What happened
Shares of Glaukos Corp. (GKOS 2.40%), a medical device manufacturer with an eye on glaucoma, are slipping today. Just ahead of the company's investors day meeting, management made some adjustments to this year's total revenue expectations that aren't sitting well. In response, the stock has fallen 16.7% as of 11:38 a.m. EDT on Thursday.
So what
The company's glaucoma-relieving iStent device is a big hit that has pushed the top line from $45.6 million in 2015 to $114.4 million last year. Such rapid growth has pushed the stock up to a nosebleed-inducing multiple of around 9.1 times trailing sales, despite today's sell-off. For comparison, Medtronic shares have been trading at about 3.8 times trailing sales.
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At such a high multiple, any hint that blazing-fast growth might taper off will lead to heavy losses. Glaukos has been dropping clues big enough for Inspector Clouseau to find that suggest a slowdown on the horizon. Today's clue was a downward revision to full-year sales guidance, from a range of $162 million to $167 million that implied growth between 42% and 46% over 2016 levels, down to a range between $155 million to $160 million.
Now what
Glaukos partly blamed recent hurricanes for the abrupt revision to the guidance it affirmed during the second-quarter earnings report delivered in early August. Unfortunately, the company also mentioned commercial carrier reimbursement and the entrance of a competitor as factors.
It's been a little over a year since Novartis earned approval for the CyPass Micro-Stent, a device to compete with Glaukos' stents for certain glaucoma patients. An estimated 83 million people worldwide have glaucoma. Medicines used to treat the condition are often ineffective, but global sales of pressure-lowering prescription eye drops hit an estimated $4.7 billion in 2015. That suggests there's plenty of room for both companies to succeed here, but Glaukos' 16-quarter streak of 40% growth from year to year may be coming to an end.
