Earnings Call Transcript - SENS Q2 2025

Operator, Operator

Good day, everyone, and welcome to Senseonics Second Quarter 2025 Earnings Call. Please note today's call will be recorded, and I will be standing by, should you need any assistance. It is now my pleasure to turn the conference over to Jeremy Feffer from LifeSci Advisors. Please go ahead.

Jeremy Feffer, Analyst

Thank you. This is Jeremy Feffer from LifeSci Advisors. 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 and 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, 2024, and our 10-Qs and our other reports filed with the SEC. These documents are available on the Investor Relations section of our website at www.senseonics.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason, except as required by law. Joining me today from Senseonics are Tim Goodnow, President and Chief Executive Officer; and Rick Sullivan, Chief Financial Officer. I'll now turn the call over to Tim.

Timothy T. Goodnow, CEO

Thanks, Jeremy, and thank you to everyone on the call for joining us today. In the second quarter, we executed on a number of programs to drive shareholder value and position Senseonics for long-term growth. Rick and I will walk you through these initiatives today. One of our main objectives is to drive Eversense awareness and adoption, and we're doing this by further supporting our product with added Senseonics commercial investment. Additional objectives include enhancing 365 access with the Eon Care build-out while expanding capabilities with our device integration efforts and advancing our key product development pipeline programs. We are making solid progress across each of these areas. Q2 completes two quarters with Eversense 365 on the U.S. market, and we continue to be pleased with our launch momentum. We expect that through expanded DTC marketing, more people will learn about the unique performance attributes and convenience of our 1-year sensor, resulting in more people choosing Eversense to help manage their diabetes. In Q2, we saw meaningful progress in that direction. Our new patient starts were up 79% over the prior year and 37% from Q1. Leads were more than doubled over the prior year, and June leads were up 50% over the prior 3-month average. We are seeing true acceleration in the growth of Eversense with the expanded DTC, and we plan to continue to augment Ascensia's DTC spending through the remainder of this year. To support this increased volume, Ascensia has hired a dozen new inside sales reps to handle these calls. Our plan is for the increased DTC spending to expand awareness and the enhanced inside sales capacity to support sales conversion, combining directly to translate into increased new patient starts. We expect these results to be bolstered by Eversense reorders in the U.S. in the fourth quarter. Recall that in transitioning from a 6-month to a 1-year product, the cadence for repeat Eversense users to have a new sensor inserted has changed to a 12-month cycle. Instead of coming back for reinsertion in 180 days, users now return in 365 days. This means that following the Q4 launch of Eversense 365, our overall U.S. shipments during Q2 and Q3 naturally reflected significantly reduced reorder volume compared with the prior year. Therefore, nearly all sensors sold in Q2 and Q3 are for new patient starts. In Q4, with the first 365 adapters coming up for their next insertions, reorders will make more meaningful contributions to sales. Beyond the U.S. launch execution, we are advancing a series of initiatives to broaden access, support adoption and enhance the user experience. We continue to expect our development work to translate into CE Mark approval for Eversense 365 in Europe and we are planning for the European launch later this year. We have begun training the OUS Ascensia sales team to be ready upon approval. We anticipate this will translate into more people in more markets having access to the promise of one year, one sensor. Additionally, we are collaborating with other companies to further improve the market presence of Eversense 365. Last month, Sequel began the launch of their twiist pump, and we announced during the quarter that our respective development teams are collaborating on the final integration work. We expect to see the Eversense 365 available for use with the twiist pump later this year. We believe combining the advanced technologies of both companies will offer real differentiation and unique benefits to people with diabetes. We all know that our users have to monitor their carb intake, exercise, and their glucose levels to determine the safe amount of insulin they need. This constant management requires significant patient involvement. And through the integration of Eversense with the Sequel twiist pump, patients can simplify their lives, reduce the diabetes overhead, destress the CGM complexity for an entire year, and rest assured that the world's most advanced diabetes technology is working for them. The integration with the twiist pump is the first of multiple partnerships we hope to announce with pump manufacturers and other parties. With the world's first and only 365-day continuous glucose monitor approved as an iCGM, we have a unique and convenient offering to integrate with any pump on the market, and we look forward to announcing updates in the future. In another important initiative, we continue working to make it easier for patients to have access to Eversense and for physicians to prescribe it. During Q2, we completed the planned transition of inserters from the nurse practitioner group to Eon Care, our network of providers that can perform Eversense 365 insertion procedures. The goal of this initiative is threefold: to make it more convenient for interested people with diabetes to be served by an inserter, to enable practitioners who want to prescribe our product but not insert it to simply do so; and third, to ensure a consistent high-quality insertion experience. Following the transition from NPG, our Eon Care network is nearly 40 strong and handles approximately 20% of our insertions. The volume of insertions through Eon Care continues to grow, increasing nearly 30% in Q2 versus Q1 this year. With the foundation of Eon Care established, we are working to quickly expand it. Our current goal is to increase this network to approximately 50 practitioners by the end of this year and roughly 100 by the end of next year. Through the combination of Eon Care nurses and prescribing providers who perform their own insertions, we continue to add further insertion depth and breadth targeting the major U.S. geographies. Our aim is to ensure that anyone who wants Eversense 365 has a convenient option to access it. Further, supporting access in Q2, CMS updated the Medicare physician fee schedule to provide payment for a full year of Eversense. This inclusion was announced in April and was retroactive to January 1. As a result, we did see a notable increase in the business that flows through our consignment program. We are also seeing some commercial payers begin to transition to a bundled payment reimbursement, similar to Medicare. As the product is consigned to the office until its use, you'll hear us refer to this channel as either bundled pay, buy-and-bill, or consignment. This reimbursement pathway covers both the product cost and providers' procedure fee through a single claim. This simplifies payment for insurers, providers, and patients. Furthermore, because Eversense is an implanted device, Medicare reimbursement for the product is included as part of CPT codes 446T and 448T. These codes are established on the physician fee schedule and covered through a member's medical benefit, Medicare Part B. Medicare correctly does not characterize Eversense as a DME product, meaning that Eversense will be excluded from the pending DME competitive bidding program. Now I'd like to turn to the important development work and progress being made by our R&D teams. Senseonics was founded to develop and deliver on the best-in-class once-a-year continuous glucose monitor. Having delivered on that promise, our mission is to now drive further advances to make the 1-year sensor more convenient, less intrusive, and more appealing to patients. Gemini is the next step in that continued evolution. As a reminder, Gemini includes a self-powered battery and offers both swipe and prospective CGM functionality, all incorporated into a tiny under-the-skin sensor. This offers the option to wear a transmitter when the full functionality of alarms and alert protection is required, and swipe when a user does not want to wear anything on their skin. This product will be especially attractive to the large population of people with diabetes on both basal insulin and those on non-insulin regimens. We're very excited about the growing type 2 opportunity with Gemini, and I'm pleased with the development team's progress. We remain on schedule to start an IDE pivotal study for Gemini later this year. Our target is to then have a U.S. submission in mid-next year, with a commercial launch in the U.S. starting near the end of 2026. The next exciting evolution beyond Gemini is our work on the Freedom program. With Freedom, we are targeting to deliver the world's first truly invisible CGM. Freedom will eliminate any on-body component to offer people continuous readings with real-time alarms and alerts directly to the phone with nothing on the skin. Our team is working towards the goal of launching Freedom about a year after Gemini. All of us at Senseonics remain committed to pushing the boundaries of technology and continue to provide the world's most advanced CGM to people with diabetes. Lastly, we raised approximately $78 million in gross proceeds during the second quarter, including $20 million from Abbott in a concurrent private placement. This capital supports the critical work that I've been speaking about, expanding the ongoing launch of Eversense 365, including increased direct-to-consumer advertising, supporting access, and other initiatives of the product and continuing our development pipeline. We believe our progress on these initiatives positions us well to further drive product awareness, innovation, long-term growth, and shareholder value. Now I'll turn the call over to Rick to walk you through financials from the quarter and provide some additional details.

Frederick T. Sullivan, CFO

Thank you, Tim, and thanks to everyone joining us this afternoon. This was an important quarter for Senseonics with a focus on many initiatives, all supported by the recent public offering, together with the Abbott investment that resulted in a combined gross proceeds of $77.8 million, including the full exercise of the underwriters' greenshoe. With a cash position of over $126 million, we have strengthened our balance sheet to support our runway, not only for continued development of both the Gemini and Freedom systems, but also to support key launch and marketing initiatives such as driving patient leads through direct-to-consumer advertising. As Tim mentioned, we are complementing Ascensia's efforts in this area. Jointly, we will more than double the previously anticipated DTC spend to more than $10 million over the next two quarters. Together with our partner, Ascensia, we expect to boost actionable leads and support our sales force and conversion to accelerate patient growth. We expect our expanded DTC efforts to improve product recognition and awareness of the unique benefits of 365, driving patients and prescribers to the Eversense brand. Our recent public offering also gave us the opportunity to speak with a significant number of institutional investors. The majority of investors that participated in the offering requested that we consider a stock split in the near future. During the marketing of the deal, we also heard from a number of potential investors that they could not participate due to internal policies and practices that limited their ability to invest in stocks trading below certain dollar value thresholds. Listening to this feedback, we plan to seek shareholder approval for a reverse stock split to overcome these limitations, which we believe will address this impediment and make it easier for a broader number of investors to invest in Senseonics. We also believe a reverse stock split will facilitate inclusion of Senseonics in indices that have stock price requirements such as the Russell and reduce the administrative costs caused by the current share count. Taking into consideration the shareholder feedback from earlier this year, we have elected to reduce the targeted split ratio to a range of 10:1 to 20:1, and we will provide additional details as we get closer to the fall special meeting of stockholders to vote on this proposed reverse stock split. Now transitioning to the quarterly results. In the second quarter of 2025, net revenue grew 37% to $6.6 million compared to $4.9 million in the prior year period on the strength of new Eversense 365 insertions. U.S. revenue for the second quarter was $4.9 million, and revenue outside the U.S. was $1.7 million. As always, a quick reminder regarding revenue recognition in our two main sales channels. Our collaboration agreement with Ascensia is based on revenue sharing with the revenue sharing percentage applied differently in each channel for sales made directly to Ascensia, we recognize revenue after discounting the current revenue sharing percentage when shipments are delivered to Ascensia. Ascensia targets 60 to 90 days of inventory, and therefore, shipments made during the quarter largely support future demand of Eversense. The supply of Eversense 365 has been at target levels since the end of Q2. We also sell product through an office consignment program, which continues to grow, making up over 40% of our revenue in Q2. In this channel, we recognize revenue at the time of procedure and at the same time, record a commission expense to sales and marketing expenses based on the current revenue sharing percentage for Ascensia's commercial support. The average selling prices in the consignment channel are approximately 2x the ASPs through the Ascensia direct shipment channel as a result of the consignment channel being primarily Medicare with the recently announced updated pricing and the ability to recognize 100% of the Eversense revenue. With this sales channel mix, we recognize approximately 80% of the Eversense revenue. In Q2 2025, gross profit was $3.1 million, an increase of $2.8 million from the prior year period. This increase in gross profit was primarily driven by the increased margins on the 365-day product, sales channel mix, and for this quarter, a one-time gain of $0.7 million from value-added tax recoveries expensed in prior years. Research and development expenses in Q2 2025 were $7.7 million, a decrease of $3.1 million compared to the prior year period. The decrease was primarily due to a reduction in clinical study spending and consulting costs due to the completion of the 365-day product trials. Second quarter 2025 selling, general and administrative expenses were $9.7 million, an increase of $0.7 million compared to $9 million in the prior year period, primarily driven by sales commission expenses due to Ascensia for commercial support of our consignment program. Net loss was $14.5 million or a $0.02 loss per share in the second quarter of 2025, compared to a net loss of $20.3 million or a $0.03 loss per share in the second quarter of 2024. Net loss decreased by $5.8 million, primarily due to improved gross profit margins of Eversense 365 and reduced research and development costs. As of June 30, 2025, cash, restricted cash, and cash equivalents totaled $126.7 million, and debt and accrued interest was $35.3 million. Reiterating our outlook for 2025, we expect full year 2025 global net revenue to be approximately $34 million to $38 million as we progress the launch of Eversense 365 in the U.S. and we expect EU. This financial outlook takes into consideration several factors, including the timeline for the regulatory approval and the planned commercial launch of Eversense 365 outside the United States, plans with respect to spending on the U.S. DTC marketing campaigns to generate leads, continued progress in our launch activities, reinsertion and pricing dynamics with the shift from a 6- to 12-month product, and the status of other sales and marketing initiatives. The full year 2025 financial outlook assumes approximately doubling the global patient base in 2025 compared to 2024. We achieved our target of approximately one-third of planned annual revenue in the first half of the year, with the remaining two-thirds of revenue expected in the second half because of the steady increase in patients and the seasonality of program discounts and patient deductibles. For the second half of the year, we expect the majority of revenue in the fourth quarter due to the continued momentum in new patient starts and importantly, reorders from our first U.S. 365 patients as we pass the first anniversary of our Eversense 365 launch. Excluding accounting adjustments and one-time benefits that have a positive impact on gross profit margins, we continue to see favorability due to our sales channel mix and the execution of our manufacturing and supply chain teams. We are continuing to monitor the impact of tariffs and currently expect that we'll be able to mitigate much of the negative impact. Taking into consideration our margin performance to date and the anticipated continued favorability, we now expect full year gross profit margins between 32.5% and 37.5%. We expect cash utilization in 2025 to be approximately $60 million, largely as a result of tight cash management while complementing Ascensia's DTC spend. Finally, we've practiced good financial housekeeping, filing an updated shelf with the SEC in the amount of $300 million with a portion assigned to a $100 million at-the-market facility with TD Cowen, two additional activities to facilitate long-term growth. And with that, I'll turn it back to Tim.

Timothy T. Goodnow, CEO

Thanks, Rick. The last thing I'll mention before wrapping up is the event we hosted at this year's ADA. We had a great turnout, and I encourage any of you that did not participate to go and listen to the replay on our website. We featured some of our DTC marketing materials featuring George, our favorite CGM personality, and heard from Gary Graf, a nurse practitioner that inserts the Eversense 365 on a regular basis. According to Gary, the procedure fits seamlessly into his practice and typically takes him about 8 minutes and can be easily completed on a patient's lunch break. As you've heard, we accomplished a lot in the second quarter and have made great strides in setting the company up for long-term growth. To build shareholder value, we'll continue to drive the 365 launch, enhancing investment in effective direct-to-consumer marketing, all while supporting greater access and convenience of Eversense and by moving Gemini and Freedom closer to the market. We're also forming partnerships to advance and simplify diabetes care, together with maintaining financial discipline and strengthening our balance sheet and remaining focused on the transformative potential of one year, one CGM. With that, I'll now turn the call over to the operator to answer any questions that you may have. Thanks once again for your time today.

Operator, Operator

We'll take our first question from Josh Jennings of TD Cowen.

Joshua Thomas Jennings, Analyst

Congratulations on a great quarter and the ongoing momentum with the Eversense 365 launch. I'd like to ask a few questions about the second half of the year. To begin with, it's clear that the fourth quarter is performing better than the third quarter, and we should see the replacement cycle start for the initial Eversense 365 patients. Can you help us understand the expectations for retention rates? What can you share about the historical attrition and retention rates for previous versions of Eversense? Additionally, what are your expectations moving forward?

Timothy T. Goodnow, CEO

Sure, Josh. Appreciate the time as well. As you know, we don't yet have the retention on the 365 as that first patient is not off yet. But our experience to date typically has been 75% retention from sensor 1 to 2 jumps to about 85% from sensor 2 to 3 and about 95% from sensor 3 and beyond. So as they become longer and longer-tenured users, of course, it becomes more and more part of their life and they continue to sign up for the reinsertion. We do expect that the retention rate will be higher for 365 than it was for the 180, but of course don't have that real data yet. So that's what our history has been, and we're obviously going to continue to work hard and have a number of programs in place to do everything we can to maximize those reinsertions.

Joshua Thomas Jennings, Analyst

Excellent. Regarding the consignment channel, which accounted for a significant portion of our second-quarter revenue, Medicare reimbursement is established. I assume this is contributing to the sequential percentage increase. How should we consider consignment as a portion of total revenue moving forward? Additionally, how should we view private pay for physicians in light of the global reimbursement structure for Medicare? How far behind are private payers in implementing that coverage, and have you already made progress with some payers?

Timothy T. Goodnow, CEO

Sure. We have started to see some payers recognize that this is not a traditional durable medical equipment model. They have begun transitioning to the buy-and-bill channel, where we consign the product. This means that doctors do not have to pay for it until they actually use it. Typically, one or two sensors will remain at their facility for insertion, and once they are used or the data appears in the cloud, we will bill them at that point. The consignment channel is definitely increasing and is the most appealing for the buy-and-bill space. Rick, would you like to share your thoughts on how we are approaching this moving forward?

Frederick T. Sullivan, CFO

Sure. Thanks, Tim. Thanks, Josh. You're absolutely right that a big piece of the increase in the percentage of revenue from the consignment channel is that Medicare pricing, but the volume is actually up as well, and it's certainly supported by our Eon Care efforts and the increase in the number of providers that we're anticipating there. So we will continue to see that consignment channel increase as a percentage of our revenue. I wouldn't expect the growth to be as dramatic in future quarters. We also will see that our average selling prices in our other Ascensia direct channel will improve in the second half of this year as many of the patient assistance programs are going to be less utilized since our patients have now met their deductibles or are near meeting them in the second half of this year.

Benjamin Charles Haynor, Analyst

Just following up on one of Josh's questions on the retention rates. Is there anything more that you could share maybe on how those changed when you move from 90 days to 180 days? Or is the sample size not there or nonrepresentative?

Timothy T. Goodnow, CEO

No, it's pretty consistent. As I mentioned, the sensor retention is approximately 75% from sensor 1 to sensor 2. About half the time, in both situations, whether it was on the 90 or the 180, it is economic. Therefore, they may have changed plans or participated in a subsidized program that may have expired, creating an economic barrier to transitioning to future options. We anticipate it will be in that range. However, it's also important to note that after using the product for a year, it truly becomes part of your life, which is definitely the case now with all the 365 sensors.

Benjamin Charles Haynor, Analyst

Okay. That makes sense. That's definitely helpful. Can you share any information about the mix of diabetics using these products? Has there been much change in what you've historically observed regarding type 1, type 2 using intensive insulin, type 1 aware, and so on?

Timothy T. Goodnow, CEO

Yes. It certainly started out with a focus on type 1 diabetes, but due to the long duration and ease of use, we are now seeing that about 75% of our patients are type 2 diabetics. This is an attractive segment for us, particularly among those on basal insulin. They prefer a technology that involves minimal overhead, such as a single office visit for a procedure that they can then forget about for the next year. Consequently, our most significant growth is coming from type 2 patients.

Benjamin Charles Haynor, Analyst

Okay. That's great. And then on consignment, is there kind of a ballpark way to think about it once you do go consignment with the clinic or provider of the kind of increase that you expect to see in patient starts that can be expected when these folks move over to that program?

Timothy T. Goodnow, CEO

Rick, would you like to address that? I'm not sure we have precise data on growth related to consignment. It's important to remember that this is a relatively costly device, as doctors now need to purchase it upfront after about a year. Therefore, we introduced the consignment program to help alleviate that purchasing challenge.

Frederick T. Sullivan, CFO

Yes. I think just to add to that, a provider isn't on a consignment program or nothing else. They may have consignment centers on their shelves ready for patients that are reimbursed through those specific payers. They also may still go through our other channel as well traditionally through those DME channels through Ascensia. So it's not a one or the other. But as we continue to add Eon Care physicians and utilize adding physicians to that consignment program, we are seeing the volume increase. Sure. Yes, there is some contribution from the Eon Care services as it relates to procedure revenue, so not revenue from the sale of our product, but that's a low single-digit percentage. So it's not something that we're going to break out today, but it will certainly grow as the Eon Care becomes a larger percentage of our total procedures and as we increase providers over the coming years.

Sean Lee, Analyst

I just have two quick ones. First, on the package with Sequel's twiist. So you mentioned that Sequel launched twiist last month. So I was wondering what will the commercialization of the combo look like? Is it going to be a co-marketing agreement? Or is there something else?

Timothy T. Goodnow, CEO

There is quite a bit of co-marketing that we plan on doing as they launch their new sensor in combination. The commercial teams have actually been working for about the last 3 or 4 months to be prepared for the day. The formal relation is actually through a development agreement where they have specific responsibilities and we have responsibilities. So we're actively following and executing. Given the uniqueness of their pump and their algorithm and the uniqueness of the 1-year sensor, it's pretty exciting to be bringing that innovation to patients. So that's a big part of how we're going to work together.

Sean Lee, Analyst

I see. My last question is on the upcoming IDE pivotal study for Gemini. So I was wondering what would the design of that study be? Like is it similar to what was done previously with Eversense?

Mukul Jain, R&D Team Member

I can take that. The evaluation will involve bringing patients to the clinic for bedside monitoring of accuracy in comparison to YSI, while we analyze glucose data from the CGM and compare the two. In this clinical study, we plan to validate the new features, specifically the flash component, without conducting the full one-year longitudinal study, as the sensor aspect of Gemini is the same as 365. This is our plan for the study. We are still in discussions with the FDA and will continue to work through that process, but this is our intent.

Anthony Charles Petrone, Analyst

Congrats on the quarter here and the launch on Eversense so far. Any comments from the Senseonics vantage point on the CMS proposal for competitive bidding and then just bundling with insulin pumps? It almost seems like the payment, if that does go through, that actually Eversense is in a favorable, I guess, position because technically, I don't think would fall into that category, but I may be misspeaking there. But just again, the views on competitive bidding and just what that actually means for Eversense if it becomes a final rule as we head into 2027? And then I'll have a follow-up.

Timothy T. Goodnow, CEO

Yes. Anthony, we agree with that assessment. Definitively, Eversense is compensated by Medicare as a medical benefit. So it's a Part B benefit. It is not a DME product, and they reimburse us, as you heard, through the payment for the combined buy-and-bill. Therefore, we recognize that we will not be part of that competitive bidding process because it is a DME process that they follow. These home-use products are subject to it, very similar to what they did in the diabetes technology space for the blood glucose meters and strips, but it is a result of that DME process. As a medical benefit with a published annual CPT code and the reimbursement for it, we will certainly be outside of that.

Anthony Charles Petrone, Analyst

No, that's helpful. And then the follow-up there would be on the provider transition Eon Care, the increased number of nurse practitioners that are now implanters, inserters. Just what's the timing there for actually when you can see that actually start to benefit volumes? And if you can give us just a scale of what that represents in terms of percentage increase in total number of implanters for Eversense.

Timothy T. Goodnow, CEO

Yes. So we are right around 40 professionals right now. Over the next 3 or 4 months, we're going to take that to 50, and then we plan to double that again in 2026. So it's going to be a very material component. It offers us not only the advantage of that flexibility, but also allows us to more regionally cover. In situations where we have transitioned to more and more type 2 patients that are seen more and more by primary care, it's less likely that they're going to be large inserters. So those areas we're augmenting with this network of closely held, closely trained, but 1099 nurses. They work on contract. We pay them an hourly or a per diem rate. Then through the Eon, we will actually bill for the procedure as well as that bundled payment if it's in Medicare or bill it through the commercial pay if it's going through the more traditional route.

Operator, Operator

This does conclude our question-and-answer session. I'd be happy to return the call to Tim Goodnow for closing comments.

Timothy T. Goodnow, CEO

Well, great. Thank you. We feel very excited about the progress that we're making with Eversense. The 365 product is truly showing some exciting times. We're excited to continue to be working with the team at Ascensia as we ramp up the DTC investment, which we're paying very close attention to and encouraged by the results that we're seeing. So look forward to updating you all in about a quarter on the progress and an important second half of the year for us. So with that, thanks everyone for the time and I look forward to speaking with you soon.

Operator, Operator

Thank you. This does conclude today's conference. You may now disconnect your lines, and everyone, have a great day.