Q2 2022 Sight Sciences Inc Earnings Call

[music].

Okay.

Hello, and welcome to the site and Sciences second quarter 2022 earnings results Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

If you would like to withdraw your question press the pound key.

Uh huh.

Thank you I will now turn the call over to Mr. Philip Taylor Investor Relations. Please go ahead Sir.

Thank you for participating in today's call presenting today are state Sciences, co founder and Chief Executive Officer, Paul, but Alley, and Chief Financial Officer, Jesse Celnik earlier today <unk> Sciences released financial results for the three months ended June 30th 2022, a copy of the press release is available on the company's website.

And investors St Sciences Dot com.

I'd like to remind everyone that comments made by management today and answers to questions will include forward looking statements within the meaning of the federal Securities laws.

Those include statements related to <unk> Sciences 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 guarantee.

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.

The annual report on Form 10-K.

Filed March 24, 2022, 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.

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 trip and thank you all for joining us.

Our second quarter 2022 performance was strong across the organization revenue increased to $17 2 million, representing 37% growth year over year and 16% sequentially.

Our total gross margin increased to 84% in the second quarter up from 82% in the prior year period.

Surgical glaucoma revenue grew 33% year over year, and 15% sequentially to $15 9 million.

While dry eye revenues grew to $1 3 million up 143% year over year and 32% sequentially.

We are pleased with our execution across both businesses and are encouraged by the leading indicators.

Port further market penetration and expansion.

A year out from our IPO.

It is readily apparent that we have steadily emerged as the market leader in mix.

Our analysis indicate that omnis growth continues to outpace that of other mixed product.

We intend to extend our lead over the coming quarters and years, both with continued share growth and market expansion.

We remain in a favorable position with over $200 million of cash on our balance sheet to fund our strategic initiatives and growth plans.

Since our IPO external factors across the mid market and the global economy have changed the operating environment significantly.

In response, we have fine tuned our strategic and operational plans to help us thrive in today's evolving market and ensure our long term success.

My remarks today will focus on these topics Jesse will then discuss how we believe our growth trajectory and disciplined expense management will facilitate our path to profitability over the medium term, while maintaining a very comfortable liquidity position.

I'll now move on to our two strategic growth initiatives and surgical glaucoma.

One increase.

Increasing adoption and utilization of omni and the established combo cataract <unk> segment and to pioneering the $5 billion U S market for Standalone mix.

Omni continues to win share in the combo cataract segment and expand the Standalone makes segment because of its duration of efficacy and safely lowering and maintaining target IOP.

Broad indication for use.

Precision engineered usability and.

In category, one CPT code recognition.

Our ever increasing confidence in armies ability to continue to both gain market share and expand the market in Migs is predicated on its mastery of these four critical concepts.

Years of research and development have culminated in an intuitive and elegant device that allow surgeons to consistently achieve clinically meaningful outcomes, along with the safety benefits of a minimally invasive approach.

Our growth came from continued new physician training, increasing active ordering accounts.

Pete orders strong utilization and extremely minimal account churn amid a migs market that includes multiple new products.

We continue to win because of our strong fundamentals and our unshakable bedrock of placing our patient at the center of everything we do.

We have discussed previously the headwinds from the Trialing of new entrants and the resulting confusion in the marketplace.

As we expected the surgical community is quickly learn what these products can and cannot do.

We have seen medical societies, and payers make strong statements clarifying the limit and limiting the coding and reimbursement pathways for some of these new entrants.

Based on whether they are procedures meet the clinical or medical requirements necessary to be reported with existing procedure codes.

Some of these products have at best very limited indications because quite simply they are not supported by sufficient clinical evidence that they can improve patient outcomes.

We anticipate trialing of these products will continue in the second half.

These trials can impact the adoption cycle for new omni users and result in pockets of account ordering softness in certain subsets of customers.

At the same time, we have seen many accounts cycle through these trialing programs and subsequently returned to omni.

Overall, we believe trialing impact will be transitory.

Regarding reimbursement CMS issued proposed payment rules for 2023 last months.

As a reminder, omni is billed under category, one CPT code $66 seven for the.

The professional fee for six 674 was revalued by the rock in 2021 and scheduled to be reduced in value.

Medicare payment was reduced from 950 in 2021.

750 in 2022 and is proposed to continue this phased in final reduction to approximately 602023.

Reevaluation for professional fees for category, one CPT code typically last for five years. So we would not expect any further adjustments to the six 674 profi for several years.

On the facility fee side CMS did not proposed to designate CPT code $66 74 at the device intensive procedure for <unk> in 2023.

We continue to believe device intensive status would represent a fair appropriate and deserved adjustment if and when it happens nonetheless.

Nonetheless in the interim our competitive position.

<unk> by superior efficacy and patient outcomes remain very strong as evidenced by our continued share growth and market expansion.

We do not foresee any meaningful hindrance to our ability to continue to penetrate the combination cataract segment and grow standalone usage of omni over the long term.

The outstanding real World outcomes, and the robust clinical data published in reputable peer reviewed journals support our belief that omnis adoption by the ophthalmic community will continue to grow.

Turning now to our second strategic initiative accelerating adoption of omni at the leading Standalone intervention.

For patients, who do not require cataract surgery. The current standard of care relies on the increasing use of topical eye drop medications to limit progression of the disease with the objective of differing conventional more invasive surgical procedures for as long as possible.

We believe that omni given it indication for use safety profile and reliable duration of efficacy offered the perfect product market fit for Standalone interventions earlier in the treatment continuum for mild to moderate patients.

Clinical trials have demonstrated that omni can safely and consistently lower IOP and reduce dependence on medications independent of cataract surgery.

Our market research indicates that 85% of glaucoma patients would likely choose a standalone intervention using omni if recommended by their doctor.

To drive adoption of omni as a standalone procedure, our efforts concentrate on raising awareness and educating the glaucoma community.

We strategically placed our glaucoma clinical consultants and territories with numerous qualified omni train surgeons.

<unk> communicate the potential benefits of Standalone omni procedures to office based primary primary care doctors to serve at the frontline of diagnosis and treatment.

They also certify that they are assigned surgeons already for Standalone cases.

Although the GCC program just launched earlier this year, we are already beginning to see results in the second quarter GCC accounts demonstrated meaningfully higher sequential growth than non GCC accounts.

These initial results are by their nature inconclusive, but directionally very encouraging.

Also preliminary projected claims data from a well respected advanced analytics provider indicate accelerating standalone usage of six 674.

Projected claims using six 674 alone for the first five months of 2022 have already exceeded those for the first six months of 2021 by almost 30%.

We believe both of these data points regarding standalone adoption are informative and look forward to sharing additional measures of progress as our initiatives mature.

Our success with omni has provided us with a unique perspective on the migs market.

While omni has the indication safety profile and efficacy to meet the needs of the vast majority of surgeons and patients across the spectrum.

We've identified three distinct smaller yet important customer segments, who prefer migs solutions that can be performed more efficiently more easily or more cost effectively than harmony.

First.

The more efficient make segment consists of ultra high volume cataract surgeons with very mild patients.

These accounts, where every minute matters in our polo, our schedule efficiency can be as important as significant IOP reduction.

Second the easier make segment consists of academic institutions and training facilities, where residents and fellows learned mix for the first time.

We expect these surgeons, who firstborn migs an easier to use devices.

And procedures, such as Goniotomy will eventually transition to omni for broader use cases as they gain surgical experience.

And finally third the more cost effective make segment consists of facilities, who may emphasize procedural profitability.

To meet the specific needs of these sub segments, we engaged our internal innovation engine to design, our new breakthrough scion Bladeless goniotomy device.

We believe that just like omni and tier care, our best in category can alloplasty and Mgd devices Zion will be the best in category Goniotomy device.

<unk> is the world's first and only Bladeless goniotomy device.

It is designed to allow surgeons to smoothly efficiently and reliably exercise and remove several clock hours of diseased trabecular meshwork tissue via an AB internal approach.

Unlike <unk> devices that cut tissue scion bladeless design micro engineered and precision manufactured using specialized lasers excited tissue without cutting instead, scion grasp and removes disease tissue as.

As the surgeon sweeps the instruments around Schlumpf canal with a single smooth motion.

We believe this eye on procedure fully satisfies the American Academy of Ophthalmology is definition of Goniotomy and aligns perfectly with CPT code six five <unk> Goniotomy, we do not foresee any ambiguity from payers or the medical community regarding <unk> ability to perform a true goniotomy.

We believe experienced surgeons and perhaps even more so mig surgeons' residents and fellows and training at academic institutions will absolutely love, the gentle and less stressful Bladeless design.

We are soft launching scion amongst select surgeons this month with plans for a more comprehensive launch in the fourth quarter.

A handful of cases have already been performed at.

And initial feedback has exceeded the lofty expectations, we have for all of our products.

We believe there will be minimal use case overlap between <unk> and omni.

<unk> will enable broader penetration of the market through our existing surgical glaucoma sales force and allow us to develop strong early relationships with surgeons learning megs through Goniotomy and.

In situations that require more robust IOP lowering such as late mild to moderate or severe combination cataract patients and all standalone patients or in other words, the vast majority of the addressable market. We believe omni will remain the procedure of choice as it is today.

Our third strategic growth initiatives.

Developing fair market access and reimbursement for dry eye treatment procedures as demonstrated by our results here care continues to make significant progress in the current cash pay environment.

Supported by data from our Olympia RCP <unk> was cleared by the FDA in 2021 for evaporative dry eye disease due to <unk> gland dysfunction.

With this expanded indication in hand, our commercial team has the freedom to articulate the full benefits of tier care.

<unk> with the compelling clinical evidence from Olympia.

We expect our currently enrolling Sahara RCT to provide the clinical foundation for our market access and reimbursement strategy are.

A key objective of Sahara is to illustrate the superior clinical outcomes of care care treatments relative to daily use of the market, leading dry eye prescription eyedrops restasis at six months.

We are on pace to complete patient enrollment and Sahara and the fourth quarter and aimed to provide an update on the superiority endpoint by the second half of 2023.

And other clinical update we had three clinical studies accepted for peer reviewed publication first we're excited to share that long term three year safety and efficacy outcomes for Canelo pasty alone perform with omni ended predicate device were accepted for publication in a leading journal.

Of cataract and refractive surgery.

In this study pre operative mean IOP of $21, one millimeters of Mercury on an average of 2.0 hypotensive medication dropped to a mean post operative IOP of $15, three plus or minus three millimeters mercury on less than one medication at 36 months plus or minus six months.

Next the results of our U S. Prospective multicenter Gemini study were published in clinical Ophthalmology Gemini measure the effectiveness and safety of omni used in combination with cataract surgery in patients with mild to moderate open angle glaucoma.

The results of this study demonstrated that <unk> performed using omni in conjunction with cataract surgery.

<unk> reduced unmet Unmedicated mean, diurnal IOP and medication use in patients with <unk>.

Moving beyond Omni our third study accepted for peer reviewed publication this quarter as it related to tier care and will be published in clinical ophthalmology.

This article analyze the symptoms data from our Olympia RCT and showed that <unk> care performed significantly better than <unk> and improving quality of vision and overall dry eye disease symptom frequency determined by OCI and sandy and subjects with more severe gland dysfunction.

We are very happy with the findings of all three studies and articles and we are excited to leverage our mounting library of clinical evidence to drive continued adoption.

We have kept a close eye on market development and have adjusted our clinical program to better suit our needs going forward. When we conceived our 20 459 patient tridentum precision rct's several years ago, we believed omni would require large RCT demonstrating superiority versus the end market leading growing.

Trabecular micro bypass implant to gain traction.

The rapid penetration of omni, especially following its expanded clearance last year.

Coupled with the declining use of trabecular bypass implant has allowed us to rethink our clinical strategy.

It is clear to us that the market requires no further proof that omni is the most effective trabecula canalicular makes procedure for <unk>.

And then we can redirect our clinical investments to more focused and streamlined clinical trials that will allow for faster enrollment completion and clinical data generation without sacrificing clinical impact on the market.

To that end, we are simplifying the protocol for our precision RCT to focus on the pivotal can alloplasty alone.

Arm, which will significantly speed completion, while delivering the most important clinical data needed from the trial prospective multicenter data on <unk> alone.

We will also be redeploying resources dedicated to our large multinational tried an RCT in Europe , which we are in the process of terminating the focused instead on smaller yet fully effective clinical studies in select European markets. We.

We are excited to continue advancing our goals in Europe , more cost effectively efficiently and systematically going forward.

Our updated clinical strategy as part of a broader effort to reposition our resources proactively. We recently completed a thorough review of our operating structure and key strategic needs in light of the current operating environment economic conditions and financial markets.

Last month, we streamlined our organization and reduced non head count expenses that do not align with our current needs. These changes will greatly improve operational execution.

<unk> and efficiency provide significant operating expense savings and noticeably shortened our runway to breakeven at Jeff will discuss in greater detail.

We made these decisions from a position of strength, we have a strong balance sheet with over $200 million of cash commercial momentum and attractive growth prospects.

Accordingly, we do not expect them to have any direct impact on our near and long term growth profile. These moves will allow us to take advantage of the superb opportunities in front of us while preserving flexibility to continue investing in high ROI growth initiatives.

In addition, we have implemented changes to optimize and align our commercial organization. According to the stage objectives and strategy for each of our growing businesses we.

We have eliminated the role of CTO, and our operating surgical glaucoma and dry eye as distinct business units.

Considering all of the company specific and macroeconomic factors discussed today, we feel that our growth. This quarter is a clear reflection of our attractive ongoing prospects over the medium term.

We are not providing out your guidance, but expect that our continued effective execution through current competitive market dynamics, coupled with our ongoing market expansion and to the Greenfield Standalone market can support an annual revenue CAGR of approximately 30% over the medium term.

We remain confident in our market leadership position and mix as evidenced by growing surgeon adoption and sustained positive patient outcomes.

We believe we will continue to win in the Migs market and have a long runway to increase adoption and utilization to extend our lead.

We also have utmost confidence in our dry eye reimbursement strategy and the significant investment we have made in our pivotal RCT Sahara.

Every patient chronically suffering from evaporative dry eye due to MPD deserves fair access to treatment.

In conclusion, all of our strategic goals, which we are advancing nicely are anchored around our steadfast commitment to improving the lives of patients with glaucoma and dry eye disease.

Jesse will now discuss our second quarter financial results and our outlook for 2022.

Jesse.

Thank you Paul I will start by reviewing our second quarter results and then move on to our 2022 guidance.

Our total revenue for the three months ended June 32022 was $17 2 million, a 37% increase from $12 5 million sustained period of 2021 and up 16% sequentially.

Our surgical glaucoma revenues for the second quarter were $15 9 million up 33% from $12 million in the second quarter of 2021 and sequentially up 15% underlying.

Fundamental growth drivers and utilization retention ordering facilities all remain strong.

Two important key leading indicators for our growth funnel are trained surgeons in new ordering facility.

In the second quarter of 2022, we trained over 190, new surgeons.

This compares to approximately 120 in the first quarter of 2022 and is well over our quarterly average in prior years.

We believe growth in trained surgeons will continue to be robust as product awareness of omni and our library of differentiated clinical data growth.

While we are making great progress, we still have a long runway at the end of the second quarter. We have trained approximately 2000 surgeons on omni while market scope estimates that over 5600 U S. Surgeons perform migs procedures and our ultimate goal is to extend the addressable surgeon pool to include all of the estimated 10000 U S.

<unk> surgeons.

With a sizable pool of recently trained surgeons and a world class trading experience, we continue to post strong customer wins.

96, new facilities ordered omni in the second quarter of 2022 compared to 105% in the first quarter of 2022.

This is on par with our average of 99 and 2021, which included a spike of 131 in the second quarter of 2021 after omnis label expansion in March.

Our commercial success.

So it would be measured by our consistently growing an extraordinarily sticky ordering base and.

In the second quarter of 2020 to 875 facilities ordered out an increase of 64 from the first quarter of 2022, we continue to feel great about the continuing growth of our base.

Customer retention is obviously another key metric for us.

We calculate developed customer retention for customers that have placed their first omni order over nine months prior and this is the net ratio of accounts to go inactive during the period the number of active customers at the beginning of the period.

Throughout 2021, and thus far in 2022, approximately two thirds of our active customer base consisted of these developed customers with over nine months of experience.

In the second quarter, our developed customer retention rate was 100%, which means that we have exactly as many developed customers return as when enacted during the quarter. While we believe this is extraordinary and it also happens to be very much in line with our historical retention.

Our drive segment revenues for the second quarter were $1 3 million, which is up 143% from 547000 in the second quarter of 2021, and a sequential increase of 32%.

Our small focused sales effort in dry eye is delivered and installed base of approximately 750 facilities at June 32022.

Our combined gross margin for the second quarter was 84% compared to 82% in the corresponding prior year period and 80% in the first quarter of 2022.

Gross margin in surgical glaucoma was 88% in the second quarter compared to 85% in the prior year periods and 89% in the first quarter of 2022.

We remain very pleased with the performance of our operations group units global supply chain persists supply chain issues persist.

Gross margin in dry was 41% in the quarter versus 3% in the prior year period and negative 53% in the first quarter of 2022 as a reminder, our first quarter of 2022 include one time charges related to our voluntary recall program, but absent those charges gross margins would have been.

A positive 32%.

So what we're beginning to see is the margin uplift because we cover our fixed costs that are allocated to dry eye with our growing revenue base.

Operating expenses for the second quarter of 2022 were $37 4 million, a 75% increase from $21 3 million in the second quarter of 2021.

Operating expenses included noncash stock based compensation of $3 5 million compared to approximately 900000 in the prior year period.

SG&A for the quarter was $31 4 million compared to $17 8 million in the second quarter of 2021.

The increase in SG&A was primarily due to our continued investment in head count to support our growth as of June 32022, We had 284 full time employees versus 264 at the end of the first quarter and 218 at the end of 2021.

R&D expenses for the quarter were $5 9 million compared to $3 5 million in the second quarter of 'twenty one.

$5 6 million in the first quarter of 2022.

All increases were associated with the ongoing execution of our clinical roadmap and development pipeline.

Our loss from operations for the three months ended June 32022 was $22 9 million compared to a loss of $11 1 million for the same period in 2021 do you have a.

Net loss of $23 8 million or <unk> 50 per share in the quarter based on a weighted average post IPO share count of 47 7 million shares compared to a net loss of $17 6 million from $1 83 per share for the second quarter of 2021.

Based on a weighted average pre IPO share count of nine 6 million shares.

We ended the quarter with $220 1 million of cash and cash equivalents and 33 million of long term debt, which includes $2 million of debt discount.

Paul discussed we have been very proactive in our liquidity management, despite our greater than $200 million cash balance.

We recently completed a comprehensive review that aimed to align our operating structure and growth investment with our key strategic needs are.

Our heritage is one of differentiated capital efficiency and high returns on investment.

Went public with to internally develop disruptive commercial products with an accumulated deficit at the IPO, we had $102 million and just the $105 million of invested capital are implied multiples of invested capital as of the IPO or in the top few of all med Tech Ipos since 2015.

The internal development of cyan and the powerful early surgeon feedback from our very first surgical cases. This month is yet another demonstration of our capital efficient heritage and disruptive ophthalmic innovation.

We have high confidence that <unk> will be our third groundbreaking product.

Our strategic and financial plans support continuing investment in all of our current growth initiatives and are designed to provide a highly achievable path to free cash flow breakeven with substantial liquidity cushion.

Made limited adjustments to both labor and non labor spend that together reduced our cash burn and put us on a faster path to profitability.

Importantly, we are not reducing investment our head count in the field and product development for and foundational clinical work. The cornerstones of our plan that will drive continued growth in the near and long term.

We expect to exit the year with less than 270 employees versus an original plan that had us approaching 300 full time employees by year end.

Further we anticipate non labor spend which constituted approximately half of our second quarter operating expenses to decrease by an even higher percentage as we both narrow and prioritize our project pipeline and execute more efficiently. We anticipate that the impact of these efficiencies will be apparent in our fourth quarter.

Since we are implementing a number of these non head count changes this quarter.

We believe our strong balance sheet.

<unk> gross margins and disciplined spend can support positive free cash flow in 2025.

Approximately 30% top line growth for the medium term, we would have the cash drop of well over $100 million.

This includes over $30 million of discretionary growth investments that's earmarked for specific development projects that are discrete and financially flexible.

We believe we have more than enough capital to execute our plan and can we retain the flexibility to make decisions based on maximizing long term value.

Finally, turning around or turning to our outlook for 2022, we are tightening our full year revenue guidance range to <unk> $68 million to $72 million with more sequential uplift in the fourth quarter than third to match typical eyecare procedure seasonality and modest contribution from <unk> in the fourth quarter.

For the year the range implies annual growth rates of approximately 39% to 47% over 2021.

It's been a very productive first half of the year precise sciences and we're excited to continue our efforts as a leading glaucoma and dry eye technology provider is transforming care and improving patients lives.

This concludes our prepared comments operator, please open up the call for questions.

Yes.

At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.

Your first question comes from the line of Cecilia furlong with Morgan Stanley .

Good afternoon, and thank you for taking the questions and congrats on a strong quarter.

Wanted to start with the guidance and just the revised guidance range.

Range Im just following the <unk> upside I'm just curious if you could talk to.

One what you're contemplating now.

Staffing challenges.

Seeing from a competitive trialing standpoint that you factored into the back half.

As well as just the benefit from the <unk> education side that you talked about it.

Yes.

I'll tackle.

Much of it but please please add on.

So fulfill yes.

We are embedded in even with the low end of the tightened guidance right.

An acceleration of year over year growth in the second half versus the first half.

No I think what we are being <unk>.

Conservative ultimately.

Not not because of lack of confidence as being conservative about the contribution from the GCC is embedded in that guidance right.

Also only a very modest contribution from <unk>.

Which just given sort of its early days and we're in the surgeon feedback days, which is very encouraging.

The timing of these contributions as just one.

As reflected in is one that will ultimately be conservative.

As Paul said in his comments.

<unk>.

Competitive.

We don't anticipate that the presence of sort of the new entrants.

It's going to go away in the second half and so that's definitely factored in to our perspective on full year guidance.

Yeah again point to the fact that.

For the omni user base.

Our retention rates are.

Really extraordinary right.

It's ultimately just.

You know its a slope impact or to push people sort of along the adoption curve and to expand utilization at the pace we want to.

More than anything that is impacting our base of business.

We are not.

And I think I'm hitting all of these we are.

There is selective example that we are seeing.

Staffing shortages impacting hospitals in the ASC.

But.

It's not material in terms of what we're seeing out there.

I would call more anecdotal.

And so really that specific factor in our guidance. It was not a specific factor in terms of.

Our tightened guidance.

Okay got it that's very helpful and if I could follow up just on Opex that with all the changes to the restructuring initiatives that you've talked about today, our business optimization, just how we should think about the <unk>.

Trajectory overall, and then I did want to ask if you could provide a bit more color just the decision to terminate China.

Realizing that's what's going on in the.

The market right.

The definitive evidence that could have provided an outlook for additional trials maybe.

To supersede that and thank you for taking my questions.

So Paul.

Hit the Opex, and then turn to <unk>.

Culture.

Yes.

Obviously looking at our Opex.

Because of the four quarters post IPO, there has been an increase sort of quarter to quarter.

We expect I think youre, what youre going to see facility and we will provide more clarity like in terms of more specific opex guidance.

On the next quarter call, because we're still sort of finalizing.

Some of the project work in non labor work to be able to do that definitively but.

You'll you won't see that growth.

Obviously in the back half of the year.

In terms of the order of magnitude of the savings I think we will provide more clarity on Q3 gave a flavor for it in my comments in terms of sort of how it impacted sort of our head count plan and the view that the non labor savings from just frankly project focus.

Should be should be in excess of that.

Hey, <unk> this is Paul.

Terms of tried and.

A large multinational.

Five increased <unk> 25 Center RCT.

While.

Yes.

Would provide valuable data the reality is we're getting.

Since we started that trial some time ago, we have very significant.

Clinical evidence that's been generated and published and we're continuing to and that trial itself.

Who is enrolling enrolling slowly and would take would take many years to be able to generate any meaningful data and publish it and while we found with <unk> in Europe .

Want to pursue a more focused strategy.

Those markets those select markets that.

Yes.

Where we know we can perform in the nearer term. So were currently commercial in the UK and Germany.

We're generating lots of data there I mentioned one of the publications three year <unk> data that just got published we have another paper three year paper, our second one out of Germany long term data.

<unk> safety and efficacy with omni not once canal Patheon trabeculectomy.

Beyond UK and Germany other countries will want to want to select.

Markets that are attractive in size.

And figure out exactly what clinical data those select markets will require.

And we can easily do more focused studies and frankly enroll them more quickly and get into those markets faster with more focused trial. So thats. The rationale there obviously, we're continuing to run studies large multicenter studies in the U S as well and that will that will also help our efforts in Europe .

We remain committed just want to focus more on select markets versus going abroad right upfront.

Hi.

Okay understood and thank you for taking the question.

Right.

Sure.

Your next question comes from Andrew <unk> with William Blair.

Okay.

Hi, guys. Good afternoon, and thanks for taking the question.

Maybe to start on the Goniotomy device and a few questions there.

Obviously as you noted this has become a bit of a crowded market for other players, bringing forth tools, but sort of bill under that <unk> pathway. So I guess three questions here.

One can you sort of give us a little bit more color around the bladeless component there I heard your comments, but maybe just be a little bit more specific on what's differentiated in terms of the mechanics of the device.

Can you just share some of the plans for clinical data generation for that device and then third.

How should we be thinking if at all.

<unk> here of omni with this new device and trust.

Yes.

Sure Good question.

Andrew.

On the <unk>.

<unk> design.

And on the blade lists.

Goniotomy instrument.

Think of it as something that.

Designed to allow surgeons to more smoothly gently reliably exercise and removed several clock hours of disease TM.

Currently available options the majority of them they cut issue.

And if you think about.

A surge in and training as an example.

They're going to be a lot more comfortable getting into the angle with a bleed lists gentle design other features on it.

Our differentiated and I think early early used from a handful of our surgeons.

Have have validated this we've got some dimensions on the device that allow the surge in again not to cut upon advancement, but instead to grab the tissue so very very small dimensions.

Grow engineered onto the device.

Using very specialized lasers to get those dimensions reproduced.

<unk> consistently and these micro dimension to allow the surgeon has a sweep the angle the.

The device.

Grabs the disease TM.

And as the surging continue to sweep it grabbing TM and it's accumulating in the trap of the device and it's pulling the tissue away. So allows it allows.

This grabbing a tissue and the sweeping motion a gentle sweeping motion around the angle allows the surgeon in a single motion.

Sleep and remove tissue so gentle its smooth it's efficient.

And I think it provides the surgeon with a little more comfort and confidence in the angle.

The early feedback we've heard Andrew from again this is a handful of surgeons, but theyre very experienced in migs.

They.

It was just a very wow I didn't know goniotomy could really be improved this much but you guys nailed it.

In terms of clinical data.

Obviously clinical data is near and Dear to everything we do because we try to deliver products that are best in class clinically it's in our interest to invest heavily in clinical data.

I think we would we would start generating that data as that on <unk>. So I think 2023, we obviously don't have any protocol it generated yet, but we would.

Right now we're focused on getting it out to a handful of surgeons and ensuring that we have delivered yet again, a best in category product.

Once we're through this early on a controlled release will be shifting our gears to one commercialization manufacturing scale up and lastly, clinical data generation.

As it relates to your third question on cannibalization, obviously thats the right thing asking the right thing to think about and we've obviously thought about it long and hard before we pursue any any portfolio.

Project.

And we really see distinct subsets of the Migs market.

<unk>.

The primary players in the Migs, Mark I'll say Theyre Goniotomy can alloplasty on trabecular micro bypass stenting most of these procedures coexist within the same account today. So we have many many high volume happy Omni surgeons.

So we're doing some goniotomy for certain use cases or some bypass denting for other use cases, so for US we view this exists already today.

We have we know that we could deliver a.

Best in category Goniotomy device, we know that we can satisfy.

A broader patient subset by offering our existing omni surgeons this device and so we're happy that it allows us to.

Provide a broader a broader offering and enhance the relationship the great relationships that our salesforce has today with their surgeon customers.

That's great I appreciate very much appreciate all that color on the device and look forward to seeing it maybe if I could just follow up with one more really around some of the longer nearer term goal medium term goals that you laid out here for revenue and profitability can you just sort of talk a little bit about some of the underlying assumptions.

How are you breaking that out between glaucoma and dry eye.

Some of the spend there over that medium term. Thanks.

Yes.

I'll take a stab at it we're not going to.

Obviously as the directional perspective, and we'll as we get to later in the year, we'll obviously update that with more definitive guidance for 2023.

The reality is Andrew.

The tier care growth.

You know reflects.

Sure.

Reflects the new the expanded label, we got at the end of last year right.

But we don't.

We don't have plans to necessarily scale.

Sales force in advance of a patient access breakthrough right. So.

It's not I think it.

The growth expectations are.

Early similar between the two segments like embedded in that.

The other thing I would say again.

I think it's conservative.

With respect to timing and order of magnitude around contributions for our big market development rocks that were moving right in terms of a standalone.

And.

And it also is fairly conservative like in terms of our perspective on the incremental impact of Si.

As you know.

We don't have conservative.

Views on the potential but just in the hearing now.

Current operating environment and sort of growth trends that we're seeing here now.

With that.

Great I'll leave it there thanks guys.

Yes.

Your next question comes from the line of Matthew O'brien with Piper Sandler.

Afternoon, Thanks for taking my questions.

So just maybe to put a finer point on a couple of things.

Jesse.

The guidance for the year. The high end was taken down by $3 million. The midpoint was taken down by $1 million I know you had a wider range, but you just beat by.

About 1 million Bucks that youre, taking the midpoint down by a couple of million Bucks. What is it specifically that is making you take that midpoint down by a couple million dollars or just take off the high end of guidance or is it something competitively are worried about the reimburse the proposed reimbursement changes something specific there.

Or do you want to focus folks on.

Yeah.

I can take a crack Jesse.

Doug do you want to add.

Yeah, I think Matt I think <unk> seen youre close to the market I think you've seen a flurry of.

New entrants.

While.

Clinically unproven I think theres a lot lot of questions. We've all seen them from societies from payers. What these devices are what they are not.

What procedures they perform what procedures they don't perform how they could be coded or not.

That's real that's been real in the first half it continues through the summer now we feel extremely confident.

And how we fair, but the reality.

And the reality is you've got pretty established companies with established commercial infrastructure pushing.

Pushing these products into the operating room and there is a natural process for surgeons.

Understand what they are understand what theyre, not and I think what we've done.

Very very well.

To compete by.

Focusing on designing the best clinical innovation for surgeons products, they love to use.

Think about think about an iPhone and some some examples where your friends of adventure at away from an iPhone only defined major frustration and come back and I think thats what were seeing here I think people love omni, it's super sticky it's reliable.

When a company introduces a new a new shiny object surgeons are going to try it and what we're seeing now with increasing frequency everyday are these surgeons are coming back is it over no it's not over yet and it affected the slope of our.

Trialing and advancing our surgeons to an adopted date it does affect that right until these surgeons to learn what these products are and what theyre not and until they come back to omni as they always seem to do because they love it.

There is a little bit of an effect and so that that to me is the is.

Is the primary driver Jesse I don't know what else you'd like to add.

Yes, Matt I'll, just reiterate it right.

The implied growth.

Second half is higher than the growth in the first half.

That should show you some of our confidence in the business.

And you know.

I think we.

When youre talking about the growth.

Growth rates as high as ours sort of.

It's really critical to to be able to push people through the trials like cycle and get them to adopt them.

So.

So I just thought it's prudent in terms of what we're seeing what we can measure it again.

We know we know that.

We didnt squeezed it proportionately, but hopefully.

Our confidence in and offsets squeezing in sort of the bottom of the range as well.

Yep Yep.

Okay, and then just on the 30% medium term growth rate I don't really know what medium term means or even interim or long term I have no clue, but but.

You've got a proposed rate cuts.

It's out there right now that historically hasn't affected the number of cases that are done even if it's the best outcome.

So how can you offset with potentially is that that impact.

With your existing product and then layering on Goniotomy next year since I.

So you could get to that 30% number that I'm sure everybody is going to go to.

In surgical glaucoma in the U S. Both probably next year, and then 24 as well thanks.

Hey, Matt when you say the proposed rate card you talked about the proceeds.

Yeah, Yeah, the proceeds for canal opacity.

That's right yes.

So with that.

Obviously reductions or.

Never never a positive.

For manufacturers or surgeons.

But the way we think about it I think the way everyone should think about it.

<unk>.

Relativity right. So the proceeds for canal plus he has always been historically very attractive it got reduced to $7 50 still attractive.

<unk> rule and let's see how it ends up in the final rule. This year, but it is proposed to go down to 600, So let's say worst case scenario the final rule.

It looks like the proposed rule at 600 and Thats it that'll be the end of any reevaluation or it.

Based on historical trends and how often the roughly values. These codes, usually it's five years until they revisit it so worst case scenario if it's $600 for the proceed the way we think about it it has has that reduction.

Created a realm.

A relatively different economic profile for canal and the answer is no right it's still.

It was below Goniotomy until Goniotomy gets rocked.

<unk> was already below Goniotomy and it remains below goniotomy.

600 dollar a canal hockey fee is above cataract surgery, it's above trabecular bypass stents I mean, it was a 750 and it remains above 600, so relatively speaking it doesn't put us in a different position.

Competitive Billy.

And in terms of just general.

Absolute attractiveness to the surgeon I think.

<unk> become very familiar with omni.

$600 is plenty sufficient for us to deliver on our.

Growth expectations.

Got it thanks, so much.

Sure.

Your next question comes from the line your language with Citibank.

Thank you and good evening.

I'm going to try a slightly different angle.

How do you define medium term.

Okay.

Sure.

Okay.

Julian I think it's I think it's.

The next couple of years.

And.

It's a number that we will revisit we'll revisit specifically as to next year the number of the.

I think as.

Fairly conservative on what we say.

Mega Upsized.

Were pursuing for no other reason.

We wanted to give what we think sort of our organic growth expectation is.

Sort of.

Without heavy reliance on that given that.

So in the early stages of development there.

Okay.

The other thing I wanted to just spend a moment on was you talked about.

How you are spending money to accelerate the path to breakeven can you clarify what's the path to breakeven.

Yeah.

Yes, our view again is.

Got it.

Entering 2025, if you just apply those.

So its medium term growth assumption, which again sort of in areas with the two year perspective right.

When you layer on our what we view as what our normalized spend will be that will be free cash flow problems.

And <unk>.

Our view is that leases fairly comfortably.

Above.

$100 million cash trough.

Above $100 million cash burn.

Yes that would be the trough balance.

Hi.

Okay.

Okay. Thanks, sure you've been public a year now congratulation for happy anniversary.

Thank you what has changed.

<unk>.

I mean, a lot of models have been updated and changed in the last 12 months.

But I'd like your view on what's different.

I'll comment and then if you want to take it I'll just take it from there.

Market perspective.

I think on an omni.

We have continued to grow in combo cataract theres been this year different than last year.

I think if you think about it we went from.

Maybe three primary product competitors two six overnight.

Doubling of the <unk>.

Competitive set and we are growing right through that our team is executing right through that omni is winning.

It's been it's been a noisy disturbance, but we're seeing again accelerating every day, we're seeing doctors figure out what's what.

And getting right back to their product which is on the.

And thats been the biggest difference I think.

In terms of.

Our market presence and what we've seen in the market.

2021, and again, we believe and we're seeing it now that this is transient.

Omni is one.

On the dry eye side.

Continue to sell nicely into more and more early adopting dry on talent and I think the most important thing. There is we are getting very close to the completion of enrollment.

Tahira.

Big study, it's payer designed we spoke to eight different insurance companies eight different medical director.

To help.

Educate them on dry eye and get their perspectives on what it would take in terms of clinical data to successfully cover and pay at a fair rate for a for a dry eye procedure with tier care. So this study again payer designed it's been enrolling very nicely. We are on track and by the end of this year it should be completely enrolled and we're looking forward to.

Turning to card on that superiority endpoint next year.

Other than that we are.

We're continuing to execute very nicely across the board our team is doing a great job and I think our growth.

As an illustration of that.

Yeah.

That the economic the economic uncertainty is different today than it was it doesn't impact.

We're not seeing a real impact in terms of.

Our commercial activity, but it is.

An important data point as youre thinking about level of investment and approach Paul articulated a bit like in terms of O U S activity.

No.

It's a great opportunity for us.

You can burn a lot of capital if you go try to do everything at once.

<unk>.

And we're just going to.

B B pretty smart about incremental investment and where it goes after that that we lost that line.

Top of mind for our company with our client.

Cash flow profile.

Thank you.

Okay.

Your next question comes from the line of Tom Stefan with Stifel.

Great Hey, guys. Thanks for squeezing me in if I can start on <unk>.

Stand alone the Gcc's it sounds like there are some encouraging signs out there kind of already have early traction maybe how should we be thinking about when these reps sort of at full productivity and our let's call it at Max capacity.

And then.

Kind of along the same lines. The Standalone mix I think has seemingly remained around 20% I assume your internal models forecast, maybe an inflection at some point can you just maybe give us a sense for what that.

<unk> might look like maybe over the next call it two to three years.

Sure Hey, Tom.

In terms of the GCC and.

The results were pleased there each signed.

To a number of a number of the accounts.

They are looking at the referral referring.

Community.

The primary eyecare prefers ophthalmologists optometrists that refer patients glaucoma patients to those omni surgeon.

Looked at the.

Omni utilization pre GCC and post GCC.

In those in those accounts and the uplift is very interesting we're looking.

It's early days, we we hire them in the first quarter.

Were trained in the second quarter and so they really just spent a couple of months out in the field educating the referral community, but early signs are very encouraging we'd like to be able to report specifically on it soon.

And then the other thing the other thing dimension is the claims data right. We look at Standalone claims six 674 reported alone.

And there is a clear trend there that that that code that claim reporting is growing as well.

In terms of capacity I think a lot of this we're going to we're going to better understand right, we're going to we're going to see.

Real results from the <unk> I think.

September onwards, we're going to be assessing it closely I think we're going to be able to reach some conclusions. We are going to understand the model I don't think theyre going to run out of capacity anytime soon think about it once once they.

Referring community is established on omni standalone. They can move to the next group of Surgeons. So we would love we would love to grow that team and do assume that means that the standalone market is growing very quickly.

We expect to we expect to grow the team in due course, but I think anytime soon we're going to reach capacity.

So in the end what does it look like.

We could we could one day have.

As many ECC that surgical sales rep, we'll see we'll see what that capacity looks like as we go.

But the market $4 billion to $5 billion Standalone market in the early innings I think would support lots of these resources, making it go.

Yeah.

Great. That's helpful. Thanks, Paul if I can just finish on the outlook.

It sounds like you guys expect the trialing headwinds to persist into 'twenty two but.

Or your thoughts on these these headwinds potentially slipping slipping into 2023, just I guess given at this stage there are competing products.

Still rolling out today any.

Any color there would be would be helpful. Thanks, guys.

Yeah.

It gets embedded in the outlook.

Sure.

We have a view that we believe that the impact of the transient and we are seeing.

As customers are stores their level of utilization for omni <unk>.

They historically have.

<unk>.

But.

We're like kind of.

As it pertains to linking it to our outlook.

We're kind of.

We're making the assumption for that purpose.

Yeah.

This persists sort of like an environment like this today right like ultimately even though.

I think thats, a very conservative way to look at.

Got it yes, I would just I would just.

With the first half of this year was pretty acute right again to go from three product competitors to six.

That's pretty acute now a lot of those things are being resolved some of them have been resolved and others are seem to be resolving.

In terms of their impact, but do we need do we need total resolution to continue to dominate now are.

Are we counting on total resolution no a lot of this.

Is in our control right. We continue to deliver best in class technology. Our sales force continues to deliver best in class customer service developed best in class relationships, we control a lot of a lot of what we do.

These new entrants and I think I would just summarize this is the acute days.

Tap in.

And we're winning it's very clear that we are and customers are going back to full omni utilization.

And.

There can be competitive place that's okay. We welcome it.

Yeah.

Okay.

Okay.

Hello.

Okay.

So operator, I think we've lost Tom so.

Are there any additional questions.

At this time there are no further questions.

Are there any closing remarks.

Yes.

I thank everybody for their time. Thank you all for your interest in <unk> Sciences. Appreciate it and look forward to speaking with all of you again soon thank.

Thank you.

This concludes today's conference you may now disconnect.

Yes.

[music].

Okay.

[music].

[music].

Hello, and welcome to the site Sciences' second quarter 2022 earnings results Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. Thank.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Because like to withdraw your question press the pound key.

Uh huh.

Thank you I will now turn the call over to Mr. Philip Taylor Investor Relations. Please go ahead Sir.

Thank you for participating in today's call presenting today are safe Sciences, co founder and Chief Executive Officer, Paul, but Alley, and Chief Financial Officer, Jackie Celnik earlier today <unk> Sciences released financial results for the three months ended June 32022, a copy of the press release is available on the company's website.

At investors <unk> Sciences Dot com.

I'd like to remind everyone that comments made by management today and answers to questions will include forward looking statements within the meaning of the federal Securities laws.

Those include statements related to <unk> Sciences 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 guarantee.

And are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements a description of some of the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward looking statements on this call can be found in the risk factors section.

Of the annual report on Form 10-K.

Filed March 24, 2022, 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 statements notices and risk factors in the recent SEC filings.

I will now turn the call over to Paul.

Thank you trip and thank you all for joining us.

Our second quarter 2022 performance was strong across the organization revenue increased to $17 2 million, representing 37% growth year over year and 16% sequentially.

Our total gross margin increased to 84% in the second quarter up from 82% in the prior year period.

Surgical glaucoma revenue grew 33% year over year, and 15% sequentially to $15 9 million while.

While dry eye revenues grew to $1 3 million up 143% year over year and 32% sequentially.

We are pleased with our execution across both businesses and are encouraged by the leading indicators that support further market penetration and expansion.

A year out from our IPO. It is readily apparent that we have steadily emerged as the market leader and mix.

Our analysis indicate that omni as growth continues to outpace that of other migs product.

We intend to extend our lead over the coming quarters and years, both with continued share growth and market expansion.

We remain in a favorable position with over $200 million of cash on our balance sheet.

Fund, our strategic initiatives and growth plans.

Since our IPO external factors across the mid market and the global economy have changed the operating environment significantly in response, we have fine tuned our strategic and operational plans to help us thrive in today's evolving market and ensure our long term success.

My remarks today will focus on these topics Jesse will then discuss how we believe our growth trajectory and disciplined expense management will facilitate our path to profitability over the medium term, while maintaining a very comfortable liquidity position.

I'll now move on to our two strategic growth initiatives and surgical glaucoma.

One.

Increasing adoption and utilization of omni and the established combo cataract mix segment and to pioneering the $5 billion U S market for Standalone mix.

Omni continues to win share in the combo cataract segment and expand the Standalone make segment because of its duration of efficacy and safely lowering and maintaining target IOP.

Broad indication for use.

Precision engineered usability and.

In category, one CPT code recognition.

Our ever increasing confidence in <unk> ability to continue to both gain market share and expand the market in migs.

Predicated on its mastery of these four critical concepts.

Years of research and development have culminated in an intuitive and elegant device that allow surgeons to consistently achieve clinically meaningful outcomes, along with the safety benefits of a minimally invasive approach.

Our growth came from continued new physician training, increasing active ordering accounts.

Pete orders strong utilization and extremely minimal account churn amid a mixed market that includes multiple new products.

We continue to win because of our strong fundamentals and our unshakable a bedrock of placing our patient at the center of everything we do.

We have discussed previously the headwinds from the Trialing of new entrants and the resulting confusion in the marketplace.

As we expected the surgical community is quickly learned what these products can and cannot do.

We have seen medical societies, and payers make strong statements clarifying the limit and limiting the coding and reimbursement pathways for some of these new entrants.

Based on whether the procedures meet the clinical or medical requirements necessary to be reported with existing procedure codes.

Some of these products have at best very limited indications because quite simply they are not supported by sufficient clinical evidence that they can improve patient outcomes.

We anticipate trialing of these products will continue in the second half.

These trials can impact the adoption cycle for new omni users and result in pockets of account ordering softness in certain subsets of customers at.

At the same time, we have seen many account cycle through these trialing programs and subsequently returned to omni.

Overall, we believe trailing impact will be transitory.

Regarding reimbursement CMS issued proposed payment rules for 2023 last month.

As a reminder, omni is billed under category one CPT code 66, $1 70 for.

The professional fee for six 674 was revalued by the rock in 2021 and scheduled to be reduced in value.

The Medicare payment was reduced from 950 in 2021 to 750 in 2022 and is proposed to continue this phased in final reduction to approximately 602023.

Reevaluation for professional fees for category, one CPT codes typically last for five years. So we would not expect any further adjustments to the six 674 proceed for several years.

On the facility fee side CMS did not propose to designate CPT code 6174 at the device intensive procedure for <unk> in 2023.

We continue to believe device intensive status would represent a fair appropriate and deserved adjustments if and when it happens nonetheless.

Nonetheless in the interim our competitive position underpinned by superior efficacy and patient outcomes remain very strong as evidenced by our continued share growth and market expansion.

We do not foresee any meaningful hindrance to our ability to continue to penetrate the combination cataract segment and grow standalone usage of omni over the long term.

The outstanding real World outcomes, and the robust clinical data published in reputable peer review journals support our belief that omnis adoption by the ophthalmic community will continue to grow.

Turning now to our second strategic initiative accelerating adoption of omni at the leading Standalone intervention.

For patients, who do not require cataract surgery. The current standard of care relies on the increasing use of topical eye drop medications to limit progression of the disease with the objective of differing conventional more invasive surgical procedures for as long as possible.

We believe that omni given an indication for use safety profile and reliable duration of efficacy offered the perfect product market fit for Standalone interventions earlier in the treatment continuum for mild to moderate patients.

Clinical trials have demonstrated that omni can safely and consistently lower IOP and reduce dependence on medication.

Independent of cataract surgery.

Our market research indicates that 85% of glaucoma patients would likely choose a standalone intervention using omni if recommended by their doctor.

To drive adoption of omni as a standalone procedure, our efforts concentrate on raising awareness and educating the glaucoma community.

We strategically placed our glaucoma clinical consultants and territories with numerous qualified omni trained surgeons.

<unk> communicate the potential benefits of Standalone omni procedures to office based primary primary care doctors to serve at the frontline of diagnosis and treatment. They also.

Certify that they are assigned surgeons already per Standalone cases.

Although the GCC program just launched earlier this year, we are already beginning to see results in the second quarter GCC accounts demonstrated meaningfully higher sequential growth than non GCC accounts.

These initial results are by their nature inconclusive, but directionally very encouraging.

Also preliminary projected claims data from a well respected advanced analytics provider indicate accelerating standalone usage of six 674.

Projected claims using six 674 alone for the first five months of 2022 have already exceeded those for the first six months of 2021 by almost 30%.

We believe both of these data points regarding standalone adoption are informative and look forward to sharing additional measures of progress as our initiatives mature.

Our success with omni has provided us with a unique perspective on the migs market.

While omni has the indication safety profile and efficacy to meet the needs of the vast majority of surgeons and patients across the spectrum.

We have identified three distinct smaller yet important customer segments, who prefer mixed solutions that can be performed more efficiently more easily or more cost effectively than harmony.

First.

The more efficient make segment consists of ultra high volume cataract surgeons with very mild patients.

These accounts, where every minute matters in our polo, our schedule efficiency can be as important as significant IOP reduction.

Second the easier make segment consists of academic institutions and training facilities, where residents and fellows learned mix for the first time.

We expect these surgeons, who firstborn migs an easier to use devices.

And procedures, such as Goniotomy will eventually transition to omni for broader use cases as they gain surgical experience.

And finally third the more cost effective make segment consists of facilities, who may emphasize procedural profitability.

To meet the specific needs of the sub segments, we engaged our internal innovation engine to design, our new breakthrough scion Bladeless goniotomy device.

We believe that just like omni and tier care, our best in category <unk> Mgd devices Zion will be the best in category Goniotomy device.

<unk> is the world's first and only Bladeless goniotomy device.

It's designed to allow surgeons to smoothly efficiently and reliably exercise and remove several clock hours of diseased trabecular meshwork tissue via an AB internal approach.

Unlike bladed devices that cut tissue scion bladeless design micro engineered and precision manufactured using specialized lasers exercises tissue without cutting instead, scion grasp and removes disease tissue as it's as.

The surgeon sweeps the instruments around Schlumpf canal with a single smooth motion.

We believe this <unk> procedure fully satisfies the American Academy of Ophthalmology is definition of Goniotomy and aligns perfectly with CPT code six five <unk> Goniotomy, we do not foresee any ambiguity from payers or the medical community regarding <unk> ability to perform a true goniotomy.

We believe experienced surgeons and perhaps even more so make surge ends residents and fellows and training at academic institutions will absolutely love, the gentle and less stressful Bladeless design.

We are soft launching scion amongst select surgeons this month with plans for a more comprehensive launch in the fourth quarter.

A handful of cases have already been performed at.

And initial feedback has exceeded the lofty expectations, we have for all of our products.

We believe there will be minimal use case overlap between <unk> and omni.

<unk> will enable broader penetration of the market through our existing surgical glaucoma sales force and allow us to develop strong early relationships with surgeons learning migs through Goniotomy and.

In situations that require a more robust IOP lowering such as late mild to moderate or severe combination cataract patients and all standalone patients or in other words, the vast majority of the addressable market. We believe omni will remain the procedure of choice as it is today.

Our third strategic growth initiatives.

Developing fair market access and reimbursement for dry eye treatment procedures as demonstrated by our results here care continues to make significant progress in the current cash pay environment.

Supported by data from our Olympia RCP <unk> was cleared by the FDA in 2021 for evaporative dry eye disease due to <unk> gland dysfunction.

With this expanded indication in hand, our commercial team has the freedom to articulate the full benefits of tier care.

<unk> with the compelling clinical evidence from Olympia.

We expect our currently enrolling Sahara RCT to provide the clinical foundation for our market access and reimbursement strategy are.

A key objective of Sahara is to illustrate the superior clinical outcomes of care care treatments relative to daily use of the market, leading dry eye prescription eyedrops restasis at six months.

We are on pace to complete patient enrollment into HERA and the fourth quarter and aimed to provide an update on the superiority endpoint by the second half of 2023.

And other clinical update we had three clinical studies accepted for peer reviewed publication first we're excited to share that long term three year safety and efficacy outcomes for <unk> alone performed with omni and its predicate device were accepted for publication in the leading journal.

Of cataract and refractive surgery.

In this study preoperative mean IOP of $21, one millimeters of Mercury on an average of 2.0 hypotensive medication dropped to a mean post operative IOP of $15, three plus or minus three millimeters of mercury on less than one medication at 36 months plus or minus six months.

Next the results of our U S. Prospective multicenter Gemini study were published in clinical Ophthalmology Gemini measure the effectiveness and safety of omni used in combination with cataract surgery in patients with mild to moderate open angle glaucoma.

The results of the study demonstrated that <unk> performed using omni in conjunction with cataract surgery.

<unk> reduced unmet Unmedicated mean, diurnal IOP and medication use in patients with <unk>.

Moving beyond Omni our third study accepted for peer reviewed publication this quarter as it related to tier care and will be published in clinical ophthalmology.

This article analyze the symptoms data from our Olympia RCT and showed that tier care performed significantly better than <unk> and improving quality of vision and overall dry eye disease symptom frequency determined by OCI and sandy and subjects with more severe gland dysfunction.

We are very happy with the findings of all three studies and articles and we are excited to leverage our mounting library of clinical evidence to drive continued adoption.

We have kept a close eye on market development and have adjusted our clinical program to better suit our needs going forward. When we conceived our 20 459 patient tridentum precision <unk> several years ago, we believed omni would require large RCT demonstrating superiority versus the end market leading growing.

Rebecca micro bypass implant to gain traction.

The rapid penetration of omni, especially following its expanded clearance last year.

Coupled with the declining use of trabecular bypass implant has allowed us to rethink our clinical strategy.

It is clear to us that the market requires no further proof that omni is the most effective trabecula canalicular migs procedure for <unk>.

And then we can redirect our clinical investment to more focused and streamlined clinical trials that will allow for faster enrollment completion and clinical data generation without sacrificing clinical impact on the market.

To that end.

We are simplifying the protocol for our precision RCT to focus on the pivotal can alloplasty alone.

Arm, which will significantly speed completion, while delivering the most important clinical data needed from the trial.

Respective multicenter data on <unk> alone.

We will also be redeploying resources dedicated to our large multinational tried an RCT in Europe , which we are in the process of terminating the focused instead on smaller yet fully effective clinical studies in select European markets.

We are excited to continue advancing our goals in Europe , more cost effectively efficiently and systematically going forward.

Our updated clinical strategy as part of a broader effort to reposition our resources proactively. We recently completed a thorough review of our operating structure and key strategic needs in light of the current operating environment economic conditions and financial market.

Last month, we streamlined our organization and reduce non head count expenses that do not align with our current needs. These changes will greatly improve operational execution.

Guests and efficiency provide significant operating expense savings and noticeably shortened our runway to breakeven as Jeff will discuss in greater detail.

We made these decisions from a position of strength, we have a strong balance sheet with over $200 million of cash commercial momentum and attractive growth prospects.

Accordingly, we do not expect them to have any direct impact on our near and long term growth profile. These moves will allow us to take advantage of the superb opportunities in front of us while preserving flexibility to continue investing in high ROI growth initiatives.

In addition, we have implemented changes to optimize and align our commercial organization. According to the stage objectives and strategy for each of our growing business that we.

We have eliminated the role of CTO, and our operating surgical glaucoma and dry eye as distinct business units.

Considering all of the company specific and macro economic factors discussed today, we feel that our growth. This quarter is a clear reflection of our attractive ongoing prospects over the medium term.

We are not providing out your guidance, but expect that our continued effective execution through current competitive market dynamics, coupled with our ongoing market expansion and to the Greenfield Standalone market can support an annual revenue CAGR of approximately 30% over the medium term.

We remain confident in our market leadership position and mix as evidenced by growing surgeon adoption and sustained positive patient outcomes.

We believe we will continue to win in the market and have a long runway to increase adoption and utilization to extend our lead.

We also have utmost confidence in our dry eye reimbursement strategy and the significant investment we have made in our pivotal RCT Sahara.

Every patient chronically suffering from evaporative dry eye due to mgd deserves fair access to treatment.

In conclusion, all of our strategic goals, which we are advancing nicely are anchored around our steadfast commitment to improving the lives of patients with glaucoma and dry eye disease.

Jesse will now discuss our second quarter financial results and our outlook for 2022.

Jesse.

Thank you Paul I will start by reviewing our second quarter results and then move on to our 2022 guidance.

Our total revenue for the three months ended June 32022 was $17 2 million, a 37% increase from $12 $5 million from the same period of 2021 and up 16% sequentially.

Our surgical glaucoma revenues for the second quarter were $15 9 million up 33% from $12 million in the second quarter of 2021 and sequentially up 15% underlying.

Fundamental growth drivers and utilization retention and ordering facilities all remain strong.

Two important key leading indicators for our growth funnel are trained surgeons in new ordering facility.

In the second quarter of 2022, we trained over 190, new surgeons.

This compares to approximately 120 in the first quarter of 2022 and is well over our quarterly average in prior years.

We believe growth in trained surgeons will continue to be robust as product awareness of omni and our library of differentiated clinical data growth.

While we are making great progress, we still have a long runway at the end of the second quarter. We have trained approximately 2000 surgeons on omni while market scope estimates that over 5600 U S. Surgeons perform <unk> procedures and our ultimate goal is to extend the addressable surgeon pool to include all of the estimated 10000 U S.

<unk> surgeons.

With a sizable pool of recently trained surgeons and a world class trading experience, we continue to post strong customer wins.

96, new facilities ordered omni in the second quarter of 2022 compared to 105 in the first quarter of 2022.

This is on par with our average of 99 and 2021, which included a spike of 131 in the second quarter of 2021 after omnis label expansion in March.

Our commercial success.

So it will be measured by our consistently growing an extraordinarily sticky ordering base.

In the second quarter of 2020 to 875 facilities ordered out an increase of 64 from the first quarter of 2022, we continue to feel great about the continuing growth of our base.

Customer retention is obviously another key metric for us we calculate developed customer retention for customers that have placed their first omni order over nine months. Prior and this is the net ratio of accounts to go inactive during the period the number of active customers at the beginning of the period.

Throughout 2021, and thus far in 2022, approximately two thirds of our active customer base consisted of these develop customers with over nine months of experience.

In the second quarter, our developed customer retention rate was 100%, which means that we have exactly as many developed customers return as when enacted during the quarter. While we believe this is extraordinary and it also happens to be very much in line with our historical retention.

Our drive segment revenues for the second quarter were $1 3 million, which is up 143% from 547000 in the second quarter of 2021.

The sequential increase of 32%.

Our small focused sales effort in dry eye is delivered and installed base of approximately 750 facilities at June 32022.

Our combined gross margin for the second quarter was 84% compared to 82% in the corresponding prior year period and 80% in the first quarter of 2020 to.

Gross margin in surgical glaucoma was 88% in the second quarter compared to 85% in the prior year period and 89% in the first quarter of 2022.

We remain very pleased with the performance of our operations group units global supply chains persists supply chain issues persist.

Gross margin in dry was 41% in the quarter versus 3% in the prior year period and negative 53% in the first quarter of 2022 as a reminder, our first quarter of 2022 included onetime charges related to our voluntary recall program and absent those charges gross margins would have been.

On a positive 32%.

So what we're beginning to see the margin uplift because we cover our fixed costs that are allocated to dry eye with our growing revenue base.

Operating expenses for the second quarter of 2022 were 37 4 million a 75% increase from $21 3 million in the second quarter of 2021.

Operating expenses included noncash stock based compensation of $3 5 million compared to approximately 900000 in the prior year period.

SG&A for the quarter was $31 4 million compared to $17 8 million in the second quarter of 2021.

The increase in SG&A was primarily due to our continued investment in head count to support our growth as of June 32022, We had 284 full time employees versus 264 at the end of the first quarter and 218 at the end of 2021.

R&D expenses for the quarter were $5 $9 million compared to three 5 million in the second quarter of 'twenty one.

$5 6 million in the first quarter of 2022.

All increases were associated with the ongoing execution of our clinical roadmap and development pipeline.

Our loss from operations for the three months ended June 32022 was $22 9 million compared to a loss of $11 1 million for the same period of 2021.

We have a net loss of $23 8 million or <unk> 50 per share in the quarter based on a weighted average post IPO share count of 47 7 million shares.

To a net loss of $17 6 million from $1 83 per share for the second quarter of 2021 based on a weighted average pre IPO share count of nine 6 million shares.

We ended the quarter with $221 million of cash and cash equivalents of $33 million of long term debt, which includes $2 million of debt discount.

As Paul discussed we have been very proactive in our liquidity management, despite our greater than $200 million cash balance.

We recently completed a comprehensive review that aimed to align our operating structure and growth investment with our key strategic needs are.

Our heritage is one of differentiated capital efficiency and high returns on investment.

Went public with to internally develop disruptive commercial products with an accumulated deficit at the IPO $102 million and just the $105 million of invested capital are implied multiples of invested capital as of the IPO or in the top few of all med Tech Ipos since 2015.

The internal development of cyan and the powerful early surgeon feedback from our very first surgical cases. This month is yet another demonstration of our capital efficient heritage and disruptive ophthalmic innovation.

We have high confidence that <unk> will be our third groundbreaking product.

Our strategic and financial plan support continuing investment in all of our current growth initiatives are designed to provide a highly achievable path to free cash flow breakeven with substantial liquidity cushion.

We made limited adjustments to both labor and non labor spend that together reduced our cash burn and put us on a faster path to profitability importantly.

Importantly, we are not reducing investment our head count in the field and product development and foundational clinical work. The cornerstones of our plan that will drive continued growth in the near and long term.

Expect to exit the year with less than 270 employees versus an original plan that had us approaching 300 full time employees by year end.

Further we anticipate non labor spend which constituted approximately half of our second quarter operating expenses to decrease by an even higher percentage as we both narrow and prioritize our project pipeline and execute more efficiently. We anticipate that the impact of these efficiencies will be apparent in our fourth quarter.

Since we are implementing a number of these non head count changes this quarter.

We believe our strong balance sheet.

<unk> gross margin and disciplined spend can support positive free cash flow in 2025.

Approximately 30% topline growth in the medium term, we would have the cash drop of well over $100 million.

This includes over $30 million of discretionary growth investments that's earmarked for specific development projects that are discrete and financially flexible.

We believe we have more than enough capital to execute our plan and can retain the flexibility to make decisions based on maximizing long term value.

Finally, turning to our outlook turning to our outlook for 2022.

We are tightening our full year revenue guidance range to $68 million to $72 million with more sequential uplift in the fourth quarter than third to match typical eyecare procedure seasonality and modest contribution from signed in the fourth quarter.

For the year the range implies annual growth rate of approximately 39% to 47% over 2021.

It's been a very productive first half of the year precise sciences and we're excited to continue our efforts as a leading glaucoma and dry eye technology provider, that's transforming care and improving patients lives.

This concludes our prepared comments operator, please open up the call for questions.

Okay.

At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.

Your first question comes from the line failure, along with Morgan Stanley .

Good afternoon, and thank you for taking the questions and congrats on a strong quarter I wanted to start with the guidance.

Just a revised guidance range.

The range Im just following the <unk> upside I'm just curious if you could talk to.

Glenn what you're contemplating now therefrom staffing challenges and what youre seeing from them.

Competitive trialing standpoint that you factored into the back half.

As well as just the benefit from that.

<unk> the education side that you talked about it.

Yes.

I'll tackle.

Much of it but please please add on.

So Phil we are embedded in even the low end of the tightened guidance right.

An acceleration of year over year growth in the second half versus the first half.

No I think what we are being <unk>.

Conservative ultimately.

Not not because of lack of confidence as being conservative about the contribution from the GCC is embedded in that guidance right.

Also only a very modest contribution from <unk>.

Which just given sort of its early days and we're in the surge of feedback days, which is very encouraging.

The timing of these contributions as just one.

As reflected in is one that we're all going to be conservative.

As Paul said in his comments.

Competitive.

We don't anticipate that the presence of sort of the new entrants.

It's going to go away in the second half and so that's definitely factored in to our perspective on full year guidance.

Yeah again point to the fact that.

For the omni user base.

Our retention rates are.

Really extraordinary right.

It is ultimately just.

<unk>.

It is a slope impactor to push people sort of along the adoption curve and to expand the utilization of the pace we want to.

More than anything is impacting our base of business.

We are not.

And I think I'm hitting all of these we are.

There is selective example that we are seeing.

Staffing shortages impacting hospitals in the ASC.

But.

It's not material in terms of what we're seeing out there.

I would call more anecdotal.

And so really that specific factor into our guidance. It was not a specific factor in terms of.

Our tightened guidance.

Okay got it that's very helpful and if I could follow up just on Opex that with all the changes and the restructuring initiatives that you've talked about today, our business optimization, just how we should think about that <unk>.

Trajectory overall, and then I did want to ask if you could provide a bit more color on the decision to terminate China.

Realizing that's what's going on in the market, but just the definitive evidence that could have provided and your outlook for additional trials maybe.

Supersede that and thank you for taking my questions.

Yeah.

So Paul I'll hit the Opex and then certainly.

Culture.

Yes.

Obviously looking at our Opex.

Because of the four quarters post IPO, there has been an increase sort of quarter to quarter.

<unk>.

We expect I think youre, what youre going to see fulfill yet and we will provide more clarity like in terms of more specific opex guidance.

On the next quarter call, because we're still sort of finalizing.

Some of the project work in non labor work to be able to do that definitively but.

You'll you won't see that growth.

Obviously in the back half of the year.

In terms of the order of magnitude of the savings I think we'll provide more clarity on Q3 gave a flavor for it in my comments in terms of sort of how it impacted sort of our head count plan and the view that the non labor savings from just frankly project focus.

Should be should be in excess of that.

Hey, <unk> this is Paul.

Terms of tried and that was a law.

Large multinational.

Five countries 25 Center RCP.

While.

Okay.

<unk> valuable data the reality is we're getting.

Since we started that trial some time ago, we have very significant.

Clinical evidence that's been generated and published and we're continuing to and that trial itself.

Who is enrolling enrolling slowly and would take would take many years to be able to generate any meaningful data and publish it and while we found with <unk> in Europe .

Want to pursue a more focused strategy.

Those markets those select markets that.

Yes.

Where we know we can perform in the nearer term. So were currently commercial in the UK and Germany.

We're generating lots of data there I mentioned one of the publications three year can alloplasty data that just got published we have another paper three year paper, our second one out of Germany long term data.

<unk> safety and efficacy with omni not once canal Patheon Trabecula out of me.

Beyond UK and Germany other countries will want to we will want to select.

Market that are attractive in size.

And figure out exactly what clinical data those select markets will require.

And we can easily do more focused studies and frankly enroll them more quickly and get into those markets faster with more focused trial. So thats. The rationale there obviously, we're continuing to run studies large multicenter studies in the U S as well and that will that will also help our efforts in Europe .

We remain committed just want to focus more on select markets versus going abroad right upfront.

Okay.

Understood and thank you for taking the question.

Right.

Sure.

Your next question comes from Andrew <unk> with William Blair.

Okay.

Hi, guys. Good afternoon, and thanks for taking the question.

Maybe just start on the Goniotomy device and a few questions there.

Obviously as you noted this has become a bit of a crowded market for other players, bringing tools, which sort of bill under that <unk> pathway. So I guess three questions. Here. One can you sort of give us a little bit more color around the bladeless component there I heard your comments, but maybe just be a little bit more specific on what's differentiated in terms of the mechanics of that.

Two can you just share some of the plans for clinical data generation for that device and then third how.

Should we be thinking if at all.

<unk> here of omni with this new device interrupt thanks.

Sure good questions.

Andrew.

On the platelet Bladeless design first and only Bladeless.

<unk> instrument.

Think of it as something that.

Designed to allow surgeons to more smoothly gently reliably ex side and removed several clock hours of disease TM.

Currently available options the majority of them they cut issue.

And if you think about.

A surge in training as an example.

They're going to be a lot more comfortable getting into the angle with a blade lists gentle design. Other features on it that are differentiated and I think early early used from a handful of our surgeons.

Have have validated this we've got some dimensions on the device that allow the surge in again not to cut upon advancement, but instead to grab the tissue. So very very small dimensions micro engineered onto the device.

Using very specialized lasers to get those dimensions.

Reproduced consistently in these micro dimension to allow the surgeon has a sweep.

The angle.

The device.

Grabs the disease TM.

And as the surging continues to sweep its grabbing TM and it's accumulating in the trap of the device and it's pulling the tissue away. So allows it allows.

This grabbing a tissue and the sweeping motion a gentle sweeping motion around the angle allows the surgeon in a single motion.

Sleep and remove tissue so gentle its smooth it's efficient.

And I think it provides the surgeon with a little more comfort and confidence in the angle.

The early feedback we've heard Andrew from again this is a handful of surgeons, but theyre very experienced in migs.

They.

It was just a very wow I didn't know goniotomy could really be improved this much but you guys nailed it.

In terms of clinical data.

Obviously clinical data is near and Dear to everything we do because we try to deliver products that are best in class clinically it's in our interest to invest heavily in clinical data.

I think we would we would start generating that data a staff on site. So I think 2023, we obviously don't have any protocol it generated yet, but we would.

Right now we're focused on getting it out to a handful of surgeons and ensuring that we have delivered yet again, a best in category product.

Once we're through this early on a controlled release will be shifting our gears to one commercialization manufacturing scale up and lastly, clinical data generation.

As it relates to your third question on cannibalization, obviously thats the right thing asking the right thing to think about and we've obviously thought about it long and hard before we pursue any any portfolio.

Project and.

And we really see this.

Linked subsets of the Migs market.

These.

The primary players in the Migs, Mark I'll say, Theyre Goniotomy can alloplasty and trabecular micro bypass stenting.

Most of these procedures co exist within the same account today.

So we have many many high volume happy Omni surgeons.

So we're doing some goniotomy for certain use cases or some bypass stenting for other use cases, so for US we view this exists already today.

We have we know that we could deliver a best in category Goniotomy device, we know that we can satisfy.

A broader patient subset by offering our existing omni surgeons this device and so we're happy that it allows us to.

Provide a broader a broader offering and enhance the relationship the great relationships that our sales force has today with their surgeon customers.

That's great I appreciate very much appreciate all that color on the device and look forward to seeing it maybe if I could just follow up with one more really around some of the longer nearer term goal medium term goals that you laid out here for revenue and profitability can you just sort of talk a little bit about some of the underlying assumptions.

Good how are you breaking that out between glaucoma and dry eye.

Some of the spend there over that medium term. Thanks.

Yes.

I'll take a stab at it we're not going to you know.

Obviously as the directional perspective, and we'll as we get to later in the year, we'll obviously update that with more definitive guidance for 2023.

The reality is Andrew.

The peer care growth.

Reflects.

<unk>.

Reflects the new the expanded label, we got at the end of last year right.

But we don't.

We don't have plans to necessarily at scale.

Sales force in advance of our patient access breakthrough right. So.

It's not I think it.

The growth expectations are.

Early similar between the two segments like embedded in that.

The other thing I would say again.

I think it's conservative.

With respect to timing and order of magnitude around contributions for our big market development rocks that were moving right in terms of a stand alone.

And.

And.

And it also is fairly conservative like in terms of our perspective on the incremental impact of <unk>.

As you know.

We don't have conservative.

Views on the potential but just in the hearing now.

Current operating environment and sort of growth trends that we're seeing we're hearing now is reflective of that.

Great I'll leave it there thanks guys.

Yeah.

Your next question comes from the line of Matthew O'brien with Piper Sandler.

Afternoon, Thanks for taking my questions.

So just maybe to put a finer point on a couple of things.

Jesse.

The guidance for the year. The high end was taken down by $3 million. The midpoint was taken down by $1 million I know you had a wider range, but you just beat by.

About 1 million Bucks, so youre, taking the midpoint down by a couple of million Bucks. What is it specifically that is making you take that midpoint down by a couple million dollars or just take off the high end of guidance is it something competitively are worried about the reimburse the proposed reimbursement changes something specific there.

Do you want to focus folks on.

Okay.

I can take a crack Jesse.

And you can Doug do you want to add.

I think Matt I think <unk> seen youre close to the market I think you've seen.

Flurry.

<unk>.

New entrants.

Yes.

While.

Clinically unproven I think theres a lot lot of questions. We've all seen them from society from payers. What these devices are what they are not what.

What procedures they perform what procedures, they don't perform how they could be coated or not.

That's real that's been real in the first half it's continued through the summer now we feel extremely confident.

And how we fair, but the reality.

And the reality is you've got pretty established companies with established commercial infrastructure.

Pushing these products into the operating room and there is a natural process for surgeons.

Understand what they are understand what theyre, not and I think what we've done.

Very very well.

To compete by.

Focusing on designing the best clinical innovations for surgeons products they'd love to use.

Think about think about an iPhone and some examples where your friends of adventure at away from an iPhone only defined major frustration and come back and I think that's what we're seeing here I think people love it.

It's super sticky it's reliable.

But when a company introduces a new a new shiny object surgeons are going to try it and what we're seeing now with increasing frequency everyday are these surgeons are coming back is it over no it's not over yet and it affected the slope of our.

Trialing and advancing our surge in two and adopted date it doesn't affect that right until the surgeon to learn what these products are and what theyre not until they come back to omni as they always seem to do because they love it.

There's a little bit of an effect and so that that to me is the.

Is the primary driver Jesse I don't know what else you'd like to add.

Yes, Matt I would just reiterate right.

The implied growth.

Second half is higher than the growth in the first half.

So that should show you some of our confidence in the business.

Yes.

And.

I think we.

When youre talking about the growth.

Growth rates as high as ours sort of.

It's really critical to to be able to push people through the trial life cycle.

We adopt them.

So.

So I just thought it's prudent in terms of what we're seeing what we can measure them again.

We know we know that.

We didnt squeezed it proportionately, but hopefully <unk>.

<unk> confidence and also squeezing in sort of the bottom of the range as well.

Yes, yes, Okay, and then just on the 30% medium term growth rate I don't really know what medium term means or even interim or long term I have no clue, but but.

You've got a proposed rate cuts.

Thats out there right now.

<unk> historically hasnt affected the number of cases that are done even if it's the best outcome.

So how can you offset with potentially is that that impact.

With your existing product and then layering on Goniotomy next year since I on to get to that 30% number that I'm sure everybody is going to go to.

In surgical glaucoma in the U S, but probably next year, and then 24 as well thanks.

Hey, Matt when you say the proposed rate cut are you talking about the proceeds.

Yeah, Yeah, the proceeds for canal a policy.

That's right yes.

So with that.

Obviously reductions or.

Never never a positive.

For manufacturers or surgeons.

But the way we think about it I think the way everyone as you think about it.

Is.

Relativity right.

So the proceeds for can Alloplasty has always been historically very attractive it got reduced to 750 still attractive.

Those roll and let's see how it ends up in the final rule. This year, but it is proposed to go down to 600, So let's say worst case scenario the final rule.

It looks like the proposed rule at 600 and Thats. It that'll be the end of any revaluation or it based on historical trends and how often they're roughly values. These codes, usually it's five years until they revisit it so worst case scenario if it's $600 for the proceed the way we think about it it has.

Has that reduction.

Created a.

Relatively different economic profile for canal and the answer is no right. It's still it was below goniotomy until Goniotomy gets rocked.

They can help hockey fee was already below goniotomy and it remains below goniotomy.

The $600 can help hockey fee is above cataract surgery, it's above trabecular bypass stents when it was at $7 50, and it remains above 600, so relatively speaking it doesn't put us in a different position.

Competitively.

And in terms of just general.

Absolute attractiveness to the surge and I think it's a.

Become very.

Earlier with omni I think $600 is plenty sufficient for us to deliver on our.

Its expectations.

Got it thanks, so much.

Sure.

Your next question comes from the line your language with Citibank.

Thank you and good evening, Tom going to try a slightly different angle, how do you define medium term.

Sure.

Julian I think it I think.

The next couple of years.

It's a number that we will revisit it we will revisit specifically for next year the number of the.

I think is fair.

Fairly conservative on what we think.

The Mega upsides.

Were pursuing for no other reason.

We wanted to give what we fix our organic growth expectation is.

Sort of you know.

Sure.

Without heavy reliance on that given that bill.

In the early stages of development there.

Okay.

The other thing I wanted to just spend a moment on was you talked about.

How you are spending money to accelerate the path to breakeven can you clarify what's the path to breakeven.

Yes, our view again is that.

Ed.

That entering 2025, if you just apply those.

Yes.

So its medium term growth assumption, which again sort of areas with the two year perspective right.

When you layer on our what we view as what our normalized spend will be that will be free cash flow positive.

And <unk>.

Our view is that leases fairly comfortably.

Above.

$100 million cash draw.

Above $100 million cash burn.

Yes that would be the trough balance.

Hi.

Okay.

Okay. Thanks, sure you've been public a year now congratulation for happy anniversary.

Thank you what has changed.

<unk>.

I mean, a lot of models have been updated and changed in the last 12 months.

But I'd like your view on what's the difference.

I'll comment and then if you want to take let's take it from there.

Market perspective.

I think on an omni.

We have continued to grow in combo cataract theres been this year different than last year.

I think if you think about it we went from.

Maybe three primary product competitors two six overnight.

<unk> of the <unk>.

<unk> set and were growing right through that our team is executing right through that omni is winning.

It's been it's been a noisy disturbance, but we're seeing again accelerating every day, we're seeing doctors figure out what's what.

And getting right back to their feedback product, which is on the.

So that's been the biggest difference I think.

In terms of <unk>.

Our market presence and what we've seen in the market.

2021, and again, we believe and we're seeing it now that this is transient.

Omni is one.

On the dry eye side.

We've continued to sell nicely into more and more early adopting dry on talent and I think the most important thing. There is we are getting very close to the completion of enrollment.

Sarah that's a really big study, it's payer designed we spoke to eight different insurance companies eight different medical director.

<unk> edge.

Educate them on dry eye and get their perspectives on what it would take in terms of clinical data to successfully cover and pay at a fair rate for a for a dry eye procedure with tier care. So this study again payer designed it's been enrolling very nicely. We are on track and by the end of this year it should be completely completely enrolled and we're looking forward to.

Turning to card on that superiority endpoint next year.

Other than that.

We're continuing to execute very nicely across the board our team is doing a great job.

Our growth.

<unk>.

As an illustration of that.

Yeah.

With.

That the economic the economic uncertainty is different today than it was it doesn't impact.

Not seeing a real impact in terms of.

Our commercial activity.

It is.

It's sort of an important data point as you're thinking about level of investment and approach Paul articulated a bit like in terms of our U S activity.

Yeah.

<unk>.

It's a great opportunity for us.

You can burn a lot of capital if you go try to do everything at once.

<unk>.

And we're just going to.

B B pretty smart about incremental investment and where it goes after that that we lost that line.

Top of mind for our company with our current cash flow profile.

Thank you.

Okay.

Your next question comes from the line of Tom <unk> with Stifel.

Great Hey, guys. Thanks for squeezing me in if I can start on it.

Stand alone the Gcc's I mean, it sounds like there are some encouraging signs out there kind of already have early traction maybe how should we be thinking about when these reps sort of full productivity and our let's call it at Max capacity.

And then.

Kind of along the same lines Standalone mix.

Think has seemingly remained around 20% I assume your internal models forecast, maybe an inflection at some point can you just maybe give us a sense for what that acceleration might look like maybe over the next call. It two to three years.

Sure Hey, Tom.

In terms of the GCC and.

Okay.

The results were pleased there each signed.

To a number of a number of omni accounts.

And Theyre looking at the referral referring.

Community.

Our primary eyecare prefers ophthalmologists optometrists that refer patients glaucoma patients to those omni surgeon.

Looked at the.

Omni utilization pre GCC and post GCC.

In those in those accounts and the uplift is very interesting we're looking.

It's early days, we've we hired them in the first quarter.

Were trained in the second quarter and so they really just spent a couple of months out in the field educating the referral community, but early signs are very encouraging we'd like to be able to report specifically on it soon.

And then the other thing the other thing dimension is the claims data right. We look at Standalone claims six 674 reported alone.

And there is a clear trend there that that that code that claim reporting is growing as well.

In terms of capacity I think a lot of this we're going to we're going to better understand right, we're going to we're going to see.

Real results from the <unk> I think.

September onwards, we're going to be assessing it closely I think we're going to be able to reach some conclusions were going to understand the model I don't think theyre going to run out of capacity anytime soon I think about it once once they.

Referring community is established on omni standalone. They can move to the next group of <unk>. So we would love we would love to grow that team and do with June that means it's the standalone market is growing very quickly.

We expect to we expect to grow the team in due course, but I don't think anytime soon we are going to reach capacity.

So in the end what does it look like.

We could we could one day have.

As many ECC that surgical sales rep, we'll see we'll see what that capacity looks like as we go.

But the market $4 5 billion Standalone market in the early innings, I think would support lots of these resources, making it go.

Okay.

Great. That's helpful. Thanks, Paul if I can just finish on the outlook.

It sounds like you guys expect the trialing headwinds to persist into H 'twenty two but what are your thoughts on these these headwinds potentially slipping slipping into 2023, just I guess given at this stage there there are competing products.

Still rolling out today.

Any color there would be would be helpful. Thanks, guys.

You know I think it gives them better.

In the outlook.

We're.

We have a view that we believe that the impact of the transient than we're seeing.

As customers are stores their level of utilization for omni.

Historically have.

<unk>.

But we're like.

As it pertains to linking it to outlook.

We're kind of.

We're making the assumption for that purpose.

This persists sort of like an environment like this today right like ultimately even though.

I think thats, a very conservative way to look at.

Got it. Thank you I would just I would just.

The first half of this year was pretty acute right again to go from three product competitors to six.

That's pretty acute now a lot of those things are being resolved some of them have been resolved and others are seem to be resolving.

In terms of their impact, but do we need do we need total resolution to continue to dominate now.

Are we counting on total resolution no a lot of this.

It is in our control right. We continue to deliver best in class technology. Our sales force continues to deliver best in class.

Customer service developed best in class relationships, we control a lot of a lot of what we do.

These new entrants and I think I would just summarize this as the acute phase to tap in.

And we're winning it's very clear that we are and customers are going back to full omni utilization.

And.

There can be competitive place that's okay. We welcome it.

Yes.

Yeah.

Okay.

Okay.

Hello.

Okay.

So operator, I think we've lost Tom so.

Are there any additional questions.

At this time there are no further questions.

Are there any closing remarks.

Yeah, So I want to thank everybody for their time. Thank you all for your interest in <unk> Sciences. Appreciate it and look forward to speaking with all of you again soon thank.

Thank you.

This concludes today's conference you may now disconnect.