Glaukos Announces Agreements to Exchange $230 Million in Principal Amount of Its 2.75% Convertible Senior Notes Due 2027 for Common Stock

Rhea-AI Summary

Glaukos (NYSE: GKOS) has entered into privately negotiated exchange agreements with certain holders of its 2.75% Convertible Senior Notes due 2027.

The company plans to repurchase $230 million in principal amount of these notes. The consideration will comprise shares of Glaukos' common stock and cash for fractional shares and accrued interest.

The exchanges are expected to close around June 25, 2024, and the shares issued will not be registered under the Securities Act of 1933.

This action is not an offer to sell or a solicitation to buy these securities in any jurisdiction where such actions would be illegal.

Positive

• Exchange agreements reduce outstanding debt by $230 million.
• Repurchase of notes may positively affect the company's balance sheet.
• Issuance of shares helps manage cash flow by reducing immediate cash outflow.
• Reducing debt may improve investor confidence and potentially stock price.

Negative

• Issuance of new shares could lead to shareholder dilution.
• Prospective increase in outstanding shares may negatively impact earnings per share (EPS).
• Unregistered shares add regulatory risk if not handled properly.
• The transaction does not provide immediate cash benefit to the company.

Insights

Financial Analyst

Glaukos' decision to exchange $230 million in principal amount of its 2.75% Convertible Senior Notes for common stock can be seen from multiple angles. The exchange of debt for equity helps to reduce the company's leverage, which can be positive for the company's balance sheet. This move effectively lowers the future interest payments, making the company's future cash flows more attractive in the long run. However, the issuance of new common stock also dilutes existing shareholders' ownership percentage, which might not be seen positively by current investors.

From a financial health perspective, this exchange could indicate that Glaukos is focusing on fortifying its capital structure. Debt reduction is typically favorable, especially in a high-interest rate environment. But, investors should watch how this affects the share price, particularly given the dilution aspect and the fact that the number of shares to be issued will be determined over an averaging period.

The complexities around the registration under the Securities Act are also worth noting. The shares issued in this transaction are not registered, which means they cannot be freely traded until certain conditions are met. This regulatory aspect adds a layer of complexity and potential risk for shareholders.

In the short term, the primary impact will likely be on the share price and investor sentiment as the market reacts to both the dilution and the improved balance sheet. Long-term impacts will hinge on how effectively Glaukos can leverage its improved financial position.

Market Research Analyst

From a market perspective, Glaukos' convertible notes exchange is an important strategic move. It signals to the market that the company is actively managing its liabilities, which could strengthen investor confidence. However, the dilution of shares is a double-edged sword. While reducing debt can free up resources for growth and innovation, the increase in the number of shares might weigh on the stock price in the near term.

The decision to use a privately negotiated agreement rather than a public offering indicates a tailored approach to managing its capital structure. This could be an attempt to minimize market disruption, though it comes at the cost of immediate liquidity constraints due to the securities not being registered under the Securities Act.

Investors should also consider the timing and conditions of the exchange. The averaging period commencing in 2024 introduces an element of uncertainty about the exact dilution impact, adding another variable to the stock price movements over the coming months. Therefore, it's important for investors to monitor the performance and any further announcements from Glaukos closely.

Overall, the balance between reducing debt and managing shareholder dilution will be key to assessing the effectiveness of this move.

ALISO VIEJO, Calif.--(BUSINESS WIRE)-- Glaukos Corporation (NYSE: GKOS), an ophthalmic pharmaceutical and medical technology company, today announced that it entered into separate, privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders of its 2.75% Convertible Senior Notes due 2027 (the “Existing Convertible Notes”). Pursuant to these Exchange Agreements, the company agreed, subject to customary closing conditions, to repurchase an aggregate of $230 million principal amount of Existing Convertible Notes for aggregate consideration consisting of a number of shares of the company’s common stock, par value $0.001 per share (the “Common Stock”), to be determined over an averaging period commencing on June 14, 2024, and cash in lieu of fractional shares and in respect of accrued interest on the Existing Convertible Notes. These exchange transactions are expected to close on or about June 25, 2024, subject to the satisfaction of customary closing conditions.

The shares of Common Stock issuable in the exchanges have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and such other jurisdictions. This press release is neither an offer to sell nor a solicitation of an offer to buy any of these securities nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

About Glaukos

Glaukos is an ophthalmic pharmaceutical and medical technology company focused on developing and commercializing novel therapies for the treatment of glaucoma, corneal disorders and retinal diseases. Glaukos first developed Micro-Invasive Glaucoma Surgery (MIGS) as an alternative to the traditional glaucoma treatment paradigm, launching its first MIGS device commercially in 2012, and continues to develop a portfolio of technologically distinct and leverageable platforms to support ongoing pharmaceutical and medical device innovations. Products or product candidates for each of these platforms are designed to advance the standard of care through better treatment options across the areas of glaucoma, corneal disorders and retinal diseases.

Forward-Looking Statements

This communication contains “forward-looking statements” within the meaning of federal securities laws. All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements are based on management’s current expectations, assumptions, estimates and beliefs. Although we believe that we have a reasonable basis for forward-looking statements contained herein, we caution you that they are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that may cause our actual results to differ materially from those expressed or implied by forward-looking statements in this press release. These potential risks and uncertainties that could cause actual results to differ materially from those described in forward-looking statements include, without limitation, uncertainties regarding the impact of the COVID-19 pandemic or other future public health crises on our business; the impact of general macroeconomic conditions including foreign currency fluctuations; the reduced physician fee and ASC facility fee reimbursement rate finalized by CMS for 2022 and 2023 for procedures utilizing the company’s iStent family of products and its impact on our U.S. combo-cataract glaucoma revenue; our ability to continue to generate sales of our commercialized products and develop and commercialize additional products; our dependence on a limited number of third-party suppliers, some of which are single-source, for components of our products; the occurrence of a crippling accident, natural disaster, or other disruption at our primary facility, which may materially affect our manufacturing capacity and operations; securing or maintaining adequate coverage or reimbursement by third-party payors for procedures using the iStent, the iStent inject W, iAccess, iPRIME, iStent infinite, iDose TR, our corneal cross-linking products or other products in development; our ability to properly train, and gain acceptance and trust from ophthalmic surgeons in the use of our products; our ability to compete effectively in the medical device industry and against current and future technologies (including MIGS technologies); our compliance with federal, state and foreign laws and regulations for the approval and sale and marketing of our products and of our manufacturing processes; the lengthy and expensive clinical trial process and the uncertainty of timing and outcomes from any particular clinical trial or regulatory approval processes; the risk of recalls or serious safety issues with our products and the uncertainty of patient outcomes; our ability to protect, and the expense and time-consuming nature of protecting our intellectual property against third parties and competitors and the impact of any claims against us for infringement or misappropriation of third party intellectual property rights and any related litigation; and our ability to service our indebtedness. These and other known risks, uncertainties and factors are described in detail under the caption “Risk Factors” and elsewhere in our filings with the Securities and Exchange Commission (SEC), including in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 23, 2024, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which was filed with the SEC on May 3, 2024. All forward-looking statements included in this press release are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on the forward-looking statements in this press release, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements whether as a result of new information, future events or otherwise, except as may be required under applicable securities law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240614638344/en/

Chris Lewis

Vice President, Investor Relations & Corporate Affairs

(949) 481-0510

clewis@glaukos.com

Source: Glaukos Corporation

FAQ

What is the purpose of Glaukos' exchange agreements for its Convertible Senior Notes?

The purpose is to repurchase $230 million in principal amount of notes, reducing outstanding debt and managing cash flow.

When will Glaukos' exchange transactions close?

The exchange transactions are expected to close around June 25, 2024.

How will Glaukos fund the repurchase of its Convertible Senior Notes?

The repurchase will be funded through the issuance of common stock and cash for fractional shares and accrued interest.

What impact will the exchange agreements have on Glaukos' shareholders?

The issuance of new shares might lead to shareholder dilution and potentially reduce earnings per share (EPS).

Are the shares issued in the exchange agreements registered?

No, the shares of common stock issued are not registered under the Securities Act of 1933.