Good afternoon and welcome to the Senseonics First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Philip Taylor, Investor Relations. Please, go ahead.

Thank you very much and welcome to the Senseonics first quarter 2020 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 reflects 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 for the year ended December 31, 2019, our 10-Q for the quarter ended March 31, 2029 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 2020 outlook in light of the COVID-19 pandemic, 2020 financial guidance was suspended on March 26, 2020. On this call, we will be providing investors U.S. GAAP net revenues and gross revenue measures to provide meaningful supplemental information regarding our performance and provide better transparency on the impact of reimbursement in the Eversense Bridge program. In accordance with U.S. GAAP, Senseonics reports revenue in its financial statements on a net basis, which includes gross to net reductions, primarily related to the Eversense Bridge program. Gross revenue measures do not reflect the gross to net reductions and accordingly may be considered to be non-GAAP financial measures. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with U.S. GAAP and Senseonics non-GAAP measures may be different from non-GAAP measures used by other companies. For more information on these non-GAAP financial measures, please see the reconciliation of these non-GAAP financial measures to their nearest comparable GAAP measures in this afternoon's earnings release, which is available on our corporate website at senseonics.com. Joining me from Senseonics are Tim Goodnow, President and Chief Executive Officer; and Nick Tressler, Chief Financial Officer. With that, I would like to turn the call over to Tim Goodnow, President and CEO. Tim?

Thank you, [Trip] [ph] and thank you all for joining us. Before starting our review, our thoughts are with everyone that's been affected by COVID-19 virus and the resulting economic impact. We at Senseonics would like to express our deep gratitude to all members of the health care system, especially the frontline providers treating the important needs of our users, who have also been impacted by the pandemic. As we announced in the last week of March, we have responded to the current environment and the company's financial challenges in several ways, culminating in this decision to explore strategic alternatives to enhance stakeholder value. As part of the strategic review, we've refocused our operations on core activities to pursue the long-term success of our Eversense CGM system and to help people with diabetes continue to access its benefits. On today's call, I will provide an update on our current corporate priorities and operational focus, then provide an overview of our first quarter results and additional business updates. Nick will provide additional details on our financials, the impact of our operational changes and our current balance sheet. As we have shared in the past two months, we have made significant changes to our organization. We have repositioned the business to move forward in an efficient and effective manner in response to our financial situation. Following the fourth quarter earnings call, in the heightened economic state and health system, COVID-19 isolation efforts, together with the challenges of a covenant in our senior facility, the company was in a position that required us to terminate our loan and security agreement with Solar Capital. We repaid all amounts outstanding and the associated prepayment fees, which totaled $48.5 million. At the time, we also announced the Board's decision to explore strategic alternatives to enhance stakeholder…

Thank you, Tim, and good afternoon, everyone. In our financial update today, we will provide additional details on how the previously announced changes to the business have impacted our financial statements in accordance with a U.S. GAAP accounting basis. As disclosed publicly through our 8-K filings, on March 23, we announced the repayment of the Solar Capital debt. Additionally on March 26, we announced a strategic review in connection with the evaluation of considered alternatives. The suspension of commercial activities in the U.S. for the 90-day system for new patients, the current suspension of financial guidance for 2020, cost reduction measures, and additional impacts from COVID-19. Subsequent to the closing of the first quarter of 2020 on March 31, in late April, we announced new financing with hybrid capital and the attainment of a loan under the Paycheck Protection Program. Our results for the first quarter of 2020 reflect these announcements and our assessment of the evolving impact of COVID-19 on our overall financial condition, including asset recoverability, liquidity and third-party obligations. In the first quarter of 2020, total net revenue was $36,000 compared to $3.4 million in the first quarter of 2019. U.S. net revenue for the first quarter was $24,000 after accounting for gross to net reductions. Reductions consisted of two primary drivers. Approximately 40% of the reduction was due to the previously described Eversense Bridge program and 60% was due to onetime considerations to distribution partners for expected inventory depletion slowdown due to both our commercial changes and the COVID-19 impact. Because early Q1 shipments were sent to distributors in anticipation of normal unrestricted patient access to doctors clinics and in consideration of expected reduced product flow, we have also extended longer payment terms to distributors for this transition. At this point, it is possible that U.S.…

We will now begin the question-and-answer session [Operator Instructions] The first question is from Chris Pasquale with Guggenheim. Please go ahead.

Thanks. Tim, can you say anything about the performance of the 180-day sensor in PROMISE and when we might see that data?

Obviously, we're not going to speak to the data on this call. We do feel very good about the 180-day product in light of the fact that, of course, we have pretty significant commercial experience with it in Europe. I'll let Mukul speak to the timing when we may want to announce some topline results. Mukul?

Certainly. Hey, Chris. So, we do expect to submit it later this summer. And at that time, the data would be available. We certainly will like to discuss with the agency as to whatever we do in terms of sharing the results at that time. It shouldn’t interfere with the process at FDA. So, that would be the time that we'll be looking at sharing that data.

Okay. And then I think previously you had talked about potentially getting into the clinic with a 360-day sensor in early 2021. Has the reorganization thrown that timeline off, or was that product already in good enough shape that you could move it forward once you had the 180-day on track, just an update on that, that next-generation product would be helpful. Thanks.

Yes. We are still targeting, Chris, to be in the clinic in 2021 with some of the investment re-strategizing that may get pushed out a quarter or so. But we're actively still working on it. But we do expect next year in the 2021 calendar time period to be starting the 365.

Our next question is from Rebecca Wang with SVB Leerink. Please go ahead.

Hi, guys. Thank you for taking the question. Actually, more of a follow-up on the last question. So it actually feels, like, we still have people pushing back and saying 90-day isn't enough for [intangible] [ph]. Should we think about 180-day sensor as being a more potential adoption infection driver, or do you guys think, it will take six -- the one -year sensor to really drive adoption inflection?

We see a continued improvement with each one of the elongations. Obviously, you add more independence in the use as it gets longer and longer. As we've seen in Europe, when you go to the 180-day product, is greater interest. We would anticipate that, of course, that gets even stronger with the 365. But we certainly expect the 180 to have some pretty compelling differentiation as well.

Thank you.

The next question is from Matt Blackman with Stifel. Please go ahead.

Good afternoon, everyone. Thanks for taking my questions. Tim, when you spoke about the 180-day product, you mentioned other enhancements beyond calibration and 180 days. Is there anything specific worth calling out on those other improvements?

Yeah, there's a number of improvements that we've taken feedback from the users, especially in regards to the user interface and the app. So we'll be bringing those out as well. Primary changes are, of course, the longevity, the [cow] [ph] reduction, but there are other important improvements that will come as well.

Okay. And then just two quick follow-ups. Are there any updates on the flash sensor partnership discussions? Is that a separate pathway from the strategic alternative process you're running now, or are they somehow linked? And then I'll just throw my follow-up. Anything at ADA worth calling out this week -- this weekend? And thanks, appreciate it.

Sure. We -- in regards to the whole portfolio development that is an active part of the conversations that we're having. I won't go further than that. But obviously, the ability to flash the sensor is pretty attractive, especially for expansion into a type 1 non-insulin population. From the ADA, we do have a poster on Saturday. That will be -- you can see that up on our website when we're done. And we'll be showing some pretty significant clinical data from, I think, the first 1,600 patients in the United States that have been on Eversense.

All right. Thank you so much.

The next question is from Jayson Bedford with Raymond James. Please go ahead.

Good afternoon. So I apologize if I missed this, but I'm a little unclear on the commercial efforts. Are you expecting to implant new patients this year?

Jayson, we've curtailed the new patients with the one exception that we are now piloting and have inserted our first Medicare patients. So where we have doctors that are currently certified on doing the insertion, now that we have Medicare coverage, there has been a good interest in some of those folks coming on the product. So we don't have the sales reps right now to do the detailing or the incremental training of new doctors. But if you're an existing doctor, we are doing some Medicare patients. And in fact, that's already occurred.

Okay. And is Roche selling the device in Europe to new patients?

Correct. Yes, there's been no change in Europe with Roche, other than just the COVID impact on their clinic access with patients and providers. We are seeing that rebound as well.

Okay. And I appreciate the commentary around expanded access. But when you get to the 180-day approval, do you have to go through this process again for this device?

No. No, Jayson. Much like you saw as the transcutaneous CGMs transition from 3 to 5, to 7, to 10, to 14 days. What that has created is, many of the payers are paying on a per day basis. And so, they just consider that in the length of the sensor. So we wouldn't anticipate that we would have to go through this approval process with a new elongated sensor.

Okay. And then maybe last one for Nick. What is the current monthly burn?

So we haven't provided guidance there. In the first quarter on an operational basis, it was $10 million a month. As we mentioned on the call, we do expect in the second half to be in that $3 million to $4 million range with those exceptions as noted. Clearly, there's a bit of a transition going from where we were in Q1 to where we expect to be in the second half of the year.

Okay. Thank you.

You're welcome.

[Operator Instructions] The next question is from Alex Nowak with Craig-Hallum Capital. Please go ahead.

Hey, good afternoon, everyone. Tim, how do you plan to conduct the 180-day launch differently than the 90 day? What went wrong with 90? What went right? And what do you plan to do differently here for the 180-day?

Yes. Well, certainly, the 180-day product, as we noted, we think is going to continue have a lot of interest as well. There's a couple of key elements. We'll certainly be much further along in regards to the payer reimbursement. We should be -- when we get the final three MACs, we should be close to 200 million covered lives. I think, the official count we're giving today is right about 170 million. So, obviously, that will be much, much further along, as well as the training and the certification of the docs to do the insertion people -- insertion of people. Recall that we've got approximately 500 folks that are doing insertions now and about something like 1,600 that were doing the prescriptions. So we'll continue to work on the network of additional inserters that are not endocrinology folks. We found that to be very successful, and we'll continue to support the patient with a longer product.

And once the 180-day is approved, how long is it going to take to go out there, rehire sales force, get them trained up? And would you expect to do something along the lines of the 90-day, where you hit the ground running with 30 or so reps, or is this going to be a little bit more of a slower-go approach?

Yes. I'd say, Alex, at this point, it's probably best. That's all part of the strategic conversations, depending on the direction that we had, would change the implementation of the commercial plan. So I'd like to defer that, let us go through the strategic process, and then we'll be able to really describe how we or partner organizations, strategic partners would approach that.

Okay. Got it. And then I just want to touch on the cash burn again. At the low end there; at the end of this year works out to basically 39 per year; obviously, there isn't a U.S. sales force and a lot of these initiatives have been halted. So I guess my question is, isn't that burn still pretty high on a – if you look at a per-year basis? And what are the options there for more lean organization going into the 100-day there?

Nick, do you want to take that?

Sure. Yes. So right now, based on the strategic – or the initiatives that Tim outlined, we have – we made reductions of approximately 60% of the employment base. So certainly, with the initiatives that we have, being a public company we continue to maintain staff of approximately 80 FTEs. And so certainly as Tim mentioned, we'll continue to go through our strategic process and we look forward to updating you all when we can.

Okay, got it. Thanks.

You’re welcome.

The next question is from Kyle Rose with Canaccord. Please go ahead.

Great. Thank you for taking the question. So a lot has been asked, but I just wanted to circle back. I think you talked about some attrition rate numbers for, I guess, the height of the pandemic and some of those restrictions. I just wanted to see; one, could you provide those again? And then also the trends you're seeing as far as reinsertion rates? And then just how we should think about, I guess, the size of the install base now and on a go-forward basis, maybe what happens to those patients who didn't have the chance to get reinserted over the course of the last 8 to 12 weeks?

Yes. I think to start with the end there, Kyle. I wouldn't suggest that we've indicated an attrition rate. What we've seen is that, insertions were down to about half. So 50% of what they were prior to going into the COVID impact. So there certainly were some patients that were not able to get sensors on their -- on their 90-day expiration, but we are – see them starting to come back. So that is why we're hesitant at this point with frankly, just really a few weeks of -- here to see that response happening at this point. But I don't expect it to say that, this is a 50% attrition, I think we're going to see it's less than that, but we'll know in a little bit more time.

Okay. Thank you. I appreciate the additional color there. I must have misheard the comments. Thank you.

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

Well, thank you. We appreciate everybody's time and interest and we look forward to updating you here as we move through the second quarter and through the strategic process. With that, good day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.