​

PART I

ITEM 1.BUSINESS

Overview

Glaukos is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. We first developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm, and launchedlaunching our first MIGS device commercially in 2012. We2012, and have since developed a proprietary bio-activatedportfolio of technologically distinct and leverageable platforms to support ongoing pharmaceutical therapyand medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of a corneal disorder, keratoconus, that was approved by the U.S. Food and Drug Administration (FDA) in 2016. We are also developing a pipeline of surgical devices, sustained pharmaceutical therapies, and implantable biosensors intended to treat glaucoma, progression, corneal disorders such as keratoconus, dry eye and refractive vision correction, and retinal diseases such as neovascular age-related macular degeneration (AMD), diabetic macular edema (DME), and retinal vein occlusion (RVO).

Ophthalmic diseases and disorders are a national and global health concern and, as the population ages, the number of individuals with vision impairment and blindness is increasing. Moreover, improving access to cost-effective tools is increasing the diagnosis of sight-threatening ocular diseases globally and driving demand for innovative products, technologies, and therapies that improve clinical outcomes, and provide ease of use and reliability. In response to the significant unmet needs that exist within ophthalmology we have designed commercial and development-stage solutions to provide ophthalmologists with various treatment options.

Our commercial solutions and development-stage product candidates include:

•MIGS products that primarily involve the insertion of a micro-scale device or drug delivery system designed to reduce intraocular pressure (IOP) by restoring the natural aqueous humor outflow pathways for patients suffering from glaucoma and MIGS biosensors to measure pressure within the eye;

•topicalbio-activated pharmaceuticals that are bio-activated on the eye by one of our proprietary systems intended to strengthen, stabilize, and reshape the cornea for patients impacted by corneal ectatic disorders such as keratoconus or refractive disorders; and

•topicaltransdermal pharmaceuticals that are applied to the eyelid and meantdesigned to treat dry eye, presbyopia, glaucoma and other ocular surface diseases and disorders,disorders; and

•proprietary micro-invasive, bio-erodible sustained release drug delivery implants that are designed to elute pharmaceuticals over time to improve the vision of patients impacted by retinal diseases such as AMD, DME, RVO, and diabetic retinopathy (DR).RVO;

Impact of COVID-19 Pandemic and Current Economic Environment

​

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. The World Health Organization declared COVID-19 to be a “pandemic,” spreading acrossWhile the globe and impacting worldwide economic activity. In the U.S., certain federal, state and local governmental authorities issued stay-at-home and other orders, proclamations and/or directives, including restrictions on elective procedures and therapies, aimed at minimizing the spread of COVID-19. Although some of these governmental restrictions have since been lifted or scaled back, recent surges of COVID-19 have in some cases led, and future surges could lead, to the reinstitution of stay-at-home or other orders and may further result in restrictions being re-implemented in response to efforts to reduce the spread of COVID-19. Even if stay-at-home or other orders are removed, potential patients may elect to stay at home voluntarily. The COVID-19 pandemic and subsequent economic slowdown has materially impacted the global demand for our products which are used in procedures and therapies that are considered elective. This decrease in demand was most significantly felt in the latter part of the quarter endedstarting March 31, 2020 and the earlier part of the quarter ended June 30, 2020. Beginning in May 2020, we began to see an early recovery toward more normalized levels for cataract and keratoconus procedures as early as May 2020, a trend that generally continued, with periodic volatility in certain geographies in which we operate, through December 31, 2021. Most recently the Omicron variant has led to a material increase in diagnosed cases worldwide, creating new government restrictions in select geographies and impacting elective procedures in hospital and ambulatory surgery center sites. Additionally, the COVID-19 pandemic has led to widespread staffing shortages, including in ambulatory surgery centers, which may also impact elective procedures. These trends accelerated at the end of December 2021 and continued through the date herein.

We continue to actively assess the impact of COVID-19 on our clinical trials and other pipeline products. The closure of ophthalmic practices and deferral of elective procedures beginning in the first quarter of 2020 in response to COVID-19 disrupted new patient enrollment in our ongoing clinical trials. While we cannot predict the full impact of

keratoconus procedures,COVID-19 on the timing of completion of our clinical trials and the expected regulatory approvals for our pipeline products, our disclosed targeted approval dates anticipate, to our best estimate, such impact.

Additionally, some of our vendors are continuing to experience supply challenges, both in the acquisition of raw materials as well as due to limited headcount resources, and we have experienced higher costs for certain raw materials. These challenges have led to delays and partial or unfulfilled deliveries of certain components needed for the manufacture of our products, in some cases requiring us to find second sources for materials. If these delays and partial or unfulfilled deliveries persist, they could impact our ability to ship some of our products to our customers, or bring some of our pipeline products to market, in a trendtimely manner. We believe that continued throughmuch of these supply challenges and higher costs stem from the quarter ended December 31, 2020. ongoing obstacles presented by COVID-19.

The ultimate impact of the COVID-19 pandemic on our operations going forward is unknown and will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 outbreak, the status of health and safety actions taken to contain its spread, the severity and transmission rates of new variants of COVID-19 such as the Omicron strain, the availability, distribution, and efficacy of vaccines for COVID-19, any additional preventative and protective actions that governments, or we, may take, any future surges of COVID-19 that may occur, the dynamics associated with the rollout of the COVID-19 vaccines, and how quickly and to what extent economic and operating conditions normalize within the markets in which we operate. For additional information, see the section titled Risks Related to Our Business within Item 1A. Risk Factors of this Annual Report on Form 10-K.

Recent Developments

​2022 U.S. reimbursement rates

On November 2, 2021, the United States (U.S.) Centers for Medicare & Medicaid Services (CMS) published its final rules for 2022 Medicare physician fee payment rates and 2022 Medicare facility fee payment rates for services furnished in both the ambulatory surgery center and hospital outpatient settings (Final Rules). These Final Rules superseded the proposed rates that were issued by CMS in July 2021 which were much lower than the rates issued in the Final Rules. Compared to the 2021 reimbursement rates, the Final Rules contained a new, significantly lower physician fee related to the implantation of trabecular bypass stents, such as our iStent family of products, in conjunction with cataract surgery. Conversely, the facility fee schedule related to surgeries that include implantation of trabecular bypass stents, such as our iStent family of products, in conjunction with cataract surgery, slightly decreases reimbursements to an ambulatory surgery center and increases reimbursements to a hospital. We estimate that approximately 80% of procedures utilizing our trabecular micro-bypass technologies in the U.S. are performed in the ambulatory surgery center setting and the remaining estimated 20% of procedures are performed in the hospital. Additionally, the Final Rules established facility fee payment rates that were lower than anticipated for standalone insertion of an aqueous drainage device in the ambulatory surgery center and hospital settings, which would be the procedure that such facilities would use with our iStent infinite product, which is not yet approved by the U.S. Food & Drug Administration. These CMS reimbursement rates contained in the Final Rules took effect January 1, 2022.

U.S. Glaucoma volumes were negatively impacted during our third and fourth quarter of 2021 as typical customer ordering patterns were disrupted and trialing of competitive products increased in anticipation of the potential 2022 CMS physician and facility fee reimbursement rate decreases becoming effective as originally proposed in July 2021. The physician fee reimbursement rate as issued in the Final Rules may have taken a numberan adverse impact on 2022 procedural iStent family product volumes, in conjunction with cataract surgery as well as on our 2022 U.S. combo-cataract Glaucoma revenues, gross profit, and net income, the full extent of steps aimedwhich is not known at minimizing the spread of COVID-19 and protecting our employees, including shifting the majority of our workforce to remote operations, which continues through the date hereof. We have maintained streamlined manufacturing and assembly processes in order to consistently provide product to our customers who depend on us. In addition to other health and safety protocolsthis time.

Attillaps License Agreement

On September 20, 2021, we announced that follow applicable guidance and regulations, employees involved in such operation-critical processes have been organizedwe had entered into a numberlicensing agreement (Attillaps License Agreement) with Attillaps Holdings, Inc. (Attillaps) under which Attillaps granted us a global exclusive license to Attillaps’ proprietary library of small shifts designed to minimizeinvestigational pharmaceutical compounds that target the time any one individual is required to be onsite. Further, in an effort to identify,eradication of Demodex mites, which are the root cause of Demodex blepharitis and avoid further infection from, asymptomatic cases,often associated with meibomian gland dysfunction and related ophthalmic diseases. Under the Attillaps Licensing Agreement, we have offered periodic voluntary COVID-19 viral testingthe exclusive global right to on-site employees.research, develop, manufacture and commercialize products using certain acetylcholinesterase inhibitors for the treatment of ophthalmic

diseases caused by Demodex mites. We paid $5.0 million upon the signing of the Attillaps License Agreement and will have ongoing milestone and royalty payment obligations depending on the success of the development, approval and commercialization of the compounds.

​Settlement of Patent Litigation

We also soughtOn September 14, 2021, we entered into a settlement agreement (Settlement Agreement) with Ivantis, Inc. (Ivantis), pursuant to preservewhich we and Ivantis agreed to terminate the patent infringement lawsuit we had filed against Ivantis on April 14, 2018 in the U.S. District Court for the Central District of California, Southern Division (the Lawsuit). In the Lawsuit, we alleged that Ivantis’ Hydrus® Microstent device infringes our U.S. Patent Nos. 6,626,858 and 9,827,143. Pursuant to the terms of the Settlement Agreement, Ivantis has made cash position by instituting a number of cost saving initiatives, the majoritypayments totaling $60.0 million, $30.0 million of which have been reinstated, although we continuewas paid to carefully manage our discretionary spending. These actions were designedus during the year ended December 31, 2021, and $30.0 million of which was paid to preserve jobs and core research and development programs. Further,us in June 2020, we issued an aggregate principalJanuary 2022.

Additionally, Ivantis will make quarterly royalty payments to us in the amount of $287.5 million10% of 2.75% convertible notes due 2027 (the Convertible Notes),Ivantis’ Hydrus Microstent U.S. sales and any international sales supplied out of the net proceeds of which will be used for working capital and general corporate purposes. As of December 31, 2020, we had cash, cash equivalents, short-term investments, and restricted cash of approximately $413.9 million, compared to $183.3 million as of December 31, 2019.

​

We continue to actively assess the impact of COVID-19 on our clinical trials and other pipeline products. The closure of ophthalmic practices and deferral of elective proceduresU.S. beginning in the firstfourth quarter of 2020 in response2021 through April 26, 2025, subject to COVID-19 disrupted new patient enrollment ina per-unit minimum payment. We and Ivantis have dismissed with prejudice all of our ongoing clinical trials. This disruption has continued even as facilities have reopened as doctors prioritize their standard procedures over clinical trial enrollment. In particular, patient enrollment for our iDose clinical trials remains impacted, which has delayed our estimated iDose approval timeline, where we now expect a potential FDA approval of this product in 2023.

​

Material Changes and Transactions

Glaukos was formed in 1998 with a focus on treating glaucoma progression, initially developing MIGS to serve as an alternative to traditional glaucoma treatment and management paradigms. We launched the iStent, our first MIGS device,claims against each other in the U.S.Lawsuit, which was scheduled for trial beginning on or around September 28, 2021, and in 2012,related lawsuits in other forums and jurisdictions. The parties also have agreed to mutual licenses and covenants not to sue the other party for patent infringement relating to Ivantis’ Hydrus Microstent or our next-generation iStent inject device in late 2018,micro-stent devices.

Santen License Agreement

On May 18, 2021, we announced that we entered into a new development and our latest iStent inject W devicecommercialization license agreement with Santen Pharmaceutical Co., Ltd. (Santen) for the PreserFlo MicroShunt, superseding the previous collaboration and distribution agreements between the two parties. Under the new agreement, we obtain exclusive commercialization rights for the MicroShunt in the second halfUnited States, Australia, New Zealand, Canada, Brazil, Mexico and the remainder of 2020, whileLatin America. The new agreement also developingprovides us with control over development activities for the MicroShunt in these same territories, including clinical development and regulatory affairs activities in the United States following a broader portfoliotransition period. We did not make any payment in connection with the execution of development-stage product candidates designedthe license agreement; however, should we be successful in obtaining regulatory approval for the PreserFlo MicroShunt, we would be required to treatpay Santen a milestone payment, followed by royalties and other potential future milestones depending on the success of the commercialization of the product.

Intratus License Amendment

On April 14, 2021, we announced that we had entered into an amended licensing agreement with Intratus, Inc. (Intratus) under which Intratus granted us a global exclusive license to research, develop, manufacture and commercialize Intratus’ patented, non-invasive drug delivery platform for application in the treatment of presbyopia. The addition of presbyopia expands upon the existing agreement between us and Intratus announced on July 22, 2019. The amendment includes a mechanism to further expand the existing agreement to other indications, applying the active pharmaceutical ingredients being advanced by us in glaucoma, progression. In recent years, we began to execute a long-term strategy that leverages our core competencies and extends our focus to include therapies for chronic eye diseases beyond glaucoma into corneal disorders and retinal health.

In June 2020, we issued $287.5 million in aggregate principal amount of 2.75% convertible notes due 2027 (the Convertible Notes), the proceeds of which are expectedpresbyopia to be used for working capital and general corporate purposes.new ophthalmic fields.

Products and Pipeline

The Company operatesWe operate in one operating segment asand our primary business activity is the development and commercialization of therapies across several end markets within ophthalmology. In an effort to provide greater visibility into our performance and progress,business, the following discussion is presented based on our three principal franchises:end markets within ophthalmology: glaucoma, corneal disorders and retinal diseases.

We have three primary commercialized products designed to treat mild-to-moderate open-angle glaucoma,glaucoma: the iStent, the iStent inject, and the iStent inject W. The iStent, the iStent inject, and the iStent inject W are FDA-approved micro-bypass stents that improve aqueous humor outflow and are inserted through the small corneal incision made during cataract surgery. Our iStent, a single stent device which reduces IOP by restoring the natural physiologic pathways for aqueous humor, was the first commercially available MIGS treatment solution. Our next generation iStent inject and iStent inject W devices include two stents pre-loaded in an auto-injection system designed to allow the surgeon to inject stents through a single corneal entry. The iStent, iStent inject, and iStent inject W procedures are currently reimbursed in the U.S. by Medicare and all major national private payors. The iStent and iStent injecttechnologies are commercially available in Japan,numerous countries, including Australia, Brazil, Canada Australia,and Japan and certain European Union (EU) and other countries, even though reimbursement may not always be available for all such procedures.

We are also developing several pipeline products for glaucoma, including the iStent Infiniteinfinite , andiStent SA and iDose TR, noneneither of which have yet been commercializedapproved for commercialization. The iStent Infiniteinfinite consists of three stents that are designed for use as a standalone procedure in patients with refractory glaucoma.glaucoma patients. In 2019,2021, we completed patient enrollment of an IDE study of iStent Infinite in order to pursue future FDAsubmitted our 510(k) clearance. Similar to application for the iStent inject infinite for the treatment of glaucoma patients who have failed prior surgical therapy and the iStent inject W,estimate that we will receive clearance in the first half of 2022iStent SA. is a two-stent product that uses a different auto-injection inserter. However, the iStent SA is designed for use as a standalone glaucoma procedure.

​

The iDose drug delivery system is a targeted injectable implant based on our micro-scale device-platform that is designed to continuously deliver therapeutic levels of medication from within the eye for extended periods of time. We commencedcompleted patient enrollment and randomization in our Phase III IND3 clinical trialtrials in 2021 for iDose TR and now anticipate submitting a new drug application (NDA) in 2018.2022 with potential FDA approval of this product in 2023. Additionally, our glaucoma pipeline includes the next-generation extended release iDose (TREX),; iDose (ROCK), iPrime(ROCK) which would includeproprietary Rho Kinase inhibitor compounds froma research and development collaboration agreement with D. Western Therapeutics Institute; programs for our iLution platform; and the IOP Sensor which are still in a research and development (R&D) stage.

​

In addition to our organic R&D efforts, in 2019 we entered into a multi-year agreement withhave licensed from Santen which appointed us to serve as the exclusive U.S. partner for the sale of the Preserflo MicroShunt, which is currently being studied in an FDA pivotal study and has not yet been approved by the FDA. PreserFlo MicroShunt. The MicroShunt is an ab-externo device being developed for treatment of glaucoma where IOP is uncontrolled with maximum tolerated medical therapy or where progression of the disease warrants surgery.

In addition, Santen submitted a PMA application to the FDA in 2018 we entered intoJune 2020, and the FDA currently is reviewing additional input obtained from glaucoma surgeons to ensure a researchcomplete evaluation of the clinical data submitted in the PMA, and development collaboration agreement with D. Western Therapeutics Institute (DWTI)as such the timing of a potential approval, and U.S. commercial launch is currently unknown. We did commence initial commercial launch activity in which we are conductingAustralia and Canada during the evaluation and developmentfourth quarter of novel intraocular products for the treatment of glaucoma using compounds from DWTI’s proprietary Rho Kinase inhibitor compound library.2021.

Corneal Disorders

The cornea, the eye’s outermost layer, is a clear, dome-shaped surface that functions best as a lens when the cornea is strong and shaped properly. The cornea is responsible for the majority of the eye’s total focusing power and corneal disorders, including ectasia, refractive vision errors and dry eye, among others, can cause vision impairment. Corneal ectatic disorders are comprised of a class of diseases characterized by an ectatic, or misshaped, cornea. Corneal ectasia is typically caused by a weakening of the cornea, which can be due to a number of factors, including genetic causes, adverse side effects from ophthalmic refractive procedures such as LASIK, or excessive eye rubbing. We are currently targeting two primary corneal ectatic disorders with our bio-activated pharmaceuticals:pharmaceuticals including keratoconus, and corneal ectasia following refractive surgery, although our therapies may also offer benefits to individuals with presbyopia and myopia.surgery. Keratoconus is mostly a hereditary, degenerative ectatic disease that is often first seen in older children or young adults in which the typically round, dome-shaped cornea progressively thins and weakens, causing a cone-like corneal bulge due to normal internal pressure of the eye. Corneal ectasia following refractive surgery is a serious complication that involves the cornea becoming weakened following a refractive procedure, such as LASIK, with symptoms similar to naturally occurring keratoconus. Refractive vision errors, or the inability of the cornea to

Our pharmaceutical iLink therapies,platform uses a suite of novel single-use drug formulations that are bio-activated by our proprietary systems to address both keratoconus andthese corneal ectasia. Thesediseases. The iLink therapies, bioactivated upon the delivery of ultraviolet A (UVA) light to the cornea, induce a biochemical reaction called corneal collagen cross-linking, or corneal cross-linking (CXL). CXL strengthens, stabilizes and reshapes the cornea to treat corneal ectatic disorders. TheOur KXL System, which delivers UVA light to a large portion of the cornea, and Photrexa therapy, is approved by the FDA for use in the U.S. following removal of the epithelium (often referred to as “iLink epi-off”), a procedure familiar to ophthalmologists. In May 2019, patient enrollment in a pivotal Phase 3 clinical trial was completed to evaluate the safety and efficacy of our latestnext generation pharmaceutical iLink therapeutic system for the treatment of keratoconus without the removal of the epithelium (often referred to as “iLink epi-on”). We now expect a U.S. NDA submission during 2022 and potential approval of the iLink epi-on product in 2023, with the delay being primarily the result of our decision2023. We also expect to change contract drug manufacturers in advance of completing registration batches and, ultimately, commercialization. Outside the U.S.,a third generation iLink therapeutic system into clinical trials during 2022. Internationally, our pharmaceutical therapies can also be administered with the KXL System to address corneal weakening caused by refractive surgery such as LASIK. Our next generation systems are being developed to provide metered beams of UVA light to a targeted portion of the cornea. Ourbio-activated pharmaceutical products bio-activated by these systems may also offer a means of improving the vision of patients with presbyopia, myopia or other corneal diseases.

​

We have also entered intodeveloped our iLution platform of cream-based drug formulations that are applied to the outer surface of the eyelid for dropless transdermal delivery of pharmaceutically active compounds for the treatment of eye disorders. Several iLution platform products leverage an exclusive global licensing arrangement with Intratus to research, develop, manufacture and commercialize a patented, non-invasive, transdermal drug delivery platformformulation designed for application on the eyelid in the treatment of dry eye disease, presbyopia, glaucoma, and other ocular surface diseases and disorders. In January 2022, we commenced patient enrollment in Phase 2 clinical trials of two investigational drug candidates for the treatment of signs and symptoms of dry eye disease (GLK-301) and presbyopia (GLK-302).

Lastly, in September 2021, we entered into a licensing agreement with Attillaps Holdings, Inc. (Attillaps) to research, develop, manufacture and commercialize Attillaps’ proprietary library of investigational pharmaceutical compounds that target the eradication of Demodex mites, which are the root cause of Demodex blepharitis and often associated with meibomian gland dysfunction and related ophthalmic diseases.

Retinal Diseases

Retinal diseases vary widely but universally affect the retina, a thin layer of tissue inside the back wall of the eye containing light-sensitive cells that convert light into neural signals. Most retinal diseases cause visual impairment, including blurred or distorted vision and vision loss. Our R&D efforts in our retinal franchise are focused on treating AMD, DME, RVO, and other retinal diseases. AMD is a progressive disease that occurs when the macula, the central portion of the retina, is impaired, which can result in severe vision problems. DME is highly prevalent among individuals with type 2 diabetes and is associated with DR, the impairment of small blood vessels in the retina caused by increased glucose levels. Advanced DR can lead to fluid leaking into the macula, which causes DME and severe vision impairment. RVO occurs when the flow of blood from the retina is blocked, often due to a blood clot blocking the retinal vein, which can result in severe vision problems.

We are developing sustained release pharmaceutical retinal platforms leveraging our expanded pharmaceutical and sustained drug delivery R&D capabilities, including Triamcinolone Acetonide SR, Multi-Kinase Inhibitor SR and Anti-VEGF SR. If commercialized, these platforms would be designed to treat AMD, DME, RVO, and other retinal diseases. The focus of our retinal research and development efforts is to develop potential treatment options with a longer duration-of-effect than current standards of care products.

Research & Development

We devote significant resources to our R&D efforts, which are focused on developing new products, and enhancing the effectiveness, ease of use, safety, and reliability of our commercialized products. Our R&D objectives are:

retinal health pipeline, if approved, may face substantial competition from large pharmaceutical companies such as AbbVie Inc., Novartis AG, Genentech/Roche, Regeneron and Bayer, and there are also a considerable number of large and small companies with development efforts in the field.

Medical Device Requirements

Each medical device commercially distributed in the United States requires one of the following: (i) exemption from or clearance under a 510(k) premarket notification;(ii) approval under a Premarket Approvalapproval (PMA) application; or (iii) approval of a de-novo classification petition; or (iv) approval under an IDE.petition.

The FDA classifies medical devices into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturing and regulatory control needed to ensure its safety and effectiveness. Class III devices, which include our iStent products that produce the majority of our revenue, are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices and devices deemed not substantially equivalent to a predicate device.device that the FDA has already cleared for marketing. Class III devices require FDA approval of the more demanding PMA application before marketing of athe device can proceed. While the iStent, iStent inject and the PreserFloMicroShunt are categorized as Class III devices and thus would generally be subject to the more rigorous PMA approval pathway, the FDA determined that an appropriate predicate device can proceed.exists for the iStent infinite and that 510(k) premarket notification would be sufficient.

​

PMA Approval Pathway

Class III devices typically requireIn a PMA before they can be marketed. In a PMA,application process, the manufacturer must demonstrate that the device is safe and effective for its intended use, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials. If the FDA accepts the application for review, it has 180 days under the FDCAFederal Food, Drug, and Cosmetic Act (FDCA) to complete its review of a PMA, although in practice, the FDA’s review can take up to several years. The FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.FDA’s Quality System Regulation (QSR). Even after a PMA approval, the FDA may require post-approval conditions to ensure the safety and effectiveness of the device, including additional clinical studies or post-market surveillance. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval. Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which may affect the safety or effectiveness of the device, require submission of a PMA supplement.

Clinical Trials of Medical Devices

Clinical trials are almost always required to support a PMA for a Class III device. All clinical investigations must be conducted in accordance with the FDA’s IDE regulations. If the device presents a “significant risk,” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDEinvestigational drug exemption (IDE) application to the FDA, showing with appropriate data that it is safe to test the device in humans and that the testing protocol is scientifically sound.

Regardless of the degree of risk presented by the medical device, clinical studies must be approved by, and conducted under the oversight of, an Institutional Review Board (IRB) for each clinical site, which is responsible for the initial and continuing review of the IDE.site. During a study, the sponsor and any clinical investigators are required to comply with the applicable FDA requirements. After a trial begins, the sponsor, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Post-Market Regulation

​

After a device is approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

​

​

​

Phase 1. Introduction into patients or healthy human volunteers and is tested for safety, dose tolerance and pharmacokinetics.

Phase 2. Introduction into a limited patient population to assess the efficacy of the drug in specific, targeted indications, assess dosage tolerance and optimal dosage, and identify possible adverse effects and safety risks.

include implantation of trabecular bypass stents, such as our iStent family of products, in conjunction with cataract surgery, reflects a slight decrease in payment rate to an ambulatory surgery center, and an increase in reimbursements to a hospital. We estimate that approximately 80% of procedures utilizing our trabecular micro-bypass technologies in the U.S. are performed in the ambulatory surgery center setting and the remaining estimated 20% of procedures are performed in the hospital. Even though a permanent billing code has been assigned to a product, there is no guarantee that coverage will be provided.

Additionally, effective in 2022, we obtained a temporary Category III CPT code associated with payment rates for facility fee payments that are lower than anticipated for standalone insertion of an aqueous drainage device in the ambulatory surgery center and hospital setting, which would be the procedure that such facilities would use with our iStent infinite product, which is not yet approved by the U.S. Food & Drug Administration. Prior to expiration of a temporary code, there are two options: submit an application to convert a temporary code to a permanent code or submit an application for a five-year extension of the temporary code. In connection with a transition to a permanent code, both the physician fee and facility fee associated with the procedures using our iStent infinite product will be reevaluated. In some cases, the physician fees and/or facility fees have been decreased at the time codes are transitioned from temporary to permanent.

There is no published Medicare payment schedule at the national level for physician payment amounts.amounts for temporary Category III CPT code products. The physician payment rate is left to the discretion of the regional Medicare Administrative Contractors (MACs), with each MAC separately determining coverage and no assurance that coverage and adequate reimbursement will be obtained from, or maintained by, the MACs. MACs have in the past, and may in the future, change coverage terms.

​

Our Photrexa pharmaceutical therapy has received a permanent healthcare common procedure coding system J code and we have obtained temporary Category III CPT code for the professional fees associated with CXL.

​

In the U.S., no uniform policy of coverage and reimbursement exists among third-party payors; coverage and reimbursement can differ significantly from payor to payor. In addition, payors continually review new products for possible coverage and existing products for changes in coverage and can, without notice, deny coverage.

​

One key aspect of reimbursement in the U.S. are the distinct billing codes that are used by healthcare providers to report the provision of medical procedures and the use of supplies for specific patients to payors. There are different categories of Current Procedural Terminology (CPT) codes (Category I, II and III) based on the procedure or supply. Although we have received a permanent healthcare common procedure coding system J code for our Photrexa pharmaceutical therapies, we have only obtained temporary Category III CPT codes for the professional fees associated with CXL and iStent-related procedures. Prior to expiration, there are two options: submit an application to convert a temporary code to a permanent code or submit an application for a five-year extension of the temporary code. With the approaching expiration of our temporary Category III CPT code for the professional fees associated our iStent-related procedures, we have applied for a permanent Category I CPT code. In connection with this transition to a permanent code, both the physician fee and facility fee associated with the procedures using our iStent products will be reevaluated. In some cases, the physician fees and/or facility fees have been decreased at the time codes are transitioned from temporary to permanent. Further, even when a permanent billing code has been assigned to a product, there is no guarantee that coverage will be provided.

International Regulation & Reimbursement outside the U.S.

​

In addition to regulations in the U.S., we are subject to a variety of regulations in other jurisdictions governing clinical trials, commercial sales and distribution of our products and reporting of payments to physicians. Whether or not we obtain FDA approval for a product, we must obtain authorization before commencing clinical trials or obtain marketing authorization or approval of a product under the comparable regulatory authorities of countries outside the

GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other things, a requirement for prompt noticesensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. Failure to data subjectscomply with the GDPR requirements may result in costly government enforcement actions, private litigation, and supervisory authoritiesnegative publicity, each of which could further result in certain circumstancesreputation damage and significant fines for non-compliance.our business, financial condition, results of operations or prospects could suffer.

Reimbursement

Outside the U.S.,Internationally, reimbursement levels vary significantly by country and by region within some countries. Reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans, and combinations of both. Some countries require additional clinical data before granting or expanding coverage and reimbursement for our products. In general, obtaining broad-based reimbursement and adequate payment for new technologies is more difficult in these markets than in the U.S. Many countries require new medical technologies to not only be safe and effective, but also to be able to demonstrate clinical benefits that outweigh the costs when compared to the standard of care. As in the U.S., reimbursement decisions can change, resulting in the elimination or reduction of reimbursement payments, which could adversely affect our financial results and our ability to invest in and grow our business.

Other

Our operations and many of the products we manufacture or sell are subject to extensive regulation by numerous other governmental agencies, both within and outside the U.S. and internationally. In the U.S., apart from the agencies discussed above, our facilities, operations, employees, products (their manufacture, sale, import and export) and services are regulated by the Environmental Protection Agency, the Occupational Health & Safety Administration, the Department of Labor, Customs and Border Protection, the Department of Commerce, the Department of Treasury, the Department of Justice and others. State agencies also regulate our facilities, operations, employees, products and services within their respective states. Government agencies outside the U.S.internationally also regulate public health, product registration, manufacturing, environmental conditions, labor, exports, imports, bribery and corruption and other aspects of our global operations.

These regulatory agencies and any current or future legislation could impact our business operations, reimbursement for our products, and the healthcare environment generally, which could adversely affect our ability to operate our business and our financial results. Compliance with these regulations has not had a material effect on our capital expenditures, earnings, or competitive position to date, but current or new legislation could have such an effect in the future. We cannot estimate the expenses we may incur to comply with potential new laws or changes to existing laws, or the other potential effects these laws may have on our business.

Human Capital Management

Glaukos is committed to developing a comprehensive, cohesive and positive employee experience. We consider talent attraction, development, engagement and retention a key driver of our business success. As of December 31, 2020,2021, we had 653727 full-time employees. Our Board of Directors, through the Compensation, Nominating and Governance

​

​

​

​

​

​

​

​

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available on our web site at www.glaukos.com, free of charge, as soon as reasonably practicable after the electronic filing of these reports with, or furnishing of these reports to, the Securities and Exchange Commission (SEC).SEC. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

​

​

Item 1A. Risk Factors

The risks discussed below are not the only ones facing our business but do represent those risks that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. Please read the cautionary notice regarding forward-looking statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to Our Business

The reduced reimbursement rates established by CMS for 2022 have, and may continue to, materially and adversely impact our business operations and financial results.

​

As described in Item 1, Business, “Recent Developments – 2022 reimbursement rates,” the United States (U.S.) Centers for Medicare & Medicaid Services’ (CMS’) Final Rules for 2022 impose a new, significantly lower physician fee and a slightly reduced facility fee related to the implantation of trabecular bypass stents, such as our iStent family of products, in conjunction with cataract surgery, furnished in the ambulatory surgery center setting. We believe these CMS physician fee and facility fee rate decreases disrupted traditional customer ordering patterns and have resulted in our customers’ trialing of competitive products, causing reduced glaucoma sales volumes in the U.S. during our third and fourth quarter of 2021. The reduction of the physician fee may continue to have an adverse impact on procedural iStent family product volumes, in conjunction with cataract surgery, in 2022, as well as on our U.S. combo-cataract glaucoma revenues, gross profit, and net income, the full extent of which is not known at this time.

​

Additionally, the Final Rules established facility fee payment rates for the procedure that hospitals and ambulatory surgery centers will use with Glaukos’ iStent infinite product, which is not yet approved by the FDA, that were lower than anticipated. The physician fee payment rate for this procedure will be set by the multi-state, regional contractors, or Medicare Administrative Contractors (MACs), responsible for administering Medicare claims, and is unknown at this time. This physician fee payment rate, alone or in combination with the standalone facility fee payment rate, may result in inadequate reimbursement and impact the use of this product, if and when approved.

​

The COVID-19 pandemic has adversely affected, and could continue to materially and adversely affect, our business, results of operations, financial condition, liquidity, and cash flows.

​

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. The World Health Organization has declaredWhile COVID-19 to be a “pandemic,” spreading across the globe and impacting worldwide economic activity. While the impacts of COVID-19its resulting variant viruses have had, and we expect them to continue to have, an adverse effect on our business, results of operations, financial condition, liquidity and cash flows, we are unable to predict the extent or nature of these impacts at this time.

​

In an effort to reduce the spread of COVID-19, certain federal, state and local governmental authorities have issued, and in some cases reinstituted, stay-at-home and other orders, proclamations and/or directives. To protect our employees and adhere to the guidance and orders of these various governmental authorities, beginning in the first quarter of 2020 and continuing through the date hereof,December 31, 2021, we shifted the majority of our workforce to remote operations and implemented changes to our manufacturing and distribution operations to include the use of personal protective equipment and ensure social distancing. Further, in an effort to identify, and avoid further infection from, asymptomatic cases, we have offered periodic voluntary COVID-19 viralrequired that any onsite individuals adhere to our social distancing and masking requirements. As our employees begin to return to onsite work, a process that began in January 2022, the return-to-work strategies we have adopted or may adopt, including masking, testing, vaccination or other requirements, may have an unanticipated impact on our employees that could be disruptive to on-site employees.our business and adversely impact our financial and operational results.

​

Government restrictions and advisories on elective procedures and therapies enacted to slow the spread of COVID-19 led to a material decrease in demand for our products versus levels achieved prior to the COVID-19 outbreak, which decrease in demand was most significantly felt in the latter part of the quarter ended March 31, 2020 and the earlier part of the quarter ended June 30, 2020. Beginning in May 2020, we began to see a return toward more normalized levels for cataract and keratoconus procedures, which normalization has continued through the quarter ended December 31, 2020. However, we cannot predict the timing and full impact of the pandemic on our future financial and operating results given the continued uncertainties associated with the situation, including the possibility of future surges of COVID-19, uncertainties about the severity and transmission rates of new variants of COVID-19, the availability, distribution and efficacy of vaccines and therapeutics for COVID-19 and patient reluctance to seek primary care from optometrists and ophthalmologists or undergo medical procedures during or following the pandemic. Restrictions on elective procedures and therapies and the closures of ophthalmic practices in an effort to halt the spread of COVID-19 have also impacted the progress of our pipeline products. For example, new patient enrollment in our iDose clinical trial slowed significantly which delayed the iDose approval timeline. Any further prolonged economic slowdown or reinstitution of stay-at-home orders may cause additional delays in the progress of our pipeline products, including those in clinical trials.

​

We implemented significant cost saving initiatives in order to preserve jobs globally and protect core research and development programs. However, the majority of our planned expenditures have been reinstated. We continue to carefully manage our discretionary spending, which may slow the growth trajectory of the Company or require us to delay projects that could have benefitted the Company. In addition to the cost saving measures, we issued $287.5 million in aggregate principal amount of 2.75% convertible notes due 2027 (the Convertible Notes) in June 2020, the proceeds of which are expected to be used for working capital and general corporate purposes.

​

Our supply chain has experienced some delays due to COVID-19 disruptions impacting some of our suppliers and third-party partners and it is possible our suppliers or third-party partners could incur further challenges supplying the materials needed for the manufacture of our products. Additionally, we have experienced a number of COVID-19 cases among our workforce, particularly in the fourth quarter of 2020, and we could experience a wider-spread outbreak of COVID-19 in our manufacturing facilities, which could require us to temporarily shut down manufacturing operations

We continue to carefully manage our discretionary spending in response to COVID, which may slow the growth trajectory of the Company or require us to delay projects that could have benefitted the Company. In addition to the cost saving measures, we issued $287.5 million in aggregate principal amount of 2.75% convertible notes due 2027 (the Convertible Notes) in June 2020, the proceeds of which are expected to be used for working capital and general corporate purposes. As described in Item 1, Business, “Impact of COVID-19 Pandemic and Current Economic Environment,” some of our supply chain and development partners have experienced delays and unfulfilled deliveries of product due to COVID, both in raw material acquisition and due to lack of headcount resources. If these delays and partial or unfilled deliveries persist, they could impact our ability to ship some of our products to our customers, or bring some of our pipeline products to market, in a timely manner.

​

We cannot predict the timing and full impact of the pandemic on our future financial and operating results given the continued uncertainties associated with the pandemic, including the possibility of future surges of COVID-19, uncertainties about the severity and transmission rates of new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, public acceptance rate and efficacy of vaccines and therapeutics for COVID-19 and patient reluctance to seek primary care from optometrists and ophthalmologists or undergo medical procedures during or following the pandemic. Additionally, the COVID-19 pandemic has led to widespread staffing shortages, including in ambulatory surgery centers, which may also impact elective procedures. Restrictions on elective procedures and therapies and the closures of ophthalmic practices in an effort to halt the spread of COVID-19 have also impacted the progress of our pipeline products. For example, new patient enrollment in our iDose clinical trial slowed significantly but was completed in June 2021, which delayed the iDose approval timeline. Any further prolonged economic slowdown or reinstitution of stay-at-home or similar orders may cause additional delays in the progress of our pipeline products, including those in clinical trials. While we cannot predict the full impact of COVID-19 on the timing of completion of our clinical trials and the expected regulatory approvals of our pipeline products, our disclosed targeted approval dates anticipate, to our best estimate, such impact.

​

We have incurred significant losses since inception and our business requires substantial capital and operating expenditures to operate and grow. There can be no guarantee that we reach sustained profitability.

Since the Company’s inception in 1998, we have incurred significant operating losses. As of December 31, 2020,2021, we had an accumulated deficit of approximately $310.1$365.2 million, principally from costs incurred in our clinical trial, research and developmentR&D programs and from our general and administrative expenses. We have funded our operations to date from the sale of equity securities, including our June 2015 initial public offering (IPO), the issuance of notes payable, cash exercises of stock options and warrants to purchase equity securities, cash generated from commercial operations and the issuance of the Convertible Notes. To implement our global business strategies we need to, among other things, fund ongoing research and developmentR&D activities, expand our manufacturing capabilities, grow our sales and marketing organization, enforce or defend our intellectual property rights, acquire companies or in-license products or intellectual property, and obtain regulatory clearance or approval to commercialize our existing products in international markets or to commercialize those currently under development in the U.S. and internationally. As a result, we expect our expenses to continue to increase as we pursue these objectives. While we believe we have sufficient cash to fund our operations for at least the next 12 months from the date our consolidated financial statements for the year ended December 31, 20202021 are made publicly available, our ability to reach sustained profitability is highly uncertain, especially given our increasingly competitive landscape, which makes forecasting our sales more difficult.

Our success depends on our ability to continue to generate sales of our commercialized products and develop and commercialize additional products, which we may not be able to accomplish.

Our primary sales-generating commercial products have been the iStent, which we began selling in the U.S. in 2012, the iStent inject, which we began selling in the U.S. in the second half of 2018, and its successor, the iStent inject W, launched in the second half of 2020, as well as our Photrexa therapies, which we acquired in connection with our acquisition of Avedro, Inc. (Avedro) in November 2019. We expect to continue to derive a significant portion of our net sales from the iStent, the iStent inject models and the Photrexa therapies.

It is important that we continue to build a more complete product offering. Developing additional products is expensive and time-consuming. Even if we are successful in developing our additional pipeline products, including those

currently in development, the success of our new product offerings is inherently uncertain and there can be no assurance that our products will produce net sales in excess of the costs of development. Any current or new products could also quickly be rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying superior technologies, features or better product safety, quality or efficacy. Our competitors include large publicly traded companies or divisions of publicly traded companies and have more resources, greater name recognition, longer operating histories, more established relationships with healthcare professionals, customers and third-party payors, broader products lines, that provide rebate and bundling opportunities, more established sales and marketing programs and distribution networks, and greater experience in obtaining regulatory clearance or approval. Additionally, our research programs, which are expensive and time-intensive, may initially show promise in identifying potential products, yet fail to yield product candidates for clinical development.development despite showing initial promise. If we are unable to successfully commercialize additional products, our business prospects would be materially affected.

As our growth strategy turns increasingly global, we are, and will continue to be, subject to a variety of risks associated with our international operations, which could adversely impact our results of operations and financial condition.

Our existing foreign operations, as well as our planned international growth, expose us to additional uncertainty and risks beyond regulatory authorization and reimbursement levels. Outside the U.S.,Internationally, we sell our products through

If the supply and/or manufacture of our principal revenue-producing products, the iStent, the iStent inject models and our Photrexa therapies, is materially disrupted, it may adversely affect our ability to manufacture products and could reduce our gross margins and negatively affect our operating results.

Our corporate headquarters and thesole manufacturing operationslocation for our iStent products are currently located inis an approximately 98,000 square foot campus located in San Clemente, California. This location serves as our sole manufacturing locationCalifornia, where we manufacture, inspect, package, release and ship nearly all of our iStent and iStent inject products. This is also the location where we currently conductconducted substantially all of our research and development (R&D) activities, customer and technical support, and management and administrative functions. We intendfunctions in 2021. In January 2022, we began to relocate our corporate administrative headquarters, along with certain laboratory, R&D and warehouse space, to a new facility located in Aliso Viejo, California.California (Aliso Facility), as described in Item 1, Business, “Facilities, Manufacturing and Distribution.” If either of our San Clemente facility or our future facility in Aliso ViejoFacility suffers a crippling event, or a force majeure event such as an earthquake, fire or flood, this could materially impact our ability to operate.

Additionally, we rely on a limited number of third-party suppliers, in some cases sole suppliers, to supply components for the iStent, the iStent inject models and our other pipeline products. If any one or more of our suppliers cease to provide us with sufficient quantities of components or drugs in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors such as the proprietary nature of our products, our domestic and international quality control standards and regulatory requirements including the FDA’s Quality System Regulation (QSR) and Current Good Manufacturing Practices (cGMPs) regulations, we may from time to time be unable to obtain components if our component suppliers are found to be in violation of such standards and we may have difficulty quickly engaging additional or replacement suppliers for some of our critical components, which could delay

producer of high quality products, which could adversely affect our business, financial condition or results of operations.

Ophthalmic surgeons may not use our products if they do not believe they are safe, efficient, effective and preferable alternatives to other treatment solutions in the market or may use our products without being adequately trained, which could result in inferior clinical outcomes.

We believe that ophthalmic surgeons will not use our products unless they conclude that our products provide a safe, efficient, effective and preferable alternative to currently available treatment options. If ophthalmic surgeons determine that any of our products are not sufficiently effective, efficient or safe, whether based on longer-term patient studies or clinical experience or unsatisfactory patient outcomes or patient injury, our sales would be harmed. Surgeons may base such determination on patient outcomes that are the result of untrained or unqualified surgeons performing procedures for which they haven’t been trained. It is also possible that as our products become more widely used, latent defects could be identified, creating negative publicity and liability problems for us and adversely affecting demand for our products. If an increasing number of ophthalmic surgeons do not continue to adopt the use of our products, our operating and financial results will be negatively impacted.

Operating results could be unpredictable and may fluctuate significantly from quarter to quarter, which could adversely affect our business, financial condition, results of operations and the trading price of our common stock.

completion of our strategic objectives, or divert management’s attention to seeking qualified replacements. Our employees, including members of our senior management, are not subject to non-competition agreements. Accordingly, the adverse effect resulting from the loss of losing key personnel could be compounded by our inability to prevent them from competing with us.

We have and may continue to enter into acquisitions, collaborations, in-licensing agreements, joint ventures, alliances or partnerships with third parties that could fail.

We have and may continue to enter into acquisitions, collaborations, in-licensing agreements, joint ventures, alliances, partnerships or undertake one or more of these transactions in order to retain our competitive position within the marketplace or to expand into new markets. Examples include our acquisitions of DOSE and Avedro, as well as our licensing of Santen’s Preserflo MicroShunt, and the Intratus drug delivery platform.platform and the Attillaps pharmaceutical compounds. However, we cannot assure you that we will be able to successfully complete any future acquisition we choose tomay pursue, or that we will be able to successfully integrate any acquired business, product or technology in a cost-effective and non-disruptive manner. Our future successes will depend, in part, on our ability to manage an expanded business, which may pose substantial challenges for our management, including challenges related tosuch as the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that we will be successful in managing such expanded business or that we will realize the expected economies of scale, synergies and other benefits currently anticipated from recent or future acquisitions or strategic transactions. In addition, if we are unable to integrate any acquired businesses, products or technologies effectively, our business will likely suffer. Additionally, some of these collaborations, joint ventures, alliances and partnerships may fail to result in any commercialized product, including due to delays in or failures to obtain regulatory approvals, such as the approval delays with respect to the PreserFlo MicroShunt, and could require us to invest a substantial amount of resources. Theseresources only to ultimately fail. In addition, these arrangements may be terminated before we are able to realize net sales to sufficiently cover the costs associated

Our enterprise resource planning (“ERP”) system, which was implemented in 2020, is integral to our ability to accurately and efficiently maintain our books and records, record transactions, and prepare our financial statements. Any disruptions or difficulties that may occur in connection with our ERP system (whether in connection with the regular operation, periodic enhancements or upgrades of such systems, or due to cyber incidents) could adversely affect our ability to provide services, fulfill contractual obligations, file reports with the SEC in a timely manner, operate our business or otherwise affect our controls environment. If our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the New York Stock Exchange, the SEC, or other regulatory authorities. Any of these events could have an adverse effect on our business, operating results and financial condition.

Failure to comply with data privacy and security laws could have a material adverse effect on our business.

We are subject to state, federal and foreign laws relating to data privacy and security in the conduct of our business, including state breach notification laws, the Health Insurance Portability and Accountability Act, (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, (HITECH), the European Union’s (EU) General Data Protection Regulation (GDPR), the UK Data Protection Act and the UK GDPR, and the California Consumer Privacy Act (CCPA)., among others. These laws affect how we collect and use data of our employees, consultants, customers and other parties. Furthermore, theseThese laws, as well as similar laws being enacted by other states and countries, impose substantial requirements that requireinvolve the expenditure of significant fundsresources and employeethe investment of significant time and effort to comply, and additional states and countries are enacting new data privacy and security laws, which will require future expansion of our compliance efforts.comply. We also rely on third parties to host or otherwise process some of this data. In some instances, these third parties have experienced immaterial failures to protect data privacy. Any failure by a third party to prevent security breaches could have adverse consequences for us. We will need to expend additional resources and make significant investments to comply with data privacy and security laws. Our failure to comply with these laws or prevent security breaches of such data could result in significant liability under applicable laws, cause disruption to our business, harm our reputation and have a material adverse effect on our business.

We cannot be certain that our net operating loss tax carryforwards will be available to offset future taxable income.

At December 31, 2020,2021, we had approximately $439.4$491.4 million, $297.6$328.4 million and $13.4$12.3 million of net operating loss (NOL) carryforwards for federal, state and foreign purposes, respectively, available to offset future taxable income. The federalrespectively. Federal NOL carryforwards incurred prior to 2018 begin to expire in 2021,2024, while a federal NOL carryforwardcarryforwards of $186.6$239.2 million will not expire.expire but can only be used to offset 80 percent of future taxable income. The state NOL carryforwards begin to expire in 2021. Theand foreign NOL carryforwards begin to expire in 2022.

At December 31, 2020,2021, we had federal and state R&D credit carryforwards of approximately $32.3$35.6 million and $15.7$18.4 million, respectively. Federal credits begin to expire in 2021,2022, state credits of $3.4$4.1 million begin to expire in 2023, and state credits of $12.2$14.3 million carry over indefinitely. We continue to provide a valuation allowance against a portion of these tax attributes because we believe that uncertainty exists with respect to their future realization, as well as with respect to the amount of the tax attributes that will be available in future periods. realization.

Utilization of these tax attributes may be subject to annual limitations under the Internal Revenue Code of 1986 (IRC) Section 382 and Section 383 if the Company experiences an ownership change. To the extent available, we intend to use these NOL and credit carryforwards to offset future taxable income and/or income tax liabilities associated with our operations. There can be no assurance that we will generate sufficient taxable income in the carryforward period to utilize the

successfully continue to commercialize our current or future products; limiting our ability to obtain additional financing on satisfactory terms; increasing our vulnerability to general economic downturns, competition and industry conditions; requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness; inhibiting our flexibility to plan for, or react to, changes in our business; and diluting the interests of our existing stockholders as a result of issuingif we issue shares of our common stock upon conversion of the Convertible Notes. The occurrence of any one of these events could have an adverse effect on our business, financial condition, operating results or cash flows and ability to satisfy our obligations under the indenture governing the Convertible Notes and any other indebtedness.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance the amounts payable under our current or future indebtedness, including the Convertible Notes, will depend on our operating and financial performance, which may be subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary investments in our business, and our cash needs may increase in the future. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities onsecure desirable terms, which could result in a default on our debt obligations.

We may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes in cash or to repurchase the Convertible Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Notes.

​

Noteholders may require us to repurchase their Convertible Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the aggregate principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Convertible Notes surrendered therefor or Convertible Notes being converted. In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversions of the Convertible Notes may be limited by law, by regulatory authority andor by agreements governing our future indebtedness. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture governing the Convertible Notes or to pay any cash payable on future conversions of the Convertible Notes as required by the indenture governing the Convertible Notes would constitute a default under the indenture governing the Convertible Notes. A default under the indenture governing the Convertible Notes or the occurrence of the fundamental change itself may lead to a default under any future credit facility or other agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or make cash payments upon conversions thereof.

​

The capped call transactions may affect the value of our common stock.

​

In connection with the issuance of the Convertible Notes, we entered into capped call transactions with certain option counterparties. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes. The capped call transactions are expected generally to reduce the potential dilution of our common stock upon any conversion of the Convertible Notes or at our election (subject to certain conditions) and offset any cash payments we are required to make in excess of the aggregate principal amount of converted Convertible Notes, as the case may be, with such reduction or offset subject to a cap.

​

We have been advised that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Convertible Notes. In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Convertible Notes (and are likely to do so on each exercise date of the capped call transactions, which are expected to occur during the 40 trading day period beginning on the 41st scheduled trading day prior to the maturity date of the Convertible Notes, or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the Convertible Notes). This activity could cause or avoid an increase or a decrease in the market price of our common stock.

​

We are subject to counterparty risk with respect to the capped call transactions.

​

The option counterparties to the capped call transactions are financial institutions, and we are subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price subject to the cap and in the volatility of our common stock.

​

In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

​

FDA’s drug and device centers prior to approval, which may delay approval. Before we can obtain regulatory approval for any product candidate, we may be required to undertake extensive clinical testing in humans to demonstrate safety and efficacy to the satisfaction of the FDA and other regulatory agencies, including outside the U.S.internationally. We have experienced in the past, and could experience in the future, delays in the commencement or completion of clinical trials or testing that could significantly affect our product development costs. We do not know whether planned clinical trials will begin on time, need to be redesigned, enroll an adequate number of patients in a timely manner or be completed on schedule, if at all. Conducting clinical trials is a complex and expensive process, can take many years, and outcomes are inherently uncertain. We incur substantial expense for, and devote significant time to, clinical trials but cannot be certain that the trials will ever result in commercial sales, even if we believe the results from such trials are positive. We may suffer significant setbacks in clinical trials, even after earlier clinical trials showed promising results, and failure can occur at any time during the clinical trial process. Any of our medical device products may malfunction and any of our products may produce undesirable adverse effects that could cause us or regulatory authorities to interrupt, delay or halt clinical trials. We, the clinical trial investigators, the independent review board responsible for overseeing the trial, the FDA, or another regulatory authority may suspend or terminate clinical trials at any time due to a number of factors, including failure to conduct the clinical trial in accordance with applicable regulatory requirements or trial protocols, failure to demonstrate a benefit from using the product, lack of sufficient funding, or to avoid exposing trial participants to unacceptable health risks. Any delay or failure in clinical trials would delay or prevent our ability to obtain necessary regulatory approvals, which would have a material adverse effect on our business, financial condition and prospects.

In some instances we or our partners have pursued, and may in the future pursue, a regulatory clearance or approval pathway that has proven or proves unsuccessful, such as the delays experienced by the PreserFlo Microshunt and the change in regulatory pathway undertaken with respect to the iStent infinite, which wouldin the past has, and in the future may, substantially increase the time and financial resources required to obtain FDA or other regulatory approval or could result in new competitive products reaching the market faster than our product candidate, which could materially adversely impact our competitive position and prospects. We cannot assure you that we will receive the requisite or timely approvals for commercialization of our product candidates.

Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations and applicable foreign laws and regulations. We may also be required to seek additional regulatory approvals to modify our approved products or their manufacturing processes, which may entail significant time and expense. We and our suppliers are subject to extensive post-marketing regulatory requirements and failure to comply with applicable requirements could subject us to enforcement actions, including product approval withdrawals. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections by the FDA. Other post-market requirements that may regulate our products include establishment registration and device listing, quality system and good manufacturing requirements, reporting of adverse events and device malfunctions, reporting of corrections and removals (recalls), labeling requirements, and promotional restrictions. Under FDA regulations, combination products are subject to the quality system and good manufacturing requirements applicable to both drugs and medical devices. Our products could malfunction, cause unexpected adverse events, or experience performance problems that require review and possible corrective action by us or a component supplier, including a recall or market withdrawal. Failure to conduct any required post-marketing studies for our approved products in a timely manner could result in the revocation of the approval for the product that is subject to such a requirement and could also result in the

as the FDA does not restrict or regulate a physician's choice of treatment within the practice of medicine. Moreover, surgeons may choose to use certain products or combinations of products in order to gain more favorable reimbursement treatment. However, if the FDA determines that our promotional materials, sales techniques, pricing programs or training constitutes promotion of an off-label use or encourages over-utilization of our products or use of our products in combinations that are not indicated or appropriate, it could request that we modify our trainingmaterials, techniques, programs or promotional materialstraining or subject us to regulatory or enforcement actions.

We are subject to healthcare fraud and abuse, anti-kickback, false claims and transparency laws and regulations, among others, which are enforced by federal and state governments with respect to our marketing, training, customer arrangements, discount, rebate and pricing programs, product bundling, financial arrangements with physicians, patient assistance programs, reimbursement support services, and other practices. See Item 1, Business, “Government Regulation --– U.S. Regulation & Reimbursement in the U.S.”Reimbursement” and “Regulation“International Regulation & Reimbursement outside the U.S.”Reimbursement” for additional information about the laws and regulations which apply to us. The U.S. Department of Justice has increased its scrutiny of interactions between manufacturers and healthcare providers, as well as various patient and product support programs, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Although we try to structure our arrangements within available safe harbors whenever possible, we may nevertheless become subject to government scrutiny or investigation. Violations may result in civil monetary penalties, criminal penalties, and exclusion from participation in government healthcare programs, including Medicare and Medicaid, all of which would have an adverse effect on our business. In the foreign markets in which we operate, different pricing and reimbursement systems, which could result in lower reimbursement, could harm our ability to operate our business.

We are also subject to compliance with various laws and regulations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions, which generally prohibit companies and their agents from making bribes or other improper payments to officials for the purpose of obtaining or retaining business. We are also subject to limitations on trade with persons in sanctioned countries. Our exposure to international markets increases the inherent risks of encountering such issues. While our employees, distributors and agents are required to comply with these laws and regulations, no assurance can be given that our training and internal policies and procedures will always protect us from violations of these laws. Any actual or alleged violations of these laws and regulations could subject us to government investigations, criminal sanctions, severe fines and penalties that could have a material adverse impact on our reputation, financial condition, results of operations and cash flows.

The scope and enforcement of each of the laws applicable to our business and products is uncertain and subject to rapid change in the current environment of healthcare reform. If our operations are found to be in violation of any of the government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in federal and state healthcare programs and the curtailment or restricting of our operations, any of which could harm our ability to operate our business and our financial results. The U.S. Department of Justice has increased its scrutiny of interactions between manufacturers and healthcare providers, as well as various patient and product support programs, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. We have built and maintained a compliance program to adhere to the various compliance and reporting requirements in multiple jurisdictions, but these laws and regulations are subject to evolving interpretation. Although we try to structure our arrangements within available safe harbors whenever possible, we may nevertheless become subject to government scrutiny or investigation. Responding to a government investigation is time and resource intensive, and may cause harm to our business and reputation even if we are able to successfully defend against it. Additionally, resolution of any such investigation may require agreement to onerous corporate integrity agreements or other compliance or reporting requirements, which may negatively affect our business.

Legislative or regulatory reform of the healthcare system could hinder or prevent our products’ commercial success.

In the U.S. and in certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare systems in ways that could impact our ability to sell our products profitably, if at all. In the U.S. in recent years, new legislation has been proposed and adopted at the federal and state levels that is effecting major changes in the healthcare system. In addition, new regulations and interpretations of existing healthcare statutes and regulations are frequently adopted and we may not be able to comply with the changed laws, they could increase the cost of manufacturing, marketing or selling our product, could make approvals of pipeline products more difficult or prevent us from selling at all. We expect there will continue to be a number of legislative and regulatory changes to the U.S. health care system that could significantly change the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products or the reimbursement thereof and may impose additional costs or lengthen review times of planned or future products. . It is also difficult to predict whether and how the policies and priorities of a new administration could materially impact the regulation governing our products.

We may from time to time increase the prices of our products, as waswe have recently done with our Photrexa therapies. Drug pricing by pharmaceutical manufacturers is currently, and is expected to continue to be, under close scrutiny, including with respect to manufacturers that increase the price of products after acquiring those products from other companies. In some cases, such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturers’ patient support programs, and reform government program reimbursement methodologies for products. Although our price increases have been based upon third party studies of the projected economic value of our products to the healthcare system, we cannot be certainguarantee they would not be subject to such scrutiny.

In May 2017, the EU adopted Medical Devices Regulation 2017/745 (MDR), which will repealrepealed and replacereplaced the Medical Device Directive (MDD). MDR was set to takewent into effect beginningin May 26, 2020; however, the effective date of MDR has been postponed a year and is now anticipated to take effect beginning May 26, 2021. Although MDR does not set out a substantially different regulatory system than MDD, it provides for stricter controls of medical devices. Under provisions that govern the transition period untilfrom MDD to MDR, takes effect, medical devices with notified body certificates issued under the MDD prior to May 26, 20202021 may continue to be marketed and sold as long as those certificates are valid (up to a maximum of five years from the date of issue) or until May 27, 2024 at the latest. After the expiration of any applicable transitional period, only devices that have been CE marked under MDR may be placed on the market in the EU. Our failure to obtain CE marks for all of our products under MDR on a timely basis, or to comply with MDR, could restrict our ability to sell our products in the EU, which would have a material adverse effect on our business and financial results.

Broader legislative changes may also impact our operations. The United Kingdom (U.K.) held a referendum on June 23, 2016 in which voters approved withdrawal from the EU (commonly referred to as Brexit).  On January 31, 2020, the U.K. withdrew from the EU (commonly referred to as Brexit) and the transition period ended on December 31, 2020. The U.K. and EU reached agreement regarding their future relationship on December 24, 2020. As a result of Brexit, there may be greater restrictions on imports and exports into and out of the U.K. and EU countries and regulatory complexities that could adversely impact the Company.

If, as a result of legislative or regulatory healthcare reform, we cannot sell our products profitably, whether due to our own inability to comply with, or the inability of other economic operators in our supply chain to qualify under, any legislative reform, our business would be harmed. In addition, any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market and distribute existing products.

Changes to the reimbursement rates for our products may adversely impact our business.

Our ability to successfully commercialize and achieve market acceptance of our products depends in significant part on adequate financial coverage and reimbursement from third party payors, including governmental payors (such as the Medicare and Medicaid programs in the U.S.), managed care organizations and private health insurers. See Item 1, Business, “Government Regulation --– U.S. Regulation & Reimbursement in the U.S.”Reimbursement” and “Regulation“International Regulation & Reimbursement outside the U.S.”Reimbursement” for additional information. Payors continually review the clinical evidence for new technologies and can change their coverage policies without notice or deny payment if the product was not used in accordance with the payor’s coverage policy. Therefore, coverage for our products can differ significantly from payor to payor. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage for these products and procedures. As a result, the coverage determination process is often time-consuming and costly and requires us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage will be obtained or will be maintained once it is obtained.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement levels. Without sufficient reimbursement from governmental programs or third party commercial payors, patients may not be able to access our products. The demand for, and the profitability of, our products could be materially harmed if the Medicaid program, Medicare program, other healthcare programs in the U.S. or elsewhere, or third party commercial payors in the U.S. or elsewhere deny reimbursement for our products, limit the indications for which our products will be reimbursed, or provide reimbursement only on unfavorable terms. Further, as we seek to transition theAlso, when procedures associated with our iStent-related products transition from a temporary Current Procedural Terminology (CPT)CPT Category III codecodes to a permanent CPT Category I code,codes, the physician and facility reimbursement levels associated with the procedures using these products could be decreased, such as the decreased payment rates for procedures using our iStent-related products, in conjunction with cataract surgery,

using our iStent products could be decreased.established by CMS for 2022, as discussed earlier in these Risk Factors under the heading “Risks Related to Our Business.” Further, evenEven when a permanent billing code has been assigned to a product, there is no guarantee that coverage will be provided. MACs have in the past, and may in the future, change coverage terms, which could result in inadequate reimbursement and impact the use of our products. If we are unable to maintain our existing codes or obtain new permanent codes for procedures using our products, or obtain new reimbursement codes for our other products in development, we may be subject to significant pricing pressure, which could harm our business, results of operations, financial condition and prospects.

We cannot predict to what extent the evolvingcontinuing effects of the COVID-19 pandemic may disrupt global healthcare systems and access to our products or result in a widespread loss of individual health insurance coverage due to unemployment, a shift from commercial payor coverage to government payor coverage, or an increase in demand for patient assistance and/or free drug programs, any of which could adversely affect our net revenue. In addition, payers consistently engage in cost containment efforts, which could include efforts to decrease reimbursement levels for prescription drugs and the imposition of prior authorization for the use of our products. We cannot predict actions that third party payors may take, or whether they will limit the access to and level of reimbursement for our products or refuse to provide any approvals or coverage.

​

Risks Related to Our Intellectual Property

If we are unable to adequately protect our intellectual property, our competitors and other third parties could develop and commercialize products similar or identical to ours, which would substantially impair our ability to compete.

Our success and ability to compete depends significantly upon our ability to obtain, maintain and protect our proprietary rights and licensed intellectual property rights to the technologies and inventions used in or embodied by our products. We rely on a combination of patents and trademark rights, and to a lesser extent on trade secrets and copyrights, together with licenses and nondisclosure agreements to protect our technologies. These legal means, however, afford only limited protection and may not adequately protect our business. We also have not pursued or maintained, and may not pursue or maintain in the future, patent protection for our products in every country or territory in which we sell or will in the future sell our products. In addition, we cannot be sure that any of our pending patent applications or pending trademark applications will issue or that, if issued, they will issue in a form that will be advantageous to us.

Despite our efforts to protect our proprietary rights, we cannot guarantee that we will be able to adequately protect these rights, which could substantially impair our ability to compete. Our patents may be challenged and held invalid or we may be unable to extend the protection on products with expiring patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. Further, although it is our policy to require each of our employees, consultants and any other parties who may be involved in the development of intellectual property on our behalf to execute proprietary information and inventions agreements, we may be unsuccessful in doing so with each party who in fact develops intellectual property that we regard as our own. The relevant assignment provisions may not be self-executing or may be breached, resulting in ownership disputes and/or litigation.

We have a number ofseveral foreign patents and patent applications, and expect to pursue patent protection in the most significant markets in which we do business. The laws of other countries in which our product offeringsproducts are or may be sold may not protect our product offerings and intellectual property to the same extent as U.S. laws, if at all. Many companies have encountered significant difficulties in obtaining, protecting and defending such rights in international markets. In addition, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, and certain countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. We also may be unable to protect our rights in trade secrets and unpatented proprietary technology in these countries. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in these jurisdictions,countries, our business, financial condition and results of operations could be substantially harmed.

We may not be able to accurately estimate or control our future operating expenses in relation to obtaining, enforcing and/or defending intellectual property, which could lead to cash shortfalls. Our operating expenses may fluctuate significantly in the future as a result of the costs of preparing, filing, prosecuting, defending and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation or costs associated with administrative proceedings and the results of such proceedings.

We have been and may in the future become involved in patent and other intellectual property litigation or administrative proceedings relating to our intellectual property rights, which could be costly, time consuming and unsuccessful and could interfere with our ability to successfully commercialize our products.

Intellectual property rights are essential to our business. We have asserted and may in the future need to assert claims of infringement against third parties to protect our rights, or to invalidate or challenge the intellectual property rights of a third party, including those rights owned by our competitors. Additionally, third parties could assert infringement or misappropriation claims against us with respect to our current or future commercial products and seek to invalidate one or more of our patents or trademarks. Intellectual property disputes often involve complex legal and factual questions, and could result in significant costs, substantial damages and our inability to manufacture, market or sell our existing or future products that are found to infringe. Even if we were to prevail in any such action, the litigation or administrative proceeding could result in substantial cost and diversion of resources that could materially and adversely affect our business. Such claims could arise in situations where certain employees, consultants or contractors were previous, or are currently, employed by other medical device, biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the intellectual property, proprietary information, know-how or trade secrets of others in their work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors.employers.

There is no guarantee that we would be successful enforcing or defending our intellectual property rights in court. A court could hold that some or all of our asserted intellectual property rights are not infringed, or could invalidate our rights, hold our rights unenforceable, or substantially narrow the scope of protection. Further, we could be prohibited from selling our products or a court could order us to pay compensatory damages as well as other penalties and fines. Any such adverse result would undermine our competitive position. Regardless of the final outcome, any litigation to enforce our intellectual property rights in patents, copyrights, trade secrets or trademarks is highly unpredictable and could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Being a Public Company and Our Common Stock

Risks generally associated with a company-wide implementation of an enterprise resource planning (ERP) system may adversely affect our business and results of operations or the effectiveness of our internal controls over financial reporting.

On May 6, 2020, we implemented a company-wide ERP system to upgrade certain existing business, operational, and financial processes, and continue to refine the system on an ongoing basis, which has been a complex and time-consuming project. This project has required and may continue to require investment of capital and human resources, the re-engineering of processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business. Any deficiencies in the design and implementation of the new ERP system could result in higher costs than we had anticipated and could adversely affect our ability to develop and launch solutions, provide services, fulfill contractual obligations, file reports with the SEC in a timely manner, operate our business or otherwise affect our controls environment. Any of these consequences could have an adverse effect on our results of operations and financial condition. In addition, because the ERP is a new system and we have no prior experience with it, there is an increased risk that one or more of our internal financial controls may fail, which could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the

​

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.

The exclusive forum provisions in our organizational documents could limit our stockholders' ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or its directors, officers or other employees.

Our Restated Certificate of Incorporation (the “Glaukos Charter”)Glaukos Charter and our Bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company or its stockholders, (iii) any action or proceeding asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Glaukos Charter or our bylaws,Bylaws, or (iv) any action or proceeding asserting a claim governed by the internal affairs doctrine (the “DelawareDelaware Exclusive Forum Provision”)Provision). Further, in November 2020, we amended our Bylaws to provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act (the “FederalFederal Forum Provision”)Provision). Our decision to adopt the Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law and means that suits brought by stockholders to enforce any duty or liability created under the Securities Act must be brought in federal court and cannot be brought in state court.

ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

​

ITEM 2.PROPERTIES

The Company leases two adjacent facilities located in San Clemente, California. Each of these leases expires on May 31, 2030, and each contains an option to extend the lease for one additional five year period at market rates. The total leased square footage of both facilities equals approximately 98,000. On November 14, 2018,Additionally, the Company entered into an office building lease pursuant to which the Company will leaseleases one property containing three existing office buildings, comprising approximately 160,000 rentable square feet of space, located in Aliso Viejo, California (Aliso Facility) which was accounted for as a finance lease. The term of the Aliso Facility commenced on AprilMay 1, 2019 and continues for thirteen years. The agreement contains an option to extend the lease for two additional five year periods at market rates. On December 18, 2018, we also purchased approximately 2.5 acres of vacant land located adjacent to the Aliso Facility for future expansion purposes. TheIn January 2022, the Company currently intends to relocatebegan relocating certain of its corporate administrative headquarters, along with certain laboratory, research and developmentR&D and warehouse space, to the Aliso Facility. The Company’s San Clemente locations will continue to serve as its main manufacturing locations for the foreseeable future.

Additionally, we lease approximately 27,000 square feet of office and laboratory space in Waltham, Massachusetts, pursuant to a lease agreement that expires in 2023. We also currently occupy approximately 19,00060,000 square feet of leased manufacturing space in Burlington, Massachusetts pursuant to a lease agreement that expires in 2023.on July 31, 2033. Our additional U.S.-based and foreign subsidiaries’ leased office space, which includes small administrative offices in Germany, Australia, Canada, Brazil, Ireland, Japan and the United Kingdom, totals less than 14,000 square feet.

We believe our existing properties are well maintained, in good operating condition and are adequate to support our present level of operations.

​

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

​

Dividend Policy

We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future.

​

​ITEM 6.[RESERVED]

​

​

​

​

​

​

​

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our audited consolidated financial statements and related notes included in Items 6 and 8, respectively, of this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements that reflect our current plans, expectations, estimates and beliefs that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events may differ materially from those discussed in these forward-looking statements. You should carefully read Item 1A - “Risk Factors” included in this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements and Industry Data.”

Overview

We are an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. We first developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm, and launchedlaunching our first MIGS device commercially in 2012. We2012, and have alsosince developed a proprietary bio-activatedportfolio of technologically distinct and leverageable platforms to support ongoing pharmaceutical therapyand medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of a corneal disorder, keratoconus, that was approved by the U.S. Food and Drug Administration (FDA) in 2016 and we are developing a pipeline of surgical devices, sustained pharmaceutical therapies, and implantable biosensors intended to treat glaucoma, progression, corneal disorders such as keratoconus, dry eye and refractive vision correction, and retinal diseases such as neovascular age-related macular degeneration and(AMD), diabetic macular edema.edema (DME), and retinal vein occlusion (RVO).

Impact of COVID-19 Pandemic and Current Economic Environment

​

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. The World Health Organization declared COVID-19 to be a “pandemic,” spreading acrossWhile the globe and impacting worldwide economic activity. In the U.S., certain federal, state and local governmental authorities issued stay-at-home and other orders, proclamations and/or directives, including restrictions on elective procedures and therapies, aimed at minimizing the spread of COVID-19. Although some of these governmental restrictions have since been lifted or scaled back, recent surges of COVID-19 have in some cases led, and future surges could lead, to the reinstitution of stay-at-home or other orders and may further result in restrictions being re-implemented in response to efforts to reduce the spread of COVID-19. Even if stay-at-home or other orders are removed, potential patients may elect to stay at home voluntarily. The COVID-19 pandemic and subsequent economic slowdown has materially impacted the global demand for our products which are usedstarting in procedures and therapies that are considered elective. This decrease in demand was most significantly felt in the latter part of the quarter ended March 31, 2020 and the earlier part of the quarter ended June 30, 2020. Beginning in May 2020, we began to see an early recovery toward more normalized levels for cataract and keratoconus procedures as early as May 2020, a trend that has generally continued, with periodic volatility in certain geographies in which we operate, through December 31, 2021. Most recently the Omicron variant has led to a material increase in diagnosed cases worldwide, creating new government restrictions in select geographies and impacting elective procedures in hospital and ambulatory surgery center sites. Additionally, the COVID-19 pandemic has led to widespread staffing shortages, including in ambulatory surgery centers, which may also impact elective procedures. These trends accelerated at the end of December 2021 and continued through the date herein.

​

We continue to actively assess the impact of COVID-19 on our clinical trials and other pipeline products. The closure of ophthalmic practices and deferral of elective procedures beginning in the first quarter endedof 2020 in response to COVID-19 disrupted new patient enrollment in our ongoing clinical trials. While we cannot predict the full impact of COVID-19 on the timing of completion of our clinical trials and the expected regulatory approvals for our pipeline products, our disclosed targeted approval dates anticipate, to our best estimate, such impact.

Additionally, some of our vendors are continuing to experience supply challenges, both in the acquisition of raw materials as well as due to limited headcount resources, and we have experienced higher costs for certain raw materials. These challenges have led to delays and partial or unfulfilled deliveries of certain components needed for the manufacture of our products, in some cases requiring us to find second sources for materials. If these delays and partial or unfulfilled deliveries persist, they could impact our ability to ship some of our products to our customers, or bring some of our pipeline products to market, in a timely manner. We believe that much of these supply challenges stem from the ongoing obstacles presented by COVID-19.

In 2020, when COVID had its greatest financial impact to date, we sought to preserve our cash position by instituting a number of cost saving initiatives, including temporary reductions in discretionary spending and capital expenditures. We temporarily deferred a significant portion of our planned 2020 capital expenditures, particularly those related to facilities expansion and consolidation plans, which were reinstituted as state and local governments began to

authorize re-openings. Further, in June 2020, we issued an aggregate principal amount of $287.5 million of 2.75% convertible notes due 2027 (the Convertible Notes), the net proceeds of which will be used for working capital and general corporate purposes. As of December 31, 2021, we had cash, cash equivalents, short-term investments, and restricted cash of approximately $423.5 million, compared to $413.9 million as of December 31, 2020.

The ultimate impact of the COVID-19 pandemic on our operations going forward is unknown and will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the COVID-19 outbreak, the status of health and safety actions taken to contain its spread, the severity and transmission rates of new variants of COVID-19 such as the Delta and Omicron variants, the availability, distribution, and efficacy of vaccines for COVID-19, any additional preventative and protective actions that governments, or we, may take, any future surges of COVID-19 that may occur, the dynamics associated with the rollout of the COVID-19 vaccines, and how quickly and to what extent economic and operating conditions normalize within the markets in which we operate. For additional information, see the section titled Risks Related to Our Business within Item 1A. Risk Factors of this Annual Report on Form 10-K.

​

stents, such as our iStent family of products, in conjunction with cataract surgery, slightly decreases reimbursements to an ambulatory surgery center and increases reimbursements to a hospital. We estimate that approximately 80% of procedures utilizing our trabecular micro-bypass technologies in the U.S. are performed in the ambulatory surgery center setting and the remaining estimated 20% of procedures are performed in the hospital. Additionally, the Final Rules established facility fee payment rates that were lower than anticipated for standalone insertion of an aqueous drainage device in the ambulatory surgery center and hospital settings, which would be the procedure that such facilities would use with our iStent infinite product, which is not yet approved by the FDA. These CMS reimbursement rates contained in the Final Rules took effect January 1, 2022.

​

U.S. glaucoma volumes were negatively impacted during the third and fourth quarter of 2021 as typical customer ordering patterns were disrupted and trialing of competitive products increased in anticipation of the potential 2022 CMS physician and facility fee reimbursement rate decreases becoming effective as originally proposed in July 2021. The physician fee reimbursement rate as issued in the Final Rules may continue to have an adverse impact on 2022 procedural iStent family product volumes, in conjunction with cataract surgery, as well as on our 2022 U.S. combo-cataract glaucoma revenues, gross profit, and net income, the full extent of which is not known at this time.

​

Attillaps License Agreement

On September 20, 2021, we announced that we had entered into a licensing agreement (Attillaps License Agreement) with Attillaps Holdings, Inc. (Attillaps) under which Attillaps granted us a global exclusive license to Attillaps’ proprietary library of investigational pharmaceutical compounds that target the eradication of Demodex mites, which are the root cause of Demodex blepharitis and often associated with meibomian gland dysfunction and related ophthalmic diseases. Under the Attillaps Licensing Agreement, we have the exclusive global right to research, develop, manufacture and commercialize products using certain acetylcholinesterase inhibitors for the Avedro Merger was $437.8 million. The consideration consistedtreatment of Glaukos common stock valued at $406.8ophthalmic diseases caused by Demodex mites. We paid $5.0 million issuedupon the signing of the Attillaps License Agreement and will have ongoing milestone and royalty payment obligations depending on the success of the development, approval and commercialization of the compounds.

Settlement of Patent Litigation

On September 14, 2021, we entered into a settlement agreement (Settlement Agreement) with Ivantis, Inc. (Ivantis), pursuant to replace Avedro common stock, Glaukos shares valued at $0.2which we and Ivantis agreed to terminate the patent infringement lawsuit we had filed against Ivantis on April 14, 2018 in the U.S. District Court for the Central District of California, Southern Division (the Lawsuit). In the Lawsuit, we alleged that Ivantis’ Hydrus® Microstent device infringes our U.S. Patent Nos. 6,626,858 and 9,827,143. Pursuant to the terms of the Settlement Agreement, Ivantis has made cash payments totaling $60.0 million, to replace certain vested Avedro warrants, and $30.8$30.0 million of value attributablewhich was paid to us during the year ended December 31, 2021, and $30.0 million of which was paid to us in January 2022.

Additionally, Ivantis will make quarterly royalty payments to us in the amount of 10% of Ivantis’ Hydrus Microstent U.S. sales and any international sales supplied out of the U.S. beginning in the fourth quarter of 2021 through April 26, 2025, subject to a per-unit minimum payment. We and Ivantis have dismissed with prejudice all of our claims against each other in the Lawsuit, which was scheduled for trial beginning on or around September 28, 2021, and in related lawsuits in other forums and jurisdictions. The parties also have agreed to mutual licenses and covenants not to sue the other party for patent infringement relating to Ivantis’ Hydrus Microstent or our micro-stent devices.

Santen License Agreement

On May 18, 2021, we announced that we entered into a new development and commercialization license agreement with Santen Pharmaceutical Co., Ltd. (Santen) for the PreserFlo MicroShunt, superseding the previous collaboration and distribution agreements between the two parties. Under the new agreement, we obtain exclusive commercialization rights for the MicroShunt in the United States, Australia, New Zealand, Canada, Brazil, Mexico and the remainder of Latin America. The new agreement also provides us with control over development activities for the MicroShunt in these same territories, including clinical development and regulatory affairs activities in the United States following a transition period. Santen submitted a premarket approval (PMA) application to the pre-combination services associatedU.S. Food and Drug Administration (FDA) in June 2020 and discussions with replacementthe FDA remain ongoing. We did not make any payment in connection with the execution of all Avedro outstandingthe license agreement; however, should we be successful in obtaining regulatory

approval for the PreserFlo MicroShunt, we would be required to pay Santen a milestone payment, followed by royalties and unexercised stock option awardsother potential future milestones depending on the success of the commercialization of the product.

Intratus License Amendment

On April 14, 2021, we announced that we had entered into an amended licensing agreement with Intratus, Inc. (Intratus) under which Intratus granted us a global exclusive license to research, develop, manufacture and all unvested restricted stock units (Replacement Awards). See Note 2, Note 4, Note 6commercialize Intratus’ patented, non-invasive drug delivery platform for application in the treatment of presbyopia. The addition of presbyopia expands upon the existing agreement between us and Note 7Intratus announced on July 22, 2019. The amendment includes a mechanism to further expand the consolidated financial statementsexisting agreement to other indications, applying the active pharmaceutical ingredients being advanced by us in Item 8 of this Annual Report on Form 10-K for additional information on our Avedro Merger.glaucoma, corneal disorders and presbyopia to new ophthalmic fields.

Factors Affecting Our Performance

In addition to the disruption resulting from COVID-19 as discussed above, the full effects of which at this time are difficult to predict at this time, our operations to date have been, and we believe our future growth will be, impacted by the following:

​

Further, subject to our temporary costs saving initiatives and spending deferrals due to COVID-19, we have made and expect to continue to make significant investments in our global sales force, marketing programs, research and development (R&D) activities, clinical studies, and general and administrative infrastructure. FDA-approved investigational device exemption (IDE) or investigational new drug (IND) studies and new product development programs in our industry are expensive. We have incurred a significant increase in administrative costs since we began operating as a public company. Our operating expenses have increased significantly following our acquisition of Avedro, and we also expect to incurhave incurred additional construction costs related to our new facility in Aliso Viejo, California (Aliso Facility).

Components of Results of Operations

Net Sales

We currently operate in one reportable segment and net sales are generated primarily from sales of iStent products and following the Avedro Merger on November 21, 2019, sales of Photrexa and other associated drug formulations, as well as our proprietary bioactivation systems, to customers.customers and royalty income. Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services.

We sell the majority of our products through a direct sales organization in the United States, and outside the United StatesStates. Internationally, we sell our products primarily through direct sales subsidiaries in sixteenseventeen countries and through independent distributors in certain countries in which we do not have a direct presence or maintain a modest commercial presence. The primary end-user customers for our products are surgery centers, hospitals and physician private practices.

While net sales may increase as we expand our global sales and marketing infrastructure and continue to increase awareness of our products by expanding our sales base and increasing our marketing efforts, historically our net sales within a fiscal year have been impacted seasonally, as demand for U.S. ophthalmic procedures is typically softer in the first quarter and stronger in the fourth quarter of a given year. However, we have not experienced the same seasonality pattern in 20202021 due in part to the COVID-19 pandemic and its effect on our commercial performance may continue into future reporting periods. We also believe the 2022 CMS physician fee and facility fee rate decreases, which were finalized in the fourth quarter 2021, have disrupted traditional customer ordering patterns and have resulted in our customers’ trialing of competitive products, causing reduced U.S. Glaucoma sales volumes during our third and fourth quarter of 2021. Additionally, for several years we had commercialized our products in the U.S. with few or no direct competitors. Other products have now become available in the U.S. and globally, or are in development by third parties, that have entered or could enter the market and which may affect adoption of or demand for our products. These other products could achieve greater commercial acceptance or demonstrate better safety or effectiveness, clinical results, ease of use or lower costs than our products, which could adversely impact our net sales.

Cost of Sales

Cost of sales reflects the aggregate costs to manufacture our products and includes raw material costs, labor costs, manufacturing overhead expenses and the effect of changes in the balance of reserves for excess and obsolete inventory.

We manufacture our iStent products at our current headquarters in San Clemente, California using components manufactured by third parties. We manufacture our KXL and Mosaic systems at our manufacturing facilities in Burlington, Massachusetts, with some limited manufacturing operations in Dublin, Ireland, and we contract with third-party manufacturers in the U.S. and Germany to produce our Photrexa and other associated drug formulations.

Due to the relatively low production volumes of our iStent products and our KXL and Mosaic systems compared to our potential capacity for those products, a significant portion of our per unit costs is comprised of manufacturing overhead expenses. These expenses include quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management.

Cost of sales includes a charge equal to a low single-digit percentage of worldwide net sales of certain current and future products, including our iStent products, with a required minimum annual payment of $0.5 million, which amount became payable to the Regents of the University of California (the University) in connection with our December 2014 agreement with the University (the UC Agreement) related to a group of our U.S. patents (the Patent Rights). This ongoing product payment obligation will change as patent coverage on certain products being to lapse, and will terminate entirely terminate on the date the last of the Patent Rights expires, which is currently expected to be in 2022.

Under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), the 2.3% federal medical device excise tax on U.S. sales of medical devices manufactured by us was suspended from January 1, 2016 to December 31,

million. Additionally, cost of sales has included amortization of the fair market value inventory adjustment recorded in connection with the Avedro Merger, which for the years ended December 31, 2020 and December 31, 2019 was $24.7 million and $4.0 million, respectively.respectively, and was fully amortized as of December 31, 2020.

Our future gross profit as a percentage of net sales, or gross margin, will be impacted by numerous factors including commencement of sales of products in our pipeline, or any other future products, which may have higher product costs. Our gross margin will also be affected by manufacturing or supply chain inefficiencies that we may experience as we attempt to manufacture our products on a larger scale, manufacture new products and change our manufacturing capacity or output. Additionally, our gross margin will continue to be affected by royalty expenses on current or future products associated with various licensing agreements. Other factors adversely affecting our net sales in future periods, including the aforementioned expenseimpact of the COVID-19 pandemic and any related to the UC Agreementsupply chain issues, and the acquisition fair market value inventory adjustment rolloutimpact of reductions by CMS in 2022 Medicare payment rates for certain of our products and related to the Avedro Merger.SeeNote 6, Business Combinations to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for additional information on our Avedro Merger. The current COVID-19 pandemicservices, may also impact our gross profit margins given the potential impact to net sales in future periods.

Selling, General and Administrative

Our selling, general and administrative (SG&A) expenses primarily consist of personnel-related expenses, including salaries, sales commissions, bonuses, fringe benefits and stock-based compensation for our executive, financial, marketing, sales, and administrative functions. Other significant SG&A expenses include marketing programs; advertising; post-approval clinical studies; conferences and congresses; travel expenses; costs associated with obtaining and maintaining our patent portfolio; professional fees for accounting, auditing, consulting and legal services; costs to implement our global enterprise systems; and allocated overhead expenses.

The Avedro Merger has resulted in additional integration expenses, restructuring expenses and personnel-related expenses during the year ended December 31, 2019 and additional personnel-related expenses, primarily stock-based compensation during the year ended December 31, 2020. Additionally, SG&A will continue to be impacted by the amortization of certain finite-lived intangible assets acquired as a result of the Avedro Merger, along with Avedro’s normal and recurring SG&A expenses.

We expect SG&A expenses to continue to grow as a result of the Avedro Merger as we increase our global sales and marketing infrastructure and general administration infrastructure in the United States; however, as discussed above under “Impact of COVID-19 Pandemic and Current Economic Environment,” we have sought to preserve our cash position by instituting a number of cost saving initiatives, including temporary reductions in discretionary spending, including variable expense associated with salesperson commissions and marketing, capital expenditures, as well as a temporary salary reduction for many of our employees, which as of the date hereof, have all been reinstated. We have started to reinstitute our plans to move forward with the planned capital expenditures as state and local governments begin to authorize re-openings.States. We also expect other nonemployee-related costs, including sales and marketing program activities for new products, outside services and accounting and general legal costs to increase as our overall operations grow. The timing of these increased expenditures and their magnitude are primarily dependent on the commercial success and sales growth of our products, as well as on the timing of any new product launches and other potential business and operational activities.

Research and Development

Our R&D activities primarily consist of new product development projects, pre-clinical studies, IDE and IND studies, and other clinical trials. Our R&D expenses primarily consist of personnel-related expenses, including salaries, fringe benefits and stock-based compensation for our R&D employees; research materials; supplies and services; and the costs of conducting clinical studies, which include payments to investigational sites and investigators, clinical research

In-ProcessIn-process Research and Development

OurOur in-process research and development (IPR&D) expenses relate to the acquisitionamendment of DOSE Medical Corporation (DOSE)our exclusive licensing agreement with Intratus, Inc. and our Attillaps License Agreement. Upfront payments of $5.0 million were made in which DOSE became a wholly-owned subsidiaryconnection with each of the Company. DOSE is developing multiple micro-invasive, sustained-released, bioerodible drug delivery platforms designed to be used in the treatment of various retinal diseases, including age-related macular degeneration and diabetic macular edema. Certain DOSE assets were in the development-stage at the time of purchasethese agreements and were expensed to IPR&D as management determined to havethere were no alternative future use.uses for the technology acquired.

Litigation-related Settlement

Pursuant to the terms of the Settlement Agreement, Ivantis paid us $30.0 million during the year ended December 31, 2021. The $30.0 million cash payment received during the year ended December 31, 2021 is included in litigation-related settlement as a reduction of operating expenses on the consolidated statements of operations.

Non-Operating (Expense) Income, Net

Non-operating (expense) income, net primarily consists of interest expense associated with our finance lease for our Aliso Viejo, California facilityFacility and for our Convertible Notes, interest income derived from our short-term investments and unrealized gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the U.S. dollar, primarily related to intercompany loans.

Income Taxes

Our tax benefitprovision is primarily comprised of U.S. federalstate and state income and franchise taxes as well as foreign income taxes. Our current U.S. federal tax benefit results from the carryback of NOLs and R&D tax credits permitted by the CARES Act for the year ended December 31, 2020. Our current state tax provision results from state minimum and franchise taxes for the year ended December 31, 2020. Our current foreign tax provision results from foreign income taxes imposed on profitable operations in our foreign subsidiaries for the year ended December 31, 2020. Our U.S. federal and state deferred tax benefit results from the deferred tax liability recorded in connection with the Convertible Notes which may be used as a source of future taxable income allowing us to record a tax benefit for a portion of our operating losses generated for the year ended December 31, 2020. Our net deferred tax liability of $10.5$7.3 million at December 31, 20202021 represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax assets, as well as deferred tax liabilities recorded to additional paid-in capital within the consolidated statement of stockholders’ equity which were not available to offset our deferred tax assets. We continue to provide a full valuation allowance against our other net deferred tax assets.

​

We record reserves for uncertain tax positions where we believe the ability to sustain the tax position does not reach thea more likely than not threshold.

​

Results of Operations

For discussion related to the results of operations and changes in financial condition for the year ended December 31, 2020 compared to the year ended December 31, 2019 refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our 2020 Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission on March 1, 2021.

Comparison of Years Ended December 31, 2021 and December 31, 2020

​

NM = Not Meaningful

Results of Operations

Comparison of Years Ended December 31, 2020 and December 31, 2019

NM = Not Meaningful

Net Sales

Our net sales are generated primarily from sales of iStent products to customers and sales of Photrexa and associated drug formulations as well as KXL systems to customers. Customers are primarily comprised of ambulatory surgery centers, hospitals and physician private practices, with distributors being used in certain international locations where we currently do not have a direct commercial presence.

Net sales for the years ended December 31, 20202021 and December 31, 20192020 were $225.0$294.0 million and $237.0$225.0 million, respectively, reflecting a decreasean increase of $12.0$69.0 million or 5%31%.

Net sales of glaucoma products in the United StatesU.S. were $133.7$170.8 million and $187.7$133.7 million for the years ended December 31, 20202021 and December 31, 2019,2020, respectively, decreasingincreasing by approximately 28% primarily due to the disruption resulting from COVID-19. We believe competition had also increased entering intodemand for combined cataract and glaucoma procedures increasing during the year ended December 31, 2021 as compared to the year ended December 31, 2020 given a return to more normalized procedure levels following the impactrollout of which is difficult to assess given the COVID-19 disruption. vaccines, a trend that generally continued throughout 2021, with periodic demand volatility in certain geographies in which we operate. We also believe the 2022 CMS physician fee and facility fee rate decreases that were proposed in July 2021 disrupted traditional customer ordering patterns and resulted in our customers’ trialing of competitive products.

​

International sales of glaucoma products for the years ended December 31, 20202021 and December 31, 20192020 were $45.6$61.2 million and $43.3$45.6 million, respectively, increasing by approximately 5%34%. The increase in netinternational sales internationally was duereflects growing demand in many key international markets for combined cataract and glaucoma procedures during the year ended December 31, 2021 as compared to sales expansionthe year ended December 31, 2020 given a return to more normalized procedure levels following the rollout of the COVID-19 vaccines, a trend that generally continued throughout 2021, with periodic demand volatility in certain of our existing international markets, partially offset by the disruption resulting from COVID-19. Additionally,geographies in the second half of 2020,which we launched our next generation iStent inject product, the iStent inject W. Pricing of our glaucoma products in the United Statesoperate, and internationally remained stable and did not provide a significant contributionfavorable foreign exchange rates compared to the results in 2020. As such, changes in unit volumes were the primary driver of the year over year change.prior year.

​

Net sales of corneal health products were $45.6$62.0 million and $6.0$45.6 million for the years ended December 31, 20202021 and December 31, 2019,2020, respectively,, as a result of the full year operations of Avedro during the year ended December 31, 2020 that were not in our operating results for the majority of 2019 increasing by 36%. The $39.6$16.4 million increase in net sales generated from our corneal health products was comprised of an increase of approximately $34.6$13.6 million in U.S. sales including an increase of $31.3 million of Photrexa net sales, using our direct sales operations and an increase of approximately $5.0$2.8 million in net sales withinternationally where we utilize distributors being used in certain international locations wheregiven we do not have a direct commercial presence.presence, due to these distributors returning to their more stabilized pre-COVID ordering patterns. The $13.6 million increase in U.S. sales of corneal health products includes an increase of approximately $14.7 million of Photrexa net sales, partially offset by reductions of approximately $1.1 million in U.S. capital equipment sales. Sales of corneal health products in 2020 were negatively impacted by disruption resulting from COVID-19. Demand for corneal health products increased during the year ended December 31, 2021 given a return to more normalized procedure levels following the rollout of the COVID-19 vaccines, a trend that generally continued throughout 2021. Additionally, corneal health sales for the year ended December 31, 2021 were positively impacted by higher realized average sales and continued new account starts.

​

Cost of Sales

Cost of sales for the years ended December 31, 20202021 and December 31, 20192020 were $91.7$66.6 million and $38.6$91.7 million, respectively, reflecting an increasea decrease of approximately $53.1$25.1 million or 138%27%. The increasedecrease was primarily comprised of a decrease of approximately $24.7 million related to the acquisition fair market value inventory adjustment rollout that was fully amortized as of December 31, 2020, and a decrease of approximately $2.3 million, net related to the acquisition fair market value inventory adjustment rollout, and $22.1 million relatedrecorded in 2020 in connection with the Avedro Merger that was fully amortized as of December 31, 2020. These decreases were partially offset by normal increases in cost of sales due to amortization of certain finite-lived intangible assets acquired, both of which are relatedhigher net sales for the year ended December 31, 2021 as compared to the Avedro Merger.year ended December 31, 2020. Our gross margin was approximately 77% for the year ended December 31, 2021 compared to approximately 59% for the year ended December 31, 2020 compared to

Selling, General and Administrative Expenses

SG&A expenses for the years ended December 31, 20202021 and December 31, 20192020 were $171.4$179.3 million and $176.6$171.4 million, respectively, reflecting a decreasean increase of $5.2$7.9 million or 3%5%.

Of the total $179.3 million, approximately $102.6 million was comprised of compensation and related employee expenses, with the remaining $76.7 million spent on our marketing programs, advertising, post-approval clinical studies, conferences and congresses, travel expenses, costs associated with obtaining and maintaining our patent portfolio, and professional fees for accounting, auditing, consulting and legal services.

We incurred approximately $112.4 million and $98.2 million ofin commercial personnel and discretionary spending in the year endingyears ended December 31, 2021 and December 31, 2020, respectively, related primarily to existing sales infrastructure in glaucoma training samples and marketing associated with our global launch of iStent Inject W and expansion of our sales infrastructure and commercial activities in Corneal Health.corneal health. We also incurred approximately $73.2$66.8 million and $73.1 million of general and administrative personnel and discretionary spending for the years ended December 31, 2021 and December 31, 2020 associated with our ongoing administrative functions previously disclosed patent litigation and global enterprise systems implementation, and amortization of our right-of-use asset related to our long-term lease in Aliso Viejo, California.

Our results for the year ending December 31, 2020 include approximately $24.6 million in additional SG&A expenses as a result of the full year operations of Avedro that were not in our operating results for the majority of 2019. These expenses were primarily comprised of commercial personnel and discretionary spending of $16.7 million and general and administrative personnel and discretionary spending of $7.9 million.Aliso Facility.

The above increase in expenses associated with the full year operations of Avedro was offset by reductions in SG&A expenses for the year ended December 31, 2021 was due to a return toward more normalized levels of spending to support increased demand for glaucoma and keratoconus procedures in certain key geographic markets in which we operate, relative to the year ended December 31, 2020, primarily consistingwhen we incurred temporary reductions in compensation and related employee expenses for our executive team, senior leadership, and many others throughout the company, and reduced professional services expenses as part of a decrease ofcost-savings measures in response to the COVID-19 pandemic. These increases in SG&A expenses during the year ended December 31, 2021 compared to the year ended December 31, 2020 were partially offset by approximately $9.4$5.2 million in professional services and software systems costs related to our global enterprise systems implementation, decreases of $6.3 million and $3.2decreased patent infringement expenses, $6.6 million in transaction expensesdecreased stock-based compensation associated with the various stock option and restructuring expenses, respectively, related to our acquisition ofrestricted stock awards we granted in connection with the Avedro Merger, $2.2 million in decreased sales tax reserve and a decrease of approximately $3.1$1.5 million related to our previously disclosed patent litigation. The remaining decrease infor costs incurred for restructuring and integration expenses of approximately $7.8 million primarily relates to decreased sales and marketing expenses and broader SG&A cost savings related to the COVID-19 pandemic.Avedro Merger.

Research and Development Expenses

R&D expenses for the years ended December 31, 20202021 and December 31, 20192020 were $85.4$101.0 million and $68.3$85.4 million, respectively, reflecting an increase of $17.1$15.6 million or 25%18%.

OurWe incurred $66.6 million in core R&D expenses for the year ended December 31, 2020 primarily relate toand $34.4 million in clinical expenses, comprised of $50.1 million in compensation and related employee expenses with the remaining $50.9 million spent on the continued research and project spending associated with our emerging pipeline ofdevelopment, clinical studies, regulatory activities, quality assurance, clinical inventory and supplies for surgical glaucoma product candidates including the clinical and development costs associated with iDose TR, iStent Infinite, the continued development ofpharmaceutical projects, such as a pharmaceutical therapeutic system for the treatment of keratoconus without the removal of the epithelium (often referred to as iLink epi-on)“epi-on”), as well asiDose and our earlier stage micro-surgical, pharmaceutical, and biosensor projects that span across glaucoma, programs fordry eye, presbyopia, and common retina conditions such as neovascular age-related macular degeneration, diabetic macular edema, and retinal vein occlusion.

Our results for the year ending December 31, 2020 include approximately $19.1 million in additional R&D expenses that were not in our operating results for the majority of 2019. These expenses were primarily comprised of $8.3 million of compensation and related employee expenses and approximately $10.8 million in other core R&D and clinical expenses spent on the continued development of iLink epi-on and other earlier stage technology and therapeutic investments.

The above increase in expenses as a result of the full year operations of Avedro was primarily offset by reductions of R&D spending related to the COVID-19 pandemic of approximately $1.3 million primarily related to decreased personnel and discretionary spending on our earlier stage programs.