Sight Sciences, Inc. (SGHT) Q2 2021 Earnings Report, Transcript and Summary

Good day Ladies and gentlemen, and welcome to the Sight Sciences Second Quarter 2021 Financial Results Conference Call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instruction will fall follow at that time. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's conference. Mr. Philip Taylor, Investor Relations, you may begin.

Thank you, and thank you all for participating in today's call. Presenting today is our Sight Sciences co-founder and Chief Executive Officer Paul Badawi and Chief Financial Officer Jesse Selnick. Earlier today, Sight Sciences released financial results for the three months and six months ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind everyone that comments made by management today and answers to questions will include forward looking statements. Those include statements related to Sight Sciences future financial and operating results and plans for developing and marketing new products. Forward-looking statements are based on estimates and assumptions as of today, and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements, including the risks and uncertainties described in Sight Sciences filings made with the SEC. 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 statements, notices and risk factors in our recent SEC filings. And with that, I will turn the call over to Paul.

And thank you to everyone joining us on our first earnings call as a publicly traded company, our Chief Financial Officer Jesse Selnick and I look forward to updating you on our performance in the second quarter, and our Chief Commercial Officer Shawn O'Neil, is also with us today. Since our story may be new to many of you, I'd like to start by providing an overview of Sight Sciences, our mission, our guiding principles and our growth strategy. We are gratified and humbled that many new and existing investors participated in our IPO and are joining us on our journey to transform the lives of patients suffering from the world's most prevalent eye diseases. Eyesight is fundamental to our quality of life. Over 50% of the human brain is devoted to vision, and over 80% of the information we need to perceive the world enters through our eyes. Our overarching goal is to improve quality of life by protecting and enhancing our most precious sense, vision. Sight Sciences is not a conventional eyecare company. I started Sight Sciences over decade ago with my brother David, a world class ophthalmologist, we came up with the all encompassing name Sight Sciences while performing simulated glaucoma experiments out of the garage of Dan, our first outside employee and our current Vice President of research and development. We believe from the very beginning that if we did things right and have some good fortune along the way, we could methodically build a platform eyecare company serving many disease categories through the development of novel and improved medical devices. To fully address the breadth and importance of our mission we built our company for the long run from day one. Many years later, and thanks to the efforts of our now almost 200 talented team members we've created and commercialize two differentiated products in what we believe to be very underserved areas of eyecare. And we intend to create many more in the coming years. We thrive on transforming ophthalmology and optometry through products that target the underlying causes of the world's most prevalent eye diseases. We seek to develop interventional solutions and an interventional mindset in eyecare that can replace conventional outdated approaches, thereby creating new treatment paradigms, while also maintaining a laser focus on optimize patient care as our utmost priority. Many investors in industry participants are curious why we have initially chosen to pursue and tackle both primary open angle glaucoma and dry eye; two very different disease categories. The simple answer is that we will pursue opportunities wherever we can leverage our organic, clinically differentiated problem solving methods and expertise to develop and commercialize products for improved clinical outcomes that empower eyecare providers or ECPs to take the best care of their patients. Moving on now to our four pillars of product development. Days at site are spent competing head on against serious eye diseases with an obsession on developing devices to meaningfully improve the standard of care and eye care. We are hyper focused on developing and commercializing clinically transformative products that maximally empower eyecare providers to take the best care of their patients. Our focus on product development is governed by four fundamental requirements that we believe are mission critical to delivering the most robust and consistent clinical outcomes for patients. Number one, disease physiology mastery. We review and analyze all available clinical data science and literature that is relevant to a disease to achieve a sound understanding of its underlying causes, which we then use to guide the development of our products. Number two treatment of underlying causes. Healthy eyes are self regulating marvels of evolution, biomechanics, chemistry and physiology. We believe that restoring the natural functionality of disease eyes by comprehensively treating underlying causes of diseases provides the optimal combination of effectiveness and safety. Number three, intuitive design. Our products are designed to transform complex, impractical, or invasive treatment approaches and to intuitive, minimally invasive, user friendly procedures. Our product development goals are focused on delivering a preferred go-to treatment of choice to ophthalmologists and optometrists. Number four, patient access. We seek to maximize the availability and accessibility of our products for as many patients as possible. We believe that our devices have the potential to offer differentiated, clinical, experiential and economic value to all eyecare stakeholders. With the goal and expectation to clinically lead any category we enter, we must have conviction that all four criteria are attainable before we begin a new project. Most of our ideas do not advance into development because they fail to satisfy all of our requirements. Today, we have commercialized two products that successfully ran the gauntlet of our rigorous product development process for use in adults with primary open angle glaucoma or POAG the world's leading cause of irreversible blindness. And in situations with a medical community recommends application of a warm compress including dry eye disease, the number one reason for a patient visit to an eye care provider. We believe both OMNI and TearCare are poised to have tremendous global clinical impact in the years ahead. Maximizing global clinical impact requires more than a transformative product that requires meticulous ECP training and commercial excellence. Over the past three years our commercial leadership team has built distinct sales and marketing teams and training programs for both OMNI and TearCare. Our commercial team works passionately with 1000s of ophthalmologists and optometrists, prospects and customers. We hear that we have a reputation among eyecare providers and within the industry as V team doing great things the right way, and the team you want to join. We thrive to continue to earn this reputation every day. Because of our commitment to the relentless pursuit of improve patient care and outcomes, we are rewarded with the best gift possible. Customers choosing our products as the reliable go to intervention when the clinical stakes are high and when we believe we can have significant impact on patient quality of life. Our passion and commitment to help our customers fight disease rises in lockstep with the clinical severity of the situation, not just with the size of the market. There is no greater satisfaction or joy to me personally or to the dedicated people of Sight Sciences than to be blessed with a meaningful role in improving the lives of patients. We are gratified and humbled that many of you have chosen to join us on our mission to protect and enhance the eyesight of patients around the world in the years to come. We believe that substantial shareholder value accrues disproportionately to those select healthcare companies that can rely on putting the patient first as their competitive advantage. Now, moving on to our three key strategic value drivers. Our strategy will always include further innovation in devices intended for use in our two core disease areas primary open angle glaucoma and dry eye disease as well as potential expansion of our pipeline into other eye diseases both in the U.S. and internationally. In the near term, however, we will be laser focused on advancing three key strategic imperatives for our two current commercial products. Number one, continuing to expand OMNI's adoption and usage by surgeons for adult patient with POAG in the established combination cataract segment of the minimally invasive glaucoma surgery or MIGS market. Please keep in mind that if you're expansion will prepare the surgeon to perform procedures within the standalone segment which brings us to number two continued development of the virtually Greenfield and substantially larger standalone POAG segment of the mix market. And number three, expanding our labeling and indications for use for TearCare for the treatment of evaporative dry disease, while also advancing market access among Medicare and commercial payers. In the second quarter we made substantial progress in all three of these goals. Our first two goals related to advancing the treatment of adult patients with POAG by offering a device that can be used for a minimally invasive intervention. POAG is a pressure based disease and elevated intraocular pressure or IOP is the greatest risk factor associated with PAG and therefore the focus of treatment. Cataract surgery on its own is known to have IOP lowering benefits. And today the MIGS market is segmented into two 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 largely artificial and primarily the result of MIGS bypass stents only being indicated for using combination cataract procedures, which has necessitated this unnatural division for the past decade and there are pivotal clinical trials trabecular bypass dents demonstrated modest incremental efficacy over the IOP lowering effect of cataract surgery alone. Trabecular bypass stents are not indicated for use in standalone mix procedures in the U.S. The surgical decision making criteria and clinical effectiveness and consistency requirements for standalone MIGS are elevated beyond those combination cataract procedures. We believe both the degree of effectiveness and the consistency of effectiveness are crucial factors for both patients and surgeons when considering a procedure. For patients we believe the anxiety that may accompany the need for ocular surgery can be tempered with the knowledge that there is a high likelihood of success. For surgeons consistent outcomes simplify the treatment choice and the decision to perform a procedure. We believe this is especially important for standalone mix procedures which must deliver a very high consistency of effectiveness and a very high degree of effectiveness to not only justify the procedure, but also provide surgeons with enough confidence to recommend standalone surgery to their patients and take them to the operating room for a singular reason. We believe devices capable of delivering consistently effective results will be crucial to unlocking the standalone market, as well as capitalizing on the full potential of the combination cataract market, which we believe is currently capturing less than 1/3 of its potential procedure volume in the U.S. In March of this year, the FDA cleared and expanded indication for use for omni that we believe bridges the unnatural divide between combination cataract and standalone mix, and which we believe covers the broadest patient population among all MIGS devices supported and FDA cleared based on internal clinical data. Importantly, 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 lens status, patients combination cataract patients and pseudo patients. We believe this is the Holy Grail indication in MIGS and we intend to invest very aggressively in the clinical and commercial development of OMNI. So why did OMNI clinical performance achieve such a broad indication in MIGS? We believe that OMNI has two critical physiological and clinical advantages. Number one OMNI is capable of comprehensively addressing up to all 360 degrees of the disease conventional outflow pathway, implantable focal treatment to address a smaller segment of the diseased outflow pathway. And number two, OMNI is capable of addressing all three points of resistance in the conventional outflow pathway for vascular meshwork, schlemm canal and the distal collector channels. As shown in our ROMEO multicenter study used for FDA clearance and label expansion use of OMNI for sequential combined and comprehensive canaloplasty has been demonstrated to safely effectively and consistently lower IOP and adult patient with POAG in both combination cataract and standalone settings. We have always viewed MIGS as a single market that seeks to improve the lives of any patient with POAG. Despite the intense, entrenched competition since OMNI launch in early 2018 we have deliberately chosen the universe of over 3,000 makes trained surgeons as our highest priority customer targets. We have successfully trained a large number of these surgeons and brought them off the OMNI learning curve. In the second quarter of 2021 we sold OMNI to nearly 700 ordering facilities, and we still have many more to go. While our commercial team deservingly received so much praise for their incredible achievements, we collectively believe it all starts with our clinically transformative mission and the clinically differentiated surgical technology we developed and perfected over a 10 year period. Our focus on putting the patient first and mastering the physiology of glaucoma allowed us to create a product that comprehensively and effectively reduces IOP and that we believe surgeons love to use. We painstakingly designed OMNI with the goal of transforming effective for complex and invasive surgeries into safer routine and minimally invasive yet equally effective procedures with an elegant device that surgeons can master within an intuitive learning curve. Our goal in pursuing existing and mixed trained surgeons was to facilitate an exceptional training and support experience that would allow surgeons to achieve such high levels of confidence in the safety, effectiveness and consistency of OMNI that they would prefer the device to reduce IOP and adult POAG patients in all settings, consistent with its broad clearance including standalone cases which have a higher clinical bar then add on combination cataract mix procedures. As we have made tremendous inroads in the established combination cataract segment, we believe this phenomenon is already starting to occur. Many of our surgeons have indeed chosen to expand their use case for OMNI to treat adult POAG patients in standalone settings. Based on the results of an internal field study we conducted late last year, we estimate that approximately 20% of the procedures using OMNI were standalone cases in 2020. I would like to note that our surgeons early increased usage of OMNI was achieved even without the benefit of our standalone marketing campaign, which we launched after OMNI received its expanded FDA label in March of this year. We believe the U.S. standalone mix segment is approximately five times larger than the $1 billion U.S. combination cataract segment and is substantially undeveloped. Our plan to fully develop standalone usage among those comprehensive ophthalmic surgeons who perform the vast majority of eye surgeries including cataract surgeries, as well as glaucoma specialists includes a first of its kind market education, awareness and development program that seeks to introduce and educate the primary eyecare providers who first diagnose and treat POAG patients both general ophthalmologists and optometrists to the possibility and benefits of earlier mix intervention regardless of the patient's lens status. We are currently developing methods to track our progress in the standalone segment on a more consistent and reportable basis and look forward to sharing more information about our progress in the coming quarters. We believe the standalone mild to moderate POAG segment is the most exciting and all of mix, we couldn't be more thrilled to be in a position to deliver the power of sight to adult POAG sufferers who do not require cataract surgery. So that summarizes our first two value drivers continuing to take share in the existing combination cataract MIGS segment, and leading the development of the much larger standalone MIGS segment. Moving on now to our third value driver is our TearCare system and development program. We currently market TearCare as a powered heating pad for the application of localized heat, where the current medical community recommends the application of a warm compress to the eyelids. We purposefully built TearCare to deliver a precise and tightly controlled level of thermal energy through the outer eyelids over a 15 minute period, and a comfortable office based procedure. After over five years of product and clinical development and multiple rounds of iteration and product optimization we introduced TearCare in mid 2019 in a controlled launch, with approximately 10 reps covering the entire United States. Gathering additional data to demonstrate TearCare safety and effectiveness through clinical trials advancing dialogue with third party payers regarding appropriate coverage and payment for TearCare treatments and working with the FDA to obtain clearance for an expanded indication for use for dry eye disease and MGD are key pillars of our TearCare strategy. Dry eye complaints are the number one reason for patient visits to an eye care provider and there are over 17 million people diagnosed with dry eye in the U.S. out of an estimated nearly 40 million total dry eye patients in the U.S. and 739 million global suffers. We believe the US market for effective MGD treatment procedures could exceed $10 billion annually. Dry eye is a multifactorial disease that is typically characterized by insufficient tear production known as aqueous deficient dry eye or poor quality tears that evaporate too quickly known as evaporative dry eye. Recent studies have determined that evaporative dry, which is most commonly associated with meibomian gland disease, or MGD , is associated with 86% of dry eye cases. Yet dry eye treatments that aim to treat aqueous deficiency or inflammation represent 95% of manufacturer revenues. This represents a huge disconnect between the way dry eye is treated today, and the actual underlying cause of disease. We studied dry eye extensively and concluded that the optimal way to help patients suffering from this potentially debilitating disease was to develop an effective way to treat MGD the most common cause of dry eye. Meibomian glands line the top and bottom eyelids and produce an oily secretion called MIGO. In healthy eyes, Meibomian has a clear olive oil like consistency and formed the outermost lipid layer of tears. Meibom is released with each blink and forms a protective barrier over the tears and prevents premature tear evaporation. When the glands become blocked or obstructed, Meibom gets trapped into glands and hardens. As the disease progresses, the consistency of Meibom can degrade to a toothpaste like consistency, which precludes you from reaching the tear film and providing protection against premature tear evaporation. Despite the prevalence of MGD as the leading cause of dry eye treatments have focused on over the counter and prescription eye drops that either treat aqueous deficiency or inflammation. The leading prescription dry eye drops have annual revenue in excess of $1.5 billion yet none are indicated for or have a mechanism targeting the number one cause of dry eye MGD. Currently, Medicare and commercial insurers have not established any meaningful reimbursement for MGD treatment procedures. We at Sight Sciences have developed a very thoughtful, well informed and long term strategy designed to change that. Although we believe that a patient pay business model for TearCare exists based on our own experience to-date we also believe that to maximize the reach of our procedure and technology and provide a comprehensive solution for the broadest range of MGD sufferers patient access and appropriate reimbursement for clinicians utilizing TearCare must improve. We are seeking to expand to your peers and your indication for use and are working with the FDA on this front. Our current controlled launch of the product for its indication, has allowed us to begin commercialization with specialized and reputable customers, while also initiating our long term focused TearCare market access strategy. Just as we built Sight Sciences for the long term, we are taking a long term approach to developing devices for potential MGD indications. We have chosen not to maximize short term revenue in favor of a more thoughtful strategy that has the potential to provide access to TearCare for the largest number of patients with MGD if cleared for an expanded label. Now, moving on to clinical evidence, which is critical to everything we do , generating robust clinical evidence is crucial to development and commercialization of our products. Beginning with dry and our Olympia RCT TearCare was associated with statistically significant clinical improvements in all assessed signs and symptoms of dry eye disease. The results of Olympia were published in a leading peer reviewed journal and we expect to other articles to be published in other leading journals in the coming months. We are also pleased to announce that enrollment in our second TearCare RCT is progressing nicely. The ERA is a crucial part of our market access and development strategy for TearCare. Last year, we convened a panel of medical directors from eight payers to understand their criteria for establishing an appropriate coverage and payment program for TearCare. We use very clear and consistent feedback from these numerous payer discussions to design the protocol. In this head to head RCT that has begun, we are evaluating the efficacy of TearCare as compared to a leading prescription dry medication and are also assessing the durability of TearCare treatments over a 24 month period. We look forward to providing you further updates on TearCare and the other facets of our tier care market access development plan over the coming quarters as we continue to make progress. Please do keep in mind the patient access for TearCare is a long term endeavor and may not always progress in a linear fashion each quarter. But it's certainly the right strategy to ensure patients have access to treatment as we pioneer procedure based reimbursed dry eye and unlock this multibillion dollar segment in the process. We also have multiple clinical trials ongoing or planned in mix with OMNI among the ongoing and planned clinical trials for OMNI are several exciting head to head RCTs versus either the leading or bypass stance or eventually versus the standard of care early intervention, prescription hypotensive medications. These studies will evaluate the effectiveness of OMNI and reducing intraocular pressure, the only treatable risk factor associated with POAG and alleviating the burden of hypotensive medications as compared to these alternatives. In terms of completed OMNI studies, the 12 month primary endpoint data from our Gemini study, our first prospective multicenter clinical trial of OMNI in the U.S., was presented at the ASCRS conference in Las Vegas last month. We observed that sequentially performed 360 degree canaloplasty and 180 degree for Trabeculotomy procedures using OMNI in combination cataract surgeries resulted in clinically significant reductions in both IOP and the need for IOP lowering medications through 12 months. We plan to submit the results of Gemini for publication in peer reviewed journals and present the results at other major ophthalmology conferences in the future. We are also pleased with the progress we were making with the FDA on our upcoming IDE trial for OMNI that, if approved and finalized, will allow us to study the safety and effectiveness of canaloplasty only procedures using OMNI in U.S. clinical trials. We expect to have further updates resulting from our discussions with the FDA on our canaloplasty alone IDE within the coming months. As a reminder, OMNI is currently cleared for canaloplasty followed by Trabeculectomy to reduce IOP and adult patients with POAG. The purpose of a canaloplasty alone study under IDE would be to seek FDA clearance for a new indication for use for OMNI for use and canaloplasty only procedures to reduce IOP and adult patients with POAG. If OMNI is clear for this new canaloplasty only indication, we believe this new indication for use would provide surgeons with additional flexibility to customize treatment based on the needs of each POAG patient. We have also made significant progress with Trident, our multinational European RCT. We expect to begin enrolling patients in the fourth quarter across seven countries in Europe. This 12 month RCT aims to study a total of 459 mild to moderate open-angle glaucoma patients who will receive on a standalone basis either canaloplasty followed by trabeculotomy using OMNI, canaloplasty only using OMNI for implantation of trabecular bypass stents. We are particularly excited about Trident because it represents our very first opportunity to compare the performance of OMNI against MIGS stance on a standalone basis across a large population. And we are eager to complete enrollment. At the annual meeting of the American Society of Cataract and Refractive Surgeons are ASCRS last month, physician presented the results from five of our clinical studies featuring OMNI and TearCare. Participation and leadership and important meetings like ASCRS are great opportunities for us to present our clinical trial results to a broad audience of ophthalmologists and optometrists and connect with longtime thought leaders, customers, surgeons and friends. We will continue to make our presence felt at other eyecare industry events in the future, including the annual meeting of the American Academy of Ophthalmology in November, and major optometry conferences like AOA and AAO. And finally moving on to reimbursement and market access. Last month, as many of you may be aware as it relates to MIGS and OMNI, CMS released new proposed fee schedule rules for payments to physicians and outpatient facilities for 2022. These results are subject to a 60 day review period and may be further revised before finalized in November and taking effect on January 1. Proposed payments related to CPT code 66174, which is used OMNI procedures were among those that were revised that proposed national payment to physicians for 66174 would be $739 a $211 reduction from the current rate. While we are disappointed in the proposed reduction and plan to engage with CMS to increase the recognized value of this procedure in the final rule we believe the proposed payment if finalized, will still provide an adequate payment to physicians. We know that this proposed payment still exceeds the proposed payment to physician for cataract surgery by over $200. The proposed payment schedule for outpatient facilities billing CPT code 66174 featured modest increases of about 3% in both the ASD setting which accounts for approximately 80% of OMNI's revenues and the HOPD setting. CMS is proposed at 3.5% increase to $1,937 for canaloplasty in the ASC setting, and a 2.6% increase to $4,019 for canaloplasty in the HOPD setting. Under the proposed fee schedule, ASC would receive over $800 more for a standalone OMNI procedure than for a standalone cataract procedure and the HOPD setting the differences over $1,800. As we have discussed previously, we continue to seek device intensive status for CPT code 66174, which covers devices including OMNI in the ASC setting, device intensive status for codes 66174 if approved, could result in a meaningful increase in payments to ASCs. We continue to work with our society's CMS and other stakeholders to encourage assignment of device intensive status and we will report back when we have more clarity on the subject. The proposed rates cited above do not include device intensive designation for OMNI procedures. CMS and other payers in part on review of relevant medical literature when making coverage and payment decisions. We believe that our clinical trial program and subsequent associated peer reviewed articles will provide further evidence regarding the effectiveness and safety of our products and support decisions regarding coverage and appropriate payments related to use of our products. Additionally, our market access team intends to supplement clinical efficacy and safety data packages with quantifiable health, economic and outcomes information to illustrate the value of our product to payers, and more importantly, our patient's quality of life. We will continue to work with the major ophthalmology societies, patient advocacy groups and influential physicians to advocate for appropriate patient access on behalf of OMNI and TearCare. The proposed fee schedule also included changes to the billing codes and payments to physicians and facilities related to trabecular bypass stent implantations performed in combination with cataract procedures. The category 3 CPT code 0191T used for tobacco or bypass dental implantation since 2008 will be replaced with new permanent category 1 CPT codes describing protected or bypassed stent implantation in combination with cataract surgery. While we have analyzed these new codes and proposed payment amounts internally, we will not speculate on proposals related to other products or any impact such proposals could have on surgeons and facilities. The proposed fee schedule rules are publicly available, and we urge investors to draw their own conclusions after careful analysis. I will now turn the call over to Jesse Selnick our Chief Financial Officer to discuss our second quarter financial results. Jesse?

Thanks, Paul. And good afternoon everyone. Our total revenue for the three months ended June 30, 2021 was $12.5 million, which was a 258% increase from $3.5 million in the same period of 2020 and a 45% sequential increase from $8.6 million in the first quarter of 2021. Our results in the second quarter of 2021 in the second quarter of 2020 are materially impacted by COVID-19 related elective procedures shut down during that period and to a lesser extent were impacted during the first quarter of 2021 due to what we observed to be patient driven cancellation. We were encouraged in the second quarter of 2021 that the operating environment closely resembled that during pre-COVID periods, with what we observed to be normalized cataracts and glaucoma procedural volumes and controlled but open commercial access to facilities for prospecting, and training eyecare providers on OMNI and TearCare. All of that being said, we are closely monitoring the Delta variant and its impact on our end markets. To-date, the primary observable impacts from the Delta variants have been related to operating practice restrictions, as opposed to noticeable widespread procedural volume impacts. However, just this week, we've been informed of some Delta very related cancellations of OMNI cases by both patients and surgeons. Again, we continue to monitor these developments extremely closely. Our combined gross margin for the second quarter of 2021 was 82% as compared to 40% in the corresponding prior year period, and 73% in the first quarter of 2021. The drivers of this increase will be discussed more in depth as we get into segment performance. Our surgical glaucoma segment revenues which is from the OMNI product for the second quarter of 2021 were $12 million up 263% from $3.3 million in the second quarter of 2020, and a sequential increase of 47% from $8.1 million in the first quarter of 2021. Sales of OMNI benefited from a number of factors primarily driven by an increase in the number of new accounts sold in the quarter, due in part to what I mentioned as a selling environment that add more normal as commercial access to customer facilities, as well as increased utilization per active account. In addition, the comparative results benefit from seasonality factors in the second quarter, and fewer COVID related impacts during the quarter. Gross margin and surgical glaucoma was 85% in the second quarter of 2021 compared to 54% in the prior year period, and 77% in the first quarter of 2021. The observable sequential improvement from the first quarter of 2021 was primarily the result of our transition in the first half of this year for more specialized R&D oriented development partner for our production to a low cost high volume contract manufacturer. Further as we continue to scale the OMNI business within surgical glaucoma. Our gross margins will benefit from greater absorption of fixed costs labor and overhead. In our dry segment, revenues were $0.5 million in the second quarter of 2021 which is up 169% from $0.2 million in the corresponding prior year period and an increase of 10% or 51,000 sequentially from the first quarter of 2021. Similar to our surgical glaucoma segment, our dry eyes benefited from a more normalized selling environment respect to COVID comparative periods and seasonality factors. In addition, our second quarter of 2021 results benefited from a growing number of new facilities sold vis-à-vis prior periods as well as a larger base reordering customers as we continue to build our embedded customer base on a focus basis. Gross margin in dry was 3% in the second quarter of 2021 versus negative 184% in the second quarter of 2020 and 11% in the first quarter of 2021. The improvement in gross margin from the comparable 1000s money period was due to the significant increase in unit sold in the 2021 period. In general, we expect TearCare gross margins for dry eye gross margins to run in this year to date range until we begin to accelerate our commercial investment and increase our revenue base for dry eye which will cover fix labor and overhead costs, as well as grow our installed base of eye care providers, which will shift our mix more towards smart led sales, which are the higher margin single use component of the system that we typically sell our smart hubs on a cost plus basis. Total operating expenses for the second quarter of 2021 were $21.6 million, which is 138% increase from $9.1 million in the second quarter of 2020 and an 18% increase from 18 million in the first quarter of 2021. Not surprisingly as we've gained traction in the launches of both OMNI and TearCare and in preparation for our initial public offering we have been consistently scaling our business and our business investment. Another specific factor which contributed to the increase of year-over-year OpEx was the accounting treatment of our $2.2 billion paycheck protection program or PPP loan which we received in the second quarter of 2020. Our PPP loan was accounted for similar to a government grant and whereas specifically the earnings impact of the loan was recognized in the earnings in the period in which we recognize the cost. And so really that's what the loan was the comp on our instance, because we utilize the loan proceeds in full in the second quarter of 2020. This effectively resulted an expense offset of $2.2 million to our second quarter 2020 operating expenses. We're understanding what was actually incurred for the principal amount of the PPP loan. I will now walk through the primary facts and future areas of our OpEx investments in greater detail. SG&A expenses for the second quarter of 2021 were 17.8 million compared to 7.7 million in the second quarter of 2020, and 14.6 million in the first quarter of 2021. The increase in SG&A expenses was primarily due to our continued investment in scaling of operations and corporate headcount to support our growth. As an example, in the first quarter of 2021, we expanded our OMNI field team from 38 quarter bearing hunter reps to 61. And at the same time, we added marketing, training and support personnel to support the growth. While we do not have a specific plan to expand reps for either business section segment at this point in time, we will continue to be opportunistic when and if we see the opportunity to further accelerate our growth, the attractive returns on incremental investment. In addition, over the periods presented we made meaningful investment in our corporate systems and personnel in finance, accounting, human resource, legal and compliance in preparation for operating as a public company and our continued business growth. R&D expenses for the second quarter of 2021 were $3.5 million compared to 1.4 million in the second quarter of 2020, and 3.4 million in the first quarter of 2021. Majority, the increase in R&D expense from 2020 to 2021 was due to three factors; an increase in personnel expenses as a result of increased headcount as we built out our clinical, regulatory and R&D departments, contract manufacturing lab supplies and product prototype development expenses for TearCare and costs associated with clinical trials. We expect our R&D expense to continue to grow over the near term as we execute our clinical roadmap across both core products and as we build out our internal R&D operational team, to enable us to execute our product enhancements and brand development roadmap. Overall, loss from operations for the three months ended June 30 2021 was 11.1 million compared to a loss of 7.7 million for the same period of 2020 and a loss of 11.7 million in the first quarter of 2021. We have a net loss of 17.6 million or $1.83 per share for the second quarter of 2021 based upon a weighted average pre-IPO share count of 9.6 million shares, compared to a loss of 8.3 million or $0.88 for the second quarter of 2020 based on a weighted average pre-IPO share count of 9.5 million shares. We ended the second quarter of 2021 with 35.6 million of cash equivalents and 32.3 million of long term debt. We were very pleased to complete our initial public offering last month which generated net proceeds were approximately 253 million, which obviously puts us in an excellent financial position to make necessary investments to continue to scale our existing business to execute robust clinical trials, to expand the indications for use for our products, and to advance our market access initially, and ultimately to develop new products, such as the new product markets, such as standalone MIGS and procedure based dry eye. One of the financial accomplishments we take a lot of pride and Sight Sciences has been our return on invested capital. As of June 30 2021, we've invested approximately $120 million into our business and that capital was able to create a substantial return when you consider that level of investment has enabled us to bring two disruptive products to market with strong clinical support and commercial traction and further when you compare it to our current market value. We intend to continue to maintain this discipline and focus as we invest our IPO proceeds in the high ROI areas. Turning to our outlook for 2021 we expect full year 2021 revenue to be in the range of 46 million to 48 million, representing growth of 66% to 74% over our 2020 revenue. This guidance reflects a continuation of the growth trends we've been seeing in each business in recent quarters through the remainder of the year, with no incremental benefit from additional sales resources although we are actively evaluating the potential to increase that opportunistically. This guidance takes into account seasonality patterns and a presumption of the operating environment that we saw in the second quarter of 2021 and to-date in the third quarter as it pertains to COVID related restrictions and the scheduling of elective procedures and our team's access to customer facilities remains consistent through year end, specifically meaning no pronounce for something from the current commercial environment that we're seeing. Further, we're not assuming any explicit end year step function benefit from the proposed CMS payment rules. These rules are still a proposed form. They will not be finalized until November 2021 and are subject to change in the interim and will go into effect only on July 1, 2022. As we get greater visibility of potential acceleration of surgeons switching to or increasing utilization of OMNI we will of course update our view on that from the potential revenue impact to you. So with that I'd like to turn the call back over to Paul for closing comments and after that, we'll open it up for Q&A.

Thank you, Jesse. As I said earlier, we build Sight Sciences for the long term. And our pledge to deliver the power of sight to patients with eye disease is unwavering. We are grateful for the support from all of our investors, customers, eye care providers, team members, societies, payers, and other stakeholders. While we were thrilled by the outcome of our successful IPO, the most important result is that our newest investors in trusted us with their capital, which we will deploy with a singular focus on achieving our full potential. We look forward to updating you on our business again in a few months. We will now open up the call for questions. Jesse and I will be joined by Shawn O'Neil our Chief Commercial Officer to answer your questions. Operator.

Thank you, sir. [Operator Instructions] Our first question comes from the line of Cecilia Furlong of Morgan Stanley. You may ask your question now.

Thank you, and good afternoon. And thanks for taking the questions. I wanted to start off with OMNI and really just ask what you've seen since you received the new label in terms of standalone volume trends, as a percentage of your total OMNI procedures versus what you saw in 2020 at the 20% just how the label is really resonating with physicians and then the impact on being able to expand into standalone.

Hi Cecilia, maybe Shawn, Jesse and I can all tag in this one. I'll just start off with a with a just some comments on the label itself to make sure that everyone's on the same page. The OMNI surgical system is indicated for canaloplasty, micro catheterization and transluminal bisco dilation canal, followed by trabeculotomy, cutting up trabecular meshwork, to reduce intraocular pressure and adult patients with POAG. Importantly, what you don't see in our label is a restriction to advanced to refractory disease. You also don't see anything about lamp status or in combination with cataract surgery. So OMNI is broadly indicated for IOP lowering and adults with the POAG. We believe our label is the Holy Grail indication within the mixed category and we were very appreciative of our highly productive, thoughtful, collaborative FDA review process late last year and early this year which ultimately resulted in our expanded label in March. So OMNI has been many years in the making, and it's comprehensive and reproducible procedure profile, and 360 degrees of treatment through two procedures targeting all three sources of resistance. And the resulting clinical data we provided to the FDA was fortunately compelling enough to warrant this very strong clearance. The expanded label is particularly important for us at Sight not only because we differentiate ourselves on efficacy. We asked our surgeons to do more and perform significantly more angle surgery again two sequential procedures up to 360 degrees each, to hopefully drive more consistency of efficacy and more robust efficacy. This consistency is particularly important in standalone surgery where OMNI angle surgery would be the only reason for the visit to the operating room. So we couldn't be more thrilled about our label than now allows us to educate the market referring ECPs and surgeons on OMNI. It allows us to share our compelling clinical data in combo cataract and standalone and thereby effectively develop a much bigger and largely Greenfield mild to moderate standalone market. Shawn, Jessie, do you guys want to talk about what you've seen in the market and as it relates to increasing use of OMNI standalone?

One of the things that we have always leverage and discussed with even right at the beginning of the demand creation and bringing on new surgeons is the value proposition of standalone. The label, since the label it really gives us an opportunity to hone in on that part of the value proposition and with that it's been well received. I think it's been accelerated to get new surgeons on board, but also it's been well received from an adopted surgeon standpoint and we are currently, as Paul mentioned the opening comments, preparing and launching a industry leadership level, education disease state education campaign around mild, moderate standalone patients to the eyecare provider, primary eyecare providers as well as to patients and that'll be forthcoming as well, which we believe will have again, additional impact on expanding into that standalone space.

Great, thank you for the color. And if I could ask as well, just in terms of account openings, being able to leverage the new label that you have, can you just walk through what you saw in 2Q and really after 2Q, either with COVID headwinds, abating being able to access sites, but really is the ability for yourself for us to leverage this new label to open new accounts? And thank you very much.

The opportunity that the new label really provides us is the ability to not only share the value proposition that I spoke of a second ago, but also to share the data behind the products and really demonstrate the consistency and the efficacy that you get with OMNI when creating primary open-angle glaucoma and adult patients and with that's what's really been allowing us I believe to be the accelerated and normalized selling environment when our sales reps have the opportunity to share that data, that compelling data that we have, and get the surgeon and the administrators and the facilities excited about bringing OMNI in for additional patient care for the primary open-angle glaucoma patients.

Our next question comes from the line of [Indiscernible]. Your line is open.

Thank you for taking the question. Can you hear me? Excellent, wonderful. Two things. The first one was with the reimbursement changes that are on the table, what do you think the impact will be to your business model and do you anticipate that it will start as we exit this year or sort of once it's finalized, or maybe even in January, like I just I'm just trying to understand, given your conversation with decisions, the type of feedback that you've been receiving?

Yes. Hi, Joanne. I'll just comment a bit and then John, if you want to add some color, I think we discussed the adjust for the proposed adjustments that are not yet finalized. But if finalized, there's an adjustment to CPT 66174 reduction to $739. In speaking with surgeons and KOLs during ASCRS a couple of weeks ago, they were very encouraged by OMNI 12 months prospective multicenter U.S. clinical data on IOP lowering effect duration and maintaining target IOP levels. And the ability for patients to lower the number of their topical drop medications or go completely off drop therapy. So we're ultimately confidence that given OMNI clinical benefits this proposed fee reduction if implemented next year will not lead to an active disruptive for OMNI utilization given its proven efficacy and safety profile and in a real world setting of care. Now that being said, we think, recommendation was thoughtful and thorough and we fully support that recommendation that would have resulted in a more accurate work value. We will be providing comments to CMS additional information to hopefully inform a more appropriate work value believe there is room for improvement for the 6617 for physician fee since we don't believe the proposed value takes into full consideration the value of OMNI technology and time and intensity required to perform a canaloplasty and more specifically, a circumferential canaloplasty followed by the evaluation of CPT 66174 we don't think takes into account the skills involved in the concomitant [Indiscernible] procedure perform using OMNI for their label.

Yes. And the second question. Yes, thank you.

I agree with Paul's comments especially around the feedback that we did receive it ASCRS as the proposal is very fresh in everyone's minds. The surgeons that we spoke with we were really pleased with the responses that they had in terms of the increase on the facility side of the 3.5% obviously, is favorable, from a facility standpoint for surgeons that have financial ownership in some of their facilities, and then, to Paul's point, we believe we have additional opportunity to physician side. But overall from a relative standpoint to other alternatives the surgeons were still very positive on the reimbursement amount as relative alternatives for 66174.

Thank you. My second question has to do at the beginning of a conversation, you talked about investing aggressively in clinical and commercial. Can you just give us two or three examples of those levels of investments that you're looking towards? Thank you.

It's Paul. On the clinical side, we have a very rigorous clinical roadmap across both OMNI and TearCare I think of it in three buckets, one OMNI standalone, clinical studies and publications, number two OMNI combination cataract, clinical studies and publications, and number three TearCare. So I'll just talk about the larger studies and OMNI standalone, we have one prospective RCT that's underway in Europe. That's the OMNI standalone versus trabecular micro bypass, stenting standalone, three arm study about 450 patients at 22 sites across seven countries in Europe. And then we have three additional studies for OMNI standalone that are retrospective studies. We're really excited about initiating this large RCT and guiding patient should enroll by the end of the year. Then in OMNI in combination with cataract, we have a prospective single arm study that's concluded Gemini. I discussed that in the prepared remarks and we're looking forward to publishing that 12 month data soon. We have a prospective RCT that we hope to kick off soon. We are in discussions with the FDA around an IDE for that study. And I'd mentioned it in my prepared remarks and that will hopefully, if successful lead to a canaloplasty alone indication. We're looking forward to executing that trial in due course, and then we also have two additional retrospective studies that we're going to be executing. All of these studies I'm mentioning, they should have some important milestones either study initiation, patient enrollment and/or publications within 12 to 18 months timeframe. And then lastly, on TearCare another four studies that should have some milestones in the next 12 to 18 months. One is the prospective RCT that we're super excited about and I talked about in the prepared remarks that's TearCare versus [Indiscernible]. It's a two year trial with two goals, one to compare and hopefully we can show TearCare superiority at the six month endpoint and then the second goal of this study, again, based on feedback from discussions with payers was to show durability of treatment effect. So we're going to crossover all of the patients to TearCare at six months, and then run that study through to two years to show durability of treatment effect. In addition to that prospective RCT in the U.S., we also have three retrospective studies that are either under where it will soon be underway again with milestones and hopefully publications in the next 12 to 18 month timeframe. So again, we're super excited to execute all these trials. We spend a lot of time again, as I'd mentioned on product development, and truly addressing the underlying causes of disease. We believe that puts us in a very competitive safety and efficacy position. And so we love to invest heavily in the clinical data that validates our thesis.

[Operator Instructions] Our next question comes from the line of Matthew O'Brian, your line is now open.

Thanks for taking my question. So, Paul, can we just flash out a little bit more on the reimbursement side, just to follow up on Joanne's question. So you're talking about this one code potentially impacted in the proposal but I think the market reader in MIGS has proposals and a couple of areas that are scheduled to be down meaningfully. So I just think on a relative basis you're probably a little bit better position than again, the market leader and then another player in the space. So I'm just curious if you seen, maybe Shawn can talk a little bit about this just an increase in the number of competitive conditions that are coming to you just ask about OMNI in response to this maybe it's too early. And then even in the near term here, I know these are all proposed, because there's something you can do from a marketing perspective to really highlight the potential difference here and really drive more clinicians over to site in the near term.

Matt, Shawn, maybe you and I can tag team on that one. I think all along we built Sight Sciences with a laser focus on trying to be best in class clinically and best in class from an efficacy position. So that's how we view kind of our jobs and we've been commercializing OMNI especially since that label expansion that allows us to share that differentiated clinical data. We're just really excited to lead first, as we always do with safety and efficacy first. So as it relates to what's happened in the field, and with respect to the new codes and proposed values for accommodation cataract and stent procedures, our understanding, CMS proposed to reduce the independent value of inserting stent during a cataract procedure as compared to current payment amounts. We think that if you look at the overall clinical and economic value that surgeons may reconsider. I mean that's kind of what we've seen at least John probably has more insight into it. But again, I think you get to add up the clinical and economic value and surgeons will make their determination. Shawn, do you have any color on?

Yes. Happy to give some additional color to that. So obviously, they are proposed rules right now. So I think it's too early to one of your questions was on timing I think it's too early to say that there is meaningful change in the transition of customers outside of the demand that we're already creating which is, as Jesse shared with the numbers has been really-really positive for OMNI. And to that, we're obviously focusing our marketing efforts on making sure that demand creation is built off of the consistent efficacy delivered by addressing all three points of resistance and conventional outflow pathway and we're obviously sharing our known economics for 66174 so that both all stakeholders, the facility managers, as well as the surgeons understand what the financial aspect of performing a OMNI procedure is and again the sentiment right now is even under the proposed rule, that those are positive opportunities for both those stakeholders. And so we're going to just continue to focus our message on those things and we feel like that puts us in a position to not only compete in that combo space, but also take and develop the leadership position in the mild to moderate standalone arena.

Thanks for that. And then for Jesse, I don't want to feel totally left out here, one for you it's got a couple parts to it. The guidance for the year is completely understandable that you kind of keep it in this range. It doesn't assume much sequential improvement throughout the back half of the year. Is that really COVID specifically and you mentioned some cases that were getting canceled. Are you just kind of assuming now that those get pushed into 2022 at this point and just love to hear a little bit more on that and then with the size of the IPO. I think you talked a little bit about this too. I mean, is there any potential for you guys to accelerate sales force expansion, other marketing activities, etc, here in the near term, which we could see impacting 22. Thanks.

A couple things, Matt, and thanks for letting me not left out. I was getting a little sad. Second quarter, we believe is the seasonally strongest quarter. And I think when you couple that factor with the fact that we believe that the second quarter for us at least was a greater than 100% quarter kind of something we talked about on the road show a lot, given that we have a preliminary number that we didn't expect much sequentially from the third quarter, which is actually a sequentially weak quarter. Heightened a lot this quarter, I think, is given the Delta noise, but also just in terms of patient and surgeon availability for procedures. And so it does we do anticipate nice sequential growth, but we're really kind of with that one exception and that exception being that we had already discussed that we thought second quarter OMNI results were extra strong, and that the third quarter is seasonally weaker quarter than the second quarter in terms of procedure volume. With respect to the proceeds I will say this, we're keeping a close eye on the market dynamics that yes, about we want to be opportunistic. We had a plan that we presented last month, and then obviously, during that road show process, some potential changes to the competitive dynamics propped up. We haven't, we're still watching, right. But if we see pockets or verticals, or geographies where we can accelerate we will. Same thing on the TearCare side. But it's kind of still that kind of prudently aggressive philosophy we've taken historically about how we'll spend it. But obviously, we'll keep a very close eye on the MIGS market in the near term and see if there's some attractive opportunities that pop up.

Our last question comes from the line of [Indiscernible] from Bank of America. You may ask your question now.

Congratulations on the first earnings call. And thanks for taking the questions. Two for me. First one kind of building on Cecilia’s earlier question, as you think about the guide, and that 20% of your mix coming from standalone last year how do you think about that mix being reflected in the 2021 guide and then longer term? Also, how do you expect that mix to kind of shift as you further pursue the standalone opportunity and then the second question if you could just expound a little bit on the canaloplasty only label, how significant do you think that that could be an offering positions further flexibility?

Jesse or Shawn, do you want to tackle the first question. I can tackle the second? I mean, I can tackle the second question first. We think the canaloplasty alone label will be helpful. We view the overall mix category just to generalize or simplify and think of six buckets. So you have combo cataract and standalone and within each of those you've got mild, moderate or severe. And in that, in that mild combo cataract segment, I think surgeons are really serious about ensuring day one post op visual acuity. They want perfect outcomes, and they want their patients to be really-really stoked about their vision on day one post op. So offering something that is more gentle, like procedure I think, would be very well received in that mild combo cataract segment. I think as it relates to moderate or advanced combo cataract or mild moderate severe standalone we like our position by the current label for canaloplasty intravascular anatomy and having the surgeons perform to sequential procedures that allows them to address all three sources of outflow resistance and do so for up to all 360 degrees of the disease conventional outflow pathway we think that functionality is necessary in other categories. So hopefully that helps explain where we think as canaloplasty alone has a nice position again, if successful with our IDE and clinical trial.

This is Jesse Selnick I'll tackle the first one. So second quarter was very strong in terms of utilization per our customer per facility. So we believe it was, we looked at it, probably beyond what a review actually happened which would inform sort of my comments to Matt about that we thought that the second quarter had some, was a little bit greater than 100% quarter, right. We just saw some volumes from some very steadily ordering customers that were beyond what we were used to seeing from them. That being said, I think a big part of that is expanded use cases as well . It's not all going patient backlog or anything like that. And it was kind of across the board very strong in terms of relative utilization to previous periods. That comes, all that comes in one of two ways, right, or one of three ways. We're either getting more share, within sort of the profile they've been using OMNI for, they're expanding their use case for severity, or they're moving in the standalone procedures. So we know, it's uplifting, it definitely was uplifting on an accelerated basis unless you're aware, and anyone that spent a lot of time with us in the road show or process, we're still figuring out a way to be able to more systematically measure our standalone mix as a percentage of the whole. So a lot of the leading indicators and like which will infer from the result were nice progress and we just don't have the ability to sort of convey that with a confident metric that's repeatable at this point in time.

And that concludes the Q&A session. I will now turn the call over back to Paul Badawi for closing remarks.

Well, thank you all. We enjoyed our first earnings call. Hopefully it was informative for everyone and we look forward to keeping everyone up-to-date on all the progress of Sight Sciences. Thank you very much.

And that concludes today's conference call. Thank you again for participating. You may now disconnect.