Senseonics Holdings, Inc.

Good day, and welcome to the Senseonics third quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. And to withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Philip Taylor of Investor Relations. Please go ahead.

Thank you. This is Philip Taylor from the Gilmartin Group. 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 those forward-looking statements is detailed under risk factors and elsewhere in our annual report on Form 10-K for the year ended December 31st, 2021, our 10-Q for the quarter ended September 30th, 2022, and other reports filed with the SEC. These documents are available in the investor relations section of our website at www.sensionix.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason except as required by law. Also, on this call, we will be discussing our 2022 outlook. Joining me from Sensionix are Tim Goodenough, President and Chief Executive Officer, and Rick Sullivan, Chief Financial Officer. With that, I'd like to turn the call over to Tim Goodenough, President and CEO. Tim?

Thank you, Tripp, and thank you all for joining us this afternoon. On the call today, we'll discuss our third quarter performance and continued collaborative efforts to expand patient adoption of Everson, as well as provide progress updates on the advancement of our product pipeline. Then, our new Chief Financial Officer, Rick Sullivan, will discuss the third quarter financials in detail, and we'll open up the call for questions. We're just completing six months from the Eversense E3 launch in the U.S., which means our earliest users are now receiving their second sensor. The feedback we have received from patients and healthcare providers continues to reaffirm our confidence that the differentiated features of our 180-day implantable CGM can positively transform diabetes patients' lives. Together with our global commercial partner, Essentia Diabetes Care, we continue to work to increase product awareness and access to establish a durable foundation for long-term growth. In the third quarter, Synthionics generated total revenue of $4.6 million, representing 31% growth compared to the prior year period. Included in this is $1.9 million of revenue from the U.S. and $2.7 million from outside the U.S. We're pleased with several recent advances in our business, while at the same time we expand the design of our future generation products. Our regulatory, clinical science, and R&D teams have achieved key milestones, including fully enrolling our pivotal trial for our 365-day sensor, filing an IDE for a pediatric indication, and making significant progress with the Gemini program, including our battery-powered sensor. We're happy to share the progress with this effort, which is targeted to be the foundation of both our periodic or flash glucose monitoring system and our full-featured CGM system, which is designed to offer flexibility and simplicity for people with either type 1 or type 2 diabetes. In the U.S., Essentia progresses further into the E3 launch. We have seen strong leads, and together we remain focused on increasing new patient starts and maintaining strong patient retention levels. We established a partnership with the Nurse Practitioner Group to expand patient access to Eversense by providing both in-office and at-home sensor insertions. We have secured additional payer coverage, and our next-generation sensor, Eversense E3, has been successfully launched across all of our markets in Europe. In the U.S., Essentia's dedicated CGM business unit is focused on growing patient adoption of E3 through a mix of DTC marketing and direct sales efforts. ADC is currently focused on 20 geographic territories established based on consideration of insulin utilization, insurance coverage, insertor presence, and qualified leads. They are planning to expand the sales force over the next few months, adding sales professionals and territories to drive more physician interactions and to better reach new and established accounts with current demand. DTC leads continue to be attractive, and ABC is working to convert leads into more insertions. Given the successful transition of patients in the U.S. to the 180-day system in the second quarter, third quarter insertions consist primarily of new patient starts, as existing users now receive their replacement sensors every other quarter. We continue to add a balanced mix of patients new to CGM and patients transitioning from our other systems. We see this as evidence of both our ability to expand the market and our ability to take share in the rapidly growing overall CGM market. Encouragingly, we now see over half of our patients have type 2 diabetes, demonstrating the value of Eversense for both patient populations. Going forward, we expect the patient pool to again represent a blend of reinsertions for existing users and new patients starting on E3. At this stage of distribution, inventory in the channel represents 60 to 90 days of supply as ADC ships product to distributors who then fulfill orders from clinics. We believe the inventory dynamic will more closely correlate with patient starts as volumes grow and the multi-step distributor channel normalizes. Looking more closely at patient demand, we continue to be pleased with the number of leads that are being generated by Essentia's direct-to-consumer digital advertising campaigns. Across social media platforms, ADC is targeting the diabetes community in specific high-potential geographies. Not only do these campaigns increase brand awareness in a cost-effective way, but they are growing the funnel of potential users. In collaboration with ADC, we are taking steps to convert the leads into an increasing number of sensor users. By nature, compared with sales forecast generated opportunities, the DTC leads represent a more diverse group of potential users. We observe that many of these patients manage their diabetes with their primary care physicians. And while these doctors are willing to prescribe ever since, they are generally not yet ever since inserters. Responding to this and to improve patient access to inserters, we are excited to announce our recent collaboration with the Nurse Practitioner Group, a leader in multidisciplinary healthcare provider solutions. The partnership is designed to provide convenient insertion options for patients both in office and at home. Because NPG's nurse practitioner staff is mobile, it will allow them to reach more patients who want Eversense but do not have an inserter nearby. We expect NPG to be remunerated from the payers by utilizing the existing CPT codes established from Plannable GM. The program has been launched in South Florida and Baltimore DC areas, and we have already begun training NPG's team of designated nurse practitioners to perform the insertion procedure. We plan to expand the program to 12 additional geographies by the end of the year and into further locations throughout 2023. We see this strategic initiative as having the potential to broaden access for patients who do not yet have a convenient location for sensor insertion. With NPG's national scale, experienced team, and flexibility to insertions in office or at home, as well as the mobility to reach patients, we're excited about the opportunity and look forward to sharing more updates on the program in the future. On the reimbursement and payer front, Payers are continuing to recognize the value of implantable CGM. We are pleased with the rate of transition to six-month coverage for E3 and continue to anticipate the changeover to be complete by the new year. On the Medicare front, as we published last week by CMS in the Physician Fee Schedule, our CPT codes have been updated to reflect the cost for the six-month Eversense sensor. And as a result, the temporary G-code CMS created for the technology will be deleted effective January 1, 2023. This national fee schedule update provides uninterrupted access for six-month and plannable CGM for Medicare beneficiaries and reflects the unique benefits of this technology. Commercial coverage for Eversense is also expanding. As a reminder, in August, one of the country's largest health insurance providers, Elevance Health, formerly Anthem, issued a positive coverage decision for EC3 that is now operational. Forty-five million members from this health insurance portfolio now have access to Eversense. Recently, Blue Cross Blue Shield of Florida and other regional payers have also issued a positive coverage decision. In addition to the continued expansion of coverage, ADC's patient assistance program provides an opportunity for patient and commercial insurance to start on EverSense for as little as $99. We believe this patient assistance program provides an attractive pricing model in CGM for those patients with coverage. This program is intended to increase patient adoption, and we anticipate it will have further impact when insurance deductibles reset at the beginning of next year. We worked hard with our partner to ensure that as many people with diabetes as possible have access to Eversense, and it is good to see the current number of covered lives. With two quarters into the U.S. E3 launch, we are encouraged by the progress to enhance access and payer wins. We look forward to the planned increase in sales professionals from Essentia to expand their market footprint. We are executing to reduce barriers to adoption, such as the collaboration with the nurse practitioner group, the patient assistance program, and payer initiatives. As we continue to launch, we plan to further use market feedback to focus our efforts to build brand awareness and convert leads into insertions, enabling more patients to experience and benefit the value of long-term CGM. Now turning to our partners' efforts in Europe. E3 achieved CE mark approval in June, and the commercial launch of Europe is underway. ADC is now offering E3 across all of their markets as originally planned. The phased launch approach began rolling out in August and is now complete. Globally, we are now shipping E3 sensors only, offering the same generation product worldwide. This increases our efficiency and supports greater leverage from the supply chain and manufacturing perspective. In Italy, Essentia continues to expand access to Eversense by working to win regional tenders. In Germany, ADC has recently hired a head of CGM. They're expecting their dedicated focus and new leadership will help improve commercial results and offset the slower-than-expected transition from the prior mail-order distribution model to a more direct distribution approach required in the CGM market. Visibility and awareness of the Eversense continues to increase in Germany through ambassador programs, advisory boards, and webinars. In the area of product development, we are very excited to report on the progress that we've made on the Eversense 365-day program. Earlier this year, we saw encouraging results in the feasibility study for our leading configuration for the one-year sensor, and based on that, requested the FDA to allow us to extend our ongoing pivotal clinical study to 365 days. That approval has been granted, and we are now fully enrolled in the study as of this past September. Additionally, we have now submitted a supplement to include a pediatric cohort to this ongoing clinical study. We look forward to working with the agency during the review process. We continue to make further progress on the technology front as well, specifically on incorporating a battery into the sensor. Our plan is to enable the sensor to take autonomous measurements and store long-term data, even when the patient is not wearing a transmitter. That data will then be retrieved simply from the sensor with a smartphone swipe from the phone over the inserted device. We're excited to be in the development of the long-sought-after CGM product without any on-skin components. Finally, on our last call, we announced enhancements on the digital connectivity capabilities for patients to share and combine their ever-since CGM data with other third-party apps through Apple Health. We are pleased with the feedback from patients and providers who are taking advantage of this new capability, helping patients and their identify correlations and gain greater insight into managing their diabetes further enhances the clinical value of Eversense. Continuing to advance our digital interconnectivity with additional partners remains a key priority for us. I'll now turn the call over to our new CFO, Rick Sullivan, to go over the details of the third quarter financials. Most investors have already had the chance to meet Rick as he's a longstanding member of our finance team. Rick has taken on roles of increasing responsibility over his nine years with Senseonics, improving the leadership skills and strategic vision that will be valuable throughout the next chapter of growth.