly, with regards to Trio, I think first, it's important to note that we've already demonstrated that in our patient subset of a Phase III clinical trial, we stratified, and we did a number of patients in office using the current iDose applicator and iDose device in an office setting. Those data, we are now stratifying and we're pulling together for a submission for a peer-reviewed publication. As we speak, and we think they will replicate the safety and efficacy of iDose implantation that are on the ASC. We are currently in the process of initiating discussions with MACs, as I've talked about before, with the intention of creating a non-facility payment code, which will allow for the reimbursement of iDose implantation in office setting. And as I've stated previously, this will likely be a several months long process. With regards to iDose Trio itself, we've gone through several enhancements of the improved iDose applicator. We continue to optimize the final engineering design. And as I've said before, we're designing this new approach with the existing iDose device. The applicator will target at approximately 1 millimeter incision. And by doing so, it should allow us to perform a closed chamber procedure, which can maintain chamber pressure and minimize dehiscence of aqueous humor and aqueous humor that would kind of percolate out during the procedure. And we have a final design, which is now targeted to enter a U.S. clinical trial by year-end. And while the design itself and the clinical trial is relatively short, the FDA has asked us to perform some additional testing over the period of 1 year. So we'll now be targeting the approval of the iDose TRIO by year-end 2027. Let me just say, this new product made is a transition for surgeons to in-office surgery, particularly as we establish nonfacility payment codes at each of the individual MACs. It is the first of what I anticipate will be many development efforts that we'll be making to optimize the in-office implantation of iDose. And I think the development of this product as well as our subsequent product comes at an enviable time. As we think about the recurring reduction of cataract surgical fees, the future capacity constraints of ASCs and accelerating the demographic patient demands of IG procedures continually drive surgeons to perform in-office implantation. So back to Tom's initial question, where are we going? We have an incredible stand-alone opportunity in front of us. We are driving and creating a new marketplace, just like we've done previously creating the global MIGS marketplace. We intend to do so as we go forward in the future. It will be led, spearheaded by procedural pharmaceuticals and by our set combinations. And I would say as well, as you think about where this could go, I do believe that people will look for multiple mechanisms with single implantations. So we'll see surgeons as they already are in the real world, starting to put in high dose with the iStent infinite or even a competitive product to be able to reduce pressure, target pressures where they can arrest the progression of glaucoma. So I think we have an incredible opportunity in front of us. The in-office implantation over the next 5 to 10 years will be an accelerant to get to the surgeons and patients to where I think they deserve to go.

Your next question comes from Richard Newitter with Truth Securities.

Just the first one. I was wondering if you could characterize the utilization trends or really any kind of behavior you're noticing in situations where appropriate is established by MACs and without? If you could specifically talk that everything from docs training, more docs getting trains or accelerating doc training in those situations or regions to whether or not just in combo cataract use potentially differ and pro fee on or pro fee established situation? And then if you could also characterize the utilization differences between the national average and any regions where you pro fee?

Richard, some of this will be a bit of a reattach from earlier in the call, but I'm happy to do it as you think about what's going on. I think the most important overall statement, and it's evidence of giving many of the answers to the questions you asked is the continued acceleration in Novitas, Noridian and First Coast is exceeding that of the overall country. So when you think about the performance that we just had in the second quarter and the fact that 50% of the Medicare lives are represented in those 3 MACs where you have an established professional fee, we saw over 80% of our iDose volumes come from those areas in Q2, and that's the percentage that's actually been increasing in recent quarters. The momentum there is driven by virtually everything that you just asked. So we see a faster pace of doctor training and onboarding. We see overall increased utilization at an increasing number of accounts where they move past trying and trialing and they start going into the full adoption mode at least within the Medicare fee-for-service arena. And we also see a widening of how they utilize it. In the early days, as to minimize both clinical distraction as well as reimbursement distraction, we really mandated they do these in stand- alone procedures. And as they get their sea legs on both of those fronts, you see them start to expand into not just stand-alone procedures, but also utilizing in combination with cataract surgery, really based upon the need for treating the glaucoma irrespective of whether that patient has a cataract or not. So I would tell you that in virtually every KPI or metric you might look at, those regions that are contained within Novitas, Noridian or First Coast, you're seeing outperformance relative to the other areas of the country.

That's really helpful. And just a quick follow-up. Thanks for the sequential color, 2Q to 3Q and then 3Q to 4Q. I just want to clarify, did you say that U.S. glaucoma would be up quarter-over-quarter 2Q to 3Q, where iDose is obviously up sequentially and core or non- iDose is down, and that nets out to positive? Just what's the directional trend on U.S. glaucoma quarter-over-quarter?

Yes, I can confirm that. Obviously, procedure volumes in the third quarter are down, right? I mean physicians are on vacation. There's a lot less activity in the third quarter than in the second, and that's generally always been the case, at least certainly over recent years. And what we've seen in prior years is that non-iDose business, if you will, is down a couple of million dollars, which we would expect to get iDose offset. And I think that should put us back into the positive category on a sequential basis for the U.S. glaucoma franchise.

Your next question comes from Michael Sarcone with Jefferies.

Just had a follow-up on the U.S. iStent business. It looks like it might have declined about 10% in the second quarter. And Joe, I think in your walk-through for 2H, you mentioned maybe mid-single-digit declines. And I don't know if I'm splitting hairs here, but what trends would kind of occur where that performance would improve somewhat off of a kind of high single-digit, low double-digit decline in 2Q?

Yes, it's a good question, Michael. I'd say there's 2 things going on there. The first one is, when you land at the 10%, there's probably a little bit of false precision around the division of what was non-iDose versus iDose even in the comparable period last year, the second quarter of 2024. I'll just reiterate what we said, which is I think the combined stent plus expiration of the Hydrus royalty impact was a high single-digit year-over-year impact. Now you raised a good point around the Q2 trend, and we had anticipated that Q2 was going to represent the peak of the headwind, if you will. Even when we set guidance last quarter, we had made that assumption when we talked about the full year kind of being in that mid-single-digit headwind area. And so the reason for that is there was a little bit of -- it was a tougher comp, if you will, in the second quarter, given some of the dynamics and ordering patterns that happened in Q2 of last year in the non-iDose business that eased as we go forward here. And we're seeing some of those trends play out already as we make our way here through July. So I think we're confident that we've seen the peak of that headwind. And as we think about the remainder of the year, it should go back down to something that's in that mid-single digits, both for Q3 and Q4 as a headwind.

Got it. That's really helpful, Joe. And then maybe a quick follow-up. I think in some of the prepared remarks at the opening of the call, you had mentioned ex some of the investments made in 2Q, you might have generated about $4 million of cash from operations. Just wanted to dig a little deeper there. And on an underlying basis, how are you thinking about cash flow generation in the near and midterm?

Mike, it's Alex. I'll take that one. And just to give you a little more flavor on the cash for the quarter and what Tom was saying in his prepared remarks. If you look at the change in cash between the end of the last quarter and the end of this quarter, that change was actually a decline of about $25 million. But as Tom mentioned in his remarks, there were 2 transactions that occurred in the quarter. The first was the purchase of a building adjacent to our headquarters, and the second was the acquisition of Mobius Therapeutics. The sum of those is about $30 million. So when you take that and take that out of the negative $25 million, you end up -- it's actually $29 million, so you end up around a plus $4 million, $4.5 million of cash generation in the quarter, and that's kind of the details around that. As we think about going forward, again, we continue to have the near-term goal to manage our business such that we march towards cash flow breakeven or maybe small amounts of cash flow generation. Our goal continues to strike the right balance between our revenues and cash generation against the investments needed in both our new product launches and our rich pipeline that you heard about as well in Tom's prepared remarks.

I think it's also worth adding that with iDose growth clearly comes -- we have long-dated terms as you expect with any new product launch. And so as we make our way through, and you see this, there's a lag effect there to the cash flow benefit, the earliest of which you're starting to see obviously in the Q2 period that Alex was just talking about.

Your next question comes from Mason Carrico with Stephens..

I'll ask my two upfront, I think, here. When it comes to commercial payers, what are your expectations around how iDose is implemented into those coverage policies. I mean, is there an opportunity for it to be incorporated first line? Should we be thinking about it as a second or third line potentially? And then as a second question, could you give us some insight into where iDose margins stand today as that product become accretive to overall corporate gross margins?

Mason, I'll start off and then Alex can answer the latter, for the second question there. The good news is on the commercial payer policies, we actually have a pretty high number of policies that we can point to in support of this answer. I mean in fact, both on the commercial policy standpoint as well as Medicare Advantage, over 50% of lives have a positive policy in place today. And the vast majority of the remainder are silent. And every day as goes by, we're adjudicating claims within those environments to get confident that patients can have access with those policies of those plans. The reality of the existing policy framework is the majority have iDose either a second or third-line procedure, and it's entirely consistent with Photrexa that obviously has been approved for a couple of years now. And so really, the policies themselves will differ, often requiring failure either on a single medication or two medications or a single medication and some form of an intervention prior to turning to iDose. That's okay for us, obviously; out of the gate, if we're launching the product. But you can imagine over time, we'll continue to work on evidence and education of these payers to drive the iDose procedure closer and closer to first-line therapy, where we believe will ultimately shift along over the next decade plus.

And then, Mason, on the margin, it's a great question. I'm glad you asked it because we were really pleased to see the margins come in at 83% in the quarter and that represented really modest accretion, both on a year-over-year and a quarter-over-quarter basis. And it also continues to be in this 82% to 84% range that we've been guiding to all year. And we've said for some time now that with iDose, as you mentioned, that is a high-margin product, that with success in the commercialization of iDose that we'd expect to see accretion in the gross margin over time. And we hope that we're starting to see it now, and that we'll continue to see modest accretion over the remaining quarters of the year.

Your next question comes from Anthony Petrone with Mizuho Group.

I'll stick with two on iDose here. And one maybe just when you think about the cadence that we're seeing now, I mean, how much is from sort of early adopters here that have been with iDose now maybe for a few quarters them increasing utilization versus new physician adds? And then maybe just an update on managed care coverage for iDose. It sounds like based on some channel checks, you're starting to see a little bit of movement there. No official formulary coverage, but there is some claims being processed. So anything you can share on the managed care firm for iDose would be helpful.

Anthony, first, there's always a lag effect as I mentioned earlier, around physician awareness, adoption and then ultimately, the procedure volumes associated with that. These folks, as you know, have backlog in terms of procedures and when they get scheduled. And so what we're seeing is a mix of expanding, I'll call it, new physicians and the early dabbling, if you will, before they fully adopt combined with increasing utilization of those early adopters. And really tying into the second part of your question, what we're starting to see in its earliest phases is for those earliest adopters who are now really going closer and closer to full scale. They're starting to expand into that broader patient population of commercially covered lives as well as Medicare Advantage lots. There's obviously a process with that. It's different than dealing with Medicare, as you know. And so the way we really continue to handle this is methodical crawl, then maybe walk and ultimately, hopefully, jog and run as we make our way through the coming quarters and years on an account-by-account basis. You really have to make sure that even when you've got proper policies in place that the account, the practice are doing benefits verification, contracting, prior authorizations, claim processing and all the things associated with proper managed care lives that they're doing it in the right way. You want to ensure that success. And so we're moving intentionally in a very methodical manner to make sure that they have a positive outcome, payer by payer and situation by situation as they continue to grow. Over time, we obviously expect this to be a significant portion of our business, especially the commercially covered lives, but we want to make sure that we set them up for success out of the gate here.

Your final question comes from Danielle Antalffy with UBS.

Congrats on a strong quarter here. Just a question on where you're seeing physicians adopt iDose? Could you maybe talk a little bit about how they're balancing iDose versus iStent? And sort of what the decision pathway is to go with iDose versus iStent? And maybe just because it could serve as a snapshot of 5 years from now, how these 2 different product lines are coexisting?

Thanks, Danielle. And obviously, it's still early days. And so you have to sort of focus in more on those physicians who are adopting and are at the phase that Anthony's prior question, are earlier adopters who are now moving into a part of their everyday practice paradigm in managing patients with glaucoma. And I think what you're starting to see for those folks who are in that is that iDose becomes their foundational therapy. That's where they go first and foremost. That shouldn't be a surprise, given how wide open that label is and the ability to treat patients up and down the disease spectrum. And they then turn increasingly to the iStent or iStent infinite, whether that be stand-alone or in combination at times with iDose to manage those patients who are progressing. They may have failed on a few more therapies along the way, and they want to make sure that they really take every chance to rest the progression of that disease and hopefully avoid the progression towards a more invasive procedure like a tube and other alternatives.

That concludes our question-and-answer session. I will now turn the call back over to the company for closing remarks.

Okay. Thank you all for your time and attention today. And again, we thank you for your continued interest and support of Glaukos. Goodbye.