Good afternoon, and welcome to the Senseonics First Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Don Elsey. Please go ahead.

Thank you very much, and welcome to the first quarter 2018 Senseonics earnings call. Joining me on today's call are Tim Goodnow, President and Chief Executive Officer; and Mike Gill, Vice President and General Manager of the U.S. region. Before we begin today, let me remind you that the company's remarks include forward-looking statements. These statements reflect management's expectations about future events, operating plans, regulatory matters, product enhancements, company performance and other matters and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from those expressed or implied by any of these forward-looking statements is detailed under risk factors and elsewhere in our annual report on Form 10-K and our other reports filed with the SEC. These documents are available in the Investor Relations section of our Web site at www.senseonics.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason except as required by law. With that, I will now turn the call over to Tim Goodnow. Tim?

Thank you, Don. We've had a productive first quarter in which we achieved a significant milestone for the company with a favorable outcome of the FDA advisory panel on the Eversense system. As a result, we are in active preparations for express approval and commercial launch, which we anticipate in the near future. Simultaneously, we are continuing to invest in our next-generation products, including the new iCGM classification as well as additional technology developments from partnership programs. We remain on track to achieve our expectations of revenue in the range of $18 million to $20 million for 2018. Don will provide more detail on our first quarter financial performance and our outlook for the year in the financial review. Now recapping the FDA clinical chemistry and toxicology advisory panel meeting, which took place on March 29. The panel comprised of independent medical and scientific experts voted unanimously 8 to 0 on each of 3 separate voting questions. First, that Eversense was safe. Second, that the product was demonstrated to be effective and finally, that the benefits of the Eversense CGM system outweigh the risks. Leading to this positive vote, the discussion at the meeting was notably positive, as we reviewed the strong clinical performance of the Eversense system, it was part of our PMA submission, as well as the real-world user experience from Europe. As you may recall, results from the PRECISE II study demonstrated very strong accuracy for the entire 90-day duration of the sensor. These results were bolstered by the PRECISION study, which provided additional sensor performance data showing comparable accuracy throughout, including the early days of SensorWare. Along with its top-tier accuracy data that demonstrated safety results in all of our clinical studies as well as in the commercial settings were also viewed as very strong. We…

Thank you. And echoing Tim's commentary, on the heels of the FDA panel meeting, we're even more encouraged about the opportunity in the U.S. market and our upcoming launch. This is driven not just by the unanimous outcome of the panel, but telling factors of validation that point to the unmet need in CGM, the clinical benefit and lifestyle importance of long-term CGM and additional options for patients. Underpinning this is that the diabetes community is rooting for Senseonics to come to market. As Dr. Steven Russell said at the panel, "I have patients who are waiting for this technology, including patients that have not chosen to use currently available CGM systems." This comment supports our market research that many patients are not satisfied with their current CGM options and are looking not for incremental changes but exponential innovations like a sensor that lasts up to 3 months. Adding to this, at the panel a representative from [indiscernible] affirmed that we believe that CGM gives patients the information they need to best manage their disease and those not using it are facing increased risk. But even despite that knowledge, an alarming low number of people are not using CGM. They went on to say that additional safe and effective products like Eversense are what doctors need to best treat their patients. From a practice integration standpoint, one of the more prolific clinicians from Europe, Dr. Dorothy Dice, testified that inserting and removing the sensor is painless, uncomplicated and a quick procedure, which she can integrate into her daily office routine easily. Turning to the operational plan. We remain on track to be ready for U.S. launch by mid-year. We continue to hire in four key areas; market access and reimbursement, clinical training, sales and customer care. We are pleased with…

Thank you, Mike. For the 3 months ended March 31, 2018, we generated $2.9 million in revenue, compared to $600,000 in the first quarter of 2017. The increase was attributable to an increase in sales of Eversense in the European market. For the 3 months ended March 31, 2018, total operating expense increased by $3.7 million to $15.6 million. This increase was driven primarily by a $2.3 million increase in the sales and marketing expense, as we prepare for the U.S. launch and $1.1 million increase in R&D, driven primarily by FDA panel activity. For the 3 months ended March 31, 2018, total net loss was $22.3 million or $0.16 per share, compared to $13.1 million or $0.14 per share in the first quarter of 2017. Our net loss for the quarter was primarily attributable to a non-cash charge of $4.8 million associated with the change in the fair value of our derivative liability and the $3.7 million increase in operating expense. First quarter 2018 net loss per share is based on 137.1 million weighted average shares outstanding, compared to 93.9 million weighted average shares outstanding in the first quarter of 2017. I'd like to now turn to our balance sheet at quarter end. At the end of the first quarter, our cash, cash equivalents and marketable securities were $65.1 million, which reflects the proceeds from the convertible note offering that we completed in January. As Tim mentioned, we are reiterating our guidance for the year. We continue to expect full year revenue in 2018 to be between $18 million and $20 million. As we have indicated previously, this guidance includes a modest contribution from the U.S. anticipated in the second half of the year. I will now turn the call back to Tim.

Thanks again, Don. Now I'd like to speak to our current commercial operations in Europe, where we're continuing to broaden our footprint through awareness programs, clinic on-boarding and expansion of market access coverage. Continuing on the heels of a very strong fourth quarter, the first quarter saw further increase in sensor insertion rate by nearly 40%. We can see that patients are not necessarily waiting for the extended 180-day sensor, but instead are embracing the currently available 3-month product, as they recognize the value of this system. As we close out at a very good first quarter, we are now going to make the Eversense XL system available in all countries this quarter. Some countries are being staged versus others as a work through including the Eversense XL in the hospital tender or reimbursement process for each of the countries. Meanwhile, new creative campaigns have been developed supporting the unique and unparalleled benefits of the world's longest-term single-sensor use for our customers in Europe. As previously noted, we introduced Eversense XL in the largest diabetes technology conference in Europe in February at the Annual Advanced Technologies and Treatment for Diabetes meeting to a very warm reception. And we will continue to generate awareness, interest and adoption in the European market. On the reimbursement front, our partner, Roche has [indiscernible] another statutory health insurance commitment with a large payer in Germany. And with this, coverage for Eversense is now poised at over 80% of covered lives in the country. This is a great achievement. We had another validation of the utilization and benefits of the system. Coverage is the first step and in the coming days, they will be in discussions on annual pricing and payment processes to ensure those who are prescribed the product are granted access in a timely…

Thank you. [Operator Instructions] Our first question comes from Kyle Rose with Canaccord Genuity.

Hi. This is actually Brandon, in for Kyle. Thanks for taking my question. First, I just wanted to touch base on the 180-day, the XL, in the international markets. I appreciate the color you gave on those -- the transition going there. Can you just give a little bit more detail on how many countries now have XL introduced in them? And at what point do you expect the entire patient base in the OUS market to be transitioned to the 180-day sensor?

Yes, Brandon. This is Mirasol. We are currently in Sweden and in the U.K. for the Eversense XL. And what we have been doing in the first quarter is training the rest of the markets as well as gearing up for -- getting ready for the reimbursements in the hospital tender process. We do expect that by the end of this quarter, all 14 of our markets will have transitioned to Eversense XL and then at which point, our 90-day sensor will then be sunsetted.

That's very helpful. And if I could just have one more question. In regards to the iCGM, that's really exciting and no surprise given the accuracy of the Eversense system that you guys would fall under that category. And I guess just from a high level, do you think -- does this have the potential to, kind of, start moving forward time lines and other pipeline products in the U.S., is there potential for the 180-day, maybe even a year SensorWare to move forward? And then just to ducktail off of that, what might be the implications of the iCGM system for some of your artificial pancreas projects that you have going with Roche and TypeZero? Thank you.

Thanks, Brandon. As you suggest, I think the FDA has been very progressive here, giving out this class or badge, if you will, for products that meet certain performance characteristics, specifically around the accuracy, is intended to do just that. It's a mechanism whereby we can all traverse through the regulatory pathways a little bit more quickly. Not only to the first use, but also as we would've made changes in the future, an iCGM product would go under the Class 2 regulatory pathway, as opposed to the current Class 3, which is the PMA. So we do, certainly, expect that it will be able to accelerate for the entire field, and we would certainly participate in that. I do just want to remind us, although we're very excited about that opportunity and what the FDA has done, the first thing we do have to get through, of course, is our primary approval and the process is a PMA approval as is well underway and then a supplement to the iCGM category. So there still is a little bit of a work to do, but we're pretty excited about where we are with our first-generation product.

Our next question comes from Chris Pasquale with Guggenheim. Please go ahead.

Thanks. Tim, just to start off, a couple of questions about what you guys think the U.S. label is likely to look like here. Maybe just your latest thoughts in terms of number of required calibrations, warm-up period and whether or not, you think you'll have a dosing claim?

Yes. Thanks, Chris. We've very specifically set the dosing claim aside for the initial review. As you may recall, the actual approval came up while -- the approval came up for the first product while we were under review. And in conversations with the agency, we felt it was best to finish out the review, not start the clock again and get the primary approval without the dosing claim and then follow it very quickly. So that's still our strategy. We have had conversations with the agency. From the other label claims perspective, we expected to be pretty consistent with everything that we've talked to the FDA about. The product is currently calibrated twice per day, and we anticipate that will be maintained in the label. And then, it is 24 hours after insertion that you will start to get the live results. And as long as you stay in calibration, you'll continue to get those for the next 90 days.

That's helpful. And then, just on the preparations for the U.S. launch, how many actual sales reps do you have in place? And where do you want to be in 60 days when you go live, presumably?

Chris, its Mike Gill, thanks for the question. We're at about 15 reps right now hired. We want to double that by the end of the year. We have a big opportunity at the ADA as long as we're FDA-approved. So we're hopeful to add a few more by that time line, but the goal is to be double that by the end of the year.

Thanks.

Our next question comes from Rebecca Wang with Leerink.

Thanks. This is actually Rebecca, in for Danielle Antalffy. I was just wanting to ask, what is Senseonics market share in Europe and like what type of the chance do you say there? Do you think they will say similar trends in the U.S. once you launch the product domestically? Thank you.

Thanks, Rebecca. I don't think that we've done a formal market share survey yet. Remember that many of the region's countries or frankly, all of the region's countries are started out in a pilot mode as we got the infrastructure, training on insertion procedure and so forth. In regards to the ramp, you'll probably recall we're seeing something like 40% to 50% of our users are coming from Flash Glucose Monitoring. We're seeing about 25% to 30%, 35% coming from traditional transcutaneous sensors and we're seeing about 25% of our users coming new -- not previously made the decision to go on CGM, but now shown interest with it with the long-term implantable. And I would expect that our experience will be pretty similar to that in the U.S.

Okay, that's very helpful. And another question, now you've been launching Eversense XL for, like, more than a quarter, have you seen any notable difference in the adoption in the Eversense XL versus first-generation 90-day sensor?

I think, we're -- Rebecca, it's me Mirasol. Thanks for the message -- for the question. We are seeing a lot of excitement in the two countries that we are in now. In Sweden, for example, we're seeing a lot of the up tick and people wanting to convert immediately, actually, to the Eversense XL once they learn about the availability of the product. And as mentioned, the rest of the countries that we're going to go in, we're starting next week, in fact, in one of the markets. And so we expect that the adoption and the excitement will continue with the other countries as well.

All right. Thank you. That's very helpful.

Our next question comes from Jayson Bedford with Raymond James. Please go ahead.

Hi. Good afternoon. Thanks for taking the question. I guess just a few follow-ups here. On the 180-day device in Sweden, it seems like that's the geography where you're -- you've transitioned from the 90-day to the 180-day, how have the economics changed? And I'm wondering how the payers view the longer duration?

Yes. Jayson, again, it's Mirasol. Thanks for the question. It varies by the tender policies and what you've submitted. For the most part, however, the pricing is very similar from a per-day basis to the existing 90-day sensor, right? So that's what we've seen and we won some of the new tenders like the Stockholm tender specifically with the Eversense XL with a very similar pricing on a per day to the 90-day sensor.

Yes. I would say that's probably the one constant theme. The pricing pressure, of course, is always there and anywhere in health care, but it's really been for us, it's been focused on a per day price, which really doesn't transition between a 90 and a 180-day product.

Okay. That's encouraging and helpful. I think, Tim, you mentioned further increase in sensor insertion rate by nearly 40%, can you just give us a little context meaning you had 40% more insertions in the March quarter than you did in December quarter, is that the right way to interpret that comment?

Yes. I'll take that, Jayson. It's building off of -- we had a great fourth quarter, and we saw something very similar in the first quarter where we increased our installed base as well as the sensor placement increased by 40%.

Okay. So the 40% increase is a 40% increase in the installed base as well? I'm just wondering, what if there'd be some reinsertions?

No. The 40% is really sensor placement and almost not quite aside on the installed base, but still complete.

Okay. And then just one on, kind of the U.S. pathway here. On the [indiscernible] dosing claim, what are the regulatory paths here? It's a little unclear. Do you have to run a small trial for those or can you use existing data to support those labels?

It's our believe, at this point, that an additional trial will not be required. But, Jayson, there is a little bit of flux as you can imagine with the announcement of these new iCGM controls or guide marks, if you will. There is the potential that with the iCGM will come some consideration for dosing. So we've got to go through and review that in detail with the agency as to exactly what the right strategy is. Is it a step-through dosing, which we don't believe we need to do a clinical trial for, or is it the iCGM, which contains not only analytical controls, but also definition around a communication pathway, a description around the manufacturing controls that you have in place, which is a little bit more comprehensive, if you will, than just dosing itself. But I don't think either one of those will require an additional clinical study.

All right. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Tim Goodnow for any closing remarks.

Once again, we'd like to thank folks for your participation here on a Thursday evening. We've got some exciting times in front of us. As you can imagine, a very lot going on at Senseonics, as we prepare to enter this next chapter of our life and we look forward to continuing to work with the agency and driving this thing across the goal line. So with that, thanks for your time and we look forward to updating you next quarter. Take care.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.