10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

Or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37463 

GLAUKOS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	33-0945406
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
229 Avenida Fabricante San Clemente, California	92672
(Address of registrant’s principal executive offices)	(Zip Code)

(949) 367-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	GKOS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act:

☒ Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer
​ ☐ Smaller reporting company ​ ☐ Emerging growth company ​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 3, 2021, there were 46,281,586 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

GLAUKOS CORPORATION

Form 10-Q

For the Quarterly Period Ended March 31, 2021

Table of Contents

		Page
PART I: FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II: OTHER INFORMATION		33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 6.	Exhibits	48
SIGNATURES		49

We use Glaukos, our logo, iStent, iStent inject, iStent inject W, iStent Infinite, iStent SA, iPrism, iDose, iPRIME, MIGS, Avedro, Photrexa, iLink, KXL, Mosaic and other marks as trademarks. This report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

References throughout this document to “we,” “us,” “our,” the “Company,” or “Glaukos” refer to Glaukos Corporation and its consolidated subsidiaries.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLAUKOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

	March 31,		December 31,
	2021		2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	96,625	$	96,596
Short-term investments		310,755		307,772
Accounts receivable, net		36,694		36,059
Inventory, net		15,271		15,809
Prepaid expenses and other current assets		14,954		13,206
Total current assets		474,299		469,442
Restricted cash		9,416		9,566
Property and equipment, net		43,314		24,008
Operating lease right-of-use asset		19,720		20,009
Finance lease right-of-use asset		50,838		51,443
Intangible assets, net		351,465		357,693
Goodwill		66,134		66,134
Deposits and other assets		7,591		7,207
Total assets	$	1,022,777	$	1,005,502
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	8,624	$	4,371
Accrued liabilities		47,944		45,331
Convertible senior notes		278,996		-
Total current liabilities		335,564		49,702
Convertible senior notes		-		189,416
Operating lease liability		20,450		20,704
Finance lease liability		61,068		60,690
Deferred tax liability, net		8,323		10,512
Other liabilities		7,598		7,029
Total liabilities		433,003		338,053
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding		-		-
Common stock, $0.001 par value; 150,000 shares authorized; 46,016 and 45,275 shares issued and 45,988 and 45,247 shares outstanding as of March 31, 2021 and December 31, 2020 respectively		46		45
Additional paid-in capital		920,819		976,590
Accumulated other comprehensive income		1,128		1,004
Accumulated deficit		(332,087)		(310,058)
Less treasury stock (28 shares as of March 31, 2021 and December 31, 2020)		(132)		(132)
Total stockholders' equity		589,774		667,449
Total liabilities and stockholders' equity	$	1,022,777	$	1,005,502

See accompanying notes to condensed consolidated financial statements.

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GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

	Three Months Ended
	March 31,
	2021		2020
Net sales	$	67,968	$	55,336
Cost of sales		16,633		32,529
Gross profit		51,335		22,807
Operating expenses:
Selling, general and administrative		41,921		50,546
Research and development		21,219		24,873
Total operating expenses		63,140		75,419
Loss from operations		(11,805)		(52,612)
Non-operating (expense) income:
Interest income		383		696
Interest expense		(3,229)		(881)
Other expense, net		(1,539)		(1,711)
Total non-operating expense		(4,385)		(1,896)
Loss before taxes		(16,190)		(54,508)
Income tax provision (benefit)		279		(450)
Net loss	$	(16,469)	$	(54,058)
Basic and diluted net loss per share	$	(0.36)	$	(1.24)
Weighted average shares used to compute basic and diluted net loss per share		45,709		43,766

See accompanying notes to condensed consolidated financial statements.

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GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

	Three Months Ended
	March 31,
	2021		2020
Net loss	$	(16,469)	$	(54,058)
Other comprehensive income:
Foreign currency translation gain		541		1,169
Unrealized loss on short-term investments		(417)		(480)
Other comprehensive income		124		689
Total comprehensive loss	$	(16,345)	$	(53,369)

See accompanying notes to condensed consolidated financial statements.

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GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

						Accumulated
				Additional		other
	Common stock			paid-in		comprehensive		Accumulated		Treasury stock			Total
	Shares	Amount		capital		income		deficit		Shares	Amount		equity
Balance at December 31, 2020	45,275	$	45	$	976,590	$	1,004	$	(310,058)	(28)	$	(132)	$	667,449
Effect of adoption of ASU 2020-06	—		—		(81,553)		—		(5,560)	—		—		(87,113)
Common stock issued under stock plans	741		1		17,034		—		—	—		—		17,035
Stock-based compensation	—		—		8,748		—		—	—		—		8,748
Other comprehensive income	—		—		—		124		—	—		—		124
Net loss	—		—		—		—		(16,469)	—		—		(16,469)
Balance at March 31, 2021	46,016	$	46	$	920,819	$	1,128	$	(332,087)	(28)	$	(132)	$	589,774

						Accumulated
				Additional		other
	Common stock			paid-in		comprehensive		Accumulated		Treasury stock			Total
	Shares	Amount		capital		income		deficit		Shares	Amount		equity
Balance at December 31, 2019	43,530	$	44	$	861,740	$	1,330	$	(189,710)	(28)	$	(132)	$	673,272
Common stock issued under stock plans	589		—		4,220		—		—	—		—		4,220
Stock-based compensation	—		—		17,176		—		—	—		—		17,176
Other comprehensive income	—		—		—		689		—	—		—		689
Net loss	—		—		—		—		(54,058)	—		—		(54,058)
Balance at March 31, 2020	44,119	$	44	$	883,136	$	2,019	$	(243,768)	(28)	$	(132)	$	641,299

See accompanying notes to condensed consolidated financial statements.

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GLAUKOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Three Months Ended March 31,
	2021		2020
Operating Activities
Net loss	$	(16,469)	$	(54,058)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		1,150		1,082
Amortization of intangible assets		6,228		6,228
Amortization of lease right-of-use assets		1,170		1,311
Amortization of debt issuance costs		343		-
Deferred income tax benefit		(24)		(709)
Stock-based compensation		8,748		17,176
Change in fair value of cash settled stock options		-		(3,171)
Unrealized foreign currency losses		1,101		2,024
Amortization of premium (discount) on short-term investments		256		(19)
Other liabilities		570		207
Changes in operating assets and liabilities:
Accounts receivable, net		(547)		9,246
Inventory, net		403		14,568
Prepaid expenses and other current assets		(1,803)		(2,235)
Accounts payable and accrued liabilities		3,023		(4,750)
Other assets		29		1
Net cash provided by (used in) operating activities		4,178		(13,099)
Investing activities
Purchases of short-term investments		(54,007)		(18,680)
Proceeds from sales and maturities of short-term investments		50,349		19,676
Purchases of property and equipment		(17,182)		(782)
Investment in company-owned life insurance		(423)		414
Net cash (used in) provided by investing activities		(21,263)		628
Financing activities
Proceeds from exercise of stock options		16,552		4,454
Proceeds from share purchases under Employee Stock Purchase Plan		1,549		1,278
Payment of employee taxes related to vested restricted stock units		(1,065)		(1,512)
Principal paid on finance lease		(251)		-
Proceeds from tenant improvement allowance		629		-
Net cash provided by financing activities		17,414		4,220
Effect of exchange rate changes on cash and cash equivalents		(450)		(565)
Net decrease in cash, cash equivalents and restricted cash		(121)		(8,816)
Cash, cash equivalents and restricted cash at beginning of period		106,162		71,756
Cash, cash equivalents and restricted cash at end of period	$	106,041	$	62,940
Supplemental disclosures of cash flow information
Taxes (refunded) paid	$	(35)	$	250

See accompanying notes to condensed consolidated financial statements.

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GLAUKOS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1.  Organization and Basis of Presentation

Organization and business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. The Company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a corneal disorder, keratoconus, that was approved by the U.S. Food and Drug Administration in 2016 and is 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, diabetic macular edema and retinal vein occlusion.

The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. As permitted under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2020, which are contained in the Company’s Annual Report on Form 10-K filed with the United States (U.S.) Securities and Exchange Commission (SEC) on March 1, 2021. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period.

Recent Developments

Acquisition of Avedro, Inc.

On November 21, 2019, the Company acquired Avedro, Inc. (Avedro), a hybrid ophthalmic pharmaceutical and medical technology company focused on developing therapies designed to treat corneal diseases and disorders and correct refractive conditions, in a stock-for-stock transaction (Avedro Merger). Avedro developed novel bio-activated drug formulations used in combination with proprietary systems for the treatment of progressive keratoconus and corneal ectasia following refractive surgery. The therapy is the first and only minimally invasive anterior segment product offering approved by the FDA shown to halt the progression of keratoconus.

Note 2.  Summary of Significant Accounting Policies

There have been no significant changes in the Company’s significant accounting policies during the three months ended March 31, 2021, as compared with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021, including in connection with the Company’s adoption of the accounting pronouncements noted below in the sub-heading “Recently Adopted Accounting Pronouncements” with the

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exception of the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). See Recently Adopted Accounting Pronouncements and Note 9. Convertible Senior Notes for more detail.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. The most significant estimates in the accompanying condensed consolidated financial statements relate to revenue recognition, the fair value of the liability component of the Convertible Notes, the incremental borrowing rate related to the Company’s leased assets, stock-based compensation expense and the valuation of certain intangible assets related to the Company’s acquisition of Avedro. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, this process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2021 reflect the Company’s estimates of the impact of the ongoing COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are uncertain, including the duration and severity of the COVID-19 outbreak, the severity and transmission rates of new variants of COVID-19, and the actions taken to contain it or treat COVID-19, including the availability, distribution, rate of public acceptance and efficacy of vaccines for COVID-19, as well as the economic impact on local, regional, national and international customers and markets. As a result, there may be changes to the Company’s estimates regarding the impact of COVID-19 in future periods.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the three months ended March 31, 2021 (in thousands):

	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	96,625	$	96,596
Restricted cash		9,416		9,566
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$	106,041	$	106,162

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB )issued ASU 2020-06, which simplifies accounting for convertible instruments. The embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASU 2020-06, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to compute diluted earnings per share to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, the Company early adopted ASU

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2020-06 using the modified retrospective adoption approach. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption. The comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods.

The adoption of ASU 2020-06 resulted in an increase to accumulated deficit of $5.5 million, a decrease to additional paid-in capital of $81.6 million, a decrease in the deferred tax liability of $2.2 million and an increase to convertible notes, net of $89.2 million. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Lastly, the Company derecognized deferred income taxes associated with the Convertible Notes and adjusted the deferred tax liability associated with the embedded conversion feature and corresponding change in the valuation allowance.

Recently Issued Accounting Pronouncements Not Yet Adopted

We reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

Note 3.  Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

	At March 31, 2021
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		198,062		121		(32)		198,151
Bank certificates of deposit	less than 2		20,799		5		(6)		20,798
Corporate notes	less than 3		61,391		198		(74)		61,515
Asset-backed securities	less than 2		12,945		150		(1)		13,094
Municipal bonds	less than 3		17,218		8		(29)		17,197
Total		$	310,415	$	482	$	(142)	$	310,755
	At December 31, 2020
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		206,704		223		(3)		206,924
Bank certificates of deposit	less than 1		20,700		8		—		20,708
Commercial paper	less than 1		1,500		—		—		1,500
Corporate notes	less than 3		54,866		308		(1)		55,173
Asset-backed securities	less than 2		13,290		205		—		13,495
Municipal bonds	less than 3		9,954		21		(3)		9,972
Total		$	307,014	$	765	$	(7)	$	307,772

Accounts Receivable, Net

Accounts receivable consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accounts receivable	$	38,161	$	37,729
Allowance for credit losses		(1,467)		(1,670)
	$	36,694	$	36,059

The Company’s allowance for credit losses represents management’s estimate of current expected credit losses and there were immaterial bad-debt write offs charged during the three months ended March 31, 2021.

As of March 31, 2021, the Company evaluated the current and expected future economic and market conditions surrounding the COVID-19 pandemic as it relates to collectability of its accounts receivable and determined the estimate

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of expected credit losses was not materially impacted. The Company will continue to re-evaluate the estimate of credit losses related to COVID-19 in conjunction with its assessment of expected credit losses in subsequent quarters.

Additionally, no customers accounted for more than 10% of net accounts receivable as of any such date.

Inventory, Net

Inventory, net consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Finished goods	$	6,662	$	5,346
Work in process		3,761		3,584
Raw material		4,848		6,879
	$	15,271	$	15,809

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accrued bonuses	$	4,669	$	10,815
Accrued vacation benefits		4,175		3,728
Accrued payroll taxes		7,568		3,198
Other accrued liabilities		31,532		27,590
	$	47,944	$	45,331

Note 4.  Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

The valuation of assets and liabilities is subject to fair value measurements using a three-tiered approach and fair value measurements are classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

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The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

			At March 31, 2021
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	March 31,		identical assets		inputs		inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	3,089	$	3,089	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		198,150		-		198,150		-
Bank certificates of deposit (ii)(iii)		24,799		-		24,799		-
Corporate notes (ii)		61,515		-		61,515		-
Asset-backed securities (ii)		13,094		-		13,094		-
Municipal bonds (ii)		17,197		-		17,197		-
Investments held for deferred compensation plans		5,754				5,754
Total Assets	$	323,598	$	3,089	$	320,509	$	-
Liabilities
Deferred compensation plans	$	5,689	$	-	$	5,689	$	-
Total Liabilities	$	5,689		-	$	5,689	$	-

			At December 31, 2020
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	December 31,		identical assets		inputs		inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	5,169	$	5,169	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		206,924		-		206,924		-
Bank certificates of deposit (ii) (iii)		25,708		-		25,708		-
Commercial paper (ii)		1,500		-		1,500		-
Corporate notes (ii)		55,173		-		55,173		-
Asset-backed securities (ii)		13,495		-		13,495		-
Municipal bonds (ii)		9,972		-		9,972		-
Investments held for deferred compensation plans		5,331				5,331		-
Total Assets	$	323,273	$	5,169	$	318,104	$	-
Liabilities
Deferred compensation plans	$	5,232		-	$	5,232		-
Total Liabilities	$	5,232	$	-	$	5,232	$	-

(i) Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets.

(ii) Included in short-term investments on the condensed consolidated balance sheets.

(iii) As of March 31, 2021 and December 31, 2020, a bank certificate of deposit totaling $4,000 and $5,000 (in thousands), respectively, is included in cash and cash equivalents on the condensed consolidated balance sheets, as the investment has a maturity of three months or less from the date of purchase on the condensed consolidated balance sheets.

Money market funds and currency are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

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U.S. government agency bonds, U.S. government bonds, bank certificates of deposit, commercial paper, municipal bonds, corporate notes and asset-backed securities are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), the Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust and Deferred Compensation Plan liability consist of company-owned life insurance policies (COLIs) and the pricing on these investments can be independently evaluated. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from third party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

There were no transfers between levels within the fair value hierarchy during the periods presented.

The Company did not have any assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of March 31, 2021 and December 31, 2020.

Convertible Senior Notes

As of March 31, 2021, the fair value of the Convertible Notes was $488.4 million. The fair value was determined on the basis of the market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See Note 9, Convertible Senior Notes for additional information.

Note 5.   Leases

The Company has operating and finance leases for facilities and certain equipment.  Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842, the Company combines lease and non-lease components.

The Company’s leases have remaining non-cancelable lease terms of approximately one year to thirteen years, some of which include options to extend the leases for up to ten years, and some of which include options to terminate the lease within one year. The exercise of lease renewal options is at the Company’s sole discretion. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for common area maintenance, landlord incentives and/or inflation.

On November 14, 2018, the Company entered into an office building lease pursuant to which the Company will lease 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 April 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. The Company intends to relocate its corporate administrative headquarters, along with certain laboratory, research and development and warehouse space, to the Aliso Facility. The lease landlord agreed to provide the Company with a tenant improvement allowance in the amount of the cost of any leasehold improvements, not to exceed approximately $12.7 million, upon the Company providing the necessary documentation evidencing the costs of the allowable leasehold improvements. Nearly all of the aforementioned tenant improvement allowances were utilized by the end of the quarter ended March 31, 2021 and the Company expects to receive reimbursement during the quarter ending June 30, 2021.

The Company leases two adjacent facilities located in San Clemente, California. The total leased square footage of these facilities equals approximately 98,000. On July 2, 2020, the Company extended the term of these facilities by five years, both of which now expire on May 31, 2030. Each agreement contains an option to extend the lease for one additional five year period at market rates. In conjunction with these extensions, the lease landlords agreed to provide the Company with tenant improvement allowances in the amount of the cost of any leasehold improvements, not to exceed approximately $0.5 million, upon the Company providing the necessary documentation evidencing the costs of the allowable leasehold improvements.

The Company currently intends to maintain its manufacturing facilities at its San Clemente location for the foreseeable future.

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The Company leases approximately 27,000 square feet of office and laboratory space in Waltham, Massachusetts, pursuant to a lease agreement that expires in 2023. The Company also currently occupies approximately 19,000 square feet of leased manufacturing space in Burlington, Massachusetts pursuant to a lease agreement that expires in 2031.

The Company’s remaining U.S.-based and foreign subsidiaries’ leased office space totals less than 14,000 square feet.

The following table presents the maturity of the Company’s operating and finance lease liabilities as of March 31, 2021:

Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases (a)		Leases (b)
Remainder of 2021	$	2,001	$	—
2022		2,953		—
2023		2,555		1,465
2024		2,408		5,184
2025		2,444		5,340
2026		2,498		5,500
Thereafter		20,790		107,522
Total lease payments	$	35,649	$	125,011
Less: imputed interest		13,926		63,943
Total lease liabilities	$	21,723	$	61,068

(a) Operating lease payments include $12.2 million related to options to extend lease terms that are reasonably certain of being exercised.

(b) Finance lease payments include $75.8 million related to options to extend lease terms that are reasonably certain of being exercised.

Note 6.   Intangible Assets and Goodwill

Avedro intangible assets

As part of the Avedro Merger on November 21, 2019, the Company acquired identifiable intangible assets for (1) developed technology related to Photrexa, a bio-activated pharmaceutical therapy for the corneal cross-linking treatment of keratoconus, which is being amortized to cost of sales over a weighted-average estimated useful life of approximately 11 years, and (2) customer relationships, which will be amortized to selling, general and administrative expense over an estimated useful life of five years. The Company also acquired IPR&D related to other applications of Avedro’s corneal remodeling platform, which will not be amortized until technological feasibility is met, but will be assessed for impairment annually, or more frequently if indicators of impairment become present.

The fair value of developed technology and IPR&D assets were determined using an excess earnings methodology. Significant assumptions used in the valuation include: (i) the period in which material net cash inflows are expected to commence, which was estimated to be 2021 for developed technology and 2023 for IPR&D assets, and (ii) the risk-adjusted discount rate of 11.5% for developed technology and 13% for IPR&D assets.

For the three months ended March 31, 2021 and March 31, 2020, amortization expense related to the above finite-lived intangible assets was approximately $5.5 million and $0.7 million, recorded in cost of sales and selling, general and administrative expenses, respectively, in the condensed consolidated statement of operations.

The Company evaluated its indefinite-lived intangible assets for impairment, including any considerations specific to the COVID-19 pandemic utilizing the methodology pursuant to the adoption of ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) and concluded these intangible assets were not impaired as of March 31, 2021.

Goodwill

The assessment of goodwill by reporting unit is performed annually, in the fourth quarter, or more frequently if events or circumstances indicate the carrying value may no longer be recoverable and that an impairment loss may have

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occurred. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on the Company’s reporting unit. Based on interim assessments, the Company did not identify any “triggering” events, as described in ASC 350-20, which would indicate an impairment of goodwill is more likely than not as of March 31, 2021.

The following table presents the composition of our intangible assets and goodwill (in thousands):

	Estimated	As of March 31, 2021						As of December 31, 2020
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200		(29,916)		222,284		252,200		(24,393)		227,807
Customer relationships	5.0		14,100		(3,819)		10,281		14,100		(3,114)		10,986
Intangible assets subject to amortization			266,300		(33,735)		232,565		266,300		(27,507)		238,793
In-process research and development	Indefinite	$	118,900		—		118,900		118,900		—		118,900
Goodwill	Indefinite	$	66,134		—		66,134		66,134		—		66,134
Total		$	451,334	$	(33,735)	$	417,599	$	451,334	$	(27,507)	$	423,827

As of March 31, 2021, expected amortization expense for unamortized finite-lived intangible assets for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Remainder of 2021	$	18,684
2022		24,912
2023		24,912
2024		24,618
2025		22,092
Thereafter		117,347
Total amortization	$	232,565

Actual amortization expense to be reported in future periods could differ from these estimates as a result of asset impairments, acquisitions, or other facts and circumstances.

Note 7. Revenue from Contracts with Customers

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

Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services, and all of the Company’s net sales are considered revenue from contracts with customers.

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Disaggregation of Revenue

The Company’s revenues disaggregated by product category and geography, for the three months ended March 31, 2021 and March 31, 2020 was as follows (in thousands):

	United States				International				Total
	2021		2020		2021		2020		2021		2020
Glaucoma	$	39,889	$	32,577	$	13,810	$	11,556	$	53,699	$	44,133
Corneal Health		12,055		8,807		2,214		2,396		14,269		11,203
Total	$	51,944	$	41,384	$	16,024	$	13,952	$	67,968	$	55,336

Contract Balances

Contract Assets

Amounts are recorded as accounts receivable when the Company’s right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days for glaucoma and corneal health products, though extended payment terms on corneal health products may be offered. However, the Company does not consider any significant financing components in customer contracts given the expected time between transfer of the promised products and the payment of the associated consideration is less than one year. As of March 31, 2021 and December 31, 2020, all amounts included in accounts receivable, net on the condensed consolidated balance sheets are related to contracts with customers.

Sales commissions earned on U.S. sales of KXL systems are capitalized as the commissions represent costs to obtain a contract and the amortization period is deemed greater than one year. These costs are deferred in other assets on the Company’s condensed consolidated balance sheet, net of the short term portion included in prepaid assets and other current assets, and are amortized as a sales and marketing expense on a straight-line basis over the expected period of benefit. Capitalized sales commissions and the related amortization expense included in the condensed consolidated financial statements were immaterial as of March 31, 2021 and December 31, 2020.

Aside from the aforementioned contract assets, the Company does not have any contract assets given that the Company does not have any unbilled receivables and sales commissions on other products are expensed within selling, general and administrative expenses within the condensed consolidated statement of operations when incurred as any incremental cost of obtaining contracts with customers would have an amortization period of less than one year.

Contract Liabilities

Contract liabilities reflect consideration received from customers’ purchases allocated to the Company’s future performance obligations.

The Company has a performance obligation to issue a rebate to customers who may be eligible for a rebate at the conclusion of their contract term. This performance obligation is transferred over time and the Company’s method of measuring progress is the output method, whereby the progress is measured by the estimated rebate earned to date over the total rebate estimated to be earned over the contract period. The Company’s rebate allowance is included in accrued liabilities in the condensed consolidated balance sheets and estimated rebates accrued were not material during the periods presented.

Additionally, in the U.S. the Company has a performance obligation related to its customers’ right to a future discount on single dose pharmaceutical purchases, and, to a lesser extent, extended warranty service contracts. The amount allocated to the customers’ right to a future discount is expected to be recognized when the customer elects to

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utilize the discount, which is generally within one year. As of March 31, 2021 and December 31, 2020, this amount was immaterial as was the amount allocated to extended warranty service contracts.

During the three months ended March 31, 2021 and March 31, 2020, the Company did not recognize any revenue related to material changes in transaction prices regarding its contracts with customers and did not recognize any material changes in revenue related to amounts included in contract liabilities at the beginning of the period.

The Company’s net sales within a fiscal year may be 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, the Company has not experienced the same seasonality pattern in 2020 and 2021 due to the COVID-19 pandemic.

Note 8.  Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for common stock equivalents. For periods when the Company realizes a net loss, no common stock equivalents are included in the calculation of weighted average number of dilutive common stock equivalents as the effect of applying the treasury stock method is considered anti-dilutive. For periods when the Company realizes net income, diluted net income per share is calculated by dividing the net income by the weighted average number of common shares plus the sum of the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury stock method. Common stock equivalents are comprised of stock options outstanding and unvested restricted stock units (RSUs) under the Company’s incentive compensation plans, and shares issuable under the Company’s Employee Stock Purchase Plan (ESPP).

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares, in thousands):

	Three Months Ended
	March 31,
	2021	2020
Convertible senior notes	5,125	-
Stock options outstanding	3,640	4,328
Unvested restricted stock units	654	470
Employee stock purchase plan	17	6
	9,436	4,804

The Convertible Notes would have had an impact on the Company’s diluted share count as of March 31, 2021 pursuant to the Company’s adoption of ASU 2020-06. See “Recently Adopted Accounting Pronouncements” and Note 9. Convertible Senior Notes for additional detail.

Note 9.  Convertible Senior Notes

In June 2020, the Company issued $287.5 million in aggregate principal amount of Convertible Notes pursuant to an indenture dated June 11, 2020, between the Company and Wells Fargo Bank, National Association, as trustee (the Indenture), in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.75% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The Convertible Notes will mature on June 15, 2027, unless earlier converted, redeemed or repurchased in accordance with their terms. In connection with issuing the Convertible Notes, the Company received $242.2 million in proceeds, after deducting fees and offering expenses and paying the cost of the capped call transactions described below.

The Convertible Notes may be converted at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2027, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable

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trading day; (2) during the five business day period immediately after any ten consecutive trading day period (the Measurement Period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of (i) the last reported sale price of the Company’s common stock and (ii) the conversion rate in effect on each such trading day; (3) with respect to any Convertible Notes the Company calls for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date, even if the Convertible Notes are not otherwise convertible at such time; or (4) upon the occurrence of specified corporate events. On or after March 15, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The Company’s current intent is to settle the principal amount of the Convertible Notes in cash upon conversion, with any remaining conversion value being delivered in shares of our common stock.

During the quarter ended March 31, 2021, the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter was greater than or equal to 130% of the conversion price on each applicable trading day, and therefore the Convertible Notes may be converted at the option of the holders during the quarter ending June 30, 2021. Consequently, the Convertible Notes were classified within current liabilities on the condensed consolidated balance sheet as of March 31, 2021. If the foregoing conditions are met during the quarter ending June 30, 2021 or any subsequent calendar quarter prior to March 15, 2027, holders of the Convertible Notes will continue to have the right to convert the Convertible Notes for the next succeeding applicable calendar quarter.

The conversion rate for the Convertible Notes is initially 17.8269 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $56.10 per share of the Company’s common stock). The conversion rate is subject to adjustment in some events in accordance with the terms of the Indenture but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event or notice of redemption, as the case may be.

The Company may not redeem the Convertible Notes prior to June 20, 2024. The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after June 20, 2024 but before the 45th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (ii) the trading day immediately preceding the date the Company sends such notice, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes.

If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Prior to the adoption of ASU 2020-06, the Company allocated the gross proceeds of the Convertible Notes between the liability and equity components of the Convertible Notes. The initial carrying amount of the liability component was $189.8 million, which was calculated by using a discount rate of 9.5%, which was estimated to be the Company’s borrowing rate on the issuance date for a similar debt instrument without the conversion feature. The carrying amount of the equity component was $97.7 million, which represents the conversion option, and was determined by deducting the fair value of the liability component from the par value of the Convertible Notes.

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After the adoption of ASU 2020-06, the Convertible Notes are no longer bifurcated into separate liability and equity components in the Company’s March 31, 2021 condensed consolidated balance sheet. Rather, the $287.5 million principal amount of the Convertible Notes, less $8.5 million in unamortized debt issuance costs, was classified as a current liability in the condensed consolidated balance sheet as of March 31, 2021.

Total transaction costs for the issuance of the Convertible Notes were $9.6 million, consisting of the initial purchasers’ discount, commissions, and other issuance costs. Prior to the adoption of ASU 2020-06, the Company allocated the total transaction costs proportionally to the liability and equity components. The transaction costs attributed to the liability component were $6.3 million, which were recorded as debt issuance costs (presented as contra debt in the Company’s condensed consolidated balance sheets) and are amortized to interest expense in the condensed consolidated statements of operations over the term of the Convertible Notes. The transaction costs attributed to the equity component were $3.3 million, which were included in additional paid-in capital.

After the adoption of ASU 2020-06, the Company recorded an adjustment to the liability and equity components under the same premise (i.e., as if debt issuance costs had always been treated as a contra-liability only). As of March 31, 2021, the unamortized debt issuance costs on the Convertible Notes was $8.5 million and is amortized using the effective interest rate method over the term of the Convertible Notes, for the next 6.3 years.

Interest expense relating to the Convertible Notes in the condensed consolidated statements of operations for the three months ended March 31, 2021 are summarized as follows (in thousands):

	Three months ended
	March 31,
	2021
Contractual interest expense	$	1,977
Amortization of debt issuance costs		343
Total interest expense	$	2,320

The effective interest rate for the three months ended March 31, 2021 was 3.23%.

As of March 31, 2021, the Convertible senior notes on the condensed consolidated balance sheets represented the carrying amount of the Convertible Notes, net of unamortized debt issuance costs, which are summarized as follows (in thousands):

	As of
	March 31,
	2021
Convertible Notes	$	287,500
Less: Unamortized debt issuance costs		(8,504)
Carrying amount of Convertible Notes	$	278,996

Capped Call Transactions

In connection with the offering of the Convertible Notes, in June 2020 the Company entered into privately negotiated capped call transactions with certain financial institutions (the Option Counterparties) and used an aggregate $35.7 million of the net proceeds from the Convertible Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Convertible Notes or at the Company’s election (subject to certain conditions) offset any cash payments the Company is 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 based on the cap price. The cap price of the capped call transactions is initially $86.30 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock on June 8, 2020, and is subject to certain adjustments under the terms of the capped call transactions. The capped calls have an initial strike price of approximately $56.10 per share, subject to certain adjustments, which corresponds to the conversion option strike price in the Convertible Notes. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes (or approximately 5.1 million shares of the Company’s common stock).

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The capped call transactions are separate transactions that the Company entered into with the Option Counterparties, are not part of the terms of the Convertible Notes and will not change the holders’ rights under the Convertible Notes. As the capped call transactions meet certain accounting criteria, the cost of the capped call transactions of $35.7 million was recorded as a reduction in additional paid-in capital in the condensed consolidated balance sheets and will not be remeasured to fair value as long as the accounting criteria continue to be met. As of March 31, 2021, the Company had not purchased any shares under the capped call transactions.

Note 10.  Stock-Based Compensation

The Company has 5,000,000 of authorized preferred stock issuable, and there is no preferred stock outstanding as of March 31, 2021 and December 31, 2020. Each share of common stock is entitled to one vote.

The Company has four stock-based compensation plans (collectively, the Stock Plans)—the 2001 Stock Option Plan (the 2001 Stock Plan), the 2011 Stock Plan (the 2011 Stock Plan), the 2015 Omnibus Incentive Compensation Plan (the 2015 Stock Plan) and the ESPP. The 2015 Stock Plan permits grants of RSU awards.

The purpose of these Stock Plans is to provide incentives to employees, directors and nonemployee consultants. The Company no longer grants any awards under the 2001 Stock Plan and the 2011 Stock Plan. The maximum term of any stock options granted under the Stock Plans is 10 years. For employees and nonemployees, stock options generally vest 25% on the first anniversary of the original vesting date, with the balance vesting monthly or annually over the remaining three years. Stock options are granted at exercise prices at least equal to the fair value of the underlying stock at the date of the grant. For employees and nonemployees, generally, RSU awards vest 25% on each of the first, second, third and fourth anniversaries of the grant date and in certain cases, vest one year after grant date.

The Compensation Committee has approved the grant of performance-based equity awards (PBEAs) to the Company’s named executive officers and certain other employees pursuant to the 2015 Stock Plan. These PBEAs will only vest upon the Compensation Committee’s determination that pre-defined Company operational goals were satisfied.

The ESPP permits eligible employees to purchase shares of the Company’s common stock, using contributions via payroll deductions of up to 15% of their earnings, at a price per share equal to 85% of the lower of the stock’s fair market value on the offering date or purchase date. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

On November 21, 2019, in connection with the Avedro Merger, the Company granted the following Replacement Awards to employees of Avedro: (i) approximately 0.2 million cash-settled stock options to certain executives, which became fully vested on December 31, 2019, (ii) approximately 0.1 million stock options and approximately 5,500 RSUs to members of Avedro’s board of directors, which were granted with no post-combination vesting requirements, and (iii) approximately 0.7 million stock options and approximately 0.1 million RSUs, which are subject to time-based vesting requirements. Approximately $30.8 million of the fair value of the Replacement Awards was attributable to pre-combination service and was included in the purchase price of Avedro. The remaining value of the Replacement Awards of $26.0 million will be recognized as post-combination expense over the remaining requisite service period for the time-vesting awards. For the three months ended March 31, 2021 and March 31, 2020, $0.5 million and $9.3 million was expensed related to the Replacement Awards, respectively.

All share-based compensation arrangements

The following table summarizes the allocation of stock-based compensation related to stock options and RSUs and includes Replacement Awards, as well as cash-settled stock options in the accompanying condensed consolidated statements of operations (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Cost of sales	$	420	$	461
Selling, general and administrative		6,494		10,257
Research and development		1,834		3,287
Total	$	8,748	$	14,005

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(i) Of the total stock-based compensation of $14.0 million for the three months ended March 31, 2020, a $(3.2) million fair value adjustment was recorded during the three months ended March 31, 2020 related to cash-settled options.

At March 31, 2021, the total unamortized stock-based compensation expense was approximately $50.9 million of which $13.6 million was attributable to stock options and is to be recognized over the stock options’ remaining vesting terms of approximately 4.0 years (2.1 years on a weighted average basis). The remaining $37.3 million was attributable to RSUs and is to be recognized over the RSUs’ vesting terms of approximately 4.0 years (2.9 years on a weighted-average basis).

The total stock-based compensation cost capitalized in inventory was not material for the three month periods ended March 31, 2021 and March 31, 2020.

Note 11.  Income Taxes

The provision for income taxes is determined using an effective tax rate. For the three months ended March 31, 2021, the Company’s estimated annual effective tax rate of (0.88)%, was lower than the U.S. federal statutory rate primarily due to the generation of U.S. NOL carryforwards, which are partially offset by a valuation allowance, as well as state and foreign income taxes. The effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions used to estimate the effective tax rate, including factors such as expected utilization of NOL carryforwards, changes in or the interpretation of tax laws in jurisdictions where the Company conducts business, the Company’s expansion into new states or foreign countries, and the amount of valuation allowances against deferred tax assets. For the three months ended March 31, 2021, the Company recorded a provision for income taxes of $0.3 million, which was primarily comprised of state and foreign income taxes. For the three months ended March 31, 2020, the Company recorded a benefit for income taxes of ($0.5) million, which was primarily comprised of U.S. federal, state, and foreign income taxes.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with NOL and tax credit carryforwards. The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made. For the three months ended March 31, 2021, the Company has recorded a valuation allowance against the portion of its deferred tax asset which are not more likely than not to be realized.

Additionally, the Company follows an accounting standard addressing the accounting for uncertainty in income taxes that prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return. As of March 31, 2021 and March 31, 2020, the Company had gross unrecognized tax benefits of $23.5 million and $17.8 million, respectively.

On March 11, 2021, the United States enacted the American Rescue Plan Act of 2021 which provided funding for COVID-19 related relief and recovery. The Company is evaluating the impact of the American Rescue Plan Act of 2021 on its condensed consolidated financial statements and related disclosures.

Note 12.  Commitments and Contingencies

Patent Litigation

On April 14, 2018, the Company filed a patent infringement lawsuit against Ivantis, Inc. (Ivantis) in the U.S. District Court for the Central District of California, Southern Division (the Court), alleging that Ivantis’ Hydrus^© Microstent device infringes the Company’s U.S. Patent Nos. 6,626,858 and 9,827,143. Discovery closed in early 2020, after which, the parties filed and the Court ruled on a series of motions seeking to limit the issues for trial. For example, Ivantis agreed not to contest infringement of several claims of the ‘143 patent under the Court’s claim constructions and the Court granted the Company’s motion for summary judgment regarding the validity of one such claim (claim 30). Although positive for the Company, Ivantis can appeal the Court’s decisions following trial, which has been delayed due to COVID-19 and is scheduled to begin on or around September 28, 2021. The Company is currently unable to predict the ultimate outcome of this matter or reasonably estimate a possible loss or range of loss, and thus, no amounts have been accrued in the condensed consolidated financial statements.

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Secured Letters of Credit

The Company had a bank issue a letter of credit in the amount of $8.8 million that is related to its Aliso Facility. The letter of credit is secured with an amount of cash held in a restricted account of approximately $8.8 million as of March 31, 2021 and December 31, 2020. Beginning as of the first day of the thirty-seventh month of the lease term, and on each twelve month anniversary thereafter, the letter of credit will be reduced by 20% until the letter of credit amount has been reduced to $2.0 million.

The Company has one other irrevocable standby letters of credit secured with approximately $0.6 million of cash in a restricted account related to its office lease agreements.

Regents of the University of California

On December 30, 2014, the Company executed an agreement (the UC Agreement) with the Regents of the University of California (the University) to correct inventorship in connection with a group of the Company’s U.S. patents (the Patent Rights) and to obtain from the University a covenant that it did not and would not claim any right or title to the Patent Rights and will not challenge or assist any others in challenging the Patent Rights. In connection with the UC Agreement, Glaukos agreed to pay to the University a low single-digit percentage of worldwide net sales of certain current and future products, including the Company’s iStent products, with a required minimum annual payment of $0.5 million. This ongoing product payment obligation will change as patent coverage on certain products begins to lapse, and will terminate entirely on the date the last of the Patent Rights expires, which is currently expected to be in 2022. For the three months ended March 31, 2021 and March 31, 2020, the Company recorded approximately $0.9 million and $1.1 million, respectively, in cost of sales in connection with the product payment.

GMP Visions Solutions, Inc.

In November 2013, the Company entered into an amended agreement (the Buyout Agreement) with GMP Vision Solutions, Inc. (GMP) pursuant to which the Company agreed to buyout any remaining royalty obligations related to the transfer and assignment of certain intellectual property from GMP to the Company. Pursuant to the Buyout Agreement, in the event of a Company sale as defined therein, the Company would be required to pay GMP a percentage of the sale consideration above a certain threshold, with such payment not to exceed $2.0 million.

Executive Deferred Compensation Plan

Pursuant to the Company’s Deferred Compensation Plan, eligible senior level employees are permitted to make elective deferrals of compensation to which he or she will become entitled in the future. The Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust consist of COLIs. The fair value of the Deferred Compensation Plan liability, included in other liabilities on the condensed consolidated balance sheets, was approximately $5.7 million and $5.2 million as of March 31, 2021 and December 31, 2020, respectively, and the cash surrender value of the COLIs, included in deposits and other assets on the condensed consolidated balance sheets, which reflects the underlying assets at fair value, was approximately $5.8 million and $5.3 million as of March 31, 2021 and December 31, 2020, respectively.

Global Enterprise Systems Implementation

In the first quarter of 2019, the Company began implementing new enterprise systems and other technology optimizations and facilities infrastructure globally. The first phase of the Company’s new enterprise system went live in May 2020; therefore, software services along with any associated implementation costs for this first phase incurred after May 1, 2020 are being capitalized in accordance with the Company’s policy. As of March 31, 2021, the Company has firm purchase commitments related to software costs and systems implementations for future phases of approximately $1.3 million, which the Company expects to primarily incur during the remainder of 2021.

Note 13.  Business Segment Information

The Company has one business activity: the development and commercialization of therapies designed to treat glaucoma, corneal disorders and retinal diseases, and operates as one operating segment. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company’s revenues

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disaggregated by revenue and product category are included in Note 7, Revenue from Contracts with Customers. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.

Note 14.  Subsequent Events

On April 22, 2021, the Company announced that it had entered into an amendment of its exclusive licensing agreement with Intratus, Inc. The amendment expanded the existing agreement, a global licensing arrangement to research, develop, manufacture and commercialize Intratus’ patented, non-invasive drug delivery platform for use in the treatment of dry eye disease, glaucoma and other corneal disorders, to also include the treatment of presbyopia. An upfront payment of $5.0 million was made in connection with the execution of the amendment. The $5.0 million payment will be expensed to in-process research and development (IPR&D) as management determined there were no alternative future uses for the technology acquired in the quarter ending June 30, 2021.

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Item 2. 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 in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (SEC) on March 1, 2021.

This report contains forward-looking statements that are based on management's beliefs and assumptions and on information currently available to management. In some cases, you can identify forward-looking statements by the following words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. You should refer to the "Risk Factors" section of this report for a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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 developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched our first MIGS device commercially in 2012. We have also developed a proprietary bio-activated pharmaceutical therapy for the treatment 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 diabetic macular edema.

Impact of COVID-19 Pandemic and Current Economic Environment

While the COVID-19 pandemic and subsequent economic slowdown materially impacted the global demand for our products starting March 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 continued through the quarter ended March 31, 2021. 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, 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 Quarterly Report on Form 10-Q.

We also 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. 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 was impacted, which delayed our estimated iDose approval timeline, where we now expect a potential FDA approval of this product in 2023.

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We have taken a number of steps aimed 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 protocols that follow applicable guidance and regulations, employees involved in such operation-critical processes have been organized into a number of small shifts designed to minimize the time any one individual is required to be onsite. Further, in an effort to identify, and avoid further infection from, asymptomatic cases, we have offered periodic voluntary COVID-19 viral testing to on-site employees.

Financial Overview

Our net sales increased to $68.0 million for the three months ended March 31, 2021 from $55.3 million for the three months ended March 31, 2020. We incurred net losses of $16.5 million and $54.1 million for the three months ended March 31, 2021 and March 31, 2020 respectively. As discussed above, the COVID-19 pandemic impacted our net sales for the three months ended March 31, 2021 and March 31, 2020.

As of March 31, 2021, we had cash, cash equivalents, short-term investments, and restricted cash of approximately $416.8 million, compared to $413.9 million as of December 31, 2020. As of March 31, 2021, we had an accumulated deficit of $332.1 million.

Material Changes and Transactions

Acquisition of Avedro, Inc.

On November 21, 2019, we acquired Avedro, Inc. (Avedro), a hybrid ophthalmic pharmaceutical and medical technology company focused on developing therapies designed to treat corneal diseases and disorders and correct refractive conditions, in a stock-for-stock transaction (Avedro Merger). Avedro developed novel bio-activated drug formulations used in combination with proprietary systems for the treatment of progressive keratoconus and corneal ectasia following refractive surgery. The therapy is the first and only minimally invasive anterior segment product offering approved by the FDA shown to halt the progression of keratoconus.

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, our operations to date have been, and we believe our future growth will be, impacted by the following:

● the rate at which we expand our global sales and marketing infrastructure, and the speed at which we can continue increasing awareness of our products to patients and physicians;

● our industry is highly competitive and subject to rapid and profound technological, market and product-related changes. Our success depends, in part, upon our ability to maintain a competitive position in the development of new products for the treatment of chronic eye diseases;

● publications of clinical results by us, our competitors and other third parties can have a significant influence on whether, and the degree to which, our products are used by physicians and the procedures and treatments those physicians choose to administer to their patients;

● the physicians who use our products may not perform procedures during certain times of the year, due to seasonality patterns typical for certain of our procedures, or when they are away from their practices for various reasons;

● the coverage and reimbursement rates by third-party payors for the procedures using our products; and

● most of our sales outside of the U.S. are denominated in the local currency of the country in which we sell our products. As a result, our revenue from international sales is impacted by fluctuations in foreign currency exchange rates.

Further, we have made and expect to continue to make significant investments in our global sales force, marketing programs, research and development 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 also expect to incur additional construction costs related to our new facility in Aliso Viejo, California.

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Additionally, the success of clinical trials of, and receipt of timely regulatory approvals for, our and our partners’ pipeline products could impact our performance. For example, on April 9, 2021, Santen, Inc. announced the delay of the FDA approval of the Santen Preserflo MicroShunt, for which we are Santen’s exclusive U.S. commercial partner.  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. We will continue to monitor any developments associated with Santen’s ongoing discussions with the FDA.

We expect our 2021 revenues and near-term performance to reflect competitive dynamics and the continuing impacts resulting from COVID-19, the full effects of which at this time are difficult to predict, and which vary based upon the specific COVID-19 dynamics in the geographies in which we operate.

Although we have been profitable for certain periods in our operating history, there can be no assurance that we will be profitable or generate cash from operations in the future.

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 sales of Photrexa and other associated drug formulations, as well as our proprietary bioactivation systems, to customers. 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 our products through a direct sales organization in the United States, and outside the United States we sell our products primarily through direct sales subsidiaries in sixteen 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 2020 and 2021 due to the COVID-19 pandemic, and its effect on our commercial performance may continue into future reporting periods. 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 on the date the last of the Patent Rights expires, which is currently expected to be in 2022.

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Beginning in the fourth quarter of 2019, cost of sales has included amortization of the $252.2 million developed technology intangible asset recognized in connection with the Avedro Merger. For the three months ended March 31, 2021 and March 31, 2020, the amortization expense was $5.5 million. Additionally, beginning in the fourth quarter of 2019, cost of sales has included amortization of the fair market value inventory adjustment recorded in connection with the Avedro Merger, which for the three months ended March 31, 2020 was $9.7 million 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 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 the aforementioned expense related to the UC Agreement. The current COVID-19 pandemic may 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.

We expect SG&A expenses to continue to grow as we increase our global sales and marketing infrastructure and general administration infrastructure in the United 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 organizations, consultants, and other outside technical services and the costs of materials, supplies and travel. We expense R&D costs as incurred. We expect our R&D expenses to continue to increase as we initiate and advance our development programs, including our expanding surgical, pharmaceutical and IOP sensor development efforts and clinical trials across glaucoma, retinal disease and corneal health.

Completion dates and costs for our clinical development programs include seeking regulatory approvals and our research programs vary significantly for each current and future product candidate and are difficult to predict. As a result, while we expect our R&D costs to continue to increase for the foreseeable future, we cannot estimate with any degree of certainty the costs we will incur in connection with the development of our product candidates. We anticipate we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early research programs, results of ongoing and future clinical trials, as well as ongoing assessments as to each current or future product candidate’s commercial potential and our likelihood of obtaining necessary regulatory approvals. We are not currently able to fully track expenses by product candidate.

Non-Operating Expense, Net

Non-operating expense, net primarily consists of interest expense associated with our finance lease for our Aliso Viejo, California facility 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.

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Income Taxes

Our tax provision is comprised of state income and foreign income taxes. Our net deferred tax liability of $8.3 million at March 31, 2021 represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived 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 the more likely than not threshold.

Results of Operations

Comparison of Three Months Ended March 31, 2021 and March 31, 2020 (in thousands):

	Three Months Ended
	March 31,				% Increase
(dollars in thousands)	2021		2020		(decrease)
Statements of operations data:
Net sales	$	67,968	$	55,336	23	%
Cost of sales		16,633		32,529	(49)	%
Gross profit		51,335		22,807	125	%
Operating expenses:
Selling, general and administrative		41,921		50,546	(17)	%
Research and development		21,219		24,873	(15)	%
Total operating expenses		63,140		75,419	(16)	%
Loss from operations		(11,805)		(52,612)	(78)	%
Total non-operating expense, net		(4,385)		(1,896)	131	%
Income tax provision (benefit)		279		(450)	NM
Net loss	$	(16,469)	$	(54,058)	(70)	%

NM = Not Meaningful

Net Sales

Net sales for the three months ended March 31, 2021 and March 31, 2020 were $68.0 million and $55.3 million, respectively, reflecting an increase of $12.6 million or 23%.

Net sales of glaucoma products in the United States were $39.9 million and $32.6 million for the three months ended March 31, 2021 and March 31, 2020, respectively, increasing by 22% primarily due to the demand for combined cataract and glaucoma procedures increasing in the first quarter 2021 given the dynamics associated with the rollout of the COVID-19 vaccines, and increasingly normalized economic and operating conditions within certain markets in which we operate as well as the launch of our next generation iStent inject product, the iStent inject W, in the second half of 2020, which has largely supplanted iStent inject. We believe competition had also increased entering into 2020, the impact of which is difficult to assess given the COVID-19 dynamics.

International sales of glaucoma products for the three months ended March 31, 2021 and March 31, 2020 were $13.8 million and $11.6 million, respectively, increasing by 20%. The increase in international sales reflects growing volume demand in many key international geographies, favorable foreign exchange rates compared to the prior year, offset by the ongoing and relative COVID-19 impact in certain European and Latin American countries in particular and a one-time catch-up provision associated with historical government rebates owed in France following the establishment of a formal reimbursement program in late 2018.

Net sales of corneal health products were $14.3 million and $11.2 million for the quarter ended March 31, 2021 and March 31, 2020 respectively, increasing by 27%. The $3.1 million increase in net sales generated from our corneal health products was comprised of an increase of approximately $3.2 million in U.S. sales, including an increase of $3.9 million of Photrexa net sales offset by reductions of $0.6 million in U.S. capital equipment sales, using our direct sales operations, and decreased by $0.2 million internationally where we utilize distributors given we do not have a direct commercial presence. Sales of corneal health products in 2021 and 2020 were negatively impacted by disruption resulting from COVID-19.

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Cost of Sales

Cost of sales for the three months ended March 31, 2021 and March 31, 2020 were $16.6 million and $32.5 million, respectively, reflecting a decrease of $15.9 million due to approximately $9.7 million related to the acquisition fair market value inventory adjustment rollout during the first quarter of 2020 in connection with the acquisition of Avedro that was fully amortized during 2020, and $7.9 million related to inventory write-offs and COVID-related excess and obsolete inventory reserves recorded during the first quarter of 2020 not present in the first quarter of 2021. Our gross margin was 76% for the three months ended March 31, 2021 and 41% for the three months ended March 31, 2020. The increased gross margin resulted primarily from the impact of the aforementioned accounting adjustments and, to a lesser extent, changes in product mix, most notably the inclusion of modestly lower margin products related to international market sales.

Selling, General and Administrative Expenses

SG&A expenses for the three months ended March 31, 2021 and March 31, 2020 were $41.9 million and $50.5 million, respectively, reflecting a decrease of approximately $8.6 million or 17%.

We incurred approximately $26.7 million of commercial personnel and discretionary spending during the three months ended March 31, 2021 related primarily to existing sales infrastructure in glaucoma and corneal health. We also incurred approximately $15.2 million of general and administrative personnel and discretionary spending associated with our ongoing administrative functions and amortization of our right-of-use asset related to our long-term lease in Aliso Viejo, California.

The above decrease in SG&A expenses for the three months ended March 31, 2021 primarily consisted of approximately $3.9 million in reduced stock-based compensation from post-combination services associated with the value attributable to the pre-combination services associated with replacement of all Avedro outstanding and unexercised stock option awards and all unvested restricted stock units, a decrease of $1.3 million in integration and restructuring expenses related to our acquisition of Avedro and a decrease of approximately $2.3 million related to our previously-disclosed patent litigation.

Research and Development Expenses

R&D expenses for the three months ended March 31, 2021 and March 31, 2020 were $21.2 million and $24.9 million, respectively, reflecting a decrease of $3.7 million or 15%.

We incurred $13.2 million in core R&D expenses and $8.0 million in clinical expenses, comprised of $11.5 million in compensation and related employee expenses with the remaining $9.7 million spent on the continued development of a pharmaceutical therapeutic system for the treatment of keratoconus without the removal of the epithelium (often referred to as “epi-on”), projects for presbyopia and earlier stage technology and therapeutic investments, including expenses associated with clinical studies, inventory and supplies for iDose and future iStent product candidates.

The above decrease in R&D expenses for the three months ended March 31, 2021 primarily consisted of approximately $1.6 million in reduced stock-based compensation from post-combination services associated with the value attributable to the pre-combination services associated with replacement of all Avedro outstanding and unexercised stock option awards and all unvested restricted stock units and $2.1 million in reduced spend related to our above-mentioned clinical studies.

Non-Operating Expense, Net

We had non-operating expense, net of $4.4 million and $1.9 million for the three months ended March 31, 2021 and March 31, 2020, respectively. The increase in non-operating expense, net primarily relates to interest expense recognized related to the Convertible Notes and recognition of unrealized foreign currency losses due to higher intercompany loan balances denominated in, and impacted by, changes in foreign currency exchange rates.

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Income Tax Provision

Our effective tax rate for the first quarter of 2021 was (0.88)%. For the three months ended March 31, 2021 and March 31, 2020, we recorded a provision/(benefit) for income taxes of $0.3 million and $(0.5) million respectively, which were primarily comprised of state and foreign income taxes for the first quarter of 2021, and U.S. federal, state and foreign income taxes for the first quarter of 2020, offset by a benefit related to the carryback of federal NOLs under the CARES Act.

Liquidity and Capital Resources

For the three months ended March 31, 2021, we incurred a net loss of $16.5 million and generated cash from operations of $4.2 million. As of March 31, 2021, we had an accumulated deficit of approximately $332.1 million. We have made and expect to continue to make significant investments in our global sales force, marketing programs, research and development activities, clinical studies and general and administrative infrastructure. FDA-approved IDE and IND studies and new product development programs in our industry are expensive. We also expect to incur additional construction costs related to our new facility in Aliso Viejo, California.

Our Convertible Notes may be converted at the option of the holders at the times and under the circumstances and at the conversion rate described in Note 9, Convertible Senior Notes. As of March 31, 2021, one of the conditions allowing holders of the Convertible Notes to convert had been met, as our trading price remained above 130% of the conversion price for at least 20 trading days during the 30 consecutive trading-day period ending on, and including, March 31, 2021. Consequently, holders of the Convertible Notes have the right to convert their Convertible Notes during the calendar quarter beginning April 1, 2021. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture. Our current intent is to settle the principal amount of the Convertible Notes in cash upon conversion, with any remaining conversion value being delivered in shares of our common stock. Given satisfaction of the aforementioned condition, the Convertible Notes are classified within current liabilities on the condensed consolidated balance sheets.

We plan to fund our operations, capital funding and other liquidity needs using existing cash and investments and, to the extent available, cash generated from commercial operations. Our existing cash and investments include the remaining net proceeds from the Convertible Notes issued in June 2020 (after payment for the related capped call transactions), which we are using for working capital and general corporate purposes. Although we have been profitable for certain periods in our operating history, there can be no assurance that we will be profitable or generate cash from operations. We may seek to obtain additional financing in the future through other debt or equity financings. There can be no assurance that we will be able to obtain additional financing on terms acceptable to us, or at all. We believe that our available cash, cash equivalents, investment balances and interest we earn on these balances and any cash generated from commercial operations will be sufficient to fund our operations and satisfy our liquidity requirements for at least the next 12 months from the date our condensed consolidated financial statements for the three months ended March 31, 2021 are made publicly available.

The following table summarizes our cash and cash equivalents, short-term investments and selected working capital data as of March 31, 2021 and December 31, 2020 (in thousands):

	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	96,625	$	96,596
Short-term investments		310,755		307,772
Accounts receivable, net		36,694		36,059
Inventory, net		15,271		15,809
Accounts payable		8,624		4,371
Accrued liabilities		47,944		45,331
Working capital (1)		138,735		419,740

(1) Working capital consists of total current assets less total current liabilities.

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Cash Flows

Our historical cash outflows have primarily been associated with cash used for operating activities such as the expansion of our sales, marketing and R&D activities; purchase of and growth in inventory and other working capital needs; the acquisition of intellectual property; and expenditures related to equipment and improvements used to increase our manufacturing capacity, to improve our manufacturing efficiency and for overall facility expansion.

The following table is a condensed summary of our cash flows for the periods indicated:

	Three Months Ended
	March 31,
(in thousands)	2021		2020
Net cash provided by (used in):
Operating activities	$	4,178	$	(13,099)
Investing activities		(21,263)		628
Financing activities		17,414		4,220
Exchange rate changes		(450)		(565)
Net decrease in cash, cash equivalents and restricted cash	$	(121)	$	(8,816)

At March 31, 2021, our cash and cash equivalents were held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity.

Operating Activities

In the three months ended March 31, 2021, our operating activities provided $4.2 million in net cash and in the three months ended March 31, 2020 our operating activities used $13.1 million of net cash.

For the three months ended March 31, 2021, our net cash provided by operating activities reflected our net loss of $16.5 million, adjusted for non-cash items of $19.5 million, primarily consisting of stock-based compensation expense of $8.7 million, depreciation of $1.2 million, amortization of intangible assets of $6.2 million, and amortization of lease right-of-use assets of $1.2 million. This was partially offset by changes in operating assets and liabilities of $1.1 million, which resulted primarily from increases in accounts receivable and prepaid expenses and other current assets of $2.4 million, partially offset by increases in accounts payable and accrued liabilities of $3.0 million and decreases in inventory of $0.4 million.

For the three months ended March 31, 2020, our net cash used in operating activities reflected our net loss of $54.1 million, adjusted for non-cash items of $24.1 million, primarily consisting of stock-based compensation expense of $17.2 million, depreciation of $1.1 million, amortization of intangibles of $6.2 million, amortization of lease right-of-use assets of $1.3 million, and the change in the fair value of cash-settled stock options of $(3.2) million. This was offset by changes in operating assets and liabilities of $16.8 million, which resulted from decreases in accounts receivable and inventory of $23.8 million, offset by decreases in accounts payable and accrued liabilities of $4.8 million and increases in prepaid expenses and other current asset of $2.2 million.

Investing Activities

In the three months ended March 31, 2021 and March 31, 2020, our investing activities used $21.3 million and provided $0.6 million of net cash, respectively.

For the three months ended March 31, 2021, we used cash of approximately $54.0 million for purchases of short-term investments, approximately $17.2 million for purchases of property and equipment, primarily related to our Aliso Facility, and approximately $0.4 million related to investments in company-owned life insurance, and we received cash of approximately $50.3 million from sales and maturities of short-term investments.

For the three months ended March 31, 2020, we used cash of approximately $18.7 million for purchases of short-term investments, approximately $0.8 million for purchases of property and equipment and approximately $0.4 million related to investments in company-owned life insurance, which was partially offset by cash received of approximately $19.7 million from sales and maturities of short-term investments.

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We expect to continue our increased investment in property and equipment in the future as we expand our manufacturing capacity for current and new products, improve our manufacturing efficiency and for overall facility expansion, as discussed above.

Financing Activities

In the three months ended March 31, 2021 and March 31, 2020, our financing activities provided $17.4 million and $4.2 million of net cash, respectively.

For the three months ended March 31, 2021, we received $18.1 million from the exercises of stock options and purchases of our common stock by employees pursuant to our Employee Stock Purchase Plan and used $1.1 million for payment of employee taxes related to restricted stock unit vestings. Additionally, we received $0.6 million in proceeds from our tenant improvement allowances for our Aliso Facility and paid $0.3 million in principal on our finance lease.

For the three months ended March 31, 2020, we received net cash proceeds of approximately $5.7 million from the exercises of stock options and purchases of our common stock by employees pursuant to our Employee Stock Purchase Plan and used $1.5 million for payment of employee taxes related to restricted stock unit vestings.

Commitments

There have been no material changes to our contractual obligations and commitments as of March 31, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021 for the year ended December 31, 2020.

Off-balance sheet arrangements

We do not have any off-balance sheet arrangements as defined in the rules and regulations of the Securities and Exchange Commission. We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for any other contractually narrow or limited purpose. However, from time to time we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims including in connection with certain real estate leases, supply purchase agreements, and with directors and officers. The terms of such obligations vary by contract and in most instances a maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted, thus no liabilities have been recorded for these obligations on our balance sheets for any of the periods presented.

Critical accounting policies and significant estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the condensed consolidated financial statements. Generally, we base our estimates on historical experience and on various other assumptions in accordance with GAAP that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions and such differences could be material to our financial position and results of operations.

Our critical accounting policies and significant estimates that involve a higher degree of judgment and complexity are described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Estimates” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021. There have been no material changes to our critical accounting policies and estimates as disclosed therein, during the three months ended March 31, 2021, as compared with those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021, with the exception of the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06).

In August 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-06, which simplifies accounting for convertible instruments. The embedded conversion features are no longer separated from the host

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contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASU 2020-06, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective adoption approach. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption. The comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods.

The adoption of ASU 2020-06 resulted in an increase to accumulated deficit of $5.5 million, a decrease to additional paid-in capital of $81.6 million, a decrease in the deferred tax liability of $2.2 million and an increase to convertible notes, net of $89.2 million. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Lastly, the Company derecognized deferred income taxes associated with the Convertible Notes and adjusted the deferred tax liability associated with the embedded conversion feature and corresponding change in the valuation allowance. See Note 2. Summary of Significant Accounting Policies and Note 9. Convertible Senior Notes within Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our exposure to market risk since December 31, 2020. Refer to Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2020 for further detail.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified by management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during our first fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information disclosed under “Legal Proceedings” in Note 12, Commitments and Contingencies of Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

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Item 1A. Risk Factors

The risks and uncertainties discussed below update, supersede and replace the risks and uncertainties previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1, 2021. 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.”

We do not believe any of the changes constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1, 2021.

Risks Related to Our Business

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 declared COVID-19 to be a “pandemic,” spreading across the globe and impacting worldwide economic activity. While the impacts of COVID-19 have had, and may 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, 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 viral testing to on-site employees.

As government restrictions and advisories on elective procedures and therapies ease, cataract and keratoconus procedures continued to return toward more normalized levels through the quarter ended March 31, 2021. 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 and development partners have 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 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 and/or cause a disruption to, or shortage in, our workforce. If a widespread outbreak were to occur, we may experience delays in our responses to our customers and possible delays in shipments of

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our products, which could harm our customer relations and adversely impact our competitive positioning and sales. We have also experienced restrictions on the ability of our personnel to travel and access customers and clinical sites for training and support. Other potential disruptions include delays in approvals by regulatory bodies; delays in product development efforts; and further challenges to our capacity to manufacture, sell and support the use of our products.

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 March 31, 2021, we had an accumulated deficit of approximately $332.1 million, principally from costs incurred in our clinical trial, research and development 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 development 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 condensed consolidated financial statements for the year ended March 31, 2021 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. 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., we sell our products through direct sales organizations in sixteen countries and a network of third-party distribution partners in other markets. These

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international operations expose us and our subsidiaries and third-party distributors to a variety of risks including, without limitation, the following:

● different, and in some cases more exacting and lengthy, regulatory approval processes, regulations and laws, and pricing and reimbursement systems;

● reduced or varied protection for intellectual property rights or difficulties enforcing our intellectual property rights and defending against third-party threats and intellectual property enforcement actions against us, our distributors, or any of our third-party suppliers;

● pricing pressure or longer sales and payment cycles;

● different competitive dynamics, including smaller market sizes, which we may not be able to fully appreciate before entering certain foreign markets;

● a shortage of high-quality regional sales managers, direct sales representatives and distributors, and the difficulties of managing foreign operations;

● relative disadvantages compared to competitors with more recognizable names, longer operating histories and better established distribution networks and customer relationships;

● political and economic instability, international terrorism and anti-U.S. sentiment, or the imposition of U.S. or international sanctions that could restrict or prohibit continued business;

● changes in duties and tariffs, license obligations and other non-tariff barriers to trade;

● scrutiny of foreign tax authorities that could result in significant fines, penalties and additional taxes being imposed on us;

● different cultural norms which may impact how business is conducted;

● laws and business practices favoring local companies;

● difficulties in maintaining consistency with our internal guidelines;

● difficulties in enforcing agreements and collecting receivables through foreign legal systems;

● failures by our third-party partners to properly comply with applicable anti-corruption laws or assist us with local guidance on operations, financial and other reporting, accounting, tax, payroll, legal and regulatory matters; and

● the imposition of costly and lengthy new export licensing requirements and restrictions, particularly relating to technology.

If we experience any of these risks, our sales in non-U.S. jurisdictions may be harmed, our results of operations would suffer, and our business prospects would be negatively impacted.

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 the manufacturing operations for our iStent products are currently located in an approximately 98,000 square foot campus located in San Clemente, California. This location serves as our sole manufacturing location 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 conduct substantially all of our research and development (R&D) activities, customer and technical support, and management and administrative functions. We intend to relocate our corporate administrative headquarters, along with certain laboratory, R&D and warehouse space, to a new facility located in Aliso Viejo, California in 2021. If our San Clemente facility or our future facility in Aliso Viejo 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 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 or impact our business, including the regulatory approval timelines as has happened with iLink epi-on. If our manufacturing facilities or those of any of our component suppliers or contract facilities are found to be in violation of

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applicable laws and regulations or fail to adequately remediate any issues discovered during an audit, the FDA or other notified bodies could take enforcement action. Even if we are able to identify and qualify a suitable second source to replace one of our key suppliers, if necessary, that replacement supplier would not have access to our previous supplier’s proprietary processes and would therefore be required to develop its own, which could result in further delay. Despite our efforts to maintain an adequate supply of inventory, the loss of these suppliers, or their inability to provide us with an adequate supply of components or products, could cause delay in the manufacture of our products, thereby impairing our ability to meet the demand of our customers and causing significant harm to our business. Any disruption of this nature or increased expense could harm our commercialization efforts and adversely affect our operating results.

Our corneal health Photrexa therapies are produced by a small number of contract manufacturing organizations. The systems that bio-activate our Photrexa therapies are primarily manufactured in Burlington, Massachusetts. Any material disruption to the manufacture of our corneal health products, either our pharmaceuticals or their bio-activation systems, could also adversely affect our operating results and clinical efforts.

If the quality or delivery of our products does not meet our customers’ expectations, our reputation could suffer and ultimately our sales and operating earnings could be negatively impacted.

In the course of conducting our business, we have had to and must continue to adequately address quality issues associated with our products, including in our engineering, design, manufacturing and delivery processes, as well as issues in third-party components included in our products. Because our products are highly complex, the occurrence of performance issues may increase as we continue to introduce new products and as we rapidly scale up manufacturing to meet increased demand for our products. Although we have established internal procedures to minimize risks that may arise from product quality issues, there can be no assurance that we will be able to eliminate or mitigate occurrences of these issues and associated liabilities. In addition, identifying the root cause of performance or quality issues, particularly those affecting third-party components, may be difficult, which increases the time needed to address quality issues as they arise and increases the risk that similar problems could recur. Finding solutions to quality issues can be expensive and we may incur significant costs or lost revenue in connection with, for example, shipment holds, product recalls and warranty or other service obligations. In addition, quality issues can impair our relationships with new or existing customers or result in product liability suits against us, which may be expensive to defend or resolve and could impact the reimbursement coverage of our products, our product liability insurance rates and/or our cash reserves in the event our existing insurance coverage is insufficient. The occurrence of any of the foregoing could adversely affect our reputation as a 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.

In addition to the impact of the COVID-19 pandemic, our net sales may experience volatility due to a number of factors, many of which are beyond our control, including, among other things, fluctuating demand, pricing pressures applicable to our products, commercialization of our new and existing products and the marketing of competitive products, results of clinical research and trials, regulatory approvals and legislative changes affecting our products, variances in the sales terms, supply chain and inventory management, timing or volume of customer orders and the length of our sales cycle, which varies and may be unpredictable. As a result, you should not rely on our results in any

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past period as an indication of future results and you should anticipate that fluctuations in our quarterly and annual operating results may continue and could generate volatility in the price of our common stock. We believe that quarterly comparisons of our financial results should not be relied upon as an indication of our future performance.

If we fail to manage our anticipated growth effectively, we may not be able to meet customer demand for our products and our business could suffer.

Since the commercial launch of the iStent in 2012, we have seen significant growth in our business, both organically and through transactions, and we must continue to grow in order to meet our business and financial objectives. However, continued growth may create numerous challenges, including, among others, new and increased responsibilities for our management team; increased competition; increased product demand which could strain our manufacturing capacity; the management of an increasing number of customer, supplier and other relationships; increased pressure on our operating, financial and reporting systems; entry into new international territories with unfamiliar regulations and business approaches; and the need to hire, train and manage additional qualified personnel. If we fail to manage any of these challenges effectively, our business may be harmed.

If we are unable to retain or recruit qualified personnel for growth, our business results could suffer.

We have benefited substantially from the leadership and performance of our senior management as well as certain key employees. For example, our chief executive officer, as well as other key members of our senior management, has experience successfully developing novel technologies and scaling early-stage medical device and pharmaceutical companies to achieve profitability. We also rely on our qualified sales representatives and on consultants and advisors in our research, operations, clinical and commercial efforts to grow our business, develop and commercialize new products and implement our business strategies. Our success will depend on our ability to retain our current management, key employees and consultants and advisors, and to attract and retain qualified personnel in the future. The loss of services of these personnel, which could occur without notice and without cause or good reason, could prevent or delay our growth plans and the implementation and 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 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. However, we cannot assure you that we will be able to successfully complete any future acquisition we choose to 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 to 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. Additionally, some of these collaborations, joint ventures, alliances and partnerships may fail to materialize into commercialized product, including due to failures to obtain regulatory approvals, and could require us to invest a substantial amount of resources only to ultimately fail. These arrangements may be terminated before we are able to realize net sales to sufficiently cover the costs associated therewith, which could materially impact our business. We cannot assure you that any such transaction would result in the benefits expected from the transaction, including revenue growth, increased profitability or an enhancement in our business prospects. Further, pursuing acquisitions, collaborations, in licensing agreements, joint ventures, alliances or partnerships with third parties, whether or not completed, is costly and time-consuming and could distract Company management from the operation of the business, which could negatively impact our operating results.

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Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions or data corruption could materially disrupt our operations and adversely affect our business and operating results.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory management, product development tasks, clinical data, customer service and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, power losses, computer system or data network failures, security breaches, data corruption and cyber-based attacks, including malicious software programs, phishing attacks or other attacks, which we have experienced and continue to monitor. In addition, a variety of our software systems are cloud-based data management applications, hosted by third-party service providers whose security and information technology systems are subject to similar risks. The failure to protect either our or our service providers’ information technology infrastructure could disrupt our entire operation or result in decreased sales, increased overhead costs, product shortages, loss or misuse of proprietary or confidential information, intellectual property or sensitive or personal information, all of which could have a material adverse effect on our reputation, business, financial condition and operating results.

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), and the California Consumer Privacy Act (CCPA). These laws affect how we collect and use data of our employees, consultants, customers and other parties. Furthermore, these laws impose substantial requirements that require the expenditure of significant funds and employee time to comply, and additional states and countries are enacting new data privacy and security laws, which will require future expansion of our compliance efforts. 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, we had approximately $439.4 million, $297.6 million and $13.4 million of net operating loss (NOL) carryforwards for federal, state and foreign purposes, respectively, available to offset future taxable income. The federal NOL carryforwards incurred prior to 2018 begin to expire in 2021, while a federal NOL carryforward of $186.6 million will not expire. The state NOL carryforwards begin to expire in 2021. The foreign NOL carryforwards begin to expire in 2022. At December 31, 2020, we had federal and state R&D credit carryforwards of approximately $32.3 million and $15.7 million, respectively. Federal credits begin to expire in 2021, state credits of $3.4 million begin to expire in 2023, and state credits of $12.2 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. 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 remaining tax attributes before they expire.

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Risks Related to Indebtedness

The requirement that we service our indebtedness could limit the cash flow available for our operations and have other consequences that could adversely affect our business, and we may not have sufficient cash flow from our business to pay our debt obligations.

As of March 31, 2021, we had $287.5 million in principal amount of indebtedness as a result of the issuance of the Convertible Notes. We may also incur additional indebtedness to meet future financing needs. Interest payments, fees, covenants and restrictions under agreements governing our current or future indebtedness, including the indenture governing the Convertible Notes, could have important consequences, including the following: impairing our ability to 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 issuing 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 on 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 and 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 conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Convertible Notes is triggered, holders of the Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option. If one or

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more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders of the Convertible Notes do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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.

Risks Related to the Regulatory Environment

Our business, products and processes are subject to extensive regulation both in the U.S. and abroad and it can be costly to comply with these regulations. Any failure to adhere to applicable regulations could harm our business, financial condition and operating results.

Our medical devices, drugs, drug/device combination products or other products are subject to extensive government regulation in the U.S. by the U.S. Food and Drug Administration (FDA), state regulatory authorities and foreign regulatory authorities in the countries in which we conduct business. These regulations relate to, among other things, research and development, design, testing, clinical trials, manufacturing, clearance or approval, environmental controls, safety and efficacy, labeling, advertising, promotion, pricing, recordkeeping, reporting, import and export, post-approval studies and the sale and distribution of our products. See Item 1, Business, “Government Regulation --

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Regulation & Reimbursement in the U.S.” and “Regulation & Reimbursement outside the U.S.” for additional information.

The process of obtaining clearances or approvals to market our products can be expensive and lengthy, and we cannot guarantee that our current products will receive approval for additional indications or that our future products will receive clearance or approval on a timely basis, if at all. 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. 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 or may pursue a regulatory clearance or approval pathway that has proven or proves unsuccessful, which would 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. 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 recall or withdrawal of the product. Any recall or product withdrawal, whether required by the FDA or another regulatory authority or initiated by us, could harm our reputation with customers and negatively affect our sales.

The FDA, state and foreign regulatory authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include, among other things, warning letters, fines, injunctions, recalls, refusals to grant or delays in granting requests, civil fines and penalties, operating restrictions, withdrawal of approvals and even criminal prosecution.

In addition, our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of a drug or medical device for a use that has not been cleared or approved by the FDA, also known as an “off-label” use. Physicians may use our products off-label, as the FDA does not restrict or regulate a physician's choice of treatment within the practice of medicine. However, if the FDA determines that our promotional materials or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions.

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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, financial arrangements with physicians, patient assistance programs, reimbursement support services, and other practices. See Item 1, Business, “Government Regulation -- Regulation & Reimbursement in the U.S.” and “Regulation & Reimbursement outside the U.S.” for additional information about the laws and regulations which apply to us. 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.

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 was 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 certain they would not be subject to such scrutiny.

In May 2017, the EU adopted Medical Devices Regulation 2017/745 (MDR), which will repeal and replace the Medical Device Directive (MDD). MDR was set to take effect beginning 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, it provides for stricter controls of medical devices. Under provisions that govern the transition period until MDR takes effect, medical devices with notified body certificates issued under the MDD prior to May 26, 2020 may continue to be marketed and sold as long as those certificates are valid, 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.

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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 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 -- Regulation & Reimbursement in the U.S.” and “Regulation & Reimbursement outside the U.S.” 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 the procedures associated with our iStent-related products from a temporary Current Procedural Terminology (CPT) Category III code to a permanent CPT Category I code, the physician and facility reimbursement levels associated with the procedures using our iStent products could be decreased. Further, even 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 evolving 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 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 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.

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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 of 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 offerings 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, 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

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property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors.

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 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. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:

● authorize our board of directors to issue, without further action by the stockholders, up to 5,000,000 shares of undesignated preferred stock;

● require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent;

● specify that special meetings of our stockholders may be called only by our board of directors, the chairman of the board of directors, the chief executive officer or the president;

● establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

● establish that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three year terms;

● provide that our directors may be removed only for cause by a supermajority vote of our stockholders;

● provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

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● specify that no stockholder is permitted to cumulate votes at any election of directors; and

● require a supermajority vote of the stockholders and a majority vote of the board to amend certain of the above-mentioned provisions and our bylaws.

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”) 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, or (iv) any action or proceeding asserting a claim governed by the internal affairs doctrine (the “Delaware Exclusive Forum 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 “Federal Forum 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.

The Delaware Exclusive Forum Provision is intended to apply to claims arising under Delaware state law and would not apply to claims brought pursuant to the Exchange Act or the Securities Act, or any other claim for which the federal courts have exclusive jurisdiction. In addition, the Federal Forum Provision is intended to apply to claims arising under the Securities Act and would not apply to claims brought pursuant to the Exchange Act. The exclusive forum provisions in the Glaukos Charter and our Bylaws will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder and, accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal courts. Our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.

The exclusive forum provisions in the Glaukos Charter and our Bylaws may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with the company or its directors, officers or other employees, which may discourage lawsuits against the Company and its directors, officers and other employees. In addition, stockholders who do bring a claim in the Court of Chancery of the State of Delaware pursuant to the Delaware Exclusive Forum Provision could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The court in the designated forum under our exclusive forum provisions may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to the Company than to our stockholders. Further, the enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that a court could find any of our exclusive forum provisions to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find all or any part of our exclusive forum provisions to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.

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Item 5. Other Information

None.

Item 6. Exhibits

		Incorporated by Reference
Exhibit No.	Description	Form	File No.	Exhibit	Filing Date
2.1	Agreement and Plan of Merger, dated as of August 7, 2019, by and between Glaukos Corporation and Avedro, Inc.	8-K	1-37463	2.1	8/7/2019
3.1	Restated Certificate of Incorporation of the Registrant	8-K	1-37463	3.1	06/30/2015
3.2	Amended and Restated Bylaws of the Registrant	8-K	1-37463	3.1	11/20/2020
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	XBRL Taxonomy Schema Linkbase Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Definition Linkbase Document
101.LAB*	XBRL Taxonomy Labels Linkbase Document
101.PRE*	XBRL Taxonomy Presentation Linkbase Document
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

* Filed Herewith.

** Furnished Herewith.

48

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Clemente, State of California, on May 6, 2021.

GLAUKOS CORPORATION
By:	/s/ THOMAS W. BURNS
Thomas W. Burns
Chief Executive Officer and President (Principal Executive Officer)
By:	/s/ JOSEPH E. GILLIAM
Joseph E. Gilliam
Chief Financial Officer and Sr. Vice President, Corporate Development (Principal Accounting and Financial Officer)

49

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) AND RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas W. Burns, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Glaukos Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2021

/s/ THOMAS W. BURNS

Name: Thomas W. Burns

Chief Executive Officer and President

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the

Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Joseph E. Gilliam, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Glaukos Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2021

/s/ JOSEPH E. GILLIAM

Name: Joseph E. Gilliam

Chief Financial Officer & Sr. Vice President, Corporate Development

EX-32.1

Exhibit 32.1

Certification of Chief EXECUTIVE Officer pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Thomas W. Burns, President and Chief Executive Officer of Glaukos Corporation (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2021

/s/ THOMAS W. BURNS

Name: Thomas W. Burns

Chief Executive Officer and President

This certification accompanies and is being “furnished” with this Report, shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief FINANCIAL Officer pursuant to 18 U.S.C. Section 1350

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Joseph E. Gilliam, Chief Financial Officer & Sr. Vice President, Corporate Development of Glaukos Corporation (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2021

/s/ JOSEPH E. GILLIAM

Name: Joseph E. Gilliam

Chief Financial Officer & Sr. Vice President, Corporate Development

This certification accompanies and is being “furnished” with this Report, shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 03, 2021
Document and Entity Information
Entity Registrant Name	GLAUKOS Corp
Entity Central Index Key	0001192448
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	001-37463
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0945406
Entity Address, Address Line One	229 Avenida Fabricante
Entity Address, City or Town	San Clemente
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92672
City Area Code	949
Local Phone Number	367-9600
Title of 12(b) Security	Common Stock
Trading Symbol	GKOS
Security Exchange Name	NYSE
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		46,281,586

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 96,625	$ 96,596
Short-term investments	310,755	307,772
Accounts receivable, net	36,694	36,059
Inventory, net	15,271	15,809
Prepaid expenses and other current assets	14,954	13,206
Total current assets	474,299	469,442
Restricted cash	9,416	9,566
Property and equipment, net	43,314	24,008
Operating lease right-of-use asset	19,720	20,009
Finance lease right-of-use asset	50,838	51,443
Intangible assets, net	351,465	357,693
Goodwill	66,134	66,134
Deposits and other assets	7,591	7,207
Total assets	1,022,777	1,005,502
Current liabilities:
Accounts payable	8,624	4,371
Accrued liabilities	47,944	45,331
Convertible senior notes	278,996
Total current liabilities	335,564	49,702
Convertible senior notes		189,416
Operating lease liability	20,450	20,704
Finance lease liability	61,068	60,690
Deferred tax liability, net	8,323	10,512
Other liabilities	7,598	7,029
Total liabilities	433,003	338,053
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 150,000 shares authorized; 46,016 and 45,275 shares issued and 45,988 and 43,247 shares outstanding at March 31, 2021 and December 31, 2020, respectively	46	45
Additional paid-in capital	920,819	976,590
Accumulated other comprehensive income	1,128	1,004
Accumulated deficit	(332,087)	(310,058)
Less treasury stock (28 shares as of March 31, 2021 and December 31, 2020)	(132)	(132)
Total stockholders' equity	589,774	667,449
Total liabilities and stockholders' equity	$ 1,022,777	$ 1,005,502

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	46,016,000	45,275,000
Common stock, shares outstanding	45,988,000	45,247,000
Treasury stock, shares	28,000	28,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 67,968	$ 55,336
Cost of sales	16,633	32,529
Gross profit	51,335	22,807
Operating expenses:
Selling, general and administrative	41,921	50,546
Research and development	21,219	24,873
Total operating expenses	63,140	75,419
Loss from operations	(11,805)	(52,612)
Non-operating (expense) income:
Interest income	383	696
Interest expense	(3,229)	(881)
Other expense, net	(1,539)	(1,711)
Total non-operating expense	(4,385)	(1,896)
Loss before taxes	(16,190)	(54,508)
Income tax provision (benefit)	279	(450)
Net loss	$ (16,469)	$ (54,058)
Basic and diluted net loss per share (in dollar per share)	$ (0.36)	$ (1.24)
Weighted average shares used to compute basic and diluted net loss per share (in shares)	45,709	43,766

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net loss	$ (16,469)	$ (54,058)
Other comprehensive income:
Foreign currency translation gain	541	1,169
Unrealized loss on short-term investments	(417)	(480)
Other comprehensive income	124	689
Total comprehensive loss	$ (16,345)	$ (53,369)

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Adjustment Additional Paid-in-Capital	Adjustment Accumulated Deficit	Adjustment	Common Stock	Additional Paid-in-Capital	Accumulated Other Comprehensive Income (loss)	Accumulated Deficit	Treasury Stock	Total
Balance at Dec. 31, 2019				$ 44	$ 861,740	$ 1,330	$ (189,710)	$ (132)	$ 673,272
Balance (in shares) at Dec. 31, 2019				43,530				(28)
Stockholders' Deficit
Common stock issued under stock plans					4,220				4,220
Common stock issued under stock plans (in shares)				589
Stock-based compensation					17,176				17,176
Other comprehensive income						689			689
Net loss							(54,058)		(54,058)
Balance at Mar. 31, 2020				$ 44	883,136	2,019	(243,768)	$ (132)	641,299
Balance (in shares) at Mar. 31, 2020				44,119				(28)
Balance (Accounting Standards Update 2020-06) at Dec. 31, 2020	$ (81,553)	$ (5,560)	$ (87,113)
Balance at Dec. 31, 2020				$ 45	976,590	1,004	(310,058)	$ (132)	$ 667,449
Balance (in shares) at Dec. 31, 2020				45,275				(28)	45,247
Stockholders' Deficit
Common stock issued under stock plans				$ 1	17,034				$ 17,035
Common stock issued under stock plans (in shares)				741
Stock-based compensation					8,748				8,748
Other comprehensive income						124			124
Net loss							(16,469)		(16,469)
Balance at Mar. 31, 2021				$ 46	$ 920,819	$ 1,128	$ (332,087)	$ (132)	$ 589,774
Balance (in shares) at Mar. 31, 2021				46,016				(28)	45,988

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating Activities
Net loss	$ (16,469)	$ (54,058)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	1,150	1,082
Amortization of intangible assets	6,228	6,228
Amortization of lease right-of-use lease assets	1,170	1,311
Amortization of debt issuance costs	343
Deferred income tax benefit	(24)	(709)
Stock-based compensation	8,748	17,176
Change in fair value of cash settled stock options		(3,171)
Unrealized foreign currency losses	1,101	2,024
Amortization of premium (discount) on short-term investments	256	(19)
Other liabilities	570	207
Changes in operating assets and liabilities:
Accounts receivable, net	(547)	9,246
Inventory, net	403	14,568
Prepaid expenses and other current assets	(1,803)	(2,235)
Accounts payable and accrued liabilities	3,023	(4,750)
Other assets	29	1
Net cash provided by (used in) operating activities	4,178	(13,099)
Investing activities
Purchases of short-term investments	(54,007)	(18,680)
Proceeds from sales and maturities of short-term investments	50,349	19,676
Purchases of property and equipment	(17,182)	(782)
Investment in company-owned life insurance	(423)	414
Net cash (used in) provided by investing activities	(21,263)	628
Financing activities
Proceeds from exercise of stock options	16,552	4,454
Proceeds from share purchases under Employee Stock Purchase Plan	1,549	1,278
Payment of employee taxes related to vested restricted stock units	(1,065)	(1,512)
Principal paid on finance lease	(251)
Proceeds from tenant improvement allowance	629
Net cash provided by financing activities	17,414	4,220
Effect of exchange rate changes on cash and cash equivalents	(450)	(565)
Net decrease in cash, cash equivalents and restricted cash	(121)	(8,816)
Cash, cash equivalents and restricted cash at beginning of period	106,162	71,756
Cash, cash equivalents and restricted cash at end of period	106,041	62,940
Supplemental disclosures of cash flow information
Taxes (refunded) paid	$ (35)	$ 250

XML

Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2021

Organization and Basis of Presentation

Organization and Basis of Presentation

Note 1.  Organization and Basis of Presentation

Organization and business

Glaukos Corporation (Glaukos or the Company), incorporated in Delaware on July 14, 1998, is an ophthalmic medical technology and pharmaceutical company focused on developing novel therapies for the treatment of glaucoma, corneal disorders, and retinal disease. The Company developed Micro-Invasive Glaucoma Surgery (MIGS) to serve as an alternative to the traditional glaucoma treatment paradigm and launched its first MIGS device commercially in 2012. The Company also offers commercially a proprietary bio-activated pharmaceutical therapy for the treatment of a corneal disorder, keratoconus, that was approved by the U.S. Food and Drug Administration in 2016 and is 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, diabetic macular edema and retinal vein occlusion.

The accompanying condensed consolidated financial statements include the accounts of Glaukos and its wholly-owned subsidiaries. All significant intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. As permitted under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2020, which are contained in the Company’s Annual Report on Form 10-K filed with the United States (U.S.) Securities and Exchange Commission (SEC) on March 1, 2021. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period.

Recent Developments

Acquisition of Avedro, Inc.

On November 21, 2019, the Company acquired Avedro, Inc. (Avedro), a hybrid ophthalmic pharmaceutical and medical technology company focused on developing therapies designed to treat corneal diseases and disorders and correct refractive conditions, in a stock-for-stock transaction (Avedro Merger). Avedro developed novel bio-activated drug formulations used in combination with proprietary systems for the treatment of progressive keratoconus and corneal ectasia following refractive surgery. The therapy is the first and only minimally invasive anterior segment product offering approved by the FDA shown to halt the progression of keratoconus.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2.  Summary of Significant Accounting Policies

There have been no significant changes in the Company’s significant accounting policies during the three months ended March 31, 2021, as compared with those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021, including in connection with the Company’s adoption of the accounting pronouncements noted below in the sub-heading “Recently Adopted Accounting Pronouncements” with the

exception of the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). See Recently Adopted Accounting Pronouncements and Note 9. Convertible Senior Notes for more detail.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. The most significant estimates in the accompanying condensed consolidated financial statements relate to revenue recognition, the fair value of the liability component of the Convertible Notes, the incremental borrowing rate related to the Company’s leased assets, stock-based compensation expense and the valuation of certain intangible assets related to the Company’s acquisition of Avedro. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, this process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2021 reflect the Company’s estimates of the impact of the ongoing COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are uncertain, including the duration and severity of the COVID-19 outbreak, the severity and transmission rates of new variants of COVID-19, and the actions taken to contain it or treat COVID-19, including the availability, distribution, rate of public acceptance and efficacy of vaccines for COVID-19, as well as the economic impact on local, regional, national and international customers and markets. As a result, there may be changes to the Company’s estimates regarding the impact of COVID-19 in future periods.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the three months ended March 31, 2021 (in thousands):

	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	96,625	$	96,596
Restricted cash		9,416		9,566
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$	106,041	$	106,162

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB )issued ASU 2020-06, which simplifies accounting for convertible instruments. The embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASU 2020-06, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to compute diluted earnings per share to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, the Company early adopted ASU

2020-06 using the modified retrospective adoption approach. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption. The comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods.

The adoption of ASU 2020-06 resulted in an increase to accumulated deficit of $5.5 million, a decrease to additional paid-in capital of $81.6 million, a decrease in the deferred tax liability of $2.2 million and an increase to convertible notes, net of $89.2 million. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Lastly, the Company derecognized deferred income taxes associated with the Convertible Notes and adjusted the deferred tax liability associated with the embedded conversion feature and corresponding change in the valuation allowance.

Recently Issued Accounting Pronouncements Not Yet Adopted

We reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

XML

Balance Sheet Details

3 Months Ended

Mar. 31, 2021

Balance Sheet Details

Balance Sheet Details

Note 3.  Balance Sheet Details

Short-term Investments

Short-term investments consisted of the following (in thousands):

	At March 31, 2021
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		198,062		121		(32)		198,151
Bank certificates of deposit	less than 2		20,799		5		(6)		20,798
Corporate notes	less than 3		61,391		198		(74)		61,515
Asset-backed securities	less than 2		12,945		150		(1)		13,094
Municipal bonds	less than 3		17,218		8		(29)		17,197
Total		$	310,415	$	482	$	(142)	$	310,755
	At December 31, 2020
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		206,704		223		(3)		206,924
Bank certificates of deposit	less than 1		20,700		8		—		20,708
Commercial paper	less than 1		1,500		—		—		1,500
Corporate notes	less than 3		54,866		308		(1)		55,173
Asset-backed securities	less than 2		13,290		205		—		13,495
Municipal bonds	less than 3		9,954		21		(3)		9,972
Total		$	307,014	$	765	$	(7)	$	307,772

Accounts Receivable, Net

Accounts receivable consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accounts receivable	$	38,161	$	37,729
Allowance for credit losses		(1,467)		(1,670)
	$	36,694	$	36,059

The Company’s allowance for credit losses represents management’s estimate of current expected credit losses and there were immaterial bad-debt write offs charged during the three months ended March 31, 2021.

As of March 31, 2021, the Company evaluated the current and expected future economic and market conditions surrounding the COVID-19 pandemic as it relates to collectability of its accounts receivable and determined the estimate

of expected credit losses was not materially impacted. The Company will continue to re-evaluate the estimate of credit losses related to COVID-19 in conjunction with its assessment of expected credit losses in subsequent quarters.

Additionally, no customers accounted for more than 10% of net accounts receivable as of any such date.

Inventory, Net

Inventory, net consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Finished goods	$	6,662	$	5,346
Work in process		3,761		3,584
Raw material		4,848		6,879
	$	15,271	$	15,809

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accrued bonuses	$	4,669	$	10,815
Accrued vacation benefits		4,175		3,728
Accrued payroll taxes		7,568		3,198
Other accrued liabilities		31,532		27,590
	$	47,944	$	45,331

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Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Fair Value Measurements

Fair Value Measurements

Note 4.  Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.

The valuation of assets and liabilities is subject to fair value measurements using a three-tiered approach and fair value measurements are classified and disclosed by the Company in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

			At March 31, 2021
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	March 31,		identical assets		inputs		inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	3,089	$	3,089	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		198,150		-		198,150		-
Bank certificates of deposit (ii)(iii)		24,799		-		24,799		-
Corporate notes (ii)		61,515		-		61,515		-
Asset-backed securities (ii)		13,094		-		13,094		-
Municipal bonds (ii)		17,197		-		17,197		-
Investments held for deferred compensation plans		5,754				5,754
Total Assets	$	323,598	$	3,089	$	320,509	$	-
Liabilities
Deferred compensation plans	$	5,689	$	-	$	5,689	$	-
Total Liabilities	$	5,689		-	$	5,689	$	-

			At December 31, 2020
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	December 31,		identical assets		inputs		inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	5,169	$	5,169	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		206,924		-		206,924		-
Bank certificates of deposit (ii) (iii)		25,708		-		25,708		-
Commercial paper (ii)		1,500		-		1,500		-
Corporate notes (ii)		55,173		-		55,173		-
Asset-backed securities (ii)		13,495		-		13,495		-
Municipal bonds (ii)		9,972		-		9,972		-
Investments held for deferred compensation plans		5,331				5,331		-
Total Assets	$	323,273	$	5,169	$	318,104	$	-
Liabilities
Deferred compensation plans	$	5,232		-	$	5,232		-
Total Liabilities	$	5,232	$	-	$	5,232	$	-

(i) Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets.

(ii) Included in short-term investments on the condensed consolidated balance sheets.

(iii) As of March 31, 2021 and December 31, 2020, a bank certificate of deposit totaling $4,000 and $5,000 (in thousands), respectively, is included in cash and cash equivalents on the condensed consolidated balance sheets, as the investment has a maturity of three months or less from the date of purchase on the condensed consolidated balance sheets.

Money market funds and currency are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

U.S. government agency bonds, U.S. government bonds, bank certificates of deposit, commercial paper, municipal bonds, corporate notes and asset-backed securities are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. Pursuant to the Company’s deferred compensation plan (the Deferred Compensation Plan), the Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust and Deferred Compensation Plan liability consist of company-owned life insurance policies (COLIs) and the pricing on these investments can be independently evaluated. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from third party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

There were no transfers between levels within the fair value hierarchy during the periods presented.

The Company did not have any assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of March 31, 2021 and December 31, 2020.

Convertible Senior Notes

As of March 31, 2021, the fair value of the Convertible Notes was $488.4 million. The fair value was determined on the basis of the market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See Note 9, Convertible Senior Notes for additional information.

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Leases

3 Months Ended

Mar. 31, 2021

Leases

Leases

Note 5.   Leases

The Company has operating and finance leases for facilities and certain equipment.  Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of ASC 842, the Company combines lease and non-lease components.

The Company’s leases have remaining non-cancelable lease terms of approximately one year to thirteen years, some of which include options to extend the leases for up to ten years, and some of which include options to terminate the lease within one year. The exercise of lease renewal options is at the Company’s sole discretion. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for common area maintenance, landlord incentives and/or inflation.

On November 14, 2018, the Company entered into an office building lease pursuant to which the Company will lease 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 April 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. The Company intends to relocate its corporate administrative headquarters, along with certain laboratory, research and development and warehouse space, to the Aliso Facility. The lease landlord agreed to provide the Company with a tenant improvement allowance in the amount of the cost of any leasehold improvements, not to exceed approximately $12.7 million, upon the Company providing the necessary documentation evidencing the costs of the allowable leasehold improvements. Nearly all of the aforementioned tenant improvement allowances were utilized by the end of the quarter ended March 31, 2021 and the Company expects to receive reimbursement during the quarter ending June 30, 2021.

The Company leases two adjacent facilities located in San Clemente, California. The total leased square footage of these facilities equals approximately 98,000. On July 2, 2020, the Company extended the term of these facilities by five years, both of which now expire on May 31, 2030. Each agreement contains an option to extend the lease for one additional five year period at market rates. In conjunction with these extensions, the lease landlords agreed to provide the Company with tenant improvement allowances in the amount of the cost of any leasehold improvements, not to exceed approximately $0.5 million, upon the Company providing the necessary documentation evidencing the costs of the allowable leasehold improvements.

The Company currently intends to maintain its manufacturing facilities at its San Clemente location for the foreseeable future.

The Company leases approximately 27,000 square feet of office and laboratory space in Waltham, Massachusetts, pursuant to a lease agreement that expires in 2023. The Company also currently occupies approximately 19,000 square feet of leased manufacturing space in Burlington, Massachusetts pursuant to a lease agreement that expires in 2031.

The Company’s remaining U.S.-based and foreign subsidiaries’ leased office space totals less than 14,000 square feet.

The following table presents the maturity of the Company’s operating and finance lease liabilities as of March 31, 2021:

Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases (a)		Leases (b)
Remainder of 2021	$	2,001	$	—
2022		2,953		—
2023		2,555		1,465
2024		2,408		5,184
2025		2,444		5,340
2026		2,498		5,500
Thereafter		20,790		107,522
Total lease payments	$	35,649	$	125,011
Less: imputed interest		13,926		63,943
Total lease liabilities	$	21,723	$	61,068

(a) Operating lease payments include $12.2 million related to options to extend lease terms that are reasonably certain of being exercised.

(b) Finance lease payments include $75.8 million related to options to extend lease terms that are reasonably certain of being exercised.

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Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2021

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Note 6.   Intangible Assets and Goodwill

Avedro intangible assets

As part of the Avedro Merger on November 21, 2019, the Company acquired identifiable intangible assets for (1) developed technology related to Photrexa, a bio-activated pharmaceutical therapy for the corneal cross-linking treatment of keratoconus, which is being amortized to cost of sales over a weighted-average estimated useful life of approximately 11 years, and (2) customer relationships, which will be amortized to selling, general and administrative expense over an estimated useful life of five years. The Company also acquired IPR&D related to other applications of Avedro’s corneal remodeling platform, which will not be amortized until technological feasibility is met, but will be assessed for impairment annually, or more frequently if indicators of impairment become present.

The fair value of developed technology and IPR&D assets were determined using an excess earnings methodology. Significant assumptions used in the valuation include: (i) the period in which material net cash inflows are expected to commence, which was estimated to be 2021 for developed technology and 2023 for IPR&D assets, and (ii) the risk-adjusted discount rate of 11.5% for developed technology and 13% for IPR&D assets.

For the three months ended March 31, 2021 and March 31, 2020, amortization expense related to the above finite-lived intangible assets was approximately $5.5 million and $0.7 million, recorded in cost of sales and selling, general and administrative expenses, respectively, in the condensed consolidated statement of operations.

The Company evaluated its indefinite-lived intangible assets for impairment, including any considerations specific to the COVID-19 pandemic utilizing the methodology pursuant to the adoption of ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) and concluded these intangible assets were not impaired as of March 31, 2021.

Goodwill

The assessment of goodwill by reporting unit is performed annually, in the fourth quarter, or more frequently if events or circumstances indicate the carrying value may no longer be recoverable and that an impairment loss may have

occurred. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on the Company’s reporting unit. Based on interim assessments, the Company did not identify any “triggering” events, as described in ASC 350-20, which would indicate an impairment of goodwill is more likely than not as of March 31, 2021.

The following table presents the composition of our intangible assets and goodwill (in thousands):

	Estimated	As of March 31, 2021						As of December 31, 2020
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200		(29,916)		222,284		252,200		(24,393)		227,807
Customer relationships	5.0		14,100		(3,819)		10,281		14,100		(3,114)		10,986
Intangible assets subject to amortization			266,300		(33,735)		232,565		266,300		(27,507)		238,793
In-process research and development	Indefinite	$	118,900		—		118,900		118,900		—		118,900
Goodwill	Indefinite	$	66,134		—		66,134		66,134		—		66,134
Total		$	451,334	$	(33,735)	$	417,599	$	451,334	$	(27,507)	$	423,827

As of March 31, 2021, expected amortization expense for unamortized finite-lived intangible assets for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Remainder of 2021	$	18,684
2022		24,912
2023		24,912
2024		24,618
2025		22,092
Thereafter		117,347
Total amortization	$	232,565

Actual amortization expense to be reported in future periods could differ from these estimates as a result of asset impairments, acquisitions, or other facts and circumstances.

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Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2021

Revenue from Contracts with Customers

Revenue from Contracts with Customers

Note 7. Revenue from Contracts with Customers

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

Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services, and all of the Company’s net sales are considered revenue from contracts with customers.

Disaggregation of Revenue

The Company’s revenues disaggregated by product category and geography, for the three months ended March 31, 2021 and March 31, 2020 was as follows (in thousands):

	United States				International				Total
	2021		2020		2021		2020		2021		2020
Glaucoma	$	39,889	$	32,577	$	13,810	$	11,556	$	53,699	$	44,133
Corneal Health		12,055		8,807		2,214		2,396		14,269		11,203
Total	$	51,944	$	41,384	$	16,024	$	13,952	$	67,968	$	55,336

Contract Balances

Contract Assets

Amounts are recorded as accounts receivable when the Company’s right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 days for glaucoma and corneal health products, though extended payment terms on corneal health products may be offered. However, the Company does not consider any significant financing components in customer contracts given the expected time between transfer of the promised products and the payment of the associated consideration is less than one year. As of March 31, 2021 and December 31, 2020, all amounts included in accounts receivable, net on the condensed consolidated balance sheets are related to contracts with customers.

Sales commissions earned on U.S. sales of KXL systems are capitalized as the commissions represent costs to obtain a contract and the amortization period is deemed greater than one year. These costs are deferred in other assets on the Company’s condensed consolidated balance sheet, net of the short term portion included in prepaid assets and other current assets, and are amortized as a sales and marketing expense on a straight-line basis over the expected period of benefit. Capitalized sales commissions and the related amortization expense included in the condensed consolidated financial statements were immaterial as of March 31, 2021 and December 31, 2020.

Aside from the aforementioned contract assets, the Company does not have any contract assets given that the Company does not have any unbilled receivables and sales commissions on other products are expensed within selling, general and administrative expenses within the condensed consolidated statement of operations when incurred as any incremental cost of obtaining contracts with customers would have an amortization period of less than one year.

Contract Liabilities

Contract liabilities reflect consideration received from customers’ purchases allocated to the Company’s future performance obligations.

The Company has a performance obligation to issue a rebate to customers who may be eligible for a rebate at the conclusion of their contract term. This performance obligation is transferred over time and the Company’s method of measuring progress is the output method, whereby the progress is measured by the estimated rebate earned to date over the total rebate estimated to be earned over the contract period. The Company’s rebate allowance is included in accrued liabilities in the condensed consolidated balance sheets and estimated rebates accrued were not material during the periods presented.

Additionally, in the U.S. the Company has a performance obligation related to its customers’ right to a future discount on single dose pharmaceutical purchases, and, to a lesser extent, extended warranty service contracts. The amount allocated to the customers’ right to a future discount is expected to be recognized when the customer elects to

utilize the discount, which is generally within one year. As of March 31, 2021 and December 31, 2020, this amount was immaterial as was the amount allocated to extended warranty service contracts.

During the three months ended March 31, 2021 and March 31, 2020, the Company did not recognize any revenue related to material changes in transaction prices regarding its contracts with customers and did not recognize any material changes in revenue related to amounts included in contract liabilities at the beginning of the period.

The Company’s net sales within a fiscal year may be 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, the Company has not experienced the same seasonality pattern in 2020 and 2021 due to the COVID-19 pandemic.

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Net Loss per Share

3 Months Ended

Mar. 31, 2021

Net Loss per Share

Net Loss per Share

Note 8.  Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares that were outstanding for the period, without consideration for common stock equivalents. For periods when the Company realizes a net loss, no common stock equivalents are included in the calculation of weighted average number of dilutive common stock equivalents as the effect of applying the treasury stock method is considered anti-dilutive. For periods when the Company realizes net income, diluted net income per share is calculated by dividing the net income by the weighted average number of common shares plus the sum of the weighted average number of dilutive common stock equivalents outstanding for the period determined using the treasury stock method. Common stock equivalents are comprised of stock options outstanding and unvested restricted stock units (RSUs) under the Company’s incentive compensation plans, and shares issuable under the Company’s Employee Stock Purchase Plan (ESPP).

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares, in thousands):

	Three Months Ended
	March 31,
	2021	2020
Convertible senior notes	5,125	-
Stock options outstanding	3,640	4,328
Unvested restricted stock units	654	470
Employee stock purchase plan	17	6
	9,436	4,804

The Convertible Notes would have had an impact on the Company’s diluted share count as of March 31, 2021 pursuant to the Company’s adoption of ASU 2020-06. See “Recently Adopted Accounting Pronouncements” and Note 9. Convertible Senior Notes for additional detail.

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Convertible Senior Notes

3 Months Ended

Mar. 31, 2021

Convertible Senior Notes

Convertible Senior Notes

Note 9.  Convertible Senior Notes

In June 2020, the Company issued $287.5 million in aggregate principal amount of Convertible Notes pursuant to an indenture dated June 11, 2020, between the Company and Wells Fargo Bank, National Association, as trustee (the Indenture), in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.75% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020. The Convertible Notes will mature on June 15, 2027, unless earlier converted, redeemed or repurchased in accordance with their terms. In connection with issuing the Convertible Notes, the Company received $242.2 million in proceeds, after deducting fees and offering expenses and paying the cost of the capped call transactions described below.

The Convertible Notes may be converted at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2027, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable

trading day; (2) during the five business day period immediately after any ten consecutive trading day period (the Measurement Period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of (i) the last reported sale price of the Company’s common stock and (ii) the conversion rate in effect on each such trading day; (3) with respect to any Convertible Notes the Company calls for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date, even if the Convertible Notes are not otherwise convertible at such time; or (4) upon the occurrence of specified corporate events. On or after March 15, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The Company’s current intent is to settle the principal amount of the Convertible Notes in cash upon conversion, with any remaining conversion value being delivered in shares of our common stock.

During the quarter ended March 31, 2021, the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter was greater than or equal to 130% of the conversion price on each applicable trading day, and therefore the Convertible Notes may be converted at the option of the holders during the quarter ending June 30, 2021. Consequently, the Convertible Notes were classified within current liabilities on the condensed consolidated balance sheet as of March 31, 2021. If the foregoing conditions are met during the quarter ending June 30, 2021 or any subsequent calendar quarter prior to March 15, 2027, holders of the Convertible Notes will continue to have the right to convert the Convertible Notes for the next succeeding applicable calendar quarter.

The conversion rate for the Convertible Notes is initially 17.8269 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $56.10 per share of the Company’s common stock). The conversion rate is subject to adjustment in some events in accordance with the terms of the Indenture but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event or notice of redemption, as the case may be.

The Company may not redeem the Convertible Notes prior to June 20, 2024. The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after June 20, 2024 but before the 45th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption and (ii) the trading day immediately preceding the date the Company sends such notice, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes.

If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Convertible Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Prior to the adoption of ASU 2020-06, the Company allocated the gross proceeds of the Convertible Notes between the liability and equity components of the Convertible Notes. The initial carrying amount of the liability component was $189.8 million, which was calculated by using a discount rate of 9.5%, which was estimated to be the Company’s borrowing rate on the issuance date for a similar debt instrument without the conversion feature. The carrying amount of the equity component was $97.7 million, which represents the conversion option, and was determined by deducting the fair value of the liability component from the par value of the Convertible Notes.

After the adoption of ASU 2020-06, the Convertible Notes are no longer bifurcated into separate liability and equity components in the Company’s March 31, 2021 condensed consolidated balance sheet. Rather, the $287.5 million principal amount of the Convertible Notes, less $8.5 million in unamortized debt issuance costs, was classified as a current liability in the condensed consolidated balance sheet as of March 31, 2021.

Total transaction costs for the issuance of the Convertible Notes were $9.6 million, consisting of the initial purchasers’ discount, commissions, and other issuance costs. Prior to the adoption of ASU 2020-06, the Company allocated the total transaction costs proportionally to the liability and equity components. The transaction costs attributed to the liability component were $6.3 million, which were recorded as debt issuance costs (presented as contra debt in the Company’s condensed consolidated balance sheets) and are amortized to interest expense in the condensed consolidated statements of operations over the term of the Convertible Notes. The transaction costs attributed to the equity component were $3.3 million, which were included in additional paid-in capital.

After the adoption of ASU 2020-06, the Company recorded an adjustment to the liability and equity components under the same premise (i.e., as if debt issuance costs had always been treated as a contra-liability only). As of March 31, 2021, the unamortized debt issuance costs on the Convertible Notes was $8.5 million and is amortized using the effective interest rate method over the term of the Convertible Notes, for the next 6.3 years.

Interest expense relating to the Convertible Notes in the condensed consolidated statements of operations for the three months ended March 31, 2021 are summarized as follows (in thousands):

	Three months ended
	March 31,
	2021
Contractual interest expense	$	1,977
Amortization of debt issuance costs		343
Total interest expense	$	2,320

The effective interest rate for the three months ended March 31, 2021 was 3.23%.

As of March 31, 2021, the Convertible senior notes on the condensed consolidated balance sheets represented the carrying amount of the Convertible Notes, net of unamortized debt issuance costs, which are summarized as follows (in thousands):

	As of
	March 31,
	2021
Convertible Notes	$	287,500
Less: Unamortized debt issuance costs		(8,504)
Carrying amount of Convertible Notes	$	278,996

Capped Call Transactions

In connection with the offering of the Convertible Notes, in June 2020 the Company entered into privately negotiated capped call transactions with certain financial institutions (the Option Counterparties) and used an aggregate $35.7 million of the net proceeds from the Convertible Notes to pay the cost of the capped call transactions. The capped call transactions are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of the Convertible Notes or at the Company’s election (subject to certain conditions) offset any cash payments the Company is 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 based on the cap price. The cap price of the capped call transactions is initially $86.30 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock on June 8, 2020, and is subject to certain adjustments under the terms of the capped call transactions. The capped calls have an initial strike price of approximately $56.10 per share, subject to certain adjustments, which corresponds to the conversion option strike price in the Convertible Notes. The capped call transactions cover, subject to customary adjustments, the number of shares of common stock initially underlying the Convertible Notes (or approximately 5.1 million shares of the Company’s common stock).

The capped call transactions are separate transactions that the Company entered into with the Option Counterparties, are not part of the terms of the Convertible Notes and will not change the holders’ rights under the Convertible Notes. As the capped call transactions meet certain accounting criteria, the cost of the capped call transactions of $35.7 million was recorded as a reduction in additional paid-in capital in the condensed consolidated balance sheets and will not be remeasured to fair value as long as the accounting criteria continue to be met. As of March 31, 2021, the Company had not purchased any shares under the capped call transactions.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Stock-Based Compensation.

Stock-Based Compensation

Note 10.  Stock-Based Compensation

The Company has 5,000,000 of authorized preferred stock issuable, and there is no preferred stock outstanding as of March 31, 2021 and December 31, 2020. Each share of common stock is entitled to one vote.

The Company has four stock-based compensation plans (collectively, the Stock Plans)—the 2001 Stock Option Plan (the 2001 Stock Plan), the 2011 Stock Plan (the 2011 Stock Plan), the 2015 Omnibus Incentive Compensation Plan (the 2015 Stock Plan) and the ESPP. The 2015 Stock Plan permits grants of RSU awards.

The purpose of these Stock Plans is to provide incentives to employees, directors and nonemployee consultants. The Company no longer grants any awards under the 2001 Stock Plan and the 2011 Stock Plan. The maximum term of any stock options granted under the Stock Plans is 10 years. For employees and nonemployees, stock options generally vest 25% on the first anniversary of the original vesting date, with the balance vesting monthly or annually over the remaining three years. Stock options are granted at exercise prices at least equal to the fair value of the underlying stock at the date of the grant. For employees and nonemployees, generally, RSU awards vest 25% on each of the first, second, third and fourth anniversaries of the grant date and in certain cases, vest one year after grant date.

The Compensation Committee has approved the grant of performance-based equity awards (PBEAs) to the Company’s named executive officers and certain other employees pursuant to the 2015 Stock Plan. These PBEAs will only vest upon the Compensation Committee’s determination that pre-defined Company operational goals were satisfied.

The ESPP permits eligible employees to purchase shares of the Company’s common stock, using contributions via payroll deductions of up to 15% of their earnings, at a price per share equal to 85% of the lower of the stock’s fair market value on the offering date or purchase date. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

On November 21, 2019, in connection with the Avedro Merger, the Company granted the following Replacement Awards to employees of Avedro: (i) approximately 0.2 million cash-settled stock options to certain executives, which became fully vested on December 31, 2019, (ii) approximately 0.1 million stock options and approximately 5,500 RSUs to members of Avedro’s board of directors, which were granted with no post-combination vesting requirements, and (iii) approximately 0.7 million stock options and approximately 0.1 million RSUs, which are subject to time-based vesting requirements. Approximately $30.8 million of the fair value of the Replacement Awards was attributable to pre-combination service and was included in the purchase price of Avedro. The remaining value of the Replacement Awards of $26.0 million will be recognized as post-combination expense over the remaining requisite service period for the time-vesting awards. For the three months ended March 31, 2021 and March 31, 2020, $0.5 million and $9.3 million was expensed related to the Replacement Awards, respectively.

All share-based compensation arrangements

The following table summarizes the allocation of stock-based compensation related to stock options and RSUs and includes Replacement Awards, as well as cash-settled stock options in the accompanying condensed consolidated statements of operations (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Cost of sales	$	420	$	461
Selling, general and administrative		6,494		10,257
Research and development		1,834		3,287
Total	$	8,748	$	14,005

(i) Of the total stock-based compensation of $14.0 million for the three months ended March 31, 2020, a $(3.2) million fair value adjustment was recorded during the three months ended March 31, 2020 related to cash-settled options.

At March 31, 2021, the total unamortized stock-based compensation expense was approximately $50.9 million of which $13.6 million was attributable to stock options and is to be recognized over the stock options’ remaining vesting terms of approximately 4.0 years (2.1 years on a weighted average basis). The remaining $37.3 million was attributable to RSUs and is to be recognized over the RSUs’ vesting terms of approximately 4.0 years (2.9 years on a weighted-average basis).

The total stock-based compensation cost capitalized in inventory was not material for the three month periods ended March 31, 2021 and March 31, 2020.

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Taxes

Income Taxes

Note 11.  Income Taxes

The provision for income taxes is determined using an effective tax rate. For the three months ended March 31, 2021, the Company’s estimated annual effective tax rate of (0.88)%, was lower than the U.S. federal statutory rate primarily due to the generation of U.S. NOL carryforwards, which are partially offset by a valuation allowance, as well as state and foreign income taxes. The effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions used to estimate the effective tax rate, including factors such as expected utilization of NOL carryforwards, changes in or the interpretation of tax laws in jurisdictions where the Company conducts business, the Company’s expansion into new states or foreign countries, and the amount of valuation allowances against deferred tax assets. For the three months ended March 31, 2021, the Company recorded a provision for income taxes of $0.3 million, which was primarily comprised of state and foreign income taxes. For the three months ended March 31, 2020, the Company recorded a benefit for income taxes of ($0.5) million, which was primarily comprised of U.S. federal, state, and foreign income taxes.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of its assets and liabilities, along with NOL and tax credit carryforwards. The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made. For the three months ended March 31, 2021, the Company has recorded a valuation allowance against the portion of its deferred tax asset which are not more likely than not to be realized.

Additionally, the Company follows an accounting standard addressing the accounting for uncertainty in income taxes that prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return. As of March 31, 2021 and March 31, 2020, the Company had gross unrecognized tax benefits of $23.5 million and $17.8 million, respectively.

On March 11, 2021, the United States enacted the American Rescue Plan Act of 2021 which provided funding for COVID-19 related relief and recovery. The Company is evaluating the impact of the American Rescue Plan Act of 2021 on its condensed consolidated financial statements and related disclosures.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies

Commitments and Contingencies

Note 12.  Commitments and Contingencies

Patent Litigation

On April 14, 2018, the Company filed a patent infringement lawsuit against Ivantis, Inc. (Ivantis) in the U.S. District Court for the Central District of California, Southern Division (the Court), alleging that Ivantis’ Hydrus^© Microstent device infringes the Company’s U.S. Patent Nos. 6,626,858 and 9,827,143. Discovery closed in early 2020, after which, the parties filed and the Court ruled on a series of motions seeking to limit the issues for trial. For example, Ivantis agreed not to contest infringement of several claims of the ‘143 patent under the Court’s claim constructions and the Court granted the Company’s motion for summary judgment regarding the validity of one such claim (claim 30). Although positive for the Company, Ivantis can appeal the Court’s decisions following trial, which has been delayed due to COVID-19 and is scheduled to begin on or around September 28, 2021. The Company is currently unable to predict the ultimate outcome of this matter or reasonably estimate a possible loss or range of loss, and thus, no amounts have been accrued in the condensed consolidated financial statements.

Secured Letters of Credit

The Company had a bank issue a letter of credit in the amount of $8.8 million that is related to its Aliso Facility. The letter of credit is secured with an amount of cash held in a restricted account of approximately $8.8 million as of March 31, 2021 and December 31, 2020. Beginning as of the first day of the thirty-seventh month of the lease term, and on each twelve month anniversary thereafter, the letter of credit will be reduced by 20% until the letter of credit amount has been reduced to $2.0 million.

The Company has one other irrevocable standby letters of credit secured with approximately $0.6 million of cash in a restricted account related to its office lease agreements.

Regents of the University of California

On December 30, 2014, the Company executed an agreement (the UC Agreement) with the Regents of the University of California (the University) to correct inventorship in connection with a group of the Company’s U.S. patents (the Patent Rights) and to obtain from the University a covenant that it did not and would not claim any right or title to the Patent Rights and will not challenge or assist any others in challenging the Patent Rights. In connection with the UC Agreement, Glaukos agreed to pay to the University a low single-digit percentage of worldwide net sales of certain current and future products, including the Company’s iStent products, with a required minimum annual payment of $0.5 million. This ongoing product payment obligation will change as patent coverage on certain products begins to lapse, and will terminate entirely on the date the last of the Patent Rights expires, which is currently expected to be in 2022. For the three months ended March 31, 2021 and March 31, 2020, the Company recorded approximately $0.9 million and $1.1 million, respectively, in cost of sales in connection with the product payment.

GMP Visions Solutions, Inc.

In November 2013, the Company entered into an amended agreement (the Buyout Agreement) with GMP Vision Solutions, Inc. (GMP) pursuant to which the Company agreed to buyout any remaining royalty obligations related to the transfer and assignment of certain intellectual property from GMP to the Company. Pursuant to the Buyout Agreement, in the event of a Company sale as defined therein, the Company would be required to pay GMP a percentage of the sale consideration above a certain threshold, with such payment not to exceed $2.0 million.

Executive Deferred Compensation Plan

Pursuant to the Company’s Deferred Compensation Plan, eligible senior level employees are permitted to make elective deferrals of compensation to which he or she will become entitled in the future. The Company has also established a rabbi trust that serves as an investment to shadow the Deferred Compensation Plan liability. The investments of the rabbi trust consist of COLIs. The fair value of the Deferred Compensation Plan liability, included in other liabilities on the condensed consolidated balance sheets, was approximately $5.7 million and $5.2 million as of March 31, 2021 and December 31, 2020, respectively, and the cash surrender value of the COLIs, included in deposits and other assets on the condensed consolidated balance sheets, which reflects the underlying assets at fair value, was approximately $5.8 million and $5.3 million as of March 31, 2021 and December 31, 2020, respectively.

Global Enterprise Systems Implementation

In the first quarter of 2019, the Company began implementing new enterprise systems and other technology optimizations and facilities infrastructure globally. The first phase of the Company’s new enterprise system went live in May 2020; therefore, software services along with any associated implementation costs for this first phase incurred after May 1, 2020 are being capitalized in accordance with the Company’s policy. As of March 31, 2021, the Company has firm purchase commitments related to software costs and systems implementations for future phases of approximately $1.3 million, which the Company expects to primarily incur during the remainder of 2021.

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Business Segment Information

3 Months Ended

Mar. 31, 2021

Business Segment Information

Business Segment Information

Note 13.  Business Segment Information

The Company has one business activity: the development and commercialization of therapies designed to treat glaucoma, corneal disorders and retinal diseases, and operates as one operating segment. The Company determined its operating segment on the same basis that it uses to evaluate its performance internally. The Company’s revenues

disaggregated by revenue and product category are included in Note 7, Revenue from Contracts with Customers. The Company’s chief operating decision-maker, its Chief Executive Officer, reviews its consolidated operating results for the purpose of allocating resources and evaluating financial performance.

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Subsequent Events

3 Months Ended

Mar. 31, 2021

Subsequent Events

Subsequent Events

Note 14.  Subsequent Events

On April 22, 2021, the Company announced that it had entered into an amendment of its exclusive licensing agreement with Intratus, Inc. The amendment expanded the existing agreement, a global licensing arrangement to research, develop, manufacture and commercialize Intratus’ patented, non-invasive drug delivery platform for use in the treatment of dry eye disease, glaucoma and other corneal disorders, to also include the treatment of presbyopia. An upfront payment of $5.0 million was made in connection with the execution of the amendment. The $5.0 million payment will be expensed to in-process research and development (IPR&D) as management determined there were no alternative future uses for the technology acquired in the quarter ending June 30, 2021.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Summary of Significant Accounting Policies

Basis of presentation

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.

The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements. As permitted under those rules, certain footnotes and other financial information that are normally required by GAAP have been condensed or omitted. In the opinion of management, the unaudited interim financial statements reflect all adjustments necessary for the fair presentation of the Company’s financial information contained herein. All such adjustments are of a normal and recurring nature. The condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements at that date, but excludes disclosures required by GAAP for complete financial statements. These interim financial statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2020, which are contained in the Company’s Annual Report on Form 10-K filed with the United States (U.S.) Securities and Exchange Commission (SEC) on March 1, 2021. The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period.

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates and assumptions. Management considers many factors in selecting appropriate financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of reasonable estimates of the ultimate future outcomes, and management must select an amount that falls within that range of reasonable estimates. The most significant estimates in the accompanying condensed consolidated financial statements relate to revenue recognition, the fair value of the liability component of the Convertible Notes, the incremental borrowing rate related to the Company’s leased assets, stock-based compensation expense and the valuation of certain intangible assets related to the Company’s acquisition of Avedro. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, this process may result in actual results differing materially from those estimated amounts used in the preparation of the condensed consolidated financial statements.

The Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2021 reflect the Company’s estimates of the impact of the ongoing COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are uncertain, including the duration and severity of the COVID-19 outbreak, the severity and transmission rates of new variants of COVID-19, and the actions taken to contain it or treat COVID-19, including the availability, distribution, rate of public acceptance and efficacy of vaccines for COVID-19, as well as the economic impact on local, regional, national and international customers and markets. As a result, there may be changes to the Company’s estimates regarding the impact of COVID-19 in future periods.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the three months ended March 31, 2021 (in thousands):

	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	96,625	$	96,596
Restricted cash		9,416		9,566
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$	106,041	$	106,162

Recently Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB )issued ASU 2020-06, which simplifies accounting for convertible instruments. The embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under ASU 2020-06, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to compute diluted earnings per share to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoption of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, the Company early adopted ASU

2020-06 using the modified retrospective adoption approach. The cumulative effect of the change was recognized as an adjustment to the opening balance of retained earnings at the date of adoption. The comparative information has not been restated and continues to be presented according to accounting standards in effect for those periods.

The adoption of ASU 2020-06 resulted in an increase to accumulated deficit of $5.5 million, a decrease to additional paid-in capital of $81.6 million, a decrease in the deferred tax liability of $2.2 million and an increase to convertible notes, net of $89.2 million. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost. Lastly, the Company derecognized deferred income taxes associated with the Convertible Notes and adjusted the deferred tax liability associated with the embedded conversion feature and corresponding change in the valuation allowance.

Recently Issued Accounting Pronouncements Not Yet Adopted

We reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2021

Summary of Significant Accounting Policies

Schedule of cash and cash equivalents and restricted cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that equate to the amount reported in the condensed consolidated statement of cash flows as of the beginning and end of the three months ended March 31, 2021 (in thousands):

	March 31,		December 31,
	2021		2020
Cash and cash equivalents	$	96,625	$	96,596
Restricted cash		9,416		9,566
Cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$	106,041	$	106,162

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Balance Sheet Details (Tables)

3 Months Ended

Mar. 31, 2021

Balance Sheet Details

Schedule of short-term investments

Short-term investments consisted of the following (in thousands):

	At March 31, 2021
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		198,062		121		(32)		198,151
Bank certificates of deposit	less than 2		20,799		5		(6)		20,798
Corporate notes	less than 3		61,391		198		(74)		61,515
Asset-backed securities	less than 2		12,945		150		(1)		13,094
Municipal bonds	less than 3		17,218		8		(29)		17,197
Total		$	310,415	$	482	$	(142)	$	310,755
	At December 31, 2020
	Maturity	Amortized cost		Unrealized		Unrealized		Estimated
	(in years)	or cost		gains		losses		fair value
U.S. government agency bonds	less than 3		206,704		223		(3)		206,924
Bank certificates of deposit	less than 1		20,700		8		—		20,708
Commercial paper	less than 1		1,500		—		—		1,500
Corporate notes	less than 3		54,866		308		(1)		55,173
Asset-backed securities	less than 2		13,290		205		—		13,495
Municipal bonds	less than 3		9,954		21		(3)		9,972
Total		$	307,014	$	765	$	(7)	$	307,772

Schedule of accounts receivable, net

Accounts receivable consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accounts receivable	$	38,161	$	37,729
Allowance for credit losses		(1,467)		(1,670)
	$	36,694	$	36,059

Schedule of inventory

Inventory, net consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Finished goods	$	6,662	$	5,346
Work in process		3,761		3,584
Raw material		4,848		6,879
	$	15,271	$	15,809

Schedule of accrued liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31,		December 31,
	2021		2020
Accrued bonuses	$	4,669	$	10,815
Accrued vacation benefits		4,175		3,728
Accrued payroll taxes		7,568		3,198
Other accrued liabilities		31,532		27,590
	$	47,944	$	45,331

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Measurements

Schedule of the Company's financial assets and financial liabilities measured at fair value on a recurring basis

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

			At March 31, 2021
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	March 31,		identical assets		inputs		inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	3,089	$	3,089	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		198,150		-		198,150		-
Bank certificates of deposit (ii)(iii)		24,799		-		24,799		-
Corporate notes (ii)		61,515		-		61,515		-
Asset-backed securities (ii)		13,094		-		13,094		-
Municipal bonds (ii)		17,197		-		17,197		-
Investments held for deferred compensation plans		5,754				5,754
Total Assets	$	323,598	$	3,089	$	320,509	$	-
Liabilities
Deferred compensation plans	$	5,689	$	-	$	5,689	$	-
Total Liabilities	$	5,689		-	$	5,689	$	-

			At December 31, 2020
			Quoted prices		Significant
			in active		other		Significant
			markets for		observable		unobservable
	December 31,		identical assets		inputs		inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents:
Money market funds (i)	$	5,169	$	5,169	$	-	$	-
Available for sale securities:
U.S. government agency bonds (ii)		206,924		-		206,924		-
Bank certificates of deposit (ii) (iii)		25,708		-		25,708		-
Commercial paper (ii)		1,500		-		1,500		-
Corporate notes (ii)		55,173		-		55,173		-
Asset-backed securities (ii)		13,495		-		13,495		-
Municipal bonds (ii)		9,972		-		9,972		-
Investments held for deferred compensation plans		5,331				5,331		-
Total Assets	$	323,273	$	5,169	$	318,104	$	-
Liabilities
Deferred compensation plans	$	5,232		-	$	5,232		-
Total Liabilities	$	5,232	$	-	$	5,232	$	-

(i) Included in cash and cash equivalents with a maturity of three months or less from date of purchase on the condensed consolidated balance sheets.

(ii) Included in short-term investments on the condensed consolidated balance sheets.

(iii) As of March 31, 2021 and December 31, 2020, a bank certificate of deposit totaling $4,000 and $5,000 (in thousands), respectively, is included in cash and cash equivalents on the condensed consolidated balance sheets, as the investment has a maturity of three months or less from the date of purchase on the condensed consolidated balance sheets.

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases

Schedule of maturity of lease liability

Maturity of Lease Liabilities	Operating		Finance
(in thousands)	Leases (a)		Leases (b)
Remainder of 2021	$	2,001	$	—
2022		2,953		—
2023		2,555		1,465
2024		2,408		5,184
2025		2,444		5,340
2026		2,498		5,500
Thereafter		20,790		107,522
Total lease payments	$	35,649	$	125,011
Less: imputed interest		13,926		63,943
Total lease liabilities	$	21,723	$	61,068

(a) Operating lease payments include $12.2 million related to options to extend lease terms that are reasonably certain of being exercised.

(b) Finance lease payments include $75.8 million related to options to extend lease terms that are reasonably certain of being exercised.

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Intangible Assets and Goodwill (Tables)

3 Months Ended

Mar. 31, 2021

Intangible Assets and Goodwill

Schedule reflecting the composition of intangible assets and goodwill

The following table presents the composition of our intangible assets and goodwill (in thousands):

	Estimated	As of March 31, 2021						As of December 31, 2020
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200		(29,916)		222,284		252,200		(24,393)		227,807
Customer relationships	5.0		14,100		(3,819)		10,281		14,100		(3,114)		10,986
Intangible assets subject to amortization			266,300		(33,735)		232,565		266,300		(27,507)		238,793
In-process research and development	Indefinite	$	118,900		—		118,900		118,900		—		118,900
Goodwill	Indefinite	$	66,134		—		66,134		66,134		—		66,134
Total		$	451,334	$	(33,735)	$	417,599	$	451,334	$	(27,507)	$	423,827

Schedule of expected amortization of finite-lived intangible assets

As of March 31, 2021, expected amortization expense for unamortized finite-lived intangible assets for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Remainder of 2021	$	18,684
2022		24,912
2023		24,912
2024		24,618
2025		22,092
Thereafter		117,347
Total amortization	$	232,565

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Revenue from Contracts with Customers (Tables)

3 Months Ended

Mar. 31, 2021

Revenue from Contracts with Customers

Schedule of disaggregation of revenue

The Company’s revenues disaggregated by product category and geography, for the three months ended March 31, 2021 and March 31, 2020 was as follows (in thousands):

	United States				International				Total
	2021		2020		2021		2020		2021		2020
Glaucoma	$	39,889	$	32,577	$	13,810	$	11,556	$	53,699	$	44,133
Corneal Health		12,055		8,807		2,214		2,396		14,269		11,203
Total	$	51,944	$	41,384	$	16,024	$	13,952	$	67,968	$	55,336

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Net Loss per Share (Tables)

3 Months Ended

Mar. 31, 2021

Net Loss per Share

Schedule of potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive were as follows (in common stock equivalent shares, in thousands):

	Three Months Ended
	March 31,
	2021	2020
Convertible senior notes	5,125	-
Stock options outstanding	3,640	4,328
Unvested restricted stock units	654	470
Employee stock purchase plan	17	6
	9,436	4,804

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Convertible Senior Notes (Tables)

3 Months Ended

Mar. 31, 2021

Convertible Senior Notes

Schedule of interest expense relating to the Convertible Notes

Interest expense relating to the Convertible Notes in the condensed consolidated statements of operations for the three months ended March 31, 2021 are summarized as follows (in thousands):

	Three months ended
	March 31,
	2021
Contractual interest expense	$	1,977
Amortization of debt issuance costs		343
Total interest expense	$	2,320

Schedule of convertible senior notes

The effective interest rate for the three months ended March 31, 2021 was 3.23%.

As of March 31, 2021, the Convertible senior notes on the condensed consolidated balance sheets represented the carrying amount of the Convertible Notes, net of unamortized debt issuance costs, which are summarized as follows (in thousands):

	As of
	March 31,
	2021
Convertible Notes	$	287,500
Less: Unamortized debt issuance costs		(8,504)
Carrying amount of Convertible Notes	$	278,996

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Stock-Based Compensation.

Schedule summarizing the allocation of stock-based compensation

The following table summarizes the allocation of stock-based compensation related to stock options and RSUs and includes Replacement Awards, as well as cash-settled stock options in the accompanying condensed consolidated statements of operations (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Cost of sales	$	420	$	461
Selling, general and administrative		6,494		10,257
Research and development		1,834		3,287
Total	$	8,748	$	14,005

(i) Of the total stock-based compensation of $14.0 million for the three months ended March 31, 2020, a $(3.2) million fair value adjustment was recorded during the three months ended March 31, 2020 related to cash-settled options.

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Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Mar. 31, 2020	Dec. 31, 2019
Restricted cash
Cash and cash equivalents	$ 96,625	$ 96,596
Restricted cash	9,416	9,566
cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$ 106,041	$ 106,162	$ 62,940	$ 71,756

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Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Jan. 01, 2021	Dec. 31, 2020
Recent Accounting Pronouncements
Accumulated deficit	$ (332,087)		$ (310,058)
Additional paid-in capital	920,819		976,590
Deferred tax liability, net	8,323		$ 10,512
Convertible senior notes	$ 278,996
Accounting Standards Update 2020-06 | Adjustment
Recent Accounting Pronouncements
Accumulated deficit		$ (5,500)
Additional paid-in capital		(81,600)
Deferred tax liability, net		(2,200)
Convertible senior notes		$ 89,200

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Balance Sheet Details - Short-Term Investments (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Short-term investments
Amortized cost	$ 310,415	$ 307,014
Unrealized gains	482	765
Unrealized losses	(142)	(7)
Estimated fair value	310,755	307,772
U.S. Government agency bonds
Short-term investments
Amortized cost	198,062	206,704
Unrealized gains	121	223
Unrealized losses	(32)	(3)
Estimated fair value	$ 198,151	$ 206,924
U.S. Government agency bonds | Maximum
Short-term investments
Maturity	3 years	3 years
Bank certificates of deposit
Short-term investments
Amortized cost	$ 20,799	$ 20,700
Unrealized gains	5	8
Unrealized losses	(6)
Estimated fair value	$ 20,798	$ 20,708
Bank certificates of deposit | Maximum
Short-term investments
Maturity	2 years	1 year
Commercial paper
Short-term investments
Amortized cost		$ 1,500
Estimated fair value		$ 1,500
Commercial paper | Maximum
Short-term investments
Maturity		1 year
Corporate notes
Short-term investments
Amortized cost	$ 61,391	$ 54,866
Unrealized gains	198	308
Unrealized losses	(74)	(1)
Estimated fair value	$ 61,515	$ 55,173
Corporate notes | Maximum
Short-term investments
Maturity	3 years	3 years
Asset-backed securities
Short-term investments
Amortized cost	$ 12,945	$ 13,290
Unrealized gains	150	205
Unrealized losses	(1)
Estimated fair value	$ 13,094	$ 13,495
Asset-backed securities | Maximum
Short-term investments
Maturity	2 years	2 years
Municipal bonds
Short-term investments
Amortized cost	$ 17,218	$ 9,954
Unrealized gains	8	21
Unrealized losses	(29)	(3)
Estimated fair value	$ 17,197	$ 9,972
Municipal bonds | Maximum
Short-term investments
Maturity	3 years	3 years

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Balance Sheet Details - Other (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Accounts Receivable, Net
Accounts receivable	$ 38,161	$ 37,729
Allowance for credit losses	(1,467)	(1,670)
Accounts receivable, net	36,694	36,059
Inventory
Finished goods	6,662	5,346
Work in process	3,761	3,584
Raw materials	4,848	6,879
Total inventory	15,271	15,809
Accrued Liabilities
Accrued bonuses	4,669	10,815
Accrued vacation benefits	4,175	3,728
Accrued payroll taxes	7,568	3,198
Other accrued liabilities	31,532	27,590
Total accrued liabilities	$ 47,944	$ 45,331

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Fair Value Measurements - Fair Value Hierarchy (Details) - USD ($)	Mar. 31, 2021	Dec. 31, 2020
Fair Value, Measurements, Recurring
Assets
Total assets	$ 323,598,000	$ 323,273,000
Liabilities
Total liabilities	5,689,000	5,232,000
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Assets
Total assets	3,089,000	5,169,000
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	320,509,000	318,104,000
Liabilities
Total liabilities	5,689,000	5,232,000
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Assets
Total assets	0	0
Liabilities
Total liabilities	0	0
Money market funds | Fair Value, Measurements, Recurring
Assets
Total assets	3,089,000	5,169,000
Money market funds | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Assets
Total assets	3,089,000	5,169,000
U.S. Government agency bonds | Fair Value, Measurements, Recurring
Assets
Total assets	198,150,000	206,924,000
U.S. Government agency bonds | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	198,150,000	206,924,000
Bank certificates of deposit
Assets
Cash equivalents	4,000,000	5,000,000
Bank certificates of deposit | Fair Value, Measurements, Recurring
Assets
Total assets	24,799,000	25,708,000
Bank certificates of deposit | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	24,799,000	25,708,000
Commercial paper. | Fair Value, Measurements, Recurring
Assets
Total assets		1,500,000
Commercial paper. | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets		1,500,000
Corporate notes | Fair Value, Measurements, Recurring
Assets
Total assets	61,515,000	55,173,000
Corporate notes | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	61,515,000	55,173,000
Asset-backed securities | Fair Value, Measurements, Recurring
Assets
Total assets	13,094,000	13,495,000
Asset-backed securities | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	13,094,000	13,495,000
Municipal bonds | Fair Value, Measurements, Recurring
Assets
Total assets	17,197,000	9,972,000
Municipal bonds | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	17,197,000	9,972,000
Investments held for deferred compensation plans | Fair Value, Measurements, Recurring
Assets
Total assets	5,754,000	5,331,000
Liabilities
Total liabilities	5,689,000	5,232,000
Investments held for deferred compensation plans | Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Assets
Total assets	5,754,000	5,331,000
Liabilities
Total liabilities	$ 5,689,000	$ 5,232,000

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Fair Value Measurements - Transfers (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Mar. 31, 2020
Fair Value Measurements, Valuation
Amount of transfers of assets and liabilities measured on a recurring basis between Levels 1, 2 and 3 of the fair value hierarchy	$ 0	$ 0
2.75% Convertible Senior Notes due 2027
Fair Value Measurements, Valuation
Fair value of convertible senior notes	$ 488,400

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Leases - Terms (Details)	3 Months Ended
	Mar. 31, 2021
Leases
Operating Lease Existence of Option to Extend	true
Optional lease extension term	10 years
Operating Lease Existence of Option to Terminate	true
Operating lease period for lease termination	1 year
Minimum
Leases
Operating lease remaining lease term	1 year
Maximum
Leases
Operating lease remaining lease term	13 years

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Leases - Leases Details (Details) $ in Millions		1 Months Ended	3 Months Ended
	Nov. 14, 2020 USD ($) ft² item	Jul. 31, 2020 USD ($) ft² item	Mar. 31, 2021 ft² item
Operating Leases
Optional lease extension term			10 years
Domestic Office Leases
Operating Leases
The number of adjacent facilities rented | item			2
Extended lease term		5 years
Number of lease renewal periods | item		1
Optional lease extension term		5 years
Area of leased space | ft²		98,000
Tenant improvement allowance and abatement | $		$ 0.5
Foreign Subsidiaries Office Leases | Maximum
Operating Leases
Area of leased space | ft²			14,000
Aliso Facility
Operating Leases
Number of properties leased | item	1
Number of buildings leased | item	3
Number of lease renewal periods | item	2
Optional lease extension term	5 years
Area of leased space | ft²	160,000
Tenant improvement allowance and abatement | $	$ 12.7
Term of lease	13 years
Waltham Massachusetts Facility
Operating Leases
Area of leased space | ft²			27,000
Burlington Massachusetts Facility
Operating Leases
Area of leased space | ft²			19,000

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Leases - Maturity (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Leases
Existence of option to extend	true
Operating Leases
Remainder of 2021	$ 2,001
2022	2,953
2023	2,555
2024	2,408
2025	2,444
2026	2,498
Thereafter	20,790
Total Operating lease payments	35,649
Less: imputed interest	13,926
Total Operating lease liabilities	21,723
Amount of operating leases with option to extend commitment	12,200
Finance Leases
2023	1,465
2024	5,184
2025	5,340
2026	5,500
Thereafter	107,522
Total Finance lease payments	125,011
Less: imputed interest	63,943
Total Finance lease liabilities	61,068
Amount of financing leases with option to extend commitment	$ 75,800

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Intangible Assets and Goodwill - Other (Details) - USD ($) $ in Thousands		3 Months Ended
	Nov. 21, 2019	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Intangible Assets and Goodwill
Amortization of intangible assets		$ 6,228	$ 6,228
Finite Lived - Gross Amount		266,300		$ 266,300
Finite Lived - Accumulated Amortization		(33,735)		(27,507)
Finite Lived - Net Amount		232,565		238,793
Goodwill		66,134		66,134
Intangible Assets, Gross		451,334		451,334
Intangible Assets, Net		417,599		423,827
In-Process Research and Development (IPR&D)
Intangible Assets and Goodwill
Indefinite Lived assets		$ 118,900		118,900
Developed Technology
Intangible Assets and Goodwill
Useful life/amortization period		11 years 4 months 24 days
Finite Lived - Gross Amount		$ 252,200		252,200
Finite Lived - Accumulated Amortization		(29,916)		(24,393)
Finite Lived - Net Amount		$ 222,284		227,807
Customer Relationships
Intangible Assets and Goodwill
Useful life/amortization period		5 years
Finite Lived - Gross Amount		$ 14,100		14,100
Finite Lived - Accumulated Amortization		(3,819)		(3,114)
Finite Lived - Net Amount		$ 10,281		$ 10,986
Avedro | In-Process Research and Development (IPR&D)
Intangible Assets and Goodwill
Discount Rate (as a percent)	11.50%
Avedro | Developed Technology
Intangible Assets and Goodwill
Discount Rate (as a percent)	13.00%
Useful life/amortization period		11 years
Avedro | Customer Relationships
Intangible Assets and Goodwill
Useful life/amortization period		5 years
Avedro | Cost of sales
Intangible Assets and Goodwill
Amortization of intangible assets		$ 5,500
Avedro | Selling, general and administrative
Intangible Assets and Goodwill
Amortization of intangible assets		$ 700

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Intangible Assets and Goodwill - Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Estimated amortization expense
Remainder of 2021	$ 18,684
2022	24,912
2023	24,912
2024	24,618
2025	22,092
Thereafter	117,347
Finite Lived - Net Amount	$ 232,565	$ 238,793

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Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues
Total net sales	$ 67,968	$ 55,336
United States
Revenues
Total net sales	51,944	41,384
International
Revenues
Total net sales	16,024	13,952
Glaucoma
Revenues
Total net sales	53,699	44,133
Glaucoma | United States
Revenues
Total net sales	39,889	32,577
Glaucoma | International
Revenues
Total net sales	13,810	11,556
Corneal Health
Revenues
Total net sales	14,269	11,203
Corneal Health | United States
Revenues
Total net sales	12,055	8,807
Corneal Health | International
Revenues
Total net sales	$ 2,214	$ 2,396

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Revenue from Contracts with Customers - Other (Details)	3 Months Ended
	Mar. 31, 2021
Revenue from Contracts with Customers
Typical payment terms on invoiced amounts	30 days
Practical expedient financing component	true
Practical expedient cost of obtaining contract	true

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Net Loss per Share (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Anti-dilutive securities
Anti-dilutive securities excluded from computation of earnings per share	9,436	4,804
Common Stock Warrants
Anti-dilutive securities
Anti-dilutive securities excluded from computation of earnings per share	5,125
Stock options
Anti-dilutive securities
Anti-dilutive securities excluded from computation of earnings per share	3,640	4,328
RSU
Anti-dilutive securities
Anti-dilutive securities excluded from computation of earnings per share	654	470
ESPP
Anti-dilutive securities
Anti-dilutive securities excluded from computation of earnings per share	17	6

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Convertible Senior Notes - General (Details) - 2.75% Convertible Senior Notes due 2027		3 Months Ended
	Jun. 11, 2020 USD ($) D $ / shares	Mar. 31, 2021 USD ($) D
Long-Term Debt
Convertible Notes | $	$ 287,500,000	$ 287,500,000
Interest rate (as a percent)	2.75%
Net proceeds from the debt | $	$ 242,200,000
Threshold trading days | D	20	20
Threshold consecutive trading days | D	30	30
Premium percentage on conversion price	130.00%	130.00%
Number of business days | D	5
Measurement period	10 days
Denomination for conversion of debt | $	$ 1,000
Product of sale price and conversion rate (as a percent)	98.00%
Conversion ratio	17.8269
Initial conversion price | $ / shares	$ 56.10
Redemption price percentage on principal amount to be redeemed	100.00%
Principal amount of the convertible notes to be repurchased (as a percent)	100.00%

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Convertible Senior Notes - Adoption of ASU (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Jun. 11, 2020
Long-Term Debt
Carrying amount of liability component		$ 189,416
2.75% Convertible Senior Notes due 2027
Long-Term Debt
Carrying amount of liability component	$ 278,996		$ 189,800
Discount rate (as a percent)			9.50%
Carrying amount of the equity component			$ 97,700
Face amount at time of issuance	287,500			$ 287,500
Debt issuance costs			9,600
Debt issuance costs	8,504
Debt issuance costs liability component			6,300
Debt issuance costs equity component			$ 3,300
Adjusted | 2.75% Convertible Senior Notes due 2027
Long-Term Debt
Debt issuance costs equity component	$ 8,500
Amortization period	6 years 3 months 18 days
Accounting Standards Update 2020-06 | Adjusted | 2.75% Convertible Senior Notes due 2027
Long-Term Debt
Face amount at time of issuance	$ 287,500
Debt issuance costs	$ 8,500

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Convertible Senior Notes - Interest expense (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Long-Term Debt
Amortization of Financing Costs and Discounts, Total	$ 343
2.75% Convertible Senior Notes due 2027
Long-Term Debt
Contractual interest expense	1,977
Amortization of debt issuance costs	343
Amortization of Financing Costs and Discounts, Total	$ 2,320
Interest rate at period end	3.23%

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Convertible Senior Notes - Carrying Amount (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Jun. 11, 2020
Long-Term Debt
Carrying amount of Convertible Notes		$ 189,416
2.75% Convertible Senior Notes due 2027
Long-Term Debt
Convertible Notes	$ 287,500			$ 287,500
Less: Unamortized debt issuance costs	(8,504)
Carrying amount of Convertible Notes	$ 278,996		$ 189,800

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Convertible Senior Notes - Capped Call Transactions (Details) - Capped Call Transactions $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended
	Jun. 08, 2020 $ / instrument	Mar. 31, 2021 USD ($) $ / shares shares
Long-Term Debt
Payment for capped call options		$ 35.7
Initial strike price (in dollars per share) | $ / shares		$ 56.10
Number of shares of common stock initially underlying the Convertible Notes | shares		5.1
Reduction in additional paid-in capital		$ (35.7)
Common Stock
Long-Term Debt
Cap price (in dollars per share) | $ / instrument	86.30
Percentage of premium on share price	100.00%

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Stock-Based Compensation - Plan Information (Details) $ in Thousands		3 Months Ended
	Nov. 21, 2019 USD ($) shares	Mar. 31, 2021 USD ($) Vote item shares	Mar. 31, 2020 USD ($)	Dec. 31, 2020 Vote shares
Stock-based compensation
Preferred stock, shares authorized		5,000,000		5,000,000
Preferred stock, shares outstanding		0		0
Number of votes per common share | Vote		1		1
Number of stock plans | item		4
Expiration period		10 years
Vesting percentage on first anniversary of grant date		25.00%
Remaining vesting period		3 years
Stock-based compensation expense | $		$ 8,748	$ 14,005
Replacement Awards
Stock-based compensation
Stock-based compensation expense | $		$ 500	$ 9,300
Employee Stock Purchase Plan 2015
Stock-based compensation
Maximum employee contributions as a percentage of earnings under the ESPP		15.00%
Purchase price per share expressed as a percentage of the lower of the stock's fair market value on the offering date or purchase date under the ESPP		85.00%
First anniversary | RSU
Stock-based compensation
Vesting (as a percent)		25.00%
Second anniversary | RSU
Stock-based compensation
Vesting (as a percent)		25.00%
Third anniversary | RSU
Stock-based compensation
Vesting (as a percent)		25.00%
Fourth anniversary | RSU
Stock-based compensation
Vesting (as a percent)		25.00%
Avedro
Stock-based compensation
Fair value of Replacement Awards attributable to pre-combination services | $	$ 30,800
Fair value of Replacement Awards attributable to post-combination services | $		$ 26,000
Avedro | RSU
Stock-based compensation
Shares issued in connection with Acquisition	5,500
Avedro | Cash-Settled Stock Option
Stock-based compensation
Shares issued in connection with Acquisition	200,000
Avedro | Stock options
Stock-based compensation
Shares issued in connection with Acquisition	100,000
Avedro | Time Vesting | RSU
Stock-based compensation
Shares issued in connection with Acquisition	100,000
Avedro | Time Vesting | Stock options
Stock-based compensation
Shares issued in connection with Acquisition	700,000

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Stock-Based Compensation - Allocation of Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Allocation of stock-based compensation
Stock-based compensation expense	$ 8,748	$ 14,005
Fair value adjustment excluded from APIC		(3,200)
Cost of sales
Allocation of stock-based compensation
Stock-based compensation expense	420	461
Selling, general and administrative
Allocation of stock-based compensation
Stock-based compensation expense	6,494	10,257
Research and development
Allocation of stock-based compensation
Stock-based compensation expense	$ 1,834	$ 3,287

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Stock-Based Compensation - Fair Value Assumptions (Details) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Stock-based compensation
Unamortized stock-based compensation expense not yet recognized	$ 50.9
RSU
Stock-based compensation
Unamortized stock-based compensation expense not yet recognized	$ 37.3
Options remaining vesting period	4 years
Weighted average period of recognition	2 years 10 months 24 days
Stock options
Stock-based compensation
Unamortized stock-based compensation expense not yet recognized	$ 13.6
Options remaining vesting period	4 years
Weighted average period of recognition	2 years 1 month 6 days

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Taxes
Effective tax rate (as a percent)	(0.88%)
Provision for income taxes	$ 279	$ (450)
Unrecognized tax benefits	$ 23,500	$ 17,800

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Commitments and Contingencies - Other (Details)	3 Months Ended
	Mar. 31, 2021 USD ($) item	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Other commitments
Letter of Credit outstanding	$ 8,800,000
Restricted cash pledged for letter of credit	$ 8,800,000		$ 8,800,000
Number of Months from start of lease for adjustments to Letter of Credit | item	37
Frequency of adjustment to Letter of Credit	12 months
Adjustment rate of Letter of Credit (as a percent)	20.00%
Amount of Letter of Credit outstanding after adjustments	$ 2,000,000.0
Number of other irrevocable letters of credit outstanding | item	1
Restricted cash pledged for office lease agreement	$ 600,000
Deferred compensation plan liability	5,700,000		5,200,000
Deferred compensation plan assets	5,800,000		$ 5,300,000
Purchase commitment obligation	1,300,000
Agreement with the Regents
Other commitments
Minimum required annual payment of the commitment obligation, based on net sales of current and future products	500,000
Maximum | Buyout Agreement with GMP Vision Solutions, Inc.
Other commitments
Buyout amount upon sale of Company.	2,000,000.0
Cost of sales | Agreement with the Regents
Other commitments
Commitment obligation payments	900,000	$ 1,100,000
Patent Litigation | Pending Litigation
Other commitments
Accrual for loss contingency	$ 0

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Business Segment Information (Details)	3 Months Ended
	Mar. 31, 2021 item segment
Business Segment Information
Number Of Business Activities | item	1
Number of Operating Segments | segment	1

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Subsequent Event (Details) $ in Millions	Apr. 22, 2021 USD ($)
Licensing Agreement With Intratus, Inc. | Subsequent Event
Subsequent Events
Upfront payment made	$ 5.0