Q2 2023 Senseonics Holdings Inc Earnings Call
Okay.
Good day and welcome to the second quarter.
23 earnings Conference call, all participants will be in listen only mode should you need assistance. Please signal a conference specialist by companies to start key followed by zero when you touched on South Africa.
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Like to turn the conference over to trip Taylor Investor Relations. Please go ahead.
Thank you. This is trip Taylor 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.
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 is detailed under risk factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2020 to our 10-Q for the quarter ended June 30th 2023, and other reports filed with the SEC. These documents are available in the Investor Relations section of our web.
Site 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 Joy.
Joining me for instance, Fiat ex parte, 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.
Today's call will start with an overview of our quarterly financial results followed by an update on Cynthia Onyx continued execution of development clinical and commercial programs to drive growth.
And our Chief Financial Officer, Rick Sullivan, who will provide detail on our financials and we'll open up the call for questions.
The second quarter, Cynthia Alex generated total revenue of $4 $1 million, representing 11% growth compared to the prior year period.
<unk> $1 8 million of revenue from the U S and $2 3 million from outside the U S ever sent shipments continue to be in line with our expectations for 2023.
The second quarter continued to be productive for Cynthia Onyx as we advance our initiatives designed to improve ease of use and increase patient adoption I've ever sense, while enhancing our technology pipeline.
To begin I'll describe recent progress that we've made in our collaboration with as Cynthia diabetes care, our global commercial partner on their initiatives to drive adoption of ever since by providers and patients.
Together, we are focused on two main objectives.
Increasing awareness in the market and increasing access to ever sent by our users.
During the second quarter, we made meaningful progress in both areas, including the expansion and training of new sales professionals in ADC dedicated U S. C. G M sales force.
We also were in a positive policy decision from United Health care to cover ever since as of July 1st and.
And we increased our regional.
Coverage by the nurse practitioner group.
Certified and credential practitioners, who conduct ever sensor insertion.
Broadening the commercial footprint is a critical component of increased awareness and access and an area in which our Cynthia continues to invest in.
An expanded sales force is enabling increased physician interactions and new account engagement, which ADC will leverage to increase their presence in numerous territories.
Salesforce is planned to increase to 50 professionals. While currently at about 45 reps, who are on boarded and trained a sense do you expect a few quarters for individuals to ramp to full productivity after onboarding.
In addition to growing the dedicated sales force ADC is investing to enhance the ever since brand.
They're focused on developing new consumer facing materials to expand and increase the awareness and benefits we've ever since.
We believe a strong cohesive brand message outlining our products unique characteristics will help position ever since its a leading CGM solution in patients and clinicians mind.
We look forward to ADC rolling out updated messaging and creative in the coming quarters to advance the brand's positioning.
It's known that every diabetes patients can benefit from ever sense. It should be able to access sensing Onyx technology partnership and established several programs that support this vision.
While our initial focus was to train endocrinology professionals to do the insertion procedure, who have large populations of diabetes patients within their practice.
The second phase of our strategy, we call prescriber first is underway it expands on ever since the endocrinology and certain networks by providing convenient insertion options to patients and managed by a broader set of health care professionals, such as family Medicine primary care and internal medicine those treating increasingly.
Growing type two patients who use ever since.
That's part of it the certified ever since specialist program identifies and trained health care professionals on the procedure.
Interested in accepting new patients for insertion.
Additionally, and in a parallel being a nurse practitioner group is an instrumental partnership that was established at the end of last year and continues to account for a growing portion of ever sensor insertion.
The second quarter over 12% of the total insertion or completed by N P. J.
This is more than double the prior quarter.
N P. G. Currently has ever since insertions in over 30 cities and they are on track to expand further by the end of 2023.
Leveraging the extent 15, a M P G along with its certified ever since specialist network not only makes it easier for patients to get ever since but it also streamlines the process for physicians, who want their patients to get the benefits of ever since but prefer to prescribe and lead the insertion to another provider.
In parallel a b C is expanding their clinic targeting to prescriber only physicians to inform them of these new options. So that they can easily manage their patients who'd ever since.
This strategy allowed sales reps to focus more on selling and the unique benefits of ever sent in.
And last on the associated workflow and insertion process.
That's enabling the field sales and clinical personnel to expand their reach and connect with more health care providers.
Additionally, in supporting further expansion as physicians learn of the benefits of ever since.
Bind with the established reimbursement for performance.
A procedure to received request.
Insertion training for physicians, who want to prescribe ever since and it's sort of ever since for their patients.
Okay.
We continue to support excuse me.
And certify them.
Ultimately.
We know that's important patients have easy convenient insertion options.
And we're making great strides through expansions across each of the three strategic network.
M P J.
Certified ever since specialist network and the traditional prescriber in certain positions.
Building on these initiatives ADC continues to take active measures to increase access to the patient assistance program.
The current program, which offers $99 co pay on each of the first two sensors. It gives patients the opportunity to wear and become familiar with the convenience and benefits of ever cents for a full year without worrying about large co pays or deductibles.
This program to ensure that we can support more patients and experiencing our products' benefits over a longer term and prepares our markets for the 365 day product that we expect in 2024.
Rounding out our progress on access.
We recently had a positive coverage decision for implantable CGM from Unitedhealthcare.
As of July 1st United Health care began providing coverage for ever sent for people with type one and insulin requiring type two diabetes.
No. It was the last top 10 payer not covering ever since and now adds an additional 45 million lives to our coverage population.
With this addition, we are nearing almost all insured adults in the United States, having access to the ever since system.
Thereby expanding coverage to benefiting approximately 300 million covered lives.
United Policy updates adds to the extensive number of payers who include ever since and their CGM coverage policies.
Well, it's paying for health care providers time for the in office insertion procedures.
Importantly, this allows ADC to introduce the ever since CGM system to more people living with diabetes.
Shifting now to a brief update on our partner's efforts in Europe .
Similar to what we discussed last quarter ATC is continuing to work through the changing market dynamics in Germany and is focused on executing and new distribution channels. These are addressing reimbursement I'm, taking action to ensure patients have access to ever since.
We continue to see attractive growth in our second largest European market, Italy, where we're continuing to win new tenders.
I mean, they're supporting our ever sense awareness initiatives, we publish key clinical data in the second quarter of this year is 88 meetings.
Includes two studies that demonstrate the safety accuracy longevity performance I've ever since the first study showed that a modified ever since system provided accurate performance through the full 365 day period with a favorable <unk> longevity and safety profile.
And importantly, this is the exact configuration is currently under evaluation in a 365 day pivotal trial.
We believe that performance in the study bodes well for our ongoing 365, great trial, which is planned to conclude in the coming weeks.
Additionally, the second study importantly showed statistically significant superior health improvements were achieved with the use of ever since in CGM naive patients compared to their traditional self monitoring of blood glucose routines.
These studies demonstrate the value of our product pipeline, which can provide for patients and providers and expand it and advanced technology with future generation products.
He's coming products are centered around advancing however, since system forward through adding further significant differentiating features.
We are confident that these new products can keep Cynthia onyx at the forefront of diabetes technology innovation and be incredibly appealing to the patients and providers.
The nearest term we're focused on extending the wear time duration of ever since to one year.
The 365 day enhanced trial is designed to evaluate the accuracy and safety I've ever since for a next generation sensor in there.
Pivotal trials nearing its completion is the lack of patient evaluation of visits will be finished in September .
Our goal is to continue expanding our ability to transform the lives of those in the global diabetes community.
Positive results from the one year trial to be a meaningful step forward.
And an important milestone and update we are pleased to announce that we have recently submitted to the food and drug agency for the IC GM designation for everything.
Our expectation is an approval in early 2024.
It will enable our ability to integrate with influent delivery devices like pins and pumps to create systems that would use ever since for autonomous control.
N C. Onyx is a number of development programs currently in place utilizing the plant ICM designation.
Look forward to providing details of these partnerships in the near future.
In addition to the enhanced trial for a 365 day sensor our product pipeline focus is on adding independent power and direct communication capabilities to our sensors.
These advances would allow for the internet in glucose monitoring based on swipe queries and ultimately remove the need for any on body transmitter we.
We continue to make positive strides with both the Gemini and freedom systems.
We believe these products have the potential to offer patients increased flexibility ease of use and simplicity with a goal of achieving patients most desired features high accuracy.
Independents with extremely long wear time, and the freedom of not needing to wear any device on the skin.
I'll now turn the call over to our CFO , Rick Solomon to go over the details of our second quarter financial results.
Thank you Tim and good afternoon, everyone. We appreciate the opportunity today to update you on our business.
In the second quarter of 2023, net revenue was $4 1 million compared to $3 7 million in the prior year period.
U S revenue for the third quarter was $1 8 million in revenue outside the U S was $2 3 million.
As a reminder, net revenue to <unk> in 2023 will represent approximately 70% to 75% of the total ever since revenue generated in the global markets as the revenue share for our partner increases According to our collaboration agreement with a sense yeah.
<unk> recognized this revenue based on our revenue share when shipments are delivered to our Cynthia and.
Initiating the multi step distribution to patients via Cynthia and their distributors.
Yeah.
<unk> profit in Q2, 2023 was 24 million a decrease of <unk> 4 million from a gross profit of <unk> 8 million in the prior year period.
The reduction in gross margin was primarily driven by an increase in the revenue share percentage due to a sense yet and gross margins were in line with expectations for the full year.
Research and development expenses in Q2, 2023 were $12 8 million, an increase of $3 5 million compared to $9 3 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.
Second quarter 2023, selling general and administrative expenses were $7 5 million a decrease of $1 1 million compared to $8 6 million in the prior year period.
The decrease was the result of reduced personnel costs and other general and administrative costs.
For the three months ended June 30th 2023, operating loss was $19 9 million compared to $17 million in the second quarter of 2022 due to the increased investments in research and development.
For the three months ended June 30th 2023, total net loss was $20 4 million or four cents loss per share compared to net income of $104 2 million or <unk> 22 gain per share in the second quarter of 2022.
Net income decreased by $124 6 million due to the accounting for embedded derivatives fair value adjustments and the exchange of the ph D notes last quarter.
As of June 30th 2023, cash cash equivalents and shortened long term investments totaled $125 1 billion and debt and accrued interest was $52 4 million.
And continued efforts to strengthen our balance sheet.
Earlier today, we entered into a series of exchange agreements with a set of holders of our 2025 notes to exchange $30 8 million in principal amounts of the notes for a combination of cash and stock.
The notes to be exchanged are convertible into approximately 23 million shares.
In the exchange, we will deliver $7 5 million in cash, which we raised on the ATM during the second quarter and then additional number of shares of common stock to be determined based on our average trading price over the next few weeks.
We expect the arrangement to result in incremental low single digit dilution the agreements contain a provision to protect against unforeseen market event, which places an absolute limit on the total number of shares being issued.
If executed as planned the exchange will reduce our outstanding indebtedness to approximately $20 4 million extinguished the covenants in the 2020 five notes, providing us with additional financial flexibility and save approximately $2 3 million and interest expense for the remaining life of the 2025 notes.
As a housekeeping matter. We also filed an S. Three registration statement to facilitate shifting our ATM to Goldman Sachs, who advised us on the debt exchange. This registration statement registers only the dollar amount of stock remaining on our prior a T M.
We will continue to monitor our capital structure and market conditions going forward and we may opportunistically evaluate the potential to access the debt and equity or equity linked markets over time.
At present market conditions and pricing levels. Our current expectation is to seek to fund the majority of any near term business operating needs through incurring nonconvertible debt.
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.
Our guidance reflects expected patient growth, which is expected to accelerate in the second half of the year and a decrease in <unk> 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 five and $12 five.
The year over year decrease in our gross profit margins are the result of the decrease in our share of ever since revenue.
For full year 2023, operating expenses are expected to increase compared to 2022 based on investments in R&D 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.
Yeah.
Thank you Rick we.
We are pleased with the progress made in the second quarter and expect the continued execution of our initiatives to further advance the company and drive greater patient utilization.
We continue to leverage superior clinical data a strong product pipeline.
Active commercialization efforts driven by a sense here to expand our footprint within the diabetes market.
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.
Thank you for your time today also joining us for questions and local Jain our chief operating officer.
Operator, let's open up the call for questions.
Thank you.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our doctor.
Yeah.
Our first question comes from Mathew Blackman with Stifel. Please go ahead.
Hi, This is Colin on for Matt I wanted to start on the U S number for the quarter, which was down sequentially.
Just curious was there any outsized essentially a destocking domestically like relative to what you were expecting or were there other dynamics that didn't play out as you anticipated.
And any metrics that you could share that tell a different story like training or any other leading indicators you follow that would be helpful. Too. Thank you.
No really the quarterly as we described earlier in the year.
The inventory dynamics, we did anticipate that did SNCF would be optimizing their stocking levels in the first couple of quarters.
That certainly has occurred and this is all part of that that transition.
Lan.
As we've guided to is the significant ramp in the second half of the year and we feel well placed to be in that transition.
And what gives you confidence in the full year guidance reiteration has anything changed with regard to the geographic mix of the business that you expect is it really that you are expecting that U S ramp to happen.
Predominantly domestically rather than the O.
U S sales mix you saw this quarter.
Yeah. It is it is predominantly the U S growth key drivers are of course, the additional sales reps that.
Cynthia has put in place that began in the second quarter of this year.
Additionally of course, we did have the win with <unk>.
United which is just beginning here in this third quarter.
And the plan.
Growth and effectiveness of those sales reps as well as the consumer advertising, which we do anticipate we will continue to grant here in the second half of the year.
Great. Thank you very much.
Our next question comes from.
<unk>. Please go ahead.
Hey, guys, you've got Sam on for Murray, Thanks for taking the questions. This afternoon.
Maybe I can start on the submission for the I T. G. M designation, congrats on getting that through our through the door.
Anyway to quantify how large of an impact that could be to new patient starts.
And once you got the potential approval and is it fair to say you'll be working with the two large open pump players.
Well at this point, we're not going to we're not going to comment on the on the partnerships. Obviously, we recognize that the integration with the insulin delivery devices is important.
But quite frankly, it's not just pumps that are important to us of course for so many more people that inject with Penn.
Making that fast style is a.
An issue for us as well so.
We do expect that after the approval, so 2024 impact that IC G M.
Not only for the access to those patients, but also just quite frankly.
To give the doctors the comfort that there is future and the integration the I T. G. M designation is certainly important so given the timing.
There won't be any contribution for 'twenty, three but we certainly see that in 'twenty four.
Okay very good I'll stay tuned for more and then maybe I can use my follow up here on the sales force expansion I'm, Tim I think I call in your prepared remarks that there also can be targeting outside and those into primary care and in other settings as well I guess is the messaging any different between the two channels.
There's one resonating more with the other and yeah any more color you can give on our on the channel expansion. Thanks, Yeah, we are looking to Uh huh.
He is actually creating some new messaging and as we've indicated in the past and certainly continues to be the case.
The majority of our patients are now coming in as type two.
Which are treated in different environments, and do have different needs and expectations. So we are updating.
Messaging or essentially is updating the messaging and they'll be rolling that out over the over the next couple of quarters.
But that really has been the.
A key driver of it you know it's gone on really for the last couple of years.
And as you've noted that you know about two thirds of our patients are now take to patients that are coming from different prescribers and.
I'm not sure of them many of them are coming to us from the D. T C efforts that they have in place.
Okay very good thanks for taking the questions.
Our next question comes from Jason Bedford with Raymond James. Please go ahead.
Hi, good afternoon.
A few questions just kind of maybe all over the place here, but what what percent of the new users are taking advantage of the the.
Patient assistant program.
Rick can you speak to that do you have an update roughly.
Yeah, I mean so.
It was and less than 50%, we're taking advantage of the patient assistance program and in the first half of the year and then I think with the United Healthcare coverage effective July we're going to see that number a decrease going forward.
Okay.
And then just getting back to the U S number.
Can we assume that the.
There were more new users added in <unk> than new users added in <unk> that a fair assumption.
Yes.
Okay. Okay.
Sure.
And then you made an interesting comment on the two thirds type two any idea in terms of.
Servers, what percent are and those versus non endo.
Or a certain.
Population is now just over 700.
Juruti are still endocrinology, but outside of endocrinology is growing quite fast and that of course includes the nurse practitioner group.
Okay.
And then Tim in terms of the 365 day data or are you going to press release that or what's in terms of disclosure how will you communicate that to investors.
I think Jason it's probably not best too.
<unk> press release the results from that given you know given that it is an FDA submission.
So I think.
But what I would expect if we make the submission which I do.
We do fully expect that.
We would do it based on comfort and performance of the of the data it would be acceptable for approval.
But it's generally not a good idea to to press release the data.
Four peer reviewed and before the agency has had a chance to take a look at.
Okay Fair enough and then.
Maybe Tim last one for you a bigger picture love to get your view on <unk>.
T O P ones and the impact they may have on your business or the CGM category.
Yeah. So obviously, it's great to see advances diabetes is a significant.
Disease State, we have we of course see no impact to date on our on the utilization of the G O P ones.
And then honestly just given the size, especially for.
The position that since he Onyx has at this point, we don't see it impacting our our market opportunity at all.
Long term could that be the case.
For sure, but not you know not over a multiyear horizon at all especially given the market share that since the onyx is growing from.
Okay. Thank you.
This concludes our question and answer session and our conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.