Q2 2020 Senseonics Holdings Inc Earnings Call
[music].
Good morning, welcome to send Siani second quarter 2020, <unk> earnings Conference call.
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I'd now like to turn the conference over to Lynn Lewis Investor Relations. Please go ahead.
Thank you very much and welcome to Cynthiana second quarter.
2020 earnings call. This is when I left from the get Martin Group before you begin today, let me remind you that the company's remarks include forward looking statements. These statements reflect management's expectations about future events operating plan regulatory matter product enhancement company performance and other matters and speak only as of the date hereof. These forward look.
These statements involve a number of risks and uncertainties a list of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is detailed under risk factors and elsewhere in our annual report on form 10-K for the year ended December 31st 2019, our 10-Q for the quarter ended.
Like June 30, 2020, and our other reports filed with the FCC. These documents are available in the Investor Relations section her website at Www Dot fancy Onyx dotcom, we undertake no obligation to update publicly or by Stifel. These forward looking statements for any reason, except as required by law also on this call we will be disks.
Nothing or 2020 outlook in light of the Cobot 19 pandemic 2020 financial guidance was suspended on March 26, 2020 on this call we will be providing investors with U.S. GAAP net revenue and gross revenue measures to provide meaningful supplemental information regarding our performance and provide better transparency on the impact of ramp.
<unk> and the ever since bridge program in accordance with U.S. GAAP Fancy Onyx reports revenue and its financial statements on a net basis, which includes gross to net reductions primarily related to the ever since bridge program gross revenue measures do not reflect the gross to net reductions and accordingly may be considered to be non-GAAP financial measures. These.
All measures are not intended to be considered an isolation or as a substitute for or superior to the financial information prepared and presented in accordance with U.S. gap and since the Onyx non-GAAP measures maybe different from non-GAAP measure used by other companies for more information on these non-GAAP financial measures.
Please see the reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures and this afternoons earnings release, which is available on our corporate web site SNC Onyx Dot com.
Joining me from Cynthiana, there, Tim Good now President and Chief Executive Officer, and net Dresser, Chief Financial officer with that I'd like to turn the call over to Tim Good now President and CEO Tim.
Thank you land and thank you all for joining us before we begin today I'd like to offer our thoughts to everyone that has been affected by the wide reaching impacts of is public health crisis, including the economic hardships experienced across our communities.
An organization, the health and safety of our employees and their families. Our top priority. We have taken every precaution to ensure a safe work environment and we'll continue to be diligent for our efforts to limit infection risk across our community.
This afternoon. In addition to our second quarter financial results, we have exciting news to share regarding the future advancement of Cynthiana mix.
Our efforts exploring strategic alternatives to increase stakeholder value have culminated in agreements with a sincere diabetes care there were announced earlier today.
Together, we have entered into a collaboration and commercialization agreement with the Cynthia concurrent with the financing arrangement with P.H.C. the parent company of a Cynthia I KKR portfolio company as well as an additional financing agreement with Masters special situations and a film.
He is a masters capital management.
Focus on her call will be on the details of these agreements and what it means for Santiago moving forward.
We feel this is an ideal result for our shareholders users health care providers payers, the company and our partners towards ensuring patient access to the only long term CGM on the market.
The partnership with the Cynthia his design to combine the strengths and leverage the complimentary competencies each organization through a highly collaborative relationship.
The agreement is structured to align incentives for mutual benefits through penetration of the CGM market with our current and future ever since products.
To start we think it would be helpful to provide some background on our partner to frame why this is such an exciting opportunity.
A sense your diabetes carries a subsidiary of P.T. grew formally known as Panasonic Health care Holdings, which is a KKR portfolio company.
Do you see group was formed as a spin out of Panasonics health care asset in a transaction with KKR in 2013.
Resulting in KKR as the majority owner of Peachy group.
Since then peachy group is focused on creating a portfolio precision digital diagnostic companies spanning across healthcare.
Over the past five years PC group as acquired not only as Cynthia diabetes care, but also the anatomical pathology business from Thermo Fisher that focuses on precision cancer diagnostics and Ellis Island Medicine Corporation, a provider of clinical and non clinical diagnostic services.
Since there is a growing global market leader offering premium connected glucose monitoring systems and testing supplies to over 10 million worldwide people with diabetes and over 125 countries.
With the operations in over 31 countries marketing products across North America, You Asia Pacific Middle East in Latin America.
Cynthia has a global growth focused strategy offering the glucose monitoring devices with the largest market share in Europe.
Their contour BGM can be used alone with diabetes apps that allow for greater advancement in diabetes care with insulin pumps with CGM and as a component of closed loop systems.
As described their global focus combined with products that had been designed to lessen the burden of diabetes management.
Patients worldwide.
FMC Rx we of course share a similar philosophy, which will help drive synergies between our organization and create an effective long term partnership.
We're excited to be partnering with a fancy it took me bringing ever sense to their expansive based on people actively managing their diabetes.
Regarding our financial agreement with P.H.C. and with the additional financing agreement with Masters I will touch on the financing components at a high level and let Nick provide additional details later in the call.
We have strengthened our balance sheet.
First we have agreed to issue senior secured convertible notes the P.H.C. in the amount of 35 million with a company option to issue up to $15 million of convertible preferred equity following receipt of ft approval for the 180 80 day ever since product in the U.S.
And on upon receipt of any required shareholder approval, which might be required by the NYSE American listing rules.
Now to the second financing erosion.
This one is with Masters special situations in this agreement, we intend to issue up to 30 million in convertible preferred equity to masters and affiliates.
The funding will take place in up to two closings.
The first closing for an initial 10% of the investment expected to occur on or about August 14th.
MFS has the option to purchase up to an additional 27 million of convertible preferred equity in a subsequent closing that is expected to occur within the next three month subject to the receipt of stockholder approval.
The combined capital of up to $80 million will primarily be used to support manufacturing operations for the ramp up of the 180 the product in the U.S., if approved and product development of future generation products as well as to repay the Highbridge first lien term loan balance.
Given the decreased organizational requirements, resulting from a DC, providing several significant commercial functions under the collaboration agreement.
We expect our operational expenses will be significantly below historical levels as we described on our last call.
We expect it if all the potential capital available under these agreements is excess we will significantly extend our cash runway through 2021.
Regarding the second component of the agreement the collaboration and commercialization agreement is intended to be a close commercial partnership.
To maximize the value of the ever since system in the global market.
Fancy Onyx will maintain pipeline and product development regulatory manufacturing and branding responsibilities.
Well, a fancy overseas sales marketing and distribution rights for current and future products worldwide for approximately five years. Following in the 180 day product availability in the U.S.
And in certain circumstances that period may be extended.
From an established position in the diabetes management market Asencio has been identified.
With an opportunity and potential forever sense as a differentiated CGM technology and as committed through this agreement to partner with us to drive commercial adoption and market penetration.
A sense it will be providing significant commercial investment for ever since and both us and Oh U.S. operations over the agreement horizon.
Well the economic terms of agreement will remain undisclosed incentives are aligned through the revenue sharing structure.
Really in the term the weighting will favor cynthiana ex while sharing shifts towards asencio later in the term.
To initiate the partnership Fancier will begin conducting pilot sales and marketing activities in the U.S. this quarter.
With a significant ramp of those activity is expected to begin in Q1 2021 subject to the 180 day product approval.
During this period the two companies will work hand in hand to share and transfer the ever since knowledge base to essentially as commercial team.
Dividing real world hands on new patient and provider Onboarding experience as we advance the installed base.
We have a pipeline of providers, who would like to be trained on the product as well as patients interested in being first time users.
These 2020 efforts are expected to prepare the market for the next generation 180 cents or launch in early 2021 if approved.
Once the transition phase is completed since it will take primary responsibility for sales marketing and market access in addition to patient and provider support.
Fancy as current plans include providing approximately 30 direct sales staff in 2021 ramping to more than 80 by the end of 2023.
True partnership form we have together identify joint work streams headed by leaders from each side to ensure a smooth transition.
I'm pleased to report the teams have started to me and the level of engagement has been naturally positive and collaborative.
Product and clinical teams have been identified and collaboration structures.
Being reviewed customer support is also being set up and marketing programs are being advanced.
Joint governance committees will be established comprised of members of both organizations to create comprehensive commercial infrastructure plans and budgets and drive close cooperation on this endeavor.
Objectives will be set by these groups to determine marketing budgets and revenue goals. Both organizations are incentivized to me.
Customer and patient support will be handled collaborative as well.
Fancy will handle the frontline interactions with users globally.
This will consist of product use performance ordering return and war warranty inquiries, we will provide the second line of customer technical support we will handle and be responsible for warranties regulatory reporting and leave it isn't liaising with our engineering and manufacturing teams.
Healthcare providers support will be managed by a sense.
Following the hands on field training and transition period.
We know they share the goal of providing the highest level of quality clinician training and clinics support because we both understand this great positive patient outcomes.
Creating long term partnerships with providers is the goal for both organizations.
Today, we remain focused on market access in the US where we now have approximately 200 million covered lives, including Medicare Medicare advantage and commercially insured patients eligible for reimbursement for ever since.
As in other areas, we will assist Cynthia in a transition of these responsibilities in the coming months, including working together to gain additional reimbursement.
Armed with the real World clinical data and the additional value add of is sensitive last up to 180 days.
We are confident we will continue our progress in obtaining broad based coverage.
Outside the U.S., we will not be renewing our distribution agreements with Roche in Rubin medical when they expire.
Until expiration, we expect these agreements will stay in full force and that we and our current partners will work together to effectively serve the needs of patients in those markets.
Upon transition Cynthia will be focused on the markets of Germany, Italy, Switzerland in Sweden, where ever sense is already commercially available.
In summary offense his responsibilities beginning with the transition period and extending to the launch of the 100 needed product in the U.S.
Include all aspects of commercialization in frontline patient and provider interaction from downstream marketing to fails detailing onboarding patient retention and support.
Starkly this has been the largest cost and use of resources for our organization.
This change to our cost structure will ultimately be beneficial for our progress towards profitability.
From a high level product and brand development regulatory approvals and manufacturing are now our core responsibilities.
One of the most important parts of this agreement from our perspective. It is our ability to now focus on product development and the future generation of our game changing CGM technology.
We feel that we can be in better control and drive the value creation process through this division of responsibilities with a goal of bringing people with diabetes additional features and extended wear on the backbone of our existing technology.
Regarding our operations in the second quarter revenue was we primarily due to the forced halting of the us commercial operations in March.
After the solar capital debt return and the effects of temporary patient deferments, resulting from the pandemic.
In the quarter, we generated total net revenue of 260000.
As distributors reduce existing inventory levels.
During March and April insertions were notably reduced as many clinics.
In the country were shut down our unrestricted access.
We did see some positive trends in May and June.
But we're still seeing insertion volumes below pre kobin levels.
Given the slowdown in insertion rates most of our fulfillment partners are still working through their inventories and shipments into the channel or mill minimal in the quarter.
Through all of this however, we are happy to continue to see re insertion rates in the U.S. of over 85% in patients wearing a third and fourth sensor.
These patients at the end users since early in our launch and this is a strong testament to the positive patient experience Airsense provides.
This underscores our belief that there will continue to be a large opportunity to satisfy the needs of people with diabetes.
We are pursuing a very committed patient population, who are focused on their diabetes management.
Especially in these current trying times.
Similarly.
Roche.
It did not order product in the quarter.
And they serve their needs from their existing inventory.
They have reported an increase in insertion volumes in June as well compared to earlier in the quarter.
Very important for patient access we continue to see positive progress on the reimbursement front as well, notably CMS. This past week released its calendar year 2021, Medicare physician fee schedule proposed rule.
In this they announced policy changes from Medicare payments.
This year. This included the proposed establishment of national payment amount for our three CPT codes as a medical benefit.
Rather than as part of the more cumbersome durable medical equipment channel.
That includes the other CGM.
These codes described the insertion removal and combined removal and insertion of the implanted interstitial glucose sensor.
Currently ever since a contractor priced by the regional Max through this proposal, which is set to be effective January onest ever sense will now receiving national coverage for the three CPT codes.
This is significant in a highly differentiated opportunity for ever since.
Additionally, we've also had continued progress in the commercial payer space as well, especially with multiple blues plans.
Most recently, including coverage by Highmark, one of the top 10 largest healthcare insurers in the U.S.
To place this opportunity in perspective in 2019 in the U.S. Cynthia Downes grew patients by nearly 4000 users with an average of only 30% of covered lives for the period.
Ever since now has approaching 80% insurance coverage in the U.S with over 2000, prescribing clinicians and roughly 550 authorized insertion specialists.
Due to our capital constraints associated with the solar capital debt. The company has not yet been able to take advantage of this increase in coverage.
Given our current position with the signing of the collaboration agreement and financing agreements.
We now expect to be in position to capitalize on the increased coverage and to resume growing our patient base in partnership with the Cynthia.
Transitioning to our pipeline development initiatives as we mentioned our top priority is the kinase inhibition for our 100 needed a product in the U.S.
With the execution of the agreements announced today our organization is focused on preparing this submission.
We're pleased to share that we remain on track to make the submission in coming weeks.
Following the PM a supplement submission in the U.S., our priority will be to bring the improved performance to the ever since XL system in Europe, which we developed for the US version of the product through our notified body in Europe.
Additionally, the product development team is shifting their attention to the next generation sensor that we plan would extend wearable lives up to 365 days.
We are currently testing configurations, demonstrating one new stability.
We are working toward I'd approval from the agency for the 365 day product.
First half of 2021.
Within estimate beginning the trial enrollment in the second half of the year.
In addition to extending the wearable life. The product is also targeted to reduce calibration frequency.
To up to one fingerstick per week.
This next generation sensor is also anticipated to provide the platinum platform for the Gemini product.
Which would offer both continuous on demand readings from a swipe command.
Finally, we are working on integrating a battery in the Gemini chronic they would eliminate the need for any on body transmitter from fully implemented 365 day sensor.
As you can see we have a pipeline full of revolutionary devices that have the potential to again shift the paradigm in CGM technology.
As projects continue to progress and we have better visibility on timelines for completing milestones we will provide additional updates.
Now with this I'll turn the call over to Nick for additional details on the financials.
Thank you Ken and good afternoon, everyone first off I would like to provide more color on how do you essentially agreements change our financial profile moving forward.
As we had previously announced we created we ceased operations targeting new commercial patients in the U.S. to improve our cost structure and address the reality of the cobot environment with essentially assuming commercial responsibilities and the related expenses, starting in Q4 of Twentytwenty and into 2021 week.
Back to sales and marketing spend 1st% see onyx will be significantly reduce on a full year basis when compared to prior historical levels.
Accelerates, our breakeven point and reduces cash needed to access patients in the U.S. any you marketplace, while allowing the company to focus on our core competencies in R&D product development clinical trials and regulatory along with manufacturing and quality.
The initial 35 million funding from asencio will be generated by the issuance of senior secured convertible notes two cents yet.
9.5% interest rate decreasing to 8% following the Pmeight approval of the 180 day product, where they maturity date of October 31st 2024.
A portion of the proceeds will be used to repay the highbridge first lien term loan balance, including the discounted prepayment premium.
The remainder will be used to find continuing operations, including supporting the current ever since installed base and product development initiatives.
Following the PMA approval of the 180 day product and receipt of any required.
Required shareholder approval required by the NYSE American listing notes, we will also be eligible to issue $15 million of convertible preferred equity to essentially which will further strengthen the balance sheet.
We further improved our liquidity position with additional financing through the entry of a stock purchase agreement with Master special situations and affiliate of Masters capital management to issue up to $30 million in convertible preferred equity.
The funding will take place in up to two closings with a floor first closing for the initial 10% of the investment expected to occur on or about August 14th 2020.
MSS has an option to purchase up to the balance of the convertible preferred equity in a subsequent closing that would be expected to occur within the next three months subject to the receipt of stockholder approval.
Now to our results for the quarter.
The second quarter of Twentytwenty total net revenue was 261000 compared to 4.6 million in the second quarter of 2019.
You asked net revenue for the second quarter was 206000 after accounting for gross to net increases.
The second quarter insertion rates for existing patients on ever since we're more favorable than we originally anticipated at the start of the outbreak leading to several new order request from our distributors and adjustments to concession allowances, reflecting actual product usage that were previously provided in Q1 to some of our customers in the United.
States Forever sense systems that may expire before placement where they patient.
India U.S. net revenue was $55000 as we mentioned on the Q1 call. We did not expect Roche to making meaningful order in the second quarter.
Gross revenue for the first quarter of Twentytwenty was 165000, nearly all of which was generated in the U.S.
Gross profit in Q2, 2020 increased by $3.4 million year over year to negative 1.1 million. The increase in gross profit was predominantly related to the lower product volume production and shipments.
Second quarter, 2020 sales and marketing expenses decreased by $11 million year over year to $3.1 million compared to $14.2 million in the prior year period.
The decrease was primarily due to recent changes in our commercial activities.
Research and development expenses in Q2, Twentytwenty decreased by $6.7 million year over year, Q3 point $8 million compared to $10.5 million in the prior year period.
The decrease was primarily driven by lower promising clinical study costs and personnel related expenses.
General and administrative expense in Q2, twentytwenty with $4.4 million.
A decrease of 1 million compared to the prior year period, mostly due to personnel related expenses patent legal fees and other administrative costs, resulting from our change in operational focus and stay at home orders during the Koby 19 pandemic.
The three months ended June Thirtyth Twentytwenty total net loss was $7.5 million or three cents per share compared to $31.1 million or 17 cents per share.
The second quarter of 2019.
Now turning to the balance sheet.
As of June Thirtyth, Twentytwenty cash cash equivalents unrestricted cash totaled $21.6 million subsequent to the quarter, resulting from the a sincere financing and repayment of the hype highbridge learn pro forma cash cash equivalents unrestricted cash following the closing of these trends.
Actions is estimated to be approximately $42 million increase including transaction and advisor fees.
<unk> to accommodate the returned to production and supporting a sense here with a 90 day restart and preparation for commercial launch of the 180 day product in the U.S., we're slightly revising our monthly operational cash burn guidance Q3 point 5 million to 4.5 million on an average monthly run rate.
For the second half of 2020 from the previous we announced range of 3 million to 4 million per month.
For fiscal year 2021, we expect annualized cash burn to be below $60 million for the year.
Tim I'll turn it back to you.
Great. Thank you Nick to conclude overall, we are extremely excited about the positive outcome of this strategic process and the opportunity ahead for since the Onyx.
And the Cynthia.
The announcement of these transactions. We have concluded this strategic review, we had announced in March.
And we're looking forward to the opportunity to drive shareholder value.
We are creating a partnership the world class organization of Fancier.
It was also focused on providing patients with advanced diabetes management technology.
Combining the strengths of our organization. This will offers significant value to all shareholders.
As well patients physicians and payers will benefit from the collaboration with increased resources dedicated to driving adoption of the ever since technology.
We are proud to partner with a sense here, who is shown through their actions and equally strong long term commitment to our life changing technology.
Again, I would like to say, thank you to all of you and importantly to all of our employees have shown tremendous dedication drive amid these challenging circumstances, both internally and externally.
We look forward to providing you with updates in the future.
Joining us for questions, our local Jane our Chief operating Officer, Marisol, Pam really old Vice President and general manager of global commercial operations.
Operator, let's now open up the call for questions.
Well now begin question answer session.
Ask a question you made press Star then one on your Touchtone phone.
You are using speakerphone, please pick up your handset before pressing Mickey.
Really draw your question. Please press Star then too.
Our first question today comes from Matthew Blackman with Stifel.
Good afternoon, everyone and congratulations a lot of positive updates today.
Any Tim I could start with you.
Gives a little bit or color on a sense is selling footprint I think you mentioned starting out with 30 reps ramping to 80 over some period of time personally I assume that's it's just a U.S. number is there any way to sort of also talk about the southern corporate outside the U.S. and again I know probably a tough question to ask you.
But is there anyway to sort of think about what a sense. He is on a began user bases and I've got a couple of follow ups for Nick Thanks, Yeah, Thanks, Matt pleasure pleasure to speak.
Yes, those numbers, specifically, our dedicated ever sand sales personnel sales professionals, not including sales management or other supportive.
Thanks for the U.S. sales efforts outside the United States, obviously, its NZ is a very significant organization.
Glucose monitoring, especially outside the United States there there they have a very significant position in the U.S., but even larger outside the United States.
And as such that's one of the reasons that there's such a great partner for US we're still in the process.
Really defining what are the best joint opportunities for two organization. So I don't have all the details.
But we do know that.
Beginning in the first quarter of 2021 the European.
Opportunity will be significant in the initial countries that I mentioned, we fully anticipate working with a sense it to expand beyond that.
Okay. Appreciate that and then nicklin couple for you.
I know, you're not giving guidance and I appreciate that but it isn't sort of the run rate. We're seeing now on revenues in particular, the way we should be thinking about.
The run rate until.
Sometime in the first half as of next year, when nothing sort of restarts again, just any any help as we think about the next couple of quarters as the you try to build our models and then the last questions. You. Nick you brought it up so I'm going to ask you mentioned accelerating sort of the breakeven threshold again, probably not hurt ask at this point, but.
How should we be thinking about sort of the new profitability frameworks for for sense. The honest is there a revenue run rate threshold for profitability, we should be comp and he just any help.
I guess in these early days, it's sort of think about how this might play out over next several years.
Hop back in queue. Thank you.
Yeah I appreciate those questions Matt for revenue I'll start there and say obviously as we mentioned in her opening comments given Kobe given the uncertainty of the environment here in 2020, we are spending any revenue guidance for this year certainly we provided some color of what we look to achieve.
With our partner here for the remainder of the year, our new partner in it in your second question on breakeven again at this time or not.
Looking to provide any long range guidance of what that would look like but certainly we're very excited about how from a piano perspective as Tim mentioned in his comments that are paid out will be improved with a much lower sales and marketing investment in opex moving forward.
Tim any comments to add.
No I think you covered it obviously, we are excited we have given the covert dynamic and the.
The financial situation hubs of since the Onyx with the solar debt. We are excited that we are able to now begin the process of.
Commercialization again, we do have a number of doctors and patients.
That have reached out to us that we have not been able to serve so we're excited about serving that backlog. We're also very excited about the opportunity to serve the Medicare population. This is especially important especially the time of.
Moving to be able to handle long term monitor.
And to be able to do it with.
Now.
Coverage from Medicare for that population is very exciting for us. So so we're going to be look too.
Explaining those expanding those up those conversations and rules with a sense here.
And really jumping back in right here in the third quarter and fourth quarter with that as since your partnership for us.
US commercialization again.
Thank you I appreciate it.
Our next question comes from Danielle Antalffy with SPD lately.
Hi, Good afternoon, Nick is Tim and Nikin team. Thanks, so much for taking the question and many congrats on this deal it sounds fantastic. So nice work there I guess can just that just a quick question on a sense yet in sort of.
Oh, yeah, what what they'll be able to do differently. Besides the obvious which is the the footprint in the presence in that physicians offices, I guess I felt like just some of the issues were around reimbursement a lot of utilization of the bridge program previously so maybe talk a little bit about what has changed.
Fundamentally other than the breadth of Oh reps in the physicians offices that well now elevate the status of adverse than in the U.S.
Sure sure Danielle and thanks.
Obviously, you hit on a couple of Q ones right. The reimbursement position forever sense, just continues to grow and get better and better even the the physician fee schedule that was proposed by CMS last week.
Honestly really a big deal, it's not typically talked about.
In the.
You know CGM space because the other products frankly are Dan meetings right there the durable medical and they go through a different channel, but the opportunity to have this is a medical benefit.
Without some of that encumbrance for a large population.
Patience is very significant and obviously, we're going to work harder the Cynthia to really get that implemented is as quickly as possible. So that's clearly one of the big changes as you've seen.
Even though we've had to scale back commercial activities in the in the last quarter plus.
The reimbursement activities continue to make progress on the commercial side as well.
Just a week or so it to go we did get notification that.
No.
Additional blues plans, many blues plans will be coming up and going live in Highmark being one of the biggest ones. So it's great to see progress in that space as well and then addition, obviously Daniel the biggest change of course is really to be able to use.
The infrastructure and capability the buying power.
When you talk about marketing programs.
Since he really has a deep.
And capable global commercial organization and as.
We were being since the onyx on our own.
Attacking the you asked obviously, you're doing afternoon from a much smaller base.
Since he has over.
1700 employees right abroad global.
Physician.
10 million patients that they talk to on a daily basis or that they talk to not on a daily basis for all 10 million certainly, but a lot of depth of experience remember they are the original BGM folks. So they know it extremely well they know the space incredibly well.
And they're just going to bring a lot of deaf to us and not only commercial operation.
They are partnerships with distributors their infrastructure to move product around we should we should certainly been able to leverage we've had conversations with.
As well as our U.S. distribution partners that they actually have a much stronger relationship. So there's a whole lot that we can leverage.
And really instead, a bifurcated the you the global opportunities like we've done in the past having that one on.
Under one umbrella with a global partner I think is going to is going to bring a lot of value to do us jointly.
Got it that makes it kind of sense and then Nick maybe that's not enough for you and I'm, sorry, I missed that but I just want to make sure I understand what this means from a revenue recognition and also margin perspective.
<unk> for Cynthiana can you give a little bit more color. It is as we think about our models should we be thinking about the same and see what's going to a cynthia and how does it impact margin. Thanks, so much.
Sure Yeah happy Daniel I would describe it that our commercial agreement is that there will be a revenue sharing piece and the since you will receive a portion of the net revenue and that's going to be at specified tiered percentages and that changes as the revenues grow so essentially as portion will grow.
As the revenue grows and we talk we provide a little bit more additional color in or 8-K in terms of disclosures, but we talk about the specified cured percentages that they're going to range from.
For a sense yeah, approximately the mid teens to the mid forties and that's based on levels across the global net revenue.
And again, we've got some additional disclosures that obviously, we provide into our 8-K, but the modeling then we'll we'll we'll be based on those tiers, which we won't necessarily disclose but we certainly look forward to providing revenue guidance at the appropriate time based on obviously the collaborative work.
With our partner in terms of margin I'm really the the biggest dimension there for margin improvement over 2021 and beyond is the switch from the 90 day product in the U.S. to the 180 day product, we're not prepared to talk about pricing or any of those types of mechanics, but certainly we see.
Expansion, there as well as other operational levers to out continue to improve those gross margins.
Thank you so much you're welcome.
Our next question comes from Alex now walk with Craig Hallum capital grip.
Great. Good afternoon, everyone. This is actually will defend ski on for Alex. Thanks for taking my questions and apologies. If this was already addressed were jumping between a couple of calls here, but could you provide us with the general sense of what the ongoing level of operating expenses is with the us with the with the deal and whether you have any levers that you could use to slow the burn.
Sure. Thanks.
Sure I'll go ahead and take that in our prepared remarks will we talked about that for the second half of 2020, we expect the operational cash burn to be in the three and a half to four and a half million on average per month, obviously, that's down significantly.
From what we were operating in 2019 and into first quarter of 2020.
For 2021.
Based on current projections, we expect the operational cash burn to be below 60 million for the full year of 2021.
Got it Okay. Appreciate that and then just second one for me you just given the covert dynamics do you mind, commenting more broadly on what you're seeing out in the field today do you sense that endocrinologists are less hesitant to do new wind plants now and that the opportunity is continuing to open up in Q3.
Tim would you like to take that one.
Pardon me, ladies and gentlemen, it doesn't look like we might have lost Tim's line. So I feel just hang on a moment, we'll try to reconnect.
Hey, well, it's it's Marisol can now let me take that on well we try to get.
10 back on line, we are seeing the insertion in crane, particularly in Europe.
Well, certainly Saad Yep March and April timeframe.
But neural nets and they knew where we've definitely seen that really stabilized.
So we expect that that will continue.
Well with coal bed and some other country.
No experiencing either later on a local level you know some shutdowns.
A little hard for us to predict but we've been very closely how.
They realize it has been in the last couple of months, particularly.
In Europe.
Great I appreciate all the detail there and congrats on the positive developments.
Sure.
Mike can you know person quarterly to a need to get into that call not so to speak.
Pardon me, everyone I have came to rejoin and well go ahead and take a question from Murray tempo.
Hi, folks can you hear me.
Yes in your hand, Okay, I apologize for that I don't know what happened I got cut out.
[laughter]. Thank you.
Yeah I wanted to ask one question here on Florida, <unk>, how we should be thinking very high level about this partnership I know a Cynthia has had partnerships in the past I believe with a company called POC attack too.
You know mark yet a CGM I believe in parts of Europe, and Asia. So I wanted to get kind of high level idea of the trajectory as you think over the next couple of years does this partnership kind of put you ahead of where you would have been on your own in 2019, I said, it's insurance coverage Hadnt, then and then of the stumbling block.
How can we think about their generally I know you can't give guidance at this point, yeah, but but it is a good point Murray. We obviously things are this is a great advantage for us with the depth of commercial resources that that asencio brings to the table for sure.
You know, especially in the U.S. the largest market the biggest opportunity.
I would you know in regards to the to the POC Tech product. We certainly are aware of it it's been a very.
Been part of our communication it was a technology that.
Since your does have a partnership with however, it's in a different place in the market.
And we do expect it to be certainly geographic geographically differentiated as well so.
We don't expect that there will certainly in any short term horizon, certainly be any overlap and obviously the commercial focus we've referred to is dedicated just to the ever since products. So as you know you ever since is quite a bit further with already having pmeight approval.
In regards to scale up and regulatory and alike.
Great Perfect and then I guess my follow up would be as they look ahead to the 180 day product is there anything that needs to be done on the insurance coverage side or is that really just sort of a supplementary update that all the commercial payers and kind of put out once they want 80 days past yeah. It's certainly something that we talk to the commercial payers about.
Well remember one of their big advantages is the expense of insertion in removal.
He was cut in half so there's certainly a motivation to do that and do recall the history in the space. We have started out with three than five and seven in 10, and now 14 days in the Transcutaneous sensors.
So many of the payers have gotten used to two per day payment scheme. So we havent received pushback as of yet, but we do expect it will be approaching them.
Probably in the fourth quarter of this year and letting them know where we are in the in the new transition to new products. So there is communication that's required.
We don't see it as being a major issue just as you've seen it really hasn't been a major issue with some of the other products has gone from seven to 10 to 14 days.
Thanks, a lot of fan thank you congrats.
This concludes our question and answer session and I'd like to turn the call back over to Tim Good now for any closing remarks.
Oh, great I want to thank everyone for the opportunity this.
This afternoon to speak we're very excited about the news in the partnership with a sense here.
We certainly look forward to to updating you as it evolves on future quarterly call. So so with that we'll go ahead and conclude and again thank everyone for their participation today. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.