10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

Commission File Number 001-40587

SIGHT SCIENCES, INC.

(Exact name of Registrant as specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (877) 266-1144

Securities registered pursuant to Section 12(b) of the Act:

Title of each class TradingSymbol(s) Name of each exchange on which registered

Common Stock, par value $0.001 SGHT The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ No☒

The registrant was not a public company as of the last business day of its most recently completed second fiscal quarter, and therefore cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date.

The number of shares of Registrant’s Common Stock outstanding as of March 18, 2022 was 47,586,682.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement relating to its 2022 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2021 are incorporated herein by reference in Part III of this Annual Report on Form 10-K.

Table of Contents

Page

PART I

Item 1. Business 1

Item 1A. Risk Factors 33

Item 1B. Unresolved Staff Comments 91

Item 2. Properties 91

Item 3. Legal Proceedings 91

Item 4. Mine Safety Disclosures 91

PART II

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 103

Item 8. Financial Statements and Supplementary Data 104

Item 9A. Controls and Procedures 130

Item 9B. Other Information 131

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 131

PART III

Item 10. Directors, Executive Officers and Corporate Governance 132

Item 11. Executive Compensation 133

Item 14. Principal Accountant Fees and Services 133

PART IV

Item 15. Exhibits and Financial Statement Schedules 134

Forward-Looking Statements

Unless the context otherwise requires, references in this Annual Report on Form 10-K to the “Company,” “Sight Sciences,” “we,” “us” and “our” refer to Sight Sciences, Inc.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•

estimates of our total addressable market, future revenue, expenses, capital requirements, and our needs for additional financing;

•

our ability to enter into and compete in new markets;

•

the impact of the COVID-19 pandemic on our business, our customers’ and suppliers’ businesses and the general economy;

•

our ability to compete effectively with existing competitors and new market entrants;

•

our ability to scale our infrastructure;

•

our ability to manage and grow our business by expanding our sales to existing customers or introducing our products to new customers;

•

our ability to establish and maintain intellectual property protection for our products or avoid claims of infringement;

•

potential effects of extensive government regulation;

•

our ability to obtain and maintain sufficient reimbursement for our products;

•

our abilities to protect and scale our intellectual property portfolio;

•

our ability to hire and retain key personnel;

•

our ability to obtain financing in future offerings;

•

the volatility of the trading price of our common stock;

•

our expectation regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”); and

•

our ability to maintain proper and effective internal controls.

Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements in this Annual Report on Form 10-K are based on information available to us as of the date of this Annual Report on Form 10-K. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

•

We have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability;

•

Our business is highly dependent on the success of two current commercial products, and in particular OMNI. The development of TearCare for expanded indications depends upon positive clinical data, and the safety and efficacy of our products are not yet supported by long-term clinical data, which could delay or prevent clearance by regulatory authorities or limit sales if cleared, certified or approved;

•

We may need additional funding in order to finance our planned operations. The inability to raise funds on acceptable terms, if at all, when needed, may force us to delay, reduce or eliminate our product development programs and commercialization efforts;

•

The COVID-19 pandemic has impacted, and likely will continue to impact, our operations and financial results and may materially and adversely affect our business and financial results in the future;

•

We are subject to extensive and costly government regulation on federal, state and foreign levels and we may not receive, or may be delayed in receiving, the necessary regulatory clearances, certifications or approvals for our future products or modifications to our current products;

•

We may incur significant liability if it is determined that we are not complying with federal, state or foreign regulatory requirements, such as if it is determined that we are promoting off-label uses of our products;

•

Changes in private and public health insurance coverage and reimbursement rates may affect the adoption of our products and our future revenue;

•

Developments by competitors may render our products or technologies obsolete or noncompetitive and the development of new products, technologies, procedures, medications or other therapies could replace or reduce the importance of our products;

•

We rely on third parties for the manufacture and supply of OMNI and TearCare;

•

We depend on a limited number of single source suppliers for some of the components, accessories, and materials used in the manufacture and assembly of OMNI and TearCare and any shortfall in the supply chain may cause our business to materially suffer;

•

If we are unable to obtain, protect, maintain, enforce and adequately protect our intellectual property rights with respect to our technology and current and future products, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and current and future products may be adversely affected;

•

Litigation related to infringement and other intellectual property claims, with or without merit, is unpredictable, may be expensive and time-consuming and may divert management's attention from our core business. Our intellectual property has not been tested in litigation. Litigation that we initiate to protect our rights could result in invalidation of our patents, which may undermine our competitive position in our current or anticipated markets; and

•

If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers or other significant personnel or experience increases in our compensation costs, our business may materially suffer.

PART I

Item 1. Business

Overview

Our mission is to transform ophthalmology and optometry through the development and commercialization of proprietary devices that target the underlying causes of the world’s most prevalent eye diseases. We are passionate about improving patients’ lives. Our business philosophy is grounded in the following principles: comprehensively understanding disease physiology; developing products that are intended to restore natural physiological functionality to diseased eyes; developing and marketing products that achieve superior effectiveness versus current treatment paradigms while minimizing complications or side effects; providing intuitive, patient friendly solutions to ophthalmologists and optometrists (together, eyecare professionals or ECPs); and delivering compelling economic value to all stakeholders, including patients, providers and third- party payors such as Medicare and commercial insurers. Our objective is to develop and market products for use in new treatment paradigms and to create an interventional mindset in eyecare whereby our products may be used in procedures which supplant conventional outdated approaches. We believe current eyecare treatment models rely heavily on prescription medications, symptom relief, or either flawed or highly invasive, later-stage procedural interventions, and often fail to adequately address the true underlying cause of disease.

We have focused our initial product development efforts on the treatment of two of the world’s most prevalent and underserved eye diseases, glaucoma and dry eye disease, or DED. We estimate the annual addressable U.S. market opportunities for the products in our Surgical Glaucoma and Dry Eye segments are approximately $6 billion and approximately $10 billion, respectively, while 2020 U.S. manufacturer revenues in the surgical glaucoma and DED markets were approximately $350 million and $2.4 billion, respectively, demonstrating that currently available solutions have not addressed a large part of the market need.

Glaucoma, a group of chronic, often asymptomatic, diseases that damage the optic nerve, is the world’s leading cause of irreversible blindness. Glaucoma does not have a cure and is a progressive disease; if left untreated or insufficiently treated, glaucoma can lead to irreversible disability and blindness. An estimated 102 million people worldwide suffer from glaucoma. Primary open-angle glaucoma, or POAG, is the most prevalent form of glaucoma and affects over 60 million people worldwide, including approximately 4.1 million people in the United States, of whom an estimated 3.4 million have been diagnosed. One of the greatest risk factors for POAG, and the only risk factor that can be controlled, is elevated intraocular pressure, or IOP. Elevated IOP is often caused by malfunctioning drainage pathways in the eye that provide abnormal resistance to the outflow of aqueous humor, a clear, watery fluid which bathes and nourishes the lens and maintains pressure within the eye.

Our OMNI Surgical System, or OMNI, is a handheld, single use, therapeutic device that allows ophthalmic surgeons to reduce IOP in adult glaucoma patients. OMNI allows the ophthalmic surgeon to sequentially complete two well-established but historically invasive ab externo glaucoma procedures, canaloplasty and trabeculotomy, in an efficient, minimally invasive manner using a single, bloodless and sutureless clear corneal microincision. OMNIallows ophthalmic surgeons to transform these two distinct, historically invasive ab externo glaucoma procedures into a sequential, ab interno minimally invasive glaucoma surgery, or MIGS, procedure. MIGS procedures are performed through a one to two millimeter clear corneal incision similar to those used in cataract surgery for intraocular access and have a strong demonstrated safety profile, characterized by minimal trauma to the eye and quick patient recovery times. The FDA has authorized the use of OMNI for reducing IOP in all adult POAG patients both by itself on a standalone basis, which we refer to as Standalone procedures, or in combination with cataract surgery, which we refer to as Combination Cataract procedures. Several competing MIGS devices, including the current market leaders, have only been authorized by the FDA for use in Combination Cataract procedures for adult patients with Mild-to-Moderate severity. We estimate that over 85% of the U.S. addressable market opportunity for POAG cannot be served with Combination Cataract procedures because less than 15% of POAG patients receive cataract surgery in any given year.

We believe that OMNI delivers the highest level of effectiveness of any available MIGS product, as it is the only device that provides access to 360 degrees of the diseased conventional outflow pathway and can address all three primary points of resistance in the conventional outflow pathway (trabecular meshwork, Schlemm’s canal, and the distal collector channels), through a single clear corneal incision.

OMNI’s indication for use, which we believe is among the most comprehensive in MIGS, was cleared by the FDA in March 2021 based upon the review of clinical data from ROMEO, our U.S. multi-center clinical study of OMNI in

Combination Cataract and Standalone procedures. OMNI has received 510(k) clearance from the FDA and a CE mark to be marketed in the U.S. and the European Union, or EU, respectively, for canaloplasty (microcatheterization and transluminal viscodilation of Schlemm’s canal) followed by trabeculotomy (cutting of trabecular meshwork) to reduce IOP in adult patients with POAG in the U.S. or with open-angle glaucoma, or OAG, in the EU. OMNI is cleared by the FDA to lower IOP in both Combination Cataract and Standalone cases for all adults with POAG. By comparison, trabecular bypass stents are indicated for use only in Combination Cataract procedures for patients with Mild-to-Moderate severity in the U.S. Trabecular bypass stents were the first MIGS implant devices to be authorized by the FDA. We believe the combination of their restricted indication for use and their market leadership position has unnaturally skewed the U.S. MIGS market towards Combination Cataract procedures. In November 2021, the FDA granted an Investigational Device Exemption, or IDE, authorizing us to conduct a clinical study, which we refer to as PRECISION, to assess the safety and effectiveness of a new, higher volume investigational OMNI device to perform canaloplasty alone to lower IOP in adults with POAG. We are conducting this canaloplasty alone IDE trial to support a premarket notification to the FDA seeking clearance for use to perform canaloplasty-alone procedures in adults with POAG.

Our goal is to establish OMNI as the standard of care for all POAG patients by continuing to grow its adoption and utilization in the existing Combination Cataract market segment, which we believe remains underpenetrated and estimate is capturing less than one-third of its current potential procedural volume, and by pioneering the development of the Standalone market segment (over 85% of the potential U.S. POAG market). We believe the consistent therapeutic outcomes OMNI delivers are important for patients and surgeons alike, especially those considering a Standalone MIGS procedure. For patients, we believe the anxiety that may accompany the need for ocular surgery can be tempered by driving education and awareness of these consistent outcomes. For surgeons, consistent outcomes simplify the treatment choice and the decision to perform a procedure. We believe delivering consistently effective results will be crucial to unlocking the Standalone market, as well as capitalizing on the full potential of the Combination Cataract market.

After receiving our initial FDA 510(k) clearance for OMNI in late 2017, we began the commercial sale of the device in February 2018. We primarily sell OMNI in the U.S. through our dedicated Surgical Glaucoma sales team. Our commercial strategy for OMNI centers on building confidence and conviction amongst the glaucoma community through continued execution of our clinical trials and publishing their results in peer- reviewed journals. In addition, our highly involved sales and training model serves to promote a world-class surgical experience and identify additional OMNI use cases within its cleared indication, including in additional Standalone procedures and across all addressable POAG severities. The procedure enabled by OMNI, canaloplasty followed by trabeculotomy, is covered and reimbursed by all Medicare Administrative Contractors, or MACs, and numerous private insurers, covering an estimated 74% of U.S. POAG sufferers. Designed for use in well-established clinical procedures, and with advantages that have been observed to promote safe, effective and highly consistent clinical outcomes, we believe that OMNI has the potential to establish a more proactive, interventional paradigm for IOP reduction in POAG. Our Surgical Glaucoma segment, which includes OMNI, represented 95% of our total revenues for the year ended December 31, 2021.

The TearCare System, or TearCare, is a unique open-eye heating and expression device designed to melt and remove meibomian gland obstructions. We believe TearCare has a compelling physiological profile to address obstruction from meibomian gland disease, or MGD, which is the primary cause of evaporative DED, a disease characterized by low quality tears that evaporate prematurely. Dry eye complaints are the most common reason for a patient visit to an eye doctor. There are an estimated 739 million people globally who suffer from DED. DED is the most common reason for a patient visit to an eye doctor, yet of the 38 million people with DED in the U.S., only an estimated 17 million have been diagnosed with DED. Dry eye symptoms have a significant impact on the quality of life and productivity of patients suffering from DED. If left untreated, DED can be extremely painful, leading to permanent cornea damage and vision impairment.

Studies have shown that evaporative DED resulting from MGD is associated with approximately 86% of all DED cases. In healthy eyes, there are 25-30 meibomian glands located within each of the upper and lower eyelids. These glands produce and secrete an oily substance called meibum which forms the outer layer of healthy tears, which is also known as the lipid layer. Meibum normally has an olive oil-like consistency and contributes a vital element of the tear film that prevents premature tear evaporation. In patients with MGD, meibum hardens within the glands causing obstructions that can partially or completely block the oily secretions from reaching the tear film. The resulting compromised outer surface of the tear leads to accelerated tear evaporation and DED. Third-party clinical studies have also demonstrated that treating MGD by liquefying and removing clogged meibum is the most effective method of eliminating obstructions and restoring a healthy tear film lipid layer, thereby preventing premature evaporation of tears.

TearCare is designed to enable ECPs to heat and liquefy meibomian gland blockages, followed promptly by manual, comprehensive clearing of these blockages with a separate clearance tool. We developed TearCare to serve as an elegant, compact, portable, and intuitive solution comprised of a reusable hardware controller, the SmartHub, and a breakthrough, wearable, software-controlled eyelid technology, the SmartLids. Applied adhesively and non-invasively to the outside of the eyelids, single-use SmartLids deliver a precise therapeuticlevel of heat into the meibomian glands. Engineering SmartLids to remain comfortably adhered to virtually all shapes and sizes of eyelids while allowing freedom to blink and delivering precise therapeutic heat is one of our most significant design accomplishments. This heating process follows clinically proven guidelines for temperature and duration required to melt obstructions in the glands and restore the production and secretion of healthy, clear meibum onto the tear surface. The proprietary, highly conformant, open-eye design of TearCare allows patients to blink naturally throughout the thermal portion of the procedure, which provides a comfortable patient experience. TearCare can be utilized by an ECP in a straightforward in-office procedure and can be accommodated during the course of a routine patient visit. Additionally, TearCare does not require a large capital equipment investment by ECPs, and we believe that it offers an attractive economic value proposition to providers, patients and third- party payors.

In OLYMPIA, our large multi-center, randomized control trial, or RCT, TearCare was associated with statistically significant clinical improvements in all assessed signs and symptoms of DED. This included tear breakup time, or TBUT, and meibomian gland secretion score, or MGSS, objective measurements of DED that were the trial’s primary endpoints, as well as patient-reported symptoms surveys, including Ehlers Danlos syndrome, or EDS, ocular surface disease index, or OSDI, and symptom assessment in dry eye, or SANDE, at all time periods measured (both two weeks and four weeks post-treatment).

We believe the MGD market requires additional ECP and patient education, including clinical data to differentiate procedural and product alternatives, and enhanced patient access through the potential advancement of reimbursement coverage. Our goals with the development of TearCare are to fully transform the current outdated treatment paradigm based primarily on over-the-counter, or OTC, and prescription eyedrops which do not address obstruction of the meibomian glands, the primary root cause of MGD, and establish use of TearCare as the standard of care for the millions of patients suffering from evaporative DED caused by MGD. Revenues from our Dry Eye segment, which includes TearCare and related accessories, represented 5% of our total revenues for the year ended December 31, 2021

In December 2021, the FDA cleared TearCare for the application of localized heat therapy in adult patients with evaporative DED due to MGD, when used in conjunction with manual expression of the meibomian glands. We modified our commercial efforts to incorporate this expanded indication for use, which we believe will make TearCare more attractive to our customers and their patients.

We focus on continuous innovation and seek regular input from our network of expert employees (including several ophthalmologists on staff), advisors and customers to rapidly iterate our pre- and post-commercial product designs with the aim of better satisfying the needs of our customers and their patients, and increasing adoption and utilization of our solutions.

Our ability to continuously and rapidly innovate our products is a core competency of our company. Our product innovation has resulted in a comprehensive portfolio of 30 issued U.S. patents, 45 issued patents outside of the U.S. (including five issued European patents and their national validations), 19 pending U.S. non-provisional patent applications, 18 pending foreign patent applications and two pending Patent Cooperation Treaty patent applications as of December 31, 2021.

The overall success of our innovative approach to eyecare to date has been confirmed by the over 85,000 estimated uses of OMNI and its direct predicates in over 1,200 hospitals and ambulatory service centers, or ASCs, in the U.S. and EU, and over 15,000 estimated uses of TearCare in over 550 eyecare facilities in the U.S. through December 31, 2021. We have experienced significant growth and market adoption since launching OMNI and are executing a long-term plan for further development of the market for TearCare.

Our Solutions

We have designed OMNI and TearCare to be interventional ophthalmology devices. We believe that both glaucoma and DED are significantly underserved by current treatment offerings and that there are large market opportunities for effective solutions that restore the natural functionality of diseased eyes.

Our Product Development Approach

The past, current, and ongoing development of OMNI and TearCare follows our internal product development approach, which is governed by four fundamental requirements that we believe are critical to delivering the most effective, safe and consistent clinical outcomes for patients with eye disease.

•

Comprehensive Understanding of Disease Physiology. We review and analyze all available clinical data, science, and literature that is relevant to a disease to achieve a sound understanding of its underlying cause(s), which guides the development of our products.

•

Treatment of Underlying Causes. Healthy eyes are self-regulating marvels of evolution, biomechanics, chemistry and physiology. We believe that restoring the natural functionality of diseased eyes by comprehensively treating underlying cause(s) of disease provides the optimal combination of effectiveness and safety.

•

Intuitive Design. Our products are designed to transform complex, impractical or invasive treatment approaches into intuitive, minimally invasive, user-friendly procedures. Our product development goals are focused on delivering a preferred “go to” treatment of choice for ophthalmologists and optometrists.

•

Patient Access. We seek to maximize availability and accessibility of our products for as many patients as possible. We believe that our devices have the potential to offer differentiated clinical, experiential and economic value to all eyecare stakeholders. For conditions where patients lack optimal treatment access due to insurance coverage limitations or difficult patient-pay economics, we plan to demonstrate the value proposition of our solutions through data from rigorous clinical trial data and real-world results to improve access.

We aim and expect to be a clinical leader in every eyecare segment we enter and seek to achieve all four criteria in any of our product development projects. From device ideation to commercialization, we take into consideration the perspectives of patients, providers and third-party payors throughout our product development process. When possible, we seek to streamline our product commercialization process by judiciously designing our products to achieve the most efficient routes for FDA clearance or authorization for each applicable indication and reimbursement coverage by third-party payors.

OMNI Surgical System

OMNI is a handheld, single use, therapeutic device for minimally invasive glaucoma surgery, or MIGS. OMNI is designed to restore the eye’s natural drainage system without compromising the structural integrity of the eye or leaving implants behind post-surgery.

We believe that OMNI is the first and only MIGS device that the FDA has indicated for ab interno procedures to lower IOP across all severities of POAG, including Standalone procedures. We further believe that OMNI is also the first and only multi-procedure MIGS device dually indicated for canaloplasty followed by trabeculotomy. Canaloplasty primarily addresses distal resistance (i.e., collapsed Schlemm’s canal, blocked collector channel ostia) and has some presumed effects on the inner wall of Schlemm’s canal and the trabecular meshwork due to dilation and stretching. In a trabeculotomy procedure, a surgeon unroofs Schlemm’s canal by cutting the trabecular meshwork to provide aqueous humor with direct access to the drainage points in the conventional outflow pathway. Trabeculotomy addresses proximal resistance (i.e., outflow resistance in the trabecular meshwork and inner wall of Schlemm’s canal). We believe that the sequential combination of canaloplasty followed by trabeculotomy is uniquely capable of treating all three primary points of resistance in the conventional outflow pathway of the eye. We believe treating all three primary points of resistance is critical to achieving the consistency and level of effectiveness in reducing IOP and medication requirements necessary to expand the use case for MIGS procedures to the Standalone market and to all disease severities among adult POAG patients.

We have applied our medical expertise, as well as specialized design and engineering capabilities, to create a complex device that is simple in appearance and intuitive to use. Each OMNI device consists of 29 separate precision-engineered parts that have been optimized for performance, effectiveness and usability. After inserting the cannula tip into the corneal microincision and accessing Schlemm’s canal, the surgeon can advance and retract the catheter with a fingertip dial up to 180 degrees. Upon retraction of the catheter, OMNI delivers viscoelastic fluid to complete the viscodilation of Schlemm’s canal. The surgeon can complete a full 360 degree canaloplasty by reinserting the catheter and advancing it in the opposite direction. To perform the trabeculotomy following the canaloplasty, the same microcatheter can be reinserted into Schlemm’s canal and used to deroof the trabecular meshwork in a titratable manner (90, 180, 270 or 360 degrees). OMNI’s versatility and titratable functionality, which we believe are unmatched by other MIGS products currently on the market, enable surgeons to perform sequential comprehensive outflow treatments that they can customize based on an individual patient’s disease severity and eye anatomy in both Combination Cataract and Standalone settings.

TearCare System

In an effort to address the treatment of evaporative DED due to MGD, we custom designed TearCare to facilitate what we believe is the optimal method for clearing meibomian gland obstructions based on numerous clinical studies: warming the glands to a minimum of 41 degrees Celsius for 15 minutes to melt congealed meibum followed by manual, clinician customized and performed removal of the liquefied obstructions using forceps to help facilitate restoration of healthy meibum production to naturally fortify the tear’s protective lipid layer. Tear film is a complex, continuously renewed solution that is necessary for maintaining a healthy cornea and optical clarity. Tears consist of three layers: an inner mucous layer that nourishes the cornea and helps stabilize and anchor the tear film; a middle aqueous layer that lubricates the eye, removes particles and prevents infection; and an outer lipid layer, or meibum, that prevents premature evaporation and maintains tear film stability. MGD occurs when meibum accumulates and hardens within the meibomian gland. Over time, the glands can become blocked or clogged, which prevents meibum from reaching the tear, fortifying the outermost tear lipid layer, and protecting the integrity of the tear. The goal of TearCare treatments is to restore the eyelid’s natural ability to produce healthy lipid secretions and recover the integrity of the tear film.

Our TearCare System includes a pair of single-use SmartLids, the first wearable, highly conformant, precision heating device for the eyelids. SmartLids allow for eyes to be open and blink during the thermal portion of the process and are software-controlled, delivering precise heat to the tarsal plates of the eyelids directly overlying the meibomian glands while continuously monitoring temperature and communicating 144 times per second with the SmartHub, a compact, finely calibrated power source and control unit which can make instantaneous adjustments to ensure delivery of the desired amount of heat and therapeutic temperature level. Engineering SmartLids to remain comfortably adhered to virtually all shapes and sizes of eyelids while allowing freedom to blink and delivering precise therapeutic heat is one of our most significant design accomplishments. Following therapeutic heat application by TearCare, ECPs may use forceps to manually express melted meibum from each gland. ECPs can tailor the amount of pressure applied during expression to specific glands based on a desired full evacuation of the glands, thereby allowing the eyelids to resume the production and secretion of meibum to coat and protect tears.

According to patient and ECP feedback, treatments using TearCare are comfortable for patients since they can keep their eyes open during the thermal portion of the procedure and have the freedom to blink naturally. Additionally, TearCare was designed to be administered during the course of a routine office visit to an ECP, which makes it convenient for patients, and allows providers to maintain procedural throughput in their practices. We believe that these features of the patient and ECP experience with TearCare procedures offer a stark contrast to other available alternatives which we believe are burdened by ineffective and suboptimal product design, including awkward and uncomfortable patient experiences through closed eye solutions and/or manual solutions that require extremely close patient proximity to the ECP throughout the treatment.

Our Success Factors

Our mission is to transform eyecare by developing products that address the underlying causes of the world’s most prevalent eye diseases. We design our products to enable ECPs to perform safe and effective interventional procedures that can transform treatment paradigms. We believe the following success factors will drive the growth of our company:

Large market opportunities in eyecare with flawed treatment paradigms. We estimate the total addressable annual market opportunities in the U.S. for OMNI and TearCare are approximately $6 billion and approximately $10 billion, respectively, yet combined 2020 U.S. manufacturer revenues in these markets implied less than 20% total

addressable market penetration. We believe the addressable market penetration in Standalone MIGS and in MGD procedures are less than 10% each. We believe that market leading MIGS alternatives do not consistently and comprehensively address the underlying causes of POAG and do not adequately treat a broad enough range of disease sufferers. In POAG, we estimate that over 85% of diagnosed sufferers can be treated only with Standalone procedures because they do not require cataract surgery. Similarly, we believe that the market leading DED products do not address the primary underlying cause of the disease, MGD, while those that do attempt to treat MGD lack user friendly design and do not provide broad patient access. Given the narrow historical product development focus on aqueous deficiency, DED patients are currently limited by a mismatched treatment set (typically prescription or OTC eyedrops) which do not address the root causes of MGD, the predominant underlying cause of the condition.

Continual development of innovative technologies. Our ability to transform treatment paradigms in large, underserved eyecare markets will depend on our ability to develop and commercialize products which are differentiated in how they treat underlying diseases, in their safety and effectiveness, in the breadth of their patient access and in their ease of use for the ECP. We believe our product development approach is a key differentiator of our team and our company. We design and iterate our products with continual input from our advisor network, an elite group of ECPs who prioritize efficiency, safety and effectiveness. Once our products are authorized by the FDA and launched, our customer feedback loop helps us further develop our products.

Consistent delivery of exceptional customer experience. One of the key drivers of our success will be fully developing the potential addressable markets for POAG and MGD by maximizing the breadth of patients that our products can serve. We believe developing our target markets requires a consistent, exceptional customer experience, which is best accomplished through a differentiated, highly involved commercial model. Our sales professionals provide ECPs with the necessary education, training and support to adopt and continue to use our products for their authorized uses. We devote significant resources to onboarding our sales professionals and to continuously augmenting their knowledge and capabilities. Our management team and commercial organization are highly experienced in developing primary markets and commercializing disruptive products designed to satisfy unmet patient needs.

Prioritization of clinical excellence and market education. We are deeply committed to a robust clinical trial program and are investing significant resources to generate additional scientific evidence regarding the safety and effectiveness of OMNI and TearCare through numerous clinical studies and the publication of our findings in leading peer-reviewed journals. We believe OMNI is growing rapidly in adoption because of its superior effectiveness and comparable safety compared to alternative MIGS devices and that patients, surgeons and other stakeholders will all benefit from our continued investment in clinical trials and our broader market education initiatives, which include actively engaging in scientific conventions, presenting at conferences, and conducting educational and promotional activities, including peer-to-peer events. We also believe that treatment decisions should be evidence-based and that rigorous clinical studies with high quality data are crucial to achieving and maintaining optimal patient access.

Focus on compelling economics and value creation for all eyecare stakeholders. We focus on developing products to generate substantial benefits for patients, providers and payors. We believe use of our devices will ultimately reduce the all-in cost of treating these diseases for payors. For the sequential procedures using OMNI, surgeons and facilities use the longstanding permanent Category I CPT code for canaloplasty, which is broadly covered by Medicare and private payors. TearCare can provide ECP practices with an attractive recurring revenue business model with only a modest initial investment. While there is a viable patient-pay market for TearCare, we believe that improving access to treatments using TearCare through insurance coverage by Medicare and private payors will be the most effective way to reach the largest number of patients. Leveraging the results from our OLYMPIA RCT, we received FDA clearance to expand TearCare’s indication for use and plan to pursue further clearances for more robust indications for use as we build out our library of clinical trial and real-world data regarding the benefits of TearCare treatments. DED is the most common reason for patient visits to an ECP and has major negative effects on patient health and society. One study estimated the overall direct and indirect costs of DED in the U.S. to be $55.4 billion per year.

Scale culture built on community, passion, courage and perseverance. Our organization is designed to be nimble, innovative, adaptive and growth oriented. We have an entrepreneurial and creative foundation that is complemented with an experienced executive team, who provide deep relationships throughout the eyecare community. We share a passion for improving the lives of people suffering from eye diseases and our success has engendered significant esprit-de-corps at all levels of our organization. We believe that our focus on thought leadership, high performance and collaboration, as well as our hiring and recruiting processes, have enabled us to attract and retain a world class team that is prepared to transform eyecare for all stakeholders.

Our Growth Strategy

The fundamental objectives of our growth strategy are to establish robust clinical data to support the development of our target markets and the continued commercialization of our products and to deliver an exceptional customer experience to the ECPs and patients who utilize our products. Our current growth strategies include:

•

Establish OMNI as the standard of care for interventional glaucoma treatment among MIGS-trained surgeons. We believe OMNI has the unique potential to transform the treatment paradigm for IOP reduction in adult POAG patients by greatly expanding the universe of patients who can be treated with MIGS treatment alternatives. We believe OMNI has distinct advantages with respect to effectiveness, safety and its broad indication for use to reduce IOP across all adult POAG patients in both Standalone and Combination Cataract procedures. High-volume cataract surgeons who are familiar with MIGS procedures are our highest priority customer acquisition targets and we have directed our initial commercial efforts towards them. We have successfully gained commercial traction with many of these surgeons, who typically first learn to use OMNI during Combination Cataract procedures.

•

Pioneer the $5 billion Standalone MIGS segment. Based on our field research, we believe that after gaining experience using OMNI and confidence in its consistency and effectiveness in familiar Combination Cataract cases, surgeons will often expand the use case for OMNI to include more proactive and interventional POAG cases. We believe many of these cases will involve Mild-to-Moderate Standalone procedures for which we believe OMNI is the only MIGS device authorized by the FDA for lowering IOP via an ab interno approach. A year-end 2020 internal field study of our user base has indicated that Standalone procedures in 2020 constituted an estimated greater than 20% of our responding customers’ total OMNI procedures. Given these strong initial results, we have continued to invest resources to execute our interventional POAG market development plan, which includes educating surgeons, Facility administrators, primary care ECP referral networks and patients on the clinical benefits of OMNI, particularly in Standalone procedures. Our ongoing and planned clinical studies feature Standalone and Combination Cataract trials, including head-to-head RCTs versus a leading trabecular bypass stent and a leading prescription OAG medication.

•

Develop the MGD treatment market through a patient access-led strategy. We are executing a comprehensive long-term strategy to increase patient access to TearCare beyond its current patient-pay market. Our long-term goal is for TearCare procedures to achieve broad reimbursement from private payors and Medicare for effectively treating the signs and symptoms of DED due to MGD. We believe the MGD market is the most underserved in eyecare and that current treatment protocols either fail to directly address MGD’s root cause, require cost-prohibitive capital equipment purchases, lack elegant and user-friendly design, and/or lack the compelling clinical data required to transform treatment paradigms and properly develop the market. Key components of our strategy include: pursuing clearance from the FDA to continue expanding TearCare’s indications for use to treat DED due to MGD; execution of our SAHARA RCT, which will compare treatments using TearCare to the leading prescription eyedrop treatment and assess the durability of TearCare procedures over a 24 month period (SAHARA was designed specifically to provide key clinical data that could support potential reimbursement decisions by third-party payors); developing real-world prior authorization and reimbursement claims evidence to educate payors on the benefits of TearCare for its authorized uses, facilitated by our market access team; and converting our temporary Category III CPT code for TearCare to a permanent Category I CPT code.

•

Drive adoption and utilization of our products by leveraging additional clinical trials and market education. We believe our existing clinical data demonstrates the compelling safety and effectiveness of OMNI for its cleared indication, and we plan to continue delivering additional clinical evidence regarding its safety and effectiveness. We have dedicated significant resources to further establish definitive clinical studies regarding the use of OMNI for IOP reduction and/or medication reduction in adult patients. We received clearance from the FDA for an expanded indication for use for TearCare in December 2021, supported by the effectiveness and safety data from our OLYMPIA RCT We have two additional ongoing and planned studies intended to evaluate the safety and effectiveness of TearCare. We believe the results of these studies will support potential clearances for expanded indications for use and our patient access development strategy.

•

Deepen and broaden our commercial organization. We plan to continue investing resources to grow our commercial team, both in the U.S. and internationally. In addition to competing in the market for devices used for Combination Cataract MIGS procedures in adult POAG patients, we are investing significant resources in our Standalone market development plan, which includes a team of representatives focused on educating ECPs, ophthalmic surgeons and patients on the broad utility and use cases for OMNI and on Standalone treatment alternatives generally. Through December 31, 2021, we had sold OMNI and its predicate devices to over 1,200 facilities in the U.S. As of December 31, 2021, there were over 750 currently active (i.e., ordering with past 90 days) ordering facilities. There are over 10,000 ophthalmologists focused on performing cataract and glaucoma surgeries in the U.S. and over 3,000 are currently MIGS trained, a figure that is expected to grow as MIGS utilization increases, in part driven by the benefits offered by OMNI. As of December 31, 2021, approximately 1,500 surgeons have been trained to use OMNI. This customerbase has seen very low churn levels, with strong retention of surgeons following a multi-month training and trial period. Our targeted and controlled launch of TearCare in the U.S. through a small, dedicated sales team has been successful in demonstrating that DED-experienced customers have strong reorder levels and in providing insights into the large patient- pay market. To help our customers secure appropriate reimbursement from payors for utilizing either OMNI or TearCare in treating their patients, our Market Access group added a dedicated field based Reimbursement Account Executive team that is now fully on board. We plan to grow our commercial organization over time by matching its growth to the achievement of key milestones in our long-term plan to develop our target markets.

•

Expand into international markets. We believe there is a substantial market opportunity for clinically effective glaucoma and DED products such as OMNI and TearCare outside of the U.S., or OUS. Over the next several years, we intend to increase our OUS investment. The number of U.S. POAG and DED sufferers represents a small fraction of global sufferers — approximately 6% and 5%, respectively — yet the U.S. represents approximately 60% and approximately 40% of the global glaucoma surgical device and DED treatment markets, respectively. There are currently a number of developed OUS markets with ECPs who have relevant ophthalmologic and optometric experience and existing reimbursement for MIGS devices, particularly in the EU where OMNI has a broad CE mark to lower IOP for all adult OAG patients. Trabecular bypass stents have established significant markets in Europe and other geographies. We also believe that a number of OUS market fundamentals are attractive with respect to potential OMNI adoption throughout Europe and Asia:

•

Surgeons in certain OUS markets choose to intervene at a later stage of eye disease which places increased criticality on highly robust and dependable effectiveness;

•

Circumferential canal procedures are widely accepted and adopted in select large OUS markets. For add addexample, ab externo canaloplasty has been very successful in Germany and ab externo circumferential trabeculotomy has been a preferred glaucoma surgery for many years in Japan; and

•

Surgeons in certain OUS markets are typically salaried and less specialized than U.S. peers and while procedural efficiency and/or potential case volumes are still significant considerations for these OUS surgeons, clinical effectiveness is of increased relative importance.

We believe that OUS markets can be particularly compelling for clinically differentiated products. Our OMNI clinical trial program includes head-to-head RCTs against competing treatments in European markets that are designed to address the needs of regulatory bodies and third-party payors in those markets. We believe the results of these trials will help OMNI penetrate and gain adoption in these geographies. We also plan to commercialize TearCare in OUS markets and believe MGD procedures have significant potential. We currently rely on a combination of direct sales personnel and independent distributors to sell our products in Europe. In 2021, we hired our first direct sales personnel in the U.K. and have continued to add to our U.K.-based sales teams. We plan to both deepen that team and expand through a combination of direct resources and distributor sales into other geographies in 2022 and beyond. We will also be expanding our Market Access capabilities as appropriate in 2022 to ensure that we secure optimal coverage and reimbursement for OMNI.

•

Continuously innovate premium product offerings throughout eyecare. Over the course of our ten year operating history, we have successfully brought to market multiple iterations of OMNI, its predicate devices and TearCare. Our product development approach, which targets underserved eyecare

populations, and our ability to effectively navigate commercialization pathways, has enabled us to launch our products in a highly capital efficient manner, which we believe is distinctive relative to other medical device technology companies and allows us to retain financial flexibility to continue investing in further product enhancements or to explore other avenues of research and development for future pipeline products in eyecare, including drug therapies, sustained release drug delivery platforms and devices. Our internal and external advisor and customer networks provide us with ongoing real-world feedback, which we use to rapidly implement improvements and further develop our products. Our product development roadmap focuses on improving our current products, seeking required FDA authorizations, and disrupting other eyecare categories where stakeholders’ needs remain unmet. We believe our product development capabilities and process provide us with a competitive advantage.

Clinical Data

We believe that treatment decisions should be evidence-based and hold ourselves to the highest clinical and ethical standards to build and maintain credibility in the medical community. We are deeply committed to conducting studies to evaluate the safety, effectiveness and durability of treatments using our products, and subjecting the results to the rigorous peer review process for publication in leading journals. Our robust and growing libraries of evidence to support OMNI and TearCare are helping to drive their awareness and adoption, and ultimately advancing patient care in ophthalmology and optometry.

We are currently conducting active and robust clinical trial programs in both POAG and MGD. Our completed, ongoing, and planned clinical trials include several head-to-head RCTs against market leading treatments. We also plan to continue supporting our investigator-initiated trial program.

OMNI Surgical System

OMNI Clinical Program Overview

Building on a solid foundation of completed and ongoing clinical trials, we are investing significant resources to further develop clinical data regarding the use of OMNI. Clinical trial designs for OMNI include both RCTs and retrospective real-world studies, based on our belief that each of these approaches has unique strengths. Since 2018, there have been 15 articles published in peer-reviewed journals for OMNI and its Sight Sciences predicate devices and procedures. Our robust clinical trial program for OMNI intends to include nearly 2,000 subjects across our trials. Our completed trials include ROMEO and GEMINI. ROMEO was used to support OMNI’s indication for use expansion in the U.S. in March 2021 and resulted in two published articles in peer-reviewed journals. GEMINI was a prospective, multi-center, historical control, single-arm, U.S. study.

Table 2: Sight Sciences OMNI Ongoing and Planned Clinical Studies

Name Description

ROMEO Study

The ROMEO study was a multi-center retrospective study conducted from February 2018 through April 2020 and designed to assess safety and effectiveness of OMNI in reducing IOP and hypotensive medication usage in Mild-to-Moderate OAG patients at 12 months post-operation. This study evaluated the clinical effect of ab interno canaloplasty and trabeculotomy performed using OMNI in both Standalone and Combination Cataract procedures, the use of ocular hypotensive medications and safety in patients with OAG. Clinical data from ROMEO supported our March 2021 FDA 510(k) clearance for an expanded indication for use of OMNI.

The study evaluated two different groups of patients based on baseline IOP with different treatment goals: The Elevated IOP Group had a preoperative IOP greater than 18 mmHg and its treatment goal was IOP reduction. The Controlled IOP Group had a preoperative IOP less than or equal to 18 mmHg, with a treatment goal of IOP maintenance and medication reduction. The primary endpoint was defined as the proportion of subjects at 12 months post-operation with IOP between 6 mmHg and 18 mmHg or with a 20% or greater reduction from preoperative baseline IOP, on the same or fewer number of ocular hypotensive medications compared to the preoperative baseline, and with no additional IOP-lowering surgery or laser treatment. IOP of 18 mmHg or below is a well-established benchmark by the clinical community for control of POAG progression and is based on the belief that maintenance of IOP control should be considered a “success” for patients already controlled on medication. For patients not controlled on medication, a 20% reduction in IOP is the recommended primary efficacy endpoint according to FDA guidance for implantable MIGS devices, which we have relied upon in designing our retrospective non-implantable device study. Safety endpoints included ocular adverse events, and efficacy endpoints included secondary surgical interventions. In ROMEO, 77.5% of all patients met the success criteria, including 80.2% of Combination Cataract patients and 72.9% of Standalone patients. There have been two articles published in peer-reviewed journals based on data from ROMEO.

GEMINI Study

The GEMINI study was a prospective, multi-center, single-arm, historic-controlled, interventional clinical trial designed to assess the safety and effectiveness of OMNI in Combination Cataract surgery in patients with Mild-to-Moderate OAG at 12 months postoperatively. The GEMINI study initiated in February 2019, completed enrollment in March 2020 (n=145) and completed final patient 12-month follow up by the end of April 2021. An article published in a peer-reviewed journal in the third quarter of 2021 based on results from GEMINI showed that Combination Cataract MIGS using OMNI resulted in a significant reduction in overall mean IOP from baseline, and in a post hoc analysis, a reduction in the variation and amplitude of mean IOP was observed at each diurnal time point evaluated. In the study, 95% of patients had a diminished peak IOP postoperatively when compared to preoperative measurements. The difference between “high”

and “low” IOP at 12 months reduced an average of 36% compared to preoperative measurements. We expect two additional articles based on data from GEMINI to be published in peer-reviewed journals in 2022.

TearCare System

TearCare Clinical Program Overview

We designed TearCare to comprehensively address meibomian gland disease, which we believe to be the primary underlying cause of evaporative DED. We have developed robust clinical data evaluating TearCare. We have completed one RCT for TearCare (OLYMPIA), have one RCT enrolling patients (SAHARA) and have one additional study in the planning stage (RESTORE). In our completed OLYMPIA RCT, we observed significant improvements in the signs and all symptoms of DED as assessed by an array of measures including both functional and biologic markers, and patient-reported symptoms surveys. We observed TearCare to be safe and well tolerated, with only minor adverse events that resolved without any further treatment. Data from OLYMPIA supported the FDA clearance of TearCare’s expanded indication for use in December 2021. Our two ongoing and planned studies are intended to evaluate the safety and effectiveness of TearCare in reducing signs and symptoms of DED due to MGD. We plan to leverage the results of these studies to support FDA clearances to further expand indications for use of TearCare and to support our patient access strategy.

Table 3: Sight Sciences TearCare Ongoing and Planned Clinical Studies

Name Description

Commercial Approach

We have built a world-class direct sales commercial organization that features professionals and executives with substantial leadership experience from leading ophthalmic product companies. In particular, we have recruited professionals with track records that include launching new technologies, growing primary demand, changing treatment paradigms and securing market access from payors. We believe this expertise is crucial to achieve our market development objectives for interventional Standalone MIGS and MGD treatment. Sales representatives typically have relevant experience across all facets of medical device and/or pharmaceutical sales focused on eyecare to ensure the development of a trusted consultative relationship with our ECPs. As we have continued to develop additionalclinical data and brand recognition, we believe our team has differentiated our product offerings and gained commercial traction through exceptional, highly involved training, support and ongoing professional education. As of December 31, 2021, our overall commercial team consisted of over 100 professionals dedicated to sales, marketing, commercial support, training and professional relations.

We created distinct sales, marketing, and training teams to sell OMNI and TearCare because the products are predominantly sold to different types of customers and require specialized product specific sales expertise and ECP training to integrate our products into their practices. We sell OMNI to facilities where ophthalmic surgeons perform outpatient procedures, mainly ambulatory surgery centers, or ASCs and hospital outpatient departments, or HOPDs. We sell TearCare to optometry and ophthalmology practices.

Our marketing efforts are centered around increasing awareness of our products and presenting clinical study results through leading medical publications and at-large industry and scientific meetings, both directly and through our advisors. We have also partnered with early-adopting ECPs to speak to peers on our behalf through educational forums either in-person or via virtual meetings. Clinical data that demonstrate the benefits of OMNI and TearCare for their authorized uses

will continue to underpin our commercial efforts and we will continue to devote significant resources to conduct new clinical studies and publish articles in peer- reviewed journals.

OMNI

Since the commercial launch of OMNI in February 2018, we have pursued a three-part strategy to gain rapid commercial adoption and simultaneously expand its potential market:

(i)

Target and train the over 3,000 high volume cataract surgeons who are already familiar with MIGS approaches (ab interno access techniques) and have a willingness to trial new technologies;

(ii)

Leverage positive clinical experiences and outcomes to expand the utilization of OMNI among these MIGS-trained surgeons and drive adoption from additional surgeons and facilities; and

(iii)

Educate ECPs on the clinical benefits of interventional Standalone treatments with OMNI for the larger population of adult POAG patients for whom other leading MIGS devices are not indicated.

The majority of our OMNI sales representatives cover dedicated geographic territories or specialized customer segments, such as academic or government institutions, across the U.S. These sales representatives establish new accounts, train new surgeons and operating room personnel and nurture the continuing use of OMNI at existing accounts. We have created a team of Strategic Account Managers, who focus on serving teaching institutions and government facilities, and a team of Glaucoma Clinical Consultants, whose goal is to educate primary care ECPs regarding the potential benefits of OMNI in interventional Standalone procedures in adult patients with POAG. The general ophthalmologists and optometrists who provide primary eyecare services are typically the first to diagnose POAG and deliver first line treatment. We aim to educate these primary care ECPs regarding the clinical benefits and use cases for OMNI as they often have referral relationships with ophthalmic surgeons for patients who require advanced treatment. We seek to increase usage of OMNI among the ophthalmic surgeons who have already been trained and convert those who are not.

We believe our initial commercial efforts for OMNI have been successful and we plan to accelerate growth with the expansion of our team to cover more geographic territories and provide increased support to accounts, as well as roll-out large-scale marketing programs for the interventional Standalone opportunity. Although the vast majority of our sales are in the U.S., we have also begun to sell OMNI in select European countries both on a direct basis and through distributors.

TearCare

We implemented a controlled launch of TearCare in the U.S. in April 2019 with a limited sales effort. We have assembled a proprietary list of over 5,000 practices that are prime targets for our device and, as of December 31, 2021, we had sold TearCare to over 550 eyecare facilities.

While the success of our initial launch has shown that a significant patient-pay market exists for TearCare, market research indicates that improving access to TearCare through Medicare and private payors will accelerate adoption of the product. Currently, no third-party payors have formal policies establishing coverage for procedures using TearCare, although we believe that some payors may agree to provide coverage outside of formal policy based on medical need. As an early step of a comprehensive long-term market development plan, our market access team assists key strategic accounts and their patients in the pursuit of prior authorization approvals and reimbursement claims for TearCare on a case-by-case basis. Simultaneously, we are also continuing to support our customers with patient-pay models, which remains a significant growth opportunity.

Our dedicated commercial team for TearCare consists of sales representatives and leaders, marketing professionals, dedicated trainers, and independent sales representatives. We intend to scale up this team to the extent we achieve key market development and patient access milestones, including completion of clinical trials and our pursuit of FDA clearances for more robust indications for use of TearCare. Our sales representatives collaborate with stakeholders across the practice to train doctors and staff, implement workflow processes and monitor operations to ensure proper integration. As we help customers incorporate the use of TearCare, we have gained insights that enable us to continually improve our selling model. We expect to add new accounts and increase utilization at existing accounts, as we methodically grow our commercial team dedicated to TearCare.

Reimbursement

There are three primary aspects of reimbursement in the United States: coding, coverage and payment. Each aspect is an important determinant of our customers’ ability to obtain appropriate reimbursement.

•

Coding refers to the availability of billing codes for use by healthcare providers to report the provision of medical procedures, and the use of supplies and resources for specific patients, to insurance providers and organizations that make payments for healthcare, commonly referred to as third-party payors. The Healthcare Common Procedure Coding System, or HCPCS, is a national, standardized code set used by providers to capture and report healthcare services and products. This code set consists of two subsystems: Level I, Current Procedural Terminology, or CPT, codes, representing procedures performed, and Level II, commonly referred to as HCPCS codes, representing healthcare products (e.g. devices, drugs, durable medical equipment), supplies and services not captured in the CPT code set. CPT codes are published by the American Medical Association, or AMA, and are used to report medical services and procedures performed in the outpatient setting of care by or under the direction of physicians. HCPCS codes are established and maintained by the Centers for Medicare and Medicaid Services, or CMS, and identify items used in the course of care delivery. Health plans pay outpatient facilities and physicians for services based on submission of a claim using one or more CPT and/or HCPCS codes. CPT codes fall into one of three categories.

•

Category I CPT codes have been approved by the AMA as permanent procedure codes based on a number of factors, including the level of published clinical evidence. They are identified with a five-digit number and official code description. Approved Category I CPT codes have typically been endorsed by relevant medical specialty societies, are consistent with contemporary medical practice, and represent procedures performed by many physicians in clinical practice in multiple locations. Category I codes are only available to procedures for which the technology (e.g., device, drug, test) has been FDA approved/cleared when such a regulatory requirement exists.

•

Category II CPT Codes are supplemental tracking codes used for performance measurement. They are intended to facilitate data collection about quality of care by coding certain services and/or testresults that support performance measures and that have been agreed upon as contributing to good patient care. Some codes in this category may relate to compliance by health care professionals with state or federal law.

•

Category III CPT codes are a temporary set of tracking codes for new and emerging technologies. These codes are designed to facilitate data collection for the assessment of new procedures. Additionally, Category III codes provide a mechanism for payors to value a new procedure. Temporary codes are not automatically assigned Relative Value Units, or RVUs, or weights and, therefore, do not typically have a widely accepted payment rate methodology. To achieve Category III status, a new procedure is required to have either an approved protocol for a study of procedures being performed, support from the specialties that would use the procedure, availability of US peer-reviewed literature, or current clinical trials that outline the effectiveness of the procedure. Once granted, Category III CPT codes expire five years after the initial application was approved, although they can be extended beyond the five-year limit.

•

Level II HCPCS codes are alpha-numeric codes governed by CMS that identify medical products and items or services that are not appropriately designated by another code set (e.g., CPT). Criteria must be met in order to qualify for an HCPCS code, including such requirements as regulatory approval (if necessary), national programmatic need, and a distinct difference from existing HCPCS codes.

•

Coverage refers to decisions made by third-party payors as to whether there is sufficient published clinical evidence to support medical necessity, or to consider a healthcare item or service “reasonable and necessary” (as per Medicare guidelines). Coverage can be established by explicit medical policies that outline specific parameters covering procedures and/or technologies, and under what conditions coverage is permitted, including specific diagnoses, clinical indications and therapeutic prerequisites. Coverage can also be implicit, as when payors are “silent” on a procedure or technology (i.e., no formal policy is developed). In the absence of formal policy, coverage may be granted one of two ways: (1) with no required review, as with long-standing established healthcare items or services, or (2) on a case-by-case

basis via review of each patient’s circumstance, as may be the case with newer procedures/technologies. Each payor can make its own decision as to which procedures or technologies warrant formal policy.

•

Payment refers to the reimbursement rate for a healthcare item or service. The amount paid by third- party payors to providers, including facilities and doctors, for specific procedures and items (e.g., medical devices, drugs, ancillary supplies) is determined by each payor. Payments for professional services under CPT coding are generally determined by the RVUs of a specific billing code. These RVUs identify the time and intensity of the work required, the practice expense incurred and the level of risk related to the procedure. Payors can use their organization-specific formula or conversion factor to translate RVUs into payment rates, or may establish payment by reference to a national Medicare payment amount. Likewise, facility payments are weighted based on the resources (e.g., operating suite time, devices and supplies) needed for the procedure to be performed in the facility setting. Most payment rates are geographically adjusted, taking into account the cost of providing services in different wage index areas across the country. As with procedure payments, payments for healthcare items (e.g., products reported using HCPCS coding) are determined by individual health plans, often based on some form of manufacturer’s invoice or billed charges based on the provider’s mark-up methodology, or based on established fee schedule rates. It is important to recognize that not all reportable codes are separately payable. Some codes are bundled with related items or services and do not have a separate payment allowance.

For further information regarding reimbursement, see “Risk Factors—We may not be able to maintain adequate levels of third-party coverage and payment for procedures in which OMNI is used, and third parties may rescind or modify their coverage related to OMNI. We may not be able to secure any, or adequate levels of, third-party coverage and payment for procedures in which TearCare is used, and even if third parties provide coverage they may rescind or modify their coverage related to TearCare." Our commercial activities are substantially within the United States. We sell OMNI primarily to ASCs and HOPDs, who in turn bill various third-party payors, such as Medicare and private health insurance plans for the healthcare services and resources rendered to treat a patient. TearCare is not currently covered or paid by Medicare or private payors under any formal policy, although some payors may agree to provide case-based coverage outside of a formal policy. Our market access team facilitates patient access to the OMNI and TearCare systems by engaging payors on coverage, coding and payment matters, and by providing support to patients and our customers as they seek reimbursement from payors that do not have positive coverage or those that do not have formal policies in place regarding our products.

Reimbursement for Uses of the OMNI Surgical System

Surgeons are able to use OMNI to sequentially perform two well-established glaucoma procedures, canaloplasty followed by trabeculotomy.

Canaloplasty and trabeculotomy are covered by the Medicare Administrative Contractors, or MACs outside of formal policy, based on a claim-by-claim adjudication. Widespread coverage is important for commercial adoption. Based on POAG prevalence, we estimate that currently over 70% of patients who receive glaucoma treatment using OMNI are covered by Medicare, and that this percentage may decline modestly over time as usage of OMNI expands to include patients with a broader range of OAG progression. Private payor coverage policies for canaloplasty and trabeculotomy vary. Some private payors, including numerous Blue Cross Blue Shield plans, have published medical policies that consider canaloplasty medically necessary for the treatment of glaucoma, though specific criteria for coverage may vary depending on the payor. Additionally, as with many healthcare items and services, some health plans cover the procedures performed using the OMNI surgical system outside of a formal policy. Where coverage is less consistent or is limited, as is the case with certain private payors, our market access team works with payors directly and with customers to facilitate patient access to our solutions and verify that appropriate reimbursement can be obtained. We have established and continue to build a substantial library of clinical trial data and published articles to directly address the needs of payors. We believe that the results from our completed, in-progress and planned clinical trials and subsequent accompanying peer-reviewed articles will help to expand and solidify coverage of canaloplasty and the use of OMNI. We estimate that, as of December 31, 2021, approximately 75% of people with medical benefit coverage have access to the canaloplasty procedures and/or OMNI specifically. We continue to proactively engage with the remaining key national and regional payors currently not covering canaloplasty and/or OMNI to seek reversals of their current non-covered policies.

Virtually all sales of OMNI in the U.S. are to ASCs and HOPDs. Surgeons may use OMNI to perform canaloplasty and trabeculotomy sequentially, with CPT code 66174 used to report the procedure. Per Medicare and many private payor payment policies, when certain procedures are performed in the ASC setting, such as cataract surgery and canaloplasty,

multiple procedure payment reduction rules apply. Therefore, when a canaloplasty is performed with cataract surgery on the same patient on the same day, payment of the lower-cost procedure (most commonly the cataract procedure) is reduced by 50%. Multiple procedure payment reduction rules also typically apply to professional services. Physicians are likely to be paid at a reduced rate for lower valued procedures when performed concomitantly. In the HOPD setting, Medicare procedures performed using OMNI as well as cataract procedures, are paid under comprehensive ambulatory payment classifications, or C-APCs. In these circumstances, the highest valued code is paid at 100%, with payment for additional procedures performed during the same operative session bundled into the single highest payment rate. Many commercial payers use a similar payment methodology, but payment rules can vary across health plans, particularly across plan types (e.g., HMO, PPO, POS).

In the ASC setting, the 2022 Medicare national unadjusted average facility payment rate for CPT 66174 is $1,917.31. In the HOPD setting, the 2022 Medicare national unadjusted average facility payment rate for CPT66174 is $3,999.59. These payments are classified as comprehensive C-APCs, therefore in the HOPD setting, the highest valued code will be paid and other C-APC classified procedures will be bundled into the highest paid procedure. Regardless of facility setting, the Medicare national unadjusted physician payment rate for CPT 66174 is $738.33. Based on customer feedback, we believe the rates for facility and physician reimbursement in both settings reflect attractive and reasonable payments to cover all of our customers’ costs and economic needs related to glaucoma treatments using OMNI for both Standalone and Combination Cataract procedures.

While commercialization of OMNI has primarily been focused on the U.S., we have also begun international commercialization efforts. Outside the U.S., we have made the most progress in the United Kingdom, where we have hired a local commercial team to promote OMNI to health care professionals and are establishing a market access team as well. In Germany, we have established and trained an ophthalmic distributor with successful experience commercializing devices approved to perform canaloplasty procedures. Although Germany employs a single-payor health system and national MIGS procedure codes which include canaloplasty and trabeculotomy, coverage decisions are decentralized among Germany's 17 regions. To date, canaloplasty and trabeculotomy procedures are covered in all 17 regions and our distributor is working towards educating health care providers and hospital personnel across all regions on how to appropriately procure and submit claims for reimbursement from the German health insurance system via the decentralized Physician’s Associations (Kassenärztliche Vereinigung) to facilitate access to OMNI for patients and ECPs. As we expand into other countries, we will establish reimbursement strategies that are appropriate for each local market. In the United Kingdom, we have secured access for OMNI at 12 hospitals to date and are continuing our efforts to obtain access at an additional 7 hospitals in 2022 across both the combination cataract and standalone procedures.

Reimbursement for Uses of the TearCare System

TearCare is not currently covered by Medicare or private payors via formal medical policy, although some payors may agree to provide coverage and payment outside of formal policy. We received FDA clearance for an expanded indication for the use of TearCare in December 2021. TearCare is now indicated for the application of localized heat therapy in adult patients with evaporative dry eye disease due to meibomian gland dysfunction, when used in conjunction with manual expression of the meibomian glands. We believe that the current standard of care (representing over 95% of the existing market), which primarily consists of over-the-counter artificial tears or lubricating eyedrops, and prescription eyedrops, does not treat the root cause of MGD. We believe TearCare, as cleared by the FDA for an expanded indication for use, has the potential to offer a better standard of care for evaporative dry eye patients and reduced overall costs for payors.

Despite the presence of a large and growing patient-pay market for TearCare as shown in our controlled launch, we believe that improving access to TearCare through positive coverage decisions by Medicare and private payors will help grow the market for the device. We are pursuing a vigorous market access development plan to obtain more favorable policies from Medicare and private payors for procedures using TearCare in the U.S.

Category III CPT code 0563T, which became effective January 1, 2020, describes the heating of meibomian glands using a wearable open-eye device and manual evacuation of meibomian glands. This code allows providers to pursue reimbursement claims and payors to establish payment rates for the procedure. Prior to formal coverage decisions or a permanent Category I code, third-party payors may cover procedures billed with temporary Category III codes on a case-by-case basis.

We have begun to generate clinical data to support positive coverage decisions from Medicare and private payors. In September 2021, an article discussing results from our OLYMPIA RCT was published in Cornea The Journal of Cornea

and External Disease. This randomized controlled trial compared treatment using TearCare to the leading alternative MGD treatment device on the market. In the study, we observed that a single use of TearCare was associated with improvement in each of the signs and symptoms of DED within two weeks of treatment in subjects with MGD. In a post-hoc analysis we also observed that a greater proportion of subjects in the TearCare group reported better symptomatic relief relative to the comparator group as assessed by patient reported outcomes.

Our comprehensive long-term strategy to improve patient access to TearCare includes the following key initiatives:

•

Demonstrate the effectiveness, safety and durability of TearCare with rigorous clinical data. Building on supportive data from completed studies, our upcoming clinical program for TearCare, including the SAHARA and RESTORE studies, aims to advance the development of TearCare for the signs and symptoms of DED due to MGD with comparative trial designs established to evaluate the effectiveness and durability of treatment with TearCare, which our research suggests would be the primary criteria for payors to decide coverage determinations. SAHARA, which commenced in 2021, features a trial design directly informed by a masked panel of medical directors from eight payors. This study is an RCT evaluating TearCare versus the leading DED prescription eyedrop, and will compare effectiveness and safety, as well as assess durability of effect through a 24-month follow up period.

•

Augment library of published articles on TearCare. We plan to facilitate publication of numerous articles describing the results of our studies of TearCare in peer-reviewed journals. We collaborate with our advisors to design and conduct our studies, and ensure findings undergo the rigorous peer review process for publication in leading ophthalmology and optometry journals, recognizing that third-party payors base coverage decisions on reviews of the published medical literature.

•

Support coverage applications. Our market access team assists key strategic accounts in their submission of high quality reimbursement requests for uses of TearCare. Our market access team also works with customers and patients to navigate the reimbursement process with third-party payors, including prior authorization approvals and appeals for denial of coverage or low payment. As more claims for uses of TearCare are accepted, we will work with third-party payors to formalize coverage decisions to streamline the coverage and payment processes.

•

Convert to permanent Category I CPT code. We plan to leverage our clinical studies, peer-reviewed publications, society and medical community support, and utilization / real world reimbursement claims data to support conversion of our Category III CPT code for TearCare to a permanent Category I CPT code. Although Medicare and private payors may cover Category III CPT codes that meet their coverage criteria, we believe AMA approval of a permanent Category I CPT code for uses of TearCare, along with potential enhanced indications for use, will bolster our efforts to gain positive coverage determinations combined with appropriate reimbursement from Medicare and private payors.

Competition

We believe our focus on developing and marketing intuitively designed products that are intended to restore the eye’s natural physiological function by addressing underlying causes of eye disease will be an important factor in our future success. The medical device and pharmaceutical industries are intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. We compete with medical device and pharmaceutical companies that develop and commercialize products for eye conditions. Notable competitors with approved MIGS products include Glaukos, Alcon/Ivantis and AbbVie/Allergan, while AbbVie/Allergan, Novartis, Johnson & Johnson, and Alcon have notable approved products to treat DED. Other competitors with approved ophthalmic products in glaucoma and DED include Aerie Pharmaceuticals, Bausch and Lomb, MST, New World Medical, Nova Eye, Kala Pharmaceuticals, Oyster Point and Sun Pharmaceutical Industries. Notable competitors seeking approval for new MIGS and sustained release glaucoma treatments include Glaukos, Ocular Therapeutix, and iSTARMedical, and in pharmaceutical DED treatments include, among others, Aldeyra Therapeutics, Bausch and Lomb, Ocular Therapeutix and Tarsus Pharmaceuticals. Some of our competitors are larger, well-capitalized companies with greater current market share and resources. Consequently, they can spend more on product development, marketing, sales and other product initiatives than we can. We also compete with several smaller medical device companies that have single products or a limited range of products. Some of our competitors have:

•

Significantly greater name recognition;

•

Broader or deeper relations with healthcare professionals, customers and third-party payors;

•

More established distribution networks;

•

Additional lines of products and the ability to offer rebates or bundle products to offer greater discounts or other incentives to attract adoption;

•

Greater experience in conducting research and development, manufacturing, clinical trials, marketing and obtaining regulatory clearance or approval for products; and

•

Greater financial and human resources for product development, sales and marketing and patent and other intellectual property litigation.

We compete primarily on the basis that our medical devices are able to treat patients with prevalent eye diseases safely and effectively. Our continued success depends on our ability to:

•

Develop innovative, proprietary technology and products that can cost-effectively address significant clinical needs;

•

Obtain and maintain regulatory clearances or approvals for the use of our products;

•

Obtain and maintain favorable reimbursement decisions relating to the use of our products;

•

Demonstrate clinical safety and effectiveness in our sponsored and third-party trials and studies;

•

Attract and retain skilled research and development and sales personnel; and

•

Successfully market and sell products.

Manufacturing

On January 14, 2021, we entered into a Supply Agreement, or the Peter’s Supply Agreement, with Peter’s Technology (Suzhou) CO LTD., or PTCS, a Chinese subsidiary of Peter’s Co., Ltd., a Taiwan-based contract manufacturer. In February 2021, PTCS began to produce commercially saleable OMNI units for us at its Suzhou City, China production facility. Currently Peter's is the sole contract manufacturer of OMNI production and we plan to have production availability with an additional high-volume contract manufacturer with U.S. production facilities by the end of the second quarter of 2022. The Peter’s Supply Agreement governs the assembly and supply of OMNI by PTCS, pursuant to which PTCS purchases components from our approved suppliers for assembly and we make purchases from PTCS on a purchase order basis. The initial term of the three year Peter’s Supply Agreement expires January 14, 2024. The Peter’s Supply Agreement automatically renews for additional one year periods if neither party provides notification that they intend to terminate the agreement within 90 days of the term ending. We have the right to terminate the agreement without cause during its term by providing 180 days’ advance written notice, or with 30 days’ written notice with any material agreement default by PTCS.

For the production of TearCare, we currently have supply arrangements with separate medical device manufacturers. For the production of TearCare’s SmartLids, we partner with Peter's Technology, and for TearCare’s SmartHubs, we have a supply arrangement with Philips-Medisize Costa Mesa (California).

We directly engage with several third-party suppliers for key components used in our products. We believe that our approved third-party suppliers will be adequate to meet our current and anticipated manufacturing needs. We do not currently plan to manufacture our products or any related components ourselves.

Manufacturing facilities that produce medical devices or their component parts intended for distribution world-wide are subject to regulation and periodic unannounced inspection or audits by the FDA and other domestic and international regulatory agencies or notified bodies. In the United States, any products we sell are required to be manufactured in compliance with the FDA’s Quality System Regulation, which covers the methods used in, and the facilities used for, the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products.

The distribution of our products is handled directly through a third-party logistics provider. Our finished goods are shipped from our contract manufacturers to a local gamma sterilization facility after which they are shipped to distribution facilities and, ultimately, to our customers.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our current and future products and product candidates, novel discoveries, product development technologies and know-how; to operate without infringing on the proprietary rights of others; and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, seeking to obtain or in-licensing U.S. and foreign patents and patent applications related to our proprietary technology that are important to the development and implementation of our business. We seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. We file new patent applications as we conduct research and development, initiate new programs, and monitor the activities of others. We also rely on other approaches to protecting our proprietary position, such as trademarks, trade secrets, know-how, and/or continuing technological innovation to develop and maintain our proprietary position.

The patent positions of medical device companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent may be challenged in courts after issuance. Moreover, many jurisdictions permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or at all, whether the claims of any patent applications, should they issue, will cover our products or product candidates, or whether the claims of any issued patents will provide sufficient protection from competitors or otherwise provide any competitive advantage.

We cannot be certain of the priority of inventions covered by our patents and pending patent applications, in part because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months or potentially even longer, and because publication of discoveries in the scientific or patent literature often lags behind actual discoveries and patent application filings. Accordingly, we may not have been the first to invent the subject matter disclosed in some of our patents and patent applications or the first to file patent applications covering such subject matter.

Patent Term

Generally, issued patents are granted a term of 20 years from the earliest claimed non-provisional filing date. In certain instances, U.S. patent term can be adjusted to recapture a portion of delay by the U.S. Patent & Trademark Office, or USPTO, in examining the patent application (patent term adjustment) or extended to account for term effectively lost as a result of the FDA regulatory review period (patent term extension), or both. In some cases, the term of a U.S. patent may be shortened by terminal disclaimer, such that its term is reduced to end with that of an earlier-expiring patent.

Trade Secrets

In addition to patents, we rely on or may in the future rely on trade secrets and know-how to develop and maintain our competitive position. We typically rely on or may in the future rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. It is our policy to protect trade secrets and/or know-how by establishing confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and collaborators. These agreements provide that all confidential information developed or made known during the course of an individual or entity’s relationship with us must be kept confidential during and after the relationship. These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, shall be our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.

Patents

As of December 31, 2021, we owned 30 issued U.S. patents, 45 issued patents outside the U.S. (which includes five issued European patents and their national validations), 19 pending U.S. non-provisional patent applications, 18 pending foreign patent applications and two pending Patent Cooperation Treaty patent applications. Our issued patents include claims directed to devices and methods for canaloplasty and/or trabeculotomy, ocular implants and related methods, the TearCare apparatus and methods of using the TearCare apparatus, components of the TearCare apparatus (including the SmartHub and SmartLids) and methods of their use, the TearCare apparatus in combination with an eyelid compression instrument and methods of their use, and methods of using the TearCare apparatus with patients wearing contact lenses.

Subject to payment of required maintenance fees, annuities, and other charges, our issued U.S. patents have expiration dates between 2027 and 2037, with six of our issued U.S. patents having expiration dates before 2030, 23 having expiration dates between 2031 and 2035, and the remaining one expiring in 2037, in each case exclusive of possible patent term extensions. Of our 19 pending U.S. non-provisional patent applications, one was filed in 2016, one was filed in 2018, three were filed in 2019, four were filed in 2020, and 10 were filed in 2021. Our pending U.S. non-provisional patent applications, if issued, have expected expiration dates between 2026 and 2041, exclusive of any possible patent term adjustments or patent term extensions.

The foreign jurisdictions where we own issued patents include: Australia, China, France, Germany, Italy, Japan, Spain, Switzerland, and the United Kingdom. Subject to payment of required annuities and other charges, these foreign patents have expiration dates between 2027 and 2035. We have pending patent applications in Australia, Brazil, Canada, China, Europe, Hong Kong, and Japan which, if issued, have expected expiration dates between 2032 and 2039.

As of December 31, 2021, we owned eight U.S. trademark registrations, one German trademark registration and one pending E.U. trademark application.

For information regarding the risks related to our intellectual property, please see the section titled “Risk Factors—Risks Related to Our Intellectual Property.”

Government Regulation

Our products and our operations are subject to extensive regulation by the U.S. Food and Drug Administration, or FDA, and other federal, state, and local authorities in the United States, as well as comparable authorities in foreign jurisdictions. Our products are subject to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.

United States Regulation

The FDA regulates, among other things, the development, design, non-clinical and clinical testing, manufacturing, safety, effectiveness, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export and post-marketing surveillance of medical devices in the United States to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each new or significantly modified medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, or approval of a premarket approval, or PMA, application. Both the 510(k) clearance and PMA processes can be resource intensive, expensive, and lengthy.

Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III— depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness. Class I devices are those for which safety and effectiveness can be assured by adherence to the FDA’s general controls for medical devices, which include compliance with the applicable portions of FDA’s current good manufacturing practices for devices, as reflected in the Quality System Regulation, or QSR, establishment registration and device listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional materials. Some Class I devices, also called Class I reserved devices, also require premarket clearance by the

FDA through the 510(k) premarket notification process described below. Most Class I devices are exempt from the premarket notification requirements.

Class II devices are subject to the FDA’s general controls, and any other special controls deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, special labeling requirements, post-market surveillance, patient registries and FDA guidance documents.

Most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Class III devices include devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, requiring approval of a PMA. Due to the level of risk associated with Class III devices, the FDA’s general controls and special controls alone are insufficient to assure their safety and effectiveness. Devices placed in Class III general require the submission of a PMA application demonstrating the safety and effectiveness of the device, which must be approved by the FDA prior to marketing, or the receipt of a 510(k) de novo classification, which provides for the reclassification of the device in Class I or II. The PMA approval process is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMA application typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.

If a new medical device does not qualify for the 510(k) premarket notification process because no predicate device to which it is substantially equivalent can be identified, the device is automatically classified into Class III. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification process. This process allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. The FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk and requires PMA or that general controls would be inadequate to control the risks and special controls cannot be developed.

Obtaining FDA marketing authorization, de novo down-classification, or approval for medical devices is expensive and uncertain, and may take several years, and generally requires significant scientific and clinical data.

Some pre-amendment devices are unclassified, but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed. Our currently marketed OMNI and TearCare products are regulated as Class II devices subject to 510(k) clearance.

Investigational Device Process

Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission. In the United States, absent certain limited exceptions, human clinical trials intended to support medical device clearance or approval or to determine safety and effectiveness of a device for an investigational use must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk,” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is

scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of subjects. Generally, clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the study protocol and informed consent are approved by appropriate institutional review boards at the clinical trial sites. There can be no assurance that submission of an IDE will result in the ability to commence clinical trials, and although the FDA’s approval of an IDE allows clinical testing to go forward for a specified number of subjects, it does not bind the FDA to accept the results of the trial as sufficient to prove the product’s safety and effectiveness, even if the trial meets its intended success criteria.

If the device under evaluation does not present a significant risk to human health, then the device sponsor is not required to submit an IDE application to the FDA before initiating human clinical trials, but must still comply with abbreviated IDE requirements when conducting such trials. A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

Regardless of the degree of risk presented by the medical device, clinical studies must be approved by, and conducted under the oversight of, an Institutional Review Board, or IRB, for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including the following:

•

The FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold;

•

Patients do not enroll in clinical trials at the rate expected;

•

Patients do not comply with trial protocols;

•

Patient follow-up is not at the rate expected;

•

Patients experience adverse events;

•

Patients die during a clinical trial, even though their death may not be related to the products that are part of the trial;

•

Device malfunctions occur with unexpected frequency or potential adverse consequences;

•

Side effects or device malfunctions of similar products already in the market that change the FDA’s view toward approval of new or similar PMAs or result in the imposition of new requirements or testing;

•

Institutional review boards and third-party clinical investigators may delay or reject the trial protocol;

•

Third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, investigator agreement, investigational plan, good clinical practices, the IDE regulations, or other FDA or IRB requirements;

•

Third-party investigators are disqualified by the FDA;

•

We or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans, or otherwise fail to comply with the IDE regulations governing responsibilities, records, and reports of sponsors of clinical investigations;

•

Third-party clinical investigators have significant financial interests related to us or our study such that the FDA deems the study results unreliable, or the company or investigators fail to disclose such interests;

•

Regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials;

•

Changes in government regulations or administrative actions;

•

The interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; or

•

The FDA concludes that our trial design is unreliable or inadequate to demonstrate safety and effectiveness.

510(k) Clearance Process

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent,” as defined in the FDCA, to a legally marketed predicate device.

A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process. A device is considered to be substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics; or (ii) different technological characteristics, but the information provided in the 510(k) submission demonstrates that the device does not raise different questions of safety or effectiveness than the predicate device.

Before the FDA will accept a 510(k) premarket notification for substantive review, the FDA will first assess whether the submission satisfies a minimum threshold of acceptability. If the FDA determines that the 510(k) submission lacks necessary information for substantive review, the FDA will issue a “Refuse to Accept” letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination regarding substantial equivalence. An applicant must submit the requested information before the FDA will proceed with additional review of the submission. If a 510(k) submission is accepted for substantive review, the Medical Device User Fee Amendments sets a performance goal of 90 days for FDA review of a 510(k) submission, but the review time can be delayed if FDA raises questions or requests addition information during the review process. As a practical matter, clearance often takes longer, and clearance is never assured. Thus, as a practical matter, clearance often takes longer than 90 days. Although many 510(k) premarketnotifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.

If the FDA determines that the device is substantially equivalent to a predicate device, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous requirements of the PMA approval process, or can request a risk-based classification determination for the device

in accordance with the “de novo” process, which is a route to market for certain novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

Medical devices can only be marketed for the indications for use for which they are cleared or approved. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval or de novo reclassification. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k), de novo request or a PMA in the first instance, but the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained or a de novo request is granted. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.

Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products. For example, in November 2018, FDA officials announced steps that the FDA intended to take to modernize the premarket notification pathway under Section 510(k) of the FDCA. Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates. These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old. These proposals have not yet been finalized or adopted, although the FDA may work with Congress to implement such proposals through legislation.

More recently, in September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. The FDA has developed and maintains a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as recommended testing methods, where feasible.

Ongoing Regulation by the FDA

Even after the FDA permits a device to be marketed, numerous and pervasive regulatory requirements continue to apply. These include:

•

Establishment registration and device listing with the FDA;

•

QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, supplier/contractor selection, compliant handling, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;

•

Labeling regulations, advertising and promotion requirements, restrictions on sale, distribution or sale of a device, each including the FDA prohibition against the promotion of products for any uses other than those authorized by the FDA, which are commonly known as “off-label” uses;

•

The Medical Device Reporting, or MDR, regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

•

Medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

•

Recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death;

•

An order of repair, replacement, or refund;

•

Device tracking requirements; and

•

Post-market study and surveillance requirements.

After a device receives 510(k) clearance, any modification that could significantly affects its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) or possibly a PMA. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with our determination not to seek a new 510(k) clearance, the FDA may retroactively require us to seek 510(k) clearance or possibly a PMA. The FDA could also require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or a PMA is obtained. Also, in these circumstances, we may be subject to significant regulatory fines and penalties.

Some changes to an approved PMA device, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new PMA application or PMA supplement, as appropriate, before the change can be implemented. Supplements to a PMA often require the submission of the same type of information required for an original PMA application, except that the supplement is generally limited to that information needed to support the proposed change from the device covered by the original PMA. The FDA uses the same procedures and actions in reviewing PMA supplements as it does in reviewing original PMA applications.

FDA regulations require us to register as a medical device manufacturer with the FDA. Additionally, some states also require medical device manufacturers and/or distributors doing business within the state to register with the state or apply for a state license, which could subject our facility to state inspection as well as FDA inspection on a routine basis for compliance with the QSR and any applicable state requirements. These regulations require that we manufacture our products and maintain related documentation in a prescribed manner with respect to manufacturing, testing and control activities.

Manufacturing processes for medical devices are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device master file, device history file, and complaint files. As a manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA. Failure to maintain compliance with the QSR requirements could result in the shutdown of, or restrictions on, manufacturing operations and the recall or seizure of marketed products, which would have a material adverse effect on our business. The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:

•

Warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

•

Recalls, withdrawals, or administrative detention or seizure of our products;

•

Operating restrictions or partial suspension or total shutdown of production;

•

Refusing or delays in processing, clearing, or approving submissions or applications for new products or modifications to existing products;

•

Suspension or withdrawal of 510(k) clearances or PMA approvals that have already been granted;

•

FDA refusal to issue certification to foreign governments needed to export our products for sale in other countries; or

•

Criminal prosecution.

Our facilities, records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. Failure to comply with the applicable United States medical device regulatory requirements could result in, among other things, warning letters, untitled letters, fines, injunctions, consent decrees, civil penalties, unanticipated expenditures, repairs, replacements, refunds, recalls or seizures of products, operating restrictions, total or partial suspension of production, the FDA’s refusal to issue certificates to foreign governments needed to export products for sale in other countries, the FDA’s refusal to grant future premarket clearances or approvals, withdrawals or suspensions of current product clearances or approvals and criminal prosecution.

Regulation of Medical Devices in the European Union

The European Union, or EU, has adopted specific directives regulating the design, manufacture, clinical investigations, conformity assessment, labeling and adverse event reporting for medical devices. EU directives must be implemented into the national laws of the EU member states and national laws may vary from one member state to another.

Until May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC, or the Medical Devices Directive, which have been repealed and replaced by Regulation (EU) No 2017/745, or the Medical Devices Regulation. Our current certificates have been granted under the Medical Devices Directive whose regime is described below. However, as of May 26, 2021, some of the Medical Devices Regulation requirements apply in place of the corresponding requirements of the Medical Devices Directive, with regard to registration of economic operators and of devices, post-market surveillance and vigilance requirements. Pursuing marketing of medical devices in the EU will notably require that our device be certified under the new regime set forth in the Medical Devices Regulation when our current certificates expire on May 26, 2024.

Medical Devices Directive

Under the Medical Devices Directive, all medical devices placed on the market in the EU must meet the relevant essential requirements laid down in the Medical Devices Directive, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others. In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner. The European Commission has adopted various standards applicable to medical devices. These include standards governing common requirements, such as sterilization and safety of medical electrical equipment and product standards for certain types of medical devices. There are also harmonized standards relating to design and manufacture. While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the essential requirements as a practical matter. Compliance with a standard developed to implement an essential requirement also creates a rebuttable presumption that the device satisfies that essential requirement.

To demonstrate compliance with the essential requirements laid down in Annex I to the Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification. As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. A conformity assessment procedure generally requires the intervention of a notified body. Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market. A notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements). If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.

Notified body certificates of conformity are valid for a fixed duration (which shall not exceed five years). Throughout the term of the certificate, the manufacturer will be subject to periodic surveillance audits to verify continued compliance with the applicable requirements. In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s).

Medical Devices Regulation

The regulatory landscape related to medical devices in the EU recently evolved. On April 5, 2017, the Medical Devices Regulation was adopted with the aim of ensuring better protection of public health and patient safety. The Medical Devices Regulation establishes a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensure a high level of safety and health while supporting innovation. Unlike the Medical Devices Directive, the Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law. This aims at increasing harmonization across the EU.

The Medical Devices Regulation became effective on May 26, 2021. The new regulation among other things:

•

strengthens the rules on placing devices on the market (e.g. reclassification of certain devices and wider scope than the Medical Devices Directive) and reinforces surveillance once they are available;

•

establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

•

establishes explicit provisions on importers’ and distributors’ obligations and responsibilities;

•

imposes an obligation to identify a responsible person who is ultimately responsible for all aspects of compliance with the requirements of the new regulation;

•

improves the traceability of medical devices throughout the supply chain to the end-user or patient through the introduction of a unique identification number, to increase the ability of manufacturers and regulatory authorities to trace specific devices through the supply chain and to facilitate the prompt and efficient recall of medical devices that have been found to present a safety risk;

•

sets up a central database (Eudamed) to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and

•

strengthens the rules for the assessment of certain high-risk devices, , such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.

Devices lawfully placed on the market pursuant to the Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled. In particular, the certificate in question must still be valid. However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the Medical Devices Regulation, in particular the obligations described below.

The Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (Eudamed), unless they have already registered. The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the person or persons responsible for regulatory compliance. The new Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier, or UDI, database. These new requirements aim at ensuring better identification and traceability of the devices. Each device – and as applicable, each package – will have a UDI composed of two parts: a device identifier, or UDI-DI, specific to a device, and a production identifier, or UDI-PI, to identify the unit producing the device. Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date. The obligations for registration in Eudamed will become applicable at a later date (as Eudamed is not yet fully functional). Until Eudamed is fully functional, the corresponding provisions of the Medical Devices Directive continue to apply for the purpose of meeting the obligations laid down in the provisions regarding exchange of information, including, and in particular, information regarding registration of devices and economic operators.

All manufacturers placing medical devices on the market in the EU must comply with the EU medical device vigilance system which has been reinforced by the Medical Devices Regulation. Under this system, serious incidents and Field Safety Corrective Actions , or FSCAs, must be reported to the relevant authorities of the EU member states. These reports will have to be submitted through Eudamed – once functional – and aim to ensure that, in addition to reporting to the relevant authorities of the EU member states, other actors such as the economic operators in the supply chain will also be informed. Until Eudamed is fully functional, the corresponding provisions of the Medical Devices Directive continue to apply. A serious incident is defined as any malfunction or deterioration in the characteristics or performance of a device made available on the market, including use-error due to ergonomic features, as well as any inadequacy in the information supplied by the manufacturer and any undesirable side-effect, which, directly or indirectly, might have led or might lead to the death of a patient or user or of other persons or to a temporary or permanent serious deterioration of a patient's, user's or other person's state of health or a serious public health threat. Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices. For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

The advertising and promotion of medical devices is subject to some general principles set forth in EU legislation. According to the Medical Devices Regulation, only devices that are CE marked may be marketed and advertised in the EU in accordance with their intended purpose. Directive 2006/114/EC concerning misleading and comparative advertising and Directive 2005/29/EC on unfair commercial practices, while not specific to the advertising of medical devices, also apply to the advertising thereof and contain general rules, for example requiring that advertisements are evidenced, balanced and not misleading. Specific requirements are defined at national level. EU member states’ laws related to the advertising and promotion of medical devices, which vary between jurisdictions, may limit or restrict the advertising and promotion of products to the general public and may impose limitations on promotional activities with healthcare professionals.

Many EU member states have adopted specific anti-gift statutes that further limit commercial practices for medical devices, in particular vis-à -vis healthcare professionals and organizations. Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on medical device manufacturers. Certain countries also mandate implementation of commercial compliance programs.

The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Other countries, such as Switzerland, have entered into Mutual Recognition Agreements and allow the marketing of medical devices that meet EU requirements.

Brexit

Following a national referendum and enactment of legislation by the government of the United Kingdom, or the UK, the UK formally withdrew from the EU on January 31, 2020, commonly referred to as “Brexit”, and, following the expiry of the Brexit transitional period on December 31, 2020, the UK now operates under a distinct regulatory regime and certain EU laws now only apply to the UK in respect of Northern Ireland (as laid out in the Protocol on Ireland and Northern Ireland). The Medicines and Healthcare products Regulatory Agency, or MHRA, is now the UK’s standalone regulator. Although the UK and EU have now reached an agreement on its future trading relationship (implemented in the EU-UK Trade and Cooperation Agreement from January 1, 2021, or TCA), the agreement does not cover all regulatory areas regarding medical devices, which may be subject to future bilateral discussions going forward and could further change the relationship between the UK and the EU in this regard.

EU laws which were directly applicable before the end of the transitional period or have been. transposed into UK law through secondary legislation continue to be applicable as “retained EU law.” However, new legislation such as Medical Devices Regulation (Regulation 2017/745) will not be applicable. The UK government has introduced a new Medicines and Medical Devices Act which seeks to address regulatory gaps through implementing regulations and delegated powers covering the fields of human medicines, clinical studies of human medicines, and medical devices.

Significantly, under the TCA there is no mutual recognition of regulatory regimes and certifications between the EU and the UK. CE marks issued by EU-based notified bodies will continue to be recognized by the UK until June 30, 2023, but from July 1, 2023, new devices placed on the Great Britain market will need to conform with the new UK Conformity Assessment, or UKCA, marking requirements. Since January 1, 2021, medical devices placed on the market in the UK must be registered with the MHRA, following a grace period ranging from four to 12 months. Manufacturers based outside the UK will also need to appoint a UK Responsible Person (which may be an individual or a corporate entity). Only a manufacturer established in the UK or a UK Responsible Person will be able to place a device on the market in Great Britain. Under the terms of the Protocol on Ireland and Northern Ireland, products placed on the market in Northern Ireland will continue to be subject to the European Union regulatory regime. A public consultation by the MHRA was opened until end of November 2021 on the post-Brexit regulatory framework for medical devices and diagnostics. The consultation proposes amendments to the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the Medical Devices Directive), in particular to create a new access pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform in vitro diagnostic regulation, and foster sustainability through the reuse and remanufacture of medical devices. The regime is expected to come into force in July 2023, coinciding with the end of the acceptance period for EU CE marks in Great Britain, subject to appropriate transitional arrangements. The consultation indicated that the MHRA will publish guidance in relation to the changes to the regulatory framework and may rely more heavily on guidance to add flexibility to the regime.

Healthcare Fraud and Abuse Laws

In the United States, we are subject to a number of federal and state healthcare regulatory laws that restrict business practices in the healthcare industry. These laws include, but are not limited to, federal and state anti- kickback, false claims, transparency and other healthcare fraud and abuse laws.

The U.S. federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value, including cash, improper discounts, and free or reduced price items and services. Among other things, the Anti-Kickback Statute has been interpreted to apply to arrangements between medical device manufacturers on the one hand and prescribers and purchasers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. The government can exercise enforcement discretion in taking action against unprotected activities. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The majority of states also have anti- kickback laws, which establish similar prohibitions, and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers and self-pay patients.

The federal false claims, including the civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Moreover, a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a federal healthcare program.

The federal Health Insurance Portability and Accountability Act of 1996 created additional federal criminal statutes that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S.

federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, such obligations will include payments and other transfers of value provided in the previous year to additional healthcare professionals, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants and certified nurse midwives.

SGHT US Equity

SGHT · 10-K · period ended 2021-12-31

Item 1. Business

SGHT US Equity☆

SGHT · 10-K · period ended 2021-12-31

Item 1. Business

SGHT US Equity