Senseonics Holdings, Inc. (SENS) Q1 2019 Earnings Report, Transcript and Summary

Good day and welcome to the Senseonics First Quarter 2019 Earnings Conference. Today's conference is being recorded. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] I would like to turn the conference over to Mr. Philip Taylor. Please go ahead.

Thank you very much, and welcome to the Senseonics first quarter 2019 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 these 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 advise 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 Chief Executive Officer; and Jon Isaacson, Chief Financial Officer. 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. On the call today, I'll provide a brief update on our business, first discussing progress and our initiatives in the U.S., then sharing developments 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. We started the year with a solid first quarter achieving total revenue of $3.4 million, including U.S. revenue of $800,000 and European revenue of $2.6 million, with revenues for both the U.S. and Europe in line with expectations based on contractual timing obligation with our distribution partners, as well as considerations of our new patient bridge access program. We continue to expect revenues for 2019 to range between $25 million and $30 million. The quarter was marked by several accomplishments, most significantly we launched our bridge access program and we are incredibly excited about the early impact we are seeing in the market. The response from both patients and subscribers is very positive. While, the program was only available for 10 days in Q1, we saw a meaningful immediate impact and are gaining momentum carrying into the current quarter. As you recall, the bridge program is designed to make Eversense available to those patients and providers who has access to our system is currently delayed by insurance coverage, and to simultaneously demonstrate the true patient demand and physician adoption to payers. I would like to share a few key metrics that demonstrate some of the success we are experiencing during the initial rollout of the program. In only a matter of weeks, we have seen increasing activity across multiple fronts including lead generation, prescriptions, reimbursement and shipments. To put things in perspective, and comparing the first few weeks of the year before the program launched to the weeks after the program launch, we've seen shipments of Eversense which have nearly tripled per week. We've seen a fivefold increase in the number of patients covered by the four largest payers currently holding experimental investigational designations with Eversense. We've seen that we have essentially doubled the number of prescriptions written each week, and we've seen a 66% increase in the number of healthcare professionals prescribing patients each week. And correspondingly, we've seen more prescriptions written per week per healthcare provider. These are all very positive indications for the product and while we recognize that we are in early days of the program, it has certainly enabled a significant increase in activity among patients, healthcare providers and payers. This further demonstrates people wanting to use our technology now that we have an enhanced stability to access it. Importantly, payers respond to member demand and with more patients on Eversense we expect to see increased traction towards payer successes. From a patient interest perspective, we are seeing rising demand as shown through the doctor recommendation, as well as significant increases in website traffic and leads generated. We're encouraged by the increasing number of people choosing Eversense and expect to continue to trend positively as awareness grows from here. Most encouragingly, we have received over 2,000 prescriptions for Eversense as part of the program. This equates to more than 2,000 patients who have either requested Eversense or have had it prescribed for them as part of their diabetes management program. To that end, their fulfilling partners are currently processing the bridge program patients to turn as many of these prescriptions into implanted sensors as possible. At the HCP level, we are seeing physicians, physician assistants and nurse practitioners significant accelerate the prescriptions since we initiated the program. We believe this reflects their increasing confidence in the simplified access program in combination with a very strong patient interest in the product. As a point of reference, we now already have well over 400 healthcare providers who have written prescriptions for Eversense. This signifies a considerable increase from the 250 that we announced on just our last call and well ahead of our plan for the year. We have successfully expanded our outbound reach beyond the initial target group of the top 300 insulin prescribing endocrinologists. Importantly, CPT payment is consistent and the claims process is straightforward where a coverage policy exists. The HCP is recognizing that as a new paradigm in patient management, and have been pleased with the reimbursement they are experiencing for sensor placement. The combination of increasing provider adoption, prescriptions written and procedure reimbursement is an indication we are building a strong base in the HCP community and Eversense is become an important part of their clinic. On the payer front, we are happy to announce that we received coverage and payment for Eversense. And for the insertion and removal codes for Blue Cross Blue Shield federal employees insurance plan, disapproval adds an additional 6 million covered lives. With this, we are now able to serve over 66 million covered lives with the Eversense technology, and we are well on the way to reach our objective of 100 million covered lives in 2019. In addition, we're in conversations with multiple payers regarding value based coverage programs, which emphasize our unique value proposition of driving better long-term adherence with Eversense and committing to improved clinical outcomes. Further, we are pleased with the increasing placements we are seeing within the largest four payers who currently hold E&I designations on Eversense. Users in this group now represent over a third of our patient base. We are convinced that the product placed with these members will lead to denial overturned and ultimately improved coverage by payers that currently view Eversense as experimental and investigational. As we have stated previously, positive experiences with these patients and payers are vital toward winning courage decisions, and we believe we are moving in the right direction. So again, while we realize it's still in the early days of our rollout of the Eversense bridge program, we are on the right track and are enthusiastic about the impact that we are already seeing. This productivity ramp drives further confidence in our ability to drive widespread access for patients. We are also continually gaining a better understanding of what it takes for our patients to progress through the funnel from interest to script to sensor insertion. Our program partners, payers and distributors in our network are becoming more familiar with one another making this conversion process more efficient. We are successfully expanding awareness and increasing patient demand, while at the same time bolstering our efforts with payers to drive additional positive coverage decisions. This increase in patient interest, prescriber support and now further payer movement confirms the value of Eversense in the U.S. market, with access supported by the bridge program. On the innovation front product evolution advancing our technology remains a top priority for us. First on the horizon is the PMA supplement to expand the label of the 90 day sensor as a non-adjunctive therapy and receive the dosing claim. The review with the agency is in an advanced stage and discussions have been positive. We continue to anticipate approval this summer launch following quickly thereafter. Once we have this claim, we plan to begin meeting with Medicare administrative contractors and other stakeholders to position Eversense as a solution for the Medicare population. We believe that Eversense brings a unique solution to this group of patients with its on-body alert features, real time glucose data and ease of use elements as an implanted sensor. As Eversense will not be a DME product for Medicare, we look forward to describing our CPT procedure based technology and how to best implement it for Medicare patients. Importantly, the 180 day sensor clinical trial is progressing according to plan, and the number of enrolled patients is increasing. As we've previously announced we remain on track to complete enrollment in the third quarter. Again, the study consists of approximately 180 patients at multiple clinics around the country. And it's designed to provide the data required for a PMA supplement to support U.S. product extension to 180 days. We plan to leverage the data collected through 90 days of use from this study for a regulatory submission to achieve ICGM classification for the current 90 day Eversense system in the first half of next year. The 180 day Eversense system with the ICGM and calibration reduction is currently expected to be launched later in 2020. Additionally, we are also happy to announce that we have completed our requirements for the mandated long-term post market safety registry study in Europe. The results corroborated those reported in our initial pivotal clinical trial data sets demonstrated the high safety performance and multi-sensor Eversense use in over 3,000 real world users. Through this registry, we observed no product or procedure related significant adverse events, and less than 4% of the participants experienced either a device or procedure related adverse event of any kind, confirming the safety and the long-term use over multiple sensor insertions. We look forward to previewing this clinical data at ADA and publishing the full results from the post market surveillance study in the next three to six months. On the pump partnership front next month at ADA Beta Bionics will present the early results from their artificial pancreas feasibility study. In this pilot the iLet system supply the algorithm control of insulin delivery according to data provided by our sensor for 18 patients. We believe that the top tier accuracy provided by Eversense will be attractive for artificial pancreas systems and we look forward to our partner's progress. Now turning to Europe, our operations with our partner Europe are expanding. Our partner Roche in Europe are expanding. We achieved first quarter European revenue according to contract at $2.6 million. Jon, will provide more detail on the cadence of European revenues for the remainder of the year. In the quarter, Roche made significant headway on the patient access front successfully securing additional payer contracts in large markets. In Germany, Eversense received a positive coverage decision from Techniker, the largest payer in the country, representing over 10 million lives. Additionally, in Austria, Roche secured national reimbursing in all counties as of February, ensuring that all type one diabetes patients have access to--. From a regulatory standpoint, we can also announce the recent receipt of product registration in Israel. To move forward commercialization will begin in a small controlled launch in one clinic to provide the necessary data to support reimbursement with the largest of the four state mandated six funds in the country. Overall, we are pleased with our results and growth in Europe. In Q1 new users increased by 62% compared to the prior year period, with sensor placements increased by 85%. In February, we celebrated our 10,000 sensor insertion, there now over 700 clinics in Europe with nearly 1,000 physicians authorized to do sensor placements. The wider adoption is encouraging and should continue to increase along with expanded reimbursement. This also gives us confidence in our ability to drive U.S. healthcare professional certification to a very broad base of prescribers over the next 18 to 24 months. I'll now turn the call over to Jon for details on our financial results.

Thank you, Tim. For the three months ended March 31, 2019, we generated $3.4 million in revenue compared to $2.9 million in the prior year period. The increase was attributable to incremental sales of the Eversense system in the United States with a small offset for sales in Europe due to contractual timing obligations, to provide increased access to the Eversense CGM system for patients with limited or no insurance coverage. During Q1 2019, the company introduced the Bridge Patient Access Program. Payments associated with the program are treated with a gross to net reduction to revenue under U.S. GAAP accounting. For the three months ended March 31, 2019 we recognized net revenue of $816,000 in Q1. We expect that on a go forward basis, there will be fluctuations in quarterly bridge payments that may affect quarterly revenue recognition, while still affirming full year 2019 revenue guidance. To reiterate Tim's comments, we are confident that our investment in the bridge program is helping patients gain access to our product and building utilization of Eversense in the market place. We're pleased with the early reception of the product with patients and physicians. Gross margin in Q1 2019 decreased by $2.9 million year-over-year to negative $3.3 million compared to negative $400,000 in the prior year period. The decrease was primarily due to obsolescence related to product upgrades, as well as product expiry due to the Roche distribution of agreement. First quarter 2019 sales and marketing expense increased by $9.4 million year-over-year to $12.8 million compared to $3.4 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 Q1 2019 decreased by $1 million year-over-year to $7.1 million compared to $8.1 million in the prior year period. The decrease was primarily driven by the completion of all activities associated with the U.S. PMA approval for Eversense. General and administrative expense in Q1 2019 increased by $2.5 million year-over-year to $6.5 million compared to $4 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 ended March 31, 2019 total net loss was $29.4 million or $0.17 per share compared to $22.3 million or $0.16 per share in the first quarter of 2018. From a balance sheet perspective as of March 31, 2019, our cash and cash equivalents of $103.7 million, outstanding indebtedness was $65.2 million. Turning to guidance and the points Tim provided previously, broadening patient access is the primary element gating the ramp of Eversense. We have made significant progress in the past many months with coverage and we're rolling out our Patient Access Bridge Program while we in parallel work with payers. Inclusive of our expectations were the likely impact both in terms of timing and revenue recognition related to the bridge program, we continue to expect 2019 reported revenues to be in the range of $25 million to $30 million. Based on the purchase commitments in our various agreements and forecasted deliveries we continue to expect approximately 30% of international sales to be in the first half and 70% to be in the second half of 2019. With that, I'll now turn the call back to Tim.

Thank you. In summary just as our partners in Europe are experiencing new user and covered life growth, in the U.S. we are building a foundation to support the same activities. With the recent positive coverage decisions from Blue Cross Blue Shield Federal Employees Plan we are two-thirds of the way through our covered lives target for the year in four months. The launch of the bridge access progress is crucial for enabling patients who see the compelling value in our technology to access it, thereby creating additional exposure and the opportunity for positive experiences with payers as we pursue wide spread coverage. Not only that but the rapid acceleration to 2,000 prescriptions and 400 healthcare providers writing scripts gives us confidence we are on the right path and we are excited to continue building on this momentum. That said, perhaps the most meaningful experiences in the quarter is the feedback we're receiving from physicians and patients on the benefits of Eversense, patients satisfaction and most importantly how information and alerts provided so conveniently by the system over a 90 day period are changing lives. It is our mission to deliver convenient access to this life changing technology to people with diabetes. This now concludes our prepared remarks also joining us for questions are Mukul Jain, our Chief Operating Officer, Mike Gale, Vice President and General Manager of the United States and Mirasol Panlilio, Vice President and General Manager for Global Commercial Operations. Operator, let's now open up the call for questions.

Thank you we will now begin the question and answer session. [Operator Instructions] And our first question will come from Rebecca Wang of Leerink.

Hi, good afternoon. So just from reimbursement perspective, you have said you still targeting 100 million covered lives. I am just wondering, can you give more color on the progress there? Like, what are the discussions you're having with payers? What are some feedbacks or pushbacks you normally get? Thank you.

Sure, thanks. Thanks, Rebecca. We feel very good and very confident about our ability to reach our milestone at this point. As we said, we've got about 66 million covered live. The largest, of course, is the top five payer Aetna with 22 million lives. So we've been able to sign - to come through with payer coverage for an additional 44 million on top of it now. We continue to have focus and work with the larger payers. Obviously firms like United Anthem Signer [ph] are at the top of our priority list and we continue to work with them and find ways to convince them of the value of the Eversense program and its clinical utility and I feel really good about the progress we're making. Also, we've had some very good and healthy conversations of late in regards to value propositions and the ability that we have for the long-term system like Eversense to really improve health outcomes. The results that we're seeing and we will be publishing shortly from the experience in Europe, as well as the experience in - early experience in the United States continues to confirm the long-term adherence that we're seeing to people that choose to be on an implanted sensor, as well as the glucose control is pretty attractive. So those are all the elements that we speak to the payers where there are a number that are underway. And as we said, our plan is to achieve 100 million covered lives by the end of 2019. And then an additional 150 million covered lives in the calendar year 2020.

Yes, thank you. That's very helpful. And I just want to ask another question, the logistic side of things. I know this is early, your U.S. launch, can you give some - how are you seeing those early adopters doing like fittings the procedure into their practice? And have you seen any difference in the adoption trend here in U.S., versus what have you seen in the Europe? Thank you.

Sure. Thanks, Rebecca. I think you're talking about the prescribers. I'm going ahead and let Mike talk about what we're seeing here in the U.S., it is a very active time right now. As you heard there's a lot of interest coming in, there's a lot of prescribers that want to do just that prescribe the product. And we're doing a great job of bringing a number of new and current prescribers up to speed.

So Rebecca, to answer your question, specifically, what's happening with their workflow and who's inserting the sensor? It's really again, I mean, we have physicians that work for university systems, we have physicians who are in private practice and within the practice, you have multiple physicians that are actually doing the procedure as well as the advanced practitioners, nurse practitioners and PAs. In fact, what we're seeing is once the practice is trained, the multiple opportunities for the providers to do the insertions, then the removal we're seeing, actually, offices have no issue with that workflow or adoption. Some are choosing to do it on demand, if you will, when the patient schedule their visit. And then others say we'll do it on Thursdays and Fridays, or Mondays and Wednesdays when they insert it. I think as Tim said in his is prepared comments, we have over 400 who have been interested in written prescriptions for it. So clearly there isn't any issue with people saying that we want to do this procedure in our practice by the volumes that we're seeing now of interested practitioners.

All right, great. Thank you very much.

And our next question will come from Alex Nowak of Craig Hallum Capital Group.

Great, good afternoon, everyone. Tim, it's been a year since the FDA - about a year since the FDA approval. I just be curious to hear your overall thoughts on how you thought the launch went in year one? What worked out for the team, what would you like to improve on for year two? I mean, based on your prepared remarks, I believe you would've wished to have the bridge program out there on day one, but just your overall thoughts there first.

Sure. Thanks, Alex. We've been very excited, the company obviously is grown a lot in that time period. We continue to put a lot of infrastructure in place to support the commercial organization not only the feet on the street, but also those that need to provide the product. Approval came just about a year ago you said actually in the second half of June and I feel really good about the way to where she got there into patients by the end of July. So just about four, five weeks. Obviously the Aetna win very early on was a great win for us and that was done because of a lot of hard work preparatory work that have been done ahead of time by the commercial team to get them on board and get them actually excited about, one being one of the early first movers. I am being real happy and excited with the continued innovation, we are seeing significant dividends come from the flexibility now to have nurse practitioners and physicians assistance do the insertion. It's a group that very much loves to do a procedure like this and has been very, very accepting of it. So that's been a great addition, obviously, now being the only CGM that's MRI compatible has helped a lot so great work by our engineering teams to get that included and out. So you're absolutely right the bridge program has been important to create that access as we said it does give us patients that are on the product, which is very important if you're looking at some of the blog space, which is a pretty active in diabetes as many know. You're starting to see more and more and more prevalence of Eversense being out there, which is important. But we still have the biggest part in front of us, which is the continued growth and expansion of the payers that as Mike said is what is absolutely gating the business and we need to get that knock down. I'm very confident that we will get there anything we can do that quicker is to our best advantage.

Okay, understood. And Jon, obviously, the guidance here is assuming a very big ramp in the second half of the year. Now I understand forecasting at newish medical device launch is difficult, but in the market or what particular metrics out there give you the confidence in hitting those revenue target in the second half of the year? And just to clarify, is the $25 million to $30 million annual guidance net of any contra revenue items from the bridge program or how is that bridge program being handled with the accounting?

Sure, I will take the second question first. And yes, the $25 million to $30 million includes net revenue. So that it's actual cash available to service our expenses, et cetera. So there's no change there, part one. And then part two is, I think, we feel quite good on a couple different fronts. Number one, Europe in our Roche contract is essentially contracted. So we feel like there's tremendous visibility to that portion of the revenues. And what we see in terms of extrapolating the last several weeks and now into the months of trends and as we look at Q1, we feel like and we've always said that this was a second half of 2019 story that Mike had to hire his sales force, Mike, had to get healthcare providers trained on this and this is - the metrics that we're seeing are tracking against our internal plans. So we feel good and comfortable still that we will be within those ranges based on those inputs.

Okay, that's helpful. And then just last question for me, Tim, just want to follow-up on the potential for an ICGM status here with the 90 day sensor now know it's a couple years out, but your device is the only implantable CGM. So I would be somewhat surprised if FDA would declassify an implantable device to a Class II medical device, but just your thoughts and how you actually can obtain the ICGM status?

Sure. I'm going let Mukul take that, Mukul, amongst other things runs our regulatory efforts in and I would say he is honestly speaking to our review group at least once a week, maybe sometimes more. So we've had a lot of conversations on many fronts including ICGM.

Yes, Alex, you're right about the complexity of implantable and then downgrading it to a 510(k) but we have had that discussion with the agency and they have look at ICGM from the perspective of being a device that can be interchanged with the pump. And they are looking at just a meeting by a special controls, as the criteria that they look for ICGM. So from that perspective, they're very comfortable looking at the implantable and giving it an ICGM, as soon as we give them the data that meets the special controls.

And I think the other thing to recognize, right, so the special controls really gives them comfort that there is a tight band of high quality analytical, so accurate glucose readings. The other thing that we're actively involved is the post approval study for the product where they're looking at extended experience on multi insertion sensors longitudinally, which we will be enrolling over the next couple of years. And then, of course, when we get our approval for the dosing claims, there'll be additional safety data that will be generated. So, safety and efficacy, they're going to have a lot of experience with and yes, it's an implantable, but they'll have a pretty well defined with that experience.

Okay, understood. Thank you.

And our next question will come from Jason Bedford of Raymond James.

Hi, thanks for the questions. This is Matt Wizman on for Jason Bedford. So I have a couple questions on the bridge program. First with the program a little bit more time under your belt with it, what are you seeing as far as the success rate goes in the appeals process? If you have a percentage there that you could maybe give. And then on the second part, is the mix of users you are seeing coming through the bridge program different than the mix those coming in before or is it similar? Thanks.

Thanks, Matt. We're not ready at this point with literally just a few weeks to talk about the success yet of the overturns for the E&I designation, but we are very confident and we do have a partner organization that is directly focused on it. I'll let Mike speak to that in a second. But first, I'm going to ask Jon to give some details on the bridge program, as it will be a pretty material part of our U.S. efforts here for the coming quarters. And we want to make sure there's good understanding about what we're doing with it.

Thanks, Tim. I hope by giving a little bit of color here that I will be answering the question you have in general and happy to dig in some detail, either separately or on this call. But we - I think it's helpful for us to walk through the patient obligations that we are bridging the deductibles and copays. So our bridge program helps to offset the patient out of pocket costs associated with the Eversense sensor and transmitter. And so if an eligible patient has an out of pocket costs higher than $99, whether that is due to deductible, copay, coinsurance or non-coverage. But the bridge program does not offset the cost of the procedure as that is between the physician and the patient. So, patients are very pleased with the program and are willing to appeal to their insurance companies strongly for their third sensor and we'd ask you to keep in mind that the appeals can be initiated and denials inactively successfully overturned even with an E&I coverage policy. So these are single case negotiations.

And then Matt, I'll just talk a little bit about our partners, they essentially form as they represent as a delegate for the patient. So they're communicating to the payers, they're actually representing, if you will on the patient's behalf. And with that, you certainly have a perking up of the review case manager and sometimes the medical director because they are the patients that pays the premiums. And again, I want to reinforce that this is not new to healthcare medical devices, copay programs have been around for many years. And the appeals process and delegate process has been around for many years. And we've been actively working in these for few weeks now. And as Tim said, we're not ready to give out percentages in terms of the overturning of the appeals. But we're actively working those. In terms of the - I could say one more thing about the terms of the percentage. We have seen, obviously, as Tim said in his prepared comments, the four big payers that have E&I, we've seen a high percentage of our now a pipeline being shipped through those payers just simply because we're offering the bridge program. And additionally, because physicians were not willing to write a prescription for someone who they knew would get denied. So there was a rate limiting factor there that they didn't actually want to write that prescription and put it into our portal now that there's access for those patients. Those four payers in terms of the prescriptions have gone up because they know that now those patients that they are writing prescriptions for have access, and that's been the mix that we've seen a pretty big increase over the last several weeks.

Okay, thanks. And then you mentioned that you were discussing value based programs with some of the payers. Could you give any details on what that would look like? And if do you have any value based programs that are active right now with other payers?

I won't comment on the last question in terms of that negotiation, that's - or those that are active. I can tell you that in many ways, value based programs are becoming a standard discussion, and then how you implement that in many ways easily you can implement it and track it, the better the outcome both for the payer and then obviously the medical device company, et cetera. We feel like we have a pretty strong physician statements there where, if the sensor utilization or wear time is not to the expected, we will work with that plan in order to figure out what is the right payment terms based on that percentage. And then the second thing is, as Tim talked about is the gluco metrics around the outcome of that patient also would be negotiated through that. And that gluco metrics, we feel very confident because of what we've seen in Europe in terms of whether it's CHPA 1C time and range, wear time of the sensor we feel pretty good and positive that if we were going to a value based program with any payer, they would not only be pleased with the outcome, the clinical outcome, but certainly the economic value that we're providing.

Great, thank you.

You're welcome.

Our next question will come from Kyle Rose of Canaccord Genuity.

Great, thank you very much for taking the question. So just two questions for me. The first one, you talked about the 400 prescribers and I wanted to kind of talk about specifically how that group of patients has been impacted by the bridge program. And you just touched on it a little bit when you talked about the fact that, these prescribers are willing to prescribe more now that they know that the bridge program is in place. So maybe kind of help me just kind of talk about those dynamics? And then secondarily, can you just talk about the pricing and reimbursement dynamics you've seen from a market standpoint, there's a lot of commentary about some increasing competition coming from Abbott with Libre 2.0, potentially getting ICGM and driving some more price competition. What are you seeing in your conversation with payers? Does that change your outlook at all?

Okay, yeah, you want to?

Sure, Kyle, it's Mike. First of all, I'll expand on what I was talking to Alex about in terms of that 400 docs that have written or healthcare providers that have written prescription. If you think about it before they would see a patient with any of the big four insurance companies that Tim mentioned earlier, United Healthcare, Signa [ph], Anthem. And they would just say, Hey, I'm not going to enter that into the Eversense ordering system because I know you're going to be denied. Now because of the bridge program, they will enter that into our portal system. Then we work with the distributor in order to work through what is the eligibility and benefit. And also, as John mentioned, the copay the deductible, we work through that with our partner for the bridge program. And then they're shipped through their fulfillment agents. So because of that streamlined process, and they know that they will have access, the patient will have access. Those physicians that were kind of waiting on the sidelines, maybe in areas that had a prevalence of United Healthcare or Signa were deciding not to prescribe now we're opening access and they're prescribing more. In terms of the pricing, we just haven't seen too much conversation on that at that, foundational level with payers. I think they understand that what the per day rate is, and we're fitting well into that. And in fact, we're fitting well into that even with the procedure code. So all conversations have been very positive. I think they understand the value proposition. When we do talk to them, we're a new, nascent product in the market, they have to work it through their coverage policy assessments. And we know that, we respect that. And we're working with them. And now with Fran Kaufman on board, we're certainly having deeper conversations in terms of the clinical output of our products that are, and we hope that over time, we'll be able to get to a full coverage policy, like other CGMs. But to answer your specific question on the pricing, we haven't seen too much difference than other CGMs in the market.

Hey, Kyle as I would say, and we've talked about this before. Strategically, we do recognize this as healthcare pricing does ultimately only go in one direction. And we fully expect that that would be the case in CGM as well as you get greater and greater and greater penetration. In fact, it's our objective to honestly go into certainly anyone that's with type 2 diabetes on insulin is a candidate and should be on a continuous glucose monitoring system and that does need to be done at the best economics that we can afford as a society. So we have absolutely been focused although we are early in our tenure. The entire reason that we're focused on taking a 90 day product to a 180 days and then 180 days to 365 is because we do recognize that we have a very unique cost position so that we can support the dynamics and potentially lead the dynamics and cost reductions in the future as we go into that much broader population.

Okay, great. And then just one on the P&L and I apologize if I missed this in the prepared remarks, but operating spend came in a bit higher than what we were thinking about is there anything one time in nature in the Q1 that we should be thinking about as we move through the year? I know you've talked about the cadence of revenues through the year, but just some color with respect to operating expenditure would helpful for modeling? Thank you.

Sure the cost of goods were certainly impacted on several fronts. We believe - and so of course that impacts the revenue reduction. In terms of COGS as we mentioned and we do believe that I want to be very careful with my words here it's one time in nature and that there was a product upgrade sure there maybe product updates again. So I don't want to say that will never happen again, that would be an unfair characterization. But in terms of the whip of the small LED products and their upgrades that's what caused and the obsolescence of that upgrade caused COGS to go up this time. And again we don't anticipate that to be at those levels going forward, but we do believe given that we're an ascent medical device company that things like this will happen as we're doing product improvement from time to time. And there's also - was product expiration based on the timing of the Roche contract. So those were the major factors again we don't believe those are recurring at these levels they will be lumpy and unpredictable and will occur from time to time. But we - I can't call them one-time in nature we don't believe they're going to occur at these levels.

And I think it's important to recognize Roche is obviously a very important partner for us but the way that their distribution model works and the fact that we provide a year's dating on our product is it actually works best for them if they purchase a majority of their need for the coming year in the fourth quarter of the prior year. So we continue and anticipate that that will be the largest quarter in our ongoing partnership with Roche as they purchased they move it to their distribution in the first quarter and then out to their other countries around the world beyond that. So that's what works best for them and of course we build to that schedule to support our efforts, but that does mean that we have a generally pretty large fourth quarter in our roll out.

Okay, thank you very much for taking the questions.

And our next question will come from Kyle Bauser of Dougherty & Company.

Hi, good afternoon. Can you hear me okay?

Same Kyle, how are you?

Great, going well thanks. I apologize I had a time here if my questions are already answered but just a couple of quick ones how many clinicians are trained on Eversense in Europe, how many are trained in the U.S. and once a center is trained can that practice training a new clinician that comes on board?

Sure, so I'm going to let Mirasol speak to Europe and then Mike will come in and talk about the U.S., but we're really excited about the progress that we've made in Europe because we do believe that it emulates what we're going to be able to do in United States.

Yes, I'll tag team with Mike here, within Europe we've been available since very late in 2016 and of course we're in 15 countries now. So we have I believe just above a thousand clinics and we are - we have authorized just over 700 providers through the first two and half years in Europe, works very similarly I would say with the U.S. but some of the things that we've learned in Europe we've passed on to Mike's team and the U.S. market to ensure that we continue to be able to ensure that our providers is doing the procedure, our confidence then comfortable with doing the procedure as well as all the learnings on the clinic workflow. So that's the number that we have in Europe. And so I'll pass it on to Mike.

Yes, Kyle, in the U.S. as Tim mentioned, we have over 400 physicians that have written prescription, we have over 100 that are trained. And were obviously they are fully trained or certified once you've done removal. So we're working on the other hundreds that now have to do removals in order to be certified. In terms of your question about can inside the practice you create like a master trainer who can actually train, once they've been authorize through the labeling, then an authorized trainer can do the training for others. Most of the time, we do have a clinician on our end who works for Senseonics there to support, but there's nothing that has stated that a practice couldn't have a master trainer who trains the rest of the healthcare providers in that practice.

Got it, that's really helpful. And then my follow-up is to the extent you can share what updates, readouts or presentations can we expect at ADA next month for Eversense?

We're - we do have a nice products leader, Frank Kaufman, our CMO is going to be leading that effort and we've certainly got the safety data which is very comprehensive, very real world well over 3,000 patients now that we have a multi-year multi-sensor experience on. And we will be sharing some of the very earliest of U.S. data and experience with the product specifically. So, we're excited to do that, we're also excited for the Beta Bionics readout as this is our first demonstrated clinical results of Eversense driving an artificial pancreas system.

Okay, thanks for the color. That's it for me.

And our next question will come from Matthew Taylor of UBS.

Hi, thank you for taking my questions. This is Eon [ph] on for Matt. I have a question on your patient mix, can you talk about how many patients in the U.S. are new to CGM and how many are from competitive CGMs?

Let's check, we were seeing about 25% that were brand new to CGM. Obviously, the predominance these are all on insulin. The vast predominance are type 1, so they've all known they should be on CGM, but for one reason or another, they didn't opt to make the move until the long-term implantable was a reality of a solution for them. The remaining 75% is coming currently from existing CGM users and we're seeing a conversion distribution that pretty much represents the market share in the U.S. This is a very similar dynamic. Early on in Europe, we saw most early adopters coming from folks that were experienced with CGM. But I think the most recent data that we got from Germany our largest market say that today they had progressed to about 50% of their users who are actually new to CGM and the other 50% were coming from the existing CGM and flash product over there.

Okay, that's great. And then just one clarifying question on payer coverage. So you talk about 100 million by year end 2019 and 250 by year end 2020 does that assume coverage win with Medicare?

Yes, our plans for Medicare have always been in the 2020 time period. Once we have the dosing claim we'll actually begin those conversations. And obviously we do everything we can to move it to earlier in 2020. But it does start with a dosing claim. So we'll begin those conversations later this summer right after the approval comes in.

Okay, thank you.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Goodnow, for any closing remarks.

Great, thank you. I do want to thank everyone for joining us this afternoon and for your continued interest in Senseonics. Please have an enjoyable weekend. Good day.

That does conclude today's teleconference. Thank you all for your participation.