Glaukos Stocks Rides on Strong Product Demand Amid Competition

Glaukos Corporation GKOS is focused on the development and commercialization of novel surgical devices and sustained pharmaceutical therapies designed to treat glaucoma. The strength in the iStent product line and solid execution across its global glaucoma and Corneal Health franchises augur well.

The sustained recovery trends across segments and solid business prospects in spite of the pandemic-induced uncertainties raise optimism. Recent strategic alliances instill confidence in the stock.

The company is also engaged in boosting its portfolio through the development of new products. It currently has seven clinical-stage trials and another three preclinical development programs underway. A number of these pipeline programs are in active pivotal clinical trials, including iLution Travoprost, iDose ROCK and iDose TREX.

The company's shares have risen 58.2% year to date compared with the industry's 8.4% growth. The rally was primarily driven by top-line growth in the past few quarters. The S&P 500 Index was up 14.4% in the same time frame.

However, stiff competition in the medical device industry and vendor uncertainty are other headwinds. Meanwhile, a stringent regulatory approval process for the iDose platform and products is a woe.

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GKOS' Products Driving Strong Business Performance

During the second quarter, GKOS' glaucoma franchise witnessed growth in revenues, driven by its iStent portfolio, coupled with growing contributions from iDose TR. The company commenced the initial phases of the controlled launch plan for iDose TR during the reported quarter.

Per the second-quarter 2024 earnings call, iStent continued to demonstrate robust demand with positive surgeon feedback. This primarily highlights its three-stent solution favorable safety profile and streamlined injector system. The company's continued advancement in key market access initiatives for iStent infinite looks promising.

Continued strong demand across international glaucoma and Corneal Health franchises should be the key top-line drivers in 2024. Moreover, the commercial launch of iStent Infinite in 2023 is boosting the U.S. glaucoma franchise, which should drive growth in the upcoming few quarters.

The unique permanent J-code for iDose TR became effective from July 1. This is likely to increase patient access, driving sales growth in the upcoming quarters. The franchise also benefited from rapid international expansion.

Clinical Progress Drives GKOS' Prospects

Clinical trials are the primary means to evaluate the efficacy and safety of new medical technologies.

Glaukos is currently developing several pipeline products, namely iDose TREX, iDose ROCK and iLution Travoprost. These next-generation extended-release candidates are in different stages of clinical development. Successful development, followed by a potential launch of these products, should boost Glaukos' glaucoma portfolio.

The iDose TR candidate received the FDA approval in December 2023. The candidate, a targeted injectable implant, demonstrated tolerability and a favorable safety profile through 12 months in a late-stage clinical study.

Glaukos is also evaluating iLink system using Epioxa therapy for the treatment of keratoconus without the removal of the epithelium in a phase III study. The company has already completed one phase III study in 2021 on iLink. A potential new drug application is expected to be filed by the end of 2024.

The company commenced three new clinical trials during the fourth quarter of 2023 — a PMA clinical trial for iStent infinite in mild-to-moderate glaucoma patients; a Phase 2a study for iLution Travoprost; and a first-in-human clinical development program for GLK-401, an intravitreal multi-kinaseinhibitor retinal program for wet AMD patients. The company plans to start a phase 3 study for iDose TREX later in 2024 and complete enrollment in Phase 2 trials for its iLink third-generation therapy.

International Market Holds Potential for GKOS

Apart from the U.S. market, Glaukos is also focusing on expanding on a global scale. The company has been developing a sales base and increasing its marketing and market access efforts. It currently sells its products primarily through direct sales subsidiaries in 17 countries and independent distributors in certain nations.

GKOS' continued efforts to scale its international infrastructure and execute the plans to position MIGS as a standard of care in each region and every major market in the world will likely boost glaucoma revenues going forward. The company's efforts have been positively impacting its international growth.

In the fourth quarter of 2023, the company's Glaucoma sales were up more than 25%. Corneal Health sales improved 19% in international markets. Continued broad-based growing demand in many key international markets for combined cataract and glaucoma procedures is likely to continue in the upcoming few quarters.

Factors Hurting the Stock

Glaukos' competitors include medical companies, academic and research institutions, and others that develop new drugs, therapies, medical devices or surgical procedures to treat glaucoma. Thus, intense competition continues to weigh on the company's overall performance.

GKOS currently relies on a limited number of third-party suppliers, in some cases sole suppliers, to supply components for the iStent, the iStent inject models and other pipeline products. If any one or more of these suppliers cease to provide the company with sufficient quantities of components or drugs in a timely manner or on acceptable terms, it would have to seek alternate sources of supply.

Additionally, some of the vendors continue to experience challenges pertaining to supply of raw materials and labor shortages. As a result of these supply chain challenges and current inflationary pressures, Glaukos has experienced higher costs for certain components and raw materials. These setbacks are likely to remain for the rest of 2024, albeit at a slower pace. 

GKOS' Zacks Rank & Stocks to Consider

Glauos currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, Quest Diagnostics Incorporated DGX and Boston Scientific Corporation BSX.

DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 17.5%.

DVA's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%. Its shares have risen 56.9% compared with the industry's 27.5% growth in the past year.

Quest Diagnostics, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 6.2%. DGX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.

Quest Diagnostics' shares have risen 21.6% compared with the industry's 27.5% growth in the past year.

Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.6%. BSX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

Boston Scientific's shares have rallied 50.8% compared with the industry's 17.2% growth in the past year.

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