What happened
Shares of Glaukos Corp (GKOS +2.61%), a medical technology company focused on glaucoma treatment, were down about 9.8% as of 11:46 a.m. on Thursday in response to a second-quarter earnings report issued after the bell on Wednesday. Although sales of the company's pressure-relieving stents are surging, the market isn't pleased with the bottom line dipping into negative territory.
So what
Second-quarter sales of Glaukos Corp's iStent and related products surged 45% higher than the same period last year, but the bottom line didn't follow the top. The company's operations lost $3.9 million during the second quarter, which is hardly what you'd expect given the $2.1 million operating profit recorded during the second quarter last year and the huge sales increase.
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Management blamed the loss on a $5.3 million in-process research and development charge associated with the recent acquisition of an intraocular pressure sensor system from DOSE Medical. I'd say the huge 63% on-year increase in sales, general, and administrative expenses during the second quarter is a bigger concern.
Now what
This was the 16th straight quarter that Glakous Corp's sales rose more than 40% from year to year. While that should be extremely encouraging, rapidly rising SG&A expenses suggest eye surgeons need a great deal of prodding to begin using the company's stents.
During the post-earnings conference call, Glaukos stated it had trained about half of 5,500 surgeons targeted and expects to reach 700 this year. That's a huge lead over the company's only real competitor in the space at the moment, but Novartis has a great deal more resources to promote the stent it launched in the U.S. last year and more recently in the EU.
At about 10.5 times trailing-12-month sales, Glaukos shares aren't cheap. If the market gets a whiff of success for Novartis' CyPass Micro-Stent in the quarters ahead, Glaukos stock could fall much further than it has today.
