Executive Summary / Key Takeaways

• Sight Sciences is strategically adapting to a dynamic eye care landscape, pivoting towards a financially disciplined, growth-oriented model focused on interventional glaucoma and dry eye treatments.
• Despite headwinds from new Medicare reimbursement restrictions on Minimally Invasive Glaucoma Surgery (MIGS), the Surgical Glaucoma segment demonstrated resilience and sequential growth in Q2 2025, driven by OMNI's comprehensive technology and targeted market development.
• The Dry Eye segment is undergoing a strategic shift to unlock reimbursed market access for TearCare, supported by compelling 24-month clinical durability and cost-utility data, positioning it for significant future growth.
• The company is actively mitigating tariff impacts through manufacturing diversification and has significantly improved cash flow, aiming for break-even without additional equity.
• Key factors to watch include the timing of TearCare reimbursement decisions, the effectiveness of new OMNIEdge technology, and the outcome of ongoing intellectual property litigation.

Setting the Scene: A New Vision for Eye Care

Sight Sciences, Inc. (NASDAQ:SGHT) is an ophthalmic medical device company dedicated to transforming eye care through innovative, interventional technologies. Founded in 2010, the Menlo Park, California-based firm has consistently pursued a mission to procedurally elevate standards of care, empowering eye care providers (ECPs) to preserve and restore patients' sight. Its core business is segmented into Surgical Glaucoma and Dry Eye, addressing two of the most prevalent and underserved eye diseases globally.

The broader eye care market is undergoing a significant paradigm shift towards interventional treatments, moving away from sole reliance on medical management. This trend is driven by a growing understanding of disease physiology and the demand for more effective, durable, and patient-friendly procedural solutions. Glaucoma, the world's leading cause of irreversible blindness, affects an estimated 83 million patients worldwide, while Meibomian Gland Disease (MGD), the primary cause of dry eye, impacts 11-13 million U.S. patients. These vast markets present substantial opportunities for companies like Sight Sciences that can deliver clinically differentiated, interventional technologies.

Technological Edge: OMNI and TearCare at the Forefront

Sight Sciences' competitive advantage is deeply rooted in its proprietary technology, designed for precision and comprehensive treatment. In Surgical Glaucoma, the OMNI Surgical System stands as an implant-free, minimally invasive glaucoma surgery (MIGS) technology. OMNI is indicated to reduce intraocular pressure (IOP) in adult patients with primary open-angle glaucoma. Its unique design allows surgeons to perform a comprehensive procedure, addressing all three points of resistance in the conventional outflow pathway: the trabecular meshwork, Schlemm's canal, and collector channels. This multi-mechanistic approach positions OMNI as a highly competitive offering, particularly in a "one MIGS world" where surgeons must choose a single device.

The company's commitment to innovation is evident with the recent launch of OMNIEdge in Q1 2025. This next-generation system incorporates TruSync technology, a proprietary motion-synchronized viscoelastic delivery mechanism. This innovation enables predictable and reproducible elastic deployment along every 3:00 hour of Schlemm's canal, designed to deliver significantly more viscodilation than prior OMNI versions while maintaining the platform's trusted consistency and safety. OMNIEdge aims to accommodate diverse surgeon preferences and evolving patient needs, driving further improvements in OMNI utilization and solidifying its leadership in the implant-free MIGS category. The SION Surgical Instrument, a bladeless device for excising trabecular meshwork, complements the OMNI portfolio, offering a more straightforward option for specific patient profiles.

For Dry Eye, the TearCare System is a proprietary, interventional device targeting evaporative dry eye disease due to MGD. TearCare is designed to melt and facilitate the comprehensive removal of meibomian gland obstructions, restoring gland functionality and healthy oil production. This technology directly addresses the root cause of MGD, a significant differentiator from traditional prescription and over-the-counter eye drops that primarily focus on increasing tear volume. The company's robust R&D pipeline, now bolstered by the appointment of Dr. M.K. Raheja as EVP, R&D, is focused on continuous iterative advancements in OMNI and further developing interventional solutions for dry eye, including potential sustained-release options.

Competitive Landscape: Niche Innovation Against Giants

Sight Sciences operates in a competitive ophthalmic device market, contending with larger, diversified players such as Alcon (ALC), Johnson & Johnson (JNJ) Vision Care, and Bausch + Lomb (BLCO). These industry giants possess vast distribution networks, extensive R&D budgets, and broad product portfolios. Alcon, for instance, offers comprehensive solutions across multiple eye conditions, leveraging its scale for market positioning and bundled offerings. Johnson & Johnson's Vision Care benefits from superior brand recognition and robust R&D, while Bausch + Lomb brings specialized expertise and established relationships with ECPs.

Against these formidable rivals, Sight Sciences carves out a niche through specialized innovation and agility. OMNI's comprehensive, implant-free procedure offers a distinct advantage, particularly as Medicare restrictions now limit surgeons to a single MIGS device in combination with cataract surgery. Management believes OMNI's efficacy and usability make it a compelling choice, noting that the company is "winning at a rate higher than 50%" in procedures where OMNI was previously combined with another MIGS. This suggests effective competitive counter-selling and a strong product-market fit.

In the dry eye space, TearCare's interventional approach directly addresses the root cause of MGD, differentiating it from the drug-centric offerings of many competitors. While larger players might offer broader DED solutions, TearCare's clinical evidence, particularly the 24-month SAHARA RCT and cost-utility analysis, provides a strong foundation for market access. Sight Sciences' smaller scale, however, presents vulnerabilities, potentially leading to higher costs per unit and less diversified revenue streams compared to its larger counterparts. The company's strategic response includes diversifying its manufacturing base to mitigate tariff impacts and focusing on targeted market development for its differentiated technologies.

Financial Performance: Resilience Amidst Transition

Sight Sciences' financial performance in the first half of 2025 reflects a period of strategic transition and adaptation to a dynamic market. For the second quarter ended June 30, 2025, total revenue was $19.6 million, an 8.5% decrease year-over-year. Surgical Glaucoma revenue, at $19.2 million, decreased 5.0% year-over-year but notably grew 12.0% sequentially from Q1 2025. This sequential rebound, which outperformed expectations, was driven by a record high in ordering accounts (up 6% sequentially and 4% year-over-year) and a 4% sequential increase in procedural utilization, partially offset by the impact of Medicare Local Coverage Determinations (LCDs).

The Dry Eye segment's revenue was $0.3 million in Q2 2025, a significant 70.4% decrease year-over-year. This decline is an intentional outcome of the company's strategic pivot away from a cash-pay model towards establishing reimbursed market access for TearCare, following a price increase implemented in Q4 2024.

Gross profit for Q2 2025 was $16.6 million, resulting in a gross margin of 84.8%, slightly down from 85.8% in the prior year. Surgical Glaucoma gross margin was 85.6%, impacted by higher overhead costs per unit, tariff costs ($0.1 million in Q2 2025), and product sales mix. Dry Eye gross margin was 38.4% in Q2 2025, affected by sales mix and higher overhead per unit due to lower volumes, though the six-month YTD gross margin for Dry Eye improved to 55.8% from 44.4% in the prior year, primarily due to the SmartLids price increase.

Operating expenses demonstrated disciplined management, with total operating expenses decreasing 9% to $28.3 million in Q2 2025, largely due to lower legal fees. Adjusted operating expenses were $24.4 million, an 8% decrease. The company's net loss for Q2 2025 was $11.9 million, or $0.23 per share, an improvement from a $12.3 million net loss ($0.25 per share) in Q2 2024.

Liquidity and Path to Break-Even

Sight Sciences maintains a solid liquidity position, with $101.5 million in cash and cash equivalents as of June 30, 2025, and $40 million in outstanding debt under the Hercules Loan Agreement.

The company has significantly improved its cash flow management, reducing cash used in operating activities to $7.3 million in Q2 2025, an improvement from $9.1 million in the prior year. This operational discipline, including substantial decreases in accounts receivable and inventory, underpins management's confidence in achieving cash flow break-even without the need for additional equity capital. While Tranche 2 of the Hercules Loan Agreement ($10 million) and an interest-only period extension were not achieved due to unmet performance milestones, the company remains in compliance with all debt covenants.

Outlook and Strategic Initiatives for 2025

Management has raised its full year 2025 revenue guidance to $72 million to $76 million, up from the prior range of $70 million to $75 million, reflecting stronger-than-anticipated performance in Surgical Glaucoma. This guidance assumes approximately $1 million from the Dry Eye segment and explicitly does not factor in any positive reimbursement coverage or payment decisions for TearCare in 2025, highlighting a conservative approach to this key catalyst.

For Q3 2025, Surgical Glaucoma revenue is expected to be down by mid-single digits year-over-year, representing the toughest comparable quarter due to the high percentage of stacked MIGS procedures performed before the LCD restrictions. However, the implied outlook for Q4 2025 suggests a potential return to slight year-over-year growth as the company laps the initial impact of these restrictions.

Adjusted operating expenses for full year 2025 are reaffirmed at $101 million to $105 million, representing a modest 0% to 4% increase over 2024. This disciplined spending includes strategic investments in pseudophakic standalone Surgical Glaucoma market development, TearCare market access, and focused R&D projects. Notably, this guidance does not assume an expansion of the commercial dry eye team, indicating a phased investment strategy tied to reimbursement wins.

Tariffs remain a consideration, with the Surgical Glaucoma segment's cost of goods sold expected to increase by $1 million to $1.5 million for full year 2025, assuming a 30% China tariff rate. To mitigate this, Sight Sciences is establishing new third-party manufacturing facilities outside of China, with OMNIEdge production expected to begin in Q1 2026, followed by other product lines.

Risks and Challenges on the Horizon

Several key risks could impact Sight Sciences' trajectory. The Medicare LCDs restricting multiple MIGS procedures continue to be a headwind for Surgical Glaucoma revenue, forcing surgeons to choose a single device and intensifying competition. While OMNI's comprehensive profile is a differentiator, the market adjustment period is ongoing. The company was also disappointed that CPT code 66174 (OMNI procedures) did not receive device-intensive status for 2025, impacting Medicare payment in Ambulatory Surgery Centers (ASCs), though efforts to pursue this status continue.

For TearCare, the timing and scope of reimbursement decisions remain uncertain. While management expresses high conviction that reimbursement is a "when, not if," delays could prolong the period of modest Dry Eye revenue. The ongoing patent infringement litigation against Alcon, despite a $34 million jury verdict in Sight Sciences' favor, faces significant uncertainty. Alcon's recent petitions for ex parte reexaminations challenging the validity of the asserted patents could materially and adversely impact the verdict, including the ability to collect past damages and ongoing royalties, potentially vacating the judgment. This legal battle adds a layer of risk to the company's financial outlook.

Conclusion

Sight Sciences stands at a pivotal juncture, strategically adapting to a dynamic eye care market while leveraging its differentiated interventional technologies. The company's resilience in its Surgical Glaucoma segment, marked by sequential growth and strategic market development for OMNIEdge and pseudophakic standalone procedures, demonstrates its ability to execute effectively amidst reimbursement shifts. Concurrently, its methodical pursuit of reimbursed market access for TearCare, backed by robust clinical and economic data, positions it for a potentially transformative growth catalyst in the dry eye market.

While challenges such as MIGS reimbursement restrictions, tariff impacts, and ongoing intellectual property litigation introduce uncertainty, Sight Sciences' disciplined financial management and clear strategic roadmap provide a compelling investment narrative. The company's commitment to innovation, evidenced by its pipeline and recent leadership hires, coupled with its focus on achieving cash flow break-even, underscores its long-term potential to establish itself as a leader in interventional eye care. Investors should closely monitor the progress of TearCare reimbursement decisions and the resolution of the Alcon litigation as critical indicators of future value creation.