Senseonics Holdings, Inc. (SENS) Q3 2018 Earnings Report, Transcript and Summary

Good afternoon, everyone, and welcome to the Senseonics Third Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference call over to Mr. Don Elsey, Chief Financial Officer. Sir, please go ahead.

Thank you very much, and welcome to the third 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 US 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 website at www.senseonics.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason except as required by law. With that, I will now turn the call over to Tim Goodnow. Tim?

Thank you, Don. The third quarter saw the biggest milestone for the company to date, the US commercialization of the Eversense continuous glucose monitoring system. We began clinic onboarding and first patient insertions at the end of July and have had very positive real-world feedback from our initial users on the conveniences and benefits of Eversense. We're excited to share with you our early experiences not only with these patients, but with the healthcare providers and payers who are motivated and eager to bring this life-changing technology to people with diabetes. In the past few months, we have learned a tremendous amount about the processes to integrate Eversense into the field and have started to establish best practices, which can be replicated as we scale. These are focused on integrating the product and procedures into clinical practices by incorporating a seamless process for clinician certification, patient insertions as well as establishing clinical and reimbursement support. To speak to our early progress, I'll ask Mike Gill, our Vice President and General Manager of the US region, to provide more detail on the initial US launch and to provide some early details of the successes that we are having.

Thanks, Tim. Needless to say, since our last conference call, we have been incredibly busy. Bringing Eversense into the US market is an amazing and transformational experience. We are seeing strong interest and demand from both the healthcare provider community and from patients. Our dialogues range from answering simple training and technical questions to certifying physicians on their first insertions or driving payer coverage policies to celebrating patient sensor removals and reinsertions 90 days later. The Eversense Mobile Clinic continues to create the strong initial awareness that we anticipated. To remind you, the Eversense Mobile Clinic, or EMC, is a state-of-the-art diabetes clinic and product training suite. It is focused on the technology, procedure with didactic and hands-on proctoring, which has proven to be a very efficient method for initial training. We have taken the EMC to over 20 major cities and have completed initial procedure training for approximately 2,000 attendees, and it has been a monumental tool to begin the educational process on Eversense and bring healthcare providers up the learning curve rapidly. Our initial focus remains on the top-300 physicians across the country. Some of our early successes include institutions such as the Barbara Davis Center, Atlanta Diabetes Associates, University of Washington, A&M Diabetes, the Grunberger Diabetes Institute, as well as numerous other practices throughout the United States. Certifying physicians on the procedure is straightforward and endocrinologists are adopting it with ease. Many of our early clinicians have said they expect Eversense to become a major part of their practice and it is rejuvenating their ability to help patients with a better long-term CGM option. The priority of our commercial team is focused on the healthcare providers and practices that are ready to adopt Eversense into their practice today. This means that immediately following our initial didactic and hands-on training, clinicians entered interested patients into our database, which we refer to as the Eversense Ordering System. Once payers have approved Eversense for several patients, the clinician is ready to schedule their first insertions so they can be certified. From the patient side, interest is robust and growing. In the past, roughly, 3 months, we have amassed over 600 patients in our Eversense Ordering System with strong month-over-month growth. Patients who have had Eversense inserted are primarily existing CGM patients, who desire increased freedom and flexibility with advanced long-term CGM. We see patients positively experiencing the convenience of Eversense and many did not fully appreciate the lifestyle flexibility Eversense could provide until they were inserted. One patient said that she went on vacation and all she took was a pack of adhesives. No more boxes of sensors or CGM insertion devices. She went on to say she removed her transmitter to wear a sleeveless dress and she put it back on for night time protection. She went on to say that it was so simple, "It's exactly how I should be able to live my life." Turning to payer access and coverage. As we have mentioned on previous calls, obtaining reimbursement and access will be a journey. What we do know is that reimbursement and coverage are key to certifying clinicians and our patient ramp. There are several different permutations of how the payer landscape is unfolding and I will highlight three of them here. First, we are pleased to recently announce the Aetna win, the third-largest US national payer covering nearly 22 million Americans. They have added Eversense to the clinical policy bulletin. Aetna has decided to pay for Eversense through a similar process as traditional CGM systems. In this case, a patient would access Eversense through his or her durable medical equipment benefit. The physician then would submit his or her own claim for placing Eversense using the Eversense CPT codes. This represents one payer approach. Second, while our overarching strategy is to create multiple channels for sales of Eversense, we do believe there is an optimized strategy in which Eversense will be covered using a bundled approach with the Eversense CPT codes. In this second scenario, the cost of the Eversense sensor and smart transmitter will be combined with the cost of the placement fee by the clinician into one payment then back to the healthcare provider. This allows for a more streamlined system for patients to receive CGM by removing variability and working through shipments of devices, multiple copay, collection points and potentially multiple claim submission scenarios. For example, of the payers that have adopted this more streamlined approach, Blue Cross Blue Shield of Minnesota and Horizon of New Jersey; they are bundling the cost of Eversense with the physician placement fee and allow for the HCP to govern the CGM acquisition process right in the clinic. We believe the broader payer community will eventually embrace this simplified approach as Blue Cross of Minnesota and Horizon New Jersey have, in turn, enabling Eversense to be truly disruptive in the market and further differentiating it from other CGMs through the economic value proposition. We recognize this is a transformational opportunity and it will take time to work with payers on rethinking their payment process for CGM. And thirdly, there are one-off scenarios in which the payer has approved Eversense through the prior authorization process, but has not clearly given direction on the payment path. In many cases, long-term CGM is new to the payer and they, too, have to operationalize around Eversense. We expect consistent utilization of Eversense to eventually require these payers to determine coverage policy and payment channel. All three of these payer scenarios are yielding approvals and shipments. Additionally, we have been pleased to see in some of our early payer wins the acceptance of combining both product cost and physician service fee in one payment that is ultimately at parity with the cost of other real-time CGM systems. Yes, there is an inherent implementation process payers follow that can take some time and includes posting their coverage policies, addressing their claims systems and setting appropriate payment. We expect coverage, coding and payment to continue to evolve with Eversense. In our view, the benefit that payers see in Eversense is the outstanding adherence wear time from our users. In our real-world European user data, 87% of Eversense patients used the system more than 80% of the time, demonstrating much greater adherence than the broader CGM patient populations. The second aspect that is appealing to payers is the advantage of providing our product and the physician time through one CPT code. Both of these elements have been important to some of early payer wins. Now turning to implementing Eversense into clinical practices. We continue to learn ways to integrate Eversense into clinics. Insertion and removal workflow is being optimized and best practices are being formed. We are working with many of the early adopters to scale Eversense practice integration with a keen focus on exceptional outcomes for the provider and the patient. In centers, who have been certified, we see an immediate acceleration of patients into our ordering process system. Certainly, having the expanded indication for NPs and PAs broadens the opportunity for more sensors to be inserted per practice. As I mentioned earlier, the desire for clinics to adopt Eversense and rejuvenate their practices has been encouragingly high. In our early days in the field, Eversense is proving to be transformational to many of the stakeholders ranging from healthcare providers and patients to the payer community, and is providing enormous opportunity for clinical and economic value in the diabetes market. We have made significant progress in a short period of time and we are excited to be increasing access to our powerful technology for people with diabetes. With that, I'll turn it back to Tim.

Thank you, Mike. I am pleased with the early execution of the organization as we build a solid foundation towards achieving our objective of ensuring an outstanding experience with Eversense. As Mike indicated, patient interest is growing rapidly. In the first 12 weeks, we have over 600 patients in our ordering system database, who, with their doctors, have requested the product. We are working with the healthcare providers on obtaining coverage and implementing Eversense into their practices to get these patients started on the product. We've referenced the certification. We were pleased to announce the approval from the FDA to expand our product labeling to allow additional providers, including nurse practitioners and physician assistants, to do the insertions and removals. The interest from these professionals coupled with high patient interest is what sets the stage for the future success of Eversense. Our primary goals as we begin the rollout are to schedule introductory training sessions at select clinician practices, to grow our patient base, expand our pool of certified clinicians and continue focusing on payer coverage. With that in mind, I would like to outline some of the metrics we are using as we plan our growth and prospects in the coming year in the United States. First, we are ramping our sales organization from 15 reps in the third quarter to 25 in this fourth quarter. We expect to continue to grow the organization to approximately 50 sales professionals during the calendar year, and with the sales team in place, it is our plan to certify over 500 healthcare providers by the end of 2019. This means that in the first half of next year, we will be calling on offices outside of the top-300 prescribers, where we will now also have the ability to certify nurse practitioners and physician assistants as well. Second, we believe that with the collective efforts of our growing sales force expanding the number of certified providers coupled with our continued reimbursement progress, we will drive expansion in our patient base. We expect to ramp the number of new patients to grow gradually for the first 6 to 9 months with more meaningful acceleration in the second half of 2019. From this, our goal is to obtain approximately 10,000 patients on Eversense by the end of 2019. Similar to our experience in Europe, we do not expect our US ramp next year to be linear. Rather, we expect our sensor utilization to grow more exponentially with meaningfully more patient starts in the second half as compared to the first half of the year. Additionally and certainly important for us to meeting our revenue ramp, are senor reinsertion rates. Here, we believe the experience we are seeing in Europe is our best guide. And as we have noted, reinsertion of the second sensor happens at about a 75% rate with subsequent reinsertions at 90% or so. We therefore expect a blended reinsertion rate of the upper 70% range as a proportionally larger number of users will be on their first sensor in 2019. Finally, turning to reimbursement, we are primed and actively working to gain coverage for Eversense, targeting at least 100 million covered lives by the end of 2019 and onto 200-plus million lives in the following year. Based on our expectations, we modeled 2019 total pricing to remain on par with the market and we are encouraged to see payment to the professionals being included in this price. With that, we now turn to our recent experience in Europe and developments there. Our distribution partners continued with steady growth in the third quarter with our new patient base up over 300% and sensor procedures up 500% versus the same time last year. We now have nearly 900 providers trained on the Eversense procedure across 14 countries outside the United States. All of our European Eversense users are now on the extended 180-day Eversense XL. We estimate that by the end of the year, our installed base will grow to approximately 5,500 users in Europe. As we grow in each of our markets, we are seeing some shift in our user base. For example, in Germany, which has the largest installed base of Eversense users, about half of our new users are also new to CGM now. This is in contrast to our earlier sets of users, which were primarily experienced or former CGM users. Additionally, we've been pleasantly surprised that in Italy, where CGM can be prescribed with pumps in all regions, we are attracting a healthy portion of MDI patients. We estimate that our installed base is split 60:40 between pumpers and those that inject. These examples bode well as Type 1 patients and their physicians become more aware of the benefits of CGM and specifically the benefits of long-term and convenient implantable CGM systems such as Eversense. The opportunity to grow within each country and across the different patient populations is strong. Like in the US, market access is key to growing our base, and we are working diligently with our partners, Roche and Rubin Medical, to gain positive coverage and payment decisions with commercial payers and regional hospital tenders. Now I'd like to turn back to the US to discuss our pipeline and the work we are doing to advance our next-generation systems. Our priority in the US is to expand the Eversense label to include a non-injunctive claim as well as calibration reduction. We expect to accomplish this through a PMA supplement that will be in front of the Agency in coming weeks. As I've previously mentioned, the expanded label allowing additional healthcare providers to perform the insertions/removals will offer offices flexibility and capacity at fitting these procedures into their clinical practices. We are also pleased to announce that the Agency has approved our IDE to start the 180-day Eversense system clinical study. We are currently working through study site logistics and the requested protocol updates and expect to start the insertions within the next couple of months. On our two artificial pancreas initiatives, we can update that Beta Bionics has completed the first phase of the iLet with Eversense study in adults with Type 1 diabetes. Data collection and analysis are underway with results expected to be published next year. We are also continuing towards the start of the NIH-funded IDCL trial, which will be performed at three sites in France and Italy using the Eversense sensor with the Accu-Chek pump and TypeZero algorithm. Product development was completed earlier in the year and the study is currently under review by the ethics committees in each country. Pending approvals, the study is expected to begin before the end of the year. With this, I'll now turn the call over to Don to review our financials and to provide some commentary on the modeling implications of our early learnings now that we have some experience from the US launch.

Thank you, Tim. For the three months ended September 30, 2018, we generated $5.2 million in revenue compared to $2.1 million in the third quarter of 2017. The increase in revenue was driven by increased sales in Europe with sales to the US representing $530,000 in the third quarter. For the three months ended September 30, 2018, total operating expense increased by $6.4 million to $23 million from Q3 2017. This increase was driven primarily by a $5.8 million increase in sales and marketing expense as we prepared for US launch and a $1.2 million increase in G&A driven by miscellaneous administrative costs in support of the US launch, offset by a reduction in R&D spending of $2.4 million. Compared to the three months ended June 30, 2018 total operating expense increased by $2.9 million driven by the formation of the US sales team. For the three months ended September 30, 2018, total net loss was $31.9 million or $0.18 per share compared to $17.4 million or $0.13 per share in the third quarter of 2017. Compared to the three months ended June 30, 2018 total net loss decreased by $600,000 primarily driven by the change in fair value of the embedded derivative associated with our convertible note. If the impact of the embedded derivative is removed, the total net loss for Q3 was $24.4 million or $0.14 per share. The third quarter 2018 net loss per share was based on 176.3 million weighted-average shares outstanding compared to 128.9 million weighted-average shares outstanding in the third quarter of 2017. I'd like to now turn to our balance sheet at quarter end. At the end of the third quarter, our cash, cash equivalents and marketable securities were $163 million. We remain on track to achieve full-year 2018 revenue in the range of $19 million to $21 million. In factoring in our early US commercial traction and process that Mike discussed, as well as the metrics by which we are measuring ourselves in both the US and in Europe that Tim outlined, I want to provide a couple of comments on what this means for modeling purposes. We expect US contribution to be roughly 10% of total revenues in the fourth quarter of 2018. Turning to some early thoughts on 2019, we expect our revenue ramp to mirror the patient insertion rate that Tim outlined. Specifically, we anticipate realizing less than 25% of revenues in the first half and over 75% in the second half of 2019. Turning to Europe, Roche continues to be a strong partner and we are in discussions with them on the structure and economics of extending our distribution agreement, which expires this year. Both companies are committed to increasing our market share in Europe and providing the highly differentiated Eversense system to more people in the key European markets. We anticipate updating the status of these discussions and we look forward to providing full 2019 guidance on our year-end call early next year. I will now turn the call back over to Tim.

Thank you, Don. We are excited to be in the commercial launch stage in the US, and importantly, hearing from our customers and clinicians with their thoughts and interest in Eversense. Their feedback on how we bring it to people with diabetes is enlightening and demonstrates their desire to see us and the product become successful. An extended-duration implantable sensor has long been the dream for many people with diabetes. And then although we've only been at this for about three months, the initial response is both affirming and motivating. In a short time, we have operationalized the aspect of product delivery, sales rep training, healthcare provider education and certification, office integration and payer negotiations. As such, we are well-positioned to further build this business, execute our rollout strategies and to better forecast our sales ramp. Lastly, progress in product development has brought us an important extended label claim as well as a clear path to bringing the 180-day product to the United States. We are looking forward to enrolling patients in this important trial. We also reviewed our favorable human data during this past quarter on our 365-day version of the sensor. Not only does this offer further differentiation in our already market-leading sensor life, it opens up real opportunities for product concepts for people with Type 2 diabetes not on insulin. We are excited to see this advance on the horizon. This concludes our prepared remarks. Joining us for questions are Mukul Jain, our Chief Operating Officer; Mirasol Panlilio, Vice President and General Manager of Global Commercial Operations. Operator, let's open up the line for questions.

[Operator Instructions] And our first question today comes from Alex Nowak from Craig-Hallum Capital Group. Please go ahead with your question.

Great. Good afternoon everyone. I've been jumping around between a few different calls. So apologies if I missed this in the prepared remarks. But this is, I guess, for both Don and Tim. It's always hard to model out a new device launch, but can you give us any indication at the end of October how many practices did you have trained and performing the implant, and if you can even go as granular as saying how many implants that they're doing per week? Just anything to give us some confidence we can start to look at the '19 ramp and start to put our numbers and make sure it makes sense.

Sure, Alex. And we really are trying to, now that we've got three months of experience, be able to give some better vision at it. We are very early in the process here in 2019, which is why we feel it's best. We did reference that we anticipate that we will be at the 10,000 patient mark at the end of 2019. And we are ramping to that rate with the predominance of that coming in the second half as we get greater market penetration, we get some of the new sales reps up to date and we get, most importantly, the reimbursement in place. So those are the key focus areas for us. And much like we saw in Europe, it is much more back-end loaded because not only do you get that continued build of the organization with the sales reps and reimbursements coming, but you also start to then get a much more meaningful sense of reinsertion. So that's what we're looking at, at this point. We are still early in getting started here in the US, but we're well on scale to hit that important 10,000 patient point in just about five quarters.

Okay, that's great. And then on Aetna reimbursement, was pricing for Aetna, was that in line with your expectations, around, call it, $10 a day, and what are they paying for the implant/explant?

It is about $10 a day, as we have talked. It's currently where the market is. As you recall, that's the total price, which includes the price for the device, but also the cost associated with the insertion as well. So we're pleased to see that that pricing continues to be on market, and we're also pleased to see whether they do it through – what Aetna has done, which is payment through the DME HCPCS codes, plus payment to the doctor under our CPT codes or, as Mike said, the Blue Cross Blue Shield payer, Horizon in Minnesota, that are doing it bundled and including that in their payments, but all are coming in at about where the market is, as you suggest, about $10 a day.

Okay, that's great to hear. And then last for me just on the Roche distribution agreement. I think that expires at the end of this year. So with two months left any update there?

We don't have an update yet, Alex. We're continuing to be in good healthy conversations with Roche. We'll be in good shape to give you an update at the next call.

Okay, got it. Thanks and congrats on the progress.

Thank you.

Our next question comes from Kyle Bauser from Dougherty and Company. Please go ahead with your question.

Hi, everyone. Can you hear me okay?

Can Kyle. Thank you.

Great progress here. Obviously, some great news on the FDA allowing NPs and PAs to implant Eversense, can you talk again just on how quickly you're able to train a clinician as well as the number of Senseonic staff members that are doing the training?

Sure. We are early in the process, as we've said. We just recently expanded to 25 reps. So we really have the 15 that are up and really in full stride today. I'm going to ask Mike to speak to the process because he's literally living it every day. This is a different product, right, in the CGM space and therefore it takes a little bit different preparation and execution to get it to our customers.

Thanks for the question, Kyle. Just to answer your question specifically, we have the 25 reps and then 15 clinical in the field that are training physicians. There is a step process associated with getting a physician certified. That means they're certified when they've actually done several patients of their own. And of course, to do several patients of their own, they have to get that authorization that I talked about in the prepared comments, whether it's from Aetna or Horizon or Blue Cross of Minnesota or otherwise. Once they receive that authorization then they can actually do their procedure with their patients. The ramp time in terms of physician certification is a little bit different for each one of these physicians depending on how quickly they get the approval from the insurance company. But once they do get the approval, they're scheduling. The patients are excited to be scheduled. And, as I said in my prepared comments, the time it takes to actually do the procedure, we've been delighted at how quickly the endocrinologists are picking up this procedure.

Thanks. That's helpful. And the PRECISE II pivotal trial for the 90-day indication, that enrolled, I think, 90 adults, Type 1 or 2, at eight centers, are those parameters going to be similar to the 180-day IDE, and when do you believe this trial will be done and rolling, roughly?

Thanks Kyle. I'm going to let Mukul, who runs our regulatory program, speak to that.

Hi, Kyle. We have the approval to start enrollment. We are looking at 125 patients enrollment for the 180-day trial. And we're expecting Q1 – by the end of Q1 to be done with the enrollment.

That's great. And then just quickly, lastly, I've heard actually from some competitors, that one of the benefits of Eversense is that it's MRI-safe unlike other CGMs. I know this is a contra-indication. You're not advising this. But this type of feature could be quite relevant particularly as diabetes is, of course, associated with a lot of comorbidities that require advanced imaging, any thoughts here? And is this an indication you're exploring for Eversense?

It's a great recognition, Kyle. The key advantage, in many cases, of course, is the ability to take the transmitter off. And obviously that would happen in an MRI. There still is a sensor there and we've done quite a bit of investigation and we have actually submitted for that conditional safe indication, but we do not, as of yet, have it. So certainly no guarantees. We're working towards it. But we do realize it's an important aspect. A person has an emergency. They don't have time to really go through a thorough process. They need to get in and have it evaluated. So the MRI safety is very important for us and we're actively working on it. And I would expect in the next quarter or two, we'll have some good progress in that space.

Okay, great. Thanks for taking the question. Great progress.

Our next question comes from Danielle Antalffy from Leerink Partners. Please go ahead with your question.

Hi, good afternoon. Thanks so much for taking the question and congrats on a really strong quarter. And actually, I wanted to touch on the performance in the quarter, you came in ahead of our estimates in Europe. I think a very strong performance. And I was hoping to get a little bit more color. So the first question is now with the 180-day sensor being the primary – or I guess only product you're selling in Europe, do you think you're seeing an inflection in adoption there? Has that made a big difference in either, A, new patient adds or, B, physicians' willingness to put patients on the Eversense? And then I have one follow-up.

Yes. Hi, Danielle. It's Mirasol. We definitely see an uptake with the Eversense XL. What we're hearing is people are really happy with the three-month sensor and certainly with the six-month sensor even more so. When you look at our increase in the installed base from last year, as well as sensor insertion, that's really all due to the Eversense XL. We're continuing with increasing the awareness throughout all of Europe. Especially strong, probably, in Germany where they're doing a lot with promoting the 180-day product. So seeing really a lot of good uptake and maybe some of that really is just because also we've been in Europe now for two years. So it's just natural. But certainly Eversense XL is doing really well for us.

Okay, got it. And then my one follow-up on Europe, and then I have a US question, is around – so, Tim, you mentioned 50% or so, I think you said, of patients now in Germany, at least, are new to CGM therapy. Of the other 50% that are on or prior CGM users, any sense of who you're taking those patients from?

Yes, similar to what we saw from the initial user base, but probably more now Libre. We estimate that half of that existing CGM sensor users that we're attracting, probably three out of four of those are Libre users.

Okay, got it. And then one quick follow-up on the US, just curious, you mentioned pricing consistent with the market. Curious about how you're thinking of the durability of that pricing because one of your competitors did report earlier this week and talked about a 6 point headwind because of pricing. Now they are shifting to the pharmacy so obviously different dynamics. But just curious on your view over the medium term, I guess I'd say, on the durability of that $10 per day. Thank you so much guys.

Sure, Danielle. We are right there as well. We do not, as you suggest, we don't have the pharmacy pricing pressure as there is no alternative to putting an implantable product through the pharmacy. We are seeing the market continue to hold for us for now, but as we have talked about, this is a healthcare system product. It is certainly growing very rapidly and will continue to be – put pricing pressure as more and more people go onto continuous glucose monitoring. So we do anticipate and we have modeled that pricing dynamic decreasing over time not only mid-term, but the long-term as well. But certainly for 2019, we're pretty comfortable with what we see and what we've modeled. It's at about that $10 a day total, split between the product and the prescriber, is holding for us.

Thank you so much.

Our next question comes from [Matt Vizmon] from Raymond James. Please go ahead with your question.

This is [Matt] on for Jason Bedford. So my question is around the payer dynamic. So what is the primary source of pushback that you're hearing from them in your negotiations? And then I have one follow-up.

Hi, [Matt], it is Mike Gill. Really, there hasn't been much pushback in terms of the discussions we've had. As I said, we see the lightbulb going on for payers that they have this idea around adherence being important across all of the medications and the devices that they administer for their members. If you were to say that there was one big one, it would be a randomized control trial with multiple subjects. But we've kind of been – and personally, I've been down that path before where we have the merits of our product and certainly our clinical trials for the FDA approval to show and talk through with the payers. But really that has been the only big, if you will, speed bump that we've seen. And as you can imagine, Aetna reviews policy very carefully, and they saw the merits of Eversense to offer to their members, as Blue Cross of Minnesota, as well as New Jersey. And then, as I had said, we're also seeing these one-off scenarios where there's no published policy, but they are approving and then that allows us to have a conversation with that payer once they're putting numbers on Eversense. And we believe because of the utilization we're seeing by providers across the nation that we'll be able to have that conversation as the approvals and the shipments go into their members.

Great. So my second question is guys on the distribution network. So do you guys feel that it's largely set up at this point or do you think you need to sign other distributors? And any update on how many you have now would be great.

Yes. We have several right now. They are a lot of the other DME suppliers that other manufacturers of CGM use. And then we have a few suppliers for the CPT code because, as you can imagine, [indiscernible] right to the physician office. We'll add more distributors as we have reps hired in markets and then we get those coverage policies. Some distributors do have contracts with payers regionally, and based on a coverage policy within a certain region, that actual strategic fulfillment agent may be a distributor of choice or an agent of choice that we choose. But it will be strategic and we'll have careful consideration in terms of those distributors or strategic fulfillment agents that we bring on.

Great. Thank you.

And our next question comes from Sean Lavin from BTIG. Please go ahead with your question.

Hi, great. It's Marie Thibault on for Sean. Thanks for taking the question. I did want to just start with the nurse practitioner and PA expansion. It sounds like an exciting opportunity. But I want to get a sense of whether the inability earlier in the quarter to have this approval was an obstacle to adoption in any way. I mean is there a way to kind of quantify, is there a certain percentage of the base that this opens up? I just wanted to get a sense of what that impact could be down the road.

It certainly helps, Marie, but, quite frankly, we – I don't know how many days it was, but it literally was measured in just a few days after approval that we submitted this. We had conversations during the review and, quite frankly, it very much happens when you're in a primary PMA review, any additional questions that come up, it's very typical to say, "Okay, let's set that aside and come back to it as a supplement," which is exactly what we did with this label extension here. So it went in very, very quickly and that's why it's one of the first approvals that we got here essentially 120 days after approval on a 90-day review. So the story behind that is, quite frankly, we have always anticipated that we would have nurse practitioners and physician's assistants in the domain set for us in doing the insertions. So although there was a little bit of time, right, this 90-days that they weren't available to do it, as Mike indicated, this is a pretty significant process for us to get people up and running. It can be 60 to 90 days to get it into the portal, get it scheduled, right, get the insurance approval to go through. If it's Aetna, there's no pre-auth so it goes pretty quick, but if it's one of those others kind of one-offs, as Mike has indicated, it's typically done with a prior authorization, additional documentation that needs to be provided. So I really don't think it had any material impact in our Q3. But obviously, just as you're launching, it's pretty early days for us. So it really sets us up. And as you heard me say, we really expect this to take off in the second half of 2019, right, because it's at that point that you're really going to be getting not only new patient additions, of course, but then your reinsertion rates really start to kick in. So it's a small number, but an expected small number here just as we launch out of the gate.

That makes a lot of sense. Congrats on that. Just two quick follow-ups on the Aetna win and then on Roche. First on Aetna, how, if anything, is that impacting the conversations you're having with other payers? I just am curious about kind of the behind-the-scenes dynamics on those conversations.

Yes, Marie. It's Mike. It certainly helps. They're the third-largest payer. They have a very stringent coverage policy review process, without question. They choose the therapies that they're going to offer their members very wisely. It does help. We have communicated obviously in our press releases. And also anytime we're talking to medical directors or policymakers at other health plans, we certainly do reference Aetna as an insurance company that's covering us. In addition to that, it certainly helps with, because they're a nationwide insurance plan, we actually know the areas in which they have stronger membership and stronger members in the market. And that's certainly where we will deploy our resources based on those areas where Aetna is very strong.

Great. And then lastly on Roche, is it foolish of me, back in September, late September, I saw a press release, Roche and Senseonics working together to integrate on data integration with Eversense and Roche's digital diabetes management solution. And that was set to start being available to patients in 2019, is it foolish to read this as a positive for the relationship, positive for future working together?

No. We have a very good and strong relationship with Roche. They've been our partner for, now, coming up on three years. And prior to that, they were involved as venture investors in the early version of the organization. So we do have a long relationship with them. We're continuing to work on a contracted extension for our relationship. And as you can imagine, any one of those conversations is always going to come down to things like dollars and cents. So we're going to continue to provide a great product. We're going to push them. They're going to push us. But we're going to have the right answer for the business as we go forward. And we'll update you on that as we get to it.

Great. Thanks for the time.

Our next question comes from Kyle Rose from Canaccord. Please go ahead with your question.

Great. Thank you very much for taking the questions. Can you hear me all right?

Kyle, how are you?

I am well. Thank you, and I apologize in advance. We're jumping between a few calls here so if I ask anything repetitive, you'll have to forgive me. I just wanted to kind of ask you another question on Roche. I guess obviously we can see the contribution there. I mean great quarter-over-quarter growth particularly from Roche. So just kind of trying to understand when does that agreement actually expire? And how should we think about when we should see an extension there or a decision for moving forward?

So the contracted agreement, as you know or to remind you – we think about it every day, I'm sure you don't – does run through this calendar year. We have been in conversations with Roche on the concepts for renewal of it and we continue to do that. But as you can imagine, Roche is a very large company with a lot of things to do and we have a lot of priorities as well. So we're going to continue to work on it. And it's my expectation, Kyle, that this will go right up until the very end. But we are actively working on it and we will come out with the best solution for Senseonics, and they're going to focus on the best solution for Roche. But we'll get it done and we'll report on it on our next call.

Okay, great. And then just touching on some of the partnerships, I mean there's a big focus on this space on some of the next-generation AP programs and decision support type algorithms. Could you just remind us where you stand as far as from a partnership standpoint and how we should think about obviously you're getting on the market in a commercial sense in the US, but more broadly as being a supplier and an innovative partner with some of these maybe smaller or private partnerships.

Sure. So we have two that are active in clinical study. Excuse me, one that's actually in clinical study and we completed the first phase of clinical testing with Beta Bionics. So that's the combination of their insulin pump with the Eversense CGM. Those results will be published next year. And then we have the NIH-funded IDCL trial. The European arm is currently under ethics committee review. All of the product development activities are finished and Roche is spearheading that. It's, again, a combination of the Accu-Chek pump with the TypeZero control algorithm and the Eversense sensor. And we're anticipating that as soon as we get ethics committee approval, we're going to get that trial started, which could come hopefully as late as the end of this year.

And then on the regulatory side in the US, I'm not sure if you mentioned it, but in the past you've talked about Eversense meeting all the criteria to achieve an iCGM designation. Just kind of wondered if you can give us an update on when you think you'll have that designation and how that could potentially impact your R&D pipeline and the cadence of getting newer products to the market.

Sure. We recognize iCGM certainly being an opportunity for this space and for us as well. And with our strong analytical accuracy, we feel really good about it. With that said, however, we do prioritize the 180-day product at a higher rate, which is why we worked on that and as we reported, we did get the IDE approval to start that clinical trial. So that's a significant amount of our regulatory resources. The other thing that's also very important to us is calibration reduction, right? So we are working in that vein as well. And the dosing claim, right? So all four of those are very, very big and important and we have decided to prioritize the 180-day right at the top of the list. I'll share with you that our very good regulatory team, as evidenced by the success we have, is comprised of two people. So they're great, but they're at capacity. We'll certainly be getting to iCGM, but it is going to have to come at the resource level that we can serve it.

Well, it sounds like they will be busy for a while, but thank you very much and I appreciate you taking the question.

Thank you, Kyle.

And ladies and gentlemen, at this time, we have reached the end of today's question-and-answer session. I'd like to turn the conference call back over to management for any closing remarks.

Well, we'd like to thank everyone for their participation and for joining us this evening, your continued interest in Senseonics. Have a very good evening. Thank you.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.