Sight Sciences, Inc.

Greetings and welcome to the Site Sciences Third Quarter 2021 Earnings Results Conference Call. At this time, I'll participate in the early mode, and this call is recorded. It is my pleasure to introduce your host, Tripp Taylor from Gilmartin Group. Thank you. You may begin.

Thank you for participating in today's call. Presenting today are Site Sciences Co-Founder and Chief Executive Officer, Paul Badawi, Chief Financial Officer Jesse Selnick, and Chief Commercial Officer Sean O'Neill. Earlier today, Site Sciences released financial results for the three months and nine months ended September 30, 2021. A copy of the press release is available on the company's website at investors.sitesciences.com. I would 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 SiteScience's anticipated financial performance and operating results, market opportunity, the future impact of COVID-19 on operations, 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 Form 10-Q 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. For more information, please refer to the forward-looking statement notices and risk factors in the recent SEC filings. I will now turn the call over to Paul.

Thank you, Tripp. And thanks to everyone for joining us on our second earnings call as a public company. I'm very excited to update you on our business and share our significant accomplishments across our commercial, clinical, regulatory, and patient access initiatives, as well as our thoughts on the 2022 payment rules released by CMS last week. Jesse will then discuss our third quarter financial results before we open up the call for questions. To start, I will highlight... Our resilient site team persevered, and we set new records for quarterly revenue as a company and for our surgical glaucoma segment. Our total revenue increased to $13.1 million, representing growth of 51% compared to the third quarter of last year. We believe we are also one of the very few eye care businesses to report meaningful sequential U.S. growth in Q3 over Q2 2021, despite significant reimbursement noise in surgical glaucoma and the continuing impacts of COVID. Although the third quarter is typically seasonally lower than the second quarter, our surgical glaucoma segment revenue increased to $12.4 million, representing 4% sequential growth from our then-record second quarter revenues, and growth of 58% versus the third quarter of last year, driven by strong new account growth and increased utilization of our surgical glaucoma product, Omni. I'd like to remind everyone of the core principles of our company that allow us to persevere and succeed in any operating environment. We focus on the patient first, always. We improve the lives of patients suffering from eye diseases by protecting and enhancing their most precious sense, vision. We aim to develop safe and effective products that address the underlying causes of the world's most prevalent eye diseases. Our current commercial products are Omni and Tear Care. Both products are the result of our rigorous product development process, which incorporates four key pillars. First, we master the physiology of a disease to gain a full understanding of the often multifactorial causes. We use this foundational knowledge base to guide our development of solutions that optimize treatment of the underlying causes of a disease. We then apply our iterative design process to develop products that are intuitive for the physicians to use. To pass the final test of our rigorous product development process, we must prove out a viable patient access strategy, either through existing avenues or by pioneering new routes. Leveraging these four pillars, we have created our first two products that have demonstrated improved clinical and real-world outcomes, empowering eye care providers to offer the best care for their patients. Having passed the rigorous test posed by our four product development pillars, we believe that both Omni and TierCare are competitively differentiated within their respective eye care markets. This product differentiation is substantiated by the commercial performance, market receptivity, and ECP feedback on both Omni and TierCare. our organic innovation and product development model works very well. So expect to hear more from us on the product development front in due course. Over the near and medium term, we will continue to prioritize three key strategic value drivers. Number one, continuing to expand OMNI's adoption and usage by surgeons for adult patients with primary open-angle glaucoma, or POAG, in the established combination cataract segment. of the minimally invasive glaucoma surgery, or MIGS, market. Converting this key group of surgeons paved the way for them to perform standalone procedures, which brings us to number two, continued development of the virtually green field and substantially larger standalone segment of the MIGS market. And number three, seeking an expanded indication for use for tear care for the application of localized heat therapy in adult patients with evaporative dry eye disease, when used in conjunction with manual expression of the meibomian glands, while also advancing market access initiatives, including payer-tailored RCTs that can help create care care insurance access to patients whose eye care professionals believe care care is appropriate for them. We are pleased with our progress advancing each of these objectives. Our success requires cross-functional collaboration and teamwork through outside sciences. including commercial performance and expansion, the design, execution, and publication of clinical studies, achieving key regulatory milestones, and finally expanding market access. Our first two goals relate to advancing the treatment of adult patients with POAG. OMNI has been clinically demonstrated to be safe and effective for intraocular pressure reduction for adult patients with POAG. Today the MIGS market is segmented into procedures performed in combination with cataract surgery, which we refer to as the combination cataract segment, and procedures performed on their own, which we refer to as the standalone segment. This segmentation is superficial and primarily the result of MIGS bypass stents only being indicated for use in combination cataract procedures. In March of this year, the FDA cleared an expanded indication for use for OMNI that we believe bridges the unnatural divide between combination cataract and standalone. This indication for use broadly covers the reduction of intraocular pressure for all adult patients with POAG without limitation with respect to severity of disease, mild, moderate, and advanced, or LEN status, FACIC, which refers to patients who have not had cataract surgery, combination cataract, as well as pseudofacic. which refers to patients who have had cataract surgery. We believe this clearance and Omni's expanded indication represented a significant clarifying step forward in identifying which MIGS procedures are appropriate for certain broad indications, rather than as a do-no-harm add-on to widespread cataract surgeries. This clearance was supported by a substantial body of real-world, multi-center clinical data. We continue to invest very aggressively in the clinical and commercial development of Omni, including further enhancements to Omni's indication for use, which I will describe in more detail later. We believe that Omni has two critical physiological and clinical advantages. Number one, Omni can comprehensively address up to 360 degrees of the disease conventional outflow pathway. Canal implants address a much smaller segment. And number two, Omni can address all three points of resistance in the conventional outflow pathway, while canal implants cannot. We believe Omni's differentiated efficacy and indication for use, coupled with our commercial excellence, have driven our best-in-class commercial performance, as evidenced by our share gain in combo cataract and market expansion with stand-alones. We've made significant inroads penetrating the adult POAG segment of the MIGS market with our exceptional customer experience initiative, which includes a meticulous surgeon and facility training program. We have already trained a substantial portion of our highest priority customers, the universe of over 3,000 MIGS trained surgeons. In the third quarter of 2021, approximately 725 facilities ordered omni-surgical systems, which included very healthy growth in new customers. The most exciting opportunity to expand the usage of OMNI lies in the five times larger standalone segment, where surgical intervention decisions rely far more heavily on procedure effectiveness and consistency relative to combination cataract procedures, in which we believe the concomitant canal implant procedure is often viewed as a do-no-harm add-on in the mild patient. To even be considered as the sole reason to take a patient to the operating room, standalone MIGS interventions like OMNI must safely deliver a very high consistency and degree of effectiveness. Typically, surgeons first master using OMNI in combination cataract procedures because they have already been trained in that MIGS setting. As surgeons gain confidence in OMNI, we have observed a natural progression towards also using OMNI in standalone procedures. In two sequential procedures, Omni allows surgeons to address up to 360 degrees of the conventional outflow channel, dilating and expanding Schlemm's canal and the collector channels with canaloplasty, followed by unroofing of diseased trabecular meshwork during a single surgical session, supported by favorable safety data from clinical studies and post-market use. Although our customers and surgeons will largely be the same in both segments, We believe the estimated $5 billion standalone segment requires a new go-to-market approach to improve awareness and educate the broader POAG community about the new treatment possibilities enabled by OMNI. This outreach program expands our contact points beyond cataract surgeons and glaucoma specialists to also encompass primary eye care providers who typically first diagnose and treat POAG with medications, as well as patients. We are excited to help ophthalmologists, optometrists, and patients better understand the potential advantages of intervention with Omni. We continue to see significant potential to expand usage of Omni and are executing a plan to take full advantage of the opportunity that will include targeted expansion of our sales team in 2022 with incremental investment in reps who will focus specifically on office-based clinical education and stand-alones. We also made significant progress advancing clinical trials and augmenting the body of published literature and high-quality peer-reviewed journals that support the safety and efficacy of Omni for use in future expanded indications for which we are developing the product. In August, we announced the publication of an article on clinical ophthalmology analyzing 24-month outcomes from a single center open-label study of the Omni surgical system conducted in Germany. The study reported that use of OMNI to perform a standalone mixed procedure in mild to moderate open-angle glaucoma patients resulted in statistically significant reductions in both IOP and IOP-lowering medication use at 24 months. Mean baseline IOP in the study decreased from 24.6 millimeters mercury preoperatively to 14.9 millimeters mercury at 24 months, or approximately a 40% IOP reduction. Mean baseline IOP-lowering medication also decreased from 1.9 average medications per patient to 0.5 medications at month 24, with nearly 60% of eyes free of IOP-lowering medication. Last week, we announced the publication of another article on clinical ophthalmology that associated MIGS using OMNI with suppressed diurnal fluctuations in IOP, a clinically meaningful and independent risk factor for the progression of glaucoma. In that study, 95% of patients had a diminished peak IOP postoperatively when compared to preoperative measurements. And finally, earlier today, we announced FDA authorization to proceed with our precision RCT under IDE. We designed this trial to evaluate the safety and effectiveness of OMNI for use in canaloplasty alone procedures. In precision, we will compare results from combination cataract procedures in three trial arms, canaloplasty alone using OMNI, canaloplasty followed by trabeculotomy using OMNI, and canal implants. We believe precision will represent the largest prospective MIGS RCT ever initiated based on our target of 459 subjects receiving a MIGS procedure. We plan to use the results of precision to support a premarket submission to the FDA, seeking clearance for an expanded indication for use of OMNI in canaloplasty alone procedures to reduce IOP in adult patients with POAG. If we are successful, surgeons would have additional flexibility to use OMNI to customize treatment and expand their preferred use case, particularly for milder cases. Additionally, we hope to share data from Precision with payers who are influential arbiters of patient access. CMS and other payers rely in part on review of relevant medical data published in peer-reviewed journals when making coverage and payment policy decisions. We believe our clinical trials would demonstrate clinically significant improvements in health and economic outcomes. Our market access team made significant progress securing coverage among private payers for Omni procedures in recent months. We're pleased to report that the OMNI procedure is now covered and reimbursed by MACS and private payers representing an estimated 75% of all medical benefit covered lives. We are grateful for the support of the AAO and AGS who continue to support our efforts. We continue to make progress and look forward to providing further updates over the coming quarters. Last week, the Centers for Medicare and Medicaid Services issued a final rule that includes updates on policy changes for Medicare payments to physicians and facilities. These final rules will go into effect on January 1, 2022, subject to the issuance of any updates or corrections by CMS. Payments related to CPT Code 66174, which is used to report procedures performed with OMNI, were among those that were revised. As a whole, we are quite pleased with the Medicare payment landscape that will bring modest increases in payment for canaloplasty and trabeculotomy in the ASC and HOPD settings from 2021 to 2022. Our preliminary assessment of the physician fee and facility fee payment rates remains the same as when the proposed rules came out in July as we were going public. We believe OMNI's professional fees will be in a better relative position in 2022 versus 2021, compared to its combination cataract implant competitors. Although the approximate professional payment for canaloplasty will decrease by $209 to $739, which was expected given the elegant procedural advancements made by the Omni technology for this procedure, the focus of our discussions with physicians continues to center on the strength of our clinical data. Nonetheless, physician reimbursement for canaloplasty will remain significantly superior to reimbursements for both standalone cataract surgery as well as cataract surgery in combination with canal-based implants. In routine combination cataract procedures using OMNI, the approximate total physician fee will be $1,003 versus $664 for the new canal implant combination cataract code, CPT66991, and $529 for standalone routine cataract surgery, CPT66984. In complex combination cataract procedures using OMNI, The approximate physician fee will be $1,101 versus $832 for the new canal implant in combination with complex cataract code CPT66989. Our near-term reimbursement objective is to continually improve the competitiveness of payments for procedures performed with OMNI. We believe the combination of, one, OMNI's highly differentiated efficacy, two, the relative advantage, of the 2022 physician fees and modest increase in facility fees for 66174, three, ongoing clinical feedback from Omni users, and four, our demonstrated historical growth trajectory will allow us to continue to take share from the combo cataract canal implants and advance our leadership in the five times larger standalone segment. We are pleased that CPT code 66174 will realize a modest increase of about 2% in both the ASC setting, which accounts for over 80% of Omni's U.S. revenues, and the HOPD setting. Payments for canalplasty will increase 2.5% to $1,919 in the ASC setting and 2.1% to $4,000 in the HOPD setting. In 2022, ASCs will receive over $850 more for a standalone Omni procedure than for a standalone cataract procedure. For HOPDs, the difference for these same two procedures will exceed $1,800. In 2021, ASCs received 953 more for combination cataract procedures using canal implants than for combination cataract canaloplasty procedures. This gap will be reduced by $158 for 2022, and we will continue our efforts alongside the medical societies, patient advocacy groups, and the surgical community to seek more equitable reimbursement. We sought device-intensive status for CPT code 66174 in the ASC setting, which would have resulted in an increase in payments to ASCs. CMS declined to assign device-intensive designation for 66174 for 2022. We believe this decision is incorrect and stems from inaccurate hospital reporting of device costs for CPT 66174. We will continue to work with the medical societies, patient advocacy groups, CMS, and other ophthalmic stakeholders to help ensure the accuracy of the billing data that CMS will rely on when deciding whether CPT66174 merits device-intensive status in the future. Our third value driver focuses on tear care, which is currently marketed as a powered heating pad for the application of localized heat where the medical community recommends the application of a warm compress to the eyelids. We purposefully built TierCare to deliver a precise and tightly controlled level of penetrating thermal energy through the outer eyelids and into the meibomian glands on the posterior side of the eyelids in a comfortable office-based procedure. We introduced TierCare in a controlled launch two years ago with approximately 10 reps covering the United States. Our plan for 2022 includes modest expansion of our TierCare sales force to fill in high-value geographic white space our controlled launch team cannot fully cover. We are developing and seeking FDA clearance of an expanded indication of tear care for the application of localized heat therapy in adult patients with evaporative dry eye disease due to meibomian gland dysfunction when used in conjunction with manual expression of meibomian glands. Dry eye is a multifactorial disease that is most commonly characterized by poor quality tears that evaporate too quickly. Study data show that 86% of dry eye cases are associated with MGD. The most common dry eye treatments used today address aqueous deficiency or inflammation and represent 95% of manufacturer revenues. None of the leading prescription eye drop medications are indicated for or have a mechanism targeting the most prevalent underlying cause of dry eye, MGD. To compound this issue, Medicare and commercial insurers have not established any meaningful reimbursement for MGD treatments. Dry eye is the number one reason for visits to an eye care provider, and we believe the U.S. market for effective MGD treatment could exceed $10 billion annually. We are executing a very thoughtful and well-informed strategy to unlock the potential market for tear care and its authorized indications by pioneering optimal patient access to effective MGD care through health insurance. We want to maximize the reach of our tear care technology and intend to provide a comprehensive solution for the broadest range of MDD sufferers. As with our value drivers for surgical glaucoma, our Dry Eye Strategic Initiative also involves cross-functional support from our clinical, regulatory, market access, and commercial teams. On the regulatory front, we submitted a pre-market notification to the FDA in September that we hope will result in clearance for an expanded indication for use of tiered care in the coming months. In parallel with our tiered care regulatory efforts, Enrollment continues nicely in our second TierCare RCT, Sahara, which will evaluate the efficacy of TierCare compared to a leading prescription dry eye medication and assess the durability of TierCare treatments over a 24-month period. Articles based on results from our first RCT, Olympia, have been published in two leading peer-reviewed journals. In Olympia, TierCare was compared to LipoFlow. Among the recent publications was an article in Cornea, reporting that a single use of tear care significantly alleviated the signs and symptoms of dry eye disease in patients with MGD. We expect data from Olympia, Sahara, and other studies will support several additional articles in peer-reviewed journals. I would like to conclude my remarks by addressing why we sued Ivantis. In brief, we sued to protect our investments in research and development and to protect the market share and margins of our product. My brother and co-founder David and I began developing breakthrough ophthalmology technologies over 15 years ago. In the years that followed, we have continuously invested in research and development. We incorporated many of these innovations in successful commercial products like Omni and TierCare. Our continuing ability to grow site sciences and invest in R&D depends on obtaining and enforcing intellectual property rights. Our investors deserve to realize value from our inventions. Where we see blatant encroachment on our intellectual property, we must vigorously defend our rights. We owe it to our patients, our company, and our shareholders to hold accountable competitors who seek to profit from our investment. We cannot sit idly by while a competitor uses our intellectual property to compete against our own products. I would also like to note that the patents asserted against Ivantis are not associated with Omni. The four patents in suit relate to our implantable, circumferential, canal scaffolding intellectual property. The hydrous microstent competes directly with Omni in the combination cataract segment. Our lawsuit seeks to enjoin Ivantis from its infringing competition. With that, I'll now turn the call over to Jesse to discuss our third quarter financial results. Jesse?