Senseonics 1Q21 – US sales re-launch commenced April 1; 180-day Eversense began in April with approval expected in 2H21; revenue of $2.9 million (+7,817% YOY) – May 13, 2021

Senseonics reported its 1Q21 financial results this afternoon on a call led by CEO Tim Goodnow and CFO Nick Tressler. See our top highlights below.

Financial and Business Highlights

1. Full commercial transition of US operations to Ascensia as of April 1, headlined by 25-person US sales team; OUS transition “executed according to plan”; DTC advertising pilot commenced

By the end of 1Q21, Ascensia had “completed the hiring and training of the US sales force,” which now includes 25 marketing and sales professionals and an additional ~25 team members in commercial support roles including sales, clinical training, market access and customer care professionals. This sales force was rolled-out in full on April 1, marking the “restart of full-scale commercialization in the US” that was paused over a year ago in March.

• To start, Ascensia has prioritized “re-starting” contact with prescribers who were early adopters of Eversense prior to Senseonics pausing its sales efforts. Next, the sales team will prioritize “outreach to new accounts.” As Ascensia moves to create new accounts, the initial focus will be on “the top insulin, CGM, and pump prescribing physicians.” During prepared remarks, Dr. Goodnow expressed that “In the first quarter, we worked hard with our partner Ascensia to transition Eversense and the commercial responsibilities for both Europe and the US. The team at Ascensia has proven that they are committed to driving adoption of Eversense as demonstrated by the investments they have made in our collaborative endeavor and in building a comprehensive US commercial organization to support the Eversense product.

• Ascensia’s European commercial transition “was executed according to plan” in February. As a reminder, Senseonics’ previous agreement with Roche expired at the end of January. Ascensia is currently active in Germany, Italy, Spain, the Netherlands, and Poland with its sales force of “more than 250 sales professionals.” Dr. Goodnow was very positive in his characterization of the transition sharing, “We were able to provide patients with sustained access to Eversense and customer service” with current goals to transfer “existing payer contracts and tenders.”

• On an exciting note, building on these growing commercial efforts, in April, Ascensia launched a DTC advertising campaign. According to management, this campaign is expected to create impressions among the target patient audience [and] also to be a “strong supplement to the direct health care provider outreach” that Ascensia is also working to advance. We didn’t hear many details on the campaign, but back in 2Q19, Senseonics’ marketing efforts had focused around Facebook, Google Ads, YouTube, and other digital channels. Other CGM companies have seen good success with DTC campaigns, so we are hopeful this will help raise awareness of Eversense among more people with diabetes. We will be back with more thoughts on this – Kelly just recorded a talk for ATTD this morning titled “Harnessing the Power of Social Media and Peer Support” for a session moderated by Dr. Partha Kar called “In a Sea of Voices – Where is the Lighthouse?” Behavioral specialist Dr. Rose Stewart and Diabetes UK’s Simon O’Neill, a nurse care advisor and PWD will also be presenting.
  

2. Senseonics begins to benefit from 2021 CMS Physician Fee Schedule; first partnership with Accountable Care Organization (ACO); Ascensia launches patient assistance programs

Though a specific update was not shared, Senseonics continues to make progress on the coverage front. Last we heard in Senseonics’ 4Q20 update, the company had secured “approximately 200 million” US covered lives for Eversense, which Dr. Goodnow had characterized as a “critical mass” for expanded access and uptake and was significant progress from over 150 million covered lives through 2019. Although the exact number of covered lives was not shared during today’s call, Dr. Goodnow did share that Eversense is now covered by Centene Corporation, one of the ten largest healthcare insurance companies in the US.

• Dr. Goodnow highlighted Senseonics’ movement into the Medicare space and its new partnership with Accountable Care Organization (ACO) University Hospitals in Cleveland, Ohio. This partnership marks Senseonics’ first partnership with an ACO, which are integrated healthcare networks that provide care to Medicare beneficiaries at a lower cost. According to Dr. Goodnow, ACOs collect data on ~20 outcomes – including A1c – to measure their success and prove their value to CMS. Given that ACOs value A1c reducing therapies and technologies, Senseonics “feels strongly” that Eversense “can be a particularly benefit” to ACOs and their Medicare patient populations. During Q&A, Mr. Goodnow argued that Senseonics could leverage the outcomes and results of this partnership to access partnerships with other ACOs, expanding Senseonics’ presence in the Medicare space via these organizations. Specifically, he shared that “we’re pretty excited about the opportunity in all of Medicare. The focus that you get in an ACO and the additional attention around the economic return, we’re pretty excited about that as well.” Down the line, Mr. Goodnow believes that ACO partnerships offer a powerful channel to access new users for Eversense CGMs. We can certainly see the value in expanding Senseonics’ Medicare userbase via ACO partnerships, particularly given the data that such partnerships will also produce.

  • Senseonics began benefitting from CMS’ 2021 Physician Fee Schedule at the beginning of 2021, and the first group of Medicare patients were added to the installed base in 4Q20. As a reminder, the updated fee schedule establishes nationwide payment amounts for the three CPT codes covering Eversense insertion, removal, and insertion/removal combined. Notably, this made Eversense the first and only CGM covered as a medical benefit by CMS, rather than durable medical equipment. This is a simplicity win for patients and providers by reducing a significant amount of paperwork and hassle.

  • Over the past few months, we’ve seen value-based agreements opening up access for CGM into new populations. In addition to the University Hospitals agreement with Senseonics, Dexcom recently highlighted its partnership with direct primary care clinic Everside Health to bring CGM to patients with type 2 diabetes. Given the well-documented benefits of CGM in a variety of patients, as CEO Tim Goodnow mentioned, from helping avoid hospitalizations to reducing A1c to improving time in range and productivity and mental health to improving quality of life, even more pull-through on the part of payers should be seen, particularly government payers. On a positive note, we are very hopeful for the potential of these partnerships to bring CGM technology to all people using insulin and SFUs and beyond. 

• Senseonics is also addressing patient access from its own end, implementing two new Eversense access programs with Ascensia. For patients who have access to commercial coverage for Eversense, patient access programs will reduce out-of-pocket costs. For patients whose insurance does not yet cover Eversense, Ascensia is launching a prior authorization program to help patients submit claims petitioning for coverage; presumably that takes the place of the Eversense Bridge Program.

• As a reminder, Senseonics only provides userbase updates annually. Last we heard in 3Q20, Senseonics’ installed userbase was “over 5,000” patients, approximately 80% of whom were in Europe. That figure compares to ~11,500 users in the company’s 4Q19 global userbase (~4,000 US and ~7,500 OUS), many of whom presumably chose to or had to discontinue Eversense due to COVID-19 restrictions and the inability to have new sensors re-inserted in the clinic (or they didn’t want to go in due to safety restrictions). Before the pandemic, Dr. Goodnow shared that Senseonics had seen “a couple years” of relatively stable reinsertion rates for Eversense. Following their first sensor, about three-quarters of patients chose to continue on Eversense; following their second sensor, “about 85%” of patients chose to continue on Eversense and by the third sensor and further, reinsertion rates were in the “mid-90s.” 
  

3. 1Q21 revenue of $2.85 million, rising 7,817% YOY from a record low in 1Q20; US sales of $0.3 million, OUS sales of $2.5 million

Senseonics reported total revenue of $2.9 million in 1Q21, rising 7,817% YOY from a record low of $36,000 in 1Q20. Sequentially, Senseonics’ revenue fell 43% from $3.9 million in 4Q20, which followed the significant revenue drop seen in 1Q20 ($36,000), 2Q20 ($261,000), and 3Q20 ($800,000). Excitingly, this suggests that Senseonics is on a different path compared to the huge COVID-prompted challenges of the first three quarters of 2020, and we’re hopeful about seeing the company move ahead and leverage its partnership with Ascensia so effectively. We are also very interested to see marketing turned on in a more specific way for specific patient groups – similarly, we are interested in what we will see in terms of feedback from older patients and more elderly patients, for whom the “hassle factors” could be lower. On a broader note, per Mr. Tressler, Senseonics’ 1Q21 revenue growth is testament to the advantages of their new business model and partnership with Ascensia.

• US revenue in the quarter was $310,000, rising 1,192% YOY on an easy comparison to only $24,000 in 1Q20 and falling 23% sequentially from $400,000 in 4Q20. Per Mr. Tressler, 1Q21 US revenue is reflective of Ascensia’s initial commercialization efforts prior to the full commercialization, which began in April. As a reminder, Ascencia began “initial focused sale efforts” for Eversense in the US at the beginning of 4Q20 after they were first halted in March 2020. Although the first quarter already saw an impact of the commercialization effort on revenue, we expect to see a greater impact on revenue in 2Q21 and beyond. As of 3Q20, we estimated Eversense had a domestic user base of just ~1,000 people. During Q&A, Mr. Goodnow shared that a “predominance” of US revenue in 1Q21 came from re-insertions for existing patients.

• OUS revenue totaled $2.5 million, rising 20,983% YOY (i.e., increased more than 200-fold) from ~$12,000 in 1Q20. 1Q21 OUS revenue was down 34% sequentially from $3.5 million in 4Q20. As a reminder, OUS 1Q21 revenue was expected to sequentially decline, because the revenue from Eversense sensors distributed in January 2021 was already recognized in 4Q20 when Roche placed its final distribution order, meaning 1Q21 was effectively a two-month quarter for OUS revenue.

• Senseonics reiterated its 2021 revenue guidance of $12-$15 million, which would represent 124%-203% YOY growth. Perhaps more fitting comparisons, $12-$15 million in FY21 guidance represents a 30%-44% decline from FY19 net revenue and a 21%-36% YOY decline from FY18 net revenue. During Q&A, Mr. Goodnow reiterated that the company is currently modeling “about 40%” of the net revenue to come in 1H21 with the remaining 60% modeled for 2H21. Mr. Goodnow also estimated that “about two-thirds” of Senseonics’ installed base would be in Europe in 2021, with the remaining third in the US, which is expected to be reflected in the revenue breakdown as well.

4. $175 million in cash raised in January brings total cash and cash equivalents to $178 million; positive gross profit of $526,000; operating losses down $33 million YOY

During his prepared remarks, Mr. Tressler reiterated excitement over the $175 million Senseonics raised in proceeds from financing transactions in late January. Following these cash raises, Senseonics ended the quarter with $178 million, compared to $18 million at the end of 2020. During the 4Q20 call, following the raise, Mr. Goodnow estimated that Senseonics then had enough cash to get the company through “cash flow breakeven from operations and the commercial launch of the 365 days sensor designed to be calibrated only once per week.”

• Senseonics reported a positive gross profit of $526,000, up $20 million YOY from a gross loss of ~$20 million in 1Q20. This positive gross margin was “primarily due to the ability to fill resupply orders with existing written-off inventory as existing patient reinsertion rates were above expectations” established in 1Q20. For the full-year, Mr. Tressler maintained the company’s guidance for gross margin of -25% to -35%, as Senseonics has already worked through the “majority” of its written-off inventory.

• Operating losses fell $32.5 million YOY to $11.3 million in 1Q21. Notably, sales and marketing expenses declined $9.5 million YOY to $1.6 million due to the strategic commercialization partnership with Ascensia.

• Net loss totaled $249.5 million in 1Q21, compared to $42.6 million in 1Q20. This increase in net loss was attributed to non-cash charges related to the “accounting for embedded derivatives and fair value adjustments related to the company's financings including the 2023 and 2025 notes along with the PHC 2024 notes and Energy Capital equity line of credit.”

Pipeline Highlights

1. FDA review of 180-day Eversense resumed in April with approval expected in back-half of 2021; PROMISE trial data to be presented at ATTD and ADA

The FDA resumed its review of Senseonics’ PMA supplement for its 180-day Eversense product in “mid-April” following delays at the administration due to COVID-19 backlog. With this update, Dr. Goodnow shared that the FDA had “assigned a lead reviewer” to the Eversense 180 PMA and reiterated Senseonics’ expectation for a roughly six-month review period, placing approval in the back half of 2021. This timeline follows similar updates from 4Q20, but lags behind Senseonics’ 3Q20 goal for approval in 1H21. As a reminder, the PMA supplement for 180-day Eversense was submitted back in early October, but the FDA Division of Chemistry and Toxicology Devices Director Dr. Kellie Kelm shared in November that most diabetes device reviews, due to COVID-19 priorities, would likely be delayed by “about 90 days.”

• Dr. Goodnow shared that data from the 180-day Eversense pivotal trial, PROMISE, will be presented at ATTD 2021 (see our preview) and ADA 2021 (see our pre-preview) both in June. According to Dr. Goodnow, Dr. Satish Garg (Barbara Davis Center) will be presenting the “accuracy and safety” data from the PROMISE trial, which enrolled 181 patients across 8 clinical sites. While we still haven’t heard anything about the specific trial results, we are looking forward to learning more in a few weeks. In the company’s 3Q20 press announcement, Senseonics did share that MARD accuracy for the 180-day sensor matched the current 90 and 180 day systems (8.5%-9.4%), which is slightly better than most commercial CGMs on the market (see a comparison here). Dr. Goodnow reiterated that today, stating, “The data demonstrated performance matching that of the current 90-day product and achieved it with reduced calibration.”

• On last quarter’s call, Dr. Goodnow discussed plans for an iCGM designation for Senseonics’ 180-day product. We didn’t hear any updates on this front today, and with the current PMA supplement as a class III CGM, Senseonics would need to file a separate submission in support of the iCGM designation. As Mr. Goodnow shared in 4Q20, “At this point we have the 180-day product in for review and right behind that we anticipate the iCGM effort.” Given the strong accuracy profile of the 90-day Eversense, and managements continued focus on the accuracy of the 180-day product, we’re fairly confident that the 180-day product would meet iCGM special controls for accuracy though the FDA can be hard to assess on this front – more broadly, it’s hard to assess timing in general for FDA at present.

2. 365-day product with one calibration/week slated for IDE submission “in the fourth quarter of this year” with US pivotal trial to follow

Senseonics plans to file an IDE submission for its 365-day sensor “in the fourth quarter of this year.” This timeline is in-line with expectations from 4Q20 when we learned that the company is planning for IDE approval “later this year,” but represents a slight delay from prior expectations for IDE approval “late in the first half of 2021. We once again heard Dr. Goodnow refer to once weekly calibrations with the 365-day sensor which would be a big win for patients. Together, we feel that one implantation per year and one calibration per week is likely to be very popular among customers, and given its potential to be a lower-cost CGM (per month), we are certainly hopeful that the work will progress as planned. Presumably, pivotal trial enrollment will begin shortly after IDE approval which we expect will come in 2022.

Analyst Q&A

Q (Chris Pasquale, Guggenheim Securities): Thanks. I have a few questions. I wanted to start with the revenue build. Can you give us an update on what you think your installed base was in the US and international markets as of the end of 1Q? And then as we think about the better than expected international results this quarter, was that driven by Ascensia bringing new patients on or was it – was there a catch up in terms of restocking of distributor inventory or something like that that may have contributed to the results?

Tim Goodnow, CEO: Thanks, Chris. Yeah. In regards to patient account, we've stuck to an annual update. You recall the most recent information we put out was at the end of last year, beginning of this year there were about 4,000 patients in Europe that were on the technology and about 1,000 in the US. So I don't have a quarter update for you. We'll go ahead and stick to that annual cadence of putting information out.

In regards to the performance in Europe. That is in line generally with our expectation. Now, do recall that also includes purchases that Roche made to complete their responsibility for a portion of Q1. They went through the end of January. So, it really is pretty representative of patient demand. There is not material stocking that's occurring, but it is the servicing of the existing patients that are on the product.

Q: Thanks, Tim. And then, Nick. I was just hoping on gross margin, if you can give us a little bit of a better sense of what to expect from here on out. Have you worked your way through the written off inventory? So going forward, should we see something that's a little bit more normalized? And I think back to September, you talked about a negative 30% gross margin for this year and it seems unlikely it's going to be that low after this start. So just updated thoughts on what the full year is going to look like? Thanks.

Nick Tressler, CFO: Sure. Yeah. Happy to take that. So we've worked through the majority of the material that we have written off a year ago. And in terms of gross margin for the year, recall that we still expect back half of the year to be greater. So as we move into Q2, and through the back half. And so, we still continue to maintain the range that we provided of negative 25% to negative 35% for the full year.

Q (Matthew Blackman, Stifel): Good afternoon, everybody. Thanks for taking my questions. Let me just start, Tim. Just want to get a better feel for the US re-launch and how it phases over the next several quarters. It sounds like phase one is going after the previous high volume Eversense implanters and then moving to just high-volume prescribers of Eversense. How does that play out over the next few quarters as 2Q is focused on existing accounts, and then the second half of the year is when you start going after new accounts?

Mr. Goodnow: Sure, Matt. Directionally, I don't think that that sounds unreasonable, although, the timing is going to be gated by success. And of course, this is appropriately under Ascensia’s timing and direction. But the focus for sure, especially with the new reps and the dynamics of not being able to get to see them for some time, is to get to reestablish the relationships with the existing prescribers and implanters. So, that's current. As the areas get comfortable, the territories are comfortable, then expansion to the bigger prescribers and opportunities will happen in the future. It's not currently in place. Right now, it really is about getting a new rep, getting established in their territory and working with their prior inserters and prescribers.

Recall, it has been just about a year that we took our sales force out of the field. So, those out of the field, so those docs and those patients have been out without a sales rep for quite some time. So, I do expect it'll take us a little while to build that back up again and hence the cadence that we've guided to on the on the US in the back half year versus the first half.

Q: Okay. Makes sense. And then Tim, you mentioned some clinics are now starting to lift restrictions in the US. Just curious how much of a headwind that still represents today whether it's access for Ascensia reps or the implant specialist. Is that still a big decline?

Mr. Goodnow: We certainly see it improving. I would say that February was better than January, and March was better than February. So, certainly believe it's in the right direction. I think we all tend to feel in the US that we're making good headway with the vaccine penetration. There's always more to do, but it does feel like that we're starting to get back to normal. And we would hope that certainly by later in Q2, certainly by Q3 that we'd be pretty good shape to have in-office visits, and trainings, and so forth, back on the docket for everyone.

Q: Okay. And then the last one, I appreciate the comments on the PROMISE study. Is there anything we should pay particular attention to or be sensitive to when the data comes out? And anything interesting that you think – you don't have to be too specific but just curious if there's any part of data you think we should pay close attention to. Thanks.

Mr. Goodnow: Yeah, yeah. I think, obviously, you know one of the key metrics of course that the agency is going to look at is just how accurate the device is. And we've always felt it's always been a number one focus for us. The Eversense technology is quite frankly very accurate and very competitively positioned against the other devices that are out there. So, we feel quite good about that. And I think when you get a chance to see the full data set, you will as well. So obviously safety is another element. And we feel pretty encouraged that we didn't certainly see anything new. We didn't see anything of note or materially more complicated than you would see with a 90-day product. So overall, we feel pretty good about it and look forward to getting it published and having people take a look at it.

Q (Danielle Antalffy, SVB Leerink): Hey. Good afternoon everyone. Thanks so much for taking the question. Tim, I had a follow up on the ACO partnership and that sounds really interesting to me and I'm just curious about how that came about? And does that potentially represent a more meaningful opportunity in an underappreciated opportunity for Senseonics over time?

Mr. Goodnow: Well, Danielle as you know, we're pretty excited about the opportunity you have in Medicare because of the alignment of the capabilities, the features and benefits of Eversense for that population. So, the ACO is a part of the group that we've reached out to. And this particular group was pretty active in getting back to us in regards to their interest as well. As I said, they've got just over 20 specific metrics that they're definitively specifically measured on. And one of them is they're A1c reduction. It’s pretty well-known and pretty well-documented that when you put people on Eversense, that we will reduce their A1cs. And that's the intent to the evaluation that we're going to – we're going to do with this group. And I do think we're pretty excited about the opportunity in all of Medicare. The focus that you get in an ACO and the additional attention around the economic return, we're pretty excited about as well.

Q: Yeah. That makes a lot of sense. Perhaps, you could leverage whatever outcomes you see with this ACO to drive adoption in other or drive a similar partnership in other ACOs, is that sort of like the overarching strategy?

Mr. Goodnow: Absolutely. And Dr. Fran Kaufman is staying very close to this. She's well familiar with the group. It's a high-quality group and she'll certainly be partnering with them. And we'll look forward to the results and experience publication out of that as well.

Q: Got it. And then just one follow up. It’s around the readiness for the 180-day from a manufacturing perspective. How quickly can you ramp up, if in fact that does prove to be an inflection point which I sort of feel like it could from an adoption perspective? Thanks so much.

Mr. Goodnow: Yeah. I guess, I'll jump in, Danielle. I would say that obviously we're doing a lot of planning right now in anticipation for that. We are reading the tea leaves in regards to the timing on it. We've begun the investment, preparatory investment for the process building the capacity. So we feel pretty good about the ability to ramp. We have a strong partnership with strong capability where we've invested direct capital with them previously. So we feel pretty confident that we're going to be – we're going to be able to support the growth and excited about what it's going to grow as well because it is going to be certainly an improvement in the likeability of the product. And we know that adoption is going to go up as well.

Q (Jayson Bedford, Raymond James): Good afternoon. I hope everyone's doing well. Just on 180-day, Tim, you talked about time lines. I realize it's difficult, but just in terms of your expectation as to when you'll get approval for the 180-day.

Mr. Goodnow: Yeah. So, as you know, a review such as this, this is a PMA supplement. It's not a primary review. PMA supplements typically would be a 180-day review. So, we don't have a reason to believe that it should vary from that other than the dynamics of COVID and what it might take a particular review, or review team's time to clear off their desk from some of the prior work they were doing. So, that's what we really don't know and probably why we're trying to be a little bit oblique on the timing. I certainly hope that it wouldn't be much, much longer than the traditional review time periods. But I do know it was a group that was notably impacted by the diagnostics responsibilities with COVID diagnostics. So, our feeling is that it'll be in probably that time period.

Q: And just to be clear, the clock started in mid-April?

Mr. Goodnow: Correct, when the reviewer picked it up.

--by Hanna Gutow, Katie Mahoney, Albert Cai, and Kelly Close