Q2 2021 Senseonics Holdings Inc Earnings Call

Okay.

Good day, and welcome to FMC Onyx second quarter, 'twenty, 'twenty, 1 and earnings conference call.

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Please note. This event is being recorded and now I'd like to turn the conference over to Philip Taylor Investor Relations. Please go ahead.

Thank you. This is Philip Taylor from the Gilmartin group before we begin today, let me remind you that the Companys remarks include forward looking statements. These statements reflect management's expectations about future events operating plans regulatory matters product enhancements and company performance and other matters and speak only ads.

The date hereof. These forward looking statements involve a number of risks and uncertainties.

Just other 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 and our annual report on form 10-K for the year ended December 31.2020.

Our 10-Q for the quarter ended June 32021, and our other reports filed with the SEC. These documents are available and the Investor Relations section of our website at Www Dot Cynthia on ex Dotcom, we undertake no obligation to update publicly or revise these forward looking statements for any reason except as required.

Wired by law.

Also on this call we will be discussing our 2021outlook joining me from <unk> are Tim Goodnow, President and Chief Executive Officer, and Nick Tressler, Chief Financial Officer with that I'd like to turn the call over to Tim Goodnow, President and CEO Tim.

Thank you Hello, and thanks, everyone for joining us today.

We'll be discussing our Q2 commercial and initiatives led by our global partner of Cynthia diabetes care and provide progress updates on our clinical and product pipeline and regulatory activities.

Nick will address our second quarter financials in detail and.

And then I will conclude and open up the call for Q&A.

And the second quarter Cynthia on ex achieved revenue of $3.3 million, which included $1 million of revenue from the U S and $2.3 million of revenue from outside the U S. Through the first half of the year. The global commercial partnership integration has progressed to SNCF, taking full commercial operations.

And we are collaboratively continued our efforts to minimize the patient base attrition maintaining ever since users.

Based off the current plan, we continue to expect the global net revenue to Cynthia on ex for the full year 2021 will be and the range of $12 million to $15 million.

As we operate today under the terms of our commercial collaboration agreement.

<unk> has resumed.

And I assumed responsibility for marketing market access sales distribution and reimbursement.

Customer service and the U S, Germany, Italy, Spain, and Netherlands, Poland, and now, Sweden, and Norway. The last 2 existing markets, which were were transitioned ahead of plan and Q2.

We had cynthia on ex remain focused on product development, including clinical trials and our regulatory activities along with manufacturing our systems.

And the U S. This was the first quarter for most members of SNCF U S sales team and we're pleased with the steps that they have taken to establish this market coverage.

To support this they identified the skill sets that are required for sales professionals to be successful introducing our transformative CGM technology.

25, new sales professionals experienced and diabetes or medical technology have now been fully on boarded and are calling on existing accounts.

This team has been trained and the reimbursement landscape and how to introduce the product and procedures to clinicians.

The sales professionals are supported by a team of inside sales and clinical trainers distribution channel market access and customer care professionals.

This comprehensive commercial infrastructure currently enables the targeting of existing providers and they are intensively managed patients as well as the payers and the trade channels.

These resources invested by our Cynthia represent their strong commitment to ever since and are supportive of the full commercial activities.

Coming out of the height of the pandemic and are very limited commercialization in 2020 to both patients and providers. The Cynthia sales force is actively reintroducing the product to both clinicians and patients who are impacted by these disruptions with initial focus on reestablishing and maintaining relationships.

The first action is calling on the existing ever since prescribers to introduce themselves make them aware of the transition and our reentry into the market and pursuit of servicing existing patients and new patients.

And this stabilization effort is targeted at rebuilding the foundation for future growth and the second half of the year. They plan to expand their reach to training and Onboarding additional prescriber practices.

And we know there is real work to be done to regain market traction and we're pleased that it is now underway.

To support driving growth and the installed base, continuing user retention and ensuring greater access to wherever sense a sense. He has launched a patient assistant program. This program is designed to accommodate those whose health plans have high deductibles and coinsurance or co pay costs and to support their out of PAH.

Cost with while using ever since.

Specifically U S ever since users can access the program, which covers up to $300 per sensor after the patient pays for the first $100 out of pocket.

For those who qualify for the full 300 dollar reimbursement per sensor ever.

Ever since we generally have a lower total annual costs and then other CGM on the market.

Cynthia estimates that over half of the people using mealtime insulin in the U S could be eligible for the patient assistance program.

Well the economics are different from our previous bridge program. The patient assistance program share. It's a similar commitment intended to help a broader group with access to ever since.

Cynthia is prioritizing raising awareness of the ever since system within the diabetes community to drive demand with the patient assistance program and the established U S commercial and infrastructure.

There are 2 main initiatives aimed at increasing awareness and direct to consumer or DTC digital marketing campaign and clinical education through Hcp's. The DTC campaign targets social media audience is primarily aimed at intensively managed patients seeking information about diabetes.

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The initial DTC campaign has resulted in nearly 50 million impressions are had served to date through Facebook and Google.

The campaign targets, raising awareness and can be and effective sales tools for generating inbound needs.

There is a strong consumer aspect of CGM and patients have the ability to ask their healthcare providers to prescribe ever since.

We anticipate that January and patient pull from DTC advertising will play an important role in driving overall adoption over time.

From a health care provider side, we remain actively engaged and scientific and industry meetings, where we partner with key opinion leaders, who experienced the positive clinical act impacts and patient testimonials and ever since can have and managing patients diabetes, and who can share those experiences with their peers 2.

2 of the most important and well attended meetings were held and the second quarter, the Ada and the ATB meeting both.

Both scientific conferences and our presence at these meetings featured lead investigator Dr. <unk> presentation, and the clinical data from the promise study the presentation highlighted the safety and accuracy profile of the ever since 180 day sensor accuracy of the system with 1 calibration per day during the.

While as measured by M. A R D was and industry, leading 8.5 to 9.1%.

We are very proud of these results, which were well received by the broader diabetes community and we look forward to seeing these results peer review published in the very near future.

Together with the Cynthia sales force. We are also actively indirectly reaching out to local and national Kols by a 1 on 1 meet ups or small group discussions in person or TV, and it's where required and we will.

And will remain engaged with the diabetes community not only to communicate the positive clinical impacts ever since can have on diabetes, but also to learn and gather insight to fuel commercial clinical and product development activities.

In addition, our initial involvement with the accountable care organization or ACO is now and motion as well with product on site and ready to be inserted in the coming days at the University Hospital, ACO and Cleveland, Ohio the other.

First accountable care organization to adopt ever sense into their practice. This initial program will include 20, Medicare and diabetes patients on insulin regimen and using the ever since system for at least a year.

And the program will assess clinical outcomes, such as HBA, when see reduction and patient reported outcomes such as satisfaction levels during their use and we hope to learn and share valuable clinical information from the use of our long term implantable CGM with this important managed care population.

Moving to progress outside the U S S. Cynthia sales professionals and the European countries have added ever sent to their sales portfolios and started marketing the system in February.

This team has quickly learn the sales model for implantable CGM and they all have extensive diabetes knowledge and familiarity with the market and its offerings.

And across European markets, we executed smooth transitions from our prior distributor.

Germany, and Italy continue to represent 2 of our largest patient basis in Germany, most payers cover ever since and new contracts have been established with SNCF and.

And Italy, where we were able to transfer a majority of the previous contracts, including tenders.

As different regions have experienced different impacts and regulations associated with Covid.

We can complicate efforts.

And to reach and train doctors with a new product.

Cynthia has focused on servicing existing patients as restrictions allow we are working closely to optimize sales channels to appropriate levels to support and in line with patient demand and they are off to a solid start outside the United States and we are excited to now be marketing and Scandinavia as well.

With us and see assuming full commercial responsibilities, we have been able to focus and allocate our resources towards developing new products strengthening our clinical profile and advancing our regulatory activities as we intended when we entered into this agreement.

Market research of existing CGM products show that the 2 most sought after features any CGM system, our sensor accuracy and extended sensor lifetimes study.

Studies have repeatedly shown that our sensor remains highly accurate throughout the full 180 day duration of the sensor life.

Our gross strategy consists of offering patients improved benefits with each iteration of longer lasting less intrusive ever sent sensors, which we believe will enable us to gain share and help expand the market for CGM and.

As evidenced through the Reinsertion rates, our patient base is shown to be loyal and which we believe highlights the distinct desired function and lifestyle benefits offered by ever since.

On the U S regulatory side the data generated from the soon to be published promise study is being used to support our 180 day product PMA supplement application.

Which we previously announced was filed last fall.

Following the emergency use authorization delays the submission was assigned to a lead review by the FDA on April 15th.

And we also reiterated the previous extended review timelines based on publicly made comments by the agency officials.

At this time and based on the confidence and the strength and quality of our submission and in discussion with the lead reviewer we continue to expect the approval of the product by the end of 2021.

Though the constantly evolving situation with the pandemic and its impact on FDA workload make it hard to precisely estimate regulatory timelines.

And looking forward, we continue to make progress on our next generation technology platform. We are designing the system to have a life span of 1 year and require only 1 calibration per week and we are actively working on its development.

The attractiveness of this product to patients would represent another step wise function that would address the needs of additional patients and we believe again and revolutionize the CGM industry.

The goal of bringing such a product and market represents our solution to the ultimate goal of lessening the burden of diabetes management and to offer people even more freedom.

Our research and development activities are currently focused on working to realize this goal with our efforts centered around the technical and chemical configuration of the sensor.

Once the technical optimization is completed we intend to submit the product for the FDA to the FDA for and <unk> as previously discussed and to begin clinical testing the development of the product has been steadily advancing and we currently expect to start the pivotal trial and the first half of next year.

I'll now turn the call over to Nick who will go over the details of our second quarter financial results.

Thank you Tim and good afternoon, everyone. Our Q2 results reflect the full transition of commercial activities in the U S and EU to our partner SNCF and the second quarter of 2021 total net revenue was $3.3 million compared to $261000 and the second quarter of 2020.

Revenue for the second quarter was $1 million and revenue outside the U S with $2.3 million gross profit in Q2, 2021 increased by $1.5 million year over year to $392000. The positive gross margin in the quarter was primarily due to the fulfillment of orders utilizing.

Existing written off inventory at the onset other COVID-19 pandemic.

Second quarter, 2021 sales and marketing expenses decreased by $1.5 million year over year to $1.6 million compared to $3.1 million and the prior year period. The decrease was primarily due to the strategic changes and other market commercialization approach through the SNCF collaborative.

Net.

Research and development expenses, and Q2, 2021 increased by $3.3 million year over year to $7.1 million compared to $3.8 million and the prior year period the.

The increase was primarily driven by clinical study costs and personnel related expenses general and.

Administrative expenses, and Q2, 'twenty, 'twenty, 1 or $7.5 million and increase of $3.1 million year over year compared to $4.4 million and the prior year period, mostly due to an increase and personnel related costs for the 3 months ended June 32021 operating loss.

<unk> was $15.9 million compared to a loss of $12.5 million and the second quarter of 2020.

This represents a $3.4 million increase and operating loss from 1 year ago.

The increase from the company's share price at the end of the second quarter as compared to the company's share price at the end of the first quarter of 2021 led to a significant non cash charge in Q2 as a result, other expenses increased by $169.4 million compared to the prior year period, primarily.

2 noncash charges, resulting from the accounting for embedded derivatives and fair value adjustments related to the company's financings, including the 2020.3 and 2025 notes along with a P. H C 2024 notes and energy capital equity line of credit as required by U S generally accepted accounting.

Principles or GAAP, we mark the value of these interest insurance mints to market for each reporting period and the change and these values are recorded as non cash charges to the income statement.

Each quarter the value of these noncash gains or losses will vary based on the volatility and the companys share price.

Generally as share price increases, we incur a non cash loss and its share price decreases we recognized a noncash gain for the second quarter and the cash portion of the other expenses was $4 million of interest expenses out of the total $164.4 million.

For the 3 months ended June 32021, total net loss was $183 million.

Or 42 cents per share compared to $7.5 million or <unk> <unk> per share and the second quarter of 2020.

Net loss increased by $172.8 million due to a $169.4 million increase to other expenses primarily related to the noncash accounting charges from the accounting other company financing as previously mentioned as well as a $3.4 million increase and loss from operations.

And the first half of 2021 our net cash used in operating activities was approximately $34 million as of June 32021, cash cash equivalents short and long term investments totaled $215 million. This includes approximately $50 million.

And gross per seats raised through our at the market or ATM equity offering program in Q2 they.

And the use of proceeds will be primarily for debt service, specifically, we will repay our P. P. P loans and have elected to pay the interest on the ph D notes in cash instead of the payment in kind or pik option.

Paying the interest and cash raised from the use of the ATM results and significantly reduced shareholder dilution due to the lower share conversion price associated with the terms of the payment and kind of agreement.

Looking at the remainder of the year, we are reiterating our 2021 guidance, we continue to expect global revenues to Cynthia Onyx.

<unk> 12, and $15 million for 'twenty, and 'twenty, 1 with $6.1 million of revenue achieved in the first half for full year 2021, net cash used in operations remains projected to be and the range of $60 million to $65 million with that I will turn the call back to Tim.

Thank you Nick.

To wrap up there were headwinds and the first half of the year as we worked with and Cynthia to initiate their commercial activities, we reintroduced ever sent to the market with a new commercial partner amid the net the.

Pandemic, which impacted both in person actions to drive awareness and created delays and the review of our highly anticipated new product.

These factors have gated isn't needed us from achieving rapid patient adoption today, but we believe we are better positioned to gain traction and the market with the right team and the right strategy to capitalize on the potential of ever since.

We are pleased to be working collaboratively with our partner on initiatives to drive growth, including increased patient and clinician and marketing and launching the patient access program.

We are confident in our product and its value proposition to users ever since users are continually commenting how our system reduces the burden of managing their diabetes and we have been pleased with the many loyal users who have already had the awareness of ever since.

We see this as a confirmation of our belief that our value proposition will resonate with a broader patient population and we.

We're excited and motivated to offer more patients the same benefits as we look forward to future generations of our technology. We are absolutely confident that we can offer existing and new patient populations additional benefits and build lasting patient and provider loyalty and this will contribute to our sustained growth and success.

<unk> as a business.

I'd like to thank you for your time today and joining us for questions are <unk> Jain, our chief operating officer, and Mirasol, <unk>, Vice President and general manager of our global commercial operations.

Operator, let's now open up the call for questions.

Thank you we will now begin the question and answer session.

Ask a question you May press Star then 1 on your telephone.

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At this time, we'll pause momentarily to assemble our roster.

Our first question comes from Mathew Blackman with Stifel. Please go ahead.

Good afternoon, everybody. Thanks for taking my questions I have 3.

And then just to start Tim I appreciate it's tricky, commenting on and active FDA review, but.

But we've been hearing from some of your peers and the last couple of weeks about further delays with some of their filings. So any more color you can provide on where your confidence is coming from and that later 2020 non approval would be would be helpful. And then I have a couple of follow ups. Thanks.

And obviously, it's through the process.

Do have the opportunity to speak with the agency.

They not only do they have a significant amount of work to do there has been some re prioritization.

Of the of the Covid activities that has impacted them and Theres also been.

Some personnel.

Changes as well, where they where they've loan people out.

And there are seeing some of that return and and and our recent conversations with the lead reviewer.

We just feel that based on where we are although it's certainly slower than we've experienced in the past that we do see the path to getting this completed here over and over the next couple of quarters.

Okay I appreciate that thanks, Tim and then as we sort of think about the sort of the relaunch and the U S. Just curious.

And I appreciate it's only been a few months here, but it has essentially been able to engage the majority of the existing U S patient and clinician customer base instead of the first part of that question and then it's unfortunate and I need to ask this again, but are the reps able to access clinics now pretty freely just asking because of some of the <unk>.

Surgeons and some.

Some different regions in the U S. And then I'll just for the last question out there right now and maybe it's for Nick just curious about how impactful you think the patient assistance program might be in terms of your mix in any given quarter I heard Tim mentioned, maybe up to 50% of our.

Ah patients, taking mealtime insulin may qualify, but maybe the more important question is is that patient assistance programs have now baked into the guidance I would suspect that may have weighed on the guidance a little bit so maybe maybe a little bit help.

Understanding sort of have the moving parts and the guidance. Thanks.

Sure, Matt I'll pick up the access.

The the new sales reps have been able to do the initial conversations I won't say that they've all been able to be in person because of some of the regional restrictions and as Youre aware.

Those have picked up again and the U S.

They have been less.

Forgiving, if you will and Europe over time.

And so we do understand that a lot of this will continue to change.

But in general we've been able to reach out to most of the existing.

Prescribers that are currently have patients on the product some of those debt.

And moved on during the time that we start commercializing we have yet to get back to and Thats a lot of the work that.

Who is going to be focused on moving forward, but.

Certainly we do continue to see some impacts due to COVID-19.

And we're just going to have to continue to work through it.

And use the TV capability, well, where we are and some of this resurgent.

Nick I'll, let you speak to the patient assistance program.

Sure Yeah. Thank you Matt for the question in terms of the patient assistance program as we take a look at our revenue forecasting for the year, there's a number of factors.

Certainly that is additional economics that is taken from the partnership but there's also other factors that we look at including payer mix and mix overall of the product across the regions.

So our guidance at this stage is really driven by 2 factors again, you mentioned 1 in terms of the timing of the 180 day approval and the U S. And then any new impact potentially from the virus strains that are currently circulating the globe.

Thank you I appreciate it.

Our next question comes from Chris Pascale Witz.

Please go ahead.

Thanks, Nick just to follow up on that last point does the guidance assume that you actually get any benefit.

And this year from 180 day sensor.

It does include a <unk>.

Small amount of pick up from the 180 and in the U S and <unk>.

Q4, okay.

Okay.

And then just a couple of quick.

Questions from a financial side of things. So do you have any written off inventory left.

That could still flow through and hold down Cogs during the back half of the year or has that now been taken care of.

Yeah, We project that in Q3, we will have fully extinguish that written off material and see more normalized margins for the back half of the year.

Okay.

And then why did G&A expense tick up so much sequentially and you guys had been running and kind of a 4 and 5 to 5.5 range for low year and a half now and then it all of a sudden shut up here and.

And did some of the benefit from having lower sales and marketing.

Sure Yeah. The main driver there is.

Stock compensation expense, there's both cash and noncash component.

That is the biggest driver that we're seeing.

Okay. Thanks.

Youre welcome.

Our next question comes from Danielle.

And Tulsa.

And <unk> Leerink. Please go ahead.

Hey, good afternoon, everyone. Thank you so much for taking the question and congrats on a really strong quarter.

I was wondering if you could give a little bit more color on some metrics over in Europe.

And so yes.

Product theyre, a little bit longer youre, a bit more established in Europe, So I'm thinking things like.

Reinsertion rates for example, with 180 day the ex all over in Europe, and then also things like I'm getting.

I don't know.

This is the right way to think about it like same store sales you know existing physician user growth versus new physicians and things like that.

Sure Danielle and thanks for the time as well.

And Europe is you're right they've had it for a couple of months longer than in the.

And then and the U S.

But still they're pretty actually coming up the learning curve I would say that Europe is still.

Much more largely impacted by Covid and the second quarter than certainly the U S was so some of those dynamics need to be considered as well specifically on insertion rates. We haven't seen any notable change as you recall, we've typically seen about 70% on the first insertion and 85 on second.

And 90 or higher on third and beyond as people really get locked into the product and they will continue to work really hard to stand and products. So so we haven't seen that change, but but new patient starts, especially at new clinics in and the time and Covid has been it.

It has been challenging for us.

Okay. That's a fair point and then I guess, just a follow up and the Reinsertion rates you know now with the XL.

As you get longer wear time do you expect those reinsertion rates hit.

Day at that 70, and then 85 and then over 90 or do you think that Theres, a chance that those reinsertion rates actually move higher with longer where thanks. So much.

Yes, well certainly just the math of the longer where helps because there's you know there's 2 less times a year for that change to occur. So that does that does have a material impact.

I would say the biggest.

<unk> that we continue to make 4 for retention and especially for that first sensor is still is around the economic about half of those 30% that do come off.

Coming off because of because of economics, so as we get more and more coverage around the globe.

That'll be the biggest opportunity for us to see improvement there.

Thank you.

Our next question comes from Jayson Bedford with Raymond James. Please go ahead.

Hi, Good afternoon, just a few questions from me, Tim and your opening remarks, you mentioned minimizing patient patient base attrition.

Succeeded.

And did the patient base grow quarter on quarter and <unk>.

<unk>.

Well patient base and attrition really was was heaviest force in 2020, Jason when we really stopped the commercial activities.

So that's what the initial efforts for our Cynthia has been in the and the U S to really bring that back. So that was really my my primary referenced they are calling on existing accounts.

And of course, we would always like to see more patient growth and then than.

And then you'd have that's really obviously then the name of the game.

And I feel that where we are making good progress, but the focus initially is really on stabilizing the market that had been through.

Pretty dramatic time was with both our stopping of commercial activities and the Covid dynamics.

And.

Okay.

On the 180 day.

Is the expectation that you get approved for both the primary and the SBA sensors, we're still working on that Jason as you saw from our technical publications, we do have a and improved formulation.

And that we are working with the agency for those and review and regards to what actually gets approved.

We will stay tuned, but we're continuing to work with the agency.

Okay.

And then maybe for Nick just for clarity.

The new patient assistant program by Cinzia impact your revenue generation or does the cimzia absorb most of the economics there.

Yes, so the patient assistance program is a gross net deduction taken at the partner level and has taken and pre the split between us and a sense yeah. Okay.

Okay. Thank you.

Okay.

Our next question comes from Alex <unk> with Craig Hallum Capital. Please go ahead.

Hey, guys. This is try and Mccarthy on for Alex.

Other questions from me.

Can you maybe speak to the clinician inception on ever since specifically through the SNCF sales force relative to when the cash.

Company and launched the product originally in 2019.

Yeah.

Well certainly since the biggest change since we launched and to that.

Ben has been the payer coverage and that is a significant consideration for a per prescriber. So the fact that we're in and much much better shape makes that reception that much that much better.

But do recall as I said most of our focus and the early couple of quarters here with us since he has been on our existing per.

Prescribers, so they know they have a.

Hey, good utilization of of ever sense and are of course by that fact is predisposed to debt.

A positive reception of it.

Okay got it and maybe just a quick follow up to that.

How many clinicians are trained to perform the insertion and how many clinicians are actively prescribing the device and I guess how has this changed since you started side in April.

I don't have the exact numbers for you, but we did see and 2020, a reduction and the number of folks that were doing the insertion and much of that driven by Covid also nodal Mount by our our lack of and active sales force.

So we continue to focus on bringing that back it's the existing clinicians that are currently doing it.

And really a focus on the top 300 that are since he is working on right now.

Okay. Thanks for the question.

Our next question comes from.

Very good.

<unk> with <unk>. Please go ahead.

Hi, Good afternoon, and this is Sam I Berlin from Murray and thanks for taking the question.

Just 1 from me on the DTC marketing efforts there I appreciate the commentary and the 15 million impressions during the quarter.

Any color and how that's maybe impacting new patient starts and growth.

I guess over the quarter. Thanks.

Sure.

And maybe what I'll do is speak to our history is this is just up and new but we did see a pretty significant amount.

Prior to the Covid activities that we anticipate getting back to.

About 50% of the patient starts previously had come from our DTC efforts. So I would anticipate that we'd be able to.

To reach that level and the future as we move forward.

Great. Thank you.

This concludes our question and answer session I would now like to turn the conference back over to Tim Goodnow for any closing remarks.

Yes.

Great and I'd like to again, thank everyone for their time and the opportunity to speak with you. The this afternoon, we look forward to giving you an update at our next quarterly call in and about the November time period with that have a good day. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.