Q3 2021 Senseonics Holdings Inc Earnings Call
Good day and welcome to the essentially on its third quarter 2021 earnings Conference call.
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I would now like to turn the conference over to Carsten backwards, what they feel Martin group. Please go ahead.
Thank you. This is carson backwards from the Gilmartin group before 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.
Most 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.
Year ended December 31, 2020, our 10-Q for the quarter ended September 30th 2021 and our other reports filed with the SEC. These documents are available in the Investor Relations section of our website.
Www Dot <unk> dot com, 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 you'll be discussing our 2021 outlook joining me from Cynthia Alex Our Timken, now President and Chief Executive Officer, and Nick Tressler, Chief Financial Officer with that I would like to turn the call over to Timken, now President and CEO Tim <unk>.
Thank you Kirsten and thank you all for joining us this afternoon.
On the call today, we will provide a brief update on <unk> regulatory developments, our product pipeline, our commercial activities and Nick will discuss the third quarter financials in detail and then I'll conclude and open up the call for Q&A.
To begin in the third quarter, Cynthia next generated $3 $5 million of revenue. This included <unk> 6 million from the U S and $2 9 million from outside the U S, where we have a larger installed base.
Commercially in the U S. As Cynthia has been re engaging health care providers, who prescribe and insert ever since to support current patients and to add new users in those clinics. The greatest challenges in this work are driving awareness converting leads into use in securing HCP comfort with reimbursement requirements as quickly as.
We would like.
We appreciate it signs of interest and anticipation among both HCP and patients and the potential FDA approval of the 180 day system.
We believe that anticipation of this launch along with the impacts of the Delta Varian also curved and number of new sensors inserted for the 90 day product relative to our expectations for the third quarter.
Given these factors, we expect global net revenue to <unk> for the full year 2021 to be right in the middle of our previously stated range of $12 million to $15 million.
We are encouraged to be able to sustain our full year guidance and exit Q3, anticipating being in the middle of our range given that our guidance for this year had been established with the expectation of the U S 180 day product contributing to 2021 revenue.
At this point, we of course do not expect contribution from the 180 named burden. This fiscal year and are happy to maintain the earlier forecasted revenue despite the delayed FDA approval.
Our collaboration with Cynthia continues to advance and together we have developed and are implementing several promising programs targeted to drive HCP and patient adoption in the U S.
At the highest level, we are focused on first raising awareness of the clinical benefits of the worlds only long term implantable CGM and second increasing patient access to the ever since technology.
We are exploring a variety of new programs to reinforce awareness and adoption.
There are as you're aware two groups to focus on hcp's at the professional level and our users at the consumer level in.
In the U S. The safety is first action on this front was to Reengage hcp's that were previously inserting ever since to introduce themselves and make the market aware that we are again available to support sensor insertions for new patients. The sales professionals that have Cynthia are now acquainted and engaged with the ever since centers to support the needs of their <unk>.
Patients in practice.
Targeted outreach and work to Reengage. These practices continues when the 180 day sensors available SNCF plans to pursue a broader group of endocrinologists that are known CGM prescribers as the top new account targets.
To further enhance awareness, particularly among providers presentations concerning the ever since system expanded this quarter.
And at each of the leading diabetes clinical meetings. In addition, a series of small group lectures with a number of providers has already begun and we are encouraged by their potential to improve awareness.
We continue to plan these in 2022.
Three manuscripts have recently been published in peer reviewed journals that demonstrates the accuracy real world performance and clinical benefit of the ever since CGM system.
All adding to the clinical confirmation of the value of a long term implantable sensor on.
On the patient awareness side DTC advertising remains an important piece of our overall commercial strategy.
The DTC digital marketing campaign continues to generate impressions and awareness within the diabetes community and this patient recognition is expected to play an important role in driving leads and broader adoption.
We are pleased with the number of leads being generated in their social media campaign and with a strong interest that remains for a long term sensor.
While awareness and demand generation are increasing ensuring patient access to ever since as equally important with favorable coverage for over 200 million covered lives in the U S. Cynthia recognize the need to assist patients who still have high out of pocket expense.
Meaning after insurance reimbursement.
Unlike the former British program as Cynthia patient assistance program provides financial assistance up to $300 per sensor and it is limited to eligible patients with commercial insurance coverage for the product.
This enables us to manage the program costs and ensure we are assisting patients who have coverage and the ability to stand ever sense long term.
Since he is also continuing efforts to expand the number of hcp's trained to insert ever since sensors to accelerate to health care providers certification process for a limited time eligible hcp's will be provided training sensors at no charge.
This program is targeted at increasing the number of in servers and make it more convenient for patients to get our long term sensor.
In addition, we are also in the final stages of planning and seeking to implement additional pilot programs to support expanded access to ever since as an example, we are working to establish a pilot program with a mobile healthcare provider, which would provide an in home insertion option for ever since users.
We hope to pilot this innovative approach to sensor delivery limited region within the coming weeks with the goal of expanding it to additional markets next year.
We continue to look at these and other ways to support access as well as patient and clinician ease with the procedure and its workflow processes.
Finally as ever since requires insertion by a health care professional it offers a reimbursement pathway unique within the CGM market payers, such as Cigna and Medicare reimbursed ever since through our established CPT codes, enabling the billing of both the product and the procedure in one claim.
This can greatly reduce the burden and time it takes for patients to obtain CGM versus their traditional processes of durable medical equipment.
In this case, the health care professionals purchases ever since upfront rather than the patient having to go through a distributor first once the procedure is complete the health care professional bills in a single claim.
While the process is not uncommon across other specialties. It is not highly practice for endocrinology specialists and we have observed some delays as clinicians offices work to establish the new product acquisition processes that are required.
To facilitate adoption and ensure healthcare professional always have product in their offices to accommodate new and recurrent patients. We are developing a consignment program that allows clinicians to stock ever since in their offices.
Having product on the shelf and the ACP is often at all times can enable fast even same day insertions.
Having to manage the inventory you're carrying costs.
We plan to pilot this approach before the end of the year and we are optimistic about its ability to help health care professionals provide patients with easy access to ever since.
In Europe, our Cynthia sales professionals across our markets have worked to continue ramping with ever since and thought to build out on the smooth transitions of contracts and tenders from our prior partner and the team's knowledge of the diabetes market.
We are encouraged that in Italy, there are certain regions, where we have strong tenders, which are creating meaningful market penetration and overall patient share in those regions is currently already above 5%.
Which we believe speaks to the potential of ever since.
<unk> continues to work to support tenders in a number of European markets.
We were pleased to recently win a tender in the <unk> region in Sweden, which we believe will continue to support positive performance in that market.
On the innovation front, we are excited to be approaching our major release of our next generation product in the U S with the FDA clearance of our 180 day sensor, which we believe remains on track to occur later this quarter in.
In the third quarter, we have been actively engaging with and responding to requests for clarifying information from the agency.
We are pleased to be nearing the completion of the interactive review process and are excited about the.
The potential in bringing this transformative product people with diabetes.
The FDA has been a great partner in these difficult times and they are highly engaged and focused on completing this review in its final stages.
If there are no other unexpected additional impacts as a result of COVID-19 delays or any other factor at the agency. We continue to expect approval by the end of this year.
Certainly one of the benefits of the authentic collaboration is enabling our focus on important development programs. We continue to advance our future generation ever since system. The development of the $3 65 day sensor there will require only one calibration per week continues to be the goal of our efforts.
These efforts are acutely focused on a technical optimization of the device and once completed we intend to submit the product to the FDA for an IDE approvals to begin pivotal clinical trials in.
In addition last month, we initiated a pilot trial here in the United States, where we are evaluating chemistry configuration and sensor architectures that are designed to be used in our 365 day product.
We are excited to have this early clinical look at the system performance of the year long configurable configuration of the product.
We do continue to expect the formal pivotal trial will be initiated in the first half of next year and would form the basis of the clinical data that we would submit to the agency for commercialization approval in the future.
Product like the planned 365 day ever sent system is something that our patients in the diabetes market is extremely excited about because of the transformation that it would represent in managing the burden of diabetes and providing ultimate freedom to our users.
I'll now turn the call over to Nick to go over the details of our third quarter financial results.
Thank you Kim and good afternoon, everyone. The Q3 results reflect the full transition of commercial activities in the U S and EU to our partner SNCF in the third quarter of 2021 total net revenue was $3 5 million compared to your point $8 million in the third quarter of 2020.
U S revenue for the third quarter was <unk> 6 million in revenue outside the U S with $2 9 million.
Gross loss in Q3, 2021 was $1 2 million a decrease of $2 million from gross profit of <unk> 8 million in the prior year period.
The decrease in gross profit was predominantly related to the increase in cost of goods sold due to impairment charges and write offs on inventory and related assets of current generation products with potential expertly concerns.
Third quarter, 2021 sales and marketing expenses were $2 5 million a decrease of <unk> 7 million compared to $3 2 million in the prior year period.
The decrease was primarily the result of a decline in salary and personnel costs from the reduction in sales support due to the transition to a sense yet for the commercialization of ever since offset by an increase in general advertising related to the shared support of the commercialization of the 90 day product in there.
The U S.
Research and development expenses in Q3, 2021 were $7 $2 million, an increase of $2 6 million compared to $4 6 million in the prior year period.
The increase was primarily due to the expansion of our R&D head count an increase in clinical studies and lab supplies and an increase in contractor expenses.
General and administrative expenses in Q3, 2021 were $5 1 million a decrease of <unk> 4 million compared to $5 5 million in the prior year period, primarily due to lower professional fees.
For the three months ended September 32021, operating loss was $16 million compared to $12 $5 million of loss in the third quarter of 2020.
The decline in the company's share price at the end of the third quarter as compared to the company's share price at the end of the second quarter of 2021 led to significant noncash gains in Q3.
As a result total other income increased by $69 9 million.
Compared to the prior year period, primarily related to noncash charges, resulting from the accounting for embedded derivatives and fair value adjustments related to the company's financings, including the 2023 and 2025 notes along with the PHP 2024 notes and energy capital equity line of credit as well.
As required by U S generally accepted accounting principles or GAAP, we mark the value of these instruments to market for each reporting period and the change in these values are recorded as noncash charges to the income statement each.
Each quarter the value of these noncash gains or losses will vary based on the volatility of the company's share price.
Generally yes.
Share price increases, we incur a noncash loss and its share price decreases we recognized a noncash gain.
For the three months ended September 32021, total net income was $42 9 million or 10 cents per share compared to a net loss of $23 4 million or <unk> 10 per share in the third quarter of 2020.
Net income increased by $66 $3 million GTD accounting for embedded derivatives and fair value adjustments previously mentioned.
Year to date, our net cash used in operating activities was approximately $44 3 million as of September 32021, cash cash equivalents short and long term investments totaled $201 $1 million in the third quarter, we began to make equal pay equal.
Repayments of principal and interest on our PPP loan without penalty, we continued to pay the interest on the notes in cash instead of using the payment in kind or pik option.
Paying the interesting cash continues to reduce shareholder dilution due to the lower share conversion price associated with the terms of the payment in kind agreement.
Lastly, looking at the remainder of the year. We currently expect global net revenue to <unk> for the full year 2021 to be right in the middle of the previously stated revenue guidance range of $12 million to $15 million. We also continue to expect full year 2021 net cash used in operations.
To be in the range of $60 million to $65 million with that I will turn the call back over to Tim.
Thank you Nick.
In conclusion, we expect to Cynthia to continue to take steps to grow the ever since patient base and optimize conversions of interest to our implanted technology <unk>.
Continually improving health care professional and patient awareness with targeted professional engagement in DTC advertising along with initiatives to drive patient access are all making meaningful impacts with the authentic commercial infrastructure in place to support a productive 180 day ever since product launch.
I believe that the foundation created by our new commercial partnership and the longest lasting CGM on the market positions us well to capture meaningful market share.
We appreciate the face that our customers have placed in us and demonstrate the value of ever sense and are excited to be able to deliver an even greater value in the future with our continued innovations.
Thank you for your time today, joining us for questions are <unk> Jain, our chief operating officer, and Mirasol, <unk>, Vice President and general manager of global commercial operations.
Operator, let's open up the call for questions.
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Today's first question comes from Mathew Blackman with Stifel. Please go ahead.
Hi, calling on for Matt just a couple from me.
On the 180 day launch how long do you anticipate the turnaround from approval.
To the actual launch how long do you anticipate that to take and given the current environment. What are your expectations for the speed flash scale of the launch maybe in relation to ever since and will materially affect.
First half revenues next year.
Okay.
So we're not going to speak to revenue for next year as of yet we'll come to that the next time, we speak but in regards to the transition obviously, it's a high motivation for us their view.
It has taken us some time to get through it.
The way the process works is one of the final things that you'll you'll agree on with the with the agency as the final configuration the final labeling than any other.
Considerations that they want to include so we will certainly go into the manufacturing and assembly and distribution support for that as quickly as we can.
We did it in.
About 30 to 45 days.
Last time that we will launch the 90 day product I would anticipate with a partner and some of the handoffs there might be a little bit.
<unk>.
But not significantly greater.
And if I could just one follow up.
Do you expect to be in the middle of the 12% to $15 million guidance range for the year can you remind us is 180 days still included in that number what else is baked in just trying to get some color.
Thank you, yes, so we at this point.
Even if we got approval right away.
Given the transition that needs to occur as we just talked about it's not likely that we would be able to commercialize product within this year. So there is no 180 day product in the U S. That's anticipated in that.
In that middle of the range of 12% to 15 so.
So we would anticipate in the U S continuing to sell the 90 day product through that time point.
Oh, Thank you and our next question today comes from Jayson Bedford with Raymond James. Please go ahead.
Hi, good afternoon.
Maybe a few questions for me.
Tim you talked a little bit around kind.
Kind of kick starting the awareness program or a sense of is there.
Any way you can give us a sense of where you are in the U S. In terms of number of users from a physician standpoint.
We were going to stick to the <unk>.
Annual.
Patient count as you recall we were.
Just about 1000 patients.
A little bit more than a year ago, we have seen some reduction from that but we are working to.
Of course, all that back so.
We'll update that on the on the next call.
And do recall that we've got quite a bit of a larger installed base in Europe as well.
Well I went about 10 more from a from a.
Injector standpoint.
From a physician standpoint is there any way you can kind of give us an idea of how many folks are in planning device today.
So there is about.
I believe the numbers a little bit over 400 folks that are actively.
Theyre trained and actively invest.
<unk> and <unk>.
So I don't know if all of those are actually.
Hello, Jason as you as you heard from the script there is a.
So very encouraging interest in the 180 day product and we have had some feedback that youre going to wait to get started back up again when that's available.
Okay.
And when will you file for the IC GM level.
We're going to we're going to get to that as soon as we get through this review recall that that is a 500 10-K.
Which has some advantages but.
I am through there is a little bit of complexity with that transaction, we have talked to the agency about it.
As our device as a combination device, there's a little bit of work that they need to do so you.
We expect it will continue to take some time, but at this point, we're all focused on the primary 180 day product.
Okay.
And maybe just for Nick.
A little bump in receivables.
On quarter, what's the ideal level either from a DSO percent of sales standpoint, I'm just wondering how should we look at the right level of receivables.
Sure Yes.
Expect that 30 to 45 day range from a receivable standpoint.
Okay. So it will come down from current levels I believe right. That's your expectation that's your expectation.
Okay.
Alright, thank you.
And gentlemen, as a reminder to ask a question. Please press Star then one.
Our next question comes from Alex <unk> with Craig Hallum. Please go ahead.
Hey, everyone. This is Conor Stevenson on for Alex Thanks for taking the questions. So I don't want a pound this too hard it sounds like you're pretty confident about the 180 day approval happening by the end of the year, but.
Given what's happening in the market with kind of FDA clocks kind of thrown out the window with other diabetes products do you see any risk of the approval kind of slipping into 2022.
I'd certainly would never say that there is no risk we are in active.
View at this point certainly earlier in the year, having their resources to be able to get back to the to the diabetes technology was was the issue for all of us.
I won't say that they are back five days a week, but they are back the majority. So certainly we would never say, there's no risk, but it's our expectation based on the cadence of the interaction and the review that we've been through.
We are encouraged and very much feel and believe that we're headed in that direction.
Okay. Okay sounds good and then just a follow up to that are there any like contract covenants, which essentially is the 180 day approval is reached by a certain point or no.
Yeah.
There is some consideration.
But it is quite a bit quite a bit a ways out from where we are today.
If we were to just ultimately never receive it.
Sure Okay. Okay.
And then what.
Looking through like the FDA database, what is the current premature failure rate sense.
We're currently in and is that expected to improve with a 180 day.
That's an area we continue to focus on that the premature failure rate is about 3% to 4%.
In the U S and those are sensors that will.
We will go early based on the body's oxidative response, but obviously the design of the 180 is to certainly significantly moderate.
Okay. Okay, great. Thank you.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team for any final remarks.
Thank you very much appreciate everyone's time, and we look forward to updating you.
On a full year performance at the next quarterly call so with that good day.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation you may now disconnect.
Your lines will have a wonderful day.
Yes.