Q3 2020 Senseonics Holdings Inc Earnings Call
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Good day and welcome to the SNC Onyx third quarter 2020 earnings Conference call.
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I would now like to turn the conference over to Lynn Lewis with Investor Relations. Please go ahead.
Thank you very much and welcome to the Fancy Onyx third quarter 2020 earnings call. This is Lynn Lewis from the Martin grip.
We 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 plans regulatory matters product enhancements company performance and other matters and speak only as of the date hereof. These forward looking 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 September 32020, and other reports filed with the SEC. These documents are available on the investor.
Her relations section of our web site at Www Fancy Onyx Dotcom, we undertake no obligation to update publicly or revise these forward looking statements for any reason except as required by law also on this call we will be discussing our 2020 outlook in light of the co. The 19 pandemic 2020 financial guidance was suspended on March 20.
FX 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 to provide better transparency on the impact of reimbursement and the ever since bridge program in accordance with U.S. GAAP since the Onyx parts revenue and a financial statements on a net basis, which includes gross to net.
Reductions primarily related to the ever sense 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 non-GAAP financial measures are not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with U.S. GAAP and sent the Onyx non-GAAP measures may be different from non-GAAP measures 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 in this afternoon's earnings release, which is available on our corporate website SNC Onyx Dot com.
Joining me for instance, the Onyx or Tim Good now President and Chief Executive Officer, and Nick Tressler, Chief Financial Officer with that I'd like to turn the call over to Tim Good now President and CEO Tim.
Thank you Lynn and thank you all for joining us.
On the call today I will discuss our partnership launch efforts had third quarter you asked in European performance in the pipeline and regulatory developments.
Nick will then detail the financial results and then we'll open up the call for questions.
In August we announced a strategic transition of our business by entering into a collaboration with the Cynthia diabetes care.
Cynthia is a global diabetes care company and a leader in the blood glucose monitoring market, we nearly $1 million in global revenue.
He also products in over 125 countries to approximately 10 million people with diabetes.
Switzerland based company is owned by Phd Holdings Corporation, a KKR portfolio company.
The formation of this partnership affords all organizations the opportunity to build on our core competencies and to provide the ever since CGM system to more people with diabetes around the world Bill.
Built on a foundation of innovation, leading technology excellence and deep market experience the global positions.
NCR next in a sense here for growth and long term success.
FMC Rx, we will continue to focus our resources, where they approved most effective developing manufacturing and leveraging industry changing products to the diabetes market.
Essentially it will market self distribute and manage reimbursement in customer service for our products globally yeah.
Given this division of responsibilities, we expect the resulting business model to allow sensing onyx to reduce sales and marketing expenses by approximately mainly $50 million per year going forward compared to historical levels.
The minimum five year agreement is backed by strong commitments from both sides.
Since he has committed to invest $50 million in since the Onyx.
$35 million was invested following the initial agreement strengthening our balance sheet.
An additional $15 million can be invested following the FDA approval of the recently submitted 100, maybe the sensor.
A tiered split of the generated revenue will benefit both companies.
Cynthia has already begun and is initiated commercial activities with ever since this commenced in the U.S. on October Onest, which I will detail shortly.
Leading up to this initiation of the collaboration we serviced our installed base of patients in the us throughout the third quarter.
We observe continued sensory insertions in many patients as clinics became more comfortable with Covidien management protocols.
Patient retention actions led to us revenues of $500000, which was beyond the depletion of inventory held at our distributors.
Likewise, our us revenue was $250000, which was also beyond the inventory held by Roche combined.
Combined with the total third quarter revenue was approximately $750000.
This was all in support of the current installed base of ever sense users that is over 5000 patients comprised of approximately 80% European patients.
This is following the impact of Cove, it and the previously paused commercialization activities in the U.S. during the last two quarters.
At the beginning of October we re initiated commercial activities targeting new patients in the us with a team of 10 cents here sales professionals.
Through this we are off to a great start transferring knowledge and experience in commercializing ever sense to our partner.
Essentially as organize their teams to address our most active accounts and.
An intensive training program completed in September oriented sales reps and sales support with our technology product the insertion procedures billing and reimbursement and the distribution processes as it pertains to selling ever sense.
This team has significant experience in selling some of the most accurate glucose monitoring devices in the channel and as a tool to skills necessary to be successful with ever since we.
We are very pleased with the level of engagement from the offense UTI.
They're excited to be in the field that ever since a new product for a more complete glucose monitoring portfolio.
The reps are currently organized as geography, and our covering the existing key ever since accounts.
Thanks his commitment to our collaboration was highlighted by their decision to add a rep in Texas, where we have a high concentration of accounts and by adding a former sensing onyx employee for this division.
The entire team is now actively calling on accounts and in the first month has already connect with the majority of high volume ever since accounts.
In addition to making introductions they have begun working with clinics towards starting new patients on ever since.
And also on reiterating the major updates on payer coverage, including following up on previous leads for Medicare patients that are now covered by Lcds.
For people on Medicare call as a Max of now publish favorable local coverage determinations for implantable CGM.
In addition, the national physician fee schedule to be implemented on January Onest as published fully supports coverage for ever sense and includes payments for the sensor insertion and removal expenses to the clinicians metal.
Medicare will cover ever sense, as a medical benefit which provides a more streamlined process for patients and providers.
We believe that ever sense is a great fit for the Medicare population and a fancy it will create efforts to raise awareness in this population and drive future growth.
In the coming quarters since your reps are focused to target new accounts and gain experience onboarding new practices.
Both organizations agree that providing the highest level of service to clinician training and practice support is crucial for optimizing patient experience.
The shared value is key to creating long term partnerships with providers and patients.
During the startup phase with a 90 day product a sense. It has set the goal of adding 400 to 500, new ever since patients in the us.
We are of course excited to be back on the market delivering a refund to new patients in the us after being pause for the last two quarters.
Yes, Thats a commercialization plan includes growing from the current 10 territories to 25 supported by an additional 37 field staff in 2021.
Approval of the 180 product will further accelerate the ramp up of sales marketing reimbursement distribution and customer support activities by offense.
Continuously improving the effectiveness of the collaboration as a shared top priority and maintaining an open strategic dialogue will help ensure we maximize the value ever since in the market.
Outside the U.S.
Cynthia we'll be taking the same commercial role following expiration of our agreements with Roche and Ruben medical.
These current partners continue to serve our our patient base in Europe today and are expected to continue through the termination of their agreements.
As both distributors have been working through existing inventory during the cobot impact.
It did not quarter historical levels in the third quarter.
We've had constructive discussions with Roche, which we expect to finalize very shortly to outline a detailed an orderly transition process, where the ever since users and the prescribers in Europe.
Both organizations are committed to prioritizing patient needs and ensuring the high level of services provided throughout the hand off.
We are designing this transition process to be as effortless as possible for patients and HCP.
We are planning on upcoming joint communication to HCV patients and payers to detail the distributorship transfer.
Patients will maintain access to their HCP used to re insertions and supplies let's.
Well I think the team will work with practices as patients with the goal of providing uninterrupted insurance coverage and technical support.
We are working to transfer the payer contracts and tenders where possible.
Through the distribution agreement.
Termination on January 31st Roshe is expected to continue to fill patient requests and has placed orders for additional product to serve this demand through the end of January.
Roche is not expected to purchase or sell any further product after their contract termination at the end of January.
To support all global demand, we expect to run.
Recognized total revenue and approximately $2.5 million in the fourth quarter.
Furthermore, with the current installed patient base and with the anticipated growth in Europe and in the US with the launch of the 100, maybe the product. We continue to expect global net revenue to essentially on X to be in the range of $12 million to $15 million in 2021.
In addition, I would also like to highlight that we just announced a private financing with current large shareholder energy capital for up to an additional $12 million.
In combination with the previous announced financing with Phd the offense, the parent company and Masters capital.
Total amount of funding expected to be raised to the approval of the 180 product is $54 million.
These capital sources, if access are expected to provide ample capital to fund the ramp up of manufacturing for the 100 Navy product.
To support further development of our next generation sensor and to fully cover expected liquidity requirements through 2021.
Now in reference to our product development and clinical pipeline efforts. As you are aware, we have submitted rpms supplement for the 100 Navy product in the US and we are now focused on preparing a similar regulatory submission for the same 100, maybe product to our notified body in Europe for CE, marking.
If approved this would bring the newest generation of the product with reduced calibration to both the us and European markets Simon.
Simultaneously.
Moment efforts are centered around optimizing configurations for the next generation sensor with a wearable life of up to 365 days with just one calibration per week.
Our development focus is is to seek and to secure the approval for the sensor late in the first half of 2021.
Toward the goal of enrolling a pivotal trial in the second half of 2021.
Importantly, with this next generation sensor. It is designed to provide both continuous and on demand glucose readings from a swipe command.
We believe that this will provide even more convenience and flexibility to ever since users who have the option to use the system as a real time continuous glucose monitor with a transmitter and as a point in time reading without any transmitter.
All with the same sensor technology.
As you've heard we plan to continue to push the boundaries of what is possible in continuous glucose monitoring our current business focused places an even greater emphasis on product development and innovation and we look forward to providing up on these projects.
For details on the third quarter financials, I'll now turn the call over to Nick.
Thank you Kim and good afternoon, everyone in the third quarter of 2020 total net revenue was 767000 compared to $4.3 million in the third quarter of 2019 U.S. net revenue for the third quarter was 509000 and that revenue outside the U.S. was too.
Britain 58000, as we mentioned previously we did not expect approach to making material order in the third quarter.
Gross profit in Q3, Twentytwenty increased by 4.2 million year over year to 835000.
The increase in gross profit was predominantly related to the ability to fill resupply orders with existing written off inventory as re insertion rates were above the expectations established at the onset of the pandemic.
Third quarter, 2020 sales and marketing expenses decreased by 8.3 million year over year to $3.2 million compared to $11.6 million in the prior year period. The decrease was primarily due to recent changes in our commercial activities.
Research and development expenses in Q3, Twentytwenty decreased by 6.5 million year over year to $4.6 million compared to $11.1 million in the prior year period.
The decrease was primarily driven by lower promise clinical study costs and personnel related expenses.
General and administrative expense in Q3, 20, $25.5 million, an increase of $8.1 million compared to the prior year period, mostly due to personnel costs related to stock based compensation.
Other expenses included increases to losses on the extinguishment, an issuance of debt offset by reductions in debt issuance costs and gains in fair value adjustments as compared to the prior year period due to the company's financings.
For the three months ended September Thirtyth 2020, total net loss was $23.4 million or 10 cents per share compared to $19.5 million or 10 cents per share in the third quarter of 2019.
Net loss increased by 3.9 million due to a 23.4 million increase to other expenses primarily related to the accounting of the company's financings, including charges to the embedded derivatives, partially offset by 19.5 million decrease in loss from operations.
Now turning to the balance sheet as of September Thirtyth, 2020, cash cash equivalents and restricted cash totaled $26.4 million to further strengthen the balance sheet as Tim mentioned, we have financings pending with matters capital energy capital and P.H.C. for a total of up to $54 million.
Oh are successfully concluded and used in October we conducted a special meeting of stockholders and received approval as required by the NYSE American listing rules to expand the number of issuable shares in order to be able to execute on the masters and PC financings.
The time to close an additional up to 27 million in convertible preferred equity with master's has been extended.
With essentially as parent company PTC Holdings Corporation since the Onyx maintains the option to sell an issue convertible preferred equity in the amount of up to $15 million. Following receipt of FDA approval for the 180 day ever since product in the U.S. if.
If we close on the sale of a $42 million of additional preferred stock to PTC and Masters, We project our available financial resources would fund operations through 2021.
To provide additional liquidity and operational flexibility in the future.
We entered an equity line of credit agreement with a significant shareholder energy capital.
Under terms of the agreement after January 21, 2021, we will have access.
To up to $12 million at our discretion through draws of up to $4 million, which could be accessed monthly in exchange for the issuance of preferred stock and warrants to energy.
Looking ahead, we expect global net revenues of approximately $2.5 million for Q4 2020.
As disclosed in our analyst day on September 15th we're anticipating global net revenues between 12.
$15 million for 2021.
Monthly operational cash burn is expected to be between 3.5 million and $4.5 million on average per month for the remainder of 2020 for full year 2021 cash used in operations is projected to be below $60 million.
With that I will turn the call back to Tim.
Okay.
Thank you Nick.
Before concluding.
I'd like to take a step back and describe what we've achieved to date in establishing the implantable CGM market.
Has the first product of its kind of launching the ever since system in the U.S. required, creating new reimbursement channels to provide access for patients remuneration for endocrinologists to perform the medical procedures. These.
These are not small undertakings, but we've been successful in a relatively short period of time.
We have to earn positive coverage decisions from a majority of large national and regional health insurance providers now over 80% of covered lives, including Medicare patients have access to ever sense.
Today, there are over 550 healthcare providers training to perform sensor insertions and over 2000 prescribers of ever sense.
To leverage this improved reimbursement environment, we undertook a strategic transformation in the third quarter to accelerate growth and the expansion of our platform in the most efficient way by entering into a global commercial distribution agreement with a sincere diabetes care.
The resulting collaboration enables our continued focus on innovation, while our partner provides an expanded commercial footprint to drive the adoption of our technology.
Together, we will maximize the value of ever sense in the market.
Our initial interactions with the since they have been highly productive from this early experience as Cynthia has demonstrated expertise and the deep commitment required for the success over the long term.
Oh opportunities only growing through increased patient access provider adoption and market expansion.
We are very confident we have found the right partner to execute the right strategy to grow and take share in the CGM market.
Finally, I'd like to say, thank you to all of our employees have shown great resilience and commitment adjusting to the challenging circumstances in the current environment.
We look forward to providing you with updates in the future.
Joining us for questions are Michael Jane our Chief operating officer, and Mira soap and Lilly, Oh, Vice President and general manager of global commercial operations.
Operator, let's open up the call for questions.
Absolutely if you would like to ask the question Superstars anymore.
If your question has been addressed and it was removed or so could you. Please for stardom two days.
Today's first question comes from personal slow with Guggenheim. Please go ahead.
Thanks, Tim.
Tim couple of questions here. So first just hoping you could go over some of the early learnings from essentially his first month as U.S. distributor.
And then just to give us an update on where things stand on the ground from a reimbursement perspective, you've got broad covers now I'm just curious.
Yes, the experienced patients are having who are coming back and maybe requesting their second or third sensors is that process going smoothly. How much pushback is there how easy is it as a patient to maintain therapy now that you've made some progress on the reimbursement front.
Sure so on.
On the early launch with that with essentially we do feel very good about how it's how it's progress there was a significant investment as you can imagine in in training education technology transfer. If you will to their commercial organization I think I think it's paid off extremely well.
There's a an excitement in in talking with the the 10 reps that are in place right now.
Mostly because they've heard from the biggest prescribers for ever sense, which naturally have a strong interest and they're just very excited to hear that it's back so on that they're able to fully support it. We've got some docs that are telling us they've got 10 patients that they'd like to put on ever since immediately.
From a reimbursement perspective, we continue to see success, we really haven't had you.
Issues outside of those where we where we don't have coverage. So in that 20% that doesn't have coverage. Yes. We are just kicking off the actions with Medicare. We have we have done our very first released insertions and then the billing for the Medicare under the medical benefit.
So we anticipate that that is running through the process Medicare typically pays in about 30 days so.
So we we hope to be seeing that here in the <unk> in the next few coming weeks.
Thanks, and then last one for me just give us an update if you could on where things stand on the IC ATM fraud.
This year is on getting the XL approved in the us.
But how much work have you been able to do with your pump partners over the last 18 months.
In a way for integration of the sensor.
Or is that still really going to have to start down. The road here has that been kind of pushed that back by everything else you guys have been going through just want to get a sense of how far out we should expect you guys to be able to participate in the integrated piece of the market. Thanks sure. So.
The I. CGM as you suggest we really are focused on getting 180 day product approved first we don't want to run into any.
Any regulatory hiccups, we do know that there have been instances was very significant delays in i. CGM and of course, we don't want to we don't want to put that in front of the primary 180 day approval. So.
In regards to integration as you know it varies by partner we've done some significant amount of work and co testing with the folks at beta Bionic.
In fact, we've already done a pretty significant amount of clinical testing over 20 patients have been.
Actively on the combined system and we have been using ever since two.
To drive their autonomous is.
Insulin infusion. So we're we're certainly excited about that and the results that we got from it.
In regards to some of the other partnerships it really is about having the.
The the CGM designation first the integration is pretty straightforward on the communication protocol that we've worked on is easily open new user accessible. So we expect that that could go could go pretty quick.
Thank you. Our next question today comes from Jason.
And then.
Please go ahead.
Good afternoon, I have a few.
So I guess just to calibrate folks.
You have just over a thousand users today in the U.S. I think you mentioned that ascend is hoping to get four or 500, new users onboard I assume that was in reference to the fourth quarter. So exiting the year in and around 1500 as the installed user base is that a fair proxy.
[noise], Jason we're looking we're looking to do the four to 500 with essentially over the next two quarters okay.
Okay. So I.
I don't think we'll get all of those in here in the next 60 days, but.
Over the next.
Our Q4 and Q1 is.
As the joint plan there.
And that was in reference to the U.S. or a global yes, that's just in reference to the U.S. correct.
Okay got it.
Sorry go ahead Tim.
I was just going to say those are the commercial activities that we've already started with them as you know we haven't started in Europe, yes.
But we certainly will on February onest.
Okay.
And then 10 reps today that grows to 25 next year is that correct Kurt.
Correct and then there is a significant amount of investment there's another 37 positions that are anticipated.
Internal sales as an example, so they're they're closely closely affiliated and supportive of commercial activities. So it's a big investment.
Okay and just <unk>.
With respect to the fourth quarter, two and a half million revenue.
Is there a way you can kind of give us expectation for U.S.O.U.S. and a little less interested in that but im curious.
Roche's still taking product in the fourth quarter, but will not sell products come post January 31st.
That's correct. So we're working with Roche such that they're able to meet all of their needs. They essentially have exhausted.
All existing inventory available inventory in the third quarter the purchase a small amount and then they will purchase the balance of what they need to get through January 30, Onest in the fourth quarter.
Okay.
Okay.
And then on the 180 day yeah.
For some reason I was expecting kind of first quarter and I realize that in the release when you submitted the.
The PM may its first half, but just in terms of.
Again early.
Early too early 21 versus first half 21, any insight you can give us there as to why we would consider a tiny bit of a delay I think Jason. We're just we did send to then we are anticipating untypical PMC supplements six month review and it went in right at the end of September.
So that would be early Q4, and Q1 approval process. So I don't think weve.
Weve changed at all we're just recognizing the reality of the end of Q3 submission.
Okay, and just last one I guess, maybe for Nick when do you recognize revenue in the U.S. it sales to a sense yet or is it when the product is used.
Yeah. It will be we will recognize a transfer price at the sale to a sense, yet and then there'll be a true up process based on the end market sales. Obviously for Q4, we will still operate under our current agreements with our distributors that will continue as has been in the past.
Okay.
Okay. Thank you.
You're welcome.
And our next question today comes from Danielle Antalffy with Leerink. Please go ahead.
Hi, good afternoon, guys. Thanks, so much for taking that question and I'm, sorry, if I missed it but just on Q4, two and a half million Q4 guide or Nick did you guys talk about how much of that is that almost entirely ex you asked and I'm just trying to get a sense of what you're expecting from that.
And Q4.
And give any like.
Thanks, Thanks, Danielle lets likely I would I would estimate that that'll likely distribute based on the population. So weve got 80% of our patients in Europe.
I would probably 80% of the revenue in this quarter come from Europe.
Okay got it that's helpful and then.
[laughter] are you accuse you know you've got 10 reps on the ground I know it's early I thought does how close are you to that sort of sales message that sense, yet is putting out there and how.
Yeah, maybe.
Maybe give us some color on what the messaging.
Your first question. The second part of the question is how to think about you send your I've been training as we are sort of still in met coal bid environment. Thanks, So much.
Sure. So on the latter and then I'll, let maryann will speak to the to the messaging on the latter we are right now focused on the existing accounts as you know we've been we've been somewhat dark.
With our commercial activities. So we want to make sure that those that are have the most patients and have the.
Most interest in immediately do it insertions or service first so we will we will focus on those clinics.
With a sense and then expand beyond that in the coming months and quarters. So.
So if you wouldn't mind speaking to the messaging we have been very close and worked very tightly with the with our partners at a sense at Minnesota, let you speak to that.
Yeah sure Hi, Danielle you know if we're still early certainly in our returns in commercial activity.
A lot of what the associate team is doing is really we didnt see any hours down to the accountants in answering the question.
That they may have held on for some time, because we lost it be pivoting.
So a lot of what the team is doing is answering those questions, but at the same time also providing responses to coverage decisions a lot on many keeping her so were clearly providing a lot more focus in terms of who is copper.
Good what the Mac started doing from an LTV standpoint, and so the 10 reps are really focused on ensuring that the council ever since clinics are aware that were back up in that patients can yep no profit not only known to our existing users.
Really getting new patient onboarding.
Down the line will will lead and put together marketing awareness campaign for the time being in this early phase, it's really let's get acquainted with our account.
Thank you.
[noise], everyone as a reminder.
Next question. Please first Oregon for our next question here comes from Rocky block from.
Stifel. Please go ahead.
Hi, This is actually Melanie on for Matthew I know you touched on this in the prepared remarks, but I'd like to drill down a little further on the training of the sales force and health care professionals.
What do you think are some of the key gating factor into your continued reengagement into the market and achieving our goal of adding the 400 to 500 new patients over the next two quarters and then more generally you could you touch upon you know the commerce, how the commercialization strategy may evolve.
Over the next.
A couple of quarters as well is there anything you can point to that different between your prior strategies, you know emphasizing or deemphasizing any aspect that you Reengage thing.
Thanks Melanie.
Hi, I'm wondering how you take that.
You know again, Oh, focusing on our independent account.
A lot of that.
Yeah can you guys hear me okay.
I know this momentum yes sounds good okay.
So the training that's being provided it's really to ensure that the account no. The patient profile type for example.
Some of those routes are still unable to get to the accounts. For example, so where are you seeing a lot and virtual hauling and.
Training would be accounts.
And the same goes with patients who we've been able to take full advantage. However.
Remote training and remote monitoring point would it.
In that respect with less debt providers.
So I think over time as more clinics opened up and travel restrictions are mitigated I think that the reps will be able to actually go in or in person yesterday. So we we all look forward to that.
And over time I I think you know we're very focused on the current accounts in our reps doing a lot of the heavy lifting but at some point well. So we're going to initiate those marketing campaign to support what the sales team the field team is doing.
Moving with digital marketing campaigns, and whatnot, but we'll probably hold off on that.
Probably until the early part of next year.
Melanie I hope that answers your question.
Got it yeah. Thanks, so much.
And ladies and gentlemen, lose a question and answer session.
Conference back over to the management team for any final remarks.
Great well I'd like to thank everybody for their for their time today, we appreciate.
Everyone's attention and we look forward to updating you here and as the quarters progress.
Thank you.
Thank you Sir This concludes today's conference. We thank you all for joining todays presentation. You may now disconnect your lines and have a wonderful day.
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