Senseonics Holdings, Inc. (SENS) Earnings Call Transcript & Summary

Okay. Well, good morning. Sorry, we are actually simulcasting this webcast. So I appreciate everybody's time to join us here Sunday morning. Thanks for the opportunity to speak. It's kind of turned into a little bit of a tradition, as you well know, that we actually do these business updates at the ADA conference. I did get to spend some time on the floor yesterday. This is now my 24th year. And it's just absolutely amazing, the transition that's happened. The most incredible thing to me is the technology. So I used to come to the ADA and it was all pharmaceuticals, right? Everything was about either insulin or treating type 2 diabetes. And you walk through today and the med tech component has just completely taken over, right? Everything to do with pumps and AID and CGM. So it's just amazing when you look back on what's happened with diabetes and the management of it and the solutions. It's exciting, it's still a pretty crappy disease, but there's a lot more tools and opportunities. So we appreciate the opportunity to give an update. We're actually very excited with where we are at Senseonics. It's been some time for us bringing our generational products to market. But we really feel like we're at a pretty significant inflection point because there's a couple of major initiatives that are underway that we'd like to update everybody on and give folks an opportunity to understand where that is. So I am Tim Goodnow. I serve as the CEO for Senseonics. I've been with organization since actually 2011. I said 12 years and I realize now I've eased into my 13th year. Also joining us today is Brian Hansen, that I'm sure many folks know from -- as he was in his training days at Tandem, he's now agreed to come join us and manage the commercialization with our partner. And it is a very strong partnership, literally a daily interaction with the team. Jeff Ruiz, who is running our program with Mercy that we talked about. We want to make sure we spend some time on that because it is a very significant opportunity for us. As Rick will share, just the opportunity with that 1 account is over 500% increase in the number of patients that we're going to put in Eversense: with just 1 account. So huge opportunity, and we really do think we can replicate it at a number of different ACOs that are out there. I'll talk a little bit about the innovation pipeline and where we are. We're right on the cusp of the -- next big initiative for us is the 365 product that we are very close to approval on. And then we'll wrap up with some of the usual financials, and obviously, be able to take any questions that you may have given where we are. So with that, as we know, we are a technology company. Right? And that's why the partnership with Ascensia has been so strong. It allows them to utilize their commercial capabilities where they had strength, 10 million patients on a strip and meter, right, serving people with diabetes. And this is the opportunity to marry the 2 organizations, have us bring the technology and the capability, with a differentiated product, into their organization. So we're excited to be where we are in that process. With a long history of innovation, as a technology company, as you would imagine. We'll talk about 365, but this is now our second major generation. We first commercialized the 90-day product pre-COVID. It was actually a very valuable time period for us, even though the frequency of insertion, which is our #1 issue, as you can imagine. Convincing people to go in and do the insertion is where we spend most of the time as a differentiated CGM. The 90-day product actually was very successful for us because it really set the foundation and started our reimbursement. Right? We really do have very broad-based reimbursement for Eversense, and it's at the benchmark pricing where the market is in commercial pay, right? It's about $10 a day Eversense is reimbursed in commercial pay. Actually, in Medicare, because as we worked with them, they really saw the value in the medical professional owning the relationship as opposed to a DME distributor, so reimbursement is about over $15 a day in CGM -- or in Eversense CGM, which is just an indication of what they thought about it. We've certainly seen that. Our fastest-growing segment is the type 2s that are in the Medicare population. We then jumped, after approval started coming back -- many of you may recall that approvals were slowed down during COVID because the diabetes group specifically was diverted to do approvals of COVID diagnostics, the emergency use authorizations. As they came back, we approved the 180-day product. But in the meantime, we actually were working on the clinical trial for the 365. And it's a -- as you can imagine, 365-day product, requires a 365-day trial, but that's a 365-day trial on the last patient that comes out, right? So it's really a 2-year cycle for us to go through a clinical program with Eversense 1 year. And we're very excited to be there, really, honestly, on the cusp of approval of that product. It was submitted as a 510(k) in early May, and knock on wood, will continue to stay on track for the 90-day approval as the Class II device. What are we focused on and really where is the opportunity? Obviously, the transcutaneous market has done incredibly well. As some of you know, I come out of that space. I worked with Abbott for over a decade, I got to work on a product called Navigator. Actually started all of the work for a project called Apollo, which is now the Libre product. So I love to see the 4 million patients that their lives are improved, but also do recognize there are things that we can't continue to do. Specifically, if you ask a patient, "What's it going to take for you to finally join to come into CGM?" they want it to be longer, they want it to be easier to use, and they'd really love the opportunity to not have anything on the body. Right? Those are the #2 requests we get. So therein lies our opportunity, right? If we can deliver that, we know that we're going to make some significant progress in this space. And I'm absolutely convinced, and we'll show you that we're on a good track to deliver both of those. The current product that Brian and his team is helping us commercialize is, of course, our current 180-day product. It is a 3-component system. There's a tiny sensor, 3 millimeters by 15, so quite small. Done in the doctor's office. We currently have a transmitter, and we'll spend some time talking about that, that does really 2 things -- 3 things actually. One, it has a vibratory motor, which is an important differentiation from the transcutaneous systems for people that want discretion. It does a better job waking you up at night, that tactile impact than actually audible will do. But it also, because there's no through-skin component, it's completely removable, right? So you can take it off. In fact, it's designed to drop in a charging cradle, while you shower, fully charged in 10 minutes, and then you put a brand-new fresh adhesive on. So people that have had adhesive issues, this essentially goes away. It's a silicone-based adhesive, which is meant to be replaced every day, with a high vapor transmission. And unlike the acrylics, they're really trying to lock it in. As you know, the #1 issue that people have with either of the transcutaneous is they fall off early, right? This is completely eliminated because, frankly, it falls off, you just pick it up and literally put it right back on again. So we'll continue to focus with that until we actually eliminate the transmitter, which is our big step. And then, of course, this full integration with the watch and the iOS and the Android platforms. And before I ask Brian to step up, just recall that it is a partnership where we share revenue based on the commercial activities and the success of the sales. Ascensia, which is a major portion of the PHC, Japanese public-listed health care company, has a global commercial responsibility and has all the investment, and it's a major investment, and they continue to lose money until our volume comes up again. So it's a big commitment on them for diabetes to commercialize Eversense. He'll speak specifically about what we're doing in the U.S. But it is global as well, where our 2 largest markets outside the United States are Germany and Italy where the product is doing well. That allows Senseonics to do what we do best, which is technology, right? We do the innovation, manufacturing, all the clinical. And we have a very strong regulatory capability as well. So with that, we're happy to take any questions, as I said, either throughout or at the end. But with that, I'll introduce Brian Hansen, who has now been with the partnership for coming up on 6 months. So he's well seasoned and ready to go.

Thank you, Tim. Not a rookie anymore, I guess, huh? So I'll answer the question that many of you have been asking this week and stuff. It's good to see a bunch of familiar faces in here. I did retire. I failed miserably at it. I retired for January, but when it became public in September, as I had told Tandem for about a year, my intention is, when Jacob was done with school, to walk away from the business. Tim reached out and said, "What would your bandwidth be? And can you spend 10 or 20 hours a week with us?" And "We'll figure that out on January 2," was my answer. But somewhere in the middle of December, he called me and said the PHC Group would really like to talk to you. And "I'm not looking for a full-time job, Tim." And he said, "They really would like to talk to you, and I'd appreciate if you had that conversation with them." Some promises were made in there and some opportunities were put on the table and stuff, and it just seemed like a very akin opportunity to where we were with Tandem many years ago, an opportunity to scale a business, to really dive in and figure out the processes and the opportunities. I got on the phone with Jeff for a couple of hours and had a really deep conversation of the opportunities and challenges in the business, and it really excited me. Tim offered a Board spot on the Senseonics side, so I really have great visibility to both sides of the business and real responsibility to both sides of the business. So here I am, back seeing all the familiar faces and very excited about it, quite frankly, and really excited about our prospects. I'll take you through some pieces here quickly and stuff and look forward to some of the questions as we get towards the end. That being said, Tim covered this to some extent, right, PHC is a nice, large, really 8 business unit type company where diabetes is a very large driver in our profitability. The BGM business continues to come down year-over-year, but it continues to, quite frankly, throw off a lot of profits and really fund some of the developmental work we're doing on the CGM side. And quite frankly, the CGM side is designed to make up for where we see the BGM business going. So this is incredibly important to the PHC organization. And then the Ascensia side of it has got a long history, back to the bear days, in the diabetes space. So we've got great opportunities to build on that around the world, and I'm very involved with the BGM business with Rob as well. So I spend a good portion of my morning out of Basel with the work going on in Europe. And then a lot of my time is [ Parsippany ]. I live in Oregon. And then I get caught on the backside of the day with all the Japanese piece. So I'm really getting -- my retirement really has not worked out as planned. But quite frankly, you can tell I'm enjoying it, right? This is right where we were with Tandem many years ago. And we've got some work to do, but that work is really going to pay off if we do it correctly. And that's the plan, right? Just to orient you. In the U.S., we have 45 territories, okay? So there are 45 reps in the field. There's 100 or so folks supporting the U.S. business through clinical activities, marketing activities, market access activities. So really, anything that is the face of the customer, tech support, customer service, it comes through the Ascensia side of it. We are locked hand-in-hand with the Senseonics folks every single day, right? I've known Tim for 10 years, have interacted with Mukul for many years, and get a chance to work with Dr. Kaufman too, who kicked my butt for many years, as you guys well know, is really neat, and then making some new friends here. And Rick and Jeff and others, we talk, as Tim said, every day. Tim, you and I talk almost every day. So there's a lot going on in the coordination of what we're doing commercially. This obviously will grow as we start to scale, but we have a really good business. One thing I was surprised, we have a really big and good business and infrastructure stood up behind what we're doing today. Now we need the volume to drive in to all the investment and work that we're doing. A slide I grabbed from one of our presentations. At the end of the day, I really came in and I looked at 4 priorities for me and for my team. For me, first off, it's making sure I have the right people and the right structure in place, and those people are incented correctly and they want to be here. This is a tough job today, right? It's tough back in the day at Tandem for a while, but when you get rolling, those pieces are really fun. And so making sure the folks are there and making sure the folks are having fun and their true passion is able to show was #1. 1a and always there, and you guys know this from my prior life, it's about the patient. It's about the patient experience and are we doing the right things to take care of that patient through the 6-month journey, soon through the 12-month journey. So when it's time for their next sensor, there's no question that they want to stay with the Ascensia and Senseonics family and put another Eversense in play. And that is really key today. It's much easier to keep a patient than it is to find a patient. So super important, and I think we did that very well in my prior life. Then you get into, okay, we've got 180, let's sell what we have today. We have goals for June. We have goals for July. We have goals for August, September. We really look forward to 365 launching in October. Mukul, no pressure, right? But we have to sell what we have today. So I really have 2 things going on at work. Push what we're doing. We just had the field together in some regional meetings. We're growing nicely quarter-over-quarter. We're really seeing an uptick in our insertions, and we're seeing an uptick in our physicians that are prescribing, prescribing more than 1, penetration and reach then. But then the team is really working behind the scenes on 365 readiness, and that's big. And there's more to it than just, okay, we go from 180 to 365. We're going to have to make sure we get paid by the payers correctly, all the things that come behind that. Jeff has been very involved in that. So there's a lot of work there. And that piece is going well. And I think that is the experience that many of you know me for, is the scaling aspect of it, right, getting the company ready for that next stage, that inflection point, and we've really taken that up a notch. And we will be ready, when that product is ready, to launch the product. A matter of fact, I think we're in a really good position today, the last month, and again, Jeff has been very involved with the team. We've really not only just turned that corner, but taken it to the level that we should expect so we have a world-class launch when the product is in our hands. And I put this in here just simply because it is still a complicated process. It's a little bit different than a traditional CGM. It is more akin to the pump business, the way that the leads come in, the way we have to work those leads, the way that we have to take those leads and share them with our DME partners or whether we're doing it through the global pay process, the Medicare patients. There is quite a process to doing that. So we're trying to reduce those days to approval, that process of adjudicating a claim, getting it out to the physician, and then obviously inserted for the patient in a very seamless and quick fashion. Because as you guys have asked me some on the side, what is some of the challenges that we face today? 365 is wonderful. We're looking forward to that. Weekly calibrations, certainly better than daily calibrations. But we need to make the insertion process easier. We have to get to that process faster. We need to make sure the cost is appropriate for that patient and their co-pay is appropriate. We have a good patient assistance program today. This funnel management is incredibly important. And again, I'll point to Jeff. He did a lot of work before I got here with my team on the whole lead-to-ship or lead-to-opportunity process. And that is -- the work that was done there is now being refined into a much better process. And I think, Jeff, I'd say we had 6 months ago before I joined. So we are on the right track to do the things that we need to do. We are certainly excited about the 365 product. And then we're certainly going to turn our attention and pressure to Mukul to get us the pipeline that we're even more excited about, because, obviously, the #1 product that would excite folks around the world is fully implantable, getting rid of the transmitter and having fully implantable. It's not something we sell, it's not something we talk about. But it's certainly something our reps know about. And over the next 3 years, that transformation of the company is something that I'm really excited about, and they're really excited about, and it's what keeps them motivated and keeps them here and keeps them driving. And we have a good team. So pulling out some of those tricks from my bag from before, and thankfully, this is something -- if somebody else had come into this job -- and I think the real neat part about this, I know the space, I know all the folks, right? I kind of -- it's akin to what I did at Tandem in the pump business. This would be really hard for a therapeutic person to jump in this job and figure out all the layers of the onion and how challenging this is. But this is building out pretty nicely right now. So with that, we're going to talk a little bit about Mercy and get on to some of the bigger pieces. I would say, as you see our social media campaigns, and I thought about putting a bunch of different slides and playing a couple of our videos, we brought in a couple of new agencies and really trying to refresh and put a little edge to some extent to what we're doing on the advertising side. The direct-to-consumer piece is super important in this space, let alone the health care provider leads. But the team, John Bradford is doing a great job here for us. I've got a new head of marketing, I've got a new head of our internal processes, Ed Monas, who came from Medtronic. So the team, I think, has really been taken to another level, and I think you're going to see some of the results from that. So Jeff, do you want to talk about Mercy and then I'll take some questions on the commercial after? That works?

All right. Thank you. And nice to get to meet some of you for the first time today. Jeff Ruiz, and I've been with Senseonics since 2019. So I've been on this journey, and with a strong focus in the U.S. I'm responsible for strategy. And was with Medtronic for 17 years prior, in the diabetes division. So I ran a number of their businesses and whether they're inside operations, et cetera, as Brian is going to reference some of my experience in helping them as well. I want to start with kind of talking about not necessarily Mercy just specific. We will get to that because I know that's of most importance. But really, the strategy around Eversense and its fit from a health system, population health standpoint, where we think we have -- we're uniquely positioned to make a difference with the patients in diabetes, particularly given some of the challenges with the health system transition phases that they're going through. Obviously, it's a large market with diabetes, and don't even necessarily talk about the cost. But one of the things that's pretty important from a health system standpoint is the extraordinary large and unfortunate number of severe hyperglycemic and hypoglycemic events, sort of very costly to a health system that are often managing these patients at either full risk or partial risk, and it's a very clearly identified area that health systems want to minimize. And of course, we collectively as an industry want and need the same. Offers a lot of different potential revenue streams for us and opportunities for us. We'll talk about that a little bit more as we go. Right? These health systems are under pressure. They're going through -- they continue to go through transition, more pressure around value-based contracting, risk-based agreements, et cetera. They have to win by both improving patient outcomes on the clinical side but also simultaneously driving down costs. And when you think about these excessive costs associated with diabetes and the comorbidities, these health systems have quite the open mindset around thinking about innovative ways of approaching new technologies, innovations, et cetera, to try and solve some of these challenging problems. Eversense itself, as you -- as we kind of step back and you say, okay, well, why does Eversense fit this model so well? The first thing that is important to note, these health systems, as we speak with them, they very well accept and understand the value that CGM can bring to their populations, and therefore, want to continue to get CGM technology to these patients, to stave off these short- and long-term complications. The challenge, however, is that the vast majority of patients that could be using CGM today, that are eligible for reimbursement of CGM today, still are not using CGM. That's not for lack of awareness. We -- every night, you can see the commercials on TV, every -- patients are aware of it. There are certainly some challenges. Tim pointed to some of the challenges from a technology standpoint. But from the adoption standpoint, right now, it's effectively try to get a patient to come in, 1 patient at a time, and want and ask. And so one of the unique things about Eversense is -- that these health systems see, is their ability to directly drive it, because of their integrated network, they have the inserters within their own system, they have the prescribers that are managing the patients. They don't need to commingle that. They can easily get the patient through the insertion process, and so they have much more kind of direct control over that. And then, of course, there's appropriate reimbursement that makes it worth their time to proactively try and drive the adoption of the CGM technology into their population. They see this as a way for them to try and get CGM technology into the broader population that is a need for it, and address some of these pretty key issues. They also are quite interested in the data, of course. And they know that they have to have the data in order to win in this risk-based world that they're trying to survive and thrive in. As we began discussing with Mercy and other health systems, the CGM technology, the -- also the discussion around what could we do to even enhance it beyond what it is, and of course, as you all know, RPM services and technology, it's kind of quickly growing. But they really wanted to begin talking about how can we have a fully kind of integrated system, not have these disparate where some patients with some devices can go this way, that way, and how can we make this a comprehensive solution. So what is RPM? Effectively, once a patient goes on Eversense, we can now provide our nurse counselors to interact with that patient on a monthly basis. This does a number of things. It reduces some burden on the provider from calls or potentially incidents or events that are occurring, that can be addressed by our RPM team. So makes it a little bit more efficient on the provider side. Makes them aware of anything that we may be able to identify that they would want to know about in between doctor visits. And most importantly, it will help patients along the way learn and understand how to best interpret their CGM data and lead to better self-management of their glycemic levels. So we're seeing a lot of strong interest around that combined CGM and RPM solution. And you'll see in a moment, Mercy is very excited about that, and certainly, an opportunity as well to hit on one of their real pain points. Can we see things through the RPM team by evaluating the data and looking at it regularly that can help us stave off some of these avoidable severe hypoglycemic and hyperglycemic events. Mercy is the first step in the kind of our case study as we go down this journey of population health and health system adoption. I think you're probably familiar with Mercy. But I think it's a little bit important to understand their strategic objectives here, right? They are very intent on looking to drive up quality clinical outcomes, reduce costs by investing in innovation. They see this as it's a long-term game for them, and they know they need to make those investments. They want to then leverage those outcomes and proactively engage the payers in these value-based agreements and risk share agreements so that they can win more of the share of wallet of the patient. And that's their overall -- it's a key part of their overall strategy. Right? And what do they need to do that? They need the innovative technology. They need innovative ways to try and help -- to try and drive adoption, to try and accelerate the adoption of things that they know can work, and so they're looking for those types of things. And then they, obviously, they have some of their own population health type programs. They want hypercare programs on top of the technology so they can maximize the benefit and the value that they get from the technology investments. Our collaboration goals, obviously, work together, collaborate to expand adoption, establishing the RPM services. We are standing this up for the first time with Mercy. They are very much partnering with us, so that we can learn and build this into an extremely effective solution comprehensively. And they are also committed to helping us roll this out beyond their health system in the future. They want to publish with us, they want to publish the results. They want to be proactively helping to take this model that we're building together and expand this beyond Mercy. And they are very collaborative from that standpoint. A little bit more detail around Mercy, a little bit more tangible aspect of it for you, if you will. We are starting in their -- what they call their East region, which is effectively St. Louis. That represents about 1/3 of their population. So we'll be starting there. Total across that population, they've identified about 30,000 patients that are in need of CGM. They have a goal of trying to get to at least 40% of those patients over the next 2 years. And as Tim mentioned, that's an opportunity for us in the short term to 5x or more our existing installed base as we sit here today. So we see Mercy as a really significant first-start opportunity for us in this space, but really just the beginning of a journey where we think Eversense has an important role to play from a health system, population health standpoint. And I look forward to your questions in the Q&A. I'll turn it back to Tim for technology.

Thanks, Jeff. We are, of course, very excited about Mercy. Not only for the opportunity to work with a large organization, but quite frankly, they're trying something very different. And one of their pitches to us, they literally came to us, pitches to us to do it, is they do want to take us on the road, right? So they've got access, they know who all our competitors are. So they're really looking to establish this as innovation from their perspective, right? They get an annual holiday metric around A1c reduction. And what we all know is when you put a population on CGM, you're going to get an A1c reduction. We'll talk about our partnership with Rimidi that's helping us do the patient monitoring. I know that we're going to even improve on that as we talk to these patients on a frequent basis. So it's pretty exciting. The president of the division happens to be a cardiovascular proceduralist. So when he saw the technology, it just made a whole lot of sense for him, right? He's very familiar with placing the link systems and the like, and has just said, "I don't have anything to monitor my diabetes patients like I do for my cardiovascular. This just made a bunch of sense." So we're excited about it, and we've got a great partner. As I said, what are we about? We're about technology. We all know that you'll move markets. Sometimes it takes time. And certainly, that's been the case with Eversense. But now where we are, the opportunity to move forward is pretty exciting, and we're finally realizing that dream that we've had. The 365, not only does it give us that long-term 1 sensor a year, but we've also essentially eliminated the calibration dynamic, right, and met the iCGM designation in doing that. So we will be doing -- currently, the product is calibrated once a day, which is a competitive limitation. When we go to 1 finger stick a week, we'll happily compare and compete with the folks that are sticking themselves with a new sensor. Typically, on average, about 1 week as well as they replace sensors that don't last that amount of time. And then as I said, the big opportunity for us to really make meaningful share is eliminating the transmitter in combination with that 1-year sensor. So we've standardized on the 1-year sensor, that's in for approval. Day 45 of a 90-day review is very important for us. That will actually happen next week, and we'll have a better visibility as to where they are in that process. But so far, we're excited to be working with a strong partnership. For those of you who know, the FDA, they are very motivated with new technology and they've done a great job at bringing on innovation and supporting us along the way. So we have a very close relationship with the review folks there. So as Brian spoke, we're currently commercializing the 180-day product. We did receive the iCGM designation. We actually submitted that knowing we're going to sunset the product because that gave us the down-regulation, right, the de novo classification so that we can down-regulate it from the PMA product to the Class II 510(k). So we held up the 365 submission and submitted it right after that approval came through, and submitted it as a 510(k). So it's in that current 90-day process. We anticipate going full commercial on October 1 where we're -- and Brian and his team are already working with the payers to do the payment transition for those. Next up for us, for somebody who haven't seen us before, our product: Gemini and Freedom. There's 2 things that the transmitter does today predominantly. One is it powers through near field. So it's NFC, it's like Google Pay, Apple Pay, right, is how we power the sensor today. And it also talks Bluetooth to the phone or to the pump. So both of those things need to be replicated into the sensor, the implanted sensor itself, to get that full sensing now. And Gemini is the first step of that and Freedom is the second step of that where the Bluetooth goes in, right? So power in the first -- now why is it important that we actually do a product which has self-powering? Because there's 2 things that we get. The on-body component is very, very important. So we're doing the Gemini product. This is the implanted sensor. It almost doubles the length of the sensor itself, but it is the same diameter. So it will be 3 millimeters by 20-something millimeters, implanted in the back of the arm. No change from what we're doing in that perspective. But as it's self-powering, it's therefore going to be generating, collecting glucose 24/7 all on its own, whether you have the transmitter there or not. And then what you can do is either interrogate it with the phone, which is important for our type 2 patients, right? They really don't want to wear the transmitter. They will have nothing on the skin with the first generation. Or where we actually get a lot of requests, college students and the like, is "I want to still get my glucose results, and I want to take the transmitter off. I want to be able to go out and not show that I have diabetes. Is there a way that I could do it together?" And yes, you'll be able to do that with the other head of Gemini, the other part of it, right, is that if you want to go to bed at night, right, have the night time's alarms. You can just put the transmitter on at night and then swipe it during the day, right, when you want to do that. It's a simple couple of seconds' swipe over it just like when you go to your point of pay and pay with your credit card. So that's the Gemini product. We're within this third quarter. So hopefully, in a couple of weeks, we'll actually be doing the first in-human testing of that where we'll finalize all the biocompatibility and we'll be using the 365 chemistry that is in the product that's in for approval right now. So we won't actually redo the accuracy trials, which are the long time period for us. We'll actually just be showing the functionality that you can power with the battery versus previously powering with the wireless NFC technology, right? So we do anticipate that we'll be able to negotiate a more attractive, least burdensome clinical program for approval of that product. And most importantly, continue to drive, especially in these Mercy patients, many of them are basal patients, right, or MDI patients, right? They're in that population. Mercy has done a great job. They're highly distributed. It's mostly primary care that's taking care of their patients as the way they set it up. I think they have something like 7 endocrinologists, it's almost -- in St. Louis, right, in 1/3 of their population. So very, very few. It's almost all primary care that treat type 2. So a product like this for people with type 2 diabetes is really going to facilitate the access, right, and make it easier. And then the ultimate product for us, which is just behind it -- so we put the battery in, we'll actually take the NFC antenna out and replace with a Bluetooth antenna. And that work is going on right now. That work is relatively straightforward, but we do need to have the full powering to power not only the LED that we flash every 5 minutes, but also to power the Bluetooth. Now Bluetooth is actually pretty power-hungry. So we're continuing to work with our battery partner. It's a company called Integer. Some of you may know, Integer produces all of the -- not all of the batteries, but most of the batteries that are out there today for implantable-grade health care products. So this custom battery comes from them with their technology. They have a new chemistry that is giving us this year-long life for the battery, that goes with the year-long life with the sensor to go with it. So you can see it's a pretty straightforward application of technologies. It's an area that we tend to do well. And as I said, we do have a very strong regulatory capability at working with the neighbors to get approval on it. So we're super excited about it. I think you can all envision just how attractive a product like this will be. We're excited to be at the point where we've got the first major step of that with the 365 chemistry and really be able to show some ramp, which we've all been waiting for, and the utilization of the Mercy partnership. So with that, I'm going to turn it over to Rick, who'll give the obligatory some financial information, which we have to do. But happy to, when we wrap up, happy to take any questions that folks may have.

Good morning, everyone. Thanks, Tim. As Tim mentioned Rick Sullivan, Chief Financial Officer at Senseonics. First, I'm going to talk about our revenue recognition, how that translates to sensor shipments and then, ultimately, to our patient base. And then we'll take a look at some financials. All right? So this slide here, the first top row is our major sales channel through Ascensia and the commercial relationship. We recognize our revenue when we send our product to Ascensia. Ascensia targets between 30 and 60 days of inventory in their warehouse, which they use to ship to the distributors, fulfillment partners who maintain about another 30 days target of inventory. From there, they send it to the physician's offices where it will sit for a week or so waiting for the patient to come in and actually receive the procedure. So we recognize our revenue approximately a quarter before it's actually inside with the patient. And that is the majority of where our sales come from. Beneath that, we have our consignment program. So we do ship directly to physicians under a consignment. So they have sensors available in their office for global payer Medicare, that they are able to use when a patient comes in and schedules. And that typically will sit in their office for about 30 days before we recognize revenue. We have over 100 consignment locations today with physicians that are participating in that program. And similarly, there will be a piece of that hospital system revenue in the future that will come through this consignment-type channel. All right. Inventory and 365-day transition. So we know we got ahead of those targets at the beginning -- at the end of '23, starting in '24. And so over the first half of this year, we have -- those target levels have gotten closer to what we would expect. We do expect shipments in the third quarter of our E3 sensor in the United States to decrease in anticipation of that 365-day launch. And then in the fourth quarter, we'll start fulfilling with the 365-day channel -- or 365-day product, in those sales channels. Which gets us to our patient base. So at the end of '23, we had disclosed that we have over 4,000 active patients globally. At the end of '24, we're expecting to have over 6,000 patients globally. And at the end of '25, with commercialization of our 365-day product and our hospital system initiatives, we'll have over 12,000 patients. These are financials. So first row is our revenue share. So this is the portion of revenue that Senseonics recognizes through the commercial relationship with Ascensia. And so for 2024, we expect somewhere between 67.5% and 72.5% of the revenue that we would actually recognize from the sale of our product. That translates to $22 million to $24 million of revenue for 2024. We guided to the $10 million for the first half of the year. We expect a little bit of a slowdown in Q3 in anticipation of that 365-day product launch, and a ramp in the fourth quarter of '24 for that full year guidance. Our gross margins through the full year expect to be between 10% and 15%. This does exclude onetime charges as a result of the transition to the E365 or 365-day product. We are transitioning to our next-generation platform, the same platform that we're going to use for Gemini, for Freedom. And so that resulted in some onetime charges to some of the raw materials from our old sensor platform. And finally, these are operating expenses. Consistent with 2023 where -- between $77.5 million and $82.5 million in operating expenses, which translates to cash utilization of about $70 million, again, consistent with 2023. For 2025 and beyond, we do expect, with the commercialization of the 365-day product and the hospital system initiatives, that we will double patients and we'll also double revenue in 2025. I think this slide is just the assumptions for those financial projections. This will be uploaded on our website so you can take a look at the assumptions that we used to generate the financial forecast. And I think with that, I'm going to open it up for questions. Joining us, we do have our Chief Operating Officer, Mukul Jain, and Dr. Lucienne Ide, the CEO and Founder of Rimidi, our remote patient monitoring partner.

Marie Thibault from BTIG. Maybe a question for Brian. You mentioned co-pays. What is the average co-pay at this point for patients on the 180-day product? And then when you consider sort of market research, is there a way of size the population that may be passed on a 6-month product but would be very eager to pick up a 1-year product?

Yes, I'll start with the second question first. The market research has certainly shown an uptick in interest to not have to calibrate daily. That's the top piece. The duration tests out very well. But to quantify that, I think, is a little bit challenging. We certainly think that that's going to be an easier sell. And so everything that the team has done on that shows an uptick in opportunity with 365, and that's clearly why we're excited about it. When you look at the co-pays on the products, there is a large group that has a 0 co-pay as it relates to the product today, but then you get into more of a traditional 10% to 20% co-pay that you would see with pump opportunity or a larger procurement like this, and that's where we're really working on the 365 opportunity because it becomes larger than the 180, right? They're used to the 90. There's a lot of deals that have been struck with the payers and the formularies on an Abbott or Dexcom sensor. We've been working with the payers to try to make that as easy and seamless as possible. But to some extent, there is then that outlay of $200, $400, and we know that's challenging for some patients. And it can get upwards if they don't have coverage. And so that's what our pass program is for, where it guarantees a patient a $99 charge, and we're basically covering some of the other side of that co-pay for them. We'll amend that some to make it a little bit more palatable for us on the 365 product. But today, it's fairly easy to get the product at a low price, and we need to do that to build the volume, right, because we need that base to grow off of.

Yes. And then maybe a follow-up on financials for Rick. Thanks for the guidance. Just a question on the gross margin onetime charge. Do you have an expectation of which quarter, maybe 3Q, that that would be hitting in? And then just a quick follow-up after that.

Yes. Yes. Certainly. With the approval anticipated in the Q3, that's when we would expect to take the one-time charge for the transition.

Okay. Makes sense. And then what were assumptions, the slide went pretty quickly, on Q4 and sort of the shipments to Ascensia and the stocking orders for the 365?

Right. So that 365-day product does take time to manufacture. So we won't fill the channels until early in 2025. And so we'll match demand pretty closely initially, and then get caught up as we manufacture.

Mat Blackman with Stifel. Rick, back to the second half guide, maybe just could you help us a little bit more with that cadence 3Q versus 4Q? I just want to make sure we're all on the same page there. And third quarter sounds like a dip; in the fourth quarter, it goes higher. But just any more color on that cadence?

Yes. It's a slight dip. We still are shipping E3 sensors for Europe. But I would -- I guess, if you want to split the second half of the year, you'd say probably 1/3 of that would be in the 3Q and 2/3 in the 4Q.

Okay. And then a question for Tim and Brian. I think it's been clear our conversations over the last several months, but also really this last weekend, that integrations are key for Senseonics in particular. I think the clinicians are really excited about a 365-day implantable option, particularly for their AID patients. So maybe just where are we on that? What's the heavy lift? Brian, you're on the other side, and I remember asking you, we go after installed base, and that's not necessarily the case here. So what's the pitch? And what should we expect over the next sort of 6 months on that front or longer?

Yes. We knew iCGM was close at hand. And I was actually out traveling that week seeing physicians, and it was quite funny talking to physicians because they thought "Tomorrow, then it would work. It's iCGM, it's interoperable. It just kind of plugs in and it goes." You explain to them there's a little bit more of an engineering process that goes there. We're excited about the opportunity now to engage in those meaningful conversations. And ironically, I was the one sitting on the other side of Tim for the last 8 years saying you need volume for me to dedicate those resources at Tandem. Now I'm on this side of the table, begging for that integration opportunity. I think the broadest comment on this would be we've had 3 or 4 really good meetings while here this week with some of the pump companies. And now with iCGM in place and with some of the pipeline, that's a little bit more in our grasp, those discussions, I think, Tim, I would say, have gone better than they probably have before.

Would you be disappointed if you didn't have announcement by the end of this year?

Yes. I mean I don't want to comment on timing yet just because it, quite frankly, it also depends on which organization goes first, right? Some of the large organizations tend to be a little bit slower where some of the smaller organizations, and you know who they are, right, can tend to go faster. So we recognize that the integration is important. I think the 365 -- just the iCGM itself was a definite validation, but 365 as well. What they know, and they see it every day, is innovation does move this market, right? That's clearly the case, right? And when you look at a 1-year sensor reduced calibration, which has been a competitive disadvantage for us, I think people recognize the value in it. And then when you dream about what Freedom could be, that is a major player of a multibillion-dollar market, right, and people want to make sure they're in front of that.

Maybe for Brian. Good to see you again.

You always got the toughest questions for me, so I'm looking forward to this.

No, please. Please. Maybe I'll ask a gross margin question. Just in terms of the opportunity, CGM, and it's along Mat's question, CGM use particularly in type 1s is fairly high. So is the focus to dislodge the 2 incumbents here? Or is it more to expand the market through greater penetration in people with type 2 diabetes?

I think it's both, right? If you take a look at the Mercy opportunity, it's expanding the opportunity for those patients that aren't using technology today. And that's what Mercy is focused on, right, the CGM-naive patients that would benefit from it. So in that scenario, 30,000 patients they've already identified in their system would benefit, that's expanding the market. We don't need a 20%, 30%, 40% share. We're not going to grab 20%, 30%, 40% from Abbott or Dexcom anytime soon, right? But we know how large the market is today. And if we can get some share of that, which today, it's obviously very minuscule for us, we build a very meaningful business, right? This business starts to really move at $200 million, $300 million, $400 million. For Ascensia, I can speak to that specifically, right? It's very positive for us. And certainly, our investment in Senseonics is very important to us. Fully implantable, you certainly could see that that could go north of that, and that, I think, would expand the market and take some share from the competition today. But it's a large space out there. Type 1 is positive for us as well with pump integration. Not everybody is on a pump. We know that, right? Where do we sit, around 38%, 40%? So there's still a whole lot of type 1s that are not using a pump today. So let's say there's 60% of that and 90-plus percent of the type 2s that we don't need pump integration to penetrate, we should have those opportunities in front of us with the right product.

Sure. And then just in terms of specialty, is it mostly endos? I recall at some point, Tim, there was an effort to kind of broaden the inserter base. And you did mention there was only, I think, 7 endos in the Mercy system, which I thought was actually smaller than I would imagine.

It's rare, obviously, to have that. Remember, there's other referring physicians into the Mercy system in St. Louis, it's 7 endos, that are within their cap, right? But that is small, I agree with you. I was surprised at that as well when we got into that -- we know some of them from my past life, too, so it's kind of funny how small this business is from that perspective.

But there are some endocrinologists, some primary care physicians who want to do the procedure themselves. The majority are more than comfortable and in many ways prefer to refer the insertion down the line to more proceduralist type approach. One of the exciting things about Mercy and the health system approach is that they have proceduralists that that's all they do. It's typically in the interventional cardiologists group, and that's what Mercy is going to do. They're going to use their interventional cardiologists to do all of the insertions and let endos and the primary care doctors manage the patients -- post-procedure, manage the data with the patients. But that's one of the nice things about these integrated health systems, is that they have proceduralists that are [indiscernible]. So that's the strategy with the health system.

And not to get too deep into the weeds, but are the interventional cardiologists compensated for these insertions?

We got 3 procedure codes associated with an implantable CGM that has [indiscernible].

Yes. Commercial pay has been averaging about $250 to $400 for the insertion. Medicare is actually north of that, where their reimbursements come in. Depending on the ZIP code, it could be significantly north of that.

And it was one of the concerns that we had to make sure -- we wanted to make sure that it was going to be, say, worth their time as an interventional cardiologist. And Mercy has validated that more than appropriate -- absolutely appropriate for them and it makes sense for them to do economically speaking. And ultimately, the benefits to their overall health system we've also been incorporating in that whole.

Yes. The other thing we'll be doing, Jayson, is we are expanding that nurse practitioner group partnership that we announced. So these are contracted nurses since we have the label for nurse practitioners to actually do the insertion. They'll come to your house, in fact. And they're utilizing that -- those payment codes, right, for remuneration for their services. So it's actually not a cost to the business, which is a nice counter, right, in the pump space. And Brian knows this well, the pump company had to fund all that education of patient and first patient interaction. The CPT codes are actually handling all of that for us. So this is a great opportunity for us to expand it. So you're absolutely right. We've been trying to push more to primary care, especially the high prescribers, insulin prescribers to penetrate CGM, but to do it with this partnered nurse to do the insertions for them. And as I think -- it's been a little bit, but they were at 25% of all of our insertions a couple of months ago, and it continues to grow for us. And we'll continue to expand that.

Josh Jennings from TD Cowen. Thanks for hosting this event. Sorry, I'm not as deep into the story as many other in the room. But was hoping you could just review the science behind the 365-day sensor capabilities. We're hearing from other CGM competitors that they're trying to -- one trying to get out to 15, one is already at 15 days on a disposable wearable, trying to maybe get out to 20 to 30 days ultimately. So I guess the question is, just remind us of the science behind the technology. And are you -- do you believe that some of these other players can get out to 20 to 30 days? And what are the limitations on their approach?

So I'll cheat a little bit because I got quite a background in the enzymatic detection. But the problem that we always face with long-term transcutaneous is that they are enzymatic, so they're protein based, right? The body does a very good job at tagging and breaking down proteins. They don't last a long time. It's pretty unrealistic to think that you're going to be able to immobilize an enzyme, put it into some type of matrix, and have it last for a year in the body. They just typically don't do that. So one of the things that I did look for is we needed to have a different approach if we were truly going to have a long term. So the technology that's here is what's called -- it's abiotic, so it's not biological based. We don't use an enzyme that gives off current, electricity to measure glucose like all the other transcutaneous or the strips and meters. What actually happens here is it's a contact lens material, which is where the biocompatibility comes, and then there's a binding agent, a binding material, Nobel Prize from almost 30 years ago, that actually binds to glucose through a boronic acid moiety that binds to 2 adjacent hydroxyl groups on the glucose molecule. It's actually very, very specific. The challenge has been, for that vicinal glycol, is it is oxidized pretty quickly in the body. So that's what we've been focusing, right, is the breakdown of that adjacent binding group through a reactive oxygen species. So everything that we've done over time is to minimize and eliminate that oxidation. So the 90-day product, we had full survivability. And many of today's sensors, frankly, will go well beyond 2 years, but unfortunately, not all of them, right? So the label is actually for the shortest sensor that survives, right? So the 1-year product has been exactly that. We're moderating that oxidative degradation of those binding agents that are inside the contact lens material, right? And the way they work is we'd shine a light and it fluoresces, right, and gives off fluorescence. It's inverse in the sense that the brightest light actually happens at low glucose. So people ask us, why do you have better accuracy in hypoglycemia? Why do you have better hypoglycemic? It's because the way our technology works, it's actually inverse. Whereas electrochemical, more current happens at higher glucose. We get more light at lower glucose. So that's a very short story, but it's -- I'm pretty skeptical you're going to get a multiyear, even a year, last of an enzyme. That's why sensors, in some cases, 10 days, in-body, in some cases, 14, 15, 20, maybe. A year is pretty difficult.

Boy, I'm glad you were here for that question, because I would have had probably not answered that the same, just saying. Kelly, you had a question?

Yes. I can't wait to get a 365 myself since I've had diabetes so many decades now.

We can make you priority number one. We have an event in San Francisco, Kelly. So just put that in the...

I don't know if I shouldn't get that, but maybe we can have a party at one of the hospitals and get a lot of us there. But what might you say about people staying older longer with diabetes? It's so exciting. All of the different interventions, GLP-1, SGLT2 inhibitors, improving heart health, improving kidney health, maybe even -- maybe even brain health. We would love to see all those folks have glycemic health, that's really good. So just wondering if you could talk about the life cycle and maybe how it could change with all these positive interventions and the impact even ultimately on systems.

I mean you exactly said it, and you live it every day, right? Gluco normalization is the key to all of that toxicity, right? So anything that we can do to make it easier is going to make the products better. So when you speak about new technologies, you also have to do it in a way that doesn't completely interrupt their life, right? And that's early on, gluco watch. It didn't work, right? But it was exciting because it was the first generation. But now we sit here 20 years later and, honestly, the technologies that are available, as is evidenced by out on the floor, that if you are highly compliant as a person with diabetes, you now have the ability to die from something else. Honestly. It doesn't have to be that glucotoxicity, right? You can have a normal life. Now it still takes quite a bit of work, but we're all here to change that. So it's not so much because of the type 1, Kelly, but our fastest-growing segment by far -- I shouldn't say by far, but a fastest-growing segment is actually the Medicare population, which is predominantly type 2 for us, right? About 60% of our patients are now type 2, when just a couple of years ago we were almost all type 1. Right? And that -- and for 2 reasons. One is because the product is easier for them to use. But the older population also gets a lot of satisfaction about going to the doctor and having their doctor do the procedure, right? They feel like they've got a partner that did it for them. They don't have to fumble with the insertion process. So we've got a good acceptance growing in that. The other end of the spectrum is we got a lot of active people because of the removable transmitter, right, and the replaceable adhesive. So we see a kind of a bifurcation, if you will, of our users. But older, I think it's going to be the long solution as well. And again, the transmitter coming on, not have to place that, further and further excitement and penetration, right?

Yes. Just maybe one question on the way that you might -- as you enter this market, you're having more detailed conversations with pump manufacturers, one of the frontiers is additional analytes. So I'm just wondering how you're thinking about that. I know you got a lot of fish on the grill right now, but wondering if that's in the pipeline as well.

Yes. Mukul is actually working on that. Mukul, let's talk about the redundancy.

So we have talked about the multiple analytes. The new technology, the ROME sensor that's behind the 365-day, that does have multiple sensing areas. So currently, we do have work ongoing to bring in ketones and lactate. That's the first priority, based on where other systems have gone. But we do have possibilities to add even more analytes that may not be stabilized in the current chemistry, but we can dedicate one of the sensing areas, one of those -- maybe I can walk up closer and quickly point it. So basically, in the new system, we have 2 [ ESECs ]. Every [ ESEC ] has 2 sensing areas. So we have 4 readings that come off and that we basically right now are weighting them and averaging them. But we can dedicate 1 to another analyte that becomes more important over time, and we have that possibility. As you said, not the priority today, but this opens up all those possibilities.

Thanks, everyone. Appreciate it. Happy to -- this concludes the webcast offering. Please enjoy some refreshments and if you have any other questions.