If you have Shadowheart in your party, give Astarion Blessing of the Trickster.
I also turn off all the torches/fires around Dammon first before attempting to sneak around in that area.
So, light affects hiding, ok. But he is facing 180 degrees away from me. Programmatically, do NPCs have eyes in the back of their heads, so to speak?
If it's not that, then the red cones might be broken like Crimsonrider suggested. The area is very clear of sight cones after distracting with cat form.