This Drug Maker Offers a VERY Attractive Stock for Investors

Glaukos (GKOS) was priced at nearly $84 on August 1. Today, a share of Glaukos sells for $66 and change. All in all, Glaukos fell more than 20% in the month of August alone. Investors exited positions in the ophthalmic medical tech and pharmaceutical company after learning of acquisition news.

The recent dip in price means Glaukos stock is trailing that of the general market across the year. Though Glaukos is up more than 15% through mid-September for the year, the overarching market has fared better. In particular, the S&P 500 is up more than 20% in the same period of time.

How Glaukos Makes Money

Glaukos creates and markets surgical devices as well as pharmaceutical drugs to help those suffering from glaucoma. The company develops and commercializes surgical devices and sustained therapies with the use of pharmaceutical medications to enhance glaucoma treatment.

At the moment, there is no cure for glaucoma. Some readers might point to medical marijuana as a potential solution to elevated intraocular eye pressure caused by glaucoma yet those in-the-know are well aware of the fact that medical marijuana poses no threats to companies such as Glaukos. Savvy ophthalmologists understand the use of medical marijuana temporarily lowers intraocular eye pressure, yet the pressure moves right back up above a healthy level after the effects of the plant wear off. As a result, the use of medical marijuana has the potential to exacerbate the problem of glaucoma rather than cure it. This is precisely why companies such as Glaukos will likely be making big money years and possibly even decades into the future.

Why the Stock Dropped

Glaukos’ terrible August is partially attributable to the fact that it announced it would acquire another ophthalmic medical tech and pharmaceutical business known as Avedro (AVDR). Avedro treats corneal disorders and diseases. The acquisition was made through a stock transfer rather than cash. As a result, Glaukos shares dropped more than 11% the next day. Avedro skyrocketed 36% that day.

Glaukos investors did not like the fact that Avedro shareholders are to receive 0.365 Glaukos shares for each Avedro share. Though the deal will help Glaukos capture more of the ophthalmic market share, it will serve as a temporary financial setback. The acquisition dilutes Glaukos shareholders’ investment by about 15%. However, the acquisition of Avedro will hike revenue growth as soon as next year.

Do Not Let the Acquisition of Avedro Scare You Away

Once the acquisition of Avedro closes in the fourth quarter of this year, investors will be able to square their focus on the positive results to come rather than the temporary financial setback caused by the deal.

It would be short-sighted to sell shares of Glaukos now simply because shares are diluted by 15% as a result of the deal. The acquisition of Avedro will bolster Glaukos’ top-line growth well beyond this year and next year. Investment analysts insist the acquisition of Avedro will lead to improved top-line growth across at least the next decade. In particular, Avedro’s Photrexa technology is particularly valuable. This system is meant to treat those suffering from corneal disease known as progressive keratoconus. This corneal disease is certainly unfortunate yet it represents a significant money-making opportunity in the United States market.

Looking Beyond Glaukos’ Recent Dip

Rewind time back to February of this year, and Glaukos stock had increased more than 16%. At that point in time, the mid-cap ophthalmic medical technology business had increased in value more than 111% across the prior year. The solid performance through the first couple months of the year is attributable to the company’s fantastic fourth-quarter results.

Glaukos executives point to the debut of its seemingly futuristic iStent inject Trabecular Micro-Bypass technology as reason for hope. This medical tool is responsible for enhancing the company’s penetration into the international market. It is hoped the iStent inject Trabecular Micro-Bypass system will significantly reduce intraocular eye pressure in those suffering from mild or moderate glaucoma.

Buy, Sell or Hold?

Hold or buy. The recent decrease in Glaukos’ stock price represents a buying opportunity. Those who already own Glaukos should maintain their position for the foreseeable future. If you do not currently own Glaukos, scooping up shares for $60 to $70 today just might prove to be quite the bargain, especially if the acquisition of Avedro helps the company capture additional market share in the months and years ahead.

Though Glaukos may never develop a cure for glaucoma, it is nearly guaranteed the company make plenty of money from this unfortunate eye disease as time progresses.


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