Q3 2023 Senseonics Holdings Inc Earnings Call
Okay.
Good day and welcome to the century Holdings third quarter 2023 earnings Conference call.
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I would now like to turn the conference over to your host today. It's Taylor was 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 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 are risk a list of the factors that could cause actual results to be materially different.
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 September 32023, and other reports filed with the SEC. These documents are available in the <unk>.
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.
Joining me from Santiago <unk> are Tim Goodnow, President and Chief Executive Officer, and Rick Sullivan, Chief Financial Officer, with that I would like to turn the call over to Tim Goodnow, President and CEO Tim.
Great. Thank you trip and thank you all for joining US today today's call will start with an overview of our quarterly performance and an update on since the Onyx continued execution of strategic initiatives, including support of our commercial partner.
And our Chief Financial Officer, Rick Sullivan will discuss the third quarter financials in detail and we'll open up the call for questions.
During the third quarter since the Onyx generated total revenue of $6 $1 million, representing 33% growth compared to the prior year period.
Including $4 million of revenue in the U S and $2 1 million from outside the United States.
Spanning ever since patient adoption and advancing our technology pipeline remain the top priorities for our business.
Our commercial partner is Cynthia diabetes care continues to work to drive greater market access and recognition forever. Since they are implementing our commercial strategy that includes downstream marketing activities to build awareness with both health care professionals and patients and are taking steps to ensure that all constituents of a P.
Positive experience with ever since.
This includes continuing to expand our dedicated commercial organization in the U S towards this goal.
During the third quarter ADC expanded their commercial investment by partnering to develop a fresh new integrated marketing campaign with space $1 50, and innovative digital agency with proven experience in driving demand of disruptive medical device technology.
For background.
CGM brands today broadly sell themselves as a panacea that makes managing diabetes easy and effortless. However, this is not the case.
Certainly for millions of people living with diabetes around the world CGM has become an indispensable tool in managing their condition.
Yet many users spend too much time, managing the shortcomings of their technology et.
It's estimated that half of the people currently using CGM brands are not fully satisfied and experienced common frustrations with their devices.
Issues, such as sensors falling off skin irritation, excessive overtaking accuracy issues and short sensor life.
As a result, many patients take breaks from their cgm's, reducing the clinical and safety benefits to technology provides.
We designed ever since to specifically address the issues intrinsic to traditional short term trans cutaneous CGM and the new direct to consumer campaign aims to inform patients on the benefits of ever since and why its the CGM for real life.
The campaign represents the most significant investment in direct to consumer marketing for ever since.
And includes extensive reach across digital and social media as well as new T V ads on digital television platforms, such as Youtube Hulu HBO Disney.
They are also testing the new TV ads on traditional broadcast TV and five metropolitan markets, including spots during NFL games and the recent World series.
As ADC monitor as a results of the campaign the plan is to broaden them in 2024.
While only a few weeks into the campaign. The early results are certainly encouraging.
The campaign's theme the CGM for real life resonates with patients who want to benefit of CGM without to traditional drawbacks.
Feedback from the provider community has been positive as well and we expect it will increase awareness and support within the clinician practices.
In the third quarter several initiatives to strengthen access forever since were advanced by ADC.
Including gaining traction on the prescriber first strategy.
We've expanded the <unk> network through both organic and sort of development as well as our partnership with a nurse practitioner group.
Through this partnership we promote ever since to prescribers not trained to do insertion such as family practitioners internal medicine. So they can simply prescribe this system and their patients can be matched with convenient insertion options.
As a quick update on the nurse practitioner group partnership we have already exceeded our original target for the number of NPG locations in 2023 and are proceeding with expansion plans for the remainder of this year and throughout 2024.
The program has been very well received by both patients and prescribers is indicated by the growing number of users receiving their assertions through NPG from 12% in Q2 to now 18% of all insertions in Q3.
We're also encouraged by the expanded opportunity with basal only coverage across commercial payers could apply to ever since.
The majority of our patients are type two and we expect this to increase with the basal only coverage.
On that front, we're working to harmonize the Medicare coverage for basal only to include implantable CGM through Medicare and the Medicare administrative contractors.
In fact, most of the Macs published updated L. C. D's that include basal only coverage for implantable CGM for public comment.
And we anticipate the remaining ones to follow soon.
We've had successful meetings during several of the Max comment periods, and we expect that they will begin publishing the updated policies in early 2024.
We did the expansion the basal only indication across commercial and Medicare plans, we anticipate continued penetration across the type two market going forward.
In Europe ADC is seeing mixed results and is focused on driving performance across its markets.
Italy has seen notable growth increasing users by over 20% during the year.
It is now our largest European market based on active users.
Julie continues having success executing in areas, where there is positive tender coverage for ever since and is seeking to expand that coverage when those opportunities become available.
ADC is also making progress in some other European markets.
Based on positive tender performance in Spain active users during the year are up over 40%.
And in Poland. Following new reimbursement coverage uses are approximately doubled.
ADC continues to transition the sales channel in Germany in mid market dynamics.
New German CGM business leader has started and the transition of territories was completed during the third quarter.
We are also pleased to have recently received a German medical aid code for ever since.
This includes ever since and the national catalog of Reimbursable medical devices, demonstrating to providers and ever since as no longer reimbursed only on an exception basis by insurers.
We believe this should result in a simpler and faster reimbursement in the German market.
ADC is seen indications of stabilization of the German business and given the size of this market. It's an important endeavor for the ADC team in Europe.
Transitioning now to our clinical and product pipeline, we're continually continuously advancing our new product initiatives targeted over the next quarters and years, where we expect to leverage these new products to drive increased adoption.
The next few years, representing an exciting opportunity for sensing onyx as they have a strong product pipeline and we are confident offers important growth opportunities.
Leading the way in terms of our next generation product is our 365 days system.
We recently announced the completion of the enhanced pivotal clinical study adult cohort as it is now in the data collection and analysis phase following completion of the 365 day visit for the final study participants.
This represents a significant milestone for <unk> as we work towards offering a differentiated benefits of implantable CGM for one full year with just a single sensor.
We appreciate the efforts of the participating investigators and patients and look forward to analyzing the data preparing a submission and working with the FDA with the golub securing approval for the planned one year ever since system in the coming quarters.
As previously discussed our CGM designation for ever since has been submitted and is under review with the FDA.
We anticipate feedback in Q1 and look forward to the potential this designation would offer.
Over the past few quarters, we have.
Discuss the importance of integration with other diabetes technologies and recognize the opportunity to provide additional benefit to people with diabetes, specifically integration with various insulin delivery devices is a priority for <unk>.
Finally, we continue to advance both our Gemini and freedom systems are.
Our nearest term focus is working to incorporate self powering for the sensor with the implantable battery and we are on track for human feasibility studies and early 'twenty four.
We're excited that this next step is right around the corner and we will provide more information as the program progresses with this I'll now turn the call over to Rick for a review of our financials.
Tim and good afternoon, everyone. We appreciate the opportunity today to update you on our business.
In the third quarter of 2023, net revenue was $6 1 million compared to $4 6 million in the prior year period.
U S revenue for the third quarter was $3 $9 million in revenue outside the U S was $2 2 million shipment volumes in the third quarter are intended to support demand generation from the new advertising campaign.
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 the Cynthia.
<unk> recognizes revenue based on a revenue share when shipments are delivered to SNCF initiating the multi step distribution to patients via Cynthia and their distributors.
We will continue to monitor inventory levels closely to optimize the supply chain as we better understand patient demand generated from commercial activity and the eventual transition to the next generation product.
Gross profit in Q3, 2023 was $1 2 million an increase of <unk> 4 million from a gross profit of <unk> 8 million in the prior year period.
The increase in gross margin was primarily driven by an increase to revenue as our volumes increased which covered a greater portion of our fixed manufacturing costs.
Research and development expenses in Q3, 2023, or $12 8 million, an increase of $1 8 million compared to $11 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.
Third quarter 2023, selling general and administrative expenses were $7 4 million, an increase of <unk> 1 million compared to $7 3 million in the prior year period.
For the three months ended September 2023, operating loss was 19 million compared to $17 6 million in the third quarter of 2022 due to increased investment in research and development.
For the three months ended September 2023, total net loss was $24 1 million or <unk> <unk> loss per share compared to a net loss of $60 4 million or <unk> 13 cents loss per share in the third quarter of 2022.
Net income increased by $36 3 million due to the accounting for embedded derivatives fair value adjustments and the exchange of a portion of the 2025 notes.
As of September 32023, cash cash equivalents and short and long term investments totaled $125 4 million and debt and accrued interest was $45 8 million.
And continued efforts to strengthen our balance sheet in September we entered into a $50 million loan facility with Hercules capital and drew down $25 million upon the transaction closing.
The Hercules loan facility strengthens our balance sheet on a non dilutive basis and based on our existing business plan assumptions and estimates is currently expected to provide the capital required to fund our current operating plans to cash flow positivity.
Turning to our outlook for 2023.
We expect full year 2023, global net revenue to be at the midpoint of the previously provided 20 million to $24 million range.
Our guidance reflects increased expected patient growth, which is expected to continue to accelerate through the end of the year and a decrease in <unk> share of 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, 5%.
The year over year decrease in our gross profit margins are the result of the decrease in our share of ever since revenue offset by cost improvements gained with increased volumes.
For the full year 2023 operating expenses are expected to increase compared to 2022 based on investments in R&D to complete the adult $3 65 day trial.
The early stages of the pediatric trial and investments in our future products Gemini and freedom.
With that I'll turn it back to Tim.
Thanks, Rick third quarter March strong performance for <unk> and we're excited about the growth a result and are positioned for the future.
We continue leveraging our commercial partnership to drive increased ever since adoption and advancing our strong product pipeline to drive further product differentiation and market demand with ever since 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, all for your time today, joining us for questions as mutual Jain our chief operating officer.
And Dr. Fran Kaufman, our Chief Medical Officer.
Operator, let's open up the call for questions.
Thank you if you would like to ask a question. Please press Star then one.
Like to remove yourself from queue. Please press Star then two once again Thats Star then one of you I have a question.
Today's first question comes from Maria <unk> with BTG. Please go ahead.
Hi, Thanks for taking the questions. This evening and congrats on a good quarter.
Wanted to start here and try to understand what drove some of the strength, particularly in the U S. I'm curious if that was the cause you know NPG is tracking ahead of plan.
It sounds like you're starting to see some really good feedback also from DTC, but that's more of a for Q dynamic. So curious also to hear sort of your level of confidence in and moving to the midpoint of the guide certainly pointing to a very nice end to the year. So two parter there U S strength what drove it.
This quarter and then what are what's driving the confidence next quarter.
It really is driven simply by the new patient additions coming in the U S right as the as the investment pays off with SNCF. We continue to continue to grow patients certainly NPG is playing a nice part of that it does or relieve some friction, especially as we move outside of the primary Diabetologist index.
Monology offices.
So we're certainly excited about that and as you heard we're going to we're going to expand that partnership so.
We do feel good midpoint of the range is where we anticipate to be.
We have things going certainly in the in the right direction.
Direction that campaign as we talked about we're pretty excited about it hopefully everybody has had a chance to see the.
Let's see the commercials theyre not a full national broadcast television yet, but we are we are testing those in a few select markets in quite a bit on digital TV.
Yeah. Thank you for that Tim and I guess I'll have my follow up then on the on the CGM for real life campaign.
What you know.
What should we know about your user base and what Youre seeing kind of in the recent new patient adds I'm. Most curious about sort of the historic proportion of patients who have had coming from finger sticks versus those coming from competitive CGM. Then if this DTC is already starting to shift that towards the competitive sherwin. Thank you.
I think we are going to see it as you've probably heard we have traditionally seen about two thirds coming from competitive products and one third that are that are new to CGM.
I would anticipate we'll continue to see more of that as we as we do this more broad based advertising.
Many of the leads and probably the biggest growth area that we're seeing are actually from.
The basal indication folks are those that are taking one maybe two shot today.
And as we've had progress with commercial reimbursement and then we've talked about we expect within the next quarter to have the Medicare.
Reimbursement in place that that'll be a good portion for growth for us in the future as well.
Yes, that's very helpful. One last quick one if I can sneak in good momentum so far.
What do you think about what a one year sensor could be doing to new patient starts something we've left came for a while and I'm curious to hear your latest take on it.
We're certainly excited about it a lot of the feedback.
Of course on the patients that are currently on the twice a year, obviously going to once a year is another level of reduction.
And new patients coming to it as well. So we're very excited about it is the platform now that we feel good that we have the survivability.
That will be building the future generations on so not only is it the basis for the one year.
CGM, but it also has the one year flash type product that's behind it and then.
Freedom with absolutely nothing on the body, we know as a home loan products. So each one of those is successively successive successively more attractive.
And we're just we're just excited to be working on that and can't wait to bring those out.
Alright, very good thanks for taking the questions.
Thank you and our next question comes from Mathew Blackman with Stifel. Please go ahead.
Hi, This is Colin on for Matt I also wanted to start on the U S performance and the visibility you guys have.
Enter new patient starts given the recent dynamics with a sense of destocking in the first half.
The $3 9 million in revenues this quarter, the right quarterly run rate to think about the U S launch from here just any visibility you have there would be great.
441, this quarter is in the U S.
Yes.
394.
Yes.
As we are building the <unk>.
As we're building product in the third quarter, you really are filling the channel of course for the fourth quarter in reality by the time that it goes out for.
The stocking that happens at our centers distributors as well as with SMT as well so.
That's certainly our plan going forward we.
We do have a couple of dynamics that as we think about it we're not ready to give guidance for 2024 for sure but it is a pretty important year for us on the one hand, you know.
We do have a lot of good work and excitement that we're seeing in the marketing campaign.
We also do have the transition to the to the one year product that we need to think about so that's going to have some inventory dynamics as well. So we're working with Cynthia now to to have that all scoped out we'll we'll look to give a better perspective. The next time, we speak yeah Collyn, we maintain the two thirds of our revenue coming from the U S. This year.
We're pretty close to that in Q3, and we expect that for the full year two thirds U S. One third O U S are pretty happy with coming in at the midpoint of our guidance.
Okay, Great. That's helpful and I wanted to squeeze one in on the pipeline I was curious what your general senses of how long it generally takes two.
Start integration activities with pump partners after receiving IC GM, you gave an encouraging update about expecting it early in the year.
How quickly can you integrate and.
We will beta bionics be first thank you.
Yes, I mean, I can't speak to who's first.
Obviously, we're we're very excited about the beta bionics technology, the clinical testing that we've that we've shown to date.
It does take those organizations a little bit of time to put it out I think youre seeing that was the some of the folks that are transitioning to the <unk> com G seven product.
So there is some certain work to do but it does all start with that ICM designation and we're actively working on to get that wrapped up in the first quarter, so not ready to speak to timing yet as it really does come from the other side.
But it's it's a high priority for us.
Thank you guys so much.
Thank you and our next question comes from Jayson Bedford with Raymond James. Please go ahead.
Good afternoon, just a few and there may be all over the place but.
Remind me when do you plan on submitting the 365 day data.
Yeah.
Michael you want to go ahead and talk through that.
Jason Yes, so we are thinking in the first half.
It'll be some dependency on when we go back on the submission that's an active review right now so, but that's maybe kind of pulling it together getting it ready and then waiting to hear back and Sunday ban So I would say somewhere in the first half.
So first half submit.
The expectation.
Would be 2000 or 2025 for approval is that fair no no our expectation is.
Six six months typical for approval, that's what we have seen based on past history.
Okay. So it's still late 'twenty four.
Later in the fall.
Okay. So again.
Our expectation right now if everything works out.
Right Okay.
Just in terms of the U S business, how many in servers do you have now.
You know what Jason I'll have to get back to you with that with the current number of in servers, but.
Do you know 12 or 1300, yes, it's over a thousand right right.
It's much more concentrated in NPG I think there are 36 of those folks.
But yes its over 1000.
Sorry, Tim what was the 36 and MTG.
Yes, so there's there's there's 36 in NPG.
Currently we're looking to expand that.
Okay.
And then just what is the rough mix between.
And melon and does in terms of your answers.
There still is a heavy endo, but by far the growth is coming outside endocrinology.
As we said.
If we're seeing when we're seeing patients that are typically in smaller offices, especially Medicare patients, it's much more likely that the doctor.
It won't have the patient flow to go through the training and they will use it where we're getting the larger volume M. D eyes, and pumper Theyre still typically in endocrinology practices. So endocrinology is still predominant but the other portion is growing quite fast and I'm sure that will surpass that in 'twenty four.
Okay. Okay. That's helpful. And then just is there any approximation of type one and type two users.
Yeah.
We've got about 65% that are now type two so one third two third.
65, okay.
Right.
And then just any.
Internationally.
Is Italy, so strong versus some of the other countries is it just that.
The tender slash reimbursement dynamics and then just on that this Germany.
Medical aid catalog does that resolve the access issue.
In Italy, it's a couple of factors obviously the team has done an exceptionally good job they've executed very well over there.
You know quite frankly, one of the reasons. They executed well is also why they have good tenders right. So I think it's.
It's just a very good team.
Has done a great job with ever since then.
A lot of the patients over there really like it.
In Germany the.
The catalog number it is important we have been operating which has been somewhat painful from our prior.
Prior distributor was not able to get this code.
In a sense he has done a great job now.
Getting this one hurdle out of the way so it becomes more of the rule as opposed to the exception.
Yeah.
Okay, Alright, thank you I'll get back in queue.
Thank you and ladies and gentlemen. This concludes our question and answer session I would like to turn the conference back over to the management group.
For any closing remarks.
Great well. Thank you we do certainly appreciate everyone's time.
This this afternoon and look forward to speaking again in the future have a good day take care.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation.
You may now disconnect your lines and have a wonderful day.
Okay.