Senseonics Holdings, Inc. (SENS) Q4 2018 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to today’s Senseonics Fourth Quarter 2018 Earnings Conference. Today’s conference is being recorded. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Philip Taylor, Please go ahead.

Thank you very much, and welcome to the Senseonics fourth quarter 2018 earnings call. This is Philip Taylor from the Gilmartin Group. Before we begin today, let me remind you that the Company's remarks include forward-looking statements. These statements reflect management's expectations about future events, operating plans, regulatory matters, product enhancements, Company performance and other matters and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from those expressed or implied by any of 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. Also on this call, we will be discussing our full year 2019 revenue guidance which was also included in the press release. In light of Regulation FD, we advice you that it is Senseonics’ policy not to comment on our financial guidance other than in public communications. Joining me from Senseonics are Tim Goodnow, President and CEO; and Jon Isaacson, CFO. With that, I would like to turn the call over to Tim Goodnow. President and CEO. Tim?

Thank you, Trip, and thank you all for joining this afternoon. Today, I’ll provide a brief update on our business, first discussing developments and initiatives in the United States and then sharing progress on the regulatory pipeline in European fronts. Jon will provide details on our financial results and outlook and then, we will open up the call to questions. First, let me begin, as we released last week, I am pleased to welcome Dr. Fran Kaufman to Senseonics as our new Chief Medical Officer. For those of you who don’t know, Fran is one of the leading clinical endocrinologists here at home and abroad and we are thrilled to have her on board. She is a past President of the American Diabetes Association, and has published extensively in clinical and scientific journals throughout her career. Fran is avid patient advocate and continues to treat patients with diabetes. She joined us after spending a number of years in a similar role for a large global diabetes company. We are confident that her knowledge, experience and leadership will have a positive impact on our success and we are excited that she is on board. As we spoke about on our last call, in our first half year on the market with Eversense in the United States, we’ve made significant inroads with patients, payors and providers and we continue to hear positive feedback from all three groups. Our top priority remains the same as we work diligently to ensure convenient reimbursement of our systems for all people with diabetes. Specifically, in regards to the U.S., we are excited about the early physician and patient interest in Eversense and with the increasing awareness we have experienced in our approval. Material growth in the CGM market is evident as more people with diabetes are ready to move away from the fingerstick testing and utilize advance technologies to make managing their disease easier and more effective whether it be the longer sensor duration, on-body vibration alerts or additional flexibility, patients are choosing Eversense for its ability to more conveniently aid their diabetes management. As a key component of our efforts to increase patient access to the product and to support patient reimbursements, we are excited to announce today the Eversense patient access bridge program. We are implementing this program to assist those patients and providers who access to the Eversense system is delayed by insurance coverage. We expect to roll this program out over the next months. In parallel, we will continue to work with the payors to gain positive coverage decisions as we seek to expand our conversion rate from patient interest to inserted sensors, to reimbursed product. As this new initiative unfolds, we expect it will impact our revenue recognition and cause some uncertainty in its timing. We anticipate that as a result of the program, our reported revenue for 2019 will be impacted. We are therefore now adjusting our guidance to include the influence of this investment and the likely timing impact on our ability to recognize revenue in calendar year 2019. We are excited about this program and we view it as an appropriate and important investment in building the value of the business. Our focus on building this company continues to be on doing what’s right for patients and this effort continues in that spirit by expanding the population of patients who are able to use the product and providing broader access to patients with many different types of insurance coverage. We expect this investment to pay dividends in 2020 and beyond by gaining patients who want to use Eversense and by establishing an important foundation for the growth of the product. As we work to develop these expansion programs, we are having successes with coverage in parallel throughout 2018, we received positive decision from Aetna, Horizon, Blue Cross Blue Shield of New Jersey, Blue Cross Blue Shield of Minnesota to name a few. That momentum has continued in 2019 with additional coverage from TRICARE and the VA and other regional payors. We are on track to see additional payor wins in 2019 driving forward the current 16 million covered lives towards our first year goal of securing 100 million covered lives by the end of this year. Regarding payors currently not covering Eversense or initially cost to find the product is experimental and investigational. These insurers have at the outside label to Eversense that E&I which is typical course for the early launch of new medical technologies. This is a mechanism that the payor will use to hold off reimbursing a new medical product until they feel there was enough information and interest in the product to approve it for payments. We have described this reimbursement process as a journey as there are multiple approaches to a successful outcome and we anticipate continued progress throughout the balance of 2019 and 2020. As we have noted, we are making progress on multiple fronts in securing expanded coverage and the ongoing discussions we are having continue to demonstrate the strong clinical benefit of Eversense. We expect these efforts will in time result in positive coverage decisions by the vast majority of payors. While each insurance company runs their own process and evaluation at their own pace, we respect their process and we will continually work with them to demonstrate the compelling value of our long-term sensor. Specific actions to attain fair coverage in addition to an announced patient access program include engaging with diabetes key opinion leaders and professional organizations like the JDRF as advocates of an implantable system and expanded patient choice. We are also actively building the Eversense clinical data publication set in the Scientific Literature. As appropriate, we have also been working with patients to actively submit claim and appeals for reimbursement of the system. While this strategy has been effective in us reaching the current $600 million covered lives, we expect all the efforts to be increasingly effective over time. As noted again, we are driving to 100 million covered lives by the end of this year and 250 million covered lives by the end of next year. As we have also noted, we see all of these programs as important early investments in the progress of Eversense and the growth of Senseonics. We look forward to updating you on the implementation of these activities as we advance patient access. Simultaneously, our sales force is driving growing awareness of Eversense every day. As an example, by year end 2018, more than 250 physicians have begun referring patients into our sales management system. This adoption is a sign that healthcare providers are finding the technology clinically beneficial that procedure workflow to be smooth and as they are comfortable with the economics. From physicians who have already placed sensors with patients we are hearing that they are happy. They have more control and hands on involvement in the direct treatment of their patients. Also, we are now starting to call on offices outside of the top 300 prescribers and certifying nurse practitioners and physician assistance who are recently approved by the FDA to perform insertions. Turning to our progress on the regulatory product pipeline. We remain focused on product enhancement iteration and next-generation technologies. Our PMA supplement to expand the label of the current product to suit a non-adjunctive claim is under review with the FDA and we consider that discussions have been positive through this interactive review. Our expectation is for approval by mid-year with launch to follow shortly thereafter. This indication would qualify Eversense as a therapeutic CGM and provide access to the Medicare population. Additionally, we plan on submitting the incorporation of a one calibration per day calibration scheme to the agency as a PMA supplement, once the dosing claim review is complete, anticipating a traditional review time, we expect the update of the Eversense system with the calibration reductions in the first quarter. Furthermore, the 180-day clinical study is underway and actively enrolling patients. We anticipate this enrollment will be completed in Q3. This trial is a multi-centered study consisting of 180 enrolled patients and given the significant length of the study, the data collected will be several times greater than any other accuracy study completed today. Sample size was expanded in discussions with the FDA to support the ICGM classification and the non-adjunctive claim. In addition, we are excited to see the progress of our collaborations with Beta Bionics. The team has completed their multi-centered feasibility study that for the first time utilized Eversense as the control CGM for patients and in our official pancreas study. In this study, 18 participants wore our 90-day sensor and were monitored in three separate, seven-day algorithm-controlled sessions. We look forward to seeing early results of this summer’s ADA Meeting with full publication later this fall. Now moving to Europe. As you know, we recently announced our updated distribution agreement with Roche and we are continuing forward with them seamlessly. In Sweden, Rubin Medical recently received approval for the regional Stockholm tender, the second largest Swedish market and the national tender in Norway, also a significant addition. These two coverage wins will help support more access to Eversense. In Germany, an important reimbursement barrier has been removed. Roche received news with the GBA, the Federal Committee responsible for reimbursement recognition has confirmed that Eversense has been included in the reimbursement basket. This means, the German payors cannot exclude an implantable CGM from coverage which had previously been cited in some payment denials. Looking back at 2018, our OUS market showed attractive year-over-year growth. New users increased by 167% with more users, we also saw an increase in sensor insertion by 266%. Additionally, last week, our EU Regulatory Notified Body approved our CMA amendment – excuse me, CE amendment allowing eligible healthcare providers including nurses to perform the sensor insertion and removal. So the procedure is now approved simultaneously in the United States and in Europe for these professionals. Once again, just like the U.S. market, we see expansion as a positive indication in the broader use of this system and the convenience this affords people with diabetes. We continue to see positive user experience including patients now on their eighth or ninth consecutive sensor. We are excited to see the feedback regarding the impact our product has on people’s day-to-day management of diabetes. Also to know, we continue to be very pleased with our safety record we observed in our EU patient registry. We expect to publish our first year – first two year safety data summary in the coming quarters. I’ll now turn the call back over to Jon for our financial results.

Thank you, Tim. For the three months ended December 31, 2018, we generated $7.2 million in revenue compared to $2.9 million in the prior year period. The increase was attributable to increased sales of the Eversense system in Europe and incremental sales in the US. Fourth quarter 2018 sales and marketing expense increased by $7.9 million year-over-year to $10.3 million, compared to $2.4 million in the prior year period. The increase was due primarily to the build out of the sales force in the U.S. Research and development expense in Q4 2018 decreased by approximately $300,000 year-over-year to $8.1 million, compared to $8.4 million in the prior year period. The decrease was primarily driven by the competition – excuse me – by the completion of all activities associated with the U.S. PMA approval for Eversense. General and administrative expense in Q4 2018 increased by $1.5 million year-over-year to $5.3 million, compared to $3.8 million in the prior year period. The increase was primarily due to an increase in compensation, legal and other expenses supporting operational growth. For the three months ending December 31, 2018, the total net loss was $7.3 million, or approximately $0.04 per share, compared to $16.3 million or $0.12 per share in the fourth quarter of 2017. Fourth quarter 2018 net loss per share is based on a 176.9 million weighted average shares outstanding compared to 136.8 million weighted average shares outstanding in the fourth quarter of 2017. From a balance sheet perspective, as of 12/31/2018 our cash and cash equivalents were $136.8 million, outstanding indebtedness was $67.7 million. Turning to guidance and the points Tim provided previously, broadening patient access is the primarily element gating the ramp of Eversense. We have made significant progress in the past many months with coverage and we are working on a set of initiatives to meaningfully expand patient access from here as well as work with payors, as well as we develop these strategies, we are working through their financial and accounting impacts. Based on our expectations for the likely impact, both in terms of timing and revenue recognition, we are adjusting our expectations for 2019 reported revenues to be in the range of $25 million to $30 million. Given where we are in the year, we also note that we expect total revenues for Q1 2019 to be sequentially down versus Q4. This is primarily a function of projected international sales for Q1. Based on the purchase commitments and our various agreements and forecasted deliveries, we expect Q1 of 2019 international sales to be down versus Q4 of 2018 with approximately 30% of international sales in the first half and 70% in the second half. With that, I’ll now turn the call back over to Tim.

Thank you, Jon. We are gaining meaningful traction with Eversense in the U.S. and are looking ahead to the most effective ways to scale our advanced technology, get our products in the hands of people with diabetes and to accelerate our momentum as we drive towards building a strong install base. We have demonstrated robust clinical outcome, strong patient satisfaction and true economic value. Armed with this growing evidence and with an experienced team we are prepared to knock down the barriers to access the patients are facing. We are excited to be bringing the Eversense bridge program to patients and clinicians who are waiting to try the product and to significantly reduce the current bottleneck in situations for patients’ insurance does not cover Eversense. We will continue to execute our strategy as we offer the diabetes community the only long-term sensing solution to help manage their diabetes. This concludes our prepared remarks. Also joining us for questions are Mukul Jain, our COO, Mike Gill - Vice President and General Manager of the United States and Mirasol Panlilio, Vice President and General Manager of our Global Commercial Operations. Operator if you would, let’s open up the call for questions.

[Operator Instructions] We’ll take our first question today from Jayson Bedford with Raymond James.

Hi, thanks for the questions. This is Matt Wizman on for Jayson Bedford. So my first question is on the new Roche contract. So, since you renegotiated the contract, are you seeing any changes on the European business with the new economics you are seeing them be a bit more aggressive or what do you see in there?

Yes, so, it is early days. But as we noted, we continue to status quo and work forward. Although there was a lot of discussion about the contract in reality from a workflow. There really was nothing changed on a day-to-day basis. What I’ll ask Mirasol to do is, speak to quite a bit of preparatory work that’s beginning for launching in some of the new markets. So I will ask Mirasol to speak to some of those efforts and progress that we are showing.

Sure. Thanks for the question, Matt. I think maybe non-quantitatively, because it’s only been a month, but I can tell you that the local countries are super excited that we don’t have this overhang with the question of the Roche agreement. So I think everyone is excited – everyone has developed their marketing campaigns and just really can’t wait to continue selling the Eversense XL system. You heard about the reimbursement positive outcome that we have with GBA in Germany, I think that’s just an another example of the markets just we are really gearing up to increase share and adoption of the product. So, hope that helps.

Yes, thank you. And then, as a follow-up, can you provide a bit more detail on the Bridge program? How does this work from a patient perspective? And anymore color you can provide on how that impacted the guidance more specifically, would be great. Thanks.

Let me speak about from a patient perspective on access and then I’ll let Jon speak about the financial considerations that we’ve put in place. So, what we’ve seen in our funnel process is we are very happy with the number of patients that are coming into the funnel. The interest on both the patient level and the professional level to do the insertion removal is very high and certainly meets or exceeds our expectations. In the cases where someone is very straightforward from a insurance coverage perspective like Aetna, it’s pretty straightforward process. The patient will be determined whether he meets the basic criteria. And if so, they move forward quite quickly and we can get it scheduled for the insertion. In the case where there is no coverage and there is an E&I for example like with United today. That’s where it gets a little bit more complicated and what would happen in a situation like that is the patient would do a determination of coverage. They would get the notification that they are not covered, they are of course given the opportunity to continue to move forward, but outside of their insurance which naturally very few take. But what happened today is they would be giving – go ahead, do that insurance coverage check with our partner organization and we determine what their exact levels. The Bridge program would be an opportunity to facilitate or support that, so it would make it more achievable and reasonable at a patient cost perspective and we do anticipate, it will be much more effective in moving folks through at that point. I’ll let Jon now speak to the financial aspects of the Bridge program and how we think about it.

Thanks, Tim, and it’s early days and I’ll ask Mike Gill to also support my comments here. But in our early investigations here it’s how this will be treated from an accounting standpoint is that this – what we consider to be an investment in patient acquisition will be a net to revenue and so that would be reflective of the discount as to where we are currently guiding versus last we spoke. But this, we believe will put us in a much better position to have patient count at a highest possible level in 2019 and to get us to that installed base, the recurring base the predictable revenue stream we are all looking for 2020 and beyond. Mike, would you like to give any further comments there?

Yes, Matt, I think if you think about the industry co-pay assisting cards are pretty standards and if you think about the way that Tim just explained it, it’s a program very similar to those whether in pharmaceuticals and also in CGM currently and that’s the way we have approached it. We did do some market research and asked some physicians about this. They overwhelmingly believe that with programs like this, the access in terms of how they think about referring patients to us, opens up significantly. Physician is also someone who is measured on time often times and if they refer patients that is done with coverage, then it’s really a waste of time for them. As we did our market research and talk to physicians about this opportunity, they said, hey, if there was a program like that, much like co-pay cards and assistance, those are programs that I would then think of Eversense more often. So, it’s really a dual opportunity here for the patient and the physicians. So there is not time wasted in talking to a patient who doesn’t have coverage.

All right. Thank you. Appreciate it.

We will hear next from Kyle Bauser with Dougherty and Company.

Hi, great. Thanks for taking the questions. If we think about the early adopters in the U.S., can you talk a bit about any key patient demographics that stand out? I mean, is it the younger patients that are more active, is it males, females, et cetera. I know the goal is widespread adoption. But I am just curious which patient cohorts might be the most compelling initially here and if that’s different than your experience in Europe?

Frankly, it’s pretty similar. We are seeing a pretty broad base of patients that are attracted to it. I am going to let Mike give more detail. But much like we’ve seen in Europe, there are attributes to the product like on-body vibration, the discreteness the ability to make the transmitter on and off that are very attractive to folks that are currently using CGMs or those that have decided now that with elements of the technology that I don’t want to move to and Eversense has eliminated those. So, Mike, why don’t you speak specifically to the U.S. and what we are seeing?

Yes, I think, Kyle, the segments of the patients are similar to European. We have seen a tendency for people to be on previous CGM of course who want advance CGM technology. Those people are looking for a lifestyle option. But that does not mean that it’s the extreme sport person who could take advantage of this. And frankly, we see a population that is north of 50 into their 60s where they say, hey, I just don’t want to look down at my phone when I m driving, when I get an alert, I want to know that I have on-body vibrations or if somebody has a significant alert that travels and they don’t hear the alarm, they would obviously have the on-body vibration. You also have people who look forward to actually being able to remove this transmitter for certain indications. Whether it’s – if they decided to do yoga and they didn’t want to on at that time, they want to put a transmitter back on, after the workout or they want to wear a sleeveless dress, we don’t see a tendency to male or female, but I will say it’s a major lifestyle improvement, especially for people who have used CGM in the past. And then the next one is, we do have alerts for portion of FMBG or fingerstick users who have waited for adoption like this. In fact, we had some quotes for patients that have basically said, we have been waiting for this for 30 years and now it’s here. And that’s fairly rewarding and exciting especially for the teams and the engineers and the product development people to hear those kinds of testimonials.

Sure. That’s great. And now that you have coverage of over 60 million people in the U.S. I know it varies, but what’s the typical time now to get an HCP implant in following your hands on training. In other words, if we are only looking at those providers that have been certified, what are the steps and how long is the certification process by the payors once the physician is trained by Senseonics?

So, Mike, why don’t you go through that? The training is required as part of our approval from the FDA. So it’s actually not a payor requirement, but it’s part of our approval. Mike, your team is dealing with it every day. Why don’t you talk about how that looks?

Yes, Kyle, without giving an exact number, because training is training and it varies by each individual in terms of their comfort with procedures generally speaking it in this procedure. But one thing that I know will help in this case is the opportunity to have more patients available to move that learning curve forward. We gauge around three people, once they have inserted, then they are authorized basically to do insertions on their own. The gate limiting factor there with how many – when they get three patients through the environment that Jon and Tim just talked about. So, as soon as you can move that forward and have more patients, be ready to be inserted, the training if you will gaining starts to get done then you can move quicker. We have seen physicians who frankly got three right away and they are authorized they’ve done the removals and of course, the removal happens 90 days later and then they get certified for the full procedure. So, all in, it’s going to take at least 90-days to get them certified just because of the duration of the sensor. And frankly, once they’ve been certified on the removal and reinsertion, we know in that case, the number of patients that now come into that practice and the physician who wants to put on Eversense accelerates even more, because now that physician had seen the entire process all the way through. And as Tim mentioned in his prepared comments, we have over close to now 250 physicians who have written prescriptions who want to take that step and that’s a really good sign and now with the Bridge program, we will be able to accelerate that, because it is a function of getting the patients approved. So they could do the insertion.

Okay. That’s great. Got it. Thanks for taking the questions.

[Operator Instructions] We will move next to Piper Jaffray’s JP Kim.

Hi, good afternoon. Thank you for taking the question. I wonder just to go back on your expectations for getting the non-adjunctive claim and then Medicare? So, I guess, first question is, is Medicare included in that 100 million lives at the end of the year? Just you get non-adjunctive claim, I think you augment to get that, right? And so, that would be a nice thought for patients there. And then, maybe just, I don’t know if you can break around the age group OUS that you are seeing. So I guess, is that 65 and near older age group, do you see that coming online in Germany? And some of these other countries in Europe, like is there demand from that age group of patients?

Hey, JP. Sorry, your incoming broke up a little bit. But in regards to the approval claim, we are fairly mature in the conversations with the agency. It has been a – what’s called the real-time review. So, we’ve done it in combination with them and answered many other questions along the way. So, we feel pretty good that they have the information they need and we expect to get that approval here this summer and as you know, that is one of the key gating requirements to have the conversations with Medicare for that patient population. So, and we know some of the other new entrants into the space have done it as well. Once they’ve gotten the dosing claim or that non-adjunctive removed, Medicare was pretty efficient at bringing their approval along. Now, I am going to let Mirasol speak to the distribution of patients we have in our clinical studies and I believe in our enrollment seeing some folks that are precedent in their maturity with diabetes.

Yes. JP, it’s probably more anecdotal, because unlike in the U.S. where we probably are lot more knowledgeable about our user base, because we go through distributors. We don’t have it really segmented if you will by different demographics. So the information that we have is probably a little bit more anecdotal. But we know for example, in Germany, the largest clinic that we have there, they have a number of depending on who you are, 65 can be older. 65 and over and significance of that to those patients have been very good certainly. I think, as Mike said, earlier, there is really a broad appeal for the product I think earlier on, we probably had the younger set, but as the market – we’ve been in the market now for a couple years. I think they are expanding in terms of who they believe can really use the product and so we have certainly our equal portion of those 65 and older.

Okay. That’s helpful. And then, I wanted to move on to just the access program that you are talking about and then how early is to guidance if you could. Just, is it fair to say that, I know you are not giving the number of – you are not guiding the number of patients for the full year. But you brought numbers down in terms of guidance compared to which you had earlier this year. It does to this access program, so, is it fair to say that the numbers are coming down, but did number of patients you expect to be on Eversense actually increased compared to your prior guidance? And then, maybe just talk about how you think about gross margins in 2019?

Hi, this is Jon Isaacson. As it pertains to – we are not prepared as you said to speak about patient counts. We believe that this is all about access. We love where we sit from a funnel standpoint at the top of the funnel, we have a bottleneck now as Tim has described about folks who have been positioned on E&I and in order to move those folks to get the 60 million lives up to several hundred million. This is going to be the bridge as for how it’s going to occur over this period of time, our goal is that patient is as high as possible as responsibly as possible. So that, we know when you run your models, this really, you have a wonderful installed base heading into 2020, 2021, that’s highly recurring, highly predictable. As it pertains to gross margin, as I mentioned earlier, to the answer to another call, we will – this is an investment. We think it’s a wonderful ROI and think that this is a great place for us to invest our capital into this patient access program and we believe that while there will be a reduction in revenue as we make that investment and there will therefore be some margin hit. It’s nonetheless very accretive as you look at the patient count installed base looking at 2020 and 2021 when you have the 75% renewal rate on somebody getting their second sensor and close to 90% on their third.

And JP, some of the complexity we are just frankly going to have to figure out, from a revenue recognition perspective, what happens when we put a patient on the product, as we said they will go in and they will ask for a prior off to do it, they’ll get turned on. We are going to move forward anyway and then we will facilitate and we’ve got some partners to do this a very active appeals process, right. And that can be multi-stepped, right. So, if an appeal is approved, we can obviously then in arrears recognize the revenue for that patient. If the product has to go through two or three appeals, then obviously it’s going to get pushed out from there. So, in all honesty until we have some experience, we are not going to know if this is a 30, 60 or 90 or maybe even never that we are actually going to get that appeals to go through. The partners that were used to do this are pretty optimistic with their success rate through the multiple appeal process, but we have to get our direct experience with it and as a result, we do think that it’s prudent for us to be frankly pretty conservative in the revenue that we are going to recognize. And Jon is going to spearhead that activity, but we expect it as we gain experience and know how many of these appeals are we going to put an insurance company through before they recognize, okay, there is quite a bit of interest and we are getting patient demand. That’s what we are really driving with this access program. We want to get more patients on it. We want to build our own install base as quickly as we can from the hundreds today to the thousands and thousands by the end of the year and at the same time, really pressure test and demonstrate to insurers that there is a strong interest by the patient and the providers for Eversense. The only way that we can do there right now, is to use this bridge program from where we stand. So it is an investment. It will cost us some ambiguity around revenue, but it’s the absolute right thing to do to build this organization. The real effectiveness of a company like this is in the install base. And this is a plan to push it as quickly as we can early in the year as opposed to later in the year. Hopefully, that makes sense.

Yes, that’s very helpful. Thank you.

We’ll move on to Matt Taylor with UBS.

Hi, thanks for taking the question. So the first question I wanted to clarify could you talk about the support program and the revenue reduction. Is that all in the U.S.? I just want to make sure.

Yes, that’s all – it’s the U.S. program. There are some limitations, government, Medicare, State of Massachusetts I believe are excluded, but other than that the rest of the U.S.

Okay. And then, when you are working with these agencies to help people through the process, the reimbursement process, is this something that you view as the one-time investment for this year and kind of in the early days and then this will come out of the cost structure or is it something that you have to continue to use to help support you for several years?

It’s certainly investments that make sense for us to do in the early years as we are at 60 million covered lives out of, let’s call it 250 that we would like to get to, right. So, we are at approximately a 25% covered lives. We’ve got another 75 to go. Once you get up to much closer to that 250 range, you are less and less subject to these dynamics. Sometimes thought, you will see in the space, people will use it in Q1 to facilitate early co-pays. Now, that’s not something we’ve anticipated today. We will address that in the future. We are bringing it in essentially in our Q2. But our expectation is that we are going to do this for a number of quarters here and really push patients on the system and really push the payors to recognize the product out there. So, we don’t anticipate it as a long-term program, but that’s not to say like, many in the space you wouldn’t bring it back once in a while.

Okay. And earlier in the call, you had a few comments that sounded pretty positive on the OUS market developments you have the Stockholm win and the Norway tender and the change in Germany reimbursement. But it seems like you could not increase OUS guidance at all. I mean, is that something that was already contemplated in guidance and it’s not material not to raise guidance or that we just not narrow at this stage?

We are not ready to forecast that as an advancement this point. As you’ve heard and know the contract with Roche and Rubin is representative of that as well is really based on their plan. We do everything we can in our marketing efforts to facilitate the pull-through there as well, but it really is driven by the economics by their marketing investments. So, we frankly support them and leave them to develop those programs.

Okay. And then, last one, I just wanted to follow-up on the earlier question which are out clear. It sounded like to get some of the 60 to 100 you are not including Medicare and that moves with the other payors that you are looking at over the course of the year. Could you talk at all about how you feel about that assumption? Are there major ones that you have to win just for that? Are there ones that you have line of sight to where you think there is a high probability of getting half way there? Is there anything to help us understand the ability that you have in getting to 100?

Yes. Sorry, you little bit broke up, Matt. But essentially, if you take a look at the top-five we currently have Aetna that was a great win for us and a great validation. Obviously, the largest that’s out there with almost 50 million covered lives is United. We continue to work with them very, very aggressively. We continue to provide information and then honestly one of the great things that Fran is going to help us with contacts and working with their medical directors to help them get comfortable with the technology. We are also working on Cigna, another one of the top payors. Anthem is another large group. You mentioned, the Medicare, Bolus. So, all of those are on our list then we are simultaneously working on those. Some are more responsive than others to patients. Some are more responsive to others and providers. So we attack it from all of those angles and we are doing everything we can to break down any one of those in this next six month time period, nine month time period. Hopefully that answers what you were saying. Those are the big ones hereafter.

Okay. Thank you so much.

And we’ll move on to Danielle Antalffy with SVB Leerink.

Hey, good afternoon, guys. Thanks so much for taking the questions. First, just wanted to ask – I thought that Dr. Kaufman joining, that was a big win for you guys. Can you talk about sort of how you think she is going to fit into the current strategy? What her – you just touched on that a little bit with Matt’s question, but what you think Dr. Kaufman’s primary role will be? What she’ll bring to Senseonics? That’s my first question. And then, second question is, what’s around reimbursement really. But for those centers that are doing procedures really around the logistics and how you are seeing these centers adopt? I’ve heard ideas around could if these centers have for Senseonics stay where they have patients coming and they are doing just Senseonics implants, explants. How are physicians fitting this into their practice? I know it’s early days, but I would just be curious to see how you are working with centers on high earning out for logistics here? Thanks so much.

So, Mike, I am going to ask you to just speak to the second portion of Danielle’s question. I am going to speak to the opportunity to work with Dr. Kaufman, we are obviously very excited to have the opportunity to attract her to work with us. She has actually been onboard for just one week. But we did have an opportunity to do some introductory consulting with her for a couple of weeks prior to that. So, in that process, what we’ve been able to do is, first and foremost, what Fran really bring is the recognition and the reality that keeping the patient in the center of our bull’s eye is the most important thing, right. And as a practicing diabetologist, she understands first-hand what the decisions and trade-offs that needs to be as effective as possible. So having access to her both from a new product development perspective as well as from a product characterization perspective, is going to be one of the key things that she brings for us and as we are looking for a CMO, it was really, really important that we got a seasoned diabetologist to be able to do that. From that, everything else can be built on the side, if you will. Certainly, her helping us with this journey as we’ve described it around payors is going to be, very, very key as well. She will certainly play a role at working with connecting with our clinical key opinion leaders. So that we get feedback on the products. How does it, not only fit into the patient life, but Danielle, as you indicated, how does it fit into their workflow. She is going to be – she is a very credible source of communication, frankly in validation that folks can think about it. She is already challenging us in the clinical domain, what additional testing do we need to get going on. Obviously, the pediatric indication is one that she is a champion of it and we’ve got to get the resources to get in front of. Gestational diabetes is another one that she has already spearheaded. So, she is going to play a huge role and although she was the last element that we added to the management team that’s already to clear to see that she is going to be one of the most influential and most important for all of us to learn from. So, very broad, but because the nature of who she is and our capability and the influence she will have on us. And Mike, I’ll let you talk to the second part.

Okay. Danielle, if you do have another question on Fran?

No, no, no. Just on the logistics as to how centers that have adopted it again, that was early days. But how they are fitting it into their practice?

Sure, yes, it’s a good question. And I think it all starts on the clinical understanding, okay. So, if a patient presents anything clinically from a lifestyle standpoint, they want to provide Eversense. And when you think about what that does as a practice flow, we have several different permutations. The first one would be a diabetes clinic that schedules their day every Thursday for removals and reinsertions and they implement those kinds of practice flows. We actually have many providers who they have them on the shelf and if a patient presents and they want Eversense, they’ll put him on the day of the visit. Other permutations we actually have a few centers up in Upstate New York, where they are referring over to a general surgeon to insert, because they’ve chose to set up a kind of a hub and spoke. And when a general surgeon actually understands and appreciates the favorable reimbursement, they are onboard in order to set up that hub and spoke. So, it’s really three different permutations. The implementation within the office has not been a real big barrier, just because it is something that they can fit into their practice Danielle. The biggest thing as Tim has said and I said and Jon has said is, the most important thing is opening up access. And when we do, do that, you see that they are very capable of fitting this into their practice. Especially considering how easy the procedure is and we validated that through our Ever Mobile Clinic that was going around the country making sure and kind of demystifying their procedure. And now with patients and that we have in the United States it’s been fairly straightforward and putting into the practices is actually pretty efficient for them. I hope that answers your question. It’s kind of taken different forms. But the first and most important thing is, they want to get access, they want to provide it for their patients and then they make it work within their practice.

Got it. Thank you so much.

And at this time for closing remarks, I would like to turn things back to Tim Goodnow.

Well, great. Again, I want to thank everyone for their time this afternoon and thanks for the continued interest in Senseonics. We look forward to updating you on progress and we will speak with you at the next quarterly call. Have a good day. Thank you.

And this conference is now concluded. Again, thank you for attending today's presentation.