Memorandum

Senseonics 1Q18 – Revenue of $2.9M up 2% sequentially; “Optimistic” for “reveal” of Eversense at ADA; Plans to submit for iCGM classification via PMA supplement – May 11, 2018

    Executive Highlights

    • Senseonics reported 1Q18 revenue of $2.9 million, essentially flat (+2%) from 4Q17. Management continued to guide for full-year 2018 revenue of $18-$20 million, anticipating “modest” contributions from the US in 2H18 (pending approval). Even the low end of this revenue forecast will require quite significant YoY and sequential growth – there was very good news on reimbursement from Germany and with this momentum, the goal could be reachable though it’s early to say.

    • Comments on user base growth implied there are somewhere between 2,000-2,800 Eversense users worldwide. An estimated ~75% of users are coming from other systems (Abbott, Dexcom, Medtronic), with only ~25% as CGM naïve.

    • Following the unanimous positive FDA Advisory Committee vote to approve Senseonics’ 90-day-wear Eversense CGM, management expressed confidence in a US launch by mid-year. In fact, VP of the US Region Mr. Mike Gill noted he is “optimistic” that Eversense will be “revealed” at ADA in June.

    • Excitingly, we learned that Senseonics plans to submit a PMA supplement for iCGM classification of its first-gen sensor following FDA approval of Eversense. Based on published data and our analysis, Eversense looks to meet the accuracy benchmarks of the special controls (if the PRECISE II and PRECISION studies are pooled); Medtronic and Abbott fall a bit short. Dr. Goodnow also remarked that he anticipates an insulin dosing claim for Eversense “in the coming quarters.” As a reminder, the system does require two fingerstick calibrations per day in contrast to no requirements for Dexcom or Abbott.

    The company finished the quarter with $61 million in cash and cash equivalents, increasing 67% from $37 million in 4Q17. The improved cash position was attributed to $52 million raised from convertible notes in January. Senseonics reported 1Q18 financial results today in a call led by CEO Dr. Tim Goodnow. Management was naturally buzzing with optimism following a unanimous positive FDA Advisory Committee vote in March in favor of the 90-day-wear Eversense CGM, on-body transmitter, and mobile app. Management seemed optimistic that it could be approved in time for ADA. We were also very excited to learn that Senseonics intends to submit a PMA supplement for iCGM classification following initial approval. Read on for our top highlights from the call.

    Financial and Business Highlights

    1. Revenue of $2.9M Up 2% Sequentially; $61M Cash on Hand; Net Loss of $22.3M; 2018 Revenue of $18-$20M Expected

    Senseonics reported sales of $2.9 million, essentially flat (+2%) sequentially from $2.9 million in 4Q17. Year-over-year, sales nearly quintupled from an early base of ~$600,000 in 1Q17. Cash and cash equivalents totaled $61 million at the end of 1Q18, rising 67% sequentially from just $37 million at 2017’s end, thanks to $52 million raised from convertible notes in January. This extra cash will be key as Senseonics build a US commercial team ahead of the impending launch. Management attributed a higher net loss of $22.3 million (up from $16.3 million in 4Q17) to preparations for the US Eversense launch and a $4.8 million increase in the fair value of its liabilities.

    • Management reiterated previous guidance for full-year 2018 revenue of $18-$20 million, including “modest” US contributions anticipated in 2H18. This 2018 total would triple sales from 2017, the first full year of Eversense availability.

    Figure 1. Senseonics Quarterly Sales (1Q16-1Q18)

    2. ~40% Sequential Increase in Sensor Insertions; <2,800 Global Users; 25% of Eversense Users CGM-Naïve, 50% from FreeStyle Libre; Access to 80% of Covered Lives in Germany

    During prepared remarks, Dr. Goodnow remarked that sensor insertion rates rose sequentially by “nearly 40%.” This was a point of confusion in Q&A, but neither Dr. Goodnow nor VP Ms. Mirasol Panlilio offered a breakdown of new vs. existing (re-inserting) customers in Q&A. Ms. Panlilio said that the installed base growth rate wasn’t quite as high (as 40%), implying that re-insertions are still fairly common (we heard in 4Q17 that 77% of individuals had re-inserted following their first sensor). As of 4Q17, there were 2,000 Eversense users in 13 EU countries plus South Africa – Ms. Panlilio’s comment implies that there are somewhere between 2,000 and 2,800 Eversense users worldwide today.

    • Dr. Goodnow highlighted that distribution partner Roche recently established a reimbursement deal with a major payer in Germany, such that over 80% of covered lives in the country now have access to Eversense! This is a nice access win, since the company only had access to ~60% of covered German lives, per March’s call. Senseonics seems to be realizing the benefit of a partnership with such an established European company in a big way. We wonder what the deal terms are for Roche – how much revenue does it capture as the Eversense distributor?

    • During Q&A, Dr. Goodnow estimated that ~25% of Eversense users are new to CGM, aligning with his previous 3Q17 prediction. He added that ~40%-50% of users come from flash glucose monitoring and ~20-35% from traditional sensors, nearly identical to assertions in August of last year (when ~50% were experienced [Abbott FreeStyle] Libre users,” 30% were previously on Dexcom or Medtronic, and the other 20% were CGM naïve). He expects to see similar breakdown in the US. The slight trend toward greater market expansion (CGM naïve users has moved from 20% to 25%) could indicate that Eversense is moving further beyond early adopters; of course, it could also be quarter-to-quarter variability. It’s possible that the rollout of the 180-day Eversense XL has a lot to do with more CGM naïve users signing up – that additional wear length certainly changes the value proposition for using the system. Dr. Goodnow previously reported that previous sensor users had a desire to move to Eversense because of the freedom, convenience, extended wear, and alarms.

    FDA Submission and US Launch Plan Highlights

    3. Optimistic that Eversense Will be “Revealed” at ADA; Meetings with Major US Payers Ongoing; 14 Sales Reps in US to Double by EOY

    Dr. Goodnow maintained that Senseonics is “on track” to support a US launch by mid-year. In fact, Mr. Gill noted he is “optimistic” that Eversense may be “revealed” at the ADA meeting in June: “Our intent is to be prepared for Eversense to be a headline at the conference. Potential events at the ADA in support of our product launch include presentations, specific exhibits, product theaters, initial HCP training, and lead generation.” “Comprehensive meetings” with major US payers are ongoing, and Mr. Gill remarked that he “continues to be pleased” by payer recognition regarding the value of Eversense. Indeed, he expressed confidence that current discussions are “paving the way” for Eversense reimbursement “as shortly as possible” through multiple channels.

    • Senseonics currently has roughly 15 sales representatives hired, with plans to double in size by the end of the year. During Q&A, Mr. Gill mentioned that as long as Eversense is FDA-approved by ADA, he is hopeful to add more representatives in time for the meeting.

    4. Positive FDA Ad Comm Vote Highlighted; Emphasis on “Overwhelming Support” Shared During OPH

    Dr. Goodnow proudly highlighted the unanimous FDA Advisory Committee vote in favor of approving Senseonics’ Eversense 90-day CGM. He underscored the newest second-gen transmitter as “the only truly smart transmitter,” given it: (i) provides unique vibration alerts even when the phone is not nearby; (ii) can be removed without wasting the sensor; and (iii) can be worn with a gentle skin adhesive for comfortable long-term wear. He confidently claimed: “I truly believe Eversense will change how CGM will be used in the future.” He also noted the algorithm improvements enabling higher accuracy and hypoglycemia detection, and emphasized that Eversense has very strong accuracy relative to other CGMs (see picture below from the Ad Comm). Still, the most powerful component of the day, said Dr. Goodnow, was the “overwhelming passion, support, and validation” shared during the Open Public Hearing. To this end, Dr. Goodnow shared several testimonials from the OPH, underscoring the life-changing benefits of Eversense. VP of the US Region Mr. Mike Gill also referenced our testimonial on the current unmet need in CGM (see Adam Brown’s and Maeve Serino’s slides and talking points here and here). Mr. Gill also cited MGH’s Dr. Steven Russell, who commented that he has several patients waiting for Eversense, including those who have turned down currently-available CGM devices. As Mr. Gill stated, patients are “looking not for incremental changes, but exponential innovations like a sensor that lasts up to three months.”

    Pipeline Highlights

    5. Plans to Submit First-Gen Sensor for iCGM Classification Following FDA Eversense Approval; Dosing Claim in “Coming Quarters”

    During prepared remarks, Dr. Goodnow declared Senseonics’ intent to submit a request for iCGM classification with the current, first-gen, 90-day Eversense system following initial FDA approval. Though the iCGM application will still follow the 510(k) pathway as established in the de novo decision for Dexcom’s G6, this decision clarifies the path that companies with previously PMA-approved sensors (Abbott, Medtronic) will follow to obtain an iCGM designation. It will be interesting to see if Senseonics gets this indication quickly! That Senseonics will pursue the reclassification to an iCGM is not surprising, since Eversense appears to meet the special controls (if PRECISE II and PRECISION studies are pooled) for accuracy. As a reminder, iCGM systems are down-regulated from a high-risk Class III (PMA) to a lower-risk class II devices (510(k) clearance). iCGMs are also approved with interoperability in mind, a big change that should enable faster iterative innovation, easier integration with pumps and software, and less regulatory burden for those that qualify.

    • In response to a question concerning the potential for an iCGM indication to accelerate timelines for the Eversense XL US launch and Senseonics’ hybrid closed loop trials with Roche and TypeZero, Dr. Goodnow spoke cautiously, commenting only that the new classification will allow all players to “traverse through regulatory pathways more quickly.” On XL, we’d assume it will depend entirely on whether the 90-day accuracy is sustained out to 180 days, and what kind of study the FDA requires to prove this. Meeting the accuracy benchmarks in the special controls are not a given with extended wear – even Dexcom will have to run a new study of G6 with 14-day wear. The pathway for closed loop could also theoretically be accelerated, though it is still unclear exactly how such a streamlined review will look for iCGMs that fit into AID systems. See our coverage of the recent JDRF/Helmsley-sponsored meeting on AID interoperability for more.

    • Dr. Goodnow is “looking forward” to an insulin dosing claim in the US “in the coming quarters.” Although the current PMA submission is for an adjunctive claim (must take a fingerstick for treatment decisions), many at the FDA Advisory Committee (Adam included) noted that Eversense’s accuracy was well within the range of a non-adjunctive claim. During Q&A, Dr. Goodnow anticipated that an additional trial will not be required for a dosing claim but cautioned that there is “a bit of flux” with the announcement of the iCGM category ­– it’s possible there will be certain considerations regarding dosing.

    • Although Dr. Goodnow did not provide a timeline regarding pursuit of a no-calibration claim, he remarked that he also does not expect it to require an additional clinical study – this is a big win for Senseonics if true, since its studies take a lot longer to complete with the long wear time. With one calibration per day, MARD was still a very solid 9.5% in the PRECISE II pivotal study. We’ve yet to see no-cal data, though have heard previously that a second-gen Eversense with redundant glucose-sensing capabilities was intended to be factory-calibrated. It’s been a year since we’ve heard an update on this next-gen sensor – how far along is it? Last May, this Eversense version was in human feasibility trials.

    6. Full Transition to Eversense XL Expected “This Quarter”; Introduction in New Market (Italy? Germany?) to Start “Next Week”

    The 180-day-wear Eversense XL is currently available in Sweden and the UK, with plans to achieve widespread availability in all 14 countries “this quarter.” Following the complete transition, the 90-day sensor will be retired (“sun-setted”) outside the US. Current efforts are focused on obtaining reimbursement, with a recent Stockholm hospital tender agreement serving as a major win in that department. Ms. Panlilio referenced “a lot of excitement” in Sweden and the UK for Eversense XL, underscoring that those in Sweden “want to convert immediately” upon learning of its availability. She briefly mentioned that Eversense XL is “starting next week” in a new market – given Dr. Goodnow’s reference to Italy as a “very attractive market” during the 4Q17 call, we might guess Italy is next. At ATTD, we learned that Eversense XL wouldn’t enter Germany until at least April, so it’s possible a German launch could also come soon.

    • During Q&A, Dr. Goodnow acknowledged that although pricing pressures will always be present in healthcare, Senseonics has “focused on per-day price, which doesn’t really transition between the 90- and 180-day product.” In 4Q17, he shared that Roche has set Eversense pricing in the EU at ~€10/day (~$12.40/day), and suggested that US pricing will remain “very close to where the market [for full featured CGMs] is,” which he estimates to be ~$10 per day. We do think pricing pressure will inevitably come to CGM (especially with more competition), so it will be important for Senseonics to prepare for this and to show value accordingly.

    • There was no mention of the 180-day Canadian trial (n=30 pediatrics; 6 adults) previously slated for publication submission in early January. Management noted very positive feedback from participants at the time. It’s currently unclear where the Health Canada regulatory submission process stands (for adult and pediatric), as well as whether Senseonics intends to pursue the 180-day indication directly in this and other geographies. We did see solid sensor longevity and error grid analysis (93% readings in Zone A) at ATTD.

    7. No Mention of IDCL Pivotal Trial with Roche/Senseonics/TypeZero Hybrid Closed Loop Last Expected to Begin in 2H18

    There were no updates regarding the EU pivotal trial of the Roche-Senseonics-TypeZero 180-day hybrid closed loop system. Last we heard during the 4Q17 call, the study is slated to begin in 2H18. This timing is slightly delayed from DTM (1Q18). We weren’t able to find the trial on ClinicalTrials.gov. With Prof. Hans de Vries moving to Dr. Lutz Heinemann’s Profil Institute, we wonder if he will remain the PI on the study, or if someone else will take over the helm.

     

    -- by Maeve Serino, Brian Levine, Adam Brown, and Kelly Close