Ladies and gentlemen, thank you for standing by. Welcome to the Sight Sciences' Third Quarter 2023 Earnings Results Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would like now to turn the conference over to your speaker today, Trip Taylor, Investor Relations. Please go ahead.

Thank you for participating in today's call. Presenting today are Sight Sciences' Co-Founder and Chief Executive Officer, Paul Badawi; Chief Financial Officer, Ali Bauerlein; and Chief Commercial Officer, Matt Link. Earlier today, Sight Sciences released financial results for the three months ended September 30, 2023. A copy of the press release is available on the company's website at investors.sightsciences.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 Sight Sciences anticipated financial performance and operating results, cost savings initiatives, market opportunity, business and product reimbursement strategy, clinical trial results and plans for developing and marketing new products. Forward-looking statements are based on estimates and assumptions as of today, 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 company's public 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. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted operating expenses. The company believes these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. See the company's earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. I will now turn the call over to Paul.

Thanks, Trip. Sight Sciences' mission is to elevate the standard of care for Glaucoma and Dry Eye patients by providing eye doctors with market-leading interventional technologies focused on the preservation of sight and improving the quality of life for all patients. We are confident that we are redefining the glaucoma and dry eye treatment paradigms. To continue these efforts, currently, our main focus is on establishing, maintaining and enhancing market access to our innovative technologies and clinically effective procedures to ensure the best treatment options are available to all patients. Based on the clinical efficacy profile of our products, coupled with demonstrated integration into routine clinical practice, we strongly believe our Surgical Glaucoma products should continue to have broad reimbursed access. Turning to discuss where we stand with market access in our Surgical Glaucoma segment. We were extremely disappointed with the final LCD that was published by WPS on October 26th that identified certain procedures as investigational in patients over the age of 18 for glaucoma management, including canaloplasty in combination with trabeculotomy ab interno to the procedural description WPS associated with OMNI. We strongly disagree with the LCD's coverage limitations with respect to these procedures, and we are pursuing all remediation possibilities to maintain Medicare coverage in the states administered by WPS. We do not have any further updates at this time about the draft LCDs published by the other four MACs in June. If these proposed LCDs are implemented as currently drafted, many non-implantable MIGS technologies would be considered investigational and non-covered for Medicare beneficiaries in the states administered by these MACs. We believe coverage for OMNI is supported by a significant body of peer-reviewed clinical evidence, demonstrating consistent safety and efficacy, a broad FDA-cleared indication for use for IOP lowering in adults with POAG, primary open-angle glaucoma,…

Thanks, Paul. Before I go into the third quarter financial results, I want to provide additional commentary on our cost reduction initiatives. As we announced in mid-October, we implemented a targeted plan intended to reduce operating expenses, improve cost efficiencies, better align our operating structure for long-term profitable growth and further extend our cash runway. We reduced our headcount by approximately 10% or 25 employees. Specifically, we reduced our commercial infrastructure and operating expenses within our Dry Eye business segment, including approximately half of our Dry Eye sales and marketing employees as we shift our commercial focus to market access, payer education and higher utilization with an existing account. And secondly, we eliminated certain positions in the Surgical Glaucoma commercial support. Infrastructure deemed nonessential to continued Surgical Glaucoma, account penetration and revenue growth. In addition, we've reduced our operating expenses principally by implementing measures to limit marketing costs, primarily for TearCare, limiting general administrative costs and delaying replacement hires for certain roles. We estimate the workforce reductions alone will yield savings of approximately $7.9 million on an annualized basis. We also estimate that the other cost savings measures should yield SG&A savings of an additional $5 million on an annualized basis for total annualized savings of approximately $13 million, with such savings primarily being realized starting in 2024. Lastly, given the additional reimbursement uncertainty in our industry, we are evaluating other cost reduction opportunities to extend our cash runway. As we have more material information to share, we will provide an update. Moving back to the third quarter. Total revenue for the third quarter was $20 million, representing 7% growth compared to the third quarter of 2022 and at the top end of the guidance range we provided mid-September. Surgical Glaucoma revenues for the third quarter were $18.4 million, up…

Thanks, Ali. Our main priorities for maintaining reimbursement for OMNI and SION, creating new coding that specifically defines the comprehensive interventional procedure delivered by our OMNI technology, creating a pathway for TearCare reimbursement, optimizing our cost structure and protecting our cash reserves, all while maintaining long-term investments in core research and development projects for the Surgical Glaucoma and Dry Eye markets. Before we open the call for Q&A, I want to introduce Matt Link, our new Chief Commercial Officer. Matt is a highly talented medtech leader with a track record of success scaling a high-growth public medical device company predictably quarter-after-quarter. When Matt joined NuVasive, a disruptive orthopedics company that transform spine surgery, it had similar revenue to Sight Sciences today. Matt methodically and persistently helped lead and scale NuVasive's business over a decade to over $1 billion in revenue. We believe his market development experience with procedurally focused less invasive solutions utilizing disruptive technology that transforms spine surgery is exactly analogous to the procedural transformation of glaucoma and dry eye disease we have undertaken. He has already made a significant impact on our commercial strategy and execution rigor. His leadership will be crucial as we enter our next phase of growth. Matt will now join us for Q&A. Operator, please open the line for questions.

Thank you. [Operator Instructions]. The first question comes from Margaret Kaczor with William Blair. Your line is open.

Hey, good afternoon guys. Thanks for taking the questions. Maybe just to start, at this point, I imagine you've had at least a few, if not many discussions, with your customers on the WPS update. So I was just curious if you can give us any sense on the distribution or discussions so far? How many people have indicated they're willing to at least keep using OMNI for patients outside of Medicare? Or are they indicating kind of the other way around? Well, maybe, unfortunately, they'll have to pull back on use until there's a more firm reimbursement update?

Yes. I can start with that, Margaret, and Paul and Matt can join in as needed here. But I think this is a very dynamic environment that we're in. And at this point, most of the industry is still trying to understand what is in that LCD, what does it mean, what are the nuances of coverage. So that is really what we're seeing from surgeons at this point is. First of all, seeking to understand and then second of all, significant disappointment of the lack of coverage for canaloplasty. So those seem to be the most prominent factors that we're hearing at this point, but it is very early since the LCDs have been published, and there is a lot of work being done to try and change course here from many parties.

Yes, Margaret, we were just completed the American Academy of Ophthalmology Annual Meeting, and I can just say that there was -- there's so much support from the surgical community. They're passionate, committed, our OMNI customers who now for years have relied on OMNI to take care of their glaucoma patients. There is tremendous support from our surgeon community, from our societies, state societies, national societies. We're all rallying behind this to get it to the right place and address these LCDs that would ultimately -- if they go into effect, takeaway treatment options for glaucoma providers, taking care of glaucoma patients. Again, this is the leading cause of irreversible blindness. So we do need to get this right.

Okay. That's helpful. And as a follow-up, I'm curious if you guys had any discussions with commercial payers either on these proposed MAC rules, the final WPS rule at this point, to give us a sense if maybe they would at least hold potential reimbursement changes should they try to copy what WPS had said? And maybe just kind of a similar question, how the society is kind of banded together and said, "Hey, here's our game plan, here is how we can respond more strongly?" Thank you.

Yes. So Margaret, since the proposals, there has not been any change in commercial payer. Cigna -- around the same time as the proposals Cigna was doing diligence on our clinical evidence and did arrive at a coverage -- a positive coverage determination. So that's one example in the interim over the past several months since we've been in this LCD process. There hasn't been any change on the commercial side. Commercial payers will regularly go through their annual cycle to review coverage. Different payers, some have positive coverage for procedures performed at OMNI, some are silent on it. And none of those policies has changed as far as we know during this period. So far so good on the commercial front.

Great. Thank you guys. Appreciate it.

Thanks.

Please standby for the next question. The next question comes from Kallum Titchmarsh with Morgan Stanley. Your line is open.

Thanks guys. I just wondered, I know you touched on it briefly, whether you could spend some time talking about the steps you're taking to remediate the current ruling with WPS and just maybe discuss the timelines on any appeals or similar processes here? And then I have one follow-up? Thanks.

Yes, Kallum, it's a collective effort, as you can imagine. A number of different parties involved, a number of different activities, were working -- we're communicating with the MACs directly, with WPS, with the other four MACs. We're working, communicating with CMS, we're communicating with our national societies. We're communicating with state societies, as you can imagine, with our very strong OMNI-surgeon customer base. We're also working with one of our medical device associations -- Medical Device Manufacturers Association, MDMA. So all stakeholders are aligned here. We feel like we've got tremendous support. We'll be making our arguments to WPS, to the other MACs, as we've been doing. We're going to continue to do that. And we're very encouraged by how much support from all of those groups I just mentioned and how aligned we seem to be to get this to the right conclusion.

Okay. Great. And then maybe if you could just provide some color around the reorganized commercial teams? What's changed here aside from the reduced headcount? And how are you thinking about the commercial teams in those regions with anticipated OMNI coverage removal? Because I know the focus of the company so far have been skewed towards the Dry Eye business? Thanks a lot.

Yes. This is Matt. Thanks for the question. Look, so -- as Paul covered in the -- and Ali in the prepared remarks, the reorg was really about restructuring the business and allowing us to be in a place for sustained growth moving forward, thinking less about infrastructure, really more focused on capacity and capability. And as you know, independent of the final LCD with WPS and the posted LCD, we have two businesses that are at very different stages. And so, focusing on the growth potential of the Surgical Glaucoma business, but as you heard in the ocular service and TearCare business, really looking at the environment, focusing on market access, we're really working with our existing customers to understand and how best to support their efforts towards increasing utilization in the use of the TearCare product, as we've stated in response to a couple of different questions. Obviously, with the LCD posted by WPS and the others pending, we'll need to continue to reevaluate how to optimize our structure to respond to the current environment. But again, as Paul just covered, we're very encouraged despite the circumstances that there's a universal and overwhelming support from all the constituency covered from our individual providers, the academy, other national societies, state societies, and other surgical and trade organizations that recognize that -- at least in the case of WPS, they've arrived at what we see and believe to be as a foundationally incorrect decision. And so we're focused on working with those other constituents in collaboration to arrive at the right outcome and then turn back to our business and really focus on the scale and growth opportunities we see in front of us.

Very clear. Thanks very much.

Please standby for the next question. The next question comes from Tom Stefan with Stifel. Your line is open.

Great. Thanks for the questions. Maybe I'll start with OMNI coverage. Really good to see the GEMINI 36-month data. I think, Paul, you said should be coming in the next couple months. But can you elaborate a bit on what the LCD reconsideration process entails? And maybe how long that might take once you submit that GEMINI data to WPS and I guess, maybe the others?

Yes. Sure, Tom. Happy to take that question. So first and foremost, we're focused on trying to reverse course before this LCD is implemented and also working with other four MACs to not have those additional LCDs move into a final status until they can consider the information from both GEMINI and the IRIS Registry as well as other missing studies and what we deem as substantive and procedural flaws in the process. But if we do have to go through reconsiderations, you cannot submit a reconsideration until an LCD is effective. So after December 24, we could submit a reconsideration request with new evidence. So we would have to have new information that the MAC has not already considered and we would submit that through a reconsideration process. That process can vary quite significantly in length based on both complexity as well as MAC availability and other priorities. But that process could take multi-months in range. So it certainly is a long process, which we believe would be a significant issue for patient access during that period, which is why we are so focused on trying to prevent implementation of that LCD in the interim period.

Got it. That makes sense. That's helpful. And then, Ali, I'll stick with you. Just on the balance sheet, if you can, it would be helpful if maybe you could provide a bit more detail just on the construct of the runway you believe the business has? I know you guys obviously pulled the OpEx guidance this year. But maybe if you can just give us a general framework of what the burn maybe looks like in the near to intermediate term? Thanks.

Sure. So Tom, as we said, we're first of all, pulling guidance. So we're not going to provide any specific guidance either for 2023 or 2024. As you can imagine, this is a very dynamic situation that we're in, and there are many variations and flavors of what could happen in terms of coverage for OMNI and SION and how that may play out with WPS and other MACs. So we are running a variety of scenarios and then focused on what our infrastructure needs to look like in each of those scenarios. But first and foremost, the priority of the upcoming week is really on what do we do to try and reverse course here with WPS and potentially resolve the issue with the other four MACs. In terms of our balance sheet, as you see, we do have significant cash resources right now with our cash balances, and we've done a good job of managing cash with only $10 million of burn in the third quarter. We would expect to continue to be very focused on where we're spending money in the interim, waiting for these solutions to resolve themselves and then we can set appropriate infrastructure. But in terms of absolute dollars or scenarios, frankly, it's just -- there's just so many different variation of outcomes here that we're working through internally. We can't provide that today, which is why we withdrew guidance.

Very fair. Thanks.

[Operator Instructions]. Please standby for the next question. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

This is Samantha on for Matt. Thanks for taking our question. I guess -- focusing on the restructuring here, I guess, you mentioned that some of that would be the mix sales force. And I guess, does that imply or suggest that you are not expecting a quick reversal of the final LCD?

Yes. Just to start, while a portion of the restructuring was associated with our Surgical Glaucoma business, that was really focused on management infrastructure on the commercial side, not on the sales rep capacity. So there was some small combining of regions, but really the focus of that reduction in force on Surgical Glaucoma was not for the carrying reps, but more management infrastructure that we think really allowed us to be more efficient and effective in our overall structure. So it did not imply anything about our likelihood of success or feelings about the Surgical Glaucoma business. All of this was done in advance of any decision by WPS. This was done in the middle of October.

Yes. And just a follow-up on Ali's comments. It was actually quite the opposite. It was moving the structure, flattening the structure in a way that we thought it would allow us to enhance our responsiveness to the opportunities in front of us, further our engagement with our customers who value the technology OMNI and the procedures we support. It was really all about our ability to both sustain and drive more consistent, predictable growth in the future. So we believe it's a structure we can scale into the future. We obviously understand we need to deal with the matters in front of us, but the moves were all about our ability to support and sustain growth moving forward.

Yes. And just to add on to that, when we were recruiting Matt, his background, scaling a business of a similar size to Sight and scaling it into the hundreds of millions and beyond to over $1 billion in revenue. He's experienced all the different stages of growth that we're going to be going through now and into the future. And I think a lot of what we're doing is very familiar to him, and it's kind of in his mind, the best-in-class way of operating a business at today's scale.

Perfect. Thank you for all that. I guess last question from us. Could you give any more details on timing of future WPS interactions or with any of the other four MACs as well?

Yes. At a high level, we are communicating with the MACs. I really think it wouldn't be appropriate for us to comment on the specific conversations or upcoming timing. Obviously, the time line that we're trying to address, all of this is before the December 24 implementation. So the next six weeks is really the critical time frame for us before it moves into the more formal reconsideration process. So that is really the timing that we would expect to be working with both WPS as well as the rest of the MAX as well as all of the key societies and CMS to try and address this. But in terms of specific communication at this point, we're just working through those with the MACs directly.

Okay. Thank you so much.

I show no further questions at this time. I would now like to turn the call back to Paul for closing remarks.

Thank you. We'd just like to thank everybody for your time listening in to this call. Thank you for your support. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.