Good day, and welcome to the Senseonics Third Quarter 2022 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 of 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 expressed or implied by any of those forward-looking statements is detailed under Risk Factors and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2021, our 10-Q for the quarter ended September 30, 2022, and 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 2022 outlook. Joining me from Senseonics are Tim Goodnow, President and Chief Executive Officer; and Rick Sullivan, 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 us this afternoon. On the call today, we'll discuss our third quarter performance and continued collaborative efforts to expand patient adoption of Eversense, as well as provide progress updates on the advancement of our product pipeline. Then our new Chief Financial Officer, Rick Sullivan, will discuss the third quarter financials in detail and we'll open up the call for questions. We're just completing six months from the Eversense E3 launch in the U.S., which means our earliest users are now receiving their second sensor. The feedback we have received from patients and healthcare providers continues to reaffirm our confidence that the differentiated features of our 180 day implantable CGM can positively transform diabetes patients' lives. Together with our global commercial partner, Ascensia Diabetes Care, we continue to work to increase product awareness and access to establish a durable foundation for long-term growth. In the third quarter, Senseonics generated total revenue of $4.6 million, representing 31% growth compared to the prior year period. Included in this is $1.9 million of revenue from the U.S. and $2.7 million from outside the U.S. We're pleased with several recent advancements in our business while at the same time we expand the design of our future generation products. Our regulatory, clinical science and R&D teams have achieved key milestones, including fully enrolling our pivotal trial for our 365-day sensor, filing an IDE for a pediatric indication and making significant progress with the Gemini program, including our battery powered sensor. We're happy to share that progress with this effort, which is targeted to be the foundation of both our periodic or Flash Glucose Monitoring system and our full featured CGM system, which is designed to offer flexibility and simplicity for people with either type 1 or type…

Thank you, Tim, and good afternoon, everyone. I’m excited to be here with you today in the new roles, we further our mission to transform lives in the global diabetes community with our innovative sensor technology. In the third quarter of 2022, net revenue was $4.6 million compared to $3.5 million in the prior year period. U.S. revenue for the third quarter was $1.9 million and revenue outside the U.S. was $2.7 million. As a reminder, Senseonics recognizes revenue based on our revenue share when shipments are delivered to as Ascensia initiating the multi-step distribution to patients via ADC and their distributors. Gross profit in Q3 2022 was $0.8 million an increase of $2 million from a gross loss of $1.2 million in the prior year period. The increase in gross profit was driven by the transition from the Eversense 90-day product to Eversense six-month product and manufacturing efficiencies. Research and development expenses in Q3 2022 were $11 million, an increase of $3.8 million compared to $7.2 million in the prior year period. The increase was primarily due to investments in our product development and clinical trials for next generation technologies. Third quarter 2022 selling, general and administrative expenses were $7.3 million, a decrease of $0.3 million compared to $7.6 million in the prior year period. The decrease was the result of reduced advertising costs, partially offset by increases in personnel costs and professional fees. For the three months ended September 30, 2022, operating loss was $17.6 million compared to $16 million in the third quarter of 2021. The increase in the company’s share price at the end of the third quarter as compared to the company’s share price at the end of the second quarter of 2022 led to significant non-cash losses in Q3. As a result, total other…

Thank you, Rick. As we move forward to close 2022, we reflect on the substantial progress Senseonics has made this year and look forward to continuing that momentum into 2023. The transition to our next generation six month E3 system has occurred globally with our partner Ascensia. We’ve taken several steps to improve patients access to our product from the payer, provider and patients perspective. We are pleased with the ongoing expansions and covered lives. We are confident that partnership with the Nurse Practitioner Group can provide an attractive additional insertion option supporting patient access. Looking forward, we're very excited about the progress with our pipeline and potential impact iCGM, a one year sensor, and our Flash Gemini technology can have for people with diabetes. All while we continuously work to improve our manufacturing scale and margins. We remain focused on executing our plans and working with our partner to increase patient adoption and to continue to advance the longest duration of CGM for more and more patients. We believe we are well positioned to expand our business and look forward to updating you on our progress in the future. Thank you for your time today. Also joining us for questions is Mukul Jain, our Chief Operating Officer. Operator, let's now open up the call for questions.

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] Our first question comes from Mathew Blackman from Stifel. Please go ahead.

Good afternoon. This is Colin on for Matt. Just a couple quick ones from me. I wanted to start out with 2023 how comfortable you are with consensus and in light of the recent basal proposal from CMS, I was wondering how you guys expect that to impact your business, especially since you passed this milestone of over half your patients being in a type 2 arena? Any color that would be really helpful. Thanks.

Sure. So at this point, Colin, we're not speaking to 2023. We'll certainly do that on our next call as we report the Q4 results. But in regards to the type 2, obviously we're real – we're real proud of the way that the product is performing in the people with type 2 diabetes. Obviously, the expansion to more folks in this case basal insulin are great candidates for the Eversense product and we look forward to providing them the long-term implantable as well. So…

And just to follow up on that. I had a quick question with regard to the nurse practitioners. How do you expect that to help kind of address these patients getting prescribed, these basal patients given the fact that some of the PCPs are not actually inserting? Do you expect that to be a major driver in 2023 or even into 2024 in helping address that population?

Yes, we're excited about the partnership as you've heard. It's a great opportunity to work with a great group with a long history of serving healthcare. It is, as I said, nurse practitioners and we are labeled for them to do the insertions and removal. So in the case, as you described, someone that's with a primary care that that's not yet doing insertions, it's a great referral out to them and the Nurse Practitioner Group, of course, is remunerated by the CPT codes that exist for the patients, especially Medicare to do the insertions and removals. So…

Appreciate the color. Thanks.

The next question comes from Marie Thibault from BTIG. Please go ahead.

Hi, good afternoon everyone. This is Sam Eiber on for Marie. Congrats on the nice quarter here and thanks for taking my questions. Maybe I can start on Gemini. It certainly sounds like a little bit more color on this quarter's call. So maybe any color you could provide on the latest updates there in terms of product development.

Sure. So we've been actively working with those that have experience in implantable batteries for medical devices. As you can imagine, things like pacemakers and so forth, there's a long history of developing that that technology. So we are working with them for a custom battery that will power the Eversense sensor. Once it receives its power from the inside as opposed to currently from the outside from the transmitter, we will have the opportunity to generate a glucose and store that value on the sensor, which could then be retrieved at any point by a smartphone using the NFC technology that's in your phone. In addition to that, that same sensor can be used for people that want to use the transmitter full-time for overnight protection and so forth. And we've heard a lot obviously from our type 2 patients that they're really looking forward to a product where there is no on body transmitter, so that that capability is available in Gemini. And then, as we said, the other half is for even more flexibility for people with type 1 diabetes that may not want to have all of that full-time alarm. So many of our folks are interested in wearing perhaps the transmitter just at night, and they could interrogate the current glucose level and trend information and history with a wand of the phone.

Very good. Thanks for the added color there. Maybe I can ask my follow up here to Rick and congrats on a new role here. I guess any change in terms of how we should think about the investment profile in terms of OpEx? Certainly it sounds like a lot of continued R&D initiative. So any change in the – that invest for growth strategy as we move into next year here?

Yes, Sam, thanks for the [indiscernible]. No, I think when we think about our operating expenses, we had the primary expense being those clinical trial costs, and so we had them in this year and we'll continue to have it next year with the 365 trial well underway.

Great. Thanks for taking the questions.

[Operator Instructions] Our next question comes from Alex Nowak from Craig-Hallum Capital Group. Please go ahead.

Hey guys, this is Chase for Alex. Congrats on the quarter in the ramp here. So I guess just starting off from us, I know it’s very early, but any color you’ve drawn from renewals thus far on the 180-day product and with the patient assistance program, does it seem to be driving adoption for both new patient starts and transfer patients? I guess just kind of talk through the dynamics there and what you’re hearing from customers?

Yes, certainly in regards to the patient assistance program, it clearly does work. It helps reduce the burden in the case where there are folks that have a high deductible or other costs. We are restricting it to only folks that do have insurance coverage, but we are seeing good acceptance and attractive utilization of the patient assistance. We do anticipate as the typical in the space that we’ll get more utilization in Q1 as deductible requirements are reset. But we’re encouraged with the utilization. In regards to reuse, we do continue to see 80% or higher retention in regards to folks that are on sensor 1, 2 to sensor 2 that continues to appear to hold for us. And then as people get long term on the sensor, 3, 4, 5 fit or beyond sensors the retention of course becomes even much, much higher well into the 90% range and beyond as people just routinely use it. I think we have users around the globe that maybe on near their 20th sensor at this point. So…

No, that’s helpful color and certainly it bodes well. So the company has previously had partnership with a pump maker, developing Eversense for their pump. Have you had any additional conversations now with 180-day product out with any pump manufacturers and about integration and any color there would be helpful again.

We do frequently have conversations with pump manufacturers. It wouldn’t really be appropriate to disclose the details of those conversations other than to say, obviously, the integration with a fully implanted system, especially a future concept without anything on body is highly attractive. So we’re actively working, as you heard on the clinical trial for the IPCGM designation which is an important milestone for us regulatory wise or for integration here in the U.S. But outside we continue to – outside the U.S., we continue to have conversations as well.

Is there any increased excitement from the pump manufacturers now that you have the 180-day product ramping and 365-day product on the horizon? Any kind of uptake in interest I guess?

There is certainly has been uptake. We’re seeing good strong likability and leads that are coming into the DTC as well as physician leads that are coming in from the offices. So certainly there’s an improvement in likability from 90 to 180 and I expect even more in the future as we continue to expand the features as well as the duration of future generation products.

And then, yes, thanks, and that’s helpful. And just last from us, you had made that comment about 60 and 90 days of inventory now out there in the channel. Is that include with obviously Ascensia and is that kind of the ballpark range where you expect it to stay as you – as your ramp and sales here?

It is – Rick, do you want to growth through that? There are a couple of steps in the distribution channel.

Yes, sure. I mean, 60 to 90 days is consistently what we’ve forecasted and what is what we expect. Remember we recognize revenue and we ship the product to as Ascensia. Ascensia then sells those products to the distributors and the various sales channels. And then from there it would go to the doctor’s offices in the U.S. and then hospitals in Europe. So there’s a couple of different steps in that process before it gets to a patient. So 60 to 90 days is probably appropriate.

Okay. Yep. Thanks. That’s all we had. I’ll hop back in queue.

[Operator Instructions] There are no questions in the queue. This concludes our question-and-answer-session. I would like to turn the conference back over to Tim Goodnow for any closing remarks.

Okay, thank you. I’d like to thank everybody for their time today and the opportunity to update the status on where we are with Eversense in the business. And we look forward to speaking with you again in the next quarterly call when we report on the fourth quarter and the full year 2022. So with that, I wish you a good evening and thanks again.

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