Good evening and welcome to the Senseonics Fourth Quarter and Full Year 2023 Earnings Release and Conference Call. All participants will be in listen-only mode. 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 Trip Taylor from the Gilmartin Group. 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 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, 2023, 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. 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. Today's call will start by providing some highlights of our 2023 performance followed by an update on Senseonics’ strategic initiatives, including ongoing measures to support Ascensia and strengthening ever since its commercial performance. I'll also provide an update on Senseonics’ development programs to advance our product pipeline. Then our Chief Financial Officer, Rick Sullivan will discuss the fourth quarter financials in detail, and we'll then open up the call for questions. 2023 was a successful year across the business for Senseonics as we made solid progress on each of our strategic growth initiatives. On the clinical and regulatory front, we completed our ENHANCE clinical trial and subsequent data analysis supporting our imminent submission for the 365-day system, and we filed the FDA submission for the ICGM designation. We expanded market awareness notably with an increase of over 300% in website impressions as a result of ADC's direct-to-consumer advertising campaign and we expanded access to Eversense for millions of patients by securing coverage from UnitedHealthcare and Medicare. We also gained expansion through the basal only and hypoglycemic indications across a significant number of commercial payers. Financially, we achieved our full year revenue guidance and strengthened our balance sheet by reducing our debt and increasing our liquidity position. We see 2024 as another year of key catalysts as we work towards delivering our plan for development milestones, regulatory approvals, patient expansion and progress across other strategic growth initiatives. For 2023, we achieved our revenue guidance as Senseonics generated total revenue of $8 million for the fourth quarter, representing 44% growth compared to the prior year period, and generated total revenue of $22.4 million for the full year 2023, representing 37% growth compared to the prior year period. In the U.S.…

Thank you Tim and good afternoon everyone. We appreciate the opportunity today to update you on our business. In the fourth quarter of 2023, net revenue was $8 million, compared to $5.6 million in the prior year period. U.S. revenue for the fourth quarter was $6.1 million and revenue outside the U.S. was $1.9 million. Our shipments to ADC in the fourth quarter are intended to support future demand for Eversense. As a reminder, Senseonics recognizes our portion of revenue when shipments are delivered to Ascensia and they take title and ownership of the inventory. This begins the multistep distribution to patients via Ascensia and their distributors. We manage our manufacturing based on patient demand generated from commercial activities targeting 60 to 90 days of inventory across the various channels. Currently, inventory levels are greater than our target and we're working closely with Ascensia to return to target levels. We are also monitoring inventory levels with consideration of the plan for the transition to the 365-day product later this year. Our share of revenue for 2023 represents approximately 75% of the expected Eversense revenue generated in the global markets. The revenue share percentage for Ascensia increases according to our collaboration agreement based on duration of the contract and annual revenue levels. Gross profit in Q4 2023 was $1.1 million, an increase of $0.5 million from a gross profit of $0.6 million in the prior year period. The increase in gross margin was primarily driven by an increase in revenue as our volumes increased, which covered a greater portion of our fixed manufacturing costs. Research and development expenses in Q4 2023 were $10.7 million, a decrease of $0.9 million compared to $11.6 million in the prior year period. The decrease was primarily due to decreases in clinical trial expenses associated with…

Thanks Rick. 2023 was a successful year across the business for Senseonics. Our accomplishments in the year included the completion of our ENHANCE clinical trial and subsequent data analysis supporting our imminent planned submission for the 365-day system. Submission of our iCGM designation, increasing awareness of Eversense through ADC's direct-to-consumer advertising campaign and increased access with expanded coverage with UnitedHealthcare and Medicare, all while strengthening our balance sheet. While we face challenges, as noted earlier, with commercial execution in the fourth quarter, we are excited about the positive changes implemented, including conversion initiatives and importantly, the new leadership and the new structure within PHC. In parallel, Senseonics is also working to create and evaluate additional options to accelerate sensor placements and drive revenue. As all these initiatives progress and we develop a refined view of 365-day product approval and launch, we look forward to updating you on our progress and expected impact on further revenue and new patient growth for this year. Finally, Senseonics remains laser focused on continuing to advance our strong product pipeline to drive increased Eversense adoption in the future. We believe we are well positioned to grow our franchise to create shareholder value. Product innovation continues to revolutionize the management of diabetes and Senseonics is committed to continuing to be a leader in the space. Thank you for your time today. Also joining us for questions is Mukul Jain, our Chief Operating Officer. Operator let's open up the call for questions.

[Operator Instructions] The first question comes from Mathew Blackman with Stifel. Please go ahead.

Hi guys, this is Colin on for Matt. I wanted to start with a bit of a level setting question and ask how much did the increased essential inventory levels contribute to the fourth quarter revenues and how should we expect those inventory levels to be worked down during 2024? Is this a similar two quarter time frame as we saw with that 2023 destocking dynamic? And how much of a revenue headwind should we expect it to be during the first half?

Well, thanks Colin. As we said, we do expect to have the inventory, the buildup of inventory from Q4 worked through in the first half of this year. So over the next frankly four months and ascension is building those plans, as we said, to work through it. The total quantification we don't have yet based on the volume of the ramp, but we feel pretty confident with the plans that are in place that we'll have it worked off here in the next four months.

And I was encouraged to hear the 300% increase in the lead generation from the recent campaign. Could you provide any color on how Ascensia plans to drive those conversions higher and any metrics you could provide on lead conversion in the pipeline and how you expect that to progress going forward, given the importance of this campaign that would be really helpful? Thank you.

Sure. Most of the input comes in through the web, and what Ascensia is doing is building out the capability, the tools, the training and the personnel within their inside sales organization to handle those conversions. Much of that improvement is being worked on right now and really has been since they recognized that the conversion rates were not where they had planned in the fourth quarter. So we're excited about those and we do fully anticipate have seen and we do fully anticipate continued improvement in that conversion. That will always continue to be a focus and a goal for us. You're always looking to improve that lead generation conversion. But we are very excited. There is a lot of interest in a long-term implantable sensor and especially in these patients, Type 2 patients that are on basal insulin. So we're excited about the opportunity. As we said, we expanded the market by over 3 million new potential patients going on ever since. So we're obviously excited about that as well and looking forward to where the Ascensia to work through all of those internal systems to be much, much more effective.

Thank you.

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

Hi, Tim, Rick, Mukul. Thanks for taking the questions. I wanted to ask a question here on guidance and specially with the Medicare basal and hypo risk expansion, certainly we saw with other CGMs that led to an acceleration adoption. What are you expecting or what have you assumed in your guidance as you think about that win? I know the first LCD just went into effect a couple of days ago here.

Yes, you're correct. And many of the others we anticipate will be up and running here over the coming weeks, certainly by the June time period. So it is a portion, Marie, of the plan and then part of this burn off of the inventory that we spoke of here in the first two quarters. We're still working with the new Ascensia team, if you will, to lay out what that looks like for the full year. But we know that it's a very meaningful opportunity for us, and we're certainly looking forward to being able to announce that in the second quarter. We also have some very exciting work with potential ACO partners that we are looking at, and there are a couple that we're talking to that are really interested in managing their Type 2 patients. As you know, those are at risk, and anything that they can do to keep them out of the hospital and keep them in better care is really valuable for those organizations. So there's also a big opportunity in that Type 2 space as well.

Okay, that's helpful. And then it's exciting to think about the 365-day approval and launch later this year. I do want to understand though, when we've seen new products come to market, sometimes we've had a little bit of lag on reimbursement or maybe working through some inventory or a little bit of pausing as people wait for a new product. I know it's early days, but do you have any thoughts on how that exciting new launch could be impacting sales and inventory here toward the end of the year or even midyear?

It's not unreasonable to anticipate that coming with a new product, there were people that will say, well, let me wait for that one. So obviously that's the planning that we're going through right now. If people do come in for the 180-day product and the 365 comes out, then when they stay in cycle and they come in further replacement, they'll continue to stay on the device, but just the new one they'll get is 365. So all of that planning is going on right now, but we do also know that the 365 is just another huge quantum step forward in just that simplicity and the ability to manage your life without thinking so much about your diabetes. So we also know that it's going to be much, much more attractive to people as well and we're excited to be on the cusp of doing that submission and an approval later this year.

Sure. Okay and one just quick follow-up. If I could get the exact number of patients at the end of 2023, I heard 4500 worldwide and more than 50% growth in the U.S. Any chance you can give us the U.S. breakout?

Rick, do we have the breakout on that? I'm not sure we have that.

Yes, we're keeping with the 4500 global patients for now.

Okay. All right, thank you.

The next question comes from Vernon Bernardino with H.C. Wainwright. Please go ahead.

Hi, thanks for taking my question and congrats on the impressive growth. Just wanted to follow-up on the inventory question, but before that I couldn't readily find the numbers right away, but could you remind us what the sales were for U.S. and ex-U.S. were in third quarter? And along those lines then with the inventory buildup, does Ascensia separate as far as inventory accounting, for example, ex-U.S. and U.S. or is it all one accounting? Just trying to figure out, let's say, day sales and all that change in rate.

Sure. Rick, do you want to take that?

Sure, yes. Vernon, first part of your question, I think, was breakdown, U.S. and OUS. Maybe it was for fourth quarter, and so $8 million was the total. It was about $6 million in the U.S. and $2 million OUS for the quarter. And Ascensia does break out their inventory between the two geographies.

Okay. Do you anticipate, you said the inventory will be wound down in the next four months, which I guess is the rest of first half, do you anticipate any further build up before, let's say, the launch of 365?

I think we expect that by the end of the second quarter that Ascensia will get back to which our target of 60 to 90 days throughout the entire channel. And then after that we'll provide guidance in the second quarter with how we think that transition from the six-month to 365-day product will go.

Great. Thanks for taking my question and my follow up.

Sure.

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

Hey, this is Glenn on for Jayson. And to start off, I just wanted to ask if you think the iCGM designation impacts commercial adoption or is it more of a vehicle to integrate with pumps?

Well, it certainly is a vehicle to integrate with pumps. Obviously, especially in the Type 1 space, there are clinicians that see the iCGM as a validation of the system as a whole. So there can be MDI patients that the docs would like to put on the pump in the future, so iCGM is certainly influenced there. But it's also, of course, an avenue to get into the million or so patients that currently are linked together and doing sensor augmented pumping.

Okay, thank you. And just to be clear, the 2Q revenue for just, for example, 2Q to Senseonics translate to implants in 3Q, I'm understanding that correctly?

Approximately, yes. We see the target of 60 to 90 days from when we recognize revenue for it to go through the channel.

Okay, so how much of the $22 million and $23 million came from new patient sales? How much of that is in a patient now?

I mean we're not providing that level of detail since we recognize our revenue in advance of the insertion into the patient. And so there's the time dynamic, and then there's also the inventory dynamic, which we spoke to being a little bit ahead of our target inventory levels.

Okay, that was all. 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.

Great. Well, thank you all for joining. Once again we appreciate it, and we look forward to further updates here in a couple of months with our Q1 call. Thank you. Have a good day.

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