Q3 2022 Senseonics Holdings Inc Earnings Call
Good day and welcome to this since the Onyx third quarter 2022 earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Philip Taylor of 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 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 those forward looking statements is 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 September 32022, and other reports filed with the SEC.
These documents are available in the Investor Relations section of our website at 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 we will be discussing our 2022 outlook joining me.
From <unk> are Tim Goodnow, President and Chief Executive Officer, and Rick Sullivan, Chief Financial Officer with that I'd like to turn the call over to Tim Goodnow, President and CEO Tim.
Thank you trip and thank you all for joining us this afternoon.
On the call today, we will discuss our third quarter performance and continued collaborative efforts to expand patient adoption of everson as well as provide progress updates on the advancement of our product pipeline.
Then our new Chief Financial Officer, Rick Sullivan, who will discuss the third quarter financials in detail and we'll open up the call for questions.
We're just completing six months from the ever since <unk> launch in the U S, which means our earliest users are now receiving their second sensor.
The feedback we have received from patients and healthcare providers continues to reaffirm our confidence that the differentiated features of our 180 day implantable CGM can positively transform diabetes patients lives.
Together with our global commercial partner of Cynthia diabetes care, we continue to work to increase product awareness and access.
Access to establish a durable foundation for long term growth.
In the third quarter, Cynthia Onyx generated total revenue of $4 $6 million, representing 31% growth compared to the prior year period.
And this is $1 $9 million of revenue from the U S and $2 $7 million from outside the U S.
We're pleased with several recent advancements in our business while at the same time, we expand the design of our future generation products, a regulatory clinical science and R&D teams have achieved key milestones, including fully enrolling our pivotal trial for our 365 day sensor.
Filling in IV for a pediatric indication and.
And making significant progress with the Gemini program, including our battery powered sensor.
We're happy to share the progress with this effort, which is targeted to be the foundation of both our periodic for flash glucose monitoring system and our full featured CGM system, which is designed to offer flexibility and simplicity for people with either type one or type two diabetes.
In the U S. Cynthia progresses further into the three launch we have seen strong leads and together we remain focused on increasing new patient starts and maintaining strong patient retention levels. We.
We established a partnership with a nurse practitioner group to expand patient access to ever sense by providing both in office and at home sensor insertion.
We have secured additional payer coverage and our next generation sensor ever since <unk> has been successfully launched across all of our markets in Europe .
In the U S. As Cynthia dedicated CGM business unit is focused on growing patient adoption of <unk> through a mix of DTC marketing and direct sales efforts.
<unk> is currently focused on 'twenty geographic territories established based on consideration of insulin utilization.
Insurance coverage and Cerner presence and qualified leads.
They are planning to expand the sales force over the next few months, adding sales professionals and territories to drive more physician interactions and to better reach new and established accounts.
With current demand.
DTC leads continue to be attractive and ADC is working to convert leads into more insertions.
Given the successful transition of patients in the U S to the 180 day system in the second quarter third quarter insertions consist primarily of new patient starts as existing users now receive their replacement sensors every other quarter.
We continue to add a balanced mix of patients new to CGM patients transitioning from our other systems.
We see this as evidenced in both our ability to expand the market and our ability to take share in the rapidly growing overall CGM market.
Encouragingly, we now see over half of our patients have type two diabetes, demonstrating the value of ever for both patient populations.
Going forward, we expect the patient pool to again represent a blend of reinsertion for existing users and new patients starting on <unk> three.
At this stage of distribution inventory in the channel represents 60 to 90 days of supply. It's ADC ships product to distributors, who then fulfill orders from clinics.
We believe the inventory dynamic will more closely correlate with patient starts as volumes grow in the multi step distributor channel normalizes.
Looking more closely at patient demand, we continue to be pleased with the number of leads that are being generated by Cynthia is direct to consumer digital advertising campaigns.
Across social media platforms, ADC is targeting the diabetes community specific high potential geographies.
Not only do these campaigns increased brand awareness in a cost effective way, but they are growing the funnel of potential users.
In collaboration with ADC, we are taking steps to convert the leads into an increasing number of sensor users.
By nature compared with sales forecast generated opportunities. The DTC leads represent a more diverse group of potential users.
We observed that many of these patients manage their diabetes with their primary care physicians and while these doctors are willing to prescribe ever since they are generally not yet ever since and servers.
Responding to this and to improve patient access to <unk>.
We're excited to announce our recent collaboration with a nurse practitioner group a leader in multi disciplinary healthcare provider solutions.
Partnership is designed to provide convenient insertion options for patients both in office and at home.
Because NPG nurse practitioner staff as mobile it will allow them to reach more patients one ever sent but do not have an insert or nearby.
We expect NPG to be remunerated from the payers by utilizing the existing CPT codes established for implantable GM.
The program has been launched in South, Florida in Baltimore, DC areas, and we have already begun training NPG team a designated nurse practitioners to perform the insertion procedure with.
We plan to expand the program to 12 additional geographies by the end of the year and into further locations throughout 2023.
We see this strategic initiatives as having the potential to broaden access for patients who do not yet have a convenient location for sensor insertion.
With Mpg's national scale experienced team and flexibility to surgeons in office or at home as well as the mobility to reach patients. We're excited about the opportunity and look forward to sharing more updates on the program in the future.
On the reimbursement and payer front payers are continuing to recognize the value of implantable CGM.
We are pleased with the rate of transition to six months coverage for <unk>, three and continue to anticipate the changeover to be complete by the new year.
On the Medicare front as we published last week by CMS and the physician fee schedule. Our CPT codes have been updated to reflect the cost for the six month ever since sensor and.
And as a result, the temporary J code CMS created for the technology will be deleted effective January one 2023.
This national fee schedule update provides uninterrupted access for six month implantable CGM for Medicare beneficiaries and reflects the unique benefits of this technology.
Commercial coverage for ever since is also expanding as a reminder, in August one of the country's largest health insurance providers, Alabama health, formerly anthem issued a positive coverage decision for EC three that is now operational.
45 million members from this health insurance portfolio now have access to ever since.
Recently Blue Cross Blue Shield of Florida, and other regional payers have also issued a positive coverage decision.
In addition to the continued expansion of coverage Adc's patient assistance program provides an opportunity for patient and commercial insurance to start on ever sense for as little as $99.
We believe this patient assistant program provides an attractive pricing model in CGM for those patients with coverage.
This program is intended to increase patient adoption and we anticipate it will have further impact on insurance deductibles reset at the beginning of next year.
We have worked hard with our partner to ensure that as many people with diabetes as possible have access to ever since and is good to see the current number of covered lives.
With two quarters into the U S. E. Three launch we are encouraged by the progress to enhance access and payer wins, we look forward to the planned increase in sales professionals from SNCF to expand their market footprint.
We are executing to reduce barriers to adoption such as the collaboration with the nurse practitioner group the patient assistance program and payer initiatives.
As we continue to launch we plan to further use market feedback to focus our efforts to build brand awareness and convert leads into insertions, enabling more patients to experience and benefit the value of long term CGM.
Now turning to our partners efforts in Europe .
<unk> achieved CE Mark approval in June and the commercial launch of Europe is underway.
ADC is now offering <unk> three across all of their markets as originally planned.
Phase launch approach began rolling out in August and is now complete.
Globally, we are now shipping <unk> sensors, only offering the same generation product worldwide.
This increases our efficiency and supports greater leverage from our supply chain and manufacturing perspective.
In Italy, our Cynthia continues to expand access to ever sense by working to win regional tenders.
And Germany ADC has recently hired a head of CGM.
They are expecting their dedicated focus and new leadership will help improve commercial results and offset the slower than expected transition from their prior mail order distribution model to a more direct distribution approach required in the CGM market.
Visibility and awareness of the ever since continues to increase in Germany through ambassador programs advisory boards and Webinars.
In the area of product development. We are very excited to report on the progress that we've made on the ever since 365 day program.
Earlier this year, we saw encouraging results in the feasibility study for a leading configuration for the one year sensor.
And based on that requested the FDA to allow us to extend our ongoing pivotal clinical study to 365 days.
That approval has been granted and we are now fully enrolled in the study as of this past September .
Additionally, we have now submitted a supplement to include a pediatric cohort two this ongoing clinical study.
We look forward to working with the agency during the review process.
We continue to make further progress on the technology front as well specifically on incorporating a battery into the sensor.
Our plan is to enable the sensor to take autonomous measurements and store long term data even when the patient is not wearing a transmitter.
That data will then be retrieved simply from the sensor this smartphone swipe over from the phone over the inserted device.
We're excited to be in the development of the long sought after a CGM product without any on skin component.
Finally on our last call, we announced enhancements on the digital connectivity capabilities for patients to share in combined there ever since CGM data with other third party apps through Apple health.
We are pleased with the feedback from patients and providers, who are taking advantage of this new capability.
<unk> patients and their providers identify correlations and gain greater insight into managing their diabetes further enhances the clinical value of ever since.
Continuing to advance our digital Interconnectivity with additional partners remains a key priority for us.
I'll now turn the call over to our new CFO , Rick Sullivan to go over the details of the third quarter financials. Most investors have already had the chance to meet Rick as he has a long standing member of our finance team.
Rick has taken on roles of increasing responsibility over his nine years with Cynthia Onyx improved and the leadership skills and strategic vision that will be valuable throughout the next chapter of growth.
Yes.
Thank you Tim and good afternoon, everyone I'm excited to be here with you today and the new roles. We further our mission to transform lives in the global diabetes community with our innovative sensor technology.
In the third quarter of 2022, net revenue was $4 6 million compared to $3 5 million in the prior year period.
U S revenue for the third quarter was $1 $9 million in revenue outside the U S was $2 7 million.
As a reminder, <unk> recognizes revenue based on our revenue share when shipments are delivered to our Cynthia initiating the multi step distribution to patients via ADC and their distributors.
Gross profit in Q3, 2022 was <unk> 8 million, an increase of $2 million from a gross loss of $1 2 million in the prior year period.
The increase in gross profit was driven by the transition from the ever since 90 day product to ever sent six month product and manufacturing efficiencies.
Research and development expenses in Q3, 2022 were $11 million, an increase of $3 8 million compared to $7 2 million in the prior year period. The increase was primarily due to investments in our product development and clinical trials for next generation technologies.
Third quarter 2020 to selling general and administrative expenses were $7 3 million a decrease of <unk> 3 million compared to $7 6 million in the prior year period.
The decrease was the result of reduced advertising costs, partially offset by increases in personnel costs and professional fees.
For the three months ended September 32022, operating loss was $17 6 million compared to $16 million in the third quarter of 2021.
The increase 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 2022 led to significant noncash losses in Q3.
As a result total other income or loss decreased by $101 8 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 companys previous financings.
As required by U S. Generally accepted accounting principles, we mark the value of these instruments to market for each reporting period and the changes 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 company share price.
So generally as the share price increases, we incur a noncash loss and as the share price decreases we recognized a noncash gain.
For the three months ended September 32022, total net loss was $60 4 million or <unk> 13 loss per share compared to net income of $42 9 million or <unk> <unk> gain per share in the third quarter of 2021.
Net loss decreased by $103 3 million due to the accounting for embedded derivatives and fair value adjustments previously mentioned.
As of September 32022, cash cash equivalents, and short and long term investments totaled $163 million.
Turning to our outlook for 2022, we're now narrowing our full year 2022 global net revenue to be in the range of $15 million to $17 million from our previous estimate of $14 million to $18 million.
We're pleased to be providing this updated guidance in light of the macroeconomic environment and the FX headwinds currently impacting our European revenues.
For gross margins, we continue to expect full year gross margins to be positive for fiscal year, 2022, which demonstrates an important progression of our business.
For full year 2022, we are improving projected expectations of net net cash used in operate chips to be at the lower end of the range of approximately $65 million based on improved gross margins and continued operating efficiencies.
We expect most of the expenses in 2022 to continue to be for investments.
First in development.
Ongoing feasibility in pivotal clinical trials for additional products and our product pipeline.
With that I'll turn it back to Tim.
Thank you Rick as we move forward to close 2020 to reflect on the substantial progress <unk> made this year and look forward to continuing that momentum into 2023.
The transition to our next generation six month <unk> system has occurred globally with our partner Cynthia.
We've taken several steps to improve patients' access to a product from the payer provider and patient perspective.
We are pleased with the ongoing expansions in covered lives. We are confident the partnership with the nurse practitioners group can provide an attractive additional insertion option supporting patient access.
Looking forward, we're very excited about the progress with our pipeline and potential impact ICJ M. A.
One year sensor and our flash Gemini technology can have for people with diabetes.
All while we continuously work to improve our manufacturing scale and margins.
We remain focused on executing our plans and working with our partner to increase patient adoption and continued to advance the longest duration CGM for more and more patients.
We believe we are well positioned to expand our business and look forward to updating you on our progress in the future.
Thank you for your time today also joining us for questions is <unk> Jain our chief operating officer.
Operator, let's now open up the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Matthew Blackman from Stifel. Please go ahead.
Good afternoon. This is this is colin on for Matt just a couple of quick ones from me I wanted to start out with 2023.
How comfortable you are with consensus and in light of the recent.
<unk> proposal from CMS I was wondering how you guys expect that to impact your business, especially since you've passed the smile milestone of.
Although were happy patient being in the type two arena.
Color there would be really helpful. Thanks sure.
No.
At this point Collyn, we're not we're not speaking to 2023, we will certainly do that on our next call as we report the Q4 results, but in regards to the type two obviously, we're real proud of the way that the product is performing.
People with type two diabetes, obviously the expansion to more folks in this case basal insulin are great candidates for the ever since product and we look forward to providing them.
The long term implantable as well so.
And just a follow up on that I had a quick question with regard to the nurse practitioners, how do you expect that to help.
Kind of address these.
These patients getting prescribed these diesel patients.
Given given the fact that some of the <unk> are not actually inserting.
Do you expect that to be a major driver in 2023 or even into 2024.
In helping address that population yes.
Yes, we're excited about the partnership as as you've heard it's a great opportunity to work with a great group with a with a long history of serving healthcare.
It is it fit nurse practitioners and we are labeled for them to do the insertions and removal. So in the case as you described someone that's where the primary care thats not yet doing insertions.
It's a great referral out to them and the nurse practitioner group of course is remunerated by the.
The CPT codes that exist for the for the patients, especially the Medicare to do the insertions and removal.
I appreciate the color. Thanks.
The next question comes from Marine Typo from <unk>. Please go ahead.
Hey, good afternoon, everyone. This is Sam on for Murray, Congrats on a nice quarter here and thanks for taking the questions.
Maybe I can start on Gemini certainly sounds like a little bit more color on this this quarter's call. So maybe any color you can provide on the latest updates there in terms of product development.
Sure. So we've been actively working with.
Those that have experience in.
And the implantable batteries for medical devices.
You can imagine things like pacemakers, and so forth has a long history of developing that technology. So we are working with them for a custom battery that will.
Power the ever sent sensor.
Once it receives its power from the inside as opposed to currently from the outside from the transmitter we will have the opportunity to.
Generated glucose and store that value on the sensor, which could then be retrieved.
At any point by a.
Smartphone using the NFC technology that sits in your phone.
In addition to that that same sensor can be used for people that want to use the transmitter full time for.
<unk>.
For overnight protection, and so forth and we've heard a lot obviously from our type two patients.
They are really looking forward to a product where there is no on body transmitter so that capability avail.
Available in Gemini and then as we said the other half is for even more flexibility for people.
With type one diabetes that may not want to have.
All of that full time alarms. So many of our folks are interested in wearing perhaps the transmitter just at night and they can interrogate the current glucose level and trend information and history with a with a one of the phone.
Very good thanks for the added color there maybe.
Maybe I can ask my follow up here to Rick and congrats on the new role here.
I guess any change in terms of how we should think about the investment profile in terms of Opex.
Certainly sounds like a lot of.
Continued R&D initiatives so.
Any change in that invest for growth strategy strategy as we move into next year here.
Yes, Sam Thanks.
Hello.
No I think when I think about our operating expenses.
We had the primary expense being those clinical trial costs and so we had them in this year and we will continue to have it next year.
With the $3 65 trial well underway.
Great. Thanks for taking the questions.
Again, if you have a question. Please press Star then one.
Our next question comes from.
Alex Nowak from Craig Hallum Capital Group. Please go ahead.
Hey, guys. This is Jason on for Alex Congrats on the quarter and the the ramp here.
Just starting off from us.
It's very early but any color you have drawn from renewals thus far on the 180 day product.
And if the patient assistance program does it seem to be driving adoption for both new patient starts and transfer patients. So I guess just kind of.
Talk through the dynamics, there and what you're hearing from customers.
Yes, yes, certainly in regards to the.
The patient assistance program it clearly does work.
It helps reduce the burden in the case, where there are folks that have a high deductible.
Or other costs, we are restricting it to the only folks that do have <unk>.
<unk> coverage, but we are we are seeing good acceptance and attractive utilization of the.
The patient assistance, we do anticipate as is typical in this space that will get more utilization in Q1.
Deductable requirements are reset.
But were encouraged with the utilization in regards to to reuse. We do continue to see 80% or higher retention in regards to folks that are on sensor one to censor too.
Continues to appear to hold for US and then as people get long term on the sensor.
345 or beyond sensors, the retention of course becomes even much much higher well into the into the 90% range and beyond.
Just routinely use it I think.
I think we have users around the globe that maybe on near their 'twenty sensor at this point.
No that's helpful color and certainly.
That bodes well.
So the company has previously had partnership.
With.
With a pump maker.
Developing a sense for their pump.
Have you had any additional conversations now with 180 day product out with any pump manufacturers and about integration and any color there would be helpful. Again.
We do frequently have conversations with pump manufacturers.
Really be appropriate.
To disclose the details of those conversations of other than to say, obviously, the integration with <unk> with a fully implanted system, especially a future concept without anything on body is highly attractive. So we're actively working as you heard on the clinical trial for the for the ICM designation.
Which is a which is an important milestone for us regulatory wise.
Or integration here in the U S, but outside we continue to kind of outside the U S. We continue to have conversations as well.
Is there any increased excitement from the pump manufacturers now that you had 180 day product ramping and 365 day product on the horizon.
Any any kind of uptick and interest I guess.
There certainly has been uptake we're seeing good strong like ability and.
Leads that are coming into the DTC as well as.
And leads that are coming in from the offices. So certainly there is an improvement in <unk> ability from 90 to 180 and I expect.
Even more in the future as we continue to expand the features as well as the duration of future generation products.
And then yes, and Thats helpful and just last from us.
You had made that comment about 60 to 90 days of inventory now out there in the channel.
Does that include with obviously with essential and is that kind of a ballpark range of where you expect it to stay in as you as you ramp in sales here.
It is Rick do you want to do you want to go through that there are a couple of steps in the distribution channel.
Yes sure.
60 to 90 days is consistently what we've forecasted and what we expect.
Remember, we recognize revenue when we ship the product to a sense yes.
Cynthia than cells.
<unk> to the distributors and the various sales channels and then from there. It would go to the doctor's offices in the U S. And then hospitals in Europe . So there's a couple of different steps in that process before it gets to a patient. So 60 to 90 days is probably appropriate.
Okay. Thanks.
That's all we had I'll hop back in queue.
Again, if you have a question. Please press Star then one.
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This concludes our question and answer session I would like to turn the conference back over to Tim Goodnow for any closing remarks.
Great. Thank you I would like to thank everybody for their for their time today and the opportunity to update the status on where we are with ever since in the business and we look forward to speaking with you again.
And the next quarterly call when we report on the fourth quarter and the full year 2022.
So with that I wish you a good evening and thanks again.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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