Q3 2024 Sight Sciences Inc Earnings Call

Janine: Thank you for standing by. My name is Janine and I will be your conference operator for today. This time I would like to welcome everyone to CiteScience's third quarter 2024 earnings results call. All lines have been placed on mute to prevent any background noise.

Janine: Today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star 1 on your touch-tone phone. And to withdraw your question, please press star 1 again. I would like to turn the conference over to Tripp from Investor Relations. Please go ahead.

Tripp: Thank you for participating in today's call. Presenting today are Site Sciences Co-Founder and Chief Executive Officer Paul Badawi and Chief Financial Officer Allie Bauerlein.

Tripp: Also in attendance is Site Sciences Chief Commercial Officer Matt Link.

Tripp: Earlier today, Site Sciences released financial results for the three months ended September 30, 2024, and reaffirmed revenue guidance and updated adjusted operating expense guidance for full year 2024.

Tripp: 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.

Tripp: These forward-looking statements include statements related to the company's anticipated financial performance.

Tripp: Operating Results, Liquidity Position, and Ability to Achieve Cash Flow Breakeven, and 2024 Revenue and Adjusted Operating Expenses Guidance, Ability to Achieve Current and Long-Term Strategic Objectives,

Tripp: Market Opportunity, Inability to Enter New Markets and Capture Market Share, Pricing Strategy

Product, Reimbursement Coverage and Strategy, Expectations regarding Regaining Commercial Momentum.

Account Utilization and Engagement Clinical Trial Strip.

Tripp: Clinical Trial Strategy and Results and the Disposition of Ongoing Patent Litigation.

Tripp: Forward-looking statements are based on estimates and assumptions as of today, are neither promises nor guarantees, and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements.

Tripp: 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 company's public filings with the Securities and Exchange Commission, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q.

Tripp: The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.

Tripp: On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States.

including adjusted operating expenses.

Tripp: The company believes these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results.

Speaker Change: See the company's earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as well as additional information about the company's reliance on non-GAAP financial measures. I will now turn the call over to Paul.

Thanks, Tripp.

Paul Badawi: Our mission is to develop transformative, interventional technologies that allow eye care providers to procedurally elevate the standards of care, empowering people to keep seeing. Our success is contingent on supporting eye care providers with the technologies they rely on to improve the lives of their patients.

Paul Badawi: Recently, there have been advancements in our strategic initiatives that will help bolster our ability to provide value in ophthalmology and optometry for the long term.

Paul Badawi: We have developed two market-tested interventional technologies in omni and tier care that address two of the biggest problems in eye care, glaucoma and dry eye disease.

Paul Badawi: Omni has been used in over 200,000 glaucoma procedures, while TearCare has been used in over 60,000 dry eye procedures.

Paul Badawi: With a strong product market fit established for both technologies, we've been focusing much of our work this year on ensuring equitable market access for both technologies and have made good progress on both fronts.

Paul Badawi: These developments help lay the foundation to establish Sight Sciences as a leading interventional eye care company and position us for growth in 2025 and beyond.

Paul Badawi: Starting with our surgical glaucoma segment, the draft local coverage determinations, or LCDs, that were published by five of the seven Medicare administrative contractors in June of this year will become effective in mid-November and confirm continued Medicare coverage for cataract surgery procedures performed with a single MIGS procedure.

including both canaloplasty and goniotomy procedures.

This is a critical development.

Paul Badawi: that, coupled with the continued optimization of our commercial organization and strategy, will support the growth of our surgical glaucoma franchise over the coming years.

Paul Badawi: Omni's differentiated clinical profile has been demonstrated with high-quality long-term peer-reviewed data that we believe will continue to support market access.

Paul Badawi: While we are pleased to have this Medicare reimbursement clarity, we also recognize there will be some impact to the MIGS device market growth rate with the inclusion of the restrictions on combination MIGS procedures.

Paul Badawi: Our estimate is that approximately 10% of total MIGS codes billed were billed as secondary procedures in combination with another MIGS code. Those secondary procedures will not be allowed under the new LCDs, and instead the surgeon will have to choose one MIGS procedure at a time.

Paul Badawi: While we expect that Omni's comprehensive procedure profile and strong efficacy provide a compelling case for surgeons to regularly choose Omni over other MIGS devices, we expect this to impact market growth until this headwind is lapped.

Paul Badawi: While the limitations on combination MIG procedures is a headwind in the short term, we believe that long term this will be a differentiator of OMNI with its comprehensive procedure profile.

Paul Badawi: Sticking with surgical glaucoma market access, I also want to comment on the final 2025 Medicare payment rule for hospitals and ASCs that was issued on November 1st.

Paul Badawi: We were disappointed to see that unlike the proposed payment rule issued in July, the final rule did not assign device intensive status for calendar year 2025 to procedures billed under CPT code 66174, a code associated with procedures performed with our Omni technology.

Paul Badawi: In the final rule, the code's reported device cost fell under the 30% threshold necessary to assign device intensive status.

Paul Badawi: We are evaluating the basis for CMS's determination and the device cost calculation in this final rule as the offset amount of 29.14% was very close to the device-intensive threshold.

Paul Badawi: Device intensive status for Omni procedures has been a long-term initiative for the company and we plan to continue to pursue this status by working closely with our hospital stakeholders to ensure device costs are properly reported to CMS.

Paul Badawi: We believe the device-intensive categorization is appropriate for OMNI procedures to ensure a more comprehensive Medicare payment in the ASC.

Paul Badawi: Based on the final Medicare rates for 2025, the ASC facility rates for CPT 66174 will increase by $49 or about 2% compared to the 2024 rates, and the Medicare HOPD facility rates will increase by $149 or about 4% compared to prior year.

Paul Badawi: In addition, Medicare professional fees are similar to 2024 rates, with a slight decrease overall, but still maintain the rate differentials for more involved procedures like canaloplasty and goniotomy versus stents, which we believe is important to surgeons.

Paul Badawi: So, we still feel like we can execute our growth plans in the existing reimbursement environment.

Paul Badawi: Now, turning to our third quarter, we generated total revenue of $20.2 million, reflecting growth of 1% versus the same period in the prior year.

Paul Badawi: Revenue did not meet our expectations due to surgical glaucoma revenue performance and a slower than expected recovery from the LCDs, partially offset by higher dry eye revenue driven by demand for tear care smart lids ahead of the price increase effective October 1st.

Paul Badawi: Surgical glaucoma revenue was $18.6 million, representing an increase of 1% compared to the third quarter of 2023, and a sequential decline of 8% compared to the second quarter of 2024.

Paul Badawi: While we expected lower sales in the third quarter compared to the second quarter due to seasonality, we'd expected a faster recovery from the LCDs and better performance in ordering accounts and utilization than we experienced.

Paul Badawi: A recovery from the ongoing LCD process during a temporary period of coverage uncertainty fell short of our expectations.

Paul Badawi: The disrupted LCD environment has raised the bar on the level of commercial execution excellence required by our team to deliver on our plan.

Paul Badawi: While many territories recovered to their pre-LCD levels of utilization following the issuance of the final LCDs, others haven't recovered as quickly and utilization in these territories is lower than expected.

Paul Badawi: Given this emerging recovery inconsistency across territories during a more challenging LCD period, we likely overestimated the pace of our overall recovery.

Paul Badawi: We've also experienced elevated trialing of lower-priced devices during a commercially disruptive LCD process that included coverage uncertainty.

Paul Badawi: This period of our intense focus on the LCDs may have allowed more trialing with less immediate and effective competitive counter-selling from our team than in prior periods.

Paul Badawi: We continue to look at the Salesforce organization and areas in which we can optimize performance to drive stronger growth.

Paul Badawi: Despite our results this quarter, the fundamentals are very much intact and our product-market fit is well established.

Paul Badawi: Many sales reps are performing effectively within the dynamic environment by clearly articulating the value of Omni and continuing to grow our business. However, a portion are performing below expected levels during this LCD period, and we are addressing the root causes of this underperformance in each market.

Paul Badawi: Over the past several months, we have been making some key organizational changes to certain layers of commercial leadership and to certain commercial functions to enhance our execution and territory performance consistency across the country.

Paul Badawi: We believe these enhancements are already having an impact and driving a greater level of consistency and performance, but we remain focused on continuing to optimize our organization until all territories are competing effectively and growing.

Paul Badawi: We are confident clarity and stabilized environment we expect to come with the effectiveness of the final LCDs later this month that provide coverage clarity and to stabilize new normal for us to operate within.

Paul Badawi: Coupled with the commercial organizational enhancements we have made over the past few quarters, position us for better performance and predictability.

Paul Badawi: In addition to our commercial organization enhancements, to re-accelerate growth, we are focused on improving our competitive positioning and increasing our stand-alone market growth, which we believe will lead to increased surge in utilization across all accounts.

Paul Badawi: Re-engagement with accounts that have decreased orders, engagement with new accounts, and an increased pipeline of new surgeons training on Omni and Scion.

Paul Badawi: We are actively working on evolving our competitive positioning to align with the strong clinical efficacy of OMNI. We are proactively working with accounts on how to navigate the new environment without combination MIGs as a treatment option for Medicare patients and why OMNI should be their preferred MIGs in patients where proven safety and efficacy to reduce IOP and medication burden are a priority.

Paul Badawi: With this, we believe we will return to more positive growth trends in our surgical glaucoma segment.

Paul Badawi: Now, moving to re-engagement with accounts. Following the uncertainty resulting from draft MIGS LCDs issued in 2023, re-engagement following 2024 LCD updates has been slower than expected.

Paul Badawi: We are focused on re-engaging accounts that have historically been frequent omni-users but which in recent periods have reduced their omni-utilization, particularly those accounts identified as engaged in trialing of competitive devices or lost during the LCD process.

Paul Badawi: Given the coverage clarity following the finalized LCDs, we look forward to growing our base of surgeons trained on our technology. There remains significant opportunity and train new surgeons as we believe we have trained less than half of the MIGs trained surgeons in the United States.

Paul Badawi: Further, we believe that the improvements we are making to our standalone strategy will also support our growth over time. We continue to see a shift in the care continuum and how physicians think about treating patients from medical management to procedural intervention.

Paul Badawi: We've taken a deeper look at the care continuum in the evolving MIGS landscape and drilled down on the specific patient population for whom omni-standalone cases have a compelling value proposition due to the comprehensive nature of the procedure and its ability to address all three areas of resistance and the drainage pathway.

Paul Badawi: This patient segment consists of patients three or more years out from prior cataract surgery.

Paul Badawi: who may have had a MAKES procedure at the time of cataract surgery.

Paul Badawi: whose IOP is not well controlled on two or more medications and are at risk of disease progression.

Paul Badawi: Most of these later stage patients are on their way to an invasive and complicated procedure, like a trabeculectomy or a shunt, but we believe that stand-alone intervention performed with OMNI can be effectively utilized for these patients, thus potentially delaying the need for these riskier, advanced procedures.

Paul Badawi: In conclusion, on our surgical glaucoma segment, while we were disappointed that CPT66174 did not receive device intensive status,

Paul Badawi: We believe that confirmed coverage for MIGs in the finalized LCDs, coupled with improvements to our surgical glaucoma organization and heightened focus on execution and strategy post-LCDs,

position us for a return to growth.

Paul Badawi: We expect to strengthen commercial execution and meet our organizational goals to drive further adoption of our clinically differentiated surgical glaucoma technologies and remain confident in the resumed growth trajectory for Omni in both combination cataract and standalone use cases in the fourth quarter of 2024 and into 2025.

Now I'll turn to our dry eye business.

Paul Badawi: With TierCare, we continue to advance our work toward achieving equitable market access, notably driving payer awareness of our 12-month Sahara RCT results.

and Budget Impact Analysis.

Paul Badawi: that demonstrate the long-term clinical and health economic value of peer care interventions relative to the standard of care prescription eye drops.

Paul Badawi: We have developed a three-pronged approach which we believe will facilitate our long-term mission of pioneering the field of reimbursed interventional dry eye and establishing a market-leading position.

Paul Badawi: This strategy includes developing best-in-class technology, delivering superior long-term clinical outcomes supported by RCTs.

Paul Badawi: and executing an effective market access strategy to establish equitable reimbursement.

Paul Badawi: Since the inception of our dry eye business, we have dedicated time and resources to building the market around our CureCare technology and working to provide a solution for the estimated 11 million U.S. patients diagnosed with MgD-associated dry eye disease.

Paul Badawi: We have been introducing the results of the budget impact analysis in our conversations with payers, which showcases the cost savings over existing treatment options.

Paul Badawi: The Budget Impact Analysis, which we expect to be published in the coming months, is important as it estimates the fiscal outcomes of adopting a new technology or treatment within a specific provider environment, and therefore is a key part of a manufacturer's formulary listing or reimbursement submission.

Paul Badawi: We continue to be encouraged by the work we are doing with payers, and we have had a number of care care claims paid through commercial insurance and Medicare plans.

Paul Badawi: With strong clinical data and health economics in hand, we feel our dry eye business is well positioned to advance coverage conversations that will drive policy and or payment decisions in 2025.

Paul Badawi: Once we have some reimbursement wins, we believe we can start to activate the over 1,000 eye care providers who have invested in peer care hubs.

Paul Badawi: been trained on the tear care procedure by our team and performed over 60,000 tear care procedures since launch.

Paul Badawi: We were also very pleased with our third quarter results in dry eye and saw stronger customer demand than expected, highlighting eye care providers' significant interest in tear care as a compelling solution for their dry eye patients.

Paul Badawi: Lastly, I'm excited to announce that we have recently added additional leadership talent to our site sciences team with the appointment of Dr. M.K. Raheja as Executive Vice President Research and Development and Brenton Taylor as Executive Vice President Operations.

Paul Badawi: M.K. has more than 35 years of experience in ophthalmology medical device innovation.

Paul Badawi: bringing over 70 ophthalmic innovations to market from past roles overseeing global industry leading ophthalmic R&D organizations

within companies such as Johnson & Johnson Vision.

Abbott Medical Optics, Teebo Vision, and Bausch & Lomb.

Speaker Change: Brenton has nearly 25 years of experience in medical and energy technology development and operations, overseeing innovation, product development, and manufacturing.

Speaker Change: He most recently served as Chief Executive Officer at Next Energy Technologies and also was a co-founder in EVP Engineering at Inogen Inc.

Speaker Change: Both MK and Brenton bring a unique skill set with vast medtech experience that will further enhance our executive team's existing capabilities.

Speaker Change: Separating the R&D and operations plans with dedicated resources to ensure we have the appropriate infrastructure to support significant pipeline development.

scale and profitable growth over the coming years.

Speaker Change: Looking ahead, the recent developments in 2024, including MIG's LCD Clarity.

Speaker Change: Continued momentum in making care care the expected first mover in reimbursed interventional dry eye in 2025 and recent executive team hires gives us ample opportunity and capability to execute on our goals and accelerate growth in 2025.

Speaker Change: We will now turn the call over to Ali to discuss our financials.

Ali: Thanks, Paul. Before I turn to the third quarter financial results, I want to mention that as we continue to progress both our strategic and operational goals and improve execution, we are doing so from a position of financial stability with the ability to support these goals moving forward.

Ali: We plan to achieve cash flow breakeven without the need to raise additional equity capital and are excited about our long-term growth opportunity.

Ali: Moving back to the third quarter, total revenue was 20.2 million. This reflects a 1% increase compared to the same period in the prior year.

Ali: Surgical glaucoma revenue for the third quarter was $18.6 million, up 1% versus the comparable period in the prior year. The increase was primarily driven by higher account utilization, which increased by 3% versus the same period in the prior year.

Ali: Utilization decreased roughly 7% sequentially and while we expected lower utilization in the third quarter compared to the second quarter due to seasonality, utilization was lower than expected.

Ali: Over 1,100 customers ordered surgical glaucoma products in the 3rd quarter, down 2% from the 2nd quarter of 2024, and flat from the 3rd quarter of 2023.

Ali: Our dry eye revenue for the third quarter was $1.5 million, down 4% compared to the third quarter of 2023, but ahead of expectation.

Ali: The expected decline was primarily due to fewer new accounts and related smart hub sales as a result of the focus on the next phase of our commercial strategy for our dry ice segment, which involves achieving equitable market access.

Ali: Gross margin for the third quarter was 84% down compared to 87% in the same period in the prior year as expected due to higher overhead costs per unit in the current period as a result of lower production volumes in both segments.

Ali: Total operating expenses for the third quarter were $28.1 million, a decrease of 8% compared to $30.7 million in the third quarter of 2023, which reflects improved operating expense leverage.

Ali: The decrease was primarily due to lower legal expenses and the current period.

Ali: Adjusted operating expenses were $23.8 million for the third quarter, a decrease of 11% compared to $26.8 million in the same period in the prior year.

Ali: Our net loss for the third quarter was $11.1 million, or $0.22 per share, compared to a net loss of $13 million, or $0.27 per share, for the third quarter of 2023.

Ali: We ended the quarter with $118.6 million of cash and cash equivalents and $35 million of debt, excluding debt discounts and amortized debt issuance costs.

Ali: We generated $0.4 million of cash in the quarter, reflecting continued operational discipline and a substantial improvement in working capital.

Ali: This was a significant improvement compared to the $10 million of cash used in the third quarter of 2023.

Ali: The key drivers of our working capital improvement during the period were a significant decrease in accounts receivable and inventory.

Ali: Cash used in the nine months ended September 30, 2024, with $19.6 million compared to $40.5 million in the same period in the prior year.

Ali: As a reminder, we have not received any monetary damages awarded in our successful jury trial verdict in our patent infringement case against Alcon.

Ali: The final ruling is still pending the judge's determination whether to confirm the jury's verdict, establish ongoing royalty damages, and or determine any potential enhancements and is subject to appeal.

Ali: Moving to our revenue outlook for the full year 2024, we are maintaining our expectation of approximately $81 to $83 million.

Ali: We still expect double-digit surgical glaucoma revenue growth in the fourth quarter of 2024 compared to the same period in the prior year as we regain commercial momentum and expand utilization and our customer base.

Ali: However, we also acknowledge headwinds to fourth-quarter revenue growth with the slower-than-expected recovery in surgical glaucoma utilization and active accounts experienced in the third quarter of 2024.

Ali: and the LCD effective date mid-quarter, which we believe will impact devices used in procedures due to combination MIGS limitations.

Ali: While the limitations on combination MIGs is a headwind in the short term, we believe that long term this will be a differentiator of OMNI with its comprehensive procedure profile.

Ali: We expect dry eye revenue for the fourth quarter of 2024 to be less than $0.5 million.

Ali: Dry eye revenue is still expected to decrease following the implementation of an increase in dry eye pricing effective October 1st, 2024.

Ali: which is expected to have a significant negative impact on cash pay procedure volumes.

Ali: in the fourth quarter of 2024 before we expect a return to growth in 2025 with market access wins and an expanded commercial presence.

Ali: We are revising our guidance expectations for full year 2024 adjusted operating expenses to approximately $104 to $106 million.

Ali: From our prior range of 107 to 109 million, representing a decrease of approximately 4 to 6% compared to 2023.

Ali: We remain focused on further penetrating and expanding the surgical glaucoma and dry eye markets as we execute and deliver on our long-term goals and build for our future.

Operator, please open the line for questions.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Should you have a question, press star followed by 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to withdraw, please press star followed by 1 again. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Our first question comes from the line of Margaret Kraser and you're from William Blair, please go ahead.

Speaker Change: Hey everyone, this is McCauley on for Margaret tonight. Thanks for taking our question.

Speaker Change: Really appreciate the color on some of the moving pieces within the surgical glaucoma performance this quarter and understand your strategy longer term, Paul, but assuming another sequential decline in dry eye sales, as you mentioned, Allie, the reiterated guidance obviously assumes that utilization step up sequentially within surgical glaucoma in the fourth quarter. So just wondering if we could get a little bit more color if you're already seeing improvements in that portion of reps that were performing below expectations.

Speaker Change: and ultimately what gives you that confidence of a sequential step up especially with the headwinds around the LCD as both of you mentioned.

Speaker Change: So I'll be happy to take the start of that, but Matt or Paul, please feel free to jump in here. So first of all, what I would note is that

Speaker Change: On the glaucoma side of the business, we typically see the fourth quarter utilization higher than the third quarter, where we typically see some summer seasonality in procedure volumes. So we do expect that to be a factor in the fourth quarter.

We have, you know, seen...

Speaker Change: improvements in the overall business, but it is very early in the quarter still. So we are looking to see that to continue to improve, but we feel like we have a very targeted plan that we are executing against in the fourth quarter.

and also dry eye is ahead of our original expectations.

Speaker Change: for the fourth quarter, while still a modest number expected in the fourth quarter of 0.5 million or less. That is ahead of our last provided guidance on dry eye. And of course, there was outperformance in the third quarter as well that offset a portion of the glaucoma shortfall in that period.

Speaker Change: It may be just secondary, I'll add to that, reiterating some of the commentary from the prepared remarks. We've been working actively within our sales organization, as we said, responding to what is always a very dynamic and evolving environment. Our team has done a great job of engaging in the marketplace, engaging and supporting our providers.

Speaker Change: And look, while there are certain takeaways with the finalization of the LCD, specifically impacting combination of mixed procedures, it does create a level of certainty in the market that eliminates noise and allows us to be very deliberate, I think, in our efforts as we continue to re-engage accounts, re-engage providers where we may have seen a decrease in utilization previously. And so the team has been working effectively against that. And again, as Allie alluded to, one of the things that we will continue to rely on is the comprehensive nature of omni-mixed procedure, the demonstrated efficacy, ensuring that we continue to win our fair share of those opportunities. So the clarity and certainty with the finalization of the LCDs, I think, ultimately comes to benefit as we continue to target our efforts across the market.

Speaker Change: And again it Ali alluded to one of the things that we will continue to rely on is the comprehensive nature of amir's procedure that demonstrated efficacy ensuring that we continue to win our fair share of those opportunities Theres, a clarity and certainty with finalization of the LCD I think often becomes a benefit as we continue to target our efforts across all segments.

Speaker Change: The U S surgical glaucoma business.

all segments of the U.S. surgical costumer business.

Speaker Change: That's great.

Speaker Change: Very helpful.

Speaker Change: Just to follow up with one on the device intensive.

Speaker Change: And not getting that in the final rule.

Speaker Change: Could you, maybe just talk about how that calculation or.

Speaker Change: As is computed I guess.

Speaker Change: Are they looking at a trailing 12 month claim and Thats whats shifted from from the 29% from 31% used in the proposal or just I.

Speaker Change: I guess any clarity in terms of.

Speaker Change: The device intensive nature. Thanks.

Matt Link: Yes. This is Matt so the short answer is we don't we don't have the details of what ultimately.

Matt Link: The claims data was that was that led to the calculation.

Matt Link: Ultimately it falling below the 30% threshold the processes looking at 2023 data claims up through the middle point of the year for the proposed <unk>.

Matt Link: <unk> on device intensive and then an interval between looking at the claims data through the balance of 'twenty three second half that's not data we have yet so assuming no mistake in the calculation of an ultimate determination or there is something in that data, which will become publicly available involves may look into it.

Matt Link: Again, as we stated multiple times, we believe strongly in.

Matt Link: The fact that we should qualify for device intensive it meets all the criteria. We worked diligently with accounts to ensure that it is coated.

Matt Link: Frankly for the accurate billing data is collected to inform these calculation and once we have the data the claims data from the second half of the year, we can better understand what we need to do and what will be required moving forward to ensure that omni is ultimately reimbursed in a manner commensurate to the value. It provides.

Matt Link: Physicians and patients.

Speaker Change: That's very helpful. Thanks.

Speaker Change: Thank you. Our next question comes from the line of Matthew O'brien.

Speaker Change: Sandler. Please go ahead.

Speaker Change: Hey, this is Phil on for Matt Thanks for taking our questions.

Speaker Change: I wanted to get your take on on <unk> volumes and more specifically how is the restrictions on multiple procedures performed a single surgery impacted your business you called out 10% of procedures being historically build with multiple devices any idea how many of those procedures you captured in Q3.

Speaker Change: Here in <unk>.

Speaker Change: My second part of this question of Q4 surgical glaucoma guidance looks like it's.

Speaker Change: Low single digit growth on a two year stack any expectations for 2025 given.

Speaker Change: Were these LCD itself.

Speaker Change: Yeah sure. So I'll take the first question. The second question first here today, we're not going to be giving 2025 guidance.

Speaker Change: Obviously, we're seeing at some level of impact associated with combination mix, but we don't have good data that tells us specifically what subset of our procedure is done in combination so when we.

Speaker Change: Discuss that 10% that's looking at claims data and looking at total volumes of claims build with the various procedures in combination with a stent procedure. We don't have a way of understanding how much of that is specifically omni which can be billed as either can alloplasty, Oregon neoteny and obviously there are.

Speaker Change: Other products that are built under those codes as well.

Speaker Change: We don't know how much of that is associated either in the third quarter or the potential impact in the fourth quarter, but we do feel like we are having good conversations with our customers to proactively discuss what their plans are in the circumstances that they are doing combination procedures and we feel like we.

Speaker Change: Have a unique value proposition because of the comprehensive nature of the omni procedure.

Speaker Change: That's helpful and my second question here and I think lost in the discussion of reimbursement and LCD was your free cash flow positive in Q3, and you've reiterated expectations for breakeven with current liquidity can you kind of walk us through the expectations built into your model some of the leverage that you expect to.

Speaker Change: Exhibit and then any thoughts on maybe free cash flow positive next year. Thank you.

Speaker Change: Sure Great I appreciate the question and we are very proud of the reductions that we've accomplished in cash burn year to date being under 20 million burn year to date with over 40 million burned in the same period of 2023, and we've really been diligent with our expense managed.

Speaker Change: <unk> as well as working capital as you know, we don't provide specific cash burn guidance or specific breakeven guidance and we're not prepared to change that today to provide guidance on those areas but.

Speaker Change: But if you look at in the period of the third quarter, we did reduce our cash flow.

Reduce our working capital our accounts receivable and inventory almost $9 million associated with those two buckets. So those are more one time benefits. After that you would typically see accounts receivable and inventory grow more approaching proportionately to revenue growth. So I think thats important.

Speaker Change: To take into account and your future modeling of cash usage, but this is an area of focus for the company seeing both sequential and year over year improvement in.

Speaker Change: Cash generation versus burn and where we will continue to look to be diligent in our spend now on top of that I would say there are key areas that we are investing in as a company and that includes our tier care market access now and next year will be on our tier care.

Speaker Change: Commercial expansion as we get market access wins and also looking at our pipeline activities, which we continue to believe are very important for our long term value creation. So all that said we are taking a balanced approach here, we expect to continue to make progress in reducing our burn over time.

Speaker Change: And feel like we are sufficiently capitalized, but we won't be providing specific breakeven guidance today.

Speaker Change: And Phil I, just wanted to add one comment to Ali's comments around the comprehensive nature of omni.

Speaker Change: In a <unk> world first of all we believe that <unk>.

Speaker Change: Surgeon should have the flexibility to provide their patients with whatever procedures. They feel are medically necessary to give them the best patient care.

Speaker Change: We've obviously developed omni to do just that.

Speaker Change: With its unique indication in unique design.

Speaker Change: Think long term once this one mix headwind as last long term midterm long term.

Speaker Change: The fact that it offers multiple mechanisms of action by designed as unique indication while it's a single comprehensive procedure. It's indicated to perform can alloplasty followed by trabecular <unk> that was deliberate the resources of outflow resistance in the conventional outflow pathway that's diseased in glaucoma.

Speaker Change: These two sequential mechanisms address all through a trabecular meshwork schlumpf can our collector channels. So competitively as we look out over the long term in a <unk> world.

Speaker Change: We think that omni offer surgeons.

Speaker Change: Reliable procedure that comprehensively addresses the conventional outflow pathway.

Speaker Change: Very helpful. Thanks, so much.

Speaker Change: Thanks.

Speaker Change: Thank you. Our next question comes from the line of David Saxon from Needham and company. Please go ahead.

Speaker Change: Hi, guys.

Paul already Matt This is Joseph foreign Kurt David.

Speaker Change: Thanks for taking our questions.

Speaker Change: So this might be a long one but just wanted to combine them. If you could maybe talk about in dry eye, if theres any way to quantify how many claims you've seen adjudicated and paid out at and maybe what's the next step of expanding that group of docs, who are submitting claims and then from the <unk>.

Speaker Change: Doctors or practices that have gotten tier care.

Speaker Change: <unk> paid out what are you seeing in terms of the air volumes stable to growing.

Speaker Change: Yes, and then I'll have a follow up.

Speaker Change: So I can start with that Matt feel free to jump in here. So far we've just seen a small volume of claims being paid were not going to quantify that at this stage, but it's been both commercial and Medicare payers that have had claims processed and they're each is an individual processing.

Speaker Change: Processing of a claim there is not a standardization and announced paid yet we are happy with the partners who are working with us to get these claims submitted and worked through the process. So we can establish coverage policy and it is a critical step in the process, but we're still early stage in that and.

Speaker Change: I would say, though that the conversations in general are very productive with the payers to leveraging that budget impact analysis as well as the Sahara RCT.

Speaker Change: And we have a compelling value proposition here, where we are having cost savings versus the standard of care and we havent RCT versus the standard of care. So we do look forward to getting that budget impact analysis published in the coming months and that will be important over time for everybody to see.

Speaker Change: See that data.

Speaker Change: And maybe the second part of that question was around provider utilization and just dovetailing on Ali's comments.

Speaker Change: Barry mentioned the discipline, so I want to reiterate her comments that we've seen incredible partnership from the care provider community and working with US is tremendous interest and enthusiasm in ensuring we're providing fair access to patients.

Speaker Change: Novel.

Speaker Change: Exciting intervention procedure intervention for dry eye, but as you can imagine.

Speaker Change: Not yet having received formal coverage.

Speaker Change: <unk> policies.

Speaker Change: The procedures of claims submitted or standardized payment being very judicious as we would expect but above all of us are very present for their partnership and enthusiasm and the fact that we're seeing that broadly.

Speaker Change: Across the US working as I said with both commercial payers and Medicare is very encouraging.

Speaker Change: And lastly on answer HERA.

Speaker Change: Current update.

Speaker Change: Very ambitious rigorous RCT two year RCT versus the standard of care prescription dry eye therapeutic as Ali mentioned, we completed phase one to six months versus Restasis and Thats published we completed the 12 months.

Speaker Change: Crossover arm.

Speaker Change: That's published.

Speaker Change: And then the last phase phase III the crossover patients from months 12 through month 24, which is designed to demonstrate to payers the durability of treatment effect for tier care and the need for re treatments.

Speaker Change: Excited to share that the last patient last visit completed last month.

Speaker Change: So that data the final data of the two year RCT.

Speaker Change: Is being analyzed reviewed soon to be drafted into a publication and submitted for publication. So that's the exciting development on this.

Speaker Change: Hi impact dry eye RCT Sahara two years.

Speaker Change: Okay. Thank you very much for all that color.

Speaker Change: And just maybe just one more on dry the.

Speaker Change: The performance in the quarter is there.

Speaker Change: You guys have any idea of maybe how much of the performance was driven by I guess stocking ahead of the price increase.

Speaker Change: Yeah sure. So obviously, we don't know exactly how much was associated with that but obviously, we saw significant interest in buying tier care smartly. It's before the price increase went into effect and Thats really a testament to the value of <unk> and how much.

Speaker Change: Providers really do want to continue doing tier care procedures and.

Speaker Change: I think some of those were stocking to be able to do cash pay procedures over the coming months before reimbursement is secured secured but.

Speaker Change: Really I think.

Speaker Change: We're trying to work with our customers to balance those needs versus the long term goal here of really a reimbursed tier care procedure, which we think is the highest value creation. So while we were happy to see the revenue really the value creation for us with tier care is associated with getting market access wins not necessarily.

Speaker Change: <unk> that.

Speaker Change: $1 5 million of revenue that we achieved in the quarter. So while we are happy to meet the needs of our customers. We really are heavily focused on market access.

Speaker Change: Sure Okay, absolutely well, thank you very much for taking our questions.

Speaker Change: Thank you again should you have a question please press <unk>.

Speaker Change: <unk> followed by the number one hour.

Our next question comes from the line of Joanne Wuensch from Citi. Please go ahead.

Speaker Change: Hey, guys. This is George on for Joanne. Thanks for taking our questions I guess first I kind of want to push back a little bit in terms of.

Speaker Change: Previous question on free cash flow.

Speaker Change: And I'll try to frame it in another way so.

Speaker Change: It sounds like you guys are spending a lot in terms of investing in re engaging with.

Speaker Change: Accounts, whether it's existing or prior accounts and then also really working hard on both.

Speaker Change: Just working through with the payers in terms of getting payer care reimbursement and then also kind of building out your data.

Speaker Change: All that said as we think about going forward. How are you able to balance all of that investment with being able to generate free cash flow positive and then.

Speaker Change: More so like what are the specific levers that you.

Speaker Change: You can pull to be able to continue to drive that free cash flow positive moving forward.

Speaker Change: Yes, sure happy to take that question and I mean, what I would comment is first of all I think we've shown good execution in this area, where we have been able to re allocate funds to the highest value areas of the business and reduce spend in other areas that werent generate.

Speaker Change: As high of a return for us so when we talk about our plans here that its more of that it's more of looking at where are we spending money and where is the right area for us to spend money and the highest value for us when we look across the business in terms of incremental spend is of course the chair.

Speaker Change: Our care expansion when we look at 2025, but still that will be incremental in nature in the sense that we will get regional win of these contracts and then we will put people in place in those areas as we get wins. So we will be doing this in a.

Speaker Change: Disciplined manner. We also will continue to invest in R&D continue to invest in our surgical glaucoma business, which we are very excited about.

Speaker Change: Yes, a standalone opportunity and how we can continue to partner with surgeons and we feel like we still have the proper amount of.

Speaker Change: Operating expenses in the business to allocate to these very critical initiative. So obviously, that's something we will have to continue to prove over time and again, we're not going to get into 2025 guidance today on spend levels, but we are in the process of finalizing our 2025 plans.

Speaker Change: Which includes that balance to look at revenue growth and investments for the future.

Yes, and maybe just in terms of account growth.

Speaker Change: <unk> re engagement and competitive re engagement, it's really about.

Speaker Change: B is driving efficiencies right and being as effective as we can so one of the things we talked about earlier, specifically as it relates to the surgical glaucoma side as we're moving the overhang and uncertainty.

Speaker Change: Of the LCD scenario, having clarity looking forward working with our organization and really driving targeted efforts across account reengagement and driving utilization and building what isn't really compelling standalone opportunity on both sides of our business and surgical glaucoma and ocular surface, we have exceptional sales professionals.

Speaker Change: And so continuing to show that they have the right tools to go out and do their jobs effectively is certainly of the.

Speaker Change: Most important to us, but as Alex said, we are absolutely prepared to continue to invest on a cadence that is supported by the performance and execution of the business. So from that standpoint, I feel like we're in the right place focus on the right things as we enter the year preparing for how we move into 2025.

Speaker Change: Okay. That's very helpful. Thank you for that and I guess.

Speaker Change: My other question would be just on the Standalone opportunity can you.

Speaker Change: <unk> us where you are in terms of like 2%.

Speaker Change: Revenues.

Speaker Change: Where that stands in terms of your Standalone opportunity and then as we look forward.

Speaker Change: The recent LCD is today.

Speaker Change: <unk> the way you think about how you're approaching your standalone or being more aggressive in that channel.

Speaker Change: Yes. It does the current date I'd say, we're still early days in the market development effort around Standalone look it's not just a matter of technology on advances of technology is really a paradigm shift in patient care and a movement toward earlier procedure intervention at every step along the care can.

Speaker Change: For glaucoma patients, we all know.

Speaker Change: One understand glaucoma is not a disease you cure you treat you manage and continue to try to preserve not just visual field, but really the elements of life and enjoyment for patients that are impacted by this.

Speaker Change: By this disease so.

Speaker Change: It's a market it takes time to develop one of the things that we referred to in the script, though is really being thoughtful we've already demonstrated we have the data through the trade data that shows the efficacy of omni. So this isn't an efficacy.

Speaker Change: With respect to our ability to treat and developed as seen on the market again, its really driving a paradigm shift in the continuum of care and so what's really exciting now as being more discreet and deliberate and looking at where along the patient care continuum, Ken we garner alignment in volume with.

Speaker Change: Physician.

Speaker Change: To help ensure that we have the greatest impact on patients and associated outcome and quality of life and so that's really the effort. We're doing again the company has been and will continue to be a markedly market leader in this segment and we're excited about what's in front of us in terms of our ability to continue to build out that market in a really meaningful and compelling way.

Speaker Change: Moving forward. However, it will take time not unlike the introduction of <unk> in combination with cataract surgery, It's really again, not just about the technology, but building.

Philosophy and the paradigm shift.

Speaker Change: Inpatient care.

Speaker Change: And just to add to Matt's comments on the clinical side, we're excited to have.

Speaker Change: Reviewed and analyzed real world outcomes from the Irish Registry American Academy of Ophthalmology is real World database partnered with Verona to mine Standalone outcome. So these are real surgeons real cases real patients.

Speaker Change: We've looked at three year up to three years standalone outcomes to surge and intervening on a standalone basis with long term outcomes going out to three years that data has been analyzed we're excited.

Speaker Change: Get the publication out into 2025 timeframe, so Matt and team can go and further develop the standalone markets of three year Standalone outcomes real world from the Irish registry coming hopefully in the.

Speaker Change: The first half of 2025 and.

Speaker Change: And there was I'm sorry, there was one last part of your question that I failed to respond to which is whether or not the LCD would have an impact on our strategy for stand alone. So we've already spoken to and highlighted that one of the outcomes of the LCD or elimination of the combination of mixed procedures.

One of the thing Thats really important to think about and I think it actually really accentuates our approach to Standalone is.

Speaker Change: Procedure by definition is youre doing an incision surgery solely for the purpose of treating glaucoma, which really emphasizes.

Speaker Change: And highlights the importance of efficacy and again one of the things we feel extremely confident in is not just the label and the indication for use of omni in standalone, but the demonstrated efficacy Paul just talked about the real world data with other clinical data in support of that and so while there is some impact with respect to the potential combination of <unk> therapy.

Speaker Change: This is a patient population in need and growing and so as we approach the market. We can do so with confidence knowing that Ami will be we believe the best solution that surgeons have to choose from based on the comprehensive efficacy. It provides.

Speaker Change: Got it that's really helpful. Thank you.

Speaker Change: Next question comes from the line of Gregg Moskowitz. Please go ahead.

Speaker Change: Great. This is nothing Cox on for Frank.

Speaker Change: Couple of question wondering if you can start with <unk>.

Speaker Change: And whether or not you think you could see that business can contribute in 2025, given the positive reimbursement.

Still in play for Goniotomy.

Speaker Change: Sure I can I can start there so.

Speaker Change: <unk> is small.

Speaker Change: Small portion of our total portfolio today, it's a good complementary product to omni for surgeons, who want to do a less comprehensive procedure and a less complicated procedure.

Speaker Change: It is not something that we see as a significant growth driver going out and to be the same size as omni for example in our business. So we think it's a nice complementary business line, but not something that we would say is is an inherent growth driver obviously.

Speaker Change: <unk> has a slightly higher <unk>.

Speaker Change: <unk> fee versus Canelo class.

Speaker Change: And there also are other goniotomy solutions that.

Speaker Change: That providers use but in general our business is really driven in surgical glaucoma based on our success with omni and <unk> is a smaller subset of that.

Speaker Change: Okay.

Speaker Change: Alright fair enough and then can you talk a bit about your longer term glaucoma pipeline any thoughts around therapeutic delivery.

Speaker Change: We've been we've been working on our surgical glaucoma pipeline for years, now and making good good progress we're going to be speaking publicly about it next year I think maybe you saw the announcement we've hired.

Executive Vice President of research and development Dr. <unk>.

Speaker Change: To help us efficiently and effectively.

Speaker Change: Advance, our robust pipeline and surgical glaucoma and dry eye over.

Speaker Change: Over the coming year or so.

Speaker Change: We are building the leading intervention will eye care company, we're in glaucoma and dry with omni in tier care today, but do you expect do you expect to learn about interventions from sustained release to other mixed approaches.

Speaker Change: Next year, we want to offer our eye care providers and surgeons technologies that allow them to intervene procedurally and a.

Speaker Change: Safer more efficacious more user friendly manner user friendly to both the eicher provider as well as the patient.

Speaker Change: From first diagnosis of glaucoma, all the way to end stage disease. So we're excited about the work we're doing there. We're excited about the new leadership, who is going to help us develop this pipeline and case managed much broader project R&D projects that companies like AML prior to its acquisition.

Speaker Change: By Johnson <unk> Johnson.

Speaker Change: I'm excited to share with you more details next year, but just know that we're making very good progress and we're very encouraged by what we're seeing.

Speaker Change: Perfect. Thanks, guys.

Speaker Change: Our last question comes from the line of Tom <unk> from Stifel. Please go ahead.

Speaker Change: Okay.

Speaker Change: Great. Thanks, everyone. Thanks for taking the questions.

Speaker Change: First wanted to tier care.

Speaker Change: Want to ask about how we should be thinking about what comes on the other side of of payer wins.

Speaker Change: Or even right before in terms of investments.

Speaker Change: In preparation, maybe if you could discuss.

Speaker Change: What that will look like before <unk> after payer wins and sort of how quickly that can ramp from the perspective of the timing around revenue contribution and hopefully that makes sense.

Yes, sure. So first of all what I would say is we already have a small team of tier care.

Speaker Change: <unk> and marketing team that have been working on developing our overall strategy and supporting the cash pay business for many years. So we have a base of infrastructure. That's already built into our numbers that you see and we've also had over 1000 customers by care care hubs and do 60.

Speaker Change: <unk> thousand procedures. So we don't start from ground zero, when we get a payer when we already have established relationships with the customers that are are excited about the potential for us to get these reimbursement wins. So from that perspective, I do think that we will see.

Speaker Change: Success quickly now what will depend is.

Speaker Change: What size of the payer when how good is the reimbursement all of those dynamics are unknown at this point, so we can't give certainty or clarity around what exactly that ramp looks like but what I would say is that on the investment side, the incremental investment side will be realm.

Speaker Change: Typically small to start and as we see success as we add areas that will come at the same time right. After a payer when it will not come in advance of those payer wins, we have the infrastructure, we need to execute winning those payer contracts already built into the base business today.

Speaker Change: Okay.

Speaker Change: Got it that's great color I wouldn't I wouldn't I would I would.

Speaker Change: I just want to emphasize what Ali mentioned on on the providers out there.

Speaker Change: It is an interventional procedure. It takes it takes a lot of training a lot of effort a lot of education and we've been at it for years, we've had a team out there doing great work for years in a cash pay environment, recognizing that's not the optimal way to create value, but we got a lot out of that cash pay expire.

Speaker Change: <unk> in terms of perfecting the technology.

Speaker Change: Understanding how it might compare to market, leading therapeutics like restasis executing that Sahara RCT with that's pretty.

Speaker Change: Obviously with confidence.

Speaker Change: So training training 1000, eyecare providers on an intervention procedure and having those folks out there now with smart hubs and understanding how to how to deliver the procedure for their patients is something that.

Speaker Change: Normally under under a launch from ground zero as Ali mentioned would take a lot of time and a lot of investment that's already that's already been done so theres a lot more work to do commercially obviously after we get payer wins, but theres a lot of work that's been done and a lot of IQ or providers that are waiting for the moment that we get that first irwin it'll be exciting.

Paul Badawi: Super helpful. Thanks, Paul.

Speaker Change: And I should have apologized and intensive.

Speaker Change: Any of these questions were asked jumping between calls, but my second question is just on surgical glaucoma.

Speaker Change: Obviously, a lot of dynamics.

Speaker Change: Shifting pretty quickly between device intensive the new Lcd's precluding stacking competition.

Speaker Change: So I wanted to ask about kind of your double digit 2025 growth target.

Speaker Change: Maybe if you could discuss.

Speaker Change: Sort of how your level of confidence in achieving that compares to I think it was maybe a couple of quarters ago. When this was initially conveyed.

Speaker Change: Whats the latest on kind of your conviction in that target.

Speaker Change: Yes, thanks, Tom So at a high level, we do expect to return to growth in 2025, we won't be providing specifics on that 2025 plan. We're still obviously working through all of those impacts and understanding that areas that we can focus on to enhance our growth.

Speaker Change: File over time, and also working through that dry eye launch plan and potential scenarios on on market access wins. So today sitting in November of 'twenty four we're not prepared to give specifics around what that growth plan will look like or give any specific.

Speaker Change: Target, but we'll come back at a later date once we have our plan fully vetted and provide an update to that.

Speaker Change: Got it Sir Thanks Ali.

Speaker Change: That concludes our Q&A session I will now turn the conference back over to Paul Donnelly for final closing comments.

Paul Donnelly: Thank you for attending today's call and we appreciate your interest in <unk> Sciences, and we look forward to updating you on our progress in the future. Thank you.

Paul Donnelly: That concludes our conference call for today you may now disconnect. Thank you.

Speaker Change: Please wait the conference will begin shortly.

Sure.

Paul Donnelly: Yes.

Paul Donnelly: [music].

Paul Donnelly: Yes.

Paul Donnelly: Yes.

Paul Donnelly: [music].

Paul Donnelly: [music].

Paul Donnelly: [music].