Q1 2022 Senseonics Holdings Inc Earnings Call
Good day and welcome to the century Holdings first quarter 2022 earnings Conference call.
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Thank you.
This is knock on the club 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.
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.
Detailed under risk factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2021.
Our 10-Q for the quarter ended March 31 2022.
And our other reports filed with the SEC.
These documents are available on the Investor Relations section of our website at Www dot since the 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 2022 outlook.
Joining me from Cynthia It makes our Tim Goodnow, President and Chief Executive Officer.
And Nick Tressler, Chief Financial Officer, with that I would like to turn the call over to Tim Goodnow, President and CEO Tim.
Thank you Malcolm and thank you all for joining us this afternoon.
On the call today will focus on the first quarter performance initiatives designed to increase the ever since user base as well as support the <unk> launch and to provide update on the progress for our product pipeline.
Nick will then discuss the first quarter financial you will open up the call for questions.
In February we achieved FDA approval for the ever since E. Three continuous glucose monitoring system.
With this important step we have now extended the duration of the longest lasting CGM system to six months of where in the U S.
Not only is this the longest lasting CGM by over 12 fold, but it also offers patients top tier glucose measurement performance with a high degree of accuracy.
<unk> D up eight 5%.
I would like to thank our team the promise study participants and investigators and the professionals at the FDA managing through the demands of the pandemic, whom were all instrumental in us achieving this milestone.
I've spent time in the field recently to engage with Hcp's patients as part of the E. Three launch in the first week of April at the insertion of our first six month commercial patient in the U S, which was performed at the impressive East, Alabama Endocrinology practice. It was clear how the <unk> hundred system represents.
A major advancement for people with diabetes pay.
Patients, both new to CGM and those experienced with CGM continue to seek alternatives to the limited choices of short term trends cutaneous sensors that exist in the market today.
Six months of where which means just two insertion procedures per year makes <unk>, even simpler more convenient and less expensive for patients.
Interest in our long term CGM is high and we're excited about the opportunity to help this large and important population with a revolutionary benefits of <unk>.
We continue to believe each advancement, we achieve in sensor wear duration represents a step wise evolution and product differentiation.
Market penetration and market expansion opportunities for ever since.
Before we move to the April launch activities for our commercial partner of Cynthia.
I would like to highlight our first quarter results.
For revenue <unk> generated $2 5 million, which included <unk> 8 million from the U S and one 7 million from Europe , as we wound down the current generation products.
The first quarter results were notably driven by inventory transition plans.
<unk>, new <unk> III product.
As Cynthia Onyx maintains focus on the design development and manufacturing of the innovative CGM systems, our global commercial partner <unk> is implementing a comprehensive commercial strategy to launch the 100 Navy product in the U S.
While it is still early in the launch of <unk>. We are just six weeks in I would like to outline key elements of our strategies and initiatives and share. Some early impressions from the past few weeks as we've worked with the Cynthia to roll <unk> out to the physicians and users in the U S.
We look forward to sharing more information on patient and provider adoption in future calls.
In the first half of the year ADC will be primarily focused on transitioning current users to the <unk> system, expanding new patient and clinician adoption and ensuring continued patient access through the payer transition from 90 days to six months insurance coverage.
Significant investments are being made to support programs targeted at enhancing these access and awareness initiatives.
In just six weeks following the FDA approval, we delivered the <unk> system to HCP for the first sensors for insertion.
This demonstrates the operational integration across these since the Onyx Cynthia collaboration as well as HCP and patient excitement for the new product.
In this short period of time, we completed manufacturing updated packaging. According to the new FDA labeling and ship products into the distribution channel.
Cynthia executed distributor contracts trained the sales force on the new label as well as the new patient assistance programs and initiated product introduction with HCP.
We believe these initiatives and programs will enable SNCF to serve more patients and providers.
We are pleased with the Swift commercial readiness of the new and growing dedicated CGM team in the U S.
The ADC reps are incentivized to transition existing patients to EC <unk> and new patients and to increase the number of certified in servers to support patient demand.
We're also excited that they have hired Rudy Thompson.
Former Cynthia Onyx head of sales to lead the U S ever since sales and marketing activities for Cynthia.
As part of the U S launch efforts to promote <unk> availability and increase overall ever since awareness.
<unk> has ramped up the direct to consumer digital advertising campaign across the largest social media platforms.
These advancements leverage the population algorithms targeting the diabetes community and specific geographies through Facebook and other channels.
Since patients have the ability to choose the CGM they would like to use the DTC advertising promotes product awareness and familiarity at broad scale.
This has proven to be an effective and efficient tool for generating patient leads and geographies with the highest insulin prescription concentrations where coverage for ever since continue in.
<unk> currently exist and where there are active in servers.
We're pleased with the early indications that this targeted approach is generating positive impressions and lead generation.
On the professional marketing front since the Onyx and ADC are both actively participating in all major diabetes industry meetings and conferences.
The <unk> conference in Spain, just 10 days ago was successful with robust HCP engagement.
Energy was high at the diabetes community was excited to meet again in person.
The team was pleased with the many opportunities to interact line with attendees and introduce them to ever since.
Booth traffic was strong as acp's demonstrated interest in gaining a deeper understanding of <unk> and then coming improvements to the 180 day product.
Training manager, we're very busy providing product demonstrations and we were pleased with the engagement at the product symposium.
We also plan to have a significant presence at the upcoming <unk> annual meeting in June . This is the largest diabetes conference of the year and a great opportunity to introduce hcp's to the new <unk> system and share clinical data that support the value proposition of our long term implantable CGM.
At the Ada this year there'll be a booth highlighting <unk> a product theater two presentations on the floor of the exhibit hall and three posters presenting clinical data, including our first data from our pilot 365 days sensors.
Regarding patient access.
<unk> is actively engaged with payers to transition coverage and payment mechanisms from the E 390 day sensor.
We are pleased with some of the early progress such as Aetna and Humana is immediate inclusion of phase III as well as Adcs interim solutions to ensure patients previously covered for the 90 day sensor will have no limitations or delays obtaining <unk> three.
Positive discussions with Medicare are ongoing and we are confident both our commercial and government players will continue to recognize the strong value proposition of our implantable CGM.
As we described on the last call Cynthia has implemented an updated patient assistance program that offers E treat any patient with commercial insurance coverage for a $99 out of pocket maximum cost for their first <unk> sensor.
We believe this is a very enticing program that should attract patients to ever since.
Ultimately this is an investment to drive adoption and increase the user base.
We expect patients new to CGM to try the product and for users on other systems to convert to the benefits of ever sent.
Following a patient first <unk> or out of pocket expenses are then limited to $100 per month with copay options, providing ongoing assistance to support access.
In Europe , our Cynthia is implementing important strategic changes and investments to provide the higher touch patient and HCP experience required for CGM commercialization.
Nancy has been holding national sales conferences, the past several weeks attended by the various commercial country organizations.
During these meetings theyre, making <unk> launch preparation designing targeting initiatives.
In Germany, <unk> Cynthia continues to transition from an indirect distribution model.
While increasing the focus resources dedicated to ever sent.
This includes an ever since internal sales specialist team to support patients from prescription to insertion and to provide patient training.
These changes enabled greater control and visibility of the sales process and an ability to directly provide reliable levels of support.
Another important aspect of serving the European market as being successful with competitive tenders in the different countries and as Cynthia continues to optimize their tender preparation process based on experience with ever since.
Now transitioning to our product pipeline, where we continue to make strides to advance CGM innovation.
<unk> hundred system is currently under final review by our notified body in the EU to achieve CE Mark.
At this point, we anticipate launching <unk> in Europe early in the third quarter.
To this end country preparations are underway to support regional launches.
The new product attributes of this enhanced six month product to our European users.
Research and development progress on our 365 day sensor configuration continues as well.
Human pilot clinical testing is underway and we continue to be encouraged by the product performance as we move toward their full year performance. Additionally.
Additionally, we are encouraged by positive progress we've demonstrated with our implanted battery design partner and currently anticipate batteries being ready for pilot clinical testing at the end of this year.
Implantable battery would allow us to pay a 180 day or 365 day sensor chemistry to create a swipe version of our system.
We are committed to deliver this targeted implantable flash product to people looking for the freedom and flexibility of an on demand product and look forward to providing further updates on the progress with our range of innovation on future calls.
I would now like to turn the call over to Nick to go over the details of our first quarter financial results.
Thank you Tim good afternoon, everyone.
In the first quarter of 2022 total net revenue was $2 5 million compared to $2 8 million in the prior year period U S revenue for the first quarter was <unk> 8 million revenue outside the U S was $1 7 million.
Gross profit in Q1, 2022 was <unk> 5 million in line with gross profit of <unk> <unk>.
5 million in the prior year period.
First quarter 2020 to selling general and administrative expenses were $7 9 million, an increase of $1 3 million compared to $6 6 million in the prior year period.
Increase was primarily the result of increased professional fees and payroll and related expenses.
Search and development expenses in Q1, 2022, or $7 8 million, an increase of $2 5 million compared to $5 3 million in the prior year period.
The increase was primarily due to the expansion of our R&D head count and increasing clinical studies lab supplies and an increase in outside expenses to further advance our product pipeline.
For the three months ended March 31, 2022, operating loss was $15 2 million compared to $11 3 million loss in the first quarter of 2022.
'twenty one.
The decline in the company's share price at the end of the first quarter as compared to the company's share price at the end of the fourth quarter of 2021 led to significant noncash gains in Q1.
As a result total other income increased by $340 1 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 ph.
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 instruments to market for each reporting period and the change in these values are recorded as noncash charges to the income statement.
Each quarter the value of these noncash gains or losses will vary based on the volatility in the companys share price. So generally as share price increases, we incur a noncash loss and its share price decreases we recognized a noncash gain.
For the three months ended March 31, 2022, total net income was $86 7 million or <unk> 19 per share compared to a net loss of $249 5 million or <unk> 68 per share in the first quarter of 2021.
Net income increased by $336 2 million due to the accounting for embedded derivatives and fair value adjustments previously mentioned.
As of March 31, 2022, cash cash equivalents short and long term investments totaled $166 9 million.
Turning to our outlook for 2022, we continue to expect our full year 2022 global net revenue to be in the range of $14 million to $18 million, we communicated previously.
As transition of payer coverage policies occur from the 90 day two the six month product, we expect gross margins to approach breakeven in the fourth quarter.
For the full year 2022, net cash used in operations is projected to be in the range of $65 million to $70 million. We expect the majority of expenses in 2020 to be for research and development for ongoing feasibility and pivotal clinical trials for additional products in our product pipeline, including the start up.
The 365 day pivotal trial subject to IV approval.
With that I will turn the call back to Tim.
Yeah.
Thank you Nick.
As we transition into providing our <unk> III product to people with diabetes. We're excited to continue the commercial rollout of our six month product in the U S through the second quarter and the expected launch across Europe in the coming quarters.
This next generation of product is an exciting advancement and diabetes management.
We believe our patients and providers have been waiting for such a product and we are eager to now bring them. The benefit of an improved version of the world's longest lasting CGM system.
We are pleased to see a cynthia's commitment to CGM and the ever since product and they invest to drive awareness and access for the product. This year, along with launching a newly dedicated CGM commercial organization and building a dedicated sales force in the U S. This investment is ramping and demonstrates their support for our partner.
<unk> and product together.
Together, our collaboration has the potential to make a positive meaningful impact for people with diabetes by bringing them our unique compelling solution.
Thank you for your time today with that concluding our prepared remarks, we will turn the call to Q&A.
Also joining us for your questions as local Jain our chief operating officer.
Operator, let's open up the call for questions.
Yes, Sir we will now begin the question and answer session to ask a question. The robust Star then one on your telephone keypad.
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First question.
Matthew Blackman with Stifel. Please go ahead.
Hi, This is Colin on for Matt I wanted to start with the first six weeks of <unk> commercial launch obviously, it's early days, but beyond new patient adds what are the leading indicators or metrics are you tracking whether it's website traffic physician interest is there anything you can share that gives you confidence in the 2022 commercial OE.
Look thank you.
Yes, Colin it's really driven by the patient and physician interest as as we noted the DTC has ramped meaningfully.
Bye.
By our Cynthia and the leads that they generate based on their request for information is is very meaningful factory. It is higher than we had anticipated which is of course very encouraging news.
Additionally through the professional.
Channel that being the doctors that treat the patients.
We do see a notable rise and that interest as well as many doctors.
We're certainly waiting for the 180 day launch so their interest is is important and.
Positive for us as well.
Great and you've talked about each duration advancement being a step wise.
Market penetration and market expansion in those opportunities is there any way you could frame the size of the <unk> III opportunity maybe relative to the market you addressed with a 90 day product. Thank you.
Well, we certainly anticipated being significant growth.
Is a big market as you are you are certainly aware.
There are still a number of people.
Net.
That are not on CGM that can benefit from it we see about a third of the people that have interest in.
And ever since or folks that haven't participated in CGM before even though they need to so we expect that there will be both a share transition from the existing players, which you know is about a global $7 billion market.
As well as the.
The growth of the people that aren't on it yet so we look at to be notable.
Thank you.
As a reminder, ladies and gentlemen would you like to ask a question. Please press Star then one.
So that's the last question comes from Marie Thibault.
Please go ahead.
Hey, good afternoon. This semi brown from Murray, Thanks for taking the questions.
Maybe I can start here on some of the conversations with both commercial and Medicare.
It sounds like.
Some early wins here.
I was wondering maybe if you could provide any additional color on maybe expected timing or pace of <unk>.
Additional payer transition to <unk> III.
We look at as a continuum you did see that we had some very early wins immediately.
We saw folks like.
And then Humana went right over to the 180 day product there are others that are in the process as well we've had active conversations with Medicare and we do anticipate that they will be putting some plans in place that will allow us very quickly on the <unk>.
Couple of months to transition to the 180 day product for Medicare patients.
So we do expect it to happen fairly quickly in the next quarter or two but we do fully recognize that there are some payers that do annual updates and it may be as late as.
Fourth quarter, or so, but we do expect it to get the transition done the majority of it in the next couple of quarters.
Great that's great to hear.
And maybe if I could ask one more here on the page patient assistance program is there a threshold there may be a time, where.
You'll have a certain amount of coverage, where maybe those programs will start to roll off or is that still.
Still to be worked out well.
We do anticipate using it for their first patients that are.
They're trying to censor at this point so you do need to have some form of commercial coverage. So if you have absolutely no coverage.
Youre not a candidate for this patient assistance program, but we do expect that to go on through to the rest of this year, obviously six months from now and the second sensor.
Sensor comes in they will transition patients transitioned to the the other where we do anticipate that there'll be a monthly cap.
For the product so expect it to happen.
And here in Q2 and Q3.
And potentially start to roll.
Re inserted patients.
To the second half of the program in the fourth quarter, all while continuing to put new patients on.
Throughout the remainder of the year.
Great. Thanks for taking the questions.
Thank you and our next question today comes from our Milwaukee with Craig Hallum. Please go ahead.
Hey, good afternoon, everyone.
The latest number of Hcp's implanting, the 90 day sensor here in the U S and just for the 180 day Anoro is six weeks since the launch is that coming out will be about 5%, 10% of ultimately converted over and I guess, just how much training. In addition needs to be done to convert those physicians over.
So Alex it's about <unk>.
Currently about 550 medical professionals that are trained to do the insertion.
There is no difference and there is no additional training is required to go from from the 182, the excuse me from the 90 to 180, it's really.
Exact same process sensor dimensions and tools that are required.
It's an automatic transition from one to the other.
Got it and then maybe you can give us an update on the inventory situation at your partner just curious how instruments results makes me think of a sense yet and then how does that the 90 day inventory in the U S. And then also the older European inventory from 180 days sort of once we get <unk> approved there how is that ultimately being factor.
And two the sales step up into Q2 Q3 Q4.
So thats part of the guidance, we've given we've been very active with the transition the 90 day.
Is fully transitioned as I noted that really occurred.
In Q1, which were there was some.
The softness in Q1 was the fact that we were running down the 90, and we Didnt, we didnt put new product into.
Into the market until the very beginning of Q2. Similarly in Europe , we do know that the <unk> III product is coming in as I said, we anticipate it will be starting here in early Q3. So we are actively taking the.
Inventory level down to the current 180 day XL product in Europe down so that we can begin that transition here.
Not too many weeks two to three.
Okay helpful. And then on the 365 day sensor are you still planning on the IDE submission here in Q2. It did sound like you might already be doing some human pilot testing, so maybe that's not necessarily needed.
And then also whether you're planning to launch the pivotal thats, both second half of that there.
Yes. So the date is still remain E filing as you noted and we do anticipate.
<unk> in the fourth quarter.
<unk>.
Concerning the first patients.
So those those are made.
Perfect and then just lastly on the cash burn how to think about.
With Q1 being kind of a low watermark.
E <unk> ramping up your Q2, Q3, and just how to think about cash burn over the course of the year.
Well as Nick said, I think we're anticipating about $60 million to $70 million of Opex. So it's just about just a little bit over $5 million per month.
Okay perfect. Thank you okay great.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Matt I wanted to follow up.
Great well I want to thank everyone for their time again today, we are very excited here to have the new <unk> free product.
We're encouraged by the initial results continue to have a focus here in Q2 and ramping both in Europe and the transition here.
From the 90 day to 180 in the U S. So I appreciate everybody's support and look forward to updating you.
Next quarter have a good day. Thank you.
Thank you Sir.
All of them at all.
You all were going to in today's presentation. You may now disconnect your lines level wonderful day.
Yeah.
Yeah.