Q1 2023 Senseonics Holdings Inc Earnings Call
Hello, and welcome to <unk> first quarter 2020 earnings conference call.
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After todays presentation, there will be no. What you ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note today's event is being recorded I would now I'll turn the conference over to your host today trip Taylor Sir. Please go ahead.
Thank you. This is trip 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.
Of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward looking statements is detailed under risk factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2022, and our 10-Q for the quarter ended March 31 2000.
23.
And our 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.
Joining me from <unk> are Tim Good now President and Chief Executive Officer, and Rich 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 today, we will open up with our first quarter performance comment on our Cynthia and Cynthia Omics key commercial priorities for driving patient adoption of ever since and discuss the key milestones for advancing never sent technology pipeline all to enhance shareholder value.
Then our Chief Financial Officer, Rick Sullivan, who will discuss the first quarter financials in detail and we will open up the call for questions.
In the first quarter Cynthia on X generated total revenue of $4 $1 million, representing 66% growth compared to the prior year period, including $2 1 million of revenue from the U S and $2 million from outside the U S.
As a reminder, net revenue to <unk> in 2023 will represent approximately 70% to 75% of total ever since revenue generated in the global markets is the revenue share for our partner increases According to our collaboration agreement with Cynthia <unk>.
Recently, a cynthia diabetes care and the parent company DHT holdings made incremental financial and strategic investments and Cynthia Onyx.
Further demonstrate their commitment to the partnership and that resulted in a stronger ever since commercial infrastructure and a stronger since the onyx balance sheet.
During the first quarter of <unk> investments in the commercialization of ever since increased focusing on U S patient and healthcare provider awareness as well as commercial access to drive patient adoption, specifically SMT is targeting driving interest in recommendations for ever sense by utilizing direct to consumer marketing and by expanding.
The dedicated U S CGM sales force.
Additionally, since the Onyx and as Cynthia continue to take steps to improve access to the progress of commercial programs such as the collaboration with a nurse practitioner group.
<unk> program and patient assistance programs.
To increase awareness of ever sense among people with diabetes ADC is primarily utilizing direct to consumer marketing.
In the last year, there have been over 1 million unique visitors to the ever since website.
Cynthia plans to increase this number with additional DTC investment.
Traffic to the ever since website creates leads for inside sales representatives, who connect the leads with health care providers, who offer ever since.
To complement the DTC marketing at Cynthia continues to make investments in growing the dedicated use CGM salesforce to.
To broaden the commercial footprint for our presenter Cynthia is expanding the U S sales force from approximately 20 sales reps in the fourth quarter of 2022 to a planned approximately 50 professionals this year.
This growing team is focused on increasing physician interactions engaging new accounts and expanding awareness.
The salesforce plans to build on the HCP focused exposure by hosting Peter peer events, and having increased presence and expanded territories.
It will take a few quarters for reps to ramp to full productivity.
Productivity in their territory.
So we expect to see the first impact of the expanded team later this year and plan for their contributions to be more material in 2024.
To incentivize ever since growth and to align these activities with building since the onyx shareholder value, we have designed and implemented a plan to remunerate. These first sales professionals with a previously described <unk> equity program.
These performance based equity awards will further incentivize sales reps towards the Cynthia and Cynthia Alex shared goal of bringing ever since to more patients.
There are currently several commercial programs underway to improve access to ever sense for people with diabetes.
These include the collaboration with a nurse practitioner group.
Office confinement program and the expanded patient assistance program.
To increase patient access to <unk> and service the DTC leaves who manage their diabetes with a primary care physician that might not yet be in ever said conservator, we established a partnership with a nurse practitioner group to provide ever since users with convenient sensor insertion options.
<unk> now has provider certified and performing insertions and approximately 25 cities the.
The reimbursement for sensor insertion. It makes this partnership and attractive endeavor for this group.
And geographies within NPG provider medical professionals as a strong complement to the guest Cynthia sales associate.
Ever since Rep can focus more on educating endocrinologists on the value of the system and it's compelling benefits for their patients.
Rather than detailing assertion logistics that can be effectively managed by NPG.
We believe offering greater availability and access to this streamlined path supports growing prescriptions for the product.
The nurse practitioner group offers an effective path to build out our network of certified ever census, or it makes insertion is more convenient for patients and we see tangible benefits to this approach.
We plan to scale. This model further by incorporating additional partnership territories during the remainder of the year.
Another commercial program, we have established to increase access to ever since as the confinement program, having product on the shelf and the Hcp's office at all times increases convenience to health care providers and patients to enable fast and even same day insertions.
A number of accounts or participating in the consignment program today, and we expect the program will continue to grow providing patients with easy access to ever since.
All in <unk> is covered for approximately 250 million lives in the U S. While.
While ADC as ongoing efforts to further expand coverage they are offering an attractive patient assistance program.
Cynthia has further extended this program two ways. It is now available for all commercially insured patients regardless of coverage and ever since users can now use the program for $2 $99 sensors.
Allows patients to wear and become familiar with the convenience benefits of ever cents for a full year without worrying about co pays or deductibles and we believe this program will be important in expanding access to more people with diabetes.
Similarly on the reimbursement front the Q1 implementation of the 2023 Medicare physician fee schedule is streamlined access to ever sent for Medicare patients.
This is a population in particular, who benefits from the features of ever since and we are pleased with the adoption that we've seen from this group.
Shifting to our partners efforts in Europe here ADC is focused on addressing some of the challenges we have previously discussed.
The changing market dynamics in Germany, specifically have created European growth headwinds ADC is taking action to transition the sales channel for ever since and address reimbursement.
While ADC continues to incorporate fundamental changes we anticipate these challenges in Germany will persist.
In other markets, such as Italy, we've seen positive growth tailwind throughout the quarter driven by the recent and continued efforts of Adcs team new.
New tenders in Italy were won in the first quarter.
This is our second largest European market and we expect it will have a positive impact in the coming quarters.
Overall commercially in Q1 ever since system shipments were executed according to the plan.
Since it continued destocking inventory as previously described and we expect the distribution channel to normalize in the second half of the year.
<unk> <unk> hundred awareness and access continues to increase the installed base of patients grew in the first quarter and we expect continued growth for the remainder of the year. The majority of that growth expected to come from the U S.
To drive further advancement the primary focus of <unk> is centered around innovation in our core implantable sensor technology.
<unk> ever set system for we have described several products in development that we are excited about including driving towards the market's first 365 day sensor as well as the Gemini system and a revolutionary freedom system.
A top focus for US right now is on extending the wear time duration of ever since to 365 days.
Patients enrolled in the expanded and enhanced study have all completed 180 days of wear time.
This keeps us on track with our plan to make an FDA submission for the 365 day product in early 2024.
A component of the enhanced trial included approval to evaluate ever since in a pediatric patient cohort.
And we're pleased to announce that we have initiated enrollment for this important group.
In addition to extending our market leading duration our teams continue to make significant strides in both our battery powered systems Gemini and freedom.
And as described in more length during our March presentations, we plan for both systems to offer patients increased flexibility ease of use and simplicity with the ultimate goal to remove the need to any device on the skin a top request for people considering using CGM.
With our unique Gemini product, we are designing to offer patients the flexibility of having both on demand internet and glucose monitoring as well as full real time CGM.
We are achieving important milestones in this development program.
We have built the first functional census for the Gemini system with a battery can power sensor autonomously.
We have started in vitro evaluation of these centers and so far we continue to be on track for the first in human evaluation towards the end of this year. If successful we plan to prepare for an <unk> submission in early 2024.
This all paves the way for the third system and development of Freedom system.
We see this is the ultimate solution for glucose monitor removing the need for an antibody component is the product feature most requested by patients. We believe that this product configuration would represent the most revolutionary development CGM since our invention of the long term implantable sensor and are excited to drive this development program forward.
The next generation sensor configuration that is enabling Gemini and freedom includes redundant sensing channels that lends itself very well as a multi analyte sensing platform. We have started initial feasibility work on incorporating continuous ketone monitoring in addition to glucose as we understand the importance of Keystone monitoring for people.
With diabetes in preventing further complications from Pos at doses.
We're very excited about the prospects of continuous glucose ketones monitoring and plan to explore other relevant analyte and addition to glucose in the near future.
I'll now turn the call over to our CFO , Rick Sullivan to go over details of our first quarter financials.
Thank you Tim and good afternoon, everyone. We appreciate the opportunity today to update you on our business and.
In the first quarter of 2023, net revenue was $4 1 million compared to $2 5 million in the prior year period.
Revenue for the third quarter was $2 1 million in revenue outside the U S was $2 million.
As a reminder, <unk> recognizes revenue based on our revenue share when shipments are delivered to a sense yet initiating the multi step distribution to patients via Cynthia and their distributors.
Gross profit in Q1, 2023 was <unk> 4 million a decrease of <unk> 1 million from a gross profit of <unk> 5 million in the prior year period gross margins were in line with expectations for the full year.
Research and development expenses in Q1, 2023 were $12 4 million, an increase of $4 6 million compared to $7 8 million in the prior year period. The increase was primarily due to investments in our product pipeline for development and clinical trials of next generation technologies.
First quarter 2023, selling general and administrative expenses were $7 7 million a decrease of <unk> 2 million compared to $7 9 million in the prior year period. The decrease was a result of reduced personnel costs and other general and administrative costs.
For the three months ended March 31, 2023 operating loss was $19 7 million compared to $15 2 million in the first quarter of 2022 due to the increased investments in research and development.
The decrease 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.
Q1, 2022, and the exchange of the ph D notes lead to noncash gains in Q1.
As a result total other income decreased by $80 8 million compared to the prior year period, primarily related to noncash charges, resulting from the accounting for embedded derivatives fair value adjustments and the C. Note exchange.
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.
Each quarter the value of these noncash gains or losses will vary based on the volatility in the company's share price. So generally as share price increases, we incur a noncash loss and as the share price decreases we recognized a noncash gain the magnitude of these noncash gains and losses will be less in future periods.
As a result of the 2023 note repayment in exchange of the ph C note, eliminating several of the embedded derivatives.
For the three months ended March 31, 2023, total net income was $1 3 million or $0 per share compared to net income of $86 7 million or 19 gain.
Gain per share in the first quarter of 2022.
Net income decreased by $85 4 million due to the accounting for embedded derivatives fair value adjustments and the exchange of the PHC notes previously mentioned.
Yes.
In 2020, PHC invested $35 million in the form of a convertible note and <unk> also received an option to sell PHC up to $15 million of convertible stock that would have resulted in the issuance of approximately 96 million shares.
We're very pleased to have exchanged the $35 million convertible note and to have received an incremental $15 million investment for approximately 84 million warrants. This reduced dilution by 12 million shares compared to if we have exercised the option to sell shares under the pricing of the previously disclosed 2000.
20 agreement.
The incremental investment strengthens our partnership with PTC and the exchange of the note will save us over $4 million of cash and interest expense that we plan to use to further our development programs.
As of March 31, 2023, cash cash equivalents in short and long term investments totaled 136 6 million.
Turning to our outlook for 2023, we are reiterating our full year 2023 global net revenue to be in the range of $20 million to $24 million or.
Our guidance reflects three factors.
Expected patient growth, which is expected to accelerate in the back half of the year.
Continued destocking from ADC through the second quarter, leading second quarter's revenues to be in line with the first quarter.
And a decrease in Cynthia on its share of the ever since revenue under the collaboration agreement in 2023 compared to 2022.
Based on both sales growth and being further along in the partnership.
For gross margins, we continue to expect full year gross margins to be between seven 5% and 12, 5% the year over year decrease in our gross profit margins are the result of the decrease in our share of ever since revenue.
For the full year 2023 operating expenses are expected to increase compared to 2022 based on investments in research and development targeted to complete the adult 365 day trial, the beginning stages of the pediatric trial and investments in our future products Gemini and freedom with that I will.
Turn it back to Tim.
Thank you Rick and the first quarter of 2023, we are pleased with the initiatives team at our global commercial partner of Cynthia and our team have undertaken to expand our commercial reach and awareness, including facilitating increased access to ever since and further develop our product pipeline.
<unk> is committed to driving awareness of our ever since <unk> sensor through increased DTC investment and expanding its U S commercial organization by Onboarding several additional sales reps.
Our collaboration with the nurse practitioners group has stretched across more U S territories, supporting our hub and spoke model and facilitating patient and HCP convenience through our at home or in office insertions.
Looking ahead, we are very excited about the progress with our ongoing clinical trial for the 365 day system and our Gemini product advances as well as the freedom product development.
With each program.
<unk> tended to transform the diabetes market.
While reaching for these goals, we continue to work to improve our manufacturing margins and operational execution we.
We believe we are well positioned to grow our franchise to create shareholder value and look forward to updating you on our progress in the future.
Thanks for your time today also joining us for question as musical Jain, our Chief operating officer.
Operator, let's open up the call for questions.
Yes. Thank you at this time, we will begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If you are 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 the roster.
Thank you.
And the first question comes from <unk> <unk> with BTG.
Hey, good afternoon, everyone. This is Sam on for Murray, Thanks for taking the questions here.
I can start on the added Salesforce from SNCF I, just want to try to understand the pace of new adds throughout the year is that something where we could see maybe a bolus to start or is it going to be more evenly weighted throughout this year.
I think it will progress fairly evenly weighted.
Pretty much over.
Some of it's already actually begun and into the second quarter I would anticipate that the majority of that should be should be finished through the second quarter.
But our experience has typically been it's a couple of quarters of learning training coming up to speed before that really highly contributory.
We expect to happen pretty quick but there is some typical ramp up time.
Right, Okay that makes sense and then it's been a couple of quarters now since <unk> been commercial here in the U S. I guess any insights in terms of how those first first groups of patients what those repeat rates are looking like.
Yes, we've continued to see.
The 70% to 75% transitioned from first to second sensor and as you go beyond it just incrementally gets better with each.
Our transition so I don't think theres been a material change in and that really since the original 90 day product.
Got it okay. So it sounds like nice sticky adoption here.
Thanks for taking the questions.
Great. Thank you Sam.
And once again, please press star and then one if you would like to ask a question.
And the next question comes from Jason She comes from Mathew Blackman with Stifel.
Hey, guys. This is colin on for Matt.
Q3 has been reimbursed differently than competitors trends detainees sensors. So I'm curious what the pathway to reimbursement looks like to participate in the basal only opportunity first through this first Medicare tranche of patients and then later through commercial payers in the U S.
Yes.
Medicare and the physician fee schedule has.
Established payment for ever since.
As what we call the global payment model. So that's the combined purchasing of the product as well as Remunerating the medical professional for actually doing the insertion and removal itself.
And in consideration of what's encouraged Medicare and the Max have established the right for that.
We are encouraged and think that thats appropriate investment for the for the product.
And the procedure on the commercial pay we continue to see reimbursement that's been pretty consistent with.
With the general market for CGM at about.
<unk> $4000 per year.
For the patients on the commercial pay side.
And with the physician fee schedule being implemented this January I'm curious about the Medicare patient mix in the first quarter and if that's changed significantly since the end of last year.
Thank you our certainly see it increase.
We ended last year at about 52% and we do see the index greater towards.
Towards type two as we evolve I don't I don't have an update through the quarter as of yet.
But my expectation is it would be a couple of points higher than that just based on the blended growth that we're seeing.
Great. Thank you.
Thank you.
The next question comes from Jason Bedford with Raymond James.
This is Glenn show on for Jason.
Just had a question about the CGM data being submitted to the FDA previously where you have it.
But you said end of Q2.
Good submitted this or will that be submitted this upcoming quarter.
Well do you want to speak to where we are I can take that.
This is Michael.
Yes.
Pretty much on track to finish up by PJM, but patient data has been completed we are cleaning up the data the clinical team is cleaning up data and we expect that there'll be in front of FDA.
Coming months.
But the real focus should be close to the end up they are where we expect approval.
Okay wonderful. Thank you and I just had one follow up question.
From your Investor Day.
<unk>, you said that around 70% of your users are coming from other CGM platforms does that still hold true.
It does that's consistent.
Okay. Thank you very much.
Thank you.
Once again press Star and then wondering if you would like to ask a question.
Okay and as there are no more questions at the present time. This does conclude the call.
This session as well as the call.
Again, thank you for attending today's presentation and you may now disconnect your lines.