Senseonics 1Q16 – Eversense implantable CGM to launch in Sweden (June), Norway and Denmark (2H16); US PMA submission by end of 2016, new CPT codes for procedure – May 12, 2016

Senseonics reported 1Q16 results this afternoon in a call led by CEO Dr. Tim Goodnow, the company’s first update following a ~$45 million IPO in March on the NYSE and reverse merger in December to go public. Below, we share the top seven highlights from the update.

Top Seven Highlights

1. Senseonics’ Eversense 90-day implantable CGM, body-worn transmitter, and mobile app will launch this June in Sweden through distribution partner Rubin Medical, with subsequent launches in Norway and Denmark slated for 2H16. Pricing details were not shared on the call. Swedish launch is contingent on EU Notified Bodies approving Senseonics’ plans for a post-market surveillance study (which will be submitted in the next two weeks).

2. The company expects to complete an agreement with an additional EU distributor “very soon,” suggesting that at least one additional 2H16 launch is possible. Management did mention the possibility of near-term commercialization in Germany and the Netherlands, hinting that the distribution partner in question may serve these markets.

3. In the US, Senseonics has already fully enrolled its 90-day pivotal study (PRECISEII; n=90) at nine sites (it began in January). An FDA submission is expected “before the end of this year” (consistent with the most recent goal for 2H16), and management estimates a ~12-month PMA process – that puts approval and launch as soon as late 2017, but more likely, 2018.

4. Senseonics has received new Category III CPT reimbursement codes that will allow US providers to be reimbursed for the removal and insertion of the Eversense implant. Management will share more on the US strategy as it gets closer to launch.

5. Near-term pipeline plans include submitting separate CE Mark amendments for an extension of the Eversense sensor life to 180 days (2Q16) and a next-gen on-body transmitter (3Q16) that is 40% thinner, significantly lighter, and water resistant (addressing a major product concern). Notably, full 180-day pivotal study results from the PRECISE trial will report at ADA 2016 in a Sunday afternoon poster (892-P).

6. The call briefly mentioned continued interest in eliminating fingerstick calibrations and integrating with insulin pumps, but did not update the timeline on these projects. See below for a summary of Senseonics’ 2016-2017 milestones.

7. As of March 31, Senseonics reported a cash balance of $37.4 million, expected to sustain operations through 3Q17. Management shared conservative guidance for 2016, predicting sales of “less than $1 million” for the full year. The newly public company is currently trading at ~$3.30 (market cap ~$290 million).

Top Seven Highlights

1. Senseonics’ Eversense 90-day implantable CGM, body-worn transmitter, and mobile app will launch this June in Sweden through distribution partner Rubin Medical, with subsequent launches in Norway and Denmark slated for 2H16. The product received CE Mark approval earlier this week (“a GREAT milestone”), a longer-than-expected review after the July 2015 submission, and a delay from the initial expectation for a “fall 2015” clearance. Eversense is approved in adults and only as an adjunctive device to complement standard home blood glucose meters (a drawback from the non-adjunctive labels for Dexcom’s G5 and Abbott’s FreeStyle Libre). Pricing details were not shared on the call, though in the past, management has suggested comparable pricing to current CGM.

• The Swedish launch is contingent on EU Notified Bodies approving Senseonics’ plans for a post-market surveillance study that will gather long-term data from repeated sensor insertions. Study plans will be finalized and submitted in the next two weeks, and management was confident that the post-market requirement would not have a material impact on the rollout. Instead, the team sees the post-marketing data as an opportunity to substantiate the long-term findings already seen in the pivotal and to increase the body of evidence that can be submitted to the FDA (PMA submission by end of year; see below).
• This is an incredibly competitive time for glucose sensing, particularly in Europe. Senseonics has to contend with Abbott (FreeStyle Libre), Dexcom (G5), and Medtronic (MiniMed 640G/Enlite 2) right now, and planned near-term EU launches for Medtronic’s Guardian Connect (standalone mobile CGM; ~May-July 2016) and Roche’s Insight CGM (2016 launch). Can Senseonics successfully commercialize its implantable CGM in a cost-sensitive environment, differentiate from competitors, manufacture at scale, and expand the CGM market in Europe? See our Appendix below for a breakdown of the company’s strengths and weaknesses.

2. The company expects to complete an agreement with an additional EU distributor “very soon” and suggested that at least one additional 2H16 launch is likely. Management mentioned the possibility of near-term commercialization in Germany and the Netherlands, meaning the distribution partner probably serves these markets. From previous conversations, we know that other EU countries of interest include the UK, Italy, Switzerland, France, Finland, and Slovenia. Senseonics also hopes to commercialize its system in Canada, Australia, and Israel. Additional international launches are possible in late 2016 and early 217 though are dependent on the outcome of “active conversations” with other distribution partners.

3. In the US, management expressed optimism that an FDA submission would come “before the end of this year” (consistent with the most recent goal to submit “as early as 2H16”). The company has already fully enrolled its 90-day US pivotal study (PRECISEII; n=90), which began in January at nine US sites, including AMCR Institute, UVA, and Mount Sinai. The trial population consists of adults with diabetes at least 18 years of age and has an estimated primary completion of June 2016. It was only recently added to ClinicalTrials.gov (NCT02647905) and no further details have yet been shared. Management hopes that full results from PRECISEII will be presented at DTM 2016.

• Senseonics estimates a ~12-month PMA process, meaning a potential US launch could occur in late 2017 or early 2018. By that time, the CGM market could look quite a bit different in the US: Abbott’s FreeStyle Libre Pro (currently under FDA review), Medtronic’s standalone Guardian Connect mobile CGM (under FDA review), Medtronic’s MiniMed 670G/Enlite 3 (FDA submission before July), Dexcom’s G6 (pivotal in late 2016), and potentially the first-gen Dexcom/Verily product (first launch in 2018) and Abbott’s FreeStyle Libre (timing unknown). There are probably others too!

4. In a major win, Senseonics has received new Category III CPT reimbursement codes that will allow providers to be reimbursed for the removal and insertion of the Eversense implant in the US. The codes are additive with existing CGM codes and should fit relatively seamlessly into the current clinic reimbursement structure. Management positioned the codes as a significant win, stressing that reimbursement questions come up repeatedly in provider conversations. These codes could bring a nice tailwind for Senseonics, particularly because diabetes does not typically give providers many procedures to bill for. The big question, of course, is whether providers will be more likely to prescribe Eversense once they hear about these codes.

• Senseonics confirmed plans to commercialize on its own in the US and intends to begin building its sales infrastructure in 1H17. Presumably, the higher potential margins and better CGM reimbursement in the US make this more attractive. This is a major strategic choice that will obviously require significant capital, and management intends to share more information on its strategy as it gets closer to launch.

5. Near-term pipeline plans include submitting separate CE Mark amendments for: (i) an extension of the Eversense sensor life to 180 days (2Q16); and (ii) a next-gen smart transmitter that is 40% thinner, significantly lighter, and water resistant (3Q16). The sensor extension is the top priority though management did not speculate on the timing of an approval or launch. From the 90-day data we saw at ATTD, the sensor’s accuracy and durability were encouraging at 90 days (MARD: 11.5%), and we wonder how that will track out to six months – will most sensors make it to six months with that accuracy? Will there be more concerns about adverse events and skin reactions?

• Full 180-day results from the “PRECISE” EU pivotal study will report at ADA in a Sunday afternoon poster (892-P). We saw full 90-day results at ATTD 2016, and will be paying particular attention the overall accuracy, hypoglycemia accuracy (MARD 20% in the 90-day data), number of sensors that make it to 180 days, and any skin reactions or explant issues.
• Senseonics hopes to submit a CE Mark amendment for its second-gen transmitter in 3Q16 that features a number of form factor improvements: (i) 40% thinner profile; (ii) significantly lighter (about the weight of “two quarters”; (iii) water resistant; and (iv) a more rounded shape for greater discretion. This update would address one of our biggest concerns about the product – the size of the on-body transmitter negating a true implantable (“invisible”) advantage. See the Appendix below for pictures of the current system.

6. The call briefly mentioned continued interest eliminating fingerstick calibrations and integrating with insulin pumps but did not update the timeline on these projects. As expected, there was no discussion of other longer-term initiatives, such as: the pediatric indication, the FreeStyle Libre Link-like smartphone swipe for type 1, improving the accuracy to <10% MARD, and the smartphone swipe for type 2 diabetes without a separate on-body transmitter. See our summary of Senseonics’ pipeline plans below, which consolidates today’s new news with our prior knowledge of the company’s goals.

7. As of March 31, Senseonics reported a cash balance of $37.4 million, expected to sustain operations through 3Q17. Management did not disclose the specific cash burn but did note that that quarterly expenditures “are going to be relatively stable from quarter to quarter.” This is surprising given upcoming commercialization activities, building a US sales force, and clear R&D pipeline plans. Net loss was $11.2 million for 1Q16 vs. $5.7 million in 1Q15, and predictably, the rise in costs was driven by greater activity in R&D and sales/marketing.

• Senseonics shared conservative guidance for 2016, predicting sales of “less than $1 million” for the full year. Management attributed the lower estimate to the late receipt of its Eversense CE Mark and potential resistance to a “new and novel” technology. The real test will come when the system is commercialized and providers have to insert it, patients opt for it over other alternatives, and payers have to reimburse it.
• As a reminder, Senseonics successfully completed an IPO on the NYSE in March that raised $45 million – see our detailed coverage here. The company is currently trading at $3.30 (market cap ~$290 million).

Close Concerns Questions

Q: How will patients weigh the system’s pros (e.g., three- to six-month implant, smartphone viewing) and cons (e.g., procedure, large on-body transmitter that is not waterproof, potentially higher cost) vs. other products?

Q: How will patients evaluate Senseonics vs. an increasingly competitive glucose sensing marketplace (Abbott’s FreeStyle Libre, Dexcom’s G5, Medtronic Enlite 2 and upcoming Guardian Connect)?

Q: How expensive is manufacturing? Can Senseonics maintain accuracy and reliability at scale?

Q: What will this system cost? How well will it be reimbursed relative to other CGMs?

Q: Will Eversense launch for both Android and iOS in Europe?

Q: How will the regulatory pathway shake out in the US?

Appendix: Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis

• An implantable CGM is an important advance for glucose monitoring, though the question is how much it could expand the population of patients on CGM – it’s hard to know at this stage without more details, particularly on the cost and “initial hassle” fronts. There’s unquestionably plenty of room to build a spectacularly underpenetrated market (especially in the EU), and more options are a win for patients if there is broad access to the product. A question mark is how patients will perceive the pros and cons of Senseonics’ composite product profile, which exceeds competitor products in some dimensions (90-180 day wear, high and low vibration alerts on the body), maintains parity on others (smartphone viewing, MARD ~11%, two fingerstick calibrations per day), and has opportunity for improvement in some cases (on-body transmitter size, need for fingerstick calibrations vs. FreeStyle Libre). The market will decide, and certainly, competition breeds faster innovation, through which patients ultimately benefit!

Appendix – Images of the Sensor and Transmitter

The Sensor

The on-Body Transmitter

SmartPhone App

-- by Varun Iyengar, Adam Brown, and Kelly Close