Sight Sciences, Inc. (SGHT) Earnings Call Transcript & Summary

Good morning. It's a pleasure to have a Sight Sciences with us this morning. We have Paul Badawi and Tom Huang with us. Thank you so much for your participation in our conference. And my name is Carolyn Huszagh, I'm on the medtech team at Bank of America.

Thanks for having us.

Thank you. Earlier this week, you reported your first quarter results, which came in better than expectations. You also reiterated your full year guidance. So maybe let's start there, walk us through the puts and takes of your full year guidance and what's taken into consideration at the low and the high end of that guided growth range?

Sure. Yes, I think we are very confident that our numbers will be within that range. And the puts and takes, as we discussed, will be the rate of competitive trialing and how quickly that levels off as well as our ability to continue growing the standalone segment with our team of 20 glaucoma clinical consultants who are helping us develop the market. And we expect to see their impacts in the second half of the year now that they're up and running and fully trained.

Great. And then maybe digging into the recovery a little bit more. So you noted that utilization was down in the quarter, particularly in January and then recovered through the balance of the quarter. So can you expand on how utilization in accounts has trended maybe since the quarter has ended and what your expectations are for how that trends again through the balance of the year?

Yes. I mean I think we would characterize the decrease in utilization in January, particularly as a COVID effect, not necessarily so much with utilization and that -- those trends definitely improved February and March. And going into this quarter, I think we're seeing more of the same trends in very high customer retention as well as new customer adds.

Great. And then turning to your newer accounts, can you talk about how utilization tends to ramp in those new accounts? And thinking about the bigger picture, how do you think about the contribution from the newer accounts versus some of your more established accounts as you move through the year?

Sure. The -- so we typically like to have a very high-touch training and onboarding process with our surgeons. So we proctor the first 10 or so cases over 2 or 3 OR days, and that can take anywhere from 1 month to 2 months typically. I think what we've talked about as well is that when -- in the face of some of the competitive trialing efforts that have been happening, that period can be extended by 30 or 60 days as our -- some of our procedures are substituted with products that surgeons want to trial, but we've seen that to be very transient in nature. I think -- and as to the second part of your question, as our installed base grows, we just reported that we had 811 ordering accounts for the quarter. As our -- as that installed base grows, the impact from adding 100 or so new accounts each quarter will decrease. So -- but that's -- those will still be very important growth drivers, but we expect our sticky installed base to account for more and more of our revenue mix.

So you touched on just now the competitive environment. And I believe you've noted, previously, your expectations for that competitive trialing dynamic to continue in the second quarter. So digging into that a little bit. You've also, I think, noted that, that tends to run its course over 2 to 6 months is what you've seen. So can you put a finer point on the expected cadence of that competitive trialing? I appreciate you gave us a little bit of color already. But again, just more on the cadence given maybe that 2- to 6-month rate that you intend to see.

Okay. Yes, I'll take that. I think let's -- when we look at competitive trialing and its impact and try to project, I think let's break the business down to the fundamentals because this is -- I think it's actually a really simple business to understand. And I think the trialing doctors -- doctors understand this pretty quickly as well. It comes down to efficacy, indication for use, reimbursement and usability. And I think OMNI has very high marks across all 4. I think it's a very unique offering, compelling offering in that regard. And I think that when doctors try these other things, any time a competitor has a new product, especially if the competition has long, productive working relationships with their customers, they're going to try new devices. But it's hard to compete. I think we just always view it and bring it back to what OMNI offers across all 4 decision drivers. So we're already starting to see the full cycle play out where doctors trial and move on because we're setting the bar -- we have set the bar, and we continue to set the bar extremely high, right, across efficacy, indication for use, what you can say about the device, how you can promote it, what types of patients, where does it work, how does it work, how well does it work, reimbursement, category 1 coding, stable, just got revalued last year, right? Everything I'm mentioning right now, there are question marks on the new entrants. And then lastly, usability, right? We're proud of the work we've done with canaloplasty. We've put it on the map. It was historically an invasive, challenging external procedure that took an hour. We didn't invent the procedure. We invented the way that you deliver the procedure, a device that allows the surgeon to perform this hour-long invasive procedure that was highly effective in a seamless, minimally invasive, single, clear corneal incision approach. So all of these things, we've set the bar high. So the trialing -- it's tough to come in with a new product that isn't meeting all of those marks and for it to have long-term impact.

Great. And maybe last question on guidance here. So you spoke on the first quarter call about the operations group executing at a high level despite some supply chain headwinds. So can you elaborate on what those supply chain challenges are that you're seeing and what your expectations are for how those ebb and flow through the balance of the year?

We're actually -- we're in really, really good shape, supply chain-wise, and we're happy. We realize we're fortunate to be in that position. We realize a lot of others are less fortunate in having lots of issues and we empathize there. But our supply chain is really strong. We have a very strong COO, who's been doing this for a long time and has very strong, well-established relationships with our manufacturers and those relationships are most important in the more challenging times, and they're really helping us. So Tom, I don't know if you have anything to add, but we...

Yes. I mean I think we haven't had any disruptions, but that's not because it's easy. It's because our team has worked extremely hard, and we are looking to further diversify some of our supply base to include a U.S. manufacturer. So that will help us sleep better at night on that front.

Then turning to maybe some more product-specific questions now, beginning with combo cataract. Can you talk about the size of the combo cataract opportunity? Where is OMNI penetration at today? And where can that go to in, say, 2 or maybe 5 years? And in the same breath, you have a third-generation OMNI coming later this year. What have you learned that maybe that third-generation device looks to address?

Sure. We think the combination cataract market is anywhere from 250,000 to 300,000 eyes per year, and we think it's growing at a nice clip of about 17% a year. So that market is -- it's already pretty established, but that still only covers about 1/3 of the total available market for combination cataract eyes. So we think that there's a ton of room for growth there. Relating to us specifically, we've trained about 1,600 surgeons that perform MIGS procedures, and we think they're about 5,600 out there. So we've got a long runway ahead of us to continue to gain share and penetrate into the combination cataract MIGS market. Standalone market is obviously a lot bigger. We estimated that at $4 billion to $5 billion. OMNI has got a really unique and compelling product market fit in standalone. The drivers of product choice and product market fit are different in the different categories in MIGS and we try to simplify the market for everyone. It's kind of the way we look at it. We split it up into 6 categories, 3 in combo cataract, 3 in standalone. Those 3 are mild, moderate, advanced. So mild, moderate, advanced combo cataract; mild, moderate, advanced standalone. The mild combo cataract market, which is the predominant number of cases getting done today, is not purely -- there are a number of considerations there. It'd be speed of procedure, efficiency, efficacy, economics, whereas as you move to more moderate or advanced combo cataract or mild, moderate, advanced standalone, this $4 billion to $5 billion standalone market, we believe in those categories, efficacy is king by a wide margin. The efficacy, the consistent efficacy and the degree of efficacy, what you can expect from this procedure is it dominates the decision-making process. And that's really where OMNI shines in that regard. In mild combo cataract, we do find with OMNI, but we'll continue to expand our offerings. We have -- we've announced that we have a goniotomy instrument coming out later this year that will help address some of those other decision-making criteria in that mild combat cataract segment.

Great. So looking at your customer base today as well as the broader market, thinking about the split between the combo cataract and the standalone, where do you think that split is today? And where do you think that split can go either again for your customer base or the broader market given that mild to moderate indication now?

Yes. I think the split between standalone and combination cataract procedures for us today is in the mid-teens. And it's a little bit hard for us to predict how that mix is going to shift. But what we're primarily concerned about today is expanding our penetration in the MIGS market as a whole. Unlike some of the other competitors out there, we have the unique ability to view the MIGS market as 1 market and not combination cataract and standalone because we can treat the entire market. That being said, we think we -- that the penetration in the standalone market has all been organic so far. Our team of GCCs hasn't been able to go out and quite get into the market until this year. And we haven't had a concerted standalone marketing campaign, which we've also kicked off this year. So we expect to be able to grow the standalone market hopefully faster than the historical growth rate of 30% a year. And just I want to emphasize for everyone, I think, the way we view our business and hopefully the way that everybody views Sight and our progress, we want to grow OMNI's utilization in combo cataract. We want to grow the standalone market in OMNI's utilization in standalone. We expect that we'll be very successful in both of those segments. The here and now market is combo cataract. We've been growing in that space very well since we launched OMNI in 2018. We think we're going to continue to grow very well in that space. And Tom provided some of the untapped opportunity there, right? We've trained 1,600 surgeons out of 5,500. So there's plenty of runway. Those 5,500 are primarily today, combo cataract. So there's plenty of runway for us to build OMNI and combo cataract. That's going to be a valuable exercise as we develop a standalone market. We've already demonstrated as we expressed on our earnings call. OMNI is growing that market organically because of that strong product market fit. It's the only standalone surgical glaucoma procedure that when we looked at the 4 primary procedures, goniotomy, canaloplasty, ab interno trabeculectomy and ab externo trabeculectomy, 66174 the code used when OMNI's performed, that's the only one that's growing. The others are shrinking. So we've demonstrated the standalone market is real. It's real without us doing everything that we're doing right now as we speak. That's historical claims data. So we expect a lot of value to be delivered over the coming years in standalone, but also in combo cataract. And remember that we have a very unique business model. As we train -- we can train surgeons in the existing combo cataract market faster than taking a surgeon who's never done mild-to-moderate standalone surgery and who's never used OMNI, where we've got 2 hurdles. Let's train you on OMNI, let's get you doing surgery that you don't yet do, mild-to-moderate standalone surgical intervention. We can do that. We have done that, but that's not the highest yield commercial strategy. The faster, higher value exercise is get the surgeons very familiar, train, loving OMNI in the established market quickly combo cataract. Now they've become -- they understand OMNI's differentiation from an efficacy perspective. They're seeing the consistency of results. And that confidence is what helps them now leap over from combo cataract into standalone and to use OMNI as a stand-alone surgical intervention. So that's our strategy. And that's why both our markets, combo cataract and standalone are intimately related. So we should look -- and when we're assessing our progress, we should look at the growth in both of those segments, not look at 1 in a vacuum.

Okay. So just maybe just piggyback on what you've just talked about and earlier you mentioned the glaucoma consultant network. So remind us what that glaucoma consultant network is responsible for? How has that grown over time? And what metrics maybe beyond what you just shared, if anything, gives you the confidence that, that network is achieving what it's set out to do?

Yes. So we have 20 glaucoma clinical consultants today. That number could grow significantly. It could match our surgical sales force over time. But we like to just be prudent, build carefully, understand the KPIs and the return on that effort before we accelerate it. We had 4 last year in like a beta test, expanded that to 20 in the first quarter of this year. They're now trained and they're out there educating. What are they doing? They're educating the referral community. Where are these stand-alone patients today? Think about a patient who's on 1 med or 2 meds, maybe had MIGS at the time of cataract surgery and is now back to their primary eye care provider, an office-based ophthalmologist or an office-based optometrist. And they're looking at these patients and they're seeing that they're progressing, and their decision-making has always been, should I add another med, should I add a second med, should I add a third med until the disease has progressed to the point where they say, meds aren't cutting it, and you've progressed enough. I have to send you to the glaucoma specialist for an invasive glaucoma surgery. That is the opportunity for a safe and consistently effective mild-to-moderate surgical intervention with OMNI. But we need to get out there and educate the referral community who are seeing these patients and think, instead of taking that second med or that third med and waiting until it's progressed and it's irreversible, and it's now very problematic for that patient, intervene earlier surgically. So its educational effort. There's a lot of referring providers, tens of thousands. So that's why we say, once we've demonstrated the return on the GCCs of 20, we expect to increase that quite a bit over time and the market -- the size of the market supports that.

Great. Helpful. And then maybe the other side of the same coin, we've talked about surgeon education, maybe turning to patient education now. You've stated that there's 85% of glaucoma patients would likely choose standalone using OMNI if it were recommended by their doctors. So appreciate that more patient referrals likely come with more physician education, but what else can Sight do to raise awareness among patients to get more potential patients into the funnel?

Sure. Yes, I think that's a great question. And I think we are just starting to scratch the surface of what we can do with patient education. We recently launched a Don't Wait for Too Late awareness campaign that make sure -- that ensures that patients and providers know that there is a standalone option out there so that they don't have to keep progressing and watching their IOP increase and adding another drop. So we think that is a powerful way to do it. I think we have a lot of ideas and things that we'll be able to test in the coming years in terms of direct-to-consumer communications. But I think we're taking things 1 step at a time, but that is a great area for us to be able to grow the market and be able to communicate with our patients directly.

Yes. We think for the patient, educating the patients, as Tom said, social media, digital, there's a lot of opportunity there, cost-effective. It's where a lot of patients are educating themselves and so that they can come into the practice, into their primary eye care provider practice, already informed, we've educated the primary eye care providers. We have a very experienced OMNI surgeon down the street from combo cataract who's now started doing standalone. So we've connected the ecosystem. So ultimately, think about how efficient the cataract referral -- cataract surgery referral ecosystem is today. It's the #1 surgical procedure in all of medicine, and it works so efficiently. We're creating that with standalone, right? There are a couple of pieces to it, it's educating the patient, it's educating the referral provider who's seeing the patient on meds, and its creating a foundation of OMNI x surgical experts in combo cataract who are moving to standalone. And then we send those surgeons, the referring provider, who is now educated on OMNI standalone can send those patients to the standalone OMNI surgeon. So it's all -- ultimately, it's all education because the product is proven. FDA has said so. Our clinical data suggest that OMNI is a very safe and effective mild-to-moderate standalone surgical option. And today, it's the only product with that kind of label that's gone through the FDA and demonstrated its safety and efficacy in that patient population.

And just one other thing that I think Paul has touched on, but hasn't -- we haven't really emphasized it today is that when we're training a combination cataract surgeon, we're also trading a standalone surgeon. So those trainings are one and the same. So as we grow the combination cataract pool of surgeons, that's -- more providers out there that we'll be able to take stand-alone referrals and perform stand-alone procedures.

Thank you. Very helpful. Stepping back, looking internationally for a moment. You have OMNI in Germany and also in the U.K. which you've noted has performed quite well. So what's your expectation for contribution from international markets maybe this year, but also over time? And what other international markets might you look to expand into?

Sure. We are direct in the U.K. and working with a distributor in Germany. The U.K. results, as you expect from going direct, have been quite impressive. But still, we only have, I think, 5 reps on the ground in the U.K. So it's still pretty small, call it single-digit millions -- low single-digit millions this year contribution. So we hope -- our hope is that it will become significant enough next year where we start to break it out. And I think the obvious market for us to enter are all based in Europe. So we'll have more news on that to share as our market development efforts and market access efforts out there gain steam.

Yes. Just a couple of thoughts to add. There are established markets with reimbursement for procedures that OMNI facilitates, Germany and the U.K., which is why we're commercial there, as 2 examples. The early, I just want to emphasize, the early experience we've had in Europe has been extremely high quality. That's from a doctor's experience, surgeon experience with OMNI as well as the quality of the people that we've been able to recruit. In the U.K. today, top quality ophthalmic commercial leaders that we're really excited about. They're doing a great job with OMNI and surgeons love it. So we're really, really excited about the international opportunity. Obviously, we need to create market access and reimbursement in those countries that don't today have it, which brings us to our TRIDENT clinical trial, our large multi-center, multi-country international study, 3-arm study. So for anyone who isn't familiar with TRIDENT, a 3-arm study, about 450 patients. OMNI performing both canaloplasty followed by trabeculotomy. OMNI performing canaloplasty alone in the second arm and then the third arm is randomization against trabecular bypass implants, which, in Europe, have indications in standalone. So that's a standalone trial. It will obviously help for clinical marketing purposes, but also to create and develop market access in those countries that don't yet support these procedures.

Great. Thank you. Maybe last question on glaucoma here before we move on to dry eye, but you touched on it earlier today. You have the introduction of a goniotomy device coming or a controlled -- introduction of a goniotomy device later this year. So at the high level, what can this product do for Sight's commercial bag, so to speak? And what's the strategy given other devices? Are you currently on the market today? What contribution do you expect from that device maybe in your full year guidance?

So the last question is the fastest. Our minimal, this year, we do expect to release it in a very controlled way this year. What does it do for our overall commercial effort? It addresses a subset of the market that I think I had mentioned previously, probably more of that mild combo cataract segment, where speed and efficiency really matter. That high-volume cataract surgeon that's just doing case after case, has 50, 60 cases in a day, and they're looking for something that kind of seamlessly fits in there. OMNI, we obviously -- it's a -- OMNI is a very comprehensive procedure, that's why it works so well. But we ask the surgeon to circumnavigate a 360-degree 200-micron diameter vessel up to 2x to perform canaloplasty and trabeculotomy. So great efficacy, but it's -- but we do ask the surgeon to do more work. Goniotomy, it's a more efficient procedure. It works well enough, I think, in those mild combo cataract cases where the cataract surgery is helping reduce pressure on its own. The goniotomy can help reduce pressure. And then lastly, the profitability. There's a lot of like private equity ownership today, so -- of ophthalmic practices. And there's pockets of emphasis on profitability and goniotomy instruments, they're more cost effective. So I think for those reasons, that mild combo cataract segment, it will help our sales force get into those accounts. And ultimately, our goal is to have a best-in-class product offering for every surge in every facility, every kind of patient. And we think a best-in-class goniotomy instrument paired with OMNI puts us in a really strong position.

So turning to dry eye and TearCare specifically. In December, you received FDA approval for an expanded label. You've also noted that, that allows Sight to communicate the benefits of TearCare more completely. So elaborate on that for us, what does this expanded label do for site? And how is early receptivity in the field?

So the expanded label was based off of our first RCT with TearCare called OLYMPIA where we randomized against the first mover in MGD LipiFlow system. Again, we've done -- we have a number of publications with TearCare. The clinical data is extremely impressive, very, very consistent improvement from study to study from site to site. All signs and all symptoms seem to improve in a very consistent way with TearCare. So the new label allows us to talk to that very compelling OLYMPIA clinical data that drove the FDA clearance. It also allows us to talk about the complete procedure with TearCare. We have the thermal component of melting the hardened meibum in the meibomian glands within your eyelids and then the clearance of that melted meibum with clearance assistant. So we can talk to the entire procedure now. We can talk to the clinical data based on the OLYMPIA trial. And we know that patients -- we've done, I don't know, 20,000 plus to about 20,000 cases?

Close.

Almost 20,000 cases in the field with TearCare. Patients love it, doctors love it, ophthalmologists and optometrists. So now with the label and the product that's proven to be enjoyable for both the provider as well as the patient, it allows us to go and be more efficient in our commercialization, I can say. Our momentum with TearCare has never been this high. The team is loving what they're doing. We're attracting better and better people every day. And they're generating better and better results every month. So it's a huge market. It's cash paid today. We're building a nice business in cash pay, and we obviously have a long-term strategy that we're investing in to pioneer market access and patient access in this category that pretty much locks it today. So both opportunities, cash pay and reimbursed, are getting more exciting by the minute with TearCare. So we're thrilled about it.

Thank you. Well, unfortunately, it looks like we are out of time at this point, but -- so I was about to get to the economics up next, but thank you for your [indiscernible]. It looks like we've ran out of time. Thank you very much for your time today. Thanks again for your participation in the conference and...

Thanks for having us.

Thank you.

Appreciate your support.