Glaukos Corporation
Q2 2016 Earnings Call Transcript

Published: 2 Aug 2016

[Operator:]

Welcome to the Glaukos Corporation’s Second Quarter 2016 Financial Results Conference Call. A copy of the company's press release issued after the market closed today is available at www.glaukos.com. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] This call is being recorded and an archived replay will be available online in the investors section at www.glaukos.com. I would now like to turn the call over to Sheree Aronson, Vice President of Investor Relations. You may begin.

[Sheree Aronson:]

Hello, everyone. Joining me today are President and CEO, Tom Burns; Chief Financial Officer, Rich Harrison; and Chief Commercial Officer, Chris Calcaterra. Following prepared remarks by Tom and Rich, all three gentlemen will take your questions. Before we begin, let me remind you that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our iStent products, our pipeline technologies, our U.S. and international commercialization efforts, the efficacy of our current and future products and our competitive market position, financial condition and results of operation. These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our actual results to differ materially from those expressed or implied by forward-looking statements. Review today’s press release and our current SEC filing for more information about these risk factors. You’ll find these documents in the Investors section of our website at www.glaukos.com. With that, I’ll turn the call over to President and CEO, Tom Burns. Tom?

[Thomas W. Burns:]

Thank you, Sheree. Good afternoon to everybody and thank you for joining us today. Glaukos reported another record high quarter today, with second quarter 2016 net sales of $28.6 million, up $10.8 million or 61% versus the same period one year ago, and marking our 12th consecutive quarter of at least 40% year-over-year sales growth. As you saw in the first quarter of 2016, strong same-store sales and convergence of high-value cataract practices helped drive our unit volumes higher in the second quarter. Given our year-to-date results, we are raising our 2016 full year net sales guidance to a range of $105 million to $107 million. Our second quarter results illustrate the continued strength of iStent’s adoption ramp. We’re extremely pleased and excited about the way ophthalmic surgeons are embracing iStent, and the potential for our portfolio of micro-scale injectable therapies to ultimately address the full range of glaucoma disease states in progression. As the founder of Micro-Invasive Glaucoma Surgery or MIGS, we are establishing an entirely new treatment class that we believe is capable of disrupting the $5.1 billion global glaucoma market. So to accomplish this, we are focusing our energy, expertise and resources on four key objectives

[Richard L. Harrison:]

Thanks, Tom. And thanks for the kind good words. Good afternoon everyone. As Tom reported earlier our net sales rose 61% to $28.6 million versus $17.8 million in the same year ago quarter. Growth was driven primarily by strong U.S. sales, which represented 89% of the increase versus the year ago quarter. U.S. sale represented 92% of total net sales in the second quarter of 2016 compared to 94% in the year ago quarter. Increased unit volume worldwide was primarily responsible for the rise in second quarter net sales, driven by an increase in the number of trained surgeons and higher overall iStent utilization. For the second quarter of 2016 our gross margin was 85% compared to 82% of sales in the second quarter of 2015. The expansion reflect increasing sales relative to our fixed manufacturing cost and our intangible asset amortization, as well as the suspension for 2016 and 2017 of the medical device excise tax, which tax was included in our 2015 cost of sales. In the second quarter of 2016 operating expenses rose 11% to $22.1 million versus $19.9 million in the year ago quarter. Our operating expenses continue to increase as we add foreign subsidiaries and domestic sales, marketing and administrative personnel and also increased our investment in worldwide marketing programs. We finished the second quarter of 2016 with net income attributable to common shareholders of $2.3 million or $0.06 per diluted share compared to a net loss attributable to common shareholders of $31.9 million or a loss of $10.96 per diluted share a year ago in the second quarter 2015. The net loss in the year ago quarter included a $25.7 million charge associated with the acquisition of the iDose product line and related assets from DOSE Medical Corporation in June 2015. While our exceptional top-line performance led to profitability in the second quarter, it is important to continue to remind you that we may not remain profitable as our focus and priority remains expanding the market penetration of iStent globally and rapidly progressing our deep and diverse pipeline. Turning to the balance sheet, at the end of the second quarter of 2016 our combined cash, cash equivalents and short-term investments stood at $93.9 million, compared to $91.1 million at the beginning of the year or $88.2 million as of the end of the first quarter March 31, 2016. As Tom indicated we have revised our 2016 net sales guidance to a range of $105 million to $107 million, which implies a 2016 growth rate of -- ranging from 46% to 49%. We believe this guidance reflects our strong performance in the first half of 2016 and remains appropriately conservative. And Tom, can I turn call back to you?

[Thomas W. Burns:]

Yeah, absolutely. Thanks, Rich. And so to wrap up Glaukos delivered solid performance in the second quarter, which by the way marks the one year anniversary of our June 25, 2015 IPO. We are growing our global team, we are driving new demand for our breakthrough technologies and executing a clearly defined strategy designed to deliver results that meet or exceed our expectations. We are both excited and confident about the future of Glaukos and the opportunity that lies ahead for our business. We appreciate your continued interest in the company and the confidence that you’ve shown us and in our vision that seeks to transform the treatment of glaucoma. So with that I’ll open up to any questions. Operator?

[Operator:]

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

[Thomas W. Burns:]

Hi, Mike.

[Operator:]

Michael Weinstein, your line is open.

[Michael Weinstein:]

Can you hear me guys?

[Thomas W. Burns:]

Yeah, we can. How are you?

[Michael Weinstein:]

I’m sorry. I’m good. Tom, I think if I would have said to you a year ago that after you guys grew 60% in 2Q ‘15, that a year later you’ll grow 61% in 2Q ‘16 you probably wouldn’t have believe me, right? Fair statement?

[Thomas W. Burns:]

I think that’s fair. Yes.

[Michael Weinstein:]

That’s fair. Let’s talk about a few items. So with number one, with how well the business is doing? And the uptick you’ve seen particularly in the last six months, you talk a little bit on the call in your prepared remarks about some of the initiatives you are taking to basically to continuing the momentum in the business to make sure that you’re doing all the right things, including creating the specialty sales force you mentioned U.S. teaching hospitals. One question I have is, do you have enough bodies right now? If I just do some simple back of the envelope math on your rep productivity, it’s already running much higher obviously than we would have then anticipating. So do you have enough reps, do you have enough bodies, is there any constraint at this point to the business just from the personnel you have in place?

[Thomas W. Burns:]

Yes, absolutely Mike. I’m going to turn this question over to Chris. And then be happy to add any further color.

[Chris M. Calcaterra:]

Hey, Mike. So as it relates to U.S., we’re always looking to see if we have enough bodies, but at this time, we do feel like we do from sales rep perspective. As you did hear from Tom, we are adding a specialty sales force to help in a number of areas. One is strategic, by getting into the teaching institutions and working with the residents and the fellows and the program chairs. Two, it also frees up time for the sales representative to go out and allow him or her to capture more business outside of the teaching institution. So there is an efficiency gain by adding the specialty sales force, we’re always looking at it Mike. And we feel pretty good about where we are right now. Most of our growth in adding more bodies and time has been spent OUS.

[Michael Weinstein:]

Did let me cover a couple of topics that have come up recently. So number one was the proposed reimbursement for the ASC in outpatient settings for FY17, which would imply a pretty significant increase in reimbursement rates for iStent. So it’s assuming those go through, can you just talk about what that might mean to your business? What it might mean to your customers business? Number one and then two, how you would think about your pricing for your products and how that might change?

[Thomas W. Burns:]

Sure. So let me cover the preliminary proposed rule and give a little bit of background. So beginning in 2017, CMS is really changing the way it calculates reimbursement by qualifying certain individual CPT codes with device intensive designations. So previously, only CPT codes within device intensive APCs of which 673 assigned to 91T was not one qualified for this designation. So the change is designed to more accurately reimburse device and non-device procedures. And so as I look at it and I look at the numbers, we can’t help that but at least glide it with a preliminary rule in the ambulatory surgery center, which represents roughly 75% of our sales. The payment rate as you all know went up from $1,794 in 2016 to really $2,554. So we’re looking at about $760 increase in the payment for the facility. And even when we drill down to taking that in combination with cataract surgery, we are looking at totally about $768 incremental dollars that are available for that CPT designation. So we can’t help but be delighted with that preliminary rule and it’s something that we’ve been working with CMS for some time to be able to augment our position and to gain more ground for this really this premium product in this premium category. So how we approach, one it is preliminary. So we won’t count our chickens until the end of October, when this will issue as a final rule. We hope that there is no absolute change, but we will wait. When we do receive that final rule, we’ll have to contemplate a number of things, the competitive landscape, the rate of adoption and how any price increase will affect our currently favorable positions with our provider customers. Current contracts that we have into place. So as you can imagine like we’ve done, we hope we’ve done with all of the things it’s been quite strategic and also empathetic to customers who’ve helped us build this whole premium market category. And so when that rule does issue, I can assure you we will already have in place a plan which will benefit both Glaukos and our customers and allows to move this really incredible embryonic market channel forward.

[Michael Weinstein:]

Okay, Tom, let me ask two more question and I’ll others jump in, so one on iDose you said you reiterated that we shouldn’t expect to see data until 2017. Could you just comment on where you are with enrollment? And then second on the Transcend approval for CyPass you just talk about for those that aren’t as close to it what outcomes then have to go through in order to get reimbursement for that implant? Thanks.

[Thomas W. Burns:]

Sure. That’s great Mike. So on iDose as you all know we were really delighted to be able to receive the go ahead from the FDA. Really several quarters prior to what we had talked about in our S1 to be able to move forth for our Phase II study our IND with the iDose device. So that was quite extraordinary and we began enrollment in the second quarter of this year, enrollment is going although we won’t comment at any granular level it is going as we expected and we are making progress with the study with our initial investigators. And so in our continued consistent approach to conservative guidance we will look to a mass this trial when we’ve completed the full enrollment at three months and then we will be able to share data with you at that time. And so I think it is fair to say that best case will have data available in 2017. So that answers your question with respect to iDose. With respect to the category of O253T of which suprachoroidal devices will be governed, this is a new category three that Glaukos established in 2011 when we sought a new code for our suprachoroidal devices. And really any product that is a suprachoroidal device will use this code going forward and will be subject to kind of the heavy sletting that we had to go through with the max and with private payers in order to get covers for the product. In our experience that took several months, I think most of you would say that we did it kind of at light speed. And so we would expect that the process will be straightforward, but rather herculean and will take some time for any company that would have a new CPT code to establish broad reimbursement and that typically takes on the order of several months to some time several years. So that’s what we would expect with anybody using a new code.

[Michael Weinstein:]

Perfect, I’ll let some others jump in. Thank you, Tom. Congratulations everybody.

[Thomas W. Burns:]

Thanks so much.

[Operator:]

Our next question comes from the line of Robert Hopkins from Bank of America Merrill Lynch. Your line is open.

[Travis Steed:]

This is Travis Steed on for Bob today. Just wanted to follow-up with on last question on Alcon, would you expect them to have any impact on the market until they get reimbursement? And also do you expect any trolling of their product to potentially impact the market at all?

[Thomas W. Burns:]

Well, I would say -- what I would say is we will be consistent with what we said all long. We think Alcon is a competitor that we respect, it’s a competitor that’s going to grow the market with the resources that they build in, certainly there is going to be people that try the product. I mean that would be something that I would say with any new product that enters there will be curious reception and there will an intent to try to see how it performs. In terms of how well they will do, I think I’ll just turn to our guidance to show you that obviously we were able to establish our guidance with the afore knowledge that Alcon received approval. And so you can expect that our strong confidence in our continued growth will continue even the presence of a new competitor.

[Travis Steed:]

Okay. Just to clarify, didn’t sound like there were any changes to the iStent Inject timelines? And then can you also just comment a little bit on what drove the upside this quarter relative to your expectations, were you able to train more doctors or was utilization better than you thought?

[Chris M. Calcaterra:]

I’ll address the later part. So the numbers were generated by higher unit volumes than we anticipated, that was driven by the addition of more high volume cataract surgeons. It was driven by more same-store sales growth and I would say it was also driven by continuing to execute on training new physicians. So all three things there Bob.

[Thomas W. Burns:]

With respect to iStent Inject, what I’d say is that, we have the data in front of us, right, at least in terms of when we completed the trial July of last year, we continue to stress guidance for two years, safety and efficacy follow-up. And so I will reassure you that that is the guidance as we go forward. I’d say if anything, I’m rather delighted with the FDA’s kind of departure from convention and kind of expedited review of the trends and device. And hope we can parlay that into a expedited review for the iStent Inject when we submit the P&A for final approval.

[Travis Steed:]

Okay, great. Thank you.

[Thomas W. Burns:]

Thanks, Travis.

[Chris M. Calcaterra:]

Thanks, Travis.

[Operator:]

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

[Brian Weinstein:]

Hey, guys. Thanks for taking the question. A question for you on the high-volume docs. How quickly does these guys get to a steady state? Are they kind of at a steady state for that kind of first cohort of high-volume doc that you were talking about last quarter? Are they still ramping, do they ramp faster than kind of your more average volume guys?

[Chris M. Calcaterra:]

I would say that it’s all across the board. Brian. Just like before some guys ramped quicker, some guys ramp later understand that these high volume guys that are coming in now have waited some time. So I would say is a general rule, they are going to be a little bit slower on the adoption curve. Just like we consistently stated, once they get their 15 or so stents in, they tend to move along quite well.

[Brian Weinstein:]

Got it. As we think sort of about the upside that you guys are showing. You’re obviously funding significant R&D, you’ve got a sales force that you said you are not looking to expand. So as this upside really comes through, where do you want to spend that if you had an extra $10 million, where would you put that, where are the needs at this point for investment in the business?

[Richard L. Harrison:]

Hey, Brian, this is Rich. So right now, our cash resources are in no way any kind of a limitation on us. As you saw, we have $93 some million as of the end of the quarter, up from where we were at the end of Q1. So we actually generated some positive cash during the quarter. So it’s hard for me to really answer where would I spend, if I had an extra $10 million, I have the extra $10 million. And I think we’re deploying our investments in the right places both in the sales and marketing side with the addition of foreign operations in those territories, where we think we can really get a good bank for our buck, as well as in the R&D and product development side.

[Brian Weinstein:]

Okay. And last one from me. You guys talked about the fact that your training was above your goals. What specifically are you guys looking for out of the sales force in terms of doctors being trained previously? You talked about kind of one new doc per rep, per month. Is that sort of how we should still think about it there, have your expectations gone up? Thanks.

[Richard L. Harrison:]

No. Theexpectations are the same. And what we said all along is the 40% growth in trained surgeons year-over-year, and we’re trending a little bit ahead of that. And what’s key there is that they’re quality trainings, we could certainly crank up the numbers, if we wanted to but we don't. We want to make sure that everybody is trained well and effectively, and then that leads to longer-term sales. So we’re just above where we anticipated, the 40% growth, and we feel really good about that.

[Brian Weinstein:]

Thanks, guys.

[Thomas W. Burns:]

Thanks, Brian.

[Richard L. Harrison:]

Thanks, Brian.

[Operator:]

The next question comes from the line of Matthew O'Brien from Piper Jaffray. Your line is open.

[Thomas W. Burns:]

Good morning, Matt.

[Matthew O'Brien:]

Afternoon. Thanks, afternoon. Thanks so much for taking the question. Just to start with on the guidance for the year. I mean, I understand you guys are trying to be conservative, but just even at the midpoint of your range for the year. Assumes basically, the same run rate that you just did in Q2 here. So I’m sure you are somewhat factoring in a Transcend approval slightly. But I’d love to hear what else potentially to keep you from putting up growth well ahead of what’s you are even guiding us to for the full year?

[Richard L. Harrison:]

Hi, Matt, this is Rich. When it comes to guidance, we’ve been fairly consistent all along in a number of ways. One way is granularity, we don't get very granular with it and now it’s not a time, where we probably going to start that. We’ve also consistently been conservative and follow a philosophy to under promise and over deliver. So I think really the best way for me to answer your question is to say, we continue to have a high level of confidence that we will meet or exceed the guidance that we’re providing to the street and that we have taken into account the planned introduction or the now new information about the introduction of a new competitor into our marketplace sometime this year.

[Matthew O'Brien:]

Okay, fair enough. And then as far as the -- and I’m using some rough numbers. So forgive me if they are wrong. But I’m getting you to about $64,000 run rate annually on a trained surgeon basis, I’m curious as far as what type of revenue a surgeon could do annually because I’m getting something closer to $150,000 per year. So I guess the question I’m trying to get to is do you think within the surgeon that you train there is still extensive room to run and then on top of that there is still a lot of room to continue adding new surgeons as well. So I guess getting back to the heart of the question on Q2 here. You talked about kind of a broad based improvement in a lot of these metrics. So is there anyone specifically that really drove a lot of the upside in the quarter be it going deeper in existing accounts new high volume guys et cetera.

[Richard L. Harrison:]

So I think maybe Chris and I can tag team this one and answer your questions. The first part about kind of the room or the maximum amount of the revenue from a surgeon that’s all over the board. As you know there are some surgeons who are practicing at high volume cataract practices and there are some that are not. So I don’t even know if I could make any kind of educated reaction to your -- I think I heard you say something about $64,000 I just wouldn’t know how to react to that. But as far as how much room remains for us to capture new surgeons we are still embryonic here and I’d like to turn it over to Chris and let him add a little color on that.

[Chris M. Calcaterra:]

Yeah a Couple of things, one, Matt, we are in the low to mid-teens in terms of market penetration. So that right there does is there is a lot of room. In terms of trying to assess where the majority of the growth came from whether it was from new high volume cataract surgeons or same-store sales growth that’s difficult to get at because of the way the product is purchased, it’s purchased by facilities who have a variety of doctors within there. But looking at it and getting it as granular as I can, we’re getting growth from both areas, both from same-store sales growth as well as high volume cataract surgeons.

[Matthew O'Brien:]

Got it, last one for me. Just on Japan I know we got approval in hand away for reimbursement. Are there any specific date that we should be looking forward to as far as one potentially you could get some favorable or get a responsive decision on reimbursement?

[Thomas W. Burns:]

No specific date. We are hopeful than we would have that by the end of the year.

[Matthew O'Brien:]

Got it, thank you.

[Thomas W. Burns:]

Thanks, Matt.

[Operator:]

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

[John Block:]

Great, thanks and good afternoon. Tom, really good injected out of Copenhagen I think you said reduction in IOP of 43%, I also think you said MIGS actually 81% of reduction. Just whether if you get Inject approved here in the U.S. for concomitant. How do you see the breakdown of that market developing? In other words what percent of the doctor opting for inject versus 2 versus 1 if you would if you can sort of look forward and give us any feel there?

[Thomas W. Burns:]

So this is -- if we had to take a best estimate at this time clearly the market has reacted quite favorably to our inject product because of just the facility of use and the fact that you had $0.02 and that’s what you are hearing in all your due diligence calls and I think we believe as well when we induce or introduce the iStent Inject we are thinking that we will be somewhere on the order if we had to make a call today of 85% to 90% use of the iStent Inject versus of the iStent. We don’t see the iStent going away completely. There will be people that have a high desire to continue its use and have used it with really strong clinical results over the years. But we do think that iStent Inject will dominate the landscape.

[John Block:]

Got it, great. And maybe two more, with two quarters in a row with GAAP profitability anything you can give us with sort of how this business the operating margin of this business looks with a revenue run rate of $200 million, $250 million on an annual basis. I guess what I’m just trying to do is look out a little bit and get more color on the earnings power and the model.

[Richard L. Harrison:]

Yeah, I think that one is a question I kind of answered in different ways before and I’ll kind of go through it with the same way and that is we’ve already demonstrated with our first couple of quarters in our history on our gross margin that if we wish to be profitable and significantly profitable go forward -- going forward, if that was our key priority and focus, we could do that. But as we continue to emphasize for the investment community, our focus is on growing the top-line and growing our franchise and our business. So it seems likely, when you throw out a number that high of revenue that you’d be in a good margin position, but I really don’t want to speculate at this point about where our margins might be at that dollar amount. It’s so completely dependent on how much we decide we’re going to spend on international infrastructure, on marketing programs eventually with more and more direct consumer campaigns, as well as continuing development in the labs and in our product development area, where we are not just focused on only those products in the pipeline that we’ve publicly talked about, but we look at other things as well all the time. So it’s really -- I'm not able to really answer your question directly.

[John Block:]

Okay, got it. And Last one from me, Tom back to you, you mentioned the sales guys are prepared for competition. Maybe what are your sales guys going to focus on in terms of Transcend? And I’m just asking, because I’m guessing it gets a little tricky, you’re likely going to have your own super stent in a couple of years. So are there certain complexity specific to the Transcend device that you guys will focus on? Thank you.

[Thomas W. Burns:]

Thanks, Jon.

[Chris M. Calcaterra:]

Yes. This is Chris, John. We are well prepared, we have, as we have always stated there is a place for suprachoroidal steps. We have suprachoroidal Shunt and we believed in it. We just believe that it is a device, it’s an enhancement procedure, it should be used in combination with Trabecular Bypass, and Trabecular Bypass is a first line of therapy. So consistent with what we’ve said in previous calls, we’ll continue to follow that direction and our sales organization well as well.

[John Block:]

Thank you, guys.

[Thomas W. Burns:]

Thanks, John.

[Operator:]

The next question comes from the line of Chris Lewis from ROTH Capital Partners. You line is open.

[Chris Lewis:]

Hi, guys. Good afternoon. Thanks for taking the question.

[Thomas W. Burns:]

Hi, Chris.

[Richard L. Harrison:]

Hi, Chris.

[Chris Lewis:]

Wanted to start on ASCRS meeting in May. Obviously, being an attendants, so it’s pretty obvious that makes those really one of the highlights coming out of that meeting I was hoping you could just spend a minute talking about the type of impact you think that had on the quarter? And just your general takeaways in terms of momentum, you've seen since that meeting in early May in terms of adoption?

[Thomas W. Burns:]

Yes, I think it’s fair to say, if you’re a participant and you were able to attend the numerous presentations that were made -- makes of which Glaukos really dominated, the plenary sessions in terms of presentations and posters. You would come away as we did, quite enthusiastic, and with kind of a second win as we went and left the ASCRS meeting. And it was clear to me that there was a strong embrace of the data that we are presenting both with single stent and with multiple stents. And it was clear to me as well that the safety profile of the device were really resonated with the group over and above other MIGS entrance, which are trying to enter the space. And so homerun is an overuse term, but it’s certainly was a 2 or 3 dagger for us. And I think we left that with strong momentum. And I think we are seeing the fruits of really a successful meeting at ASCRS today.

[Chris Lewis:]

Great. And for the U.S. IDE study for iStent Inject for standalone. I may have missed it, but can you go through how enrollment is coming along there? And I guess, any kind of timing expectations of when you expect complete enrollment?

[Thomas W. Burns:]

Yeah, I’d happy to. So it’s unchanged really from the last update I gave. We continue to make progress; we really started enrolling an earnest in 2015. And we’re enrolling initial cohort. And as I stated before, it’s an onerous inclusion/exclusion criteria, not dissimilar from what we experienced when we first started the combination cataract study in the first phase. And so our goal now is to liberalize that study through the amendments that we are submitting to the FDA of which we are achieving success. So that we really do open it up and facilitate and expedited move, when we move in to a pivotal expanded phase. So this is not new for us, we’ve been successful in the past. It does take efforts, particularly in this initial phase until we get the protocol that we like in the expanded phase.

[Chris Lewis:]

And moving to international front you had a pretty big jump there just in terms of absolutely dollar number in sales. Can you just elaborate on what markets are driving that? You talked about Germany and then you also mentioned you are building direct sales team in UK, Sweden and Brazil I believe. So how many researchers that you plan to add there and how should we think about those markets layering into the full -- in the back half of this year into 2017? Thanks.

[Chris M. Calcaterra:]

Thanks, Chris, and that has certainly been a focus of a number of peoples’ efforts here is to grow our international business and there has been a lot of activity taking place in Latin America and Europe. I would say that all three of those countries that you mentioned that iStent Inject Australia, Germany and Canada certainly contributed to the growth on the international side. In terms of where we are going next and our plans there Europe and Latin America. We have set up legal entities in a number of countries in Europe. We mentioned two Sweden and UK, then in Latin America we’ve sent up a legal entity in Brazil and we will be moving to staff that in fact we already are, we are about half way through some of the headcounts that we have identified and we’ll be adding more in the third quarter.

[Chris Lewis:]

Great. Thanks for the time.

[Thomas W. Burns:]

Thank you, Chris.

[Operator:]

And our last question comes from the line of Elemer Piros from Cantor Fitzgerald. Your line is open.

[Elemer Piros:]

Yes, good afternoon. My question is related to the Japanese market, Tom, it’s a huge pharmaceutical market. But could you please remind us that in glaucoma what sort of numbers are we looking at? And if you look out three, four years into the future what percentage of your total revenue might come from Japan?

[Chris M. Calcaterra:]

This is Chris and I can’t get that granular in terms of sales for the upcoming years and the imapct and so forth. But you are absolutely right, very strong pharmaceutical business in Japan. They didn’t get glaucoma devices until roughly four years ago, five years ago and the adoption of those is starting to increase, which gives us encouragement for our entry into the surgical glaucoma devices market. I feel bullish on Japan, but as I have always stated Japan we will go a little bit slower than some of our other major markets for some of the reasons I just described; and two, just the overall culture there of adopting new technologies. They tend to move a little bit slower. But there is a lot of glaucoma in Japan. I look at the high utilization of meds there to be a big opportunity for us.

[Elemer Piros:]

Thank you. And somewhat unrelated I only noted one center on clinicaldrivetrials.gov for the iDose Phase II study in South Dakota. Do you plan to add more or is that just not an updated list for the time being?

[Thomas W. Burns:]

Yeah, it’s just not an updated list. We have several centers that are involved in the initial Phase II trial.

[Elemer Piros:]

Okay, thank you very much. Congratulations.

[Thomas W. Burns:]

Thanks, Elemer.

[Chris M. Calcaterra:]

Thank you.

[Operator:]

And that concludes the Q&A session. I’ll pass the call back to Mr. Burns.

[Thomas W. Burns:]

Okay. Thank you to everybody for participating today and thank you again for your confidence and your support and with that I’ll leave you. Thanks so much. Good bye.

[Richard L. Harrison:]

Take care, good bye.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference call. Thank you for joining us. You may now disconnect your lines.