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

So next up, we have the management of Sight Sciences, Paul Badawi and Alison Bauerlein.

So I want to start from a big picture perspective. You did pre-announce fourth quarter results, highlighting some of the changes in the MIGS landscape. And I think that's a great place to start as we think about the Sight Sciences story.

Yes, happy to start there, and thank you for having us here. And when we think about the fourth quarter dynamics, first of all, we had in the middle of the quarter the new LCDs effective for Medicare in 5 of the 7 regions. And those LCDs, first of all, confirmed coverage, ongoing coverage for canaloplasty and goniotomy, which has been a question mark for 1.5 years plus now as we worked through those LCD dynamics with those MACs. So we were very glad to see that, that final LCD went effective, confirming that coverage. On the other side, though, they did restrict the stacking of multiple MIGS in a single procedure at the same time as cataract surgery. And so that restriction does impact a portion of the market. Typically, patients who needed the most efficacy that had maybe more challenging glaucoma were receiving these additional procedures at the same time. The MACs came to the conclusion that there wasn't adequate clinical evidence to support the benefits of these multiple MIGS, at least today. In the future, maybe there will be support and coverage for this.

Let's pause there for a second because I know I throw around the phrase stacking, all right? And I think I know what it means. But maybe we need to base what percentage of procedures are stacking. What percentage of those procedures is Sight Sciences exposed to? And then what exactly is the stacking procedure?

So I'll start off with the why "stack procedures". I think glaucoma is a complex disease, the outflow pathway is compromised in different ways. Surgeons find it useful to treat different sources of outflow resistance with different mechanisms of action. So a canaloplasty, for example, might dilate the collapsed Schlemm's canal, a trabecular bypass stent will bypass disease trabecular meshwork. There's another solution. Goniotomy might also help remove some of the disease trabecular meshwork. So the treatment philosophy is if I'm in the eye and I can do more for this patient and offer them multiple mechanisms of action that might add up to an invasive alternative that comes with lots of lifelong complications. Then I should do that. As Ali mentioned, that's probably more obvious to do for a later-stage patient that's more advanced, maybe less obvious on mild, although I think the data will eventually [Technical Difficulty] is a good thing. But the rationale is to try to offer multiple mechanisms of action to the glaucoma patient while you're in the eye. And so as it relates to Sight Sciences and OMNI, thankfully, we agree with the multiple mechanism of action treatment philosophy, and that's why OMNI has been designed the way it's been designed, and it's indicated the way it's indicated, it's indicated for canaloplasty followed by trabeculotomy. Years ago, we saw the opportunity, and in talking with our surgeons where they were trying to hit the disease with multiple mechanisms, we had an opportunity to bring these 2 different mechanisms together in one device, one procedure. So OMNI treats all 3 sources of resistance in the outflow pathway with, again, a single device, single procedure. So it's multi-mechanistic and multimodal by design. So for that reason, while the market is transitioning from 2 MIGS down to 1 MIG in combination with cataract surgery, thankfully, we have a solution that we can offer our surgeons that allows them to continue offering multiple mechanisms with one device.

So, getting back to the market question of what is the real percentage of the market that we're seeing here. First of all, there is stents plus canaloplasty or stents plus goniotomy. Those are the codes that are now restricted under the new LCDs that are effective. Canaloplasty plus goniotomy was already not allowed. So that restriction was already in place. And so it's really stents plus one of the canal-based surgeries that is restricted now. Our estimate is that, that's about 15% of the MIGS claims billed were these stacked combination procedures. And so that portion of the market will come out of the base as we think about going forward. We do estimate that our percentage was slightly higher, maybe in the low 20s percentile of total claims were OMNI was. We don't have exact numbers here because OMNI doesn't have a unique code. And so it's more looking at the extrapolating from our customer usage. But we do know that OMNI was used in combinations with stents slightly more than the general market.

Okay. So if there are roughly 500,000 MIGS procedures, some 75,000 of them are exposed to this new chain.

Correct. About 15%. Yes, our estimates are a little less on the 500,000 is more like 400,000.

400,000, there's more. Okay. So it's fewer exposures.

Okay, not the 500,000 that I had originally thought.

So about 15%. And it sounds like yours is of the 15%, maybe half, 2/3? When you say 20% of the total were OMNI, what does that mean?

Yes. When we say that, we mean our exposure. Our procedures, what percent are done with the stacked procedure, and that's in the low 20%.

Of total OMNI cases.

Correct. Of total OMNI. I was trying to back into the math the other way from the total market to the stacking to the percent that you're exposed to. I can do that math to you later.

All right. So what happens now as we think about this something you go back, and you petition the societies to say, "Hey, look, this is actually really good for the patient. Do you look at different codes that encapsulate 2 procedures and 1? Because my suspicion is they're looking at 3 bills, and they're like you can do 3 bills, you only can do 2.

Yes. So first, we work with the surgeon community and remind them of the comprehensive nature of OMNI by itself. Then again, the full OMNI procedure is up to 360 degrees of canaloplasty and up to 360 degrees of goniotomy. So it's very comprehensive and multi-mechanistic by design. So we are active right now in the market, making sure that, that's top of mind. That OMNI by itself is a very comprehensive procedure that delivers the efficacy necessary, whether that's mild, moderate or advanced patients. So that's first and foremost. As it relates to multiple products or stacking, I think there's an interest in generating the clinical data that will be needed to support combination coding. I think the payers are going to want to see that robust long-term clinical evidence. I think the surgeon community has a significant interest in it. I think societies do. I think the industry does. We believe it's the right thing for patients, for surgeons to have the flexibility to treat their patients with whatever they see fit. Ultimately, the clinical data needs to show it. So I think there's a number of efforts underway now to try to generate that data, but that will likely take some time.

It takes time. So what does Sight Sciences do in the meantime?

The first thing I mentioned, which is getting out there right now. And OMNI, again, is multi-mechanistic by nature. It's comprehensive by design, canaloplasty followed by trabeculotomy.

So how do you think about increasing physician education, patient and moving procedures forward?

We're continuing to invest in all of the above. We have a very significant commercial infrastructure a very good team, educating surgeons, reminding surgeons and facilities on the benefits of OMNI, not just in combination with cataract, but also in stand-alone. Surgical glaucoma, we're entering a really interesting time in ophthalmology. And I know you cover cardiovascular companies and orthopedics companies, which decades before ophthalmology, interventional approaches, and minimally surgical procedures became standard of care over time, it takes time. And so just like interventional cardiology, we are entering in ophthalmology in our field, in particular, glaucoma. So it's a very exciting time. You can feel it. We have the American Glaucoma Society meeting this weekend. We'll be flying down from here in New York down to D.C. this afternoon. And there is a lot of talk and buzz and clinical data on interventional glaucoma, and we're doing everything we can to help lead that effort.

And how do you think physicians are looking at interventional glaucoma?

We think that the data is becoming clear enough, whether that's interventional surgery like MIGS, whether that's interventional laser like SLT as a potential first-line treatment, or if that's interventional pharmaceuticals like sustained release. I think those 3 modalities should continue to become viewed as early-stage interventions as opposed to daily pharmaceuticals, disease progression almost guaranteed, and then the need for an invasive procedure. So what's going to be talked about at AGS this weekend? Intervening earlier with sustained-release meds, intervening earlier with a laser like SLT, intervening earlier with microinvasive glaucoma surgery like OMNI.

Are these procedures financially rewarding and beneficial because they make money during these procedures, physician?

They do. Yes. I think that was the answer.

So what stops them from adopting the technology? I mean, I would assume they'd be motivated.

Yes. I think a lot of it just has to do with the focus and the attention and seeing that these patients need intervention. They're very busy people. They have full surgery centers, and they need to really understand opportunity. And specific to OMNI, our focus, as we talked about on our last call, is really trying to target those pseudophakic glaucoma patients that obviously already had a cataract procedure 3-plus years ago. They have increasing medication use, 2-plus medications, their IOP is increasing. And these are patients that right now aren't treated. They don't have a treatment option outside of just adding another med, and they're waiting for an advanced glaucoma surgery. And this is an area that we're really trying to target instead of saying glaucoma surgeon, you should treat everybody on a stand-alone basis. That's a really hard sales pitch to make. They're very busy. It's instead, let's take a really targeted approach and address a patient population that clearly needs treatment, needs a MIGS intervention, doesn't have another option, isn't the right candidate for these other treatment modalities and start there in terms of stand-alone MIGS penetration. And so that's what we're focused on is really trying to get that message out through peer-to-peer education, us educating them, the clinical data. We just had the 36-month IRIS Registry published in January, showing sustained benefits of OMNI, and those things are really important as we look to drive this stand-alone market adoption.

Changing practice patterns and treatment paradigms takes time. It takes, as Ali mentioned, a lot of clinical data, and we have more and more coming, compelling clinical data that suggests intervening earlier is better for the patient. But getting beyond educating the surgeon community and patients and referring community on the benefits of intervening earlier, really getting them to act. I think that's sort of where we're at now, and there's another talk at AGS about moving from. The clinical evidence is pretty clear. These interventions, whether it's laser sustained release or MIGS sooner is better for the patient long term. But now we're at the point where we need to figure out how do you act? How do we activate them? How do we get the cases done? And that's working with our customers, surgeons and facilities. The ASCs are busy. Cataract surgery is the #1 surgery in all of medicine. ASCs are busy around the clock with cataract surgery. So how do we work the interventional glaucoma procedures into the busy schedules of both surgeons and ASCs? And that's all happening now? But it will grow. The question is how much can we all affect that growth and how much can we steepen the curve of adoption?

So we've been talking for some time, not just today, over time. How is physician training built over years, over the past couple of years? And how do you see that going forward? Is it a matter of training more docs? Or is it a matter of taking the docs that are trained and do more procedures or some combination?

Yes, I think it's both. Yes, Joanne, we've obviously been discussing interventional glaucoma for years. We've been training a lot of surgeons on MIGS. I think we're at about half, maybe just under half, of all the MIGS-trained surgeons have now been trained on OMNI. So that's exciting in that we have a very sticky customer base that loves OMNI and the clinical results it delivers, but we also have a lot of runway in terms of training new surgeons. So both going deeper in our existing base and driving that pseudophakic market development and case volume, that's one area of focus for us, and then continuing to train new surgeons.

And is the interest from the surgeons as high today as it was 12 months ago?

So I think now that we have LCD clarity, that helps a lot. During the LCD uncertainty period, we absolutely did see a drop in new surgeon training. As you would expect, surgeons don't want to train on something if they aren't sure that there's going to be long-term durable reimbursement for those procedures. So we do expect to continue to see progress in reengaging on new surgeons training as we move forward from here now with clarity behind us.

Okay. I'm going to shift gears just a wee bit here, and I want to talk a little bit about the bigger picture. I'm asking everybody this question in no particular order today. There's a lot coming out of Washington. How do you think about things such as tariffs, NIH funding, FDA cuts, and those types of factors when you think about your business?

It's a very big question, and it's a dynamic environment. Just saw right before the start of this session that there was additional commentary from the President on proposed additional China tariffs. For us, the largest exposure is the China tariffs. We do have our contract manufacturing based in China for our OMNI, SION, and a portion of our TearCare production as well. So that is the largest exposure for us. We do have some U.S.-based facilities as well. So that is an impact for us. The 10% is kind of an incremental impact on our overall business in terms of results. But of course, this is an environment where these things are changing on a daily basis on the tariff front. And, of course, supply chains are global. So there are interconnections as we look and evaluate our strategy here. In terms of the other impacts, NIH funding or those types of things really don't have a material impact on our business. Of course, that does have an impact on just the general medical community, and so that impacts our customers. And that is important to us, and we hope that there is continued investment in those. On the FDA front, I think it's still very early to say what that potential impact would be. We do have products in development and communications ongoing with the FDA around those products. So, cuts there could delay R&D projects depending on what happens with those specific cuts and how it impacts our industry. So at this point, we're just kind of working through those. I wouldn't say anything has a large material impact at this point from those changes, but we all know that there's a lot of uncertainty around those potential outcomes.

Okay. I want to spend a little bit of time now talking about TearCare. And Dry Eye disease is getting just a lot more interest, just generally across the ophthalmology space, the manufacturers. This is a multipart question. How do you think about adoption of new Dry Eye techniques? And how do you think about the positioning of Tear?

Sure. So the Dry Eye, another massive problem in eye care, one of the top reasons for a visit to an eye care provider and probably increasingly so, given everyone, all of our society is obsessed with screens, staring, not blinking. These are the  factors that contribute to it, but it's a growing problem. We've seen the adoption of new pharmaceuticals, new eye drops that have different mechanisms of action, and they've performed quite well. So I think, for example, there's some MGD-specific targeted eye drops that are in particular, doing very well, which I think is a good leading indicator for the type of Dry Eye that TearCare addresses meibomian gland disease or evaporative Dry Eye disease is the #1 type of Dry Eye disease. That disease originates within the eyelids and the oil-producing glands in the eyelids and meibomian glands. And I believe we're a first mover in a market access-focused strategy to develop this market. It's today, interventional procedure for Dry Eye, interventional procedure for meibomian gland disease are cash pay. Patients deserve a need to have reimbursed access to highly effective treatments. And so we set out on this strategy many years ago, and, Joanne to your point, if there was a year to start paying attention to TearCare, that year is 2025. We've been executing this strategy in terms of developing and iterating on best-in-class technology that offers the patient and doctor the best safety, efficacy, and usability possible. We've been working on driving up all of those criteria for our technology, but then also generating the clinical data in a form that payers could be motivated by. So we talked to insurance companies before designing our pivotal RCT, SAHARA, which we'll share where we're at on that in a moment. But payers wanted to see 2 things. If we could deliver these 2 things, then they suggested they would support coverage and payment for TearCare. One, they wanted to see how does TearCare compare to the gold standard, the standard of care, which is cyclosporine, daily cyclosporine eye drops, Allergan's, RESTASIS. Two, ideally, if we could show superiority, to RESTASIS, then the second endpoint is, well, how long does the TearCare procedure last? Meaning, if we decide to cover this procedure, is it one treatment per year? Is it 2 treatments per year? Is it more than that? And so we've done commercially 65,000-plus cash pay cases. So that's allowed us to really perfect the TearCare technology as well as understand how it's performing clinically. And so the SAHARA RCT is a reflection of what we've been seeing in the market to date. And TearCare has a very strong reputation for its safety, efficacy, and usability. We've just completed the 2-year last patient last visit, I think it was in October of last year, recently submitted for our 2-year publication. So hopefully, that's going to be published this year. The goal is to take that package of clinical data, Phase I and Phase II, 6 months and 12 months have been published. The 24 months will be published soon, again, in 2025, along with a budget impact model, which was published late last year, a cost-utility analysis, which will also be published this year, and our RVU analysis. So those 6 deliverables serve as the foundation for highly productive payer conversations and our market access team, our commercial team doing a great job right now, 2025, working with our customers, ensuring that high-quality TearCare claims are submitted to payers in parallel with payers understanding how TearCare is performing clinically in the market, our market access team is having policy conversations with payers. So we've stated that we believe we're going to see coverage policy decisions, successful coverage, and payment decisions this year, and that's what we're actively working on. So it's a very, very exciting time. Just like we talked earlier about interventional glaucoma, we're working to create and pioneer a category of interventional Dry Eye, interventional ocular surface disease. I think we're way ahead with our TearCare long-term strategy. And this is the year where, hopefully, we can deliver some very meaningful catalysts, not just for site, obviously, but for patients who need access to these treatments to doctors who need reimbursed options to take care of these patients that don't really have great options and also to payers. Payers benefit as well, and that's what the budget impact model says, it's what the cost utility analysis will say also. So we're trying to bring value to all stakeholders in TearCare, and it's a unique opportunity where you've got millions and millions of patients who are suffering from a disease that today doesn't have a reimbursed procedure. And we're on the cusp, we believe, of unlocking that opportunity.

So let's unpack some of that, you just said a lot. So you're collecting the economic aspect of it. You're collecting the clinical data, multiple clinical trials. You're presenting it to commercial payers, you're presenting it to all the commercial payers.

Yes, national commercial, regional commercial as well as MAC.

And as well as MAC. And so you're going to have to go MAC by MAC or private insurer by private insurer? And/or is this one of those situations like somebody says, yes, we're going to reimburse for this, and everyone is like, okay.

There's a strategy to it, and it's targeted. There's a number of considerations, payers who may adopt technology sooner, payers where we may feel like we have stronger, well-established relationships with, but there's strategy embedded in who we're talking to and how we're going about '25, '26, '27 coverage. But right now, I'll say that we are talking to a variety of smaller commercial, some national commercial, as well as a handful of MAC.

Yes. This is a large market opportunity. It will take multiple years for us to get full coverage across all of the payers. But in the interim, in each market, there are huge opportunities here. There's 19 million patients with Dry Eye disease across the United States. As we work through these challenges with the payers, what's great is we can leverage the infrastructure. So, say we get a win in a specific region. We already have some level of commercial capacity within those regions based on the cash pay business that we created previously. There are about 1,500 customers that have TearCare hubs that are trained on procedures that know how to use the device. And as Paul said, we've done 65,000 cash pay procedures over the last few years. So there is already an existing base of commercial activity that is waiting for some of these wins to happen. And then as we get these wins in specific markets, we'll be able to activate that infrastructure and have a targeted approach to it as we add more covered lives.

So, do you think that there's a wait list that's starting to form? I mean, are doctors aware, okay, there's reimbursement that's coming, Mr. Smith, I'm going to put you on this wait list. Are you starting to see that yet, or maybe not?

No, I don't think that it's necessarily a waitlist of individual patients. I think that there is more doctor demand for this type of procedure, and we are waiting to see us get some wins here. Now, what we are seeing is that we are actively engaged with the community and the eye care professionals to try and establish coverage. So in each of these discussions, there is a doctor who's performed a procedure and submitted a claim, and we're working with them to try and get attention from the payer. So there is a baseline of work with the KOLs to get these claims submitted and get some level of interest from the commercial payer, in particular, and the MACs to establish that there is a need, there is a demand for these procedures. So that work has been ongoing over the last year, and we've made good progress on that front.

And again, to tie it all together, this strategy from day one, we've been working to get to 2025. So our commercialization, we have a really, really strong TearCare commercial team, small but lean and mean and very effective. The goal of commercialization in the cash pay environment was less around how fast we grow revenue, more around how do we perfect the technology, how do we ensure that we're able to deliver reimbursement worthy clinical data in the form of the SAHARA RCT. And lastly, and very importantly, how do we develop really, really strong relationships with highly reputable Dry Eye KOLs who really, really understand the power of TearCare in this procedure, patients and patient care so that they can help us in those conversations with payers, as Ali mentioned. And so we have a network of reputable KOLs, ophthalmologists, as well as optometrists across the country. And we're equipped right now because of that cash pay commercial experience over the last few years to have high-quality trusted conversations with any payer wherever they might be.

Okay. What are the economics because I run financial models, what are the economics of TearCare?

Yes. So that's something that we'll have to wait to see what the payers end up assigning as a reimbursement for this. As you know, we established new pricing effective in October of last year based on the clinical data from the SAHARA study as well as the budget impact analysis to reflect the value of the TearCare procedure. And we're seeing that pricing. The list price was $1,200, with ASPs around $1,000 for providers buying the products. And we'll see where reimbursement is established long-term. But we think that this is what we showed in the budget impact analysis that can save payers significant money versus the standard of care, which is the RESTASIS product. And so that's something that is very interesting to payers. And I think that this opportunity is something that when you step back and you look at it, it's a huge market potential. It is a market that is underserved with the existing solution where patients are not happy doing twice daily eye drops that may or may not actually be addressing the underlying cause of their Dry Eye disease. And then you have a circumstance where right now, the eye care professionals, they're not participating in the economics of prescribing a prescription. If they do a procedure, they will get a portion of the economic picture as well. And then, on top of that, you have payers who are looking to save money. And if you can provide a solution that also saves the payer money, it's really a win across the board for patients, for providers, for payers. And that's something that we think is really compelling about this unique opportunity. It's also a recurring business here where this is a procedure where you would need a treatment once a year, maybe twice a year if you're a severe patient. And that type of recurring business model is really attractive to optometrists and other eye care professionals as well as just that predictability for revenue.

A second question for glaucoma. They get paid for this, right?

That's important. Obviously, they're doing it as a procedure. It's an in-office procedure. So, as Ali mentioned, I think what differentiates this model, Joanne, when you're modeling OMNI and you're modeling TearCare, the difference is because OMNI, while it's minimally invasive, it is surgery. We're trying to push the results, and make OMNI as long-term effective as possible. And in glaucoma, if you can be effective for, say, 5 years, that's a huge win. In a Dry Eye with these procedures, while some patients might benefit for the very long term, like well beyond a year, it's a chronic disease, and the nature of meibomian gland disease in particular, and what we've seen in the 65,000 cash pay cases, the typical patient is like going to need like 1 or 2 treatments per year. One patient might be fine with like a single treatment per year; a more advanced patient or more problematic for whatever reason, might need more than 1 treatment, but not 5 treatments, maybe 2 treatments per year. And so when you're building the model, the difference between the OMNI model and the TearCare model is that these patients stay within the model. So it's obviously very interesting from a modeling perspective, and there are tens of thousands of optometrists who can all be customers, ophthalmologists also will use TearCare.

And it's the #1 reason people go to their optometrists is for Dry Eye disease. The average optometrist sees 70 Dry Eye patients a month. It's an incredible opportunity to really solve a critical issue. People think the Dry Eye is just, oh, that's an irritant or an aggravation, but it actually makes a huge difference in people's quality of life, their reading speed. We've done some studies on that. And these things really make a difference when you can see effectively without pain.

Yes, there are vision considerations and corneal considerations. It's a real disease.

What also is another interesting factor when the sell side is thinking about models and those types of things there is also inherent synergies between the business on the glaucoma side of the business. Cataract patients in general, tend to also have Dry Eye. So there is a lot of patient overlap as well, even though, of course, the Dry Eye population is much larger than the surgical glaucoma population.

And strategically, this is a little further out, but just imagine a world where we have broad coverage and we have sales reps in many, many optometric practices. Those optometrists are also the same ECPs who are seeing glaucoma patients who need stand-alone OMNI glaucoma surgery. So that's over time, where we're going to build towards is we talk about how do you accelerate the development of the pseudophakic stand-alone glaucoma segment. Well, one of the key pillars of that is really staying top of mind, educating, and staying top of mind with the referring community. That referring community are the optometrists that we are going to be selling reimbursed TearCare to in due course.

In our time remaining, I want to hit on 2 things. One is the ASCRS is coming up in April. What should we expect?

Well, before ASCRS, we got AGS this weekend. So just look for some very compelling surgical glaucoma data at AGS.

All right. And then we'll continue to have new data available at ASCRS. So we'll continue to have compelling sessions there talking about pseudophakic stand-alone development and really focused on that peer-to-peer education and how we really just collaborate with the industry around the needs here. I think that will be the main focus.

I haven't hit numbers. I know you've pre-announced first quarter, not first quarter. Well, feel free to pronounce fourth quarter. And we're waiting for next Wednesday night for '25 guidance. So I don't want to front-run that. But I would love to say, given all the bits and pieces that you have here, is there a philosophy to how you think about putting that all together?

Yes. I mean, as Paul said, we have an incredible opportunity in front of us, both in surgical glaucoma and Dry Eye. 2025, when we look at it and we think about the business and the puts and takes, obviously, the critical area on Dry Eye will be when we establish that reimbursement, when do we start getting any of that coverage, either payment decisions or coverage policy decisions. So that will be critical in thinking about 2025 growth on the dry-eye side of the business. On the surgical glaucoma side, of course, the main dynamic will be the impacts of the multiple MIGS restrictions. And then, of course, what can we do in terms of competitive selling, growth of the overall patient population, and, of course, the pseudophakic stand-alone market development? So those are the things that we'll be thinking about, and we'll be providing more details next week during our earnings call.

And then my favorite question. When we're together a year from now, what do you think we're going to be talking about?

I think we're going to be heavily focused on the dry-eye side of the business and really what that model could look like over time. Right now, it seems very conceptual to people. But until we start actually getting those wins, I don't think people have appreciated the power of that model and the recurring nature and the size of the market potential here and what that really could be for a business opportunity. So I think next year, once we actually have some, hopefully, wins under our belt there, and we're starting to grow that business, I would expect us to spend more time on that. I would also expect us to have some interventional glaucoma. How is that going on the stand-alone side? And I would also say the pipeline will be a hope at that point. We will have met some nice milestones on the pipeline side that I think we will start wanting to communicate about.

Excellent. Paul and Ali, thank you so much.