Yeah, let's start off. All right, good morning, everybody. My name is Matt Blackman, member of the Stifel MedTech Research team. Thank you for joining our session this morning with Senseonics. Very pleased to have CEO Tim Goodnow and CFO Rick Sullivan to walk us through the Senseonics story. Like all of our other sessions, this will be a fireside chat. Questions are welcome. Just raise your hand, and I'll do my best to acknowledge you. So, guys, thank you for joining us. I very much appreciate it. I thought maybe we could just start to level set, everybody. Just looking back briefly a couple of weeks ago, I think it was a couple of weeks, it might have been last week. The Q3, just how it shook out relative to expectations, seemed largely in line, a little bit better than perhaps we expected.
It's really about 2025 and beyond with 365, but just the state of the business as we sit here today.
Yeah, I think starting with the financials, certainly in line with expectations. We'd talked about at the ADA previously that Q3 would be a little bit down sequentially as a result of the destocking of the Eversense E3 product as we transitioned to the 365-day product. So revenues were in line with expectations, about $4.3 million. We did get the approval for the 365-day product, which we will certainly spend some time talking about today during the quarter. We also talked a little bit about financing that we did early in the Q4 just to shore up the balance sheet in order to pay back some of our debt. And we did do a small acquisition of the Nurse Practitioner Group assets so that we could expand our inserter network through Eoncare, our wholly owned subsidiary.
So it was an active quarter, but I think certainly in line with expectations and really just trying to set up Q4 and beyond with the 365-day product.
So good segue. Thanks for teeing me up for that. Let's talk about the 365 and the launch itself. And Tim, maybe it'd be helpful, hard to always sense where the audience is at in terms of their understanding of the technology that we're talking about, but this is a truly differentiated continuous glucose monitoring platform. Maybe just give some folks some background on what 365 is and how it's different.
Sure. So it's a microsensor, very small. It's about the length of your fingernail, three millimeters wide. It goes in the back of the arm, and at that point, of course, really becomes invisible. Today, we do have a transmitter that powers and communicates to your cell phone with it. So it is a two-part system. We'll talk a little bit, I'm sure, about what we're doing to go down to just a single fully implant. But it works on a technology that we've developed over the years and been working on the stabilization of in the body for quite some time. And we're happy to get the FDA approval in late September for the 365, meeting the iCGM designation. So that keeps us in the class two regulations, which helps a little bit less complicated, a little bit more predictable timelines. So all very good news.
And then, importantly, we were also able to, with the new architecture that's in the 365, significantly reduce the calibration requirements, which has been very, very nicely received by users and clinicians. So, all certainly good news and in the right direction.
So, for anyone in the audience, this 365 days under the skin. Competition today is above the skin transdermal, but seven, 10, and then 14 or 15 days. So significant change in the duration. I suspect that the longer duration is one of the things that is resonating with patients. Anything else? You may mention calibration reduction. Maybe talk specifically where you were now on that front. But as we think about, is there anything else interesting in terms of the new product and what patients are attracted to?
Yeah, so we've made a number of small changes to the user interface, continue to make improvements, as you would imagine, through the evolution as you get patient feedback. But the big changes really are the duration and the calibration reduction. So specifically, with continuous glucose monitoring or with any diabetes technology, the less and less you can ask the patient to do, and the more and more you can do as the device technology folks, the more interested folks are going to be in using your product. So with the 365, it is you pay the price, if you will, of using the product just once. You go to the doctor's office, you have the procedure done. It's very quick, about 20 minutes. It's done under a small dose of lidocaine. Sensors placed by the professional, and then you never interact with the sensor.
You don't put it in, you don't take it out. You just go on and live your life. And that now having a full year to not think about it is a high, high attraction. Our entire marketing campaign now is based on one year, one CGM. But in addition, because of some of the physics that we changed in the optics, we've been able to significantly reduce the calibration. So previously, they were doing one fingerstick a day, which was not current with the market, but now we're doing one fingerstick a week. So very much consistent with the stick that you need to do to place a new transcutaneous sensor with some of the other products. So we're winning a lot of interest.
Certainly, we can talk about where we are with lead interest, but it's quite significant, and we're really happy with how the early launch is going.
Okay. And we all know that patients, even if there is a no-cal indication, are still fingersticking themselves anyway. So once per week is a much less onerous.
You're going to do that stick with placing the new sensor, right? You're going to do that, as you said, seven, 10, 14 days. Also importantly, it can be random, right? A good portion, something like 30% of those don't go to the label claim because the adhesive will not stick for you. So you've got to consider that and have the backup. All of that goes away when you have a long-term implant.
It's interesting, and I don't know if you've noticed, and probably you're sure you have, but FDA is now requiring more explicit longevity data. So I see Abbott's Lingo, and there's an asterisk that says 75% of sensors. I'm making this number up, so apologies to Abbott, but 75% of sensors make it 10 days and then 14 days. That only helps sort of your value proposition.
It really points out the difference because it's quite drastic, as you said. I think it's something like 68%.
Yeah, I was trying to be generous. I wasn't sure if it was 10 days or 12 days, but so you sort of mentioned. I'm also curious, so what's resonating? I think we touched on that, but who is it resonating? And is there a common thread on the patients? You mentioned lead, so even on the lead side, but also those folks that actually get it implanted. Is it a certain type of patient? Is it a Medicare patient, older, younger? Is it a type two? Is it a type one? Just any way to help understand that?
We have today about two-thirds of our patients are Type 2s. So again, along those lines of who are the patients that want, are most motivated by less and less involvement. If you're a Type 1, you're very active. Certainly, if you're on a pump, a lot of the folks have gone to the fully integrated with the AP. And they are willing to do almost the hour-by-hour diabetes management. They have to because of the nature of their disease state. When you progress more and more into the Type 2s, and we're certainly seeing this with the basal patients that are coming up, those are the folks that are not actively, certainly hour-by-hour or even day-by-day managing their diabetes. So we're getting a good amount of interest in that patient that really sees the value of, okay, I should be on CGM.
It's something like less than 35%, maybe less than 25% that are on CGM with basal today because you're not getting to those patients because they're just not willing to invest the time. And with the long-term implant, that reduces that barrier. So we're definitely seeing a larger proportion of the type two folks that come to the implant.
Interesting. And I guess so the next leg of this story would be integration with a pump to the extent you can get after type ones. How important an opportunity is that? I mean, I just think conceptually, if I'm wearing a pump, even if it's a patch pump, I'm swapping that thing out every three days wearing a pump. I'm switching out the CGM. I'm switching out the infusions. There's a lot of stuff going on. Maybe taking one of those pieces out of that equation could be compelling for folks. So you've got ICGM designation. What's the next step here in terms of that path? And is that something you're going to pursue aggressively? Just help us understand that.
Yeah, so we actually are, we haven't announced the partners, but there are more than one partner that we're actually in active development with, so the integration, the iCGM gives you the opportunity to do the integration and then not go back to the agency and file for the pre-approval to commercialize that, but it doesn't remove the responsibility for you to do all the design and development documentation, your quality system, which is all still subject to audit, whether that be by the FDA or our notified body, so you're still doing all of the development work, which is exactly what we're in the process of right now, so I hope in the first couple of quarters of 2025, we'll be able to announce some of that work and talk about when we're actually coming out with our integrated partners.
Okay. And just conceptually, because we're sensitive to it on the pump company side, is it challenging for you? There's a heavy lift for the pump companies to integrate CGMs, even though there have been several sequential series of these integrations. What kind of lift on your end? You said a couple of quarters into '25. Is there something you need to do? Is there a hurdle that needs to be cleared and you'll feel good about it or no, it's just sort of blocking and tackling?
So the technologies, of course. You are sending wireless data, the information that obviously has your glucose, your glucose rates, any alarm conditions, request for calibration. You're essentially replicating the information in the user interface and providing that back and forth to the pump company. So we provide all of that, of course. It's in our motivation to make it easy. So we will make some modifications. For example, if company A says, "Hey, we'd like to do it this way," it's better for us to provide it in that form and work differently with company B. So there is some work on our side, but it is heavy lifting on the pump side because they tend to be more the center of the universe. They have the algorithm or wherever they put the control algorithm.
So they integrate all that together and tend to be the nucleus of the design combination.
Is it your hope, your plan to integrate with whomever you can integrate?
Absolutely, of course. Choice is important to us and it's important to the customers that want to use Eversense. We are hearing from our users as well that they want their pump company to participate. So they are getting some pressure from our users.
Okay. So that's sort of the product background. Let's maybe talk about the go-to-market and maybe helpful to just frame the relationship you have with Ascensia. They're doing a lot of the lift on the commercial side, but it might be helpful to give a baseline for folks. And then we can talk about some of the, I think, really interesting new developments on some of your collaborations.
Sure. The way we partition it, Ascensia has the responsibility for the investment and delivery of the commercial expenses. So they'll do the sales force. They'll do the marketing. They'll do the sales distribution channel. We do the design, development, and manufacturing. We work closely together. I mean, literally every day. We're integrating and working with our commercial partners. As we do a handoff, for example, we got the approval in late September. Once you have the approval, it does take you some time. You get your final labeling, and so forth. You go into manufacturing, do all that assembly, put it together. I think they went live with the product about October 1st on the availability. They made folks aware of it. Just about November 1st is when they got it, started to get the front end into the channel and actually out to patients.
We've been inserting patients for just a couple of weeks, I think, except for some very, very early adopters that we sponsor.
I guess it's really early to even be asking this question, but are these new patients to the census that are starting on 365 or are you swapping out old folks?
It's really a lot of new folks. It's actually quite exciting. In fact, we heard yesterday that we continue every week is a new highest lead week for us, both in DTC. So those are the folks that are coming in through the social media channels, as well as from the clinician side, from doctors. So that's exciting. From the one-month time period pre the launch to comparing to the one-month time period post the launch, our DTC leads are up over 200% and our leads from the medical channel are up over 250%. So it's a lot of new interest. In addition, we've had over 600 accounts that we hadn't been able to get into yet throughout the U.S. that have come to us. So significant. We've had about 1,600 physicians, medical professionals do sensor insertions that have put it in perspective. So 600 to reach out to us.
Some of these are big institutions that you have a hard time getting into because they're pretty deep. There's a lot of interest. A lot of it has to do with the one year, but also the calibration reduction as well.
Do you have the footprint now with the inserter team under your umbrella to get after all of these opportunities, even Ascensia?
As Rick said, that was a big addition we made, but it's been a nice augmentation to the team.
Yeah, we were able to transition the 30-plus nurses from the NPG group into Eoncare services and then expand that over the course of this year and next year and continue to add nurses in geographies that make sense. We'll continue to train other physicians on the insertion as well. So it's kind of both sides of it just to make sure that there's access to Eversense. Do you have a metric of what the capacity of one inserter is? So 30 inserters, obviously, would be dependent on geography, but you would hope their productivity would be X?
Yeah, these nurse practitioners primarily are contractors. So they're consultants, and so they do it.
So they have a day job.
They have a day job, right? So call it a side hustle. But we have instances where I think we've recently set records where they've done 10 insertions back to back in a single day. So they're able to get some volume, even doing insertions one or two times a week as they schedule them back to back. And they are remunerated to do that, right? They bill for that procedure. So it is attractive for them, which is why they're drawn to it as well. But from a metrics perspective, about 8% of our inserters are in that, but they're doing almost a quarter of all of our insertions. So they're highly efficient, which is why it was attractive for us to bring them in.
It's, frankly, pretty neutral cost for us because they're paid by their billable for their procedure, which we don't have the responsibility or the right to, so it works out well, and many of these, it may be a dad or a mom that wants to take Friday off to be with the kids and Thursday afternoons does insertions, so we can be quite flexible with that group.
Let's transition now, talk about some of the other, I think, really encouraging updates, particularly on the commercial side. And these are your remote patient monitoring collaborations. Mercy being the big one, may be helpful to level set everybody just what exactly this relationship with Mercy is, and then we can dig into the details and the implications and, most importantly, how you can replicate this as a playbook.
Sure. So Mercy specifically, a hospital system out of St. Louis, top 20, very large, pretty innovative, a high at-risk proportion of their patient base. They actually came to us because they're looking for a way to monitor their diabetes patients and help improve their HEDIS scores, help improve their costs since they take a lot of risk. They'd like to be able, and they do a pretty good job with their cardiology patients with monitoring, but they have a gap with diabetes. So they've got about 30,000 patients that are on insulin that they'd like to put on CGM. These are primarily managed through managed care. And they were looking for a way, could they manage them with a CGM so that they could ensure compliance?
In all honesty, a big consideration for them was the fact that they actually have a procedure that they can build to, which is unlike any of the other at-home use products.
Like you said, this is very similar to the LINQ, the cardio monitoring stuff.
Exactly, and in fact, it is their decision. It is that group of cardiologists, interventionalists that are actually doing the insertions for them.
Oh, interesting.
They will go. They're getting paid. I think the St. Louis payment is something around $600 for them to do the insertion in their region, which is on par with what they're getting with LINQ. They're excited. It economically makes sense. They're enrolled in the program. In addition, we've integrated with the Epic system. They'll bring patients in. They'll be monitored through a remote patient monitoring system where we'll have a team of nurses that they'll pay for, again, by the reimbursement for that because you get reimbursed about $90 a month if you have continuous communication with those patients. Again, these are their economics. They'll review the glucose data. They'll look and they'll triage those patients that have significant hypo. They'll notify the docs through the Epic system to get them in.
Or if they've got long-term hyper, those are the two that cost them the most, drive people into the emergency department. They'll identify them through the monitoring and instead of just seeing them once or twice a year, they'll see them a lot more frequent.
I think I know why, but why do you think they chose you?
It's duration and the procedure fee, quite frankly. They select the patient, they put it in. The one thing you know, that patient's going to have a sensor there later. It's not as if, as I said, the patient does not interact with the sensor.
There's no compliance issues.
Exactly.
Who owns the data? Do you have access to any of the data they're collecting?
The patient ultimately owns the data. We do have it available, of course. It's in the Epic system, and then it's also in our data management system. That allows us to be able to use it to help with that triage process, but also they're able to do it as well. Part of the partnership is they're very interested in, of course. We'll work with them. They'd like to use some AI models. They've got some partnerships in Israel that they use for data mining and to get better at managing this population.
Maybe Rick, so 30,000 patients, $5,000. I'm joking. But how do we think about that opportunity? I guess even before we get to that, do you have a sense? I'm sure you do the flavor of those patients in terms of type 1, type 2s. Are they sort of lining up with?
It's predominantly Type 2. Most of the Type 1s, as is typically seen by their endocrinology practice, but this is primary care where they have the gap, so it's heavy Type 2s. A lot of them are these new Basal or relatively new Basal patients that have been reimbursed over the last year and a half or so.
It's an interesting strategy. I'm sort of just reflecting. I apologize here. PCP is going to be, PCP office is going to be critical for diabetes growth, whether it's CGM or even pumps now going forward in the type 2 opportunity. A lot of your competitors on the CGM side, call them your peers on the pump side, are sort of doing the bottoms up where they're doing the knife fights in the PCP offices. It seems like a really much more efficient way to get after it. I'm going to call it a top-down institutional driven. I guess the point here is how replicatable is this?
We think it can be significantly because what's going to happen, what we know, which has been demonstrated over and over again, when you put a population on continuous glucose monitoring, you will reduce their A1C. And that's where all the reimbursement has come. That's why you've seen the extension. In fact, I am sure that even if you put a population of people with diabetes that are just on oral agents with that monitoring, you'll reduce the A1C. We haven't got the reimbursement for that yet, but that's coming. So where we sit today is you put those patients on, you'll monitor them, you will get an A1C reduction. And then what we'll be able to do is show that in another population that are actively in RPM, so they're getting monthly coaching and counseling, feedback, nutrition, exercise, lifestyle, you'll see a further reduction in A1C.
We will publish those results. We'll show that you get the clinical benefit. Not only is it good information for the payers, but it's also the type of information that we can partner, we can utilize and actually go to other ACO organizations.
It's a case study.
Exactly, and they're motivated to do it as a nonprofit, so actually, we had a discussion with KOL as well as the president of the group at Mercy that actually did all of this, and he's actually highly motivated to go on the road with us and go to some of the other ACOs to show them what they've done because he's proud of the work that's coming from it. Cardiologists as well, and he's seen the success in his patient group and he knows that they can leverage it in diabetes.
Interesting.
Yeah. So we did the first patient in October with 365. It was big news, but it is a large healthcare system. So it takes a little bit of time to ramp that up. So we'll certainly see increased penetration, that 30,000 patient population that could benefit from CGM over the next couple of years.
Just remind us of your U.S. installed base just so we can put this in the proper context.
Yeah, about 5,000. So certainly a pretty significant opportunity. And we certainly collaborate with Ascensia. They have a national accounts team. And so we're in conversations with a handful of other accounts similar to Mercy that we could certainly begin similar programs with.
We've got about five minutes left and I want to punch through a couple of things here because there's more beyond 365. And it was pretty remarkable the pipeline and the technology you have. Maybe before we get to Gemini, what are the plans for 365 in Europe? Timelines, anything? I think you said early next year, but just.
Yeah, yeah. We continue to be on target for early next year. What actually happens late in the year is a notified body. We use BSI. There's always a lull around Christmas, New Year's. They do some internal training very early in January. So right after that, we're working to get our submission in for the 365 approval in Europe. And although it's not as predictable from a timeframe perspective, but we do hope to have that approval and be able to bring it to European patients later in 2025.
Okay. And Ascensia touts this, but is it a full launch out of the gate? Is it limited?
It does tend to be staggered because the reality is much of the market is tendered, and when you're in a tender, you're required to provide a particular product for a time period, so Italy is a very good market for us, but it's tender, so it does take some time to roll it in. Germany is a little bit easier, so we'll do it based on the market needs in each country.
Those tenders, are you included with all the other CGMs or is it somehow a carve-out?
No, you typically make your case, and as an implanted, we've actually had quite good success at getting added as the one implanted alternative.
And no pushback on cost? I mean, I think some of the.
It's healthcare. There's always pushback on cost. And as you'll know, we're in the markets that can support a new technology launch, but you're not yet in France. And there's a reason for it because of those.
Yeah. Gemini. What is Gemini?
So Gemini, as I said, the transmitter today is our objective to eliminate the transmitter. It does two things. It powers the sensor through Near-Field Energy and it Bluetooth communicates to the phone. So Gemini is actually the incorporation of that powering. So we're working with the world's largest supplier of implantable batteries for medical devices. They're doing a custom battery for us so that the sensor will self-power itself.
Integer? Who is that?
Integer. Yes, Integer is the name of the company.
That was Greatbatch.
Formerly Greatbatch, yes. That group, and as you know, I think with the exception of Medtronic, they pretty much produce all the implantable batteries that everyone else uses, so this is their core competency. They're doing a custom battery for us, and then when you think about it, since it's able to power itself, the professional will place the sensor. It'll then give you 24/7 results whether you have a transmitter on or not, so that'll be a big change. You can then go interrogate the sensor when you want it.
It's like a flash.
Information like a flash. We are currently in human testing, collecting everything that we need so that we can get our IDE approved for the pivotal trial. We anticipate doing that in the first half of the year, and then we'll negotiate what the clinical trial looks like. Again, this is not a new 365 sensor. It's the exact same sensor. It just has the battery appended. We anticipate that we'll be able to negotiate that clinical evaluation, which will be quite a bit shorter than a traditional one-year clinical trial, and very much hope to get that started in 2025 as well.
Beyond sort of resonating with folks that from aesthetic standpoint maybe wanted the 365 but didn't want to wear a transmitter, does this open it up as we think about the spectrum of patients that potentially could benefit from a CGM down the acuity spectrum?
I certainly believe it is going to be. As we talked about in the beginning, the patients that are on type 1 diabetes actively manage it hour by hour, sometimes minute by minute. As you get to the bigger population of people with less active diabetes management, they want a device that's less and less. So that's why the Gemini and the Freedom after it, I believe, are going to be great products for that huge population.
Maybe Rick, in the last two minutes, talk a little bit about the P&L and the cash flow and the balance sheets. Maybe it'd be helpful. Obviously, it's a different relationship. This is a partnership. And so when we think about the margin structure at scale, and I'll let you understand what scale, I'll let you explain what scale might be from a revenue standpoint, what could the margin profile look like?
Yeah. So I guess going back to Q3, we did have some inventory write-downs as we transitioned from E3 to 365. I think what's important there is we transitioned to our next generation platform. So this is the platform that the Gemini and the Freedom are going to be built on. And so pretty excited that we made that transition with the 365-day product, but did have to take some inventory write-downs. At the same time, we began early manufacturing of 365, but since it was prior to approval, those were expensive. We'll see margins pop up pretty nicely in Q4, but then level out in 2025 and then start to grow towards 30% with the 365-day product. And then after that, get to 50% at scale. So now that might not sound so exciting, but that's because we have a revenue sharing arrangement that Tim mentioned with Ascensia.
And so that revenue sharing arrangement, we don't recognize the full amount of the Eversense revenue. We take about 70% of it. And so without that partnership, we see margins very close to 50%-70% with scale. And so because we're not able to recognize that full revenue, it really depresses our margins.
It depresses your gross margins, but your OPEX is significantly less.
OPEX is significantly less. Ascensia today is spending approximately $60 million on commercial efforts for Eversense. That's something that we don't have to pay for. On the financial balance sheet side, I think we ended the quarter with about $75 million. And that is enough to take us into the very end of 2025. And so funded for a little over a year at this point. So pretty happy with that. We did that financing in order to pay down some debt that comes due in January. So really optimizing the balance sheet from a capital structure perspective.
Okay. We've got 10 seconds left. Do you want to add anything? I'm kidding. Well, I think we'll leave it there. If there are any questions from the audience, more than happy to take them. Colin? No? Okay. Well, thank you, guys. Always good to see a lot of progress here in the last year. Excited about 2025.
Yeah, we are excited. 365 is going to be a breakthrough product for us. So we're quite excited.
It makes us proud.
Great.
Thank you everybody.