SENS - NASDAQ

Good day, everyone, and welcome to Senseonics Second Quarter 2025 Earnings Call. [Operator Instructions] 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.

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.

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 2 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 that 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 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 1 year, 1 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, our respective development teams are collaborating on the final integration work, and 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 a 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, simplify 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 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. And 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 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.

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 ADC's efforts in this area. Jointly, we will more than double the previously anticipated DTC spend to more than $10 million over the next 2 quarters. Together with our partner, Ascensia, we expect to boost actionable leads and support our sales force and conversion and other activities 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. And 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 2 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 onetime 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 spend 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 time line 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 1/3 of planned annual revenue in the first half of the year, with the remaining 2/3 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 onetime benefits that have a positive impact to 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 impacts. 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, 2 additional activities to facilitate long-term growth. And with that, I'll turn it back to Tim.

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 1 year, 1 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, let's go ahead and open up the call for questions.

[Operator Instructions] We'll take our first question from Josh Jennings of TD Cowen.

Congratulations on the nice quarter and continued momentum with the Eversense 365 launch. I wanted to just ask a couple of questions on the back half here. And I guess to start, just calling out, again, just the fourth quarter stronger than the third quarter, and you'll have some -- the replacement cycle kick in for Eversense, the initial Eversense 365 patients. Maybe just help us think about or help us frame up expectations for retention rates. Anything you can share just on historic attrition/retention/attrition rates for Eversense in prior versions? And then what do you expect going forward?

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 a number of programs in place to do everything we can to maximize those reinsertions.

Excellent. And then just on the consignment channel, a big percentage of 2Q revenue, Medicare reimbursement is in place. I'm assuming that, that's helping that kind of percentage increase sequentially. But how should we be thinking about consignment as a percentage of total revenue going forward? And just on the second part of this last question is just how do you -- should we think about the private pay for physicians and this kind of this global reimbursement in play for Medicare, how far behind are private payers to institute that coverage? And are you already there with some payers?

Sure. Yes. We actually have started to see some of the payers. They recognize that this is not a traditional DME by any means. So they have begun that transition to that buy-and-bill channel, which, again, we consign that product. So they docs don't actually pay for it until they actually use it. So typically, 1 or 2 sensors will sit in their institution, they'll do the insertion and then it will run out or it will appear in the cloud, and we'll actually build them for it at that point. So -- and for sure, that consignment channel is definitely increasing. It's the most attractive for that buy-and-bill space. But Rick, do you want to speak to how we're thinking about it going forward?

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 ASPs 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 near meeting them in the second half of this year.

We'll take our next question from Ben Haynor of Lake Street Capital Markets.

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?

No, it's pretty consistent. As I said, the sensor retention is around 75% from sensor 1 to sensor 2. About half of the time in both cases, whether it was on the 90 or the 180, it is economic. So they will have moved plans potentially or would have been a participant in a subsidized, so a patient assistance program that might have expired and it's an economic barrier to transition to future ones. So we think it will be -- we're planning in that range. But again, there's also the recognition that by the time you use the product for a year, it really does become part of your life. And that's certainly, of course, the case with now all the 365 sensors.

Okay. That makes sense. That definitely helpful. And then is there anything you can share on kind of the mix of diabetics that are getting these things? Is it -- has it changed much between what you've seen historically, type 1, type 2 using intensive insulin, type 1 aware, et cetera?

Yes. It's -- I mean it certainly started out where all CGM started out being very heavy into the type 1, but especially because of the long duration and frankly, the ease of use, we are seeing the vast majority of our patients. It's now about 75% are type 2s that are coming in, the very attractive space for us with the folks that are on basal insulin. Again, they're looking for a technology that's got a little bit lower overhead and going into the office, having one procedure done and then being able to forget about it for the next 365 days is pretty attractive for them. So our biggest growth by far is coming from type 2 patients.

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?

Rick, do you want to take that one? I don't know if we've got good data on the growth due to consignment. It really is -- remember, this is a fairly expensive device now that it's up to a year for a doctor to purchase upfront. So we implemented the consignment program as a way to moderate that buying barrier.

Yes. And 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.

Okay. Got it. And then lastly on Eon Care, is there any revenue contribution model for -- that's factored into guidance on that? And is that meaningful? Or should we expect it to be meaningful for the year?

Rick, do you want to...

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 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.

We'll go next to Sean Lee of H.C. Wainwright.

I just have 2 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?

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 that we're actively following and executing. But by the nature of the uniqueness of their pump and their algorithm and the uniqueness of the 1-year sensor, it's pretty exciting to be taking to patients that innovation. So that's a big part of how we're going to work together.

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, would you mind speaking to that?

I can take that. So what would be similar would be the evaluation, right, where we bring the patients to the clinic and hook them up and do a bedside monitoring of that accuracy to YSI while we look at the glucose data coming out of the CGM and compare the 2. What we intend to do in this clinical study is to just test for -- validate the new features, which is the flash part of it and not go through the entire longitudinal 1 year because the sensor part of the Gemini is the same as 365. This is how we are planning on that study. We still are in discussions with FDA, doing a preserve and having those discussions. So it still have to be worked through that, but that's the intent.

[Operator Instructions] We'll move next to Anthony Petrone of Mizuho Group.

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.

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 remunerate us, as you heard through the payment for the combined buy and bill. And therefore, we recognize that we will not be part of that competitive bidding process because it is a DME process that they follow. So it's those home use products that 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. And as a medical benefit with a published annual CPT code and the reimbursement for it, we will be -- we will certainly be outside of that.

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.

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, also allows us to more regionally cover. So in situations where as 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. So they work on contract. We pay them an hourly or a per diem rate. And then through the Eon, we'll 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.

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

Well, great. Thank you. We feel very excited about the progress that we're making with Eversense. The 365 product is truly shows some exciting times. We're excited to continue to be working with the team at Ascensia as we wrap up -- excuse me, as we ramp up the DTC investment, which we're paying very close to and encouraged with 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 look forward to speaking with you soon.