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

So here we go, we're going again. I'm Joanne Wuensch, I'm the medical technology analyst here, and we have the management of Sight Sciences with us. So thank you all for joining us.

Thanks for having us, Joanne.

So I need to start big picture, and let's start with the MIGS market and the landscape and how you see it evolving, and maybe we'll call it a post-pandemic environment.

Yes. We're super excited about the market. There's the combo cataract segment. It's growing nicely. We're continuing to take share in that segment. We're expanding the combo cataract segment in the model to advance space and then there's the much larger stand-alone opportunity, 4x to 5x larger. We're developing that market. We've got a unique indication for use and unique usability and efficacy profile that allows us to effectively develop that market. There's 4 million to 5 million patients in the U.S. who don't need cataract surgery but have glaucoma, that might be prior to cataract surgery or they've already had cataract surgery. They're elevated -- the pressures are elevated. They're on meds and the provider taking care of the patient has a decision to make. They're on 2 meds and their pressure's uncontrolled. Do you prescribe a third med? Are they on 1 med? Pressure's uncontrolled, do you prescribe a second med? And we think there's a tremendous opportunity for better patient care, by intervening surgically safely and effectively earlier and transforming this category, the field of glaucoma, from a medical disease to a surgical disease.

Okay. So there's a lot to unpack there. Let's start with the combination cataract market. Well, I'm going to take a step back further. Of your revenue, what percentage comes from combination cataract and what percentage comes from stand-alone?

Yes, for our surgical glaucoma business, we estimate about 85% or so comes from combo cataract cases and the remaining 15% from stand-alone.

And how has that changed over the last 2 years?

It's been pretty steady on a mix basis, we believe, but we've been growing very nicely overall. So I think we've been not just establishing and pioneering the stand-alone market but also taking a lot of share in the combo market.

Yes, there's a divide. It's interesting because our -- the way that we view the space, there are patients, there's millions of patients with glaucoma. Some of those patients are phakic. Some have cataracts and need cataract surgery, and some of them have already had cataract surgery and were pseudo-phakic, but their pressures are uncontrolled. So for us, we want to -- we want to treat as many patients with OMNI as we can. That's going to include stand-alone, combo cataract. So as long as we're growing both businesses, growing in combo cataract, growing in stand-alone, we're happy we've been doing both, as Tom said. So we expect to continue growing both.

So sticking with combination cataract, a lot has happened in that market in the last 2 years. There's acquisitions, there's reimbursement, there's education, help me understand how you see the MIGS market today, your market share today? And certainly, maybe just do a state of the union on combination cataract.

There's, I'd say, 2 different segments within combo cataract, I think and maybe different choices of procedures depending on which segment you're in. If you're in -- there's mild, moderate and severe glaucoma. If you're -- if a patient has, let's say, mild disease and needs cataract surgery, they might not need that much efficacy, right? So now some other procedural attributes, maybe efficiency, speed of procedure, ease of procedure, economics of procedure, economics per minute, those things might factor into the decision-making of which procedure I want to offer to this patient. That's in the mild segment. As you move to the right, more moderate or advanced disease, the efficacy starts growing in importance. And so we have SION which competes in that mild combo cataract segment, where it's not purely an efficacy-driven decision. And then as for moderate and advanced, we have OMNI not only taking share in moderate and advanced, but also expanding the combo cataract market. So wherever efficacy is your primary determinant of procedural choice, we think OMNI has the top product market fit. And that's driving our overall growth.

And market growth?

Yes, the market continues to grow. I mean the declines in the stent business notwithstanding, we think the MIGS business is still growing low teens. And I think we're growing much faster than that.

I think you are too. And do you think you're taking share from others who are in the MIGS market, or do you think you're taking share -- I mean I guess that's my option. I'm trying to think where else you'll be taking it.

Yes. I mean we're -- I mean, obviously, on the stand-alone side, we are the only product that's until recently -- very recently, we're the only product that's indicated for stand-alone MIGS. So we're -- every case that we perform there is growing the market. On the combo cataract side, I think we're both taking share and expanding the market into more severe disease states.

So help me understand, if I'm a physician and I have a patient who comes in, we're just dealing with a combination right now because we'll spend time on stand-alone, and I have a patient that comes in that I'm going to have a cataract procedure done on him or her, and they have glaucoma begin to say it's mild to moderate. What's the decision tree for which tool or device that I pick up to treat them?

There's a couple of scenarios, subsets to the market. So mild combo cataract, if you're a very high-volume cataract surgeon, right, doing 40, 50 cataracts a day, you don't want to compromise that efficient cataract schedule. So you're probably -- and the disease is mild, so you don't necessarily need whopping efficacy. So you're probably going to choose the most efficient procedure, in some cases, that's goniotomy. If you're a private equity owned facility, right, and profit is top of mind, what's the most profitable procedure? That could be goniotomy. If you're a resident or a fellow learning MIGS for the first time, what procedure is the training wheel of MIGS? Goniotomy. So there's a segment, those are all distinct subsets of the market in combo cataract, more on the mild side where goniotomy has a very nice product market fit, and we have a very [indiscernible] goniotomy device in SION. As the disease progresses more, the prioritization will become more towards efficacy? We're obviously [indiscernible] the strongest product market fit.

Okay. So SION, for those who are not familiar with it, can you describe the device, please?

Yes. It's really nice bladeless goniotomy device. So no blades, atraumatic design. Very smooth in the angle, slides very nicely -- you okay?

Yes, I have been talking all day. So I'm going to drink some water while you talk, if there's a plan here, yes.

Yes, so it's a bladeless design, less traumatic than other options. It slides very nicely in the angle, very gentle. And I think it's a nice -- kind of goniotomy elevated is what we call it, nice upgrade to the procedure, goniotomy. It's gotten very good early reception from surgeons. We've had it out in the market for a couple of months now, and the feedback's been terrific.

But are you taking away from OMNI procedures with SION or are you combining it?

They're distinct subset of the market. So just keep in mind, when we launched OMNI in 2018, we launched into a market that already had well-established goniotomy instruments. So OMNI has never existed in the market where goniotomy wasn't pervasive. What we're doing with SION is offering a better goniotomy instrument for that well-established subset of market, that's distinct from OMNI. We try to sell OMNI into some of these accounts, and either the really, really busy cataract surgeon doesn't want to spend the extra time to get more efficacy because that patient might be mild and maybe the surgeon feels like they don't need more efficacy, and they don't need to spend more time with OMNI. We've been trying to sell OMNI into those accounts. There's a subset of them, and now we can get in there with SION. And that opens up a nice opportunity to now where we're in the operating room with our great reps working with great relationship with the surgeons. And they're in there with SION, and then they can say, well, that patient is a little more advanced. Maybe next time think about OMNI.

Okay. Let's talk about reimbursement. Again, we're doing combination cataract and we're going to do other things shortly. That's changed a lot over the last 2 years. Where is it today? How attractive is it for the physician, for the ASC, and do you view it as stable?

We do view it -- it has not been stable historically. There's been a lot of noise as you said. I do feel like right now, finally, heading into 2023 we feel like we're actually in the most stable market environment we've ever had. So we feel good. And is the reimbursement for OMNI attractive? It is. It's been -- there have been some cuts. The resulting fee this year for OMNI is $620 -- $610, $620, pro fee, which is not where it used to be, but it's sufficient. And if you compare it to the #1 surgical procedure in all of medicine, cataract surgery, which pays $535. You can see how it compares, and it's favorable.

Excellent. Is the decision tree for a physician different if the patient isn't mild to moderate, but is moderate or severe?

Absolutely, yes. When the disease gets more serious, the efficacy prioritization goes way up to #1 in the decision tree.

Okay. Why would a patient wait to be that sick? And if sick is the wrong word, why would they wait to be moderate to severe, but not caught mild to moderate?

Well, we'd love to change that, right? Now that we have OMNI, historically, there was a lack of safe and effective surgical interventions that doctors could recommend early on in the disease. So when your only option surgically is something invasive with lifelong risks of complications, procedures like trabeculectomies or valves or filters, you hold off on treating -- surgically treating earlier and you leave that patient on meds. They're put on a med and that med works for a while, but then it stops controlling. The disease stops controlling the, pressure rise, you recommend a second med. You may even recommend a third, sometimes a fourth med. And historically, you're doing everything to delay the need for that invasive surgery. Now with safe and effective minimally invasive surgical interventions, we can change the treatment paradigm. We can -- surgeons can recommend earlier surgical intervention so that patients don't have to progress to severe. So when our job is done, many years from now, yes, we should see lots of effective earlier surgical intervention and fewer patients progressing to end-stage disease.

So as a student of med tech for a long time, it strikes me that sometimes you don't get into other markets until one is saturated. In other words, you don't get into stand-alone until combination cataract is saturated. Do you think that that's true, or do you think that there's a driving force behind stand-alone mix?

Our dynamic is a little unique, in my opinion. In that stand-alone market for us. It's the same surgeon. So all the surgeons were training in combo cataract or are stand-alone surgeon. It's the same device, it's OMNI. OMNI use -- same OMNI used in combo cataract, it's the same OMNI used in stand-alone. It's the same procedure/procedures, canaloplasty followed by trabeculotomy. So in this case, it's really a matter of where every time we train a surgeon in combo cataract, that's the surgical foundation that we build, the stand-alone business on top of. So then it's just a matter of changing how this disease is treated by the referring provider community where instead of prescribing a second or third med, they're recommending OMNI surgery to that already established base of OMNI surgeons who are very familiar with the device and the procedures from having done 100 or several hundred cases in combo cataract.

So part of the selling point, and I've sort of reticent to use those words, but the process is Mr. and Mrs. Jones, I'm going to be giving you a cataract surgery. At the same time, while you're already there, I can treat your glaucoma. Now the conversation is different. Now it is you're on, talk me through this, help me understand the process.

So you're -- you've been on 2 meds. Your pressure is now uncontrolled or I'm worried that you're not complying with your meds or the meds are causing way too much ocular surface damage. We can put you on a third med, but those issues remain. The meds maybe stop working effectively. They're not just -- they can't control the disease anymore or the patient isn't really complying with their daily routine. Or they can't tolerate the meds anymore or the costs are too high at that point. So instead of recommending an additional med at that point now with OMNI, we have to educate the market to think surgical intervention earlier, control IOP, control medication. So we can get the pressure down, we can often reduce the medication burden both, and that's what the clinical data shows that OMNI can reduce not only the pressure but also the medication requirements.

Do you need a direct-to-consumer campaign, one that educates the patient, not just the physician?

I don't know if we need one, but we are taking some early tests of a direct-to-patient campaign and hope to have some strong results later this year.

We think it can help. We think with -- generally with chronic diseases, patients tend to look online or in social media or different groups for solutions. And the early work we've done in terms of testing this with patients, there is an interest, patients who are -- who have glaucoma and are on multiple medications are definitively interested in learning about a surgical option, a safe, minimally invasive and effective surgical option. So we were in the midst of early pilot right now on DTC and more to come later this year.

And we've done internal market research that indicates 85% of patients would likely get an OMNI procedure, if it was recommended by their doctor on a stand-alone basis. So it's really -- the education is a huge part of the stand-alone market development process.

I can say that. How has your sales force evolved over the last 12 to 18 months?

So on a territory basis, we've got about 55 quota-bearing reps throughout the country. Over the last 18 months, we've added a team of about 16 or so strategic account managers that cover teaching institutions and the VA, and that's been a huge success for us. And we've also added a team of 20 glaucoma clinical consultants that really hit the ground in force a few quarters ago. So we are learning the best way to deploy them. And that's really where the investment has been over the past year or so.

So we have about 100 -- Tom, particularly, we've got 100 field resources focused on glaucoma. We feel like that's a pretty good team. We can deliver our plan.

So stable from here.

Yes.

And we've been spending all this time so far talking about the U.S. Where are you internationally?

So we went direct in the U.K. in 2022, and we are direct in Germany as of January 1. So I think we are entering new markets in a measured fashion, and we need to make sure that the market access is -- and regulatory procedures are in place before we start spending a lot of money overseas.

We're very pleased with our early, early progress in both the U.K. and Germany. We're very, very lean teams but very, very high-quality teams, very experienced commercial talent. And they've rolled out OMNI to the early adopter KOL community in both of those countries. And the reception of OMNI has been fantastic.

Okay. What's the next best market outside the United States for you?

Today, it's the U.K. because of the regulatory and reimbursement environment. And I think, obviously, we think Germany is also a very high-quality market. Beyond that, some of the European markets are also of a decent size, but they have some regulatory challenges that we'll need to overcome. There's also big markets in the places where there are big populations. So Brazil, China, India, Japan, are also very large. Those will take a bit more effort and care to enter profitably.

It's a big roll out there.

It is.

TearCare, where is that in this development?

It's -- we're very excited about where we are with TearCare. We've been pursuing a highly differentiated pioneering style strategy to develop the MGD or evaporative dry eye market, in our opinion, the right way, which is generate highly meaningful clinical evidence that can support successful coverage and payment and reimbursement. Dry eye is the #1 cause for a visit to an eye care provider. The #1 underlying cause of dry eye is meibomian gland disease. Yet there's not a single meaningfully covered reimbursed treatment to chronic disease, millions of patients suffer from it. There needs to be a treatment that's covered. That's a heavy lift, right, because there's millions of patients suffering from into payers are going to care what they may or may not cover. And so our strategy all along has been one, we're commercial in the existing cash pay market having great success with TearCare small team. We're not driving it necessarily for max revenues and max growth today, but we want to get it out there thoughtfully kind of in a controlled release, kind of way to make sure that the reputable dry eye key opinion leaders are using TearCare successfully, taking care of their patients to dry eye patients successfully in parallel with that focused commercial effort. We're running our pivotal RCT. We already have one successful RCT complete with outstanding clinical results, but we're not stopping there. We have a second large RCT, probably the largest device, RCT dry eye device. RCT performed the first, I believe, drug versus device RCT, probably the longest duration of study, and it's a 2-year trial. Most dry eye studies are 1 month or 3 months. We're executing this large RCT that really is a payer design study. We spoke to 8 different insurance companies and 8 different medical directors, some of them ophthalmologists, some of them family practice, a variety of payers, a variety of medical directors. So a really nice cross-section of who we might be talking to at the tail end, at the conclusion of our SAHARA RCT. And we asked these peers, here's the state of affairs in dry eye. You're paying all this money for prescription Rx, yet prescription Rx is indicated for a very small subset of the dry eye population. It's being prescribed to everybody, but it's only indicated for a very small subset of aqueous deficient dry eye sufferers. The vast majority of patients who show up with dry eye symptoms actually have meibomian gland disease and their tears are evaporating too quickly. The Rx isn't affecting that. So there needs to be a procedure. This disease will one day be an interventional disease. And we believe it will be with the TearCare intervention. So in talking to those payers, those long interviews, we said what will it take? When we run a robust study, what do you need to see to successfully cover and pay for TearCare? And it was very clear from all 8 of those discussions, they need to see how TearCare compares to RESTASIS. We're aiming for superiority. That's a 6-month endpoint study completed enrollment at the end of August last year. So we think by summer, late summer time frame, we'll be ready to put out some top level the readout on the 6-month primary endpoint. And the other secondary endpoint is 2-year durability. Payers want to see if we decide to cover this and pay for this, how many treatments are typically required to improve the signs and symptoms of a dry eye patient. Now based on the 20,000-plus cases that we've performed to our customers, our eye care providers have performed in the field, what we typically see is 1 or 2 TearCare treatments per year is enough to deliver sustained improvements in the signs and symptoms of dry eye.

So SAHARA finished enrollment early.

It did.

And when do we get to see the clinical data?

So there's the 6-month endpoint and the 2-year endpoint. The 6-month end point will be -- we're going to submit for publication, hopefully, by late summer. That's the earliest we'd be ready. We need to -- it would be very, very kind of high-level outcomes. But by the end of the year, we will have the SAHARA 6-month superiority readout.

Is that enough for you to get going on?

With payers? Absolutely. So if we submit by summer, and we have a publication we're aiming for, obviously a top journal by the end of this year, then in early 2024, we would go payer by payer or maybe a commercial payer by commercial payer, and we expect to have highly -- this assumes success, obviously, in the trial, and we'd expect to have very productive discussions with those payers.

So if you're doing roughly $1 million to $2 million a quarter now from TearCare, is the accelerant the 6-month data which is published or is the accelerant the Tear data?

Both. I think there's a variety of payers, right? There's always the hold outs. There's the early adopter, the payers that come on board sooner with enough evidence, and it's worth their while and their opinion and then there's the payers that are the last to cover and they're going to want to see not just the 6-month comparison, but also the 2-year durability end point. But we think the 6 months starting in 2024 will be plenty to go, and there's such a large market, there's so many dry eye patients. Any small win with a commercial payer is going to be needle-moving in terms of potential revenue growth.

Okay. I'm going to ask this question even though you're sitting there. Where are you on your -- you know where I'm going now, right?

Jim is our amazing interim CFO. Actually, I mean that. We have a rock solid finance team. We're in very good shape, and we are in the midst of a CFO search, as you know. And I'd say, we have some very, very high qualified candidates that are advancing through the process. And hopefully, in due course, we'll have something to update you all on.

So one of the things that came up when your previous CFO resigned was who owns the numbers? Is it him? Is it you?

We all do, and I'd say, again, pointing to our high-quality finance team, and we all work closely together on the numbers and the plan, we work closely with our commercial team, I think...

We all own the numbers. I mean at the end of the day, Paul is the founder and CEO. He owns them. It's a little bit more than everybody else. I want to own as much as I can, but obviously the buck has to stop somewhere. I think we've really been doing a great job transitioning since Jesse left and haven't missed a beat, and we have no fears about our numbers or financials or anything like that. So we're good.

Excellent. So in your MIGS portfolio, just to get back there, you've got OMNI, you have SION, what else do you need? What else do you have that you can talk about? You are itching to say something, I can see it here.

No, I think there's a difference between what we have and what we want to have, right? We have -- what we have are some very, very big ideas that we think we can execute very efficiently. But it's still a bit early days for that.

But in terms of -- I'd expand that to the glaucoma categories. Specifically within MIGS, we think OMNI is the market leader and we'll continue to be, especially as we continue to develop the stand-alone market. There are subsets within the MIGS market of products and procedures that doctors like to use, goniotomy is one example, stents, suprachoroidal. I think these are all areas within MIGS that will either have a role or will 1 day again, have a role. Again, I think OMNI will lead the way. But depending on a patient profile or a surgeon preference, there are going to be subsets within that. So we would expect over time to offer an even broader MIGS portfolio. But then going beyond MIGS, in terms of the glaucoma category, we've been in this space for a while, and we understand the disease, we understand how to innovate well. Everything we've done so far has been internally developed. And we believe we have 3 out of 3 best-in-class products with OMNI, SION and TearCare. So we'd like to offer a best-in-class sustained release medication from day 1 of diagnosis and then offer something all the way beyond MIGS to end-stage disease where maybe you need to go ab externo. So that's what the future, like as we look out our vision for the next 5 to 10 years is to offer a portfolio that helps the eye care provider take care of their patients from first diagnosis all the way to end-stage disease.

Gross margins quite healthy. What keeps them up, what pushes them down?

What's been keeping them up is that we have great product versions. When we've been able to source and have our products manufactured very efficiently, where there is some room for growth is on the TearCare side, where we aren't at scale yet. So we're not fully covering some of the manufacturing overhead. Once that business scales a bit more, we'll have gross margins for the entire business that approach the low to mid-80s.

We're fortunate we've not had any major supply chain issues. We have a rock star ops team. They do a really good job and no supply chain issues, very strong margin profile. If we're not where we want to be margin-wise, we love 80% plus and hopefully significantly beyond that in volume. And I think we have visibility on everything we do to get to that point.

So when we're here a year from now talking, what do you think we'll be talking about?

A lot of exciting things on the MIGS side, OMNI's continued share gains in combo cataract, continued market expansion in combo cataract. Maybe even more exciting, continued growth in stand-alone. On the TearCare side, I mean, we talked about the timelines. Next year when we're here, Joanne, we'll be talking about SAHARA and talking about what we're doing with that data and the payers that we're talking to, hopefully.

Wonderful. With that, I'm going to wrap it up. Thank you so much for joining us today.

Thanks.

Thanks for having us. Pleasure.