Good day and welcome to the Senseonics Second Quarter 2021 Earnings Release and 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. 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 for the year ended December 31, 2020, our 10-Q for the quarter ended June 30, 2021 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 2021outlook. Joining me from Senseonics are Tim Goodnow, President and Chief Executive Officer; and Nick Tressler, Chief Financial Officer. With that, I’d like to turn the call over to Tim Goodnow, President and CEO, Tim?

Thank you. Hello and thanks everyone for joining us today. We’ll be discussing our Q2 commercial initiatives led by our global partner Ascensia Diabetes Care and provide progress updates on our clinical, product pipeline and regulatory activities. Nick will address the second quarter financials in detail. And then, I’ll conclude and open up the call for Q&A. In the second quarter, Senseonics achieved revenue of $3.3 million, which included $1 million of revenue from the U.S. and $2.3 million of revenue from outside the U.S. Through the first half of the year, the global commercial partnership integration has progress to Ascensia taking full commercial operations, and we have collaboratively continued our efforts to minimize the patient base attrition, maintaining Eversense users. Based off the current plan, we continue to expect the global net revenue to Senseonics for the full year 2021 will be in the range of $12 million to $15 million. As we operate today under the terms of our commercial collaboration agreement, Ascensia has assumed responsibility for marketing, market access, sales, distribution, reimbursement, and customer service in the U.S., Germany, Italy, Spain, the Netherlands, Poland, and now Sweden and Norway, the last two existing markets, which were transitioned ahead of plan in Q2. We at Senseonics remain focused on product development, including clinical trials and regulatory activities, along with manufacturing our systems. In the U.S., this is the first quarter for most members of Ascensia’s U.S. sales team. And we’re pleased with the steps that they have taken to establish this market coverage. To support this, they identified the skill sets that are required for sales professionals to be successful introducing our transformative CGM technology. 25 new sales professionals experienced in diabetes or medical technology have now been fully on-boarded and are calling on existing accounts. This team…

Thank you, Tim, and good afternoon, everyone. Our Q2 results reflect the full transition of commercial activities in the U.S. and EU to our partner Ascensia. In the second quarter of 2021, total net revenue was $3.3 million, compared to $261,000 in the second quarter of 2020. U.S. revenue for the second quarter was $1 million and revenue outside the U.S. was $2.3 million. Gross profit in Q2 2021 increased by $1.5 million year-over-year to $392,000. The positive gross margin in the quarter was primarily due to the fulfillment of orders, utilizing existing written off inventory at the onset of the COVID-19 pandemic. Second quarter 2021 sales and marketing expenses decreased by $1.5 million year-over-year to $1.6 million compared to $3.1 million in the prior year period. The decrease was primarily due to the strategic changes in our market commercialization approach through the Ascensia collaborative partnership. Research and development expenses in Q2 2021 increased by $3.3 million year-over-year to $7.1 million, compared to $3.8 million in the prior year period. The increase was primarily driven by clinical study costs and personnel related expenses. General and administrative expenses in Q2 2021 were $7.5 million, an increase of $3.1 million year-over-year, compared to $4.4 million in the prior year period, mostly due to an increase in personnel-related costs. For the three months ended June 30, 2021, operating loss was $15.9 million, compared to a loss of $12.5 million in the second quarter of 2020. This represents a $3.4 million increase in operating loss from one year ago. The increase in the Company’s share price at the end of the second quarter, as compared to the Company’s share price at the end of the first quarter of 2021 led to a significant noncash charge in Q2. As a result, other expenses increased by…

Thank you, Nick. To wrap up, there were headwinds in the first half of the year as we worked with Ascensia to initiate their commercial activities. We reintroduced Eversense to the market with a new commercial partner amid the pandemic, which impacted both, in-person actions to drive awareness and created delays in the review of our highly anticipated new product. These factors have gated us from achieving rapid patient adoption to-date, but we believe we are better positioned to gain traction in the market with the right team and the right strategy to capitalize on a potential of Eversense. We are pleased to be working collaborating with our partner on initiatives to drive growth, including increased patient and clinician marketing, and launching the patient access program. We are confident in our product and its value proposition to users. Eversense users are continually commenting how our system reduces the burden of managing their diabetes. And we have been pleased with the many loyal users who have already had the awareness of Eversense. We see this as a confirmation of our belief that our value proposition will resonate with a broader patient population. And we’re excited and motivated to offer more patients the same benefits. As we look forward to future generations of our technology, we are absolutely confident that we can offer existing and new patient populations additional benefits, and build lasting patient and provider loyalty. And this will contribute to our sustained growth and success as a business. I’d like to thank you for your time today. And joining us for questions are Mukul Jain, our Chief Operating Officer, and Mirasol Panlilio, Vice President and General Manager of our 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] Our first question comes from Mathew Blackman with Stifel. Please go ahead.

Good afternoon, everybody. Thanks for taking my questions. I have three. Maybe just to start, Tim, I appreciate it. It’s tricky commenting on an active FDA review. But, we’ve been hearing from some of your peers the last couple of weeks about further delays with some of their filings. So, any more color you can provide on where your confidence is coming from in that later 2021 approval would be would be helpful. And I have a couple of follow-ups. Thanks.

Yes. Obviously, through the process you do have the opportunity to speak with the agency. They -- not only do they have a significant amount of work to do, there has been some reprioritization of the COVID activities that has impacted them. And there’s also been some personnel changes as well, where they have lone people out. There are seeing some of that return. And in our recent conversations with the lead reviewer, we just feel that based on where we are, although it’s certainly slower than we’ve experienced in the past, that we do see the path to getting this completed here, over the next couple of quarters.

I appreciate that. Thanks, Tim. And then, as we sort of think about the relaunch in the U.S., just curious -- and I appreciate it’s only been a few months here. But, has Ascensia been able to engage the majority of the existing U.S. patient and clinician customer base? The sort of the first part of that question. And then, it’s unfortunate, I need to ask this again, but are the reps able to access clinics now pretty freely? Just asking because of some of the resurgence in some different regions in the U.S. And then, I’ll just throw the last question out there right now. And maybe it’s for Nick. Just curious about how impactful you think the patient assistance program might be in terms of your mix in any given quarter. I heard Tim mention maybe up to 50% of patients taking mealtime insulin may qualify. But maybe the more important question is, is that patient assistance programs have now baked into the guidance? I suspect that that may have weighed on the guidance a little bit. So, maybe a little bit help understanding of the moving parts in the guidance. Thanks.

Sure, Matt. I’ll pick up the access. The new sales reps have been able to do the initial conversations. I won’t say that they’ve all been able to be in person because of some of the regional restrictions. And as you’re aware, those have picked up again in the U.S. They have been less forgiving, if you will, in Europe over time. So, we do understand that a lot of this will continue to change. But in general, we’ve been able to reach out to most of the existing prescribers that currently have patients on the product. Some of those that moved on during the time that we stopped commercializing, we have yet to get back to and that’s a lot of the work that Ascensia is going to be focused on moving forward. But, certainly, we do continue to see some impacts through the COVID. And we’re just going to have to continue to work through it and use the televisit capability while we’re in some of this resurgence. Nick, I’ll let you speak to the patient assistance program.

Sure, yes. Thank you, Matt, for the question. In terms of the patient assistance program, as we take a look at our revenue forecasting for the year, there’s a number of factors. Certainly, that is additional economics that is taken from the partnership. But there’s also other factors that we looked at including payer mix and mix overall of the product across the regions. So, our guidance at this stage is really driven by two factors. Again, you mentioned one in terms of the timing of the 180-day approval in the U.S., and then any new impacts potentially from the virus strains that are currently circulating the globe.

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

Thanks. Nick, just to follow up on that last point. Does the guidance assume that you actually get any benefit this year from the 180-day sensor?

It does include a small amount of pickup from the 180 in the U.S., in Q4.

Okay. And then, just a couple of questions from a financial side of things. So, do you have any written off inventory left that could still flow through and hold down COGS during the back half of the year, or has now been taken care of?

Yes. We project that in Q3, we will have fully extinguished that written off material and see more normalized margins for the back half of the year.

Okay. And then, why did G&A expense tick up so much sequentially? And you guys had been running in kind of a 4.5 to 5.5 range for the year and a half now, and then it all of a sudden shot up here, and sort of undid some of the benefit from having lower sales and marketing.

Sure. Yes, the main driver there is stock compensation expense, there’s both cash and noncash component. That is the biggest driver that we’re seeing.

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

Congrats on a really strong quarter. I was wondering if you could give a little bit more color on some metrics over in Europe, since the Ascensia’s had the product there a little bit longer, you’re a bit more established in Europe. So, I’m thinking things reinsertion rates, for example, with 180-day, the XL over in Europe, and then also things like getting sort of, I don’t know if this is the right way to think about it, but like same-store sales, existing physician user growth versus new physicians, things like that?

Sure, Danielle, and thanks for the time as well. In Europe, you’re right, they’ve had it for a couple of months longer than in the U.S. But still, they’re pretty actually coming up the learning curve. I would say that Europe is still much more largely impacted by COVID in the second quarter than certainly the U.S. was. So, some of those dynamics needs to be considered as well. Specifically on assertion rates, we haven’t seen a notable change. As you recall, we’ve typically seen about 70% on the first insertion, 85 on second, and 90 or higher on third and beyond, as people really get locked into the product, and they’ll continue to work really hard to stay on the product. So, we haven’t seen that change, but new patient starts, especially at new clinics, in the time of COVID has been has been challenging for us.

Okay. That’s a fair point. I guess, just a follow-up on the reinsertion rates. Now, with the XL, if you get longer wear time, do you expect those reinsertion rates to stay at that 70 and then 85, and then over 90, or do you think that there’s a chance that those reinsertion rates actually move higher with longer wear? Thanks so much.

Yes. Well, certainly just the math of the longer wear helps, because there’s two times a year for that change to occur. So, that does have a material impact. I would say, the biggest improvement that we continue to make for retention, especially for that first sensor still is around the economic. About half of those 30% that do come off, are coming off because of economics. So, as we get more and more coverage around the globe, that’ll be the biggest opportunity for us to see improvement there.

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

Hi. Good afternoon. Just a few questions for me. Tim, in your opening remarks, you mentioned minimizing patient base attrition. Have you succeeded, meaning did the patient base grow quarter-on-quarter in 2Q?

Patient base attrition really was heaviest for us in 2020, Jayson, when we really stopped the commercial activities. So, that’s what the initial efforts for Ascensia has been in U.S. to really bring that back. So, that was really my primary reference. They are calling on existing accounts. And of course, we’d always like to see more patient growth than you’d have. That’s really obviously the name of the game. But, I feel that we are making good progress, but the focus initially is really on stabilizing the market that had been through a pretty dramatic time with both our stopping of commercial activities and the COVID dynamics.

Okay. On the 180-day, is the expectation that you get approved for both the primary and the SBA sensors?

We’re still working on it, Jayson. As you saw from our technical publications, we do have an approved formulation, and that we are working with the agency for those in review. In regards to what actually gets approved, we’ll stay tuned. But, we’re continuing to work with the agency.

Okay. And then, maybe for Nick, just for clarity. Does the new patient assistance program by Ascensia impact your revenue generation or does Ascensia absorb most of the economics there?

Yes. So, the patient assistance program is a gross net deduction taken at the partner level and is taking previous split between us and Ascensia.

Our next question comes from Alex Nowak with Craig-Hallum Capital. Please go ahead.

Hey, guys. This is Trent McCarthy on for Alex. A couple of questions for me. Can you maybe speak to the clinician reception on Eversense specifically through the Ascensia sales force, relative to when the Company launched the product originally in 2019?

Well certainly, the biggest change since we launched in 2019 really has been the payer coverage. And that is a significant consideration for a prescriber. So, the fact that we’re in much, much better shape and exact reception than much better, but do recall, as I said, most of our focus in the early couple of quarters here with Ascensia has been on our existing prescribers. So, they have a good utilization of Eversense and are, of course, by that fact, just predisposed to have a positive reception of it.

And maybe just a quick follow-up to that. How many clinicians are trained to perform the insertion and how many clinicians are actively prescribing the device? And I guess, how has this changed, since Ascensia started selling in April?

I don’t have the exact numbers for you. But, we did see in 2020, a reduction in the number of folks that were doing the insertion, much of that driven by COVID, also notable amount by our lack of an active sales force. So, we continue to focus on bringing that back. It’s the existing clinicians that are currently doing it and really a focus on the top 300 that Ascensia is working on right now.

Our next question comes from Marie Thibault with BTIG.

Hi. Good afternoon. This is Sam Eiber [ph] on from Marie. Thanks for taking the question. Just one from me on the DTC marketing efforts there. I appreciate the commentary on the 15 million impressions during the quarter. Any color on how that’s maybe impacting your patient starts and growth, I guess, over the quarter? Thanks.

Sure. Maybe what I’ll do is speak to our history, as this is just up anew. But, we did see a pretty significant amount, prior to the COVID activities that we anticipate getting back to. About 50% of the patient starts previously had come from our DTC efforts. So, I would anticipate that we’d be able to reach that level in the future as we move forward.

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

Great. And I’d like to again thank everyone for their time and the opportunity to speak with you this afternoon. We look forward to giving you an update at our next quarterly call in about the November time period. With that, have a good day. Thank you.

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