Good day and welcome to the Senseonics Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to your host today, Trip Taylor, with Investor Relations. Please go ahead.

Thank you. This is Trip 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 risk -- a list of the factors that can 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, 2022, our 10-Q for the quarter ended September 30, 2023, 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. 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?

Great, thank you, Trip, and thank you all for joining us today. Today's call will start with an overview of our quarterly performance and an update on Senseonics’ continued execution of strategic initiatives, including support of our commercial partner. Then our Chief Financial Officer, Rick Sullivan will discuss the third quarter financials in detail, and we'll open up the call for questions. During the third quarter, Senseonics generated total revenue of $6.1 million, representing 33% growth compared to the prior year period, including $4 million of revenue in the US and $2.1 million from outside the United States. Expanding Eversense patient adoption and advancing our technology pipeline remain the top priorities for our business. Our commercial partner, Ascensia Diabetes Care, continues to work to drive greater market access and recognition for Eversense. They are implementing a commercial strategy that includes downstream marketing activities that build awareness with both healthcare professionals and patients and are taking steps to ensure that all constituents have a positive experience with Eversense. This includes continuing to expand their dedicated commercial organization in the US towards this goal. During the third quarter, ADC expanded their commercial investment by partnering to develop a fresh new integrated marketing campaign with space150, an innovative digital agency with proven experience in driving demand of disruptive medical device technology. For background, CGM brands today broadly sell themselves as a panacea that makes managing diabetes easy and effortless. However, this is not the case. Certainly for millions of people living with diabetes around the world, CGM has become an indispensable tool in managing the condition. Yet, many users spend too much time managing the shortcomings of their technology. It's estimated that half of the people currently using CGM brands are not fully satisfied and experience common frustrations with their devices. Issues such…

Thank you, Tim, and good afternoon, everyone. We appreciate the opportunity today to update you on our business. In the third quarter of 2023, net revenue was $6.1 million compared to $4.6 million in the prior year period. US revenue for the third quarter was $3.9 million and revenue outside the US was $2.2 million. Shipment volumes in the third quarter are intended to support demand generation from the new advertising campaign. As a reminder, net revenue to Senseonics in 2023 will represent approximately 70% to 75% of the total Eversense revenue generated in the global markets as the revenue share for our partner increases according to our collaboration agreement with Ascensia. Senseonics recognizes revenue based on our revenue share when shipments are delivered to Ascensia, initiating the multi-step distribution to patients via Ascensia and their distributors. We will continue to monitor inventory levels closely to optimize the supply chain as we better understand patient demand generated from commercial activity and the eventual transition to the next generation product. Gross profit in Q3 2023 was $1.2 million, an increase of $0.4 million from a gross profit of $0.8 million in the prior year period. The increase in gross margin was primarily driven by an increase to revenue as our volumes increased, which covered a greater portion of our fixed manufacturing costs. Research and development expenses in Q3 2023 were $12.8 million, an increase of $1.8 million compared to $11 million in the prior year period. The increase was primarily due to investments in our product pipeline for development and clinical trials of next-generation technologies. Third quarter 2023 selling, general, and administrative expenses were $7.4 million, an increase of $0.1 million compared to $7.3 million in the prior year period. For the three months ended September 2023, operating loss was $19…

Thanks, Rick. The third quarter marked strong performance for Senseonics, and we're excited about the growth, our results, and our position for the future. We continue leveraging our commercial partnership to drive increased Eversense adoption and advancing our strong product pipeline to drive further product differentiation and market demand with Eversense. We believe we are well positioned to grow our franchise to create shareholder value and look forward to updating you on our progress in the future. Thanks all for your time today. Joining us for questions is Mukul Jain, our Chief Operating Officer, and Dr. Fran Kaufman, our Chief Medical Officer. Operator, let's open up the call for questions.

Thank you. [Operator Instructions] Today's first question comes from Marie Thibault with BTIG. Please go ahead.

Hi, thanks for taking the questions this evening and congrats on a good quarter. Wanted to start here and try to understand what drove some of the strength, particularly in the US. Curious if that was because NPG is tracking ahead of plan. It sounds like you're starting to see some really good feedback also from DTC, but that's more of a 4Q dynamic. So curious also to hear sort of your level of confidence and moving to the midpoint of the guide, certainly pointing to a very nice end to the year. So two-parter there, US strength, what drove it this quarter, and then what's driving the confidence next quarter?

It really is driven simply by the new patient additions coming in the US, right? As the investment pays off with Ascensia, we continue to continue to grow patients. Certainly, the NPG is playing a nice part of that. It does relieve some friction, especially as we move outside of the primary diabetology, endocrinology offices. So we're certainly excited about that, and as you heard, we're going to expand that partnership. So we do feel good. Midpoint of the range is where we anticipate to be and we have things going certainly in the right direction. The campaign, as we talked about, we're pretty excited about it. Hopefully, everybody's had a chance to see the see the commercials. They're not full national broadcast television yet but we are testing those in a few select markets and quite a bit on digital television.

Yeah, thank you for that, Tim. And I guess I'll have my follow-up then on The CGM for Real Life campaign. What should we know about your user base and what you're seeing kind of in the recent new patient ads? I'm most curious about sort of the historic proportion of patients you've had coming from fingersticks versus those coming from competitive CGMs and if this DTC is already starting to shift that toward the competitive share wins. Thank you.

I think we are going to see it, as you've probably heard, we have traditionally seen about two-thirds coming from competitive products and one-third that are new to CGM. I would anticipate we'll continue to see more of that as we do this more broad-based advertising. Many of the leads and probably the biggest growth area that we're seeing are actually from the basal indication folks, those that are taking one, maybe two shots a day. And as we've had progress with commercial reimbursement, and then we talked about, we expect within the next quarter to have the Medicare reimbursement in place, that'll be a good portion for growth force in the future as well.

Yeah, that's very helpful. One last quick one if I can sneak in. Good momentum so far. What do you think about what a one-year sensor could be doing to new patient starts? Something we've looked to for a while, and I'm curious to hear your latest take on it.

Yeah, well, we're certainly excited about it. A lot of the feedback, of course, on the patients that are currently on twice a year, obviously going to once a year is another level of reduction, and new patients coming to it as well. So we're very excited about it. It is the platform. Now that we feel good, that we have the survivability, that we'll be building the future generations on. So not only is it the basis for the one-year CGM, but it also is the one-year flash type product that's behind it. And then, freedom with absolutely nothing on the body we know is a home run product. So each one of those is successively more attractive. And we're just excited to be working on that and can't wait to bring those out.

All right, very good. Thanks for taking the questions.

Thank you. And our next question comes from Mathew Blackman with Stifel. Please go ahead.

Hi, this is Colin on for Matt. I also wanted to start on the US performance. And the visibility you guys have into new patients starts given the recent dynamics with Ascensia destocking in the first half. So is the $3.9 million in revenues this quarter, the right quarterly run rate to think about the US launch from here? Any visibility you have there would be great.

$4.1 million this quarter is in the US. [$3.94 million] (ph). So yeah, that -- as we are building product in the third quarter, you really are filling the channel, of course, for the fourth quarter. In reality, by the time that it goes out for stocking that happens at the Ascensia’s distributors as well as with Ascensia as well. So, that's certainly our plan going forward. We do have a couple of dynamics that as we think about, and we're not ready to give guidance for 2024 for sure. But it is a pretty important year for us. On the one hand, we do have a lot of good work and excitement that we're seeing in the marketing campaign, but we also do have the transition to the one-year product that we need to think about. So that's going to have some inventory dynamic as well. So we're working with Ascensia now to have that all scoped out. We'll look to give a better perspective the next time we speak.

Yeah, Colin, we maintain the two-thirds of our revenue coming from the US this year. We're pretty close to that in Q3, and we expect that for the full year. Two-thirds US, one-third OUS, and are pretty happy with coming in at the midpoint of our guidance.

Okay, great, that's helpful. And I wanted to squeeze one in on the pipeline. I was curious what your general sense is of how long it generally takes to start integration activities with pump partners after receiving iCGM. You gave an encouraging update about expecting it early in the year. How quickly can you integrate? And will Beta Bionics be first? Thank you.

Yeah, I mean, I can't speak to who's first. Obviously, we're very excited about the Beta Bionics technology, the clinical testing that we've shown to-date. It does take those organizations a little bit of time to put it out. I think you're seeing that with the some of the folks that are transitioning to the Dexcom G7 product. So there is some certain work to do, but it does all start with that iCGM designation and we're actively working on to get that wrapped up in the first quarter. So not ready to speak to timing yet, as it really does come from the other side, but it's a high priority for us.

Thank you guys so much.

Thank you. And our next question comes from Jayson Bedford with Raymond James. Please go ahead.

Good afternoon. Just a few and they may be all over the place. But remind me, when do you plan on submitting the 365-day data to the FDA?

Mukul, you want to go ahead and talk through that?

Hey Jason, yeah, so we are thinking in the first half, there will be some dependency on when we hear back on the other submission that's in active review right now. So -- but that's where we are kind of pulling it together, getting it ready and then waiting to hear back and send it in. So, I would say somewhere in the first half.

So, first half submit, the expectation would be 2025 for approval? Is that fair?

No, no, our expectation is six months, is typical for our approval. That's what we have seen based on past history.

Okay, so it's still late ’24?

Late ‘24.

Okay.

So again, that's expectation, right, and then if everything works out.

Right, okay. Just in terms of the US business, how many inserters do you have now?

You know what, Jason, I'll have to get back to you on that with the current number of inserters, but do you know?

It's 1,200 or 1,300.

Yeah, it's over 1,000.

Right.

It’s much more concentrated in MPG. I think there were 36 of those folks. But, it’s over 1,000.

Sorry, Tim, what was the 36 in MPG?

Yeah. So there's 36 in MPG currently. We're looking to expand that.

Okay. And then just, what is the rough mix between endos and non-endos in terms of your inserters?

There still is a heavy endo, but by far the growth is coming outside endocrinology. As we said, if we’re seeing -- when we're seeing patients that are typically in smaller offices, especially Medicare patients, it's much more likely that the doctor won't have the patient flow to go through the training, and they'll use it. Where we're getting the larger volume MDIs and pumpers, they're still typically in endocrinology practices. So endocrinology is still predominant, but the other portion is growing quite fast. And I'm sure that we'll surpass that in ‘24.

Okay, okay, that's helpful. And then just, is there any approximation of Type 1 and Type 2 users?

We've got about 65% that are now Type 2, so one-third, two-third.

65 Type 2, okay.

Right.

And then just internationally, why is Italy so strong versus some of the other countries? Is it just the tender/reimbursement dynamics? And then just on that, this German medical aid catalog, does that resolve the access issue?

In Italy, it's a couple of factors. Obviously, the team has done an exceptionally good job. They've executed very well over there. Quite frankly, one of the reasons they executed well is also why they have good tenders, right? So I think it's just a very good team that has done a great job with Eversense and a lot of the patients over there really like it. In Germany, the catalog number is important. We have been operating, which has been somewhat painful from our -- our prior distributor was not able to get this code. In a sense, he's done a great job now at getting this one hurdle out of the way. So it becomes more of the rule as opposed to the exception.

Okay. All right. Thank you. I'll get back in queue.

Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Great. Well, thank you. We do certainly appreciate everyone's time this afternoon and look forward to speaking again in the future. Have a good day, take care.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.