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Glaukos (GKOS) Gains Nearly 25% YTD: What's Driving the Rally?

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Glaukos (GKOS - Free Report) is witnessing strong momentum, with its shares having rallied 24.8% year to date compared with 6.7% growth of the industry.The S&P 500 Composite has risen 8.4% during the same time frame.

With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment.

Headquartered in San Clemente, CA, Glaukos is an ophthalmic medical technology and pharmaceutical company. It is focused on the development and commercialization of novel surgical devices and sustained pharmaceutical therapies designed to treat glaucoma. The company’s flagship iStent is the first FDA-approved surgical device available for insertion, in conjunction with cataract surgery.

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Catalysts Driving Growth

The rally in the company’s share price can be attributed to strength in its flagship iStent. The optimism, led by a solid fourth-quarter 2023 performance and robust business potential, is expected to contribute further. Moreover, investors are optimistic about continued strong demand across international glaucoma and Corneal Health franchises.

Glaukos exited the fourth quarter of 2023 with mixed results, wherein its earnings missed estimates but revenues beat the same. However, management is excited regarding the company’s continued top-line growth in the reported quarter. GKOS has provided its revenue guidance for 2024. It expects the top line to be in the range of $350-$360 million, indicating a 11.2-14.4% year-over-year improvement.

GKOS has launched several products, including iPrime, iAccess and iStent, in the past few quarters, which is aiding its revenue growth. The company has been focused on delivering improved outcomes for patients suffering from chronic eye diseases. It does so by continuing to develop a pipeline of novel, dropless platform technologies, designed to meaningfully advance the standard of care.

Glaukos gained the FDA approval for its latest product, iDose TR, in December 2023, for the reduction of intraocular pressure in patients with ocular hypertension or open-angle glaucoma. The company received permanent Healthcare Common Procedure Coding System J-code for i-Dose TR by the U.S. Centers for Medicare and Medicaid Services.

The new J-code for iDose TR, J7355, is likely to become effective starting Jul 1, 2024. It is expected to increase patient access in the United States as it will likely accelerate the billing process and physician reimbursement.

Glaukos is currently developing several pipeline products — iDose TREX, iDose ROCK and iLution Travoprost. These next-generation extended-release candidates are in different stages of clinical development. Successful development, followed by a potential launch of these products, will boost the company’s glaucoma portfolio.

Apart from the U.S. market, Glaukos is focusing on expanding globally. It currently sells its products through direct sales subsidiaries in 17 countries and independent distributors in certain countries.

The company’s continues with its efforts to scale its international infrastructure and drive MIGS forward as a standard of care in each region. In the fourth quarter of 2023, GKOS’ Glaucoma sales were up more than 25%, while Corneal Health sales improved 19% in international markets. Continued broad-based growing demand in many key international markets for combined cataract and glaucoma procedures is likely to continue in the upcoming few quarters.

Risk Factors

Although Glaukos’ top line is improving, its earnings have been under pressure amid rising costs and expenses during the fourth quarter. The fourth-quarter adjusted operating loss was $32.4 million, wider than the year-ago period’s reported loss of $27.4 million.

The company currently relies on a limited number of third-party suppliers, in some cases sole suppliers, to supply components for the iStent, the iStent inject models and other pipeline products. If any one or more of these suppliers cease to provide GKOS with sufficient quantities of components or drugs in a timely manner or on acceptable terms, the company would have to seek alternative sources of supply.

A Look at Estimates

Glaukos’ loss per share in 2024 and 2025 is envisioned to narrow 4% and 37.6%, respectively, to $2.18 and $1.36, on a year-over-year basis.  The Zacks Consensus Estimate for loss has widened 1 cent for 2024 but narrowed 1 cent for 2025 in the past 30 days.

Revenues for 2024 and 2025 are anticipated to rise 13.1% and 25.8%, respectively, to $356 million and $447.8 million, on a year-over-year basis.

Stocks to Consider

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Cencora (COR - Free Report) .

DaVita, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have risen 27.9% compared with the industry’s 6.3% growth year to date.

Cardinal Health, carrying a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.

CAH’s shares have risen 7.2% year to date compared with the industry’s 5.4% growth.

Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.

Cencora’s shares have risen 16.2% year to date compared with the industry’s 3.4% growth.

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