Q3 2024 Earnings Summary
- Upcoming Reimbursement Wins for TearCare Could Drive Significant Growth: The company is progressing towards achieving equitable market access for their TearCare technology, supported by strong clinical data, including the recently completed two-year SAHARA RCT. They believe that once reimbursement is secured, they can quickly activate over 1,000 eye care providers who have invested in TearCare hubs, potentially leading to substantial revenue growth in 2025.
- Confidence in Returning to Growth in 2025 with Surgical Glaucoma Segment: Despite current challenges, the company expects to return to growth in 2025, focusing on improvements in their surgical glaucoma business. They have a targeted plan to enhance their growth profile and have seen early improvements in the business, expecting higher utilization in the fourth quarter compared to the third quarter.
- Improved Financial Discipline and Cash Flow Management: The company demonstrated improved financial performance by generating $0.4 million of cash in the quarter, a significant improvement compared to the $10 million of cash used in the third quarter of 2023. They are confident in their ability to manage investments and continue reducing cash burn over time, aiming to achieve cash flow breakeven without needing additional equity capital.
- Uncertainty in Surgical Glaucoma Growth: Management is not providing specific guidance on the 2025 growth plan for the surgical glaucoma segment, indicating potential challenges in resuming strong growth amid evolving market dynamics and reimbursement headwinds from recent LCD changes.
- Sustainability of Free Cash Flow Generation: The company's free cash flow positivity in Q3 was partly due to one-time reductions in working capital, specifically accounts receivable and inventory. Management cautions that future cash generation may not be sustained at the same level as working capital is expected to grow with revenue, potentially impacting future free cash flow.
- Dry Eye Segment Revenue Concerns: The increase in dry eye revenue in Q3 was partially driven by customers stocking up on TearCare Smart Lids ahead of a price increase, suggesting that future revenues may not maintain the same levels. Additionally, the reimbursement landscape for TearCare is still in early stages, with a small volume of claims being paid and uncertainty around standardized payment amounts, which may affect future growth in this segment.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Full-Year 2024 Revenue | FY 2024 | $81 million to $83 million | $81 million to $83 million | no change |
Dry Eye Revenue for Q4 2024 | Q4 2024 | no prior guidance | Expected to be less than $0.5 million | no prior guidance |
Full-Year 2024 Adjusted Operating Expenses | FY 2024 | $107 million to $109 million | $104 million to $106 million | lowered |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
TearCare reimbursement strategies and market access | In Q2, Q1, and Q4 2023 the company emphasized achieving payer coverage through robust clinical evidence (SAHARA RCT, budget impact analyses) and a strategic shift from cash‐pay to market access ( , , ). | In Q3 2024, the focus remains on leveraging clinical data, existing provider infrastructure (over 1,000 trained providers and 60,000 procedures) and incremental sales/marketing investments as reimbursement wins are pursued ( ). | Consistent emphasis with an evolving, more detailed strategy that builds on prior successes and maintains cautious optimism about payer wins. |
Surgical glaucoma growth and OMNI system utilization | Across Q2, Q1, and Q4 2023 the discussions centered on growing revenue through increased utilization, surgeon training, and reengaging accounts amid LCD uncertainty ( , , ). | Q3 2024 highlights double-digit revenue growth expectations while noting short-term headwinds from LCD restrictions on combination MIGS procedures and a sequential decrease in OMNI utilization ( ). | A consistent focus on growth, now nuanced by recognition of LCD challenges that impose short‐term restraint amid long‐term optimism. |
Financial discipline, cash flow management, and sustainable free cash flow | Prior periods (Q2, Q1, and Q4 2023) detailed significant reductions in cash burn, disciplined expense management, and milestones like reduced cash usage and secured credit facilities ( , , ). | Q3 2024 reinforces improved cash generation (with $0.4M cash produced), continued working capital improvements, and progress toward achieving cash flow breakeven without additional equity ( ). | Steady improvement and a consistent disciplined approach, reinforcing confidence in a sustainable free cash flow path. |
Dry eye revenue dynamics and pricing impact | In Q2, Q1, and Q4 2023, Dry Eye revenue faced significant declines due to a strategic shift and price increases—with reduced new account adds and lower gross margins—but with expectations for a recovery in 2025 ( , , ). | In Q3 2024, revenue is slightly down (4% decline YoY) with evidence of customer stocking ahead of the October 1 price increase; near‐term cash-pay volume is expected to drop in Q4 2024, with long‐term growth tied to market access wins ( ). | A continued strategic pivot where short‐term revenue and margin pressures coexist with plans for rebound through improved reimbursement and market access. |
Innovative product development pipeline | Q1 2024 provided explicit discussion of products like an intracanalicular scaffold (Helix stent) and sustained release treatments, signaling early-stage innovations ( ). Q2 and Q4 2023 did not mention these innovations. | Q3 2024 mentions progress in a longer-term glaucoma pipeline (including sustained release treatments) alongside the appointment of a new EVP of R&D to drive future innovation ( ). | While explicit detail has lessened compared to Q1, the pipeline remains a strategic priority with enhanced R&D leadership underscoring its long-term impact. |
Guidance and forecasting uncertainty for 2025 | Q2 expressed confidence in double-digit growth despite withholding specific guidance ( ); Q1 hinted at double-digit growth in late 2024/2025 ( ); Q4 provided no specific forecasts ( ). | Q3 2024 states that while growth is expected in 2025, no concrete guidance or targets have been set yet, reflecting ongoing review of strategic opportunities ( ). | Consistent uncertainty remains regarding 2025 forecasts, balanced by cautious optimism and a focus on refining growth targets. |
Customer account expansion and retention trends | Q1 stressed reengagement of lost accounts and increasing utilization, Q2 highlighted a 5% increase in ordering accounts and ongoing surgeon training, and Q4 showed strong reengagement efforts amid LCD uncertainty ( , , ). | Q3 2024 continues the effort to reengage accounts affected by previous LCD uncertainty and emphasizes training new surgeons and optimizing the sales force to boost utilization ( ). | A consistently prioritized area with sustained efforts on account reengagement and retention, fostering an optimistic long-term outlook. |
Reimbursement policy risks and potential LCD/CPT changes affecting the OMNI system | Q1 discussed LCD uncertainty and efforts to reengage accounts; Q2 focused on proposed favorable changes including device-intensive status proposals; Q4 detailed proactive MAC engagement and the withdrawal of adverse LCDs ( , , ). | Q3 2024 highlights new challenges with LCD restrictions limiting combination MIGS procedures and disappointment over not receiving device-intensive status, though long-term recovery plans are in place ( ). | An evolving risk management landscape: earlier optimism is now tempered by new LCD restrictions, yet the company remains confident in strategic adjustments for long-term viability. |
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Cash Flow and Breakeven Expectations
Q: Walk us through expectations for breakeven and free cash flow positive next year.
A: Alison stated they are proud of reducing cash burn year-to-date to under $20 million, compared to over $40 million burned in the same period of 2023. They've been diligent with expense management and working capital. In Q3, they reduced working capital (accounts receivable and inventory) by almost $9 million. While they won't provide specific cash burn or breakeven guidance, they are focusing on investments like TearCare market access and pipeline activities, taking a balanced approach and expecting to continue reducing burn over time. -
2025 Growth Target Conviction
Q: What's your conviction in achieving double-digit 2025 growth target amid shifting dynamics?
A: Alison said they expect to return to growth in 2025 but won't provide specifics at this time. They're working through the impacts of various factors and focusing on areas to enhance growth, including the dry eye launch plan and potential market access wins. They will update once their plan is fully vetted. -
Impact of Reimbursement Changes
Q: How are reimbursement changes, like LCDs and device intensive calculations, affecting your business?
A: Matthew explained they don't have details on why OMNI fell below the 30% threshold for device intensive classification. They believe OMNI meets all criteria and are working to ensure accurate billing data is collected. Alison noted they're seeing some impact from restrictions on multiple MIGS procedures but lack precise data on how much is specific to OMNI. They're proactively discussing plans with customers and feel confident due to OMNI's comprehensive nature. -
TearCare Reimbursement Progress
Q: Can you update us on TearCare reimbursement claims and SAHARA RCT progress?
A: Alison mentioned they've seen a small volume of claims paid, with both commercial and Medicare payers processing claims, but amounts aren't standardized yet. They're working with partners to establish coverage policies and leveraging their budget impact analysis and SAHARA RCT data. Paul added that the final data from the 2-year SAHARA RCT is being analyzed and will be submitted for publication soon, demonstrating the durability of TearCare's treatment effect. -
OMNI's Competitive Positioning
Q: How does OMNI's comprehensive nature position it competitively?
A: Paul emphasized that in a "one MIGS world," OMNI offers multiple mechanisms of action in a single comprehensive procedure. It's indicated to perform canaloplasty followed by trabeculotomy, addressing three sources of outflow resistance in glaucoma. They believe this makes OMNI a reliable procedure that comprehensively addresses the conventional outflow pathway, benefiting from the clarity provided by the finalization of LCDs. -
Balancing Investment with Cash Flow Generation
Q: How are you balancing investments with generating positive free cash flow?
A: Alison stated they've executed well in reallocating funds to high-value areas and reducing spend elsewhere. The highest value in terms of incremental spend is the TearCare expansion in 2025, which will be incremental and disciplined, aligning investments with regional wins. They'll continue investing in R&D and the surgical glaucoma business while maintaining appropriate operating expenses. -
Stand-Alone Opportunity and LCD Impact
Q: What's the status of the stand-alone opportunity, and how do recent LCDs affect your strategy?
A: Matthew said they're in early days of market development for stand-alone procedures, which involve a paradigm shift in patient care towards earlier intervention. The elimination of combination MIGS procedures by LCDs highlights the importance of efficacy in stand-alone surgeries. They feel confident in OMNI's demonstrated efficacy and believe it is the best solution for surgeons based on its comprehensive efficacy. Paul added that real-world data from the IRIS registry on up to 3-year stand-alone outcomes will be published in the first half of 2025. -
Glaucoma Pipeline Development
Q: Can you discuss your longer-term glaucoma pipeline and thoughts on therapeutic delivery?
A: Paul shared that they've been working on their surgical glaucoma pipeline for years and are making good progress. They've hired Dr. M.K. Raheja as EVP of R&D to advance their robust pipeline in surgical glaucoma and dry eye. They aim to offer technologies that allow eye care providers to intervene procedurally in safer, more user-friendly ways, from first diagnosis to end-stage disease. They plan to share more details next year. -
Dry Eye Performance and Stocking Impact
Q: How much of dry eye performance was driven by stocking ahead of the price increase?
A: Alison acknowledged they don't know exactly how much was due to stocking but saw significant interest in buying TearCare smart lids before the price increase. This reflects the value of TearCare and the desire of providers to continue procedures. Some were stocking to perform cash-pay procedures over the coming months before reimbursement is secured. Their focus remains on achieving market access wins rather than the $1.5 million in revenue achieved in the quarter. -
SiOn Business Outlook
Q: Do you think the SiOn business can contribute in 2025 given positive reimbursement for goniotomy?
A: Alison explained that SiOn is a small portion of their portfolio and a complementary product to OMNI for less comprehensive procedures. They don't see it as a significant growth driver going forward. Their business is driven by the success of OMNI, with SiOn being a smaller subset. -
TearCare Investments Post Payer Wins
Q: How should we think about investments before and after payer wins for TearCare?
A: Alison stated they already have a small TearCare sales and marketing team and established relationships with over 1,000 customers who've performed 60,000 procedures. They expect success quickly after payer wins, but the ramp depends on the size of the win and reimbursement levels. Incremental investments will be relatively small to start and will come immediately after payer wins, not before, as they already have the necessary infrastructure in place.