Executive Summary / Key Takeaways

• Reimbursement Breakthrough for TearCare: Two Medicare Administrative Contractors established jurisdiction-wide pricing at $1,142 per procedure effective January 1, 2025, covering 10.4 million Medicare lives, potentially unlocking a $3 billion interventional dry eye market that has been inaccessible due to coverage gaps.

• Surgical Glaucoma Stabilizing Amid Headwinds: Despite Medicare LCD restrictions that eliminated coverage for multiple MIGS procedures combined with cataract surgery starting Q4 2024, the segment returned to 5.8% year-over-year growth in Q3 2025, driven by OMNI Edge launch and expanded UnitedHealthcare coverage effective October 2025.

• Aggressive Operational Restructuring: A 20% reduction in force in August 2025, combined with lowered operating expense guidance to $90-92 million, demonstrates management's commitment to achieving cash flow break-even without additional equity dilution, though this creates execution risk during a critical growth phase.

• Manufacturing and Tariff Mitigation: With $1-1.5 million in expected tariff exposure for 2025, the company is diversifying supply chains outside China starting Q1 2026, addressing a structural cost disadvantage that has compressed gross margins and created competitive pressure.

• Critical Execution Period Ahead: Q4 2025 and 2026 represent a make-or-break window to convert reimbursement wins into commercial traction, with management guiding for Dry Eye revenue of just $0.5-1 million in Q4, highlighting the gap between pricing establishment and actual adoption.

Setting the Scene: A Two-Segment Ophthalmic Device Specialist

Sight Sciences, incorporated in Delaware in 2010 and headquartered in Menlo Park, California, has built its business around a simple premise: interventional procedures can elevate the standard of care for prevalent eye diseases better than pharmaceutical alternatives. The company operates through two distinct segments that target different points in the ophthalmic treatment continuum. Surgical Glaucoma, representing the vast majority of revenue, offers the OMNI Surgical System family and SION Surgical Instrument for minimally invasive glaucoma surgery (MIGS) . Dry Eye, a nascent but potentially transformative segment, provides the TearCare System for meibomian gland dysfunction.

The business model relies on a highly involved direct sales force that educates surgeons and eyecare providers, differentiating through intensive training and customer service rather than pure product features. This approach targets ambulatory surgery centers (ASCs), hospital outpatient departments, and eyecare facilities where procedures are reimbursed by Medicare or private payors. Through September 30, 2025, the company has achieved over 350,000 estimated uses of its Surgical Glaucoma products across more than 2,200 U.S. and European facilities, while TearCare has been used over 70,000 times in more than 1,500 U.S. eyecare facilities.

Sight Sciences occupies a challenging position in the ophthalmic device landscape. The MIGS market features dominant players like Glaukos Corporation with its established iStent franchise and Alcon Inc. with the Hydrus Microstent, while the dry eye market includes pharmaceutical giants like Bausch + Lomb with prescription drops and device competitors like Alcon's iLux. This competitive context matters because it shapes every strategic decision: Sight Sciences must differentiate through technology and clinical data while navigating reimbursement hurdles that larger competitors can more easily absorb.

The company has faced significant external pressures over the past two years. Patent infringement litigation against Ivantis and Alcon, while resulting in a $34 million jury verdict in April 2024, remains subject to appeal and ex parte reexamination proceedings that could invalidate key claims. More critically, Medicare Local Coverage Determinations implemented in Q4 2024 restricted coverage for multiple MIGS procedures combined with cataract surgery, creating an industry-wide headwind that management estimates impacted approximately 15% of total MIGS codes billed. These challenges have forced a strategic pivot toward pseudophakic standalone procedures and intensified the focus on securing reimbursed market access for TearCare.

Technology, Products, and Strategic Differentiation

Surgical Glaucoma: Comprehensive Outflow Restoration

The OMNI Surgical System's core technological advantage lies in its ability to access three distinct outflow pathways—trabecular meshwork, Schlemm's canal, and collector channels—in a single, implant-free procedure. This comprehensive approach differs from competitors like Glaukos' iStent, which places a permanent stent at a single point, or Alcon's Hydrus, which provides scaffold support along a portion of the canal. The clinical implication is meaningful: OMNI can address the entire conventional outflow pathway, potentially providing more durable intraocular pressure (IOP) reduction for patients with varying disease severity.

The March 2025 launch of OMNI Edge, featuring TruSync technology with motion-synchronized viscoelastic delivery, represents an evolution designed to meet diverse surgeon preferences and improve procedure consistency. Priced at a premium to OMNI Ergo, Edge incorporates predictable and reproducible viscodilation along Schlemm's canal while delivering significantly more viscodilation than prior systems. This innovation matters because it addresses a key barrier to adoption: procedure variability. By standardizing the viscoelastic delivery mechanism, Edge reduces the learning curve and potentially improves outcomes, supporting higher average selling prices and competitive positioning against more established devices.

The SION Surgical Instrument, a bladeless, manually operated device for excising trabecular meshwork, complements the OMNI portfolio by offering surgeons a alternative for specific clinical scenarios. While representing a smaller portion of revenue, SION diversifies the product line and provides a entry point for surgeons who prefer manual techniques.

Dry Eye: Reimbursed Interventional Therapy

TearCare's technological differentiation centers on its wearable, open-eye design that delivers targeted thermal pulsation to melt meibomian gland obstructions while allowing natural blinking. This approach contrasts with Alcon's iLux, which requires manual expression, and pharmaceutical alternatives like Bausch + Lomb's MIEBO drops that treat symptoms rather than underlying gland dysfunction. The 24-month SAHARA RCT results, published in Q2 2025, demonstrated durability of treatment effect through 24 months, with mean signs and symptoms remaining statistically significantly better than baseline. A cost utility analysis showed TearCare's cost-effectiveness compared to cyclosporine, providing the clinical and economic evidence needed to support reimbursement.

The October 2025 establishment of jurisdiction-wide pricing by Novitas Solutions and First Coast Service Option represents a watershed moment. The $1,142 payment rate for CPT code 0563T , effective retroactively to January 1, 2025, covers an estimated 10.4 million Medicare lives and provides a benchmark for negotiations with other Medicare Administrative Contractors (MACs) and commercial payers. This transforms TearCare from a cash-pay procedure with limited adoption to a reimbursed therapy with addressable market scale. The company estimates 6,500 potential eye care providers nationwide, with an existing footprint of approximately 200 providers in the covered jurisdictions who have previously purchased SmartHubs.

R&D and Manufacturing Strategy

Sight Sciences' R&D investments are evident in the OMNI Edge development and SAHARA study publication. This strategy reflects the reality that in ophthalmic devices, payer coverage often matters more than technical specifications.

The manufacturing strategy addresses a critical vulnerability: concentration in China. With most OMNI, SION, and TearCare SmartLids produced and assembled in China, the company faces 30% tariff rates that increased Surgical Glaucoma cost of goods sold by $0.6 million in the first nine months of 2025. The plan to establish third-party manufacturing outside China, starting with OMNI Edge and TearCare SmartLids in Q1 2026, mitigates this risk but creates near-term margin pressure and supply chain complexity. Additional manufacturing locations also face tariffs of 15-19%, meaning the solution isn't tariff elimination but diversification and optimization.

Financial Performance & Segment Dynamics

Q3 2025 Results: Mixed Signals

Third quarter 2025 revenue totaled $19.9 million, comprising $19.7 million from Surgical Glaucoma, which saw a 5.8% year-over-year increase, and $0.2 million from Dry Eye, which experienced an 87.7% decline. The Surgical Glaucoma growth, while modest, marked a return to positive territory after several quarters of decline, driven by increased OMNI and SION units sold and higher average selling prices. Ordering accounts reached a record high, up 2% sequentially and 8% year-over-year, while utilization remained flat sequentially against typical seasonal declines. This performance suggests the company's commercial initiatives—educating surgeons on earlier intervention, engaging accounts on reimbursement, and competitive counter-selling—are gaining traction despite LCD headwinds.

The Dry Eye collapse reflects the strategic decision to implement a price increase on October 1, 2024, to establish value for reimbursement discussions. This materially reduced demand through Q3 2025 as the company focused on achieving reimbursed market access rather than volume growth. While painful in the short term, this trade-off was necessary to create a sustainable commercial model. The Q3 2025 Dry Eye gross margin of 37.8%, down from 47.7% in the prior year, resulted from higher overhead costs per unit due to lower volumes, partially offset by higher average selling prices.

Margin Analysis: Tariff and Mix Pressures

Consolidated gross margin of 86.4% in Q3 2025 improved from 83.9% in the prior year, but segment-level dynamics reveal structural pressures. Surgical Glaucoma gross margin of 86.9% remained robust, supported by higher average selling prices from OMNI Edge adoption, but faced headwinds from overhead costs per unit, tariff expenses, and product mix. The $0.4 million in tariff costs in Q3 2025 represents a direct margin drag that will persist until non-China manufacturing comes online.

Dry Eye gross margins, while depressed at 37.8% due to volume, are expected to expand significantly with higher volumes associated with broader reimbursed market access. Management expects Q4 2025 Dry Eye gross margin to be higher than the first three quarters, reflecting the beginning of volume recovery as providers respond to the Novitas and FCSO fee schedules. However, tariffs will continue to impact both segments, with full-year 2025 Surgical Glaucoma tariff exposure of $1-1.5 million.

Operating Expenses: Discipline Through Restructuring

Research and development expenses decreased $1.4 million in Q3 2025 compared to the prior year, driven by lower clinical studies expense and reduced payroll costs from the August reduction in force. Selling, general and administrative expenses fell $1.6 million due to lower legal expenses, stock-based compensation, and commissions, partially offset by increased payroll-related expenses. These reductions reflect the strategic RIF that cut approximately 20% of global workforce, with 45% of impacted employees in general and administrative functions.

The $2.8 million restructuring charge in Q3 2025 is expected to generate $12 million in annualized personnel-related savings. This demonstrates management's willingness to make difficult decisions to achieve cash flow break-even without additional equity financing. However, it also creates execution risk: can the company scale TearCare commercialization and maintain Surgical Glaucoma momentum with a leaner organization?

Balance Sheet and Liquidity

As of September 30, 2025, Sight Sciences held $92.4 million in cash and cash equivalents against an accumulated deficit of $380.6 million. The Hercules Loan Agreement provides a maximum $65 million credit facility, with $40 million drawn and $2.4 million final fee due at maturity. An amendment in September 2025 extended the interest-only period from August 1, 2026 to February 1, 2027, and reallocated an undrawn $10 million tranche to increase availability through the interest-only period from $15 million to $25 million, subject to Hercules approval.

Net cash used in operating activities was $27.9 million for the nine months ended September 30, 2025, primarily due to a $34.3 million net loss. The company believes its cash position will satisfy working capital and capital resource requirements for at least 12 months from the November 6, 2025 financial statement issuance date. This liquidity runway is adequate but not abundant, making the successful execution of the reimbursement strategy critical to avoid future equity dilution.

Outlook, Management Guidance, and Execution Risk

2025 Guidance: Raised Revenue, Lowered Expenses

Management raised full-year 2025 revenue guidance to $76-78 million, implying fourth quarter revenue growth in Surgical Glaucoma of low single digits at the midpoint versus Q4 2024. The guidance includes Dry Eye segment revenue of $0.5-1 million for Q4, reflecting cautious optimism about the reimbursement impact. This modest Dry Eye forecast highlights the gap between pricing establishment and actual procedure volume conversion—a key execution variable for 2026.

Adjusted operating expense guidance was lowered to $90-92 million, representing a 9-11% decrease compared to 2024. This reduction reflects the RIF savings and intensified fiscal discipline, but management emphasizes that investments in pseudophakic standalone market development, TearCare market access, and focused R&D continue. The ability to cut costs while maintaining strategic investments demonstrates operational leverage, but also raises questions about whether the reduced spend is sufficient to capture the reimbursement opportunity.

2026 Vision: Return to Growth

Management expects to return to growth in both segments in 2026, with TearCare's growth rate "significantly larger" due to its small base. Paul Badawi, CEO, emphasizes that TearCare's office-based procedure model offers higher throughput potential than operating room procedures, and the existing base of 200 providers in reimbursed jurisdictions provides a foundation for rapid scaling. Alison Bauerlein, newly promoted to COO, will have direct responsibility for TearCare's scale-up, signaling organizational focus on execution.

The pseudophakic standalone market represents a significant opportunity for OMNI. Management estimates a large unmet need among patients 3+ years post-cataract surgery with uncontrolled IOP on multiple medications. This market is less dependent on cataract surgery volumes and LCD restrictions, providing a growth vector that competitors with cataract-dependent devices may struggle to address. The question is whether the commercial team can penetrate this market quickly enough to offset continued LCD impacts.

Competitive Positioning: Defending Share in a Consolidating Market

Matt Link, head of Surgical Glaucoma, acknowledges that competitive pressure hasn't subsided, but believes the organization is performing better than prior periods. The company's focused team and comprehensive OMNI technology position it well in a "one MIGS world" where surgeons must choose a single procedure. OMNI's ability to treat mild, moderate, and advanced disease in both combo and standalone settings provides a competitive counter-narrative to single-purpose devices.

However, competitors are not standing still. Glaukos continues to expand iStent adoption with strong clinical data and international growth. Alcon's integrated pharma-device portfolio and global scale provide pricing power and distribution advantages. Bausch + Lomb's pharmaceutical focus in dry eye offers a non-invasive alternative that may limit TearCare's addressable market. Sight Sciences' smaller scale and narrower product portfolio create vulnerabilities that the reimbursement strategy must overcome to achieve sustainable growth.

Risks and Asymmetries

Reimbursement Execution Risk

The most material risk is the gap between establishing fee schedules and achieving commercial adoption. While Novitas and FCSO pricing provides a benchmark, the majority of Medicare lives remain uncovered, and commercial payer negotiations are ongoing. If other MACs or commercial payers establish rates substantially below $1,142, or if they refuse to cover the procedure, TearCare's market opportunity could be severely limited. Management acknowledges that if low payment rates are not increased to appropriate levels, they could adversely impact efforts to achieve sufficient reimbursement for broad commercial growth.

Patent Litigation Uncertainty

The $34 million jury verdict against Alcon and Ivantis remains subject to appeal and ex parte reexamination proceedings filed in June 2025. If the Patent and Trademark Office issues final, non-appealable judgments of invalidity before the Court enters final judgment, or if claims are amended during reexamination, the verdict could be materially reduced or eliminated. The company cannot currently predict the outcome or financial impact, creating a binary risk that could affect both near-term cash expectations and long-term competitive positioning.

Tariff and Supply Chain Concentration

With most products manufactured in China, the company faces ongoing tariff exposure and supply chain risk. While the Q1 2026 diversification plan mitigates this over time, any disruption in Chinese manufacturing could prevent the company from meeting customer demand. The new manufacturing locations also face 15-19% tariffs, meaning gross margins will remain pressured even after diversification. This structural cost disadvantage versus domestic or tariff-exempt competitors could limit pricing flexibility and compress margins.

Competitive and Market Dynamics

The MIGS market remains highly competitive, with established players possessing larger sales forces, deeper clinical data libraries, and stronger payer relationships. If Glaukos or Alcon successfully position their devices as superior for standalone procedures, or if new entrants like New World's Via 360 gain traction, OMNI's growth could stall. In dry eye, pharmaceutical alternatives and other device-based treatments compete for both patient and provider attention, requiring Sight Sciences to demonstrate clear economic and clinical value to justify its premium pricing.

Valuation Context

At $8.11 per share, Sight Sciences trades at an enterprise value of $376.6 million, representing 4.71 times trailing twelve-month revenue of $79.9 million. This revenue multiple sits below Glaukos (13.31x sales) and above Alcon (3.81x sales) and Bausch + Lomb (1.21x sales), reflecting its niche position and growth uncertainty. The company's gross margin of 86.0% exceeds all three competitors, demonstrating strong pricing power and manufacturing efficiency when tariff-free, but operating margin of -25.7% and profit margin of -60.6% highlight the scale disadvantage.

The balance sheet provides moderate strength: $92.4 million in cash against $40 million in debt drawn under the Hercules (HTGC) facility yields net cash of $52.4 million. The current ratio of 9.60 and quick ratio of 8.63 indicate strong liquidity, while debt-to-equity of 0.63 is manageable. However, with net cash used in operations of $27.9 million in the first nine months of 2025, the company has approximately three years of runway at current burn rates, making the reimbursement strategy's success critical to avoid future equity dilution.

For an unprofitable company at this scale, valuation hinges on three factors: the probability of TearCare achieving meaningful commercial adoption, the sustainability of Surgical Glaucoma growth amid LCD restrictions, and the timeline to cash flow break-even. Management's guidance implies 2025 revenue of $76-78 million, representing a modest increase of 0.1% to 2.8% from 2024's $75.9 million, with a return to stronger growth expected in 2026. If TearCare can capture even 5% of its estimated 6,500 potential provider base at modest procedure volumes, it could generate $15-25 million in annual revenue, fundamentally altering the company's growth trajectory and justifying a higher multiple. Failure to convert reimbursement into volume would likely result in continued multiple compression and potential equity raises at unfavorable terms.

Conclusion

Sight Sciences stands at a critical inflection point where two years of reimbursement groundwork and operational restructuring must translate into commercial execution. The October 2025 establishment of Medicare pricing for TearCare and UnitedHealthcare's expanded OMNI coverage provide the catalysts for a potential growth reacceleration in 2026, but the modest Q4 2025 guidance reflects management's prudent recognition that pricing establishment does not guarantee adoption.

The company's 86% gross margins and comprehensive OMNI technology provide a foundation for profitability, but scale remains the primary constraint. The August 2025 reduction in force and lowered operating expense guidance demonstrate disciplined capital allocation, yet they also create execution risk as the company attempts to scale TearCare with fewer resources. Competitive pressure from Glaukos (GKOS), Alcon (ALC), and Bausch + Lomb (BLCO) will intensify if Sight Sciences shows signs of gaining share, making the speed of reimbursement conversion critical.

For investors, the thesis hinges on two variables: whether TearCare can achieve meaningful procedure volumes in the 10.4 million covered Medicare lives by Q2 2026, and whether OMNI can sustain growth in the pseudophakic standalone market while navigating LCD restrictions. Success on both fronts could drive revenue growth above 20% in 2026 and justify a multiple re-rating toward Glaukos levels. Failure would likely result in continued cash burn, potential equity dilution, and a stagnant valuation. The stock's current price embeds modest expectations, creating asymmetric upside if the reimbursement strategy executes as planned, but the narrow product portfolio and limited cash runway demand careful monitoring of quarterly conversion metrics.