Sight Sciences, Inc. (NASDAQ:SGHT) Q4 2022 Earnings Call Transcript

Sight Sciences, Inc. (NASDAQ:SGHT) Q4 2022 Earnings Call Transcript March 13, 2023

Operator: Hello, and welcome to Sight Sciences Fourth Quarter 2022 Earnings Results. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I would now like to hand the conference over to Trip Taylor of Investor Relations. You may begin.

Philip Taylor: Thank you for participating in today’s call. Presenting today are Sight Sciences’ Co-Founder and Chief Executive Officer, Paul Badawi; Interim Chief Financial Officer, Jim Rodberg; and Head of Corporate Strategy, Tom Huang. Earlier today, Sight Sciences released financial results for the 3 months and full year ended December 31, 2022. A copy of the press release is available on the company’s website at investors.sightsciences.com. I’d like to remind everyone that comments made by management today and answers to questions will include forward-looking statements within the meaning of the federal securities laws. Those include statements related to Sight Sciences’ anticipated financial performance and operating results, market opportunity, the future impact of supply chain disruptions, business strategy, and plans for developing and marketing new products.

Forward-looking statements are based on estimates and assumptions as of today and are neither promises nor guarantees and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements. A description of some of the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements on this call can be found in the Risk Factors section of the Annual Report on Form 10-K that was filed today and other filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. I will now turn the call over to Paul.

Paul Badawi: Thanks, Trip. In our first full year as a public company, we made great strides fulfilling our mission to improve the lives of patients with glaucoma and dry eye. We are grateful for the trust and partnership our customers, physicians and patients have placed in us. In 2022, we grew total revenue by 46% to $71.3 million and executed our commercial and operational initiative to further solidify our position as the innovation and efficacy leader in MIGS and dry eye. We exercised a rigorous financial discipline to rationalize operating expenses and reduce burn as planned in the third quarter, which bolsters our belief that our $185 million cash balance at the end of 2022 is sufficient to support our growth plans and achieve cash flow breakeven in 2025 with a substantial cash cushion.

On the commercial front, we continue to propel market penetration and expansion with both the OMNI Surgical System and TearCare System, expand our current addressable markets with the successful launch of SION, our innovative bladeless goniotomy technology, and advance our efforts to establish fair market access and reimbursement for our dry eye treatment technology. We also announced several publications providing clinical support for broadening the use case for our core products and make great progress with our ongoing clinical trial programs. Our fourth quarter results exhibited strong sustained revenue growth and meaningful impacts from our cost rationalization program. Our fourth quarter total revenue increased to $20.5 million, up 40% compared to the fourth quarter of 2021.

Notably, we grew revenue 10% sequentially, while decreasing both quarterly cash burn by 27% or $5.5 million and quarterly OpEx by 10%, a $3.7 million versus the third quarter. Surgical Glaucoma revenue was $18.8 million in Q4 2022, growing 35% year-over-year and 10% compared to Q3. And Dry Eye revenue was $1.8 million, growing 135% year-over-year and 12% compared to Q3. I will now discuss the progress and strategic focus for our business units, starting with Surgical Glaucoma. Our growth metrics demonstrate further adoption and utilization of our OMNI and SION technologies as surgeons continue to embrace the new minimally invasive glaucoma surgery techniques enabled by these important innovations. As a reminder, our core mission in surgical glaucoma is to provide surgeons with the best solutions for their patients, regardless of severity of disease or lens status.

We continue to advance our growth initiatives which include: one, expanding the large and growing moderate to advanced combination cataract segment and the considerably larger standalone MIGS segment with OMNI’s differentiated efficacy profile; two, driving adoption and utilization of SION among specific subsets of surgeons, who choose a more basic procedure; and three, increasing our total share of MIGS with our OMNI and SION technologies. Our growth has significantly outpaced the overall MIGS market. We are taking share in combination cataract procedures and expanding MIGS beyond its narrow legacy confines. We believe OMNI is the only technology that offers the efficacy, functionality and clinical results to support long-term market expansion and penetration of the entire $6 billion plus MIGS market opportunity as evidenced by our growing penetration and sticky customer base.

We continue to see a natural progression of surgeons who first learned to use OMNI technology in combination with cataract for patients with less severe POAG, then expand their use cases to patients with more severe POAG and to standalone use in patients that do not require cataract surgery. In the fourth quarter, we maintained a greater than 99% developed customer retention rate for OMNI, while growing active accounts by 24% since the end of 2021. Among the placed OMNI orders in both the fourth quarter of 2022 and the fourth quarter of 2021, OMNI utilization increased 28%. We believe we are both increasing our market share and legacy combination cataract and expanding the market beyond legacy combination cataract procedures and towards standalone procedures.

These market expansion opportunities are substantial and very sticky for our OMNI technology due to its proven degree and consistency of efficacy. These important long-term efficacy minded customers are among the most attractive in MIGS. To accelerate adoption and facilitate broader patient access, we have created a comprehensive program that includes targeted field resources, patients and physician education and programs focused on improving patient access to these new combination cataracts and standalone procedures made possible by our OMNI technology. As part of this program, our team is actively educating the glaucoma community on our new real-world data recently published in International Ophthalmology from TREY, our multicenter study that evaluated the safety and efficacy of OMNI in patients with uncontrolled IOP, despite a history of trabecular bypass stent implantation at the time of cataract surgery.

Pre-highlighted a significant in intraocular pressure reductions were achieved with a standalone OMNI technology intervention in patients who already had stents implanted at the time of cataract surgery. This study suggests OMNI could be a natural fit for standalone interventions for the over 1 million patients who have undergone combination cataract stent implantations. Here is an example of what we are regularly seeing in the real world. One recent case at a prestigious West Coast medical school involved a patient with low 20s IOP on three medications after combo cataract stent implantation. Standalone intervention with our OMNI technology decreases patients IOP to 14 millimeters mercury on just one medication after 6 months. Needless to say, the patient and surgeon were very happy to avoid an invasive conventional surgery.

This is just one example of the type of results that we believe OMNI can consistently deliver. To further demonstrate our market leading efficacy, we have partnered with the data and technology provider Verana Health. Our partnership leverages the American Academy of Ophthalmology’s Iris registry of real world data to analyze post surgical outcomes for the leading MIGS technologies in the U.S., including OMNI, iStent and Hydrus. The first phase of the study analyzes IOP and medication reduction in 77,391 patients out to 2 years. This is the largest collection of MIGS data ever studied and offers compelling real-world evidence that we believe will demonstrate the clinical superiority of our OMNI technology. We plan to present and publish these groundbreaking study results including comparative IOP and medication reduction outcomes at the 1 and 2-year marks at multiple medical meetings and in peer reviewed literature throughout 2023.

We believe our four other ongoing implant studies will further corroborate the results of Trey and Iris in both combination cataract and standalone settings to further propel our share taking and market expansion progress. Surgeon feedback from our clinical trials and real-world usage informs our innovation. We seek to continually improve clinical outcomes by improving functionality and usability, innovating creatively, and raising the technological bar within mix. Earlier this month, we announced the launch of our newest OMNI technology, called the Ergo-Series at the recent American Glaucoma Society meeting. As with our other technologies, the Ergo-Series incorporates direct input from many of our customers and was designed entirely in-house.

We’re very pleased with the enthusiastic reception it has received thus far and the feedback confirms that our continuous enhancements to usability are key reasons surgeons love OMNI and choose it as their preferred mix technology. The Ergo-Series technology sets a new standard in circumferential glaucoma surgery and it’s just the latest in our long line of best-in-class technologies. This brings us to our newest product, the SION Surgical Instrument, the world’s first bladeless goniotomy technology. We designed SION to allow surgeons to smoothly, efficiently and reliably excise and remove several clock hours of diseased trabecular meshwork tissue via an ab interno approach. SION is an ideal solution for a subset of patients prioritizing a simpler goniotomy procedure, complementing our OMNI technologies broad indication for use and leading efficacy.

The fourth quarter with our commercial team’s first full quarter offering SION following its limited launch in August of 2022. Surgeon feedback on the instrument continues to be extremely positive, particularly around procedural smoothness, a less traumatic goniotomy and improve the ease of use. The ideal customers for SION fall outside of OMNI’s optimal product market fit, and we have observed minimal overlap in our analysis of early ordering patterns for SION customers. In addition to adding completely new accounts and reviving dormant accounts, we saw significant uplift in accounts that use both OMNI and SION technologies. Among accounts that ordered OMNI in the fourth quarter of 2021, and both OMNI and SION in the fourth quarter of 2022, average revenue per facility increased by 32%.

Encouragingly, we saw utilization of our OMNI technology increased 12% and these accounts even as they added SION to their armamentarium. Our portfolio approach has already increased revenue per account. We also continue to make progress bringing OMNI technology to international markets. We launched direct operations in Germany, our second direct OUS market in January of this year. Germany, along with the U.K., our first direct OUS market are two of the largest MIGS markets in the world. We’ve begun laying the groundwork in several other OUS markets and plan to proceed as prudently and aggressively as market access, regulatory and commercial conditions permit. We couldn’t be more excited to deliver the power of Sight to improve patient lives around the world.

Transitioning now to our Dry Eye business where we continue to focus on establishing fair market access and reimbursement for Dry Eye treatment procedures. Our success introducing TearCare to over 1,000 accounts, including over 400 new accounts in 2022 spotlights the pent-up demand for effective Dry Eye treatments, especially interventional eyelid procedures. Note that we accomplished the thousand account milestone while still in a controlled launch deploying only 20 sales representatives. Given the 14 million diagnosed evaporative Dry Eye sufferers in the U.S and the growing prevalence of the disease, we believe the lack of fair market access to reimburse effective Dry Eye treatments is one of the greatest problems and opportunities in eyecare today.

We have built a foundation from which TearCare can scale rapidly. Adding just one single additional treatment per week for our existing customer base would quadruple the size of our Dry Eye revenues. So it is very easy to appreciate just how big this market can become with appropriate reimbursement. Pioneering fair market access will require strong payer centric clinical data to demonstrate TearCare’s health benefits to patients and economic benefits to insurers. We custom tailored our SAHARA RCT with extensive input from medical directors at eight different payers to understand and form the clinical foundation required to successfully support reimbursement coverage For TearCare. After completing enrollment of SAHARA in the third quarter of 2022, we remain on track to provide the initial 6- month data readout by the second half of 2023.

As a reminder, this 6-month endpoint is powered to evaluate the superiority of TearCare treatments versus the leading multi-billion dollar Dry Eye prescription eye drop Restasis. With over 300 subjects, we believe SAHARA is the largest Dry Eye device study ever and the first to attempt to demonstrate the superiority of a device versus the most successful daily prescription eye drop. The 6-month study period designed to allow Restasis to achieve maximum efficacy also covers a much longer study period than the one to three month endpoints typical in other Dry Eye studies. SAHARA is in all respect a very ambitious study, but one that is also very worthwhile given the unmet need that we were seeking to address. In summary, we drove significant growth with all three of our category leading products and made substantial progress expanding our opportunities in MIGS and Dry Eye.

We remain dedicated to increasing physician adoption and utilization across our portfolio and increasing the number of customers and patients we serve. Looking ahead, we are focused on leveraging our procedure field, productive field team, and increasing body of clinical evidence to train new customers and broaden use cases with each of our products. With the ultimate goal of generating sustainable growth, while continually improving operating efficiency and maintaining strict financial discipline. With these factors in mind, we are providing revenue guidance for 2023 of $89 million to $94 million. We expect 2023 to exhibit similar seasonal impacts and quarterly revenue distribution that we saw in 2022 with the first quarter stepping down sequentially versus the last quarter of 2022, then increasing as the year progresses.

Specifically, we expect first quarter revenue to comprise 20% to 21% of the midpoint of our 2023 guidance, consistent with the first quarter of 2022. As it relates to operating expense, we continue to believe our reduced quarterly cash OpEx of approximately $30.5 million is an appropriate level of spend to meet our growth plan for the year. Before I turn the call over to Jim Rodberg, our interim CFO to detail the fourth quarter financial results, I’d like to thank Jim and his team for stepping up and doing an absolutely phenomenal job, Jim.

RossHelen/Shutterstock.com

Jim Rodberg: Thanks, Paul. Total revenue for the fourth quarter was $20.5 million, representing 40% growth year-over-year and 10% growth sequentially. Surgical Glaucoma revenues for the fourth quarter were $18.8 million, up 35% year-over-year and up 10% sequentially. We continued to show strong underlying growth fundamentals in customer retention and ordering facilities. Additionally, we saw a notable increase in utilization, which is a critical metric for our omni market expansion efforts. 941 facilities ordered OMNI during the fourth quarter compared to 913 facilities in the third quarter, demonstrating the continued combination of strong new customer acquisition activity and our high retention rate. Combined with our strong account ads for SION, our commercial team did a tremendous job introducing our technologies to customers in 2022.

Our surgical glaucoma customer acquisition funnel remained strong for both products, creating great momentum for 2023. We ended Q4 with over 2,300 U.S surgeons trained on OMNI and approaching 300 on SION. We have made great progress and given the estimated 5,700 MIGS trained surgeons in the U.S., we have a substantial runway to roll out both products to targeted surgeons. Our Dry Eye revenues for the fourth quarter were $1.8 million, up 135% year-over-year and up to 12% sequentially. We grew our installed TearCare base to 1,042 facilities at year-end up from 881 as of September 30th and over 550 at the end of 2021. Gross margin for the fourth quarter was 82% compared to 87% in the prior year period. The decrease was primarily due to product mix and a .5 million write-off of legacy components that aren’t required in our OMNI ERGO series technology.

Excluding the inventory charge, gross margin would’ve been 85% for the quarter in line with our expectations. Our operations team continues to perform well in the face of global supply chain issues, driving manufacturing efficiencies and top tier margins. Total operating expenses for the fourth quarter were $33.9 million, an increase of 23% compared to $27.5 million in the fourth quarter of 2021. And importantly, a 10% decrease from $37.6 million in the third quarter of 2022. Excluding non-cash compensation, depreciation and amortization, our cash operating expenses in the quarter were approximately $30.5 million. This is exactly in line with the normalized cash OpEx for the third quarter and the 2023 spending plan we described on our last call, R&D expenses were $5.2 million compared to $4.4 million in the fourth quarter of 2021, and SG&A was $28.7 million compared to $31.5 million in Q3 and $23.1 million in the fourth quarter of 2021.

Both SG&A and R&D increases year-over-year were driven by growth in personnel along with continued strategic investments in new and ongoing initiatives. Our loss from operations for the fourth quarter was $17.1 million compared to a loss of $21.8 million in the third quarter of 2022 and $14.7 million for the fourth quarter of 2021. We had a net loss of $16.9 million or $0.035 per share in the quarter. On a weighted average share count of 48.2 million shares compared to a net loss of 15.9 million or $0.34 per share for the fourth quarter of 2021. Based on our weighted average share account of 47.4 million shares. We ended the quarter with $185 million of cash and cash equivalence and $33.3 million of long-term debt, including $1.7 million of debt discount.

In the fourth quarter, cash burn was reduced by 27% compared to the third quarter of 2022. We expect operating loss and cash burn will continue to decrease as our business model begins to flex the considerable operating leverage driven by our high gross margins. As evidenced in our discussion of operating expenses and cash burn, we continue to proactively manage our liquidity and operating expenses to maintain our strong cash position. We are confident that our continued and robust growth trends, market leading positions in MIGS and MGD, strong balance sheet, leading gross margins and disciplined spend can drive us to positive free cash flow in 2025, while preserving a substantial cash cushion. With that, operator, you may open the line for questions.

Tom Huang, our Head of Corporate Strategy will also join us for Q&A.

See also 11 Best Cryptocurrencies to Invest In for Beginners and 15 Countries with Highest Inflation Rates.

Q&A Session

Operator: Our first question comes from the line of Tom Stephan with Stifel. Your line is open.

Thomas Stephan: Great. Hey guys. Thanks for the questions. I’ll start with guidance. Paul, can you elaborate a bit on what it factors in, just when it comes to competition in glaucoma? Obviously, there’s a standalone stent and a delivery device that are going to be incremental in 2023. And maybe if it’s easier to lay it out this way, I guess, how do you expect competitive pressures in 2023 will compare to those that were experienced last year?

Paul Badawi: Yes. Hi, Tom. Thanks for the question. I’d say we’re entering this year feeling as good as ever. We saw a number of new entrants, new products introduced last year, and I think our quarterly performance — very consistent quarterly performance speaks for itself. And I think we’re — we actually see a more stabilized environment this year compared to last year even with the new entrants. In terms of the standalone stent, we welcome new entrants into the $4 billion to $5 billion standalone MIGS market. I think the more opportunities there are to intervene and to change the practice of medicine and to shift this category from a medically focused category to an interventional category. And I think the more companies and product opportunities there are for the foreseeable future, for the next 5 years, I see that as probably being helpful versus competitive.

And moving on just specifically to Sight, I think we’re generally just very, very confident in the positive growth trends and the underlying strong fundamentals. We continue to see commercially in both of our businesses, Glaucoma and Dry Eye as well as a number of catalysts to think about this year on both the technology and clinical fronts. Tom, commercially we expect to continue doing what we’ve been doing for years, which is taking share in mild to moderate combo cataract MIGS in the face of competition, right. That’s nothing new. We’ve been doing that since launching OMNI years ago. We’ll continue to expand the moderate to advanced combo cataract MIGS segment. That’s a very attractive one, and we’ll continue to expand the moderate to advanced standalone MIG segment.

We think that’s the kind of the earliest market opportunity in standalone is probably moderate, hasn’t really been exploited yet. Mild is probably down the road. So we’re focused on the moderate to advanced standalone MIG segments. On the TearCare side of our business, we expect to continue driving adoption of TearCare to new customers as well as focusing on improving utilization with — within existing Dry Eye accounts. In terms of other catalysts on the technology side for 2023, we’re very happy with our OMNI Ergo launch earlier this year. It’s going extremely well. The benefits of the enhancements and the usability enhancements are exceeding our expectations and our surgeon’s expectations. And with SION, we’re entering this year for the first time with a portfolio of products, early insights as we talked about, show that our portfolio approach is driving enhanced revenue opportunities within our accounts.

And Tom, the last thing I’ll just mention, in terms of 2023 and our outlook and how we feel about in catalysts, if you think about clinical catalysts, we have Trey, that we’re a publication that we’re leveraging now that’s OMNI’s used in Pseudophakic patients who have a history of trabecular bypass stent at the time of cataract surgery. If 1 million stents have been implanted worldwide, if you take roughly $1,000 ASP, that’s a $1 billion market opportunity. So that’s happening now. We’re leveraging that data now in standalone. We talked about the Verana data that we expect to be publishing later this year, and presenting at various conferences. That’s a very exciting comparative MIGS data set. And lastly, SAHARA, we’ve got a tremendous milestone coming up in terms of the 6-month readout, showing how TearCare interventional eyelid procedures compare to the leading Dry Eye prescription Rx. So with all of those things said, Tom, I think all in all we’re very confident the positive growth trends we’re seeing across our businesses and throughout 2023.

Thomas Stephan: That’s helpful. Great color. And then to pivot a bit just to the profitability plan, it’s good to see you guys continue to expect breakeven in 2025. I guess what does this assume in terms of Dry Eye and notably SAHARA. Do those plans assume SAHARA hits the endpoint? I’m just curious if it’s fair to think about if that were the case, the company may be leaning into commercialization and marketing efforts as reimbursement may start to come through. I guess, what I’m asking is what do those profitability plans assume around Dry Eye and SAHARA? Thanks.

Paul Badawi: Yes, thanks, Tom. Maybe, Tom or Jim can add to this. I’ll just talk about timing for SAHARA. We expect to have the readout soon, within a few months. We expect to submit for publication in the roughly the third quarter of this year. In the ideal scenario, we’re aiming for a top journal as you can imagine. This assumes the results are successful knock on there. But assuming a good timeline, we could have something published by the end of the year and we would leverage that publication again assuming success, early in 2024, working payer by payer, likely commercial payer by commercial payer. So as it relates to our projections now, we’re not assuming SAHARA reimbursement success, we’re assuming continued enhancements to our current cash pay business model, which is continuing to sell to new Dry Eye accounts and continuing to drive improvements in reorder rates.

Tom Huang: Yes. And just, hey Tom, this is Tom. Just to put another point on that. The medium term growth expectations we’ve talked about in the past don’t include a hockey stick for TearCare or so. It’s kind of steady as it goes projection for us.

Thomas Stephan: Got it. Thanks guys.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Craig Bijou with Bank of America. Your line is open.

Craig Bijou: Good afternoon, guys. Thanks for taking the questions. So wanted to start with SION, and wanted to see if you guys would be willing to provide how much it contributed in the quarter, or at least maybe some qualitative commentary, recognizing that it’s still early. And then, how many of those 200 accounts overlap with your OMNI accounts. And then just thinking about 23 and how to think about Surgical Glaucoma and the mix that — the mix between SION and OMNI and how you guys think about that growth materializing between the two products.

Tom Huang: Sure. Hey, Craig, this is Tom. Yes, we don’t want to get too much into specifics on SION for competitive reasons. But I think it’s fair to say that it’s trending in the mid single digits annualized range. And, sorry, can you repeat your other questions? They were

Craig Bijou: Yes, sure., On the accounts, the 200 accounts that you guys had, just wanted to know how much of an overlap that was with your OMNI users?

Tom Huang: Oh, sure, yes. About, a little over a third were brand new accounts — that were brand new to order SION, did not order OMNI as well.

Craig Bijou: Got it. And one other follow-up on SION, just thinking about ’23, how should we think about the — whether it’s the acceleration from kind of where revenue was in Q4, or just any help in trying to think about the mix between OMNI and SION contribution in ’23.

Craig Bijou: Sure. I think we are continuing to prioritize OMNI, as our flagship product. We do think that we’ll have, a nice growth year-over-year as we have a full year of contribution from SION. But again the opportunity for SION is smaller than the one for OMNI. So I think you can take that as guidance.

Craig Bijou: Got it. It’s helpful. And if I can just follow up maybe on the last question on TearCare and understand that you’re not building into your assumptions a hockey stick, or a significant acceleration and growth. But we’d love to just hear the opportunity, what you guys think insurance coverage could do for TearCare. And you’ve obviously been growing strong, strong — growth has been strong in just the private pay market, but would love to hear what could happen if you do get insurance.

Paul Badawi: Yes, Craig, I’ll take that one. I think with a successful SAHARA outcome, again, the endpoints: one, is the first is 6 months superiority readout to Restasis. And then we’re also following all 300 plus patients out for 2 years to show durability of TearCare treatment effect. I believe that if we are successful with SAHARA and successful in our payer efforts, again, this was a payer informed clinical trial protocol and design, that this can be one of the most exciting opportunities that eyecare has seen in the past decade. We talked about what happen to our revenue if our accounts added just a single treatment per week. You can imagine, again, Dry Eye is the number one reason for a patient visit to an eyecare provider, number one.

There is no meaningfully reimbursed interventional procedure for Dry Eye. And so if we can show to payers that the clinical value is there versus prescription eye drops, costly prescription eye drops, and that the health economic value and the costs of such treatments are not only justified, but hopefully in payer’s interests compared to costly prescription Rx. You can imagine, how exciting this business model can become overnight.

Craig Bijou: Got it. Thanks. Thanks for taking the questions, guys.

Paul Badawi: Thanks, Craig.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Joanne Wuensch with Citi. Your line is open.

Joanne Wuensch: Good evening, and thank you for taking my questions. There are two of them, I’ll just put them right up to do with reimbursement. Could you please comment on any changes or stability you’ve seen in the reimbursement for SION and the procedure? And then the second one has to do with growth margins. As you move towards your path to profitability and layer in peer care, we’ll have . Thanks.

Tom Huang: Yes. Hey, Joanne. Why don’t we take the second one first, so that seems top of mind. We continue to expect gross margins will stabilize and in the mid 80s range as TearCare volumes increased their gross margins will approach that as OMNI. So thank you for your models. Mid 80s, is a nice place to be.

Paul Badawi: On the — hi, Joanne. On the reimbursement question, let’s go with OMNI first. OMNI the code to bill Omni the canaloplasty code was revalued 2 years ago. The professional fee was revalued at the same time as the stent fees were revalued. And so we’re now in the fully revalued phase. The reimbursement was adjusted to $600 for an OMNI procedure as of January 1st. So we’re operating with that economic profile relative to other procedures. I think it is the key, the professional fee for performing. OMNI has not dropped below any other professional fee for any competitive procedures. So I think that’s the key in assessing any potential pro fee reduction impact to OMNI utilization. It’s sufficient, it’s attractive. Nobody likes a reimbursement reduction, but it’s sufficient for performing high volume OMNI and it hasn’t changed relative to any other competing procedure.

For SION, the goniotomy hasn’t been revalued for a while, and so there is an expectation that at some point goniotomy will be revalued. So what does that mean? What does that mean for site? I think if goniotomy is revaluing the pro fee comes down quite a bit. There are a subset, a subset of surgeons or facilities who will perhaps rethink whether Goniotomy, it’s already just a subset of the MIGS. OMNI again, is our leading product. But I think even within that subset, some folks might rethink whether goniotomy is their procedure of choice or whether they want to move to something like canaloplasty with Omni. So I think it’s even with a goniotomy adjustment. I can see movement towards OMNI, which is ultimately what we’re driving towards.

Operator: Thank you.

Jim Rodberg: Thanks.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Cecilia Furlong with Morgan Stanley. Your line is open.

Cecilia Furlong: Great. Good afternoon, and thank you for taking the questions. I wanted to ask a follow-up on TearCare, really thinking about ’23 specifically and how you think about just install-based growth ahead of SAHARA and tied in with that to just your outlook, that is incorporated in OpEx, for further Dry Eye sales team growth post SAHARA 6-month data?

Paul Badawi: Yes. Hey, Cecilia. In terms of the second part of your question on sales team growth, we haven’t factored in significant increase in commercial activity due to SAHARA this year, because once we get the 6-month data, we’ll take a few months to publish and get out there and be in a format ready to present to payers. So we don’t expect significant impact until 2024. And I think we’re expecting to see reimbursement when happen on a — on an incremental basis, not just flipping a switch and having the entire country go live at once. I think it’s — I think we’ll be able to deploy resources regionally as we accumulate payer wins and be able to effectively and efficiently cover new markets — cover markets that have new reimbursement wins very effectively and show really strong growth that way.

Cecilia Furlong: Great. And if I could follow-up as well. Just incorporating your OpEx outlook for about $30.5 million, how should we think about R&D on a relative basis versus what we saw in 4Q tying in some of your pipeline products as well as clinical studies ongoing?

Paul Badawi: We expect to see a similar mix of R&D and SG&A as we saw in Q4 into 2023. And we’re planning to be very diligent in our — in any of the investments we make as we continue to manage the OpEx targets that we’ve set in our path to cash flow breakeven.

Cecilia Furlong: Great. Thanks for taking the questions.

Paul Badawi: Thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Margaret Kaczor with William Blair. Your line is open.

Margaret Kaczor: Hey, good afternoon, guys. Thanks for taking the questions. I wanted to follow-up maybe to start on the Ergo-Series of products. And if you can share any specifics, I guess, on the average time of procedures, maybe efficiency stats or the data empirical versus the last generation?

Paul Badawi: Yes. Hi, Margaret. Yes, in terms of Ergo and the name of the game and in MIGS and making a product or procedure, the go-to preferred MIGS option comes down to procedural ease of use and usability and obviously clinical outcomes. And with OMNI, we’ve seen the differentiated clinical outcomes and differentiated safety and efficacy profile over and over, and we continue to publish on that. So there remains opportunity to enhance the procedure and the usability, and that’s what we were focused on with OMNI Ergo. And we’ve upgraded the ergonomics, the hand piece, we’ve also upgraded and enhanced the technology at the most distal end of the device that allows the surgeon to access the diseased outflow pathway. And that’s critical.

Improving how a surgeon accesses the diseased outflow pathway is critical. And we think that there was an opportunity to modify some of the dimensions on our cannula and catheter and allow the surgeon more reproducible, quiet, less traumatic and consistent access into the canal. And once they — once the surgeon gets into the canal with OMNI, the brilliant engineering of the device and design kind of takes over. So, in terms of circumnavigating the canal up to 360 degrees and up to 2x for both canaloplasty and trabeculotomy. So, the early feedback in terms of the enhancements we made to help the surgeon more reproducible get into Schlemm’s Canal has been very, very positive. And I think I’d say it surpassed even our expectations.

Margaret Kaczor: Okay. Yes, that’s helpful. And then, if we could move to some of the DTC pilots that you guys have spoken to. Can you share, I guess, any progress in terms of being able to reach the patients or maybe those who have had kind of a stent and planted in the past, who might be looking for standalone solution. Have the DTC pilots, I guess, been useful and any other initiatives to — that you guys could put out there to reach these patients? Thanks.

Paul Badawi: Yes. Well, yes, thanks for that question. We’re excited about the possibilities here. We have been working with a leading MedTech DTC provider. I’ll say that, they conducted their own pilot prior to us entering into an engagement with them to understand whether the diseases that we’re addressing Glaucoma and Dry Eye would be good candidates for DTC strategies. And those pilots that our partner did on their own, executed on their own, seemed very favorable. And so we’ve decided to enter into an agreement with them and run a pilot. Now, in terms of timing, Margaret, the first month, sorry, first quarter of the year, this quarter has been the setup phase for the pilot DTC program. And the second quarter of this year will be the actual execution phase where we’ll run it, we’ll run the program and hopefully by the end of that exercise we’ll be able to have an early read on how DTC is helping with our OMNI market development efforts. So stay tuned.

Margaret Kaczor: Sounds good. Thank you guys.

Paul Badawi: Yep.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Matthew O’Brien with Piper Sandler. The line is open.

Unidentified Analyst: Hey, this is Phil on for Matt. Thanks for taking our questions and congrats on the great quarter. Just on guidance, I don’t think I heard anyone ask, but can you give us your puts and takes for what gives you to the top end of your range versus the bottom? Maybe what you’re seeing in the broader MIGS market in terms of any headwinds, staffing, procedural headwinds, et cetera, and maybe by segment what you’re puts and takes for 2023. And I guess what I’m really trying to get at is TearCare grew about 3 million in 2022. Can it grow another 3 million in 2023?

Paul Badawi: Yes, I think on the OMNI side of our business or Surgical Glaucoma with OMNI and SION, we have a history of taking share in the mild to moderate combo cataract segment. So, we expect to continue building our business there. I think, I think what drives, what will drive, further upside, to our plans and our historical performance is how well we can continue to expand, the surgical glaucoma markets. And again, that’s, moderate to advanced combo cataract and moderate to advanced standalone. So, we talked about a number of initiatives that we’re executing on this year to help drive that, continued market development. I think that’s the market expansion opportunities or what provide I think a lot of the upside.

Unidentified Analyst: That’s really helpful. And I guess just to end it here, on the Verana Health, that partnership, how big could that be for your business in 2024, in terms of additional surgeons and adoption and that just your puts and takes would be helpful.

Tom Huang: Yes, I mean we’re really, really excited about the possibilities with the Verana data. It is — they have access to millions of patients entered by — patient data entered by the members of the American Academy of Ophthalmology. So it is the most comprehensive eyecare database out there. And we are extremely excited about the ability to demonstrate OMNI’s efficacy compared to the other devices out there. I don’t think we’ll be able — I don’t think we can translate that directly into increased penetration next year, but we are very excited to say the least.

Paul Badawi: Yes, and I think it’s — what we love, really love about just a large, a large volume of, of real world clinical data. We design our products to help the — help make the average surgeon deliver optimal clinical outcomes, right. We talked about the Ergo-Series of OMNI. And so that’s success to us. Success is making the average surgeon very successful in taking care of their patients and driving optimized clinical outcomes. So for Sight Sciences having access to many, many, many surgeon — surgeries from many, many different surgeons as opposed to a very — there’s a benefit highly controlled clinical trials and RCTs and whatnot. But there’s also something to be said about how does your product and procedure perform across thousands of surgeons and the average surgeon, not just your preferred clinical trial site.

So we’re very excited about that. We think that we can’t talk about the timing exactly — it depends on the publication. But it’ll offer a powerful clinical marketing. And ultimately we are seeing and hearing that payers going forward are going to be relying more and more on credible, substantial real world evidence. So we would expect to continue mining, Veronica real world data. As we proceed we expect that it will certainly help in terms of growing our businesses from a clinical marketing perspective and how OMNI compares to other MIGS options. And then ultimately as payers begin to rely more and more on these large scale real world evidence studies, we think that that can be helpful as well.

Unidentified Analyst: Great. Thank you so much.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of David Saxon with Needham & Company. Your line is open.

David Saxon: Hi, good afternoon and thanks for taking the questions. Maybe to start on surgical glaucoma, of the 200 SION accounts. It looks like you have about 130 that are on the accounts, so could you talk about what you’re seeing from a cannibalization perspective?

Tom Huang: Yes, sure. I think we’re seeing very little of it based on the account, as Paul said, his remarks based on the accounts that ordered OMNI in the fourth quarter of 2021 and OMNI and SION in the fourth quarter of 2022, utilization of OMNI actually increased by 12%. So we are really excited about that. We — with no cannibalization you would see, flat utilization. The fact that we are actually able to increase utilization at accounts despite adding SION to their portfolio. They really suggests that we’ve got a lot of runway here.

Paul Badawi: And just keep in mind that the portfolio allows our reps even more time to be with their surgeon customers in the operating room. And so the — that opportunity just creates more opportunity for us to educate and train our surgeons on all the good work that we’re doing across our portfolio and the increasing body of clinical evidence that we’re generating for both OMNI and SION going forward. Okay. Yes, that’s helpful. And then I guess maybe staying on glaucoma, can you talk about the pricing trends you’re seeing just given some competitive launches? Are you seeing anyone get more aggressive with pricing, or doing anything with bundling? Thanks so much for taking the questions.

Tom Huang: I don’t think we’ve seen much of that in the field yet. Our ASP has had remained steady.

David Saxon: Great. Thank you.

Operator: Thank you. I’m showing no further questions in the queue. I would now like to turn the call back to Paul for closing remarks.

Paul Badawi: Well, thank you all for your interest in Sight Sciences and have a great day.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.