Senseonics Holdings Inc (SENS) 2018 Q2 法說會逐字稿

Good day, and welcome to the Senseonics Second Quarter 2018 Conference Call. (Operator Instructions) Please note, that this event is being recorded.

I would now like to turn the conference over to Don Elsey, Chief Financial Officer. Please go ahead.

Thank you very much, and welcome to the Second Quarter 2018 Senseonics' Earnings Call.

Joining me on today's call are Tim Goodnow, President and Chief Executive Officer; and Mike Gill, Vice President and General Manager of the U.S. region.

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 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.

With that, I will now turn the call over to Tim Goodnow. Tim?

Thank you, Don. I'm pleased to have the opportunity to discuss our very important second quarter milestones and plans for further expansion of the Eversense footprint around the globe.

In the quarter, we finalized our most important achievement to-date with the FDA approval of the Eversense System on June 21. This facilitated the opportunity for a tremendously successful ADA Conference. Between our booth, our mobile training unit and product theater, the interest and interactions we experienced were remarkable. It was clear that the excitement about Eversense and our ability to provide it to people with diabetes in the United States is very high.

Subsequent to the conference, we've hit the ground running and are thrilled with the early reception to our commercial launch in the U.S. At the same time, we continue to drive adoption and awareness of Eversense in Europe, but we also advance our next-generation products and partnership programs. Additionally in the quarter, we added roughly $150 million to strengthen our balance sheet and ensure a comprehensive U.S. commercial launch.

As a result of both increasing adoption in Europe and our early commercial progress with Eversense in the U.S., we are increasing our revenue expectation for 2018. We now expect to realize full year revenues in the range of $19 million to $21 million, up from our previous expectations of $18 million to $20 million.

As I'm sure much of the interest is on our early U.S. launch activities, I'll turn the call over to Mike Gill, Vice President and General Manager of the U.S. region, to provide more color and about our initial commercial activities and plans for the rest of the year. I will then provide an update on our continued progress in Europe as well as our development pipeline and clinical progress. And Don will wrap up with more details on our second quarter financials.

With that, Mike?

Thank you, Tim. After historic ADA, where Eversense stole the show, we're in full commercialization mode. The ADA started a flurry of interest and exceeded all expectations. We introduced the Eversense Mobile Clinic, a state-of-the-art diabetes clinic and product training suite focused on the technology procedure with didactic and hands-on proctoring.

As you may recall, the Ever Mobile Clinic was on the ADA Exhibit floor. We trained over 500 attendees at our booth and generated close to 1,000 leads. The ADA Eversense product theater was standing room only and was met with loud applause from our patient, Tobias, who had Eversense inserted over 6 times in Germany.

The Eversense product theater started simultaneously with the opening of the ADA Exhibit Hall immediately following the product theater. There was a line to see the actual procedure in the Mobile Clinic and that energy sustained throughout the ADA.

Quotes from our other Mobile Clinic attendee registration book included, "I never thought I would want to do a procedure, and that's why I got into endocrinology. But with a procedure as simple as Eversense, I'm in. Finally, a sensor my patients will want. " Senior representatives from leading diabetes institutions were eager to get Eversense Mobile Clinic in their cities to train their physician, staff and patients.

From the ADA, we traveled to the ATDC in Keystone, Colorado, sponsored by the Barbara Davis Center and hosted by Dr. Satish Garg. Again, we were met with rave reviews. We trained and demonstrated the procedure to over 500 attendees. To-date, the Ever Mobile Clinic has hosted over 1,200 participants.

After the ADA and ATDC, we started our quest to insert our first patients. As we announced last month, our goal was to insert in July. We're proud to say on July 31, through our fulfillment agents, we delivered sensors to clinics and we professionally inserted our first patients, and we continue to insert throughout the week. We called it National Eversense Freedom Week. These people with diabetes and their physicians were elated by the procedure simplicity and ease of starting the system once the sensor was placed.

Over 80% of our first patients were previous Dexcom users. Until they were inserted, it didn't dawn on them that for 3 months, they will not have to start a new sensor. If they stayed on their G5 or even their G6, they would have close to a dozen sensors inserted into their bodies over that same period.

One patient stated that, it was truly a day of freedom because each week, she would build with anxiety knowing she would have to remove and insert another sensor. She also mentioned how she would always be careful on the first day to monitor blood sugars, because day 1 accuracy could vary. Now she will only have one day for the full 90 days.

Another patient could not believe that all they were taking home was a pack of patchers and a charger, 1 sensor, 1 site, 1 order, she said is absolute freedom. The patients who had not been on CGM before were equally delighted. The procedure was simple and painless. They were thrilled when the first blood sugar appeared on their smartphone and 1 patient said, "My wife finally got a full night's rest knowing I could feel the on-body vibrations if I was going well." And as he was choking up with joy, he said, "This type of freedom is truly priceless. Thank you, Senseonics." We have many more patients like this in our pipeline and look forward to serving these patients with Eversense.

In addition to the sales operational activities, we're also making strong progress on coverage. As I've mentioned on past calls, our conversations with payers have been very encouraging. We have provided payers with the clinical dossier and the Senseonics access team continues to meet with medical directors, contracting and utilization management teams to establish policy.

Two positive themes are reoccurring in these conversations. First, the nature of implantable sensors creates patient adherence and high wear times. This is supported by real-world data from patients in Europe. Secondly, the Category III CPT code, which wraps the supply cost and physician time in a bundle is an attractive payment option.

In parallel, diabetes clinics are submitting claims to insurance companies through all of our fulfillment agents. These study submissions of claims show that there is a demand and clinical need for Eversense, which will accelerate coverage policies. While we continue widespread -- while we continue to expect widespread reimbursement to develop over time,

we are pleased with our progress and excited to announce that in only 5 weeks after PMA approval, we have obtained our first coverage decision for Eversense from Horizon Blue Cross Blue Shield of New Jersey. Horizon is one of the 20 largest payers in the United States with almost 4 million covered lives. Under this policy, Eversense will be covered exactly the same way as other CGMs.

We are excited to see a traditionally conservative plan at Eversense so quickly. We believe this is a validation that the economic buyers see the significant value of Eversense, and we are confident that other payers and health systems will follow Horizon's lead. By the next earnings call, we feel strongly that we will be able to announce other payer wins for Eversense.

That said, we continue to feel that securing the majority of coverage is a process that could take a couple of years. We understand there are factors out of our control such as annual policy review periods to include new technology and we're working diligently to answer all their questions and provide any data required for them to make their decision. There is still much work to do with the payers, but we're very excited with the initial interest that we received, and of course, our first payer win.

For us what this means, is that we've done our job to bring Eversense to the U.S. market. We have an exciting road ahead of us and a lot of work to do to help millions of people with diabetes. Yet, in over a little over 30 days, the Senseonics team has been able to operationalize and execute on our commitments to our customers and shareholders. We're excited and proud to continue the Eversense journey in the U.S.

With that, I'll turn it back to you, Tim.

Thank you, Mike. We are certainly encouraged by our early progress in the U.S. and looking to continue this momentum throughout the rest of the year.

None of this would have been possible without the tremendous know-how we've generated commercializing the product in Europe. Our nearly 2 years of experience in the region has allowed us to not only incrementally improve our product, we've gained valuable experience and scale up of the manufacturing process, while also enhancing our training, aftersales support, education and marketing program.

We're convinced that the result will be substantially improved experience for our customers and has enabled us to move so quickly in the United States. And similar to last quarter, this has showed continued growth in our European business. Sensor procedures are up 27% and the installed base increased 38% compared to just the previous quarter.

As of June, all of our existing markets have successfully introduced and transitioned to the newer extended life 180-day Eversense sensor. In Germany, for example, the Eversense XL has featured prominently and our distribution partner Roche's booth at the country's annual DDG scientific conference. The interest was very high and a constant flow of attendees were detailed on the product, including the ease of this sensor procedure. Importantly, Eversense XL now accounts for over 70% of our installed base.

We will continue to support our distribution partner's efforts in creating awareness and excitement around the longest lasting sensor in the world and looking forward to reporting on patients experience 6 months down the line when removal and reinsertions are happening in various clinic practices.

Turning back to the U.S. and the future program for this important market. I'd like to now discuss some of our progress on the clinical regulatory front. We are on a clear path of Eversense label expansion to the PMA supplement process. We continue to leverage the strength of the underlying technology with a strong analytical performance and best-in-class accuracy.

As we have stated previously, one of the first supplements we plan to submit was to expand the labeling for the non-injunctive claim to allow patients the ability to make treatment decisions based on data provided by Eversense. The accuracy and performance of this system has proven capable of the benchmarks set by the agency. We remain committed and motivated to continually evolving our products to improve patient experience. And to that end, we also want to prioritize the reduction of calibration to once per day. As such, we are incorporating calibration reduction and the dosing claim into 1 supplement for the Eversense system, and we aim to submit the supplement within a month and look forward to continuing the productive dialogue with the agency throughout its approval.

While executing on the U.S. launch and further expanding the Eversense label remain our primary focus, we are continuing to develop our pipeline of next-generation products. As you know, the second generation system Eversense XL, which is currently available in Europe features our sensor the last 180 days. To support the regulatory submission for this product in the U.S., we will similarly be submitting an IDE to the agency in September, which will enable us to begin the trial in the coming months.

Finally, and on an even longer term basis, we've made tremendous progress on the in vivo sensor stabilization out to the 1-year time frame. This fall, we expect to see the complete results which will guide our course of action. We are hoping to finalize the design and start a 365-day trial in the first half of 2019.

Senseonics has significantly advanced the science and expertise of in-body sensing technology and now have every expectation that we will be looking at a one year of life of our highly accurate sensor within 2019.

With that, I'll now turn the call over to Don to review our financials.

Thank you, Tim. For the 3 months ended June 30, 2018, we generated $3.6 million in revenue compared to $800,000 in the second quarter of 2017. The increase in revenue was driven by increased sales in Europe.

For the 3 months ended June 30, 2018, total operating expense increased by $8.4 million to $20.1 million from Q2 2017. This increase was driven primarily by a $5 million increase in sales and marketing expense as we prepared for U.S. launch, and a $2.7 million increase in R&D driven by FDA panel activity and ongoing product development. Compared to the 3 months ended March 31, 2018, total expense increased by $4.1 million, driven by the formation of the U.S. sales team.

For the 3 months ended June 30, 2018, total net loss was $32.5 million or $0.23 per share compared to $12.4 million or $0.12 per share in the second quarter of 2017. Compared to the 3 months ended March 31, 2018, total net loss increased by $10.2 million, primarily driven by a $4.1 million increase in operating expense and a $5.3 million increase in the loss from the change in fair value of the embedded derivative associated with our convertible note. If the impact of the embedded derivative is removed, the total net loss was $22.3 million or $0.16 per share.

Second quarter 2018 net loss per share is based on 138.8 million weighted average shares outstanding compared to 103.7 million weighted average shares outstanding in the second quarter of 2017.

Turning to our balance sheet. At quarter end, we had cash, cash equivalents and marketable securities of $192 million, which reflects the proceeds from the equity offering that we completed in June.

I will now turn the call back to Tim.

Thanks, Don. And to wrap up, I'd like to take a moment and thank all of the hard working team members that have done so much for Senseonics and for people with diabetes.

In the matter of just 6 short weeks, we've accomplished a lot. We've received the authorization from the agency to commercialize the U.S. We launched our U.S. commercial activities, including the highly successful Mobile Clinic campaign. We've already submitted 1 PMA supplement for label expansion. Our operations team provided product to our strategic fulfillment partners. We shipped and completed our first commercial sale. We inserted our first patients at multiple clinics in the U.S. during National Eversense Freedom Week, and we received our first positive coverage decision from a payer, all of this in less than 45 days.

These are all tremendously important accomplishments for this small and growing company. Our ability to stay focused and action-oriented as we grow will help us to continually meet the needs of our users. It's with my sincerest gratitude that I thank all of this team that has got this done.

This concludes our prepared remarks. Also joining us for questions are Mukul Jain, our Chief Operating Officer; and Mirasol Panlilio, our Vice President and General Manager of Global Commercial Operations.

Operator, let's open up the call for questions.

(Operator Instructions) And our first question comes from Chris Pasquale from Guggenheim Securities.

Congrats on the progress, guys. Tim, I'm curious given how early you guys are in the U.S. launch, the decision to go ahead and bump full year guidance up a little bit. Can you just walk through the pieces there? And what gives you confidence in that improved outlook at this stage?

It's really driven by 2 things, Chris. One is the product performance in Europe, which obviously is the trajectory that we've been on. We continue to do extremely well with acceptance of the product. And the other portion of it is just the readiness that we have in the United States, and frankly, the acceptance that we've gotten from the clinicians and patients to go into the procedure. So looking at the 2 of those, it now looks like we're going to be able to do a little bit better than we originally forecasted earlier in the year. So in the sense of a good transparency, we opted to go ahead and set that expectation.

Would you say that the extra $1 million is U.S. revenue? Or is it really not that cut and dried?

No. As I just said, it's really coming from both the European performance as well as the readiness. We really hit the ground running. Our team has done a great job. As you heard, we launched the product from FDA approval and got in patients in 6 weeks. That's almost unheard of in this environment. Diabetes technology companies tend not to be able to move that fast, but it's really been a focus for us.

And then can you just give us an update on where you are with the U.S. sales force headcount at this point? Where would you like to be exiting the year? And how should we think about SG&A expense ramping from here over the next couple of quarters?

Sure. Mike, why don't you go ahead and fill folks in on where we are with the commercial expansion plan, which is actively underway?

Sure. Thanks for the question, Chris. By the middle of August, we'll have 20 quota reps, about 15 clinical people and we'll have 10 to 12 in customer care. So in terms of that, our commercial support and selling organization will be 45 total people. As we stated on previous calls, we would ramp to about 30 by the end of the year, and much of that will be determined by the coverage policies based on payers where we deploy resources. Are you still there?

That's great. Don, just wanted to follow-up on the SG&A expenses. How should we model operating expenses from here?

Sure. As we have -- as you know, we have not given guidance on OpEx for the year. But as you saw, the growth in second quarter for the formation of the sales group, that general increase will continue through the year as we continue to add, and it's not going to be linear. It's going to be somewhat chunky as we probably add them in groups over the balance of the year. But you're going to see a continued uptrend, but not dramatic.

And our next question comes from Alex Novak from Craig-Hallum Capital Group.

Great to hear the positive traction on Eversense so far in the U.S. Mike, just what is the biggest pushback you're hearing from endo's and patients now that the product is approved here in the U.S. and it's being actively marketed?

Alex, as I said, at the ADA, I thought there was really positive response. In fact, the response has been frankly more positive than we could have even imagined. Procedure is pretty straightforward, actually simpler than they think. The clinic is well prepared to put this into their practice. I think they're thinking about those patients that are best suited for Eversense and we continue to see, if you will, more and more patients that physicians are thinking of. Obviously, I think, the reimbursement will be the biggest piece of this. And as you can -- as I said earlier, with our first coverage policy, I think the payer community will start to see that Eversense is a meaningful product that we need to put into the diabetes treating community. So probably that reimbursement would probably be the biggest thing that we've heard so far.

Yes. Alex, let me just echo that. Just like we saw in Europe, there is a good expectation on the clinicians that they can get comfortable with the procedure. The real question they have that we don't have to answer for today, but we're actively working on it is when can my patients in my particular region get coverage for it. So we've got great progress in New Jersey, and Mike has a team that's working to expand that across the United States as quick as we can. So that's actually the biggest area of focus for us as you can imagine.

That's great. And kind of that's a great segue into my next question. Certainly, congrats on the Horizon coverage policy. I also saw that UnitedHealth updated its coverage policy at the beginning of August and they still do not cover Eversense and they actually state that there is insufficient evidence to conclude that Eversense actually improves glycemic control. So I'm just curious, what's your response, do you think some payers are going to may need to run additional clinical trials before getting coverage?

Mike, why don't you go ahead and speak to what you guys are hearing. Certainly, the standard practice on any new technology for many, many of the payers is to -- is to list it as not covered, and we have to fight to get that -- to get added in. And Mike, why don't you go through some of that?

Sure. Yes, Alex, I think, what you're referring to is UnitedHealthcare listed as experimental investigational and that's not just with Eversense, other technologies coming into the market and actually different feature sets that came into the market, they've listed as experimental investigational with logo called Suspend. And we have experienced people on the team who can navigate through that experimental investigational, and we feel confident, one, the utilization will be out there, and I think that's really important that the physician community continues to submit claims to payers, so they can see that utilization and demand is out there. And then we have a discussion, we have a discussion with the medical directors and the policymakers within the plans and review the dossier that I talked about. But experimental investigational is not uncommon within new technologies, novel technologies within the diabetes space. And it's a process to work through it. That's why we said, clearly that payer coverage is a journey and each individual payer and plan has their own review process. We'll work actively specifically with UnitedHealthcare. We do have some early conversations with that group already and we'll work through their process, and we're confident as I said, we'll have the majority of coverage policy within the next couple of years.

Okay. Understood, Mike. And then just last question from me, I believe the Roche's distribution agreement ends at -- or expires at the end of this year. Just curious, where are you with contract renegotiations?

So Roche continues to be a very good partner for us. They're very deep organization and the largest glucose monitoring entity in the world. We're continuing to work with them. We're looking at ways to continue advance the relationship. So we're speaking with them right now. And we'll certainly keep all updated in regards to how that contract conversation is going throughout the process. So nothing new to report, but we are both actively discussing it and both very interested in renewing it.

And our next question comes from Kyle Rose from Canaccord.

I just wanted to circle back on the increased guidance moving into the second half year. And I think on the last call, you characterized that contribution from U.S. has been a bit modest. It sounds like the extra $1 million here is coming from both the OUS, and then I guess, calling it running head start in the U.S. But can you kind of frame what your definition of modest contribution is? I mean, is it $2 million? Is it $3 million? Is it $1 million? And then more -- longer term, when I think about 2019, when I talk to investors, I think there's a fear out there just regarding consensus estimates, just coming in a wide range. I just wonder if you wanted to maybe frame how you're thinking about 2019, maybe not so much as in specifics, but maybe just a cadence of growth exiting '18 and into 2019?

Kyle, I appreciate your question and I know folks are trying really trying to reconnoiter on where the business is going. Obviously, we think about that every day. But at this point, it is just too early for us to make any comments on 2019. We're literally in the market for less than 6 weeks right now. In regard to the performance in the United States, as you said, it is a combination of the 2, as I stated. What we're actively focused on, as Mike indicated, is getting their fishing licenses, getting the authorizations and approvals to go hunting with the insurance companies and their particular patients. We have 1. There are many, many more to go that we're working on. So as we knock those off, we'll have better and better visibility. But at this point, I think, it's just too premature to give too much more indication of guidance.

In regards to the U.S. versus Europe, as we've said, it is predominantly the European markets. Remember what we're going through. We're putting patients on the sensor today, in August, and they will come up for their first opportunity to reinsert in November, right? So if we put a patient on in October, they're not going to come up for a reinsertion until January. So it's actually a pretty modest amount in 2018 just because the nature of our business. So we'll ramp up very quickly, but we're obviously starting from a small base. We're excited, because we do see some great acceptance and we think there's going to be a lot of opportunities there. Recall that we're focused on the top 300 prescribers in the United States. And when we speak with them and they get the feedback and they start telling us, these are the types of patients, these are the number of patients I would expect to have an interest in the Eversense product, that's where we get our vision for how they should roll forward. So we'd love to be able to give you some more guidance, but do bear with us that it's still pretty early in the game for us to go with a fine degree of specificity at this point.

Okay. I understand that. Let me just phrase it just one other way, just trying to get a little more of a directional answer. Are you comfortable with where consensus is currently modeling your 2019 estimates just from -- as far as the midpoint of consensus?

In all honesty, Kyle, that's not something that we've even got to at this point. We'll look at it as we get a little bit closer. But at this point, we're going to stay focused on that $19 million to $21 million in the United States, and we'll have to get back to you on 2019.

Okay. And then just last question from me and I'll hop back into queue, which is internationally, obviously, moving over to the XL product, I think, you talked about at least 70% of your installed base has that XL implant. Just any update from a pricing standpoint as far as how that's being sold on? Are you able to get an increased cost per implant for the respective increase in the days that they're being delivered to the patient's?

Well, recall that our pricing is static by contract with Roche and our revenue route forward is that -- is revenue to our distributor. But I'll let Mirasol speak to the dynamics of pricing in the European market. Mirasol, you want to describe what the current -- looks like.

Yes. Kyle, I'm not sure if I can add more than what Tim had already said. It really varies from country to country, and within the country, whether it's reimbursed or tendered business. But what we can see is on a per day basis, the XL is very similar to the 90-day sensor, may be slightly lower, but not materially so, and it's still at parity with the other real-time CGM sensors.

And Kyle, just for further clarification. We are seeing the predominance of all the action in Europe, something like 3 quarters of our revenue is still coming from the 3 key markets of Sweden, Germany and Italy. Those are all good reimbursement markets, places where there is much greater pricing pressure like France, the Roche partner has not commercialized yet. So it's still heavily driven by the biggest reimbursed markets.

And our next question comes from Jayson Bedford from Raymond James.

Just a few. I guess, just for clarification, did you recognize any revenue in the U.S. in the second quarter?

No. We did not.

No, we did not. We received approval in June and didn't ship until July.

Okay, okay. Maybe just on the distribution side, how many distributors do you have signed up? And are these more drug wholesalers or conventional distributors that most of the other device companies in the space use?

We have 3. Mike, why don't you describe -- it is obviously, a completely different distribution relationship that we have with Roche or Rubin. Mike, why don't you describe how they help?

Yes, sure. So Jayson, thanks for the question. As Tim mentioned, we have 3, what we're calling strategic fulfillment agents, and these -- think about this, these are distributors that are distributing the product directly to 1 of 2 customers here. If they go through the procedure codes that wrap code that I talked about in my comments earlier, that would be shipped through one specific distributor to the physician offices, and then we have 2 other distributors that would process a normal DME like you mentioned earlier as other CGMs. And those would go through the DME medical benefit, which would be shipped directly to the physician’s office on behalf of the patient. And those 3, we're going to probably build to a few more than that by the end of the year and those are the agents that we've sent to, to recognize that revenue that Tim talked about, and then all of our first patients that we inserted, those sensors were sent directly to the physician offices. They actually paid for those sensors from the fulfillment agents and then the physicians delivered those sensors to the patients.

Okay. That's helpful. And so when I think of the -- you mentioned the wrap code, if I'm understanding correctly, Blue Cross Blue Shield of New Jersey is going more of the DME route and not the wrap code from a reimbursement perspective?

If you look at the policy coverage statement, it actually shows that we are listed as a provider -- actually, not a provider, a manufacturer within the A code, which is that DME code, but they also list [0446T], which is actually a procedure code for the physician. We are having discussion in terms of their reimbursement channel that they would like to move that through, whether it is all in the wrap or if they want to go through the procedure code. But right now, we are submitting claims into Horizon right now through that A code as you mentioned earlier.

Okay. And the goal is to steer more folks or get aligned more on the wrap code side of things, correct?

Well, we believe that, that -- the CPT code is a more favorable code when you look at the physician actually being the provider rather than a DME company, and we've had conversations with payers as I've said in my comments that they prefer that. We believe that, that's a more efficient way to actually receive payment because there is only one provider that you're paying rather than paying the provider and then the DME company, to physician, and that's a preference that we've heard back from payers and that is a primary strategy for us to use that established Category III code of the 3 different codes that we have for inserted glucose sensing.

With that said, Jayson, it is an option. We can support either one. If a firm prefers the traditional DME route, we can certainly go that route. Those that prefer -- would like to move to DME channel, we can do that as well. And we are happy to work with those in either mechanism that works for them.

How many of your top 30 targeted endo's are part of the Blue Cross Blue Shield of New Jersey network?

Jayson, I prefer not to speak specifics there. We're just got -- getting through all of the plans to work with Horizon. I prefer not to talk through specific numbers right now.

It's pretty small handful, as you can imagine, it is 4 million covered lives. So out of the top 300, it's geographically probably a few percent, right?

Okay. And just maybe lastly from me. In Europe, can you just talk about payer coverage in Germany in terms of percent of covered lives? I don't know how you want to frame it, but are you fully covered in most of Germany right now? Or is there still some geographies or territories within Germany to be opened?

Roche is still working. We got a predominance. Mirasol, do you want to -- I think the live stuff that we did in the last call...

Yes, yes. Hi, Jason, we -- similar to what we reported at the last earnings call, we have about 80% of covered lives in Germany. So the product is reimbursed. The process that we go through in Germany is, first, you get a prescription from a doc, and then that is provided to the manufacturer, who then works with insurance company to get that through the system. What we're finding in Germany is that we get a lot of these prescriptions, but the prior authorization process may take a little while, some up to several weeks, and so that's part of the challenge we're working through in Germany and partnered with Roche is how to just speed up that process. But the product is reimbursed in Germany as well as in other markets.

And our next question comes from Rebecca Wang with Leerink Partners.

This is Rebecca for Danielle Antalffy. I just want to ask on the competitive landscape. What is management's view on the U.S. market in terms of competition? Do you see any difference here in the U.S. versus what you have seen in Europe?

Obviously, the products that are available are identical between the 2 regions. The advent of the Gen6 Dexcom is the most recent addition. But obviously, the Libre product first got its start in Europe and is now available in the United States. So pretty similar competitive environment. I will say that it is honestly an advantage to us to have so much going on in this space, right, with the extent that Abbott now is bringing up the Libre product, the Dexcom has as they're bringing out G6. It is very, very, very high recognition in acceptance of the need of CGM and that's been frankly attractive for us in coming out. So obviously, the competitive environment is going to be important. We still are seeing the majority of our patients in Europe coming from existing products, but we see a pretty good portion coming from new patients that are educated on the opportunity as well. So that competitive dynamic will certainly be there. But so, will bringing new folks, which is most important for all of us to the table as well.

And if I can just follow up on that question. So in the market where you have reimbursement such as Germany, what is Eversense market share in that country when you compete against Libre and Dexcom?

I frankly don't have their market share number at this point. It's something we will have a little bit better handle on in the United States. But given the dynamics of the distribution partnership, I don't have it yet, and we have not funded an independent survey.

And our next question comes from Jacob Frankel from Paulson Investment. (Operator Instructions) And our next question comes from Sean Lavin from BTIG.

This is Marie Thibault on for Sean today. Thanks for the positive anecdotal feedback so far on the early days of the U.S. launch. I want to dig into that a little bit more and hear how doctors are introducing patients to the technology and how they might adopt from here? I mean, is it the sort of pattern where we should have expect docs to implant a couple of patients and then wait to see how they do? Or should we expect them to ramp steadily once they started implanting, just any color you can offer there?

Mike, why don't you describe how the early conversations around are helping docs and patients?

Yes. Well, I'll take the first one first, how they're thinking about it through patients. The way that we have heard physicians talk about it both at the ADA, ATDC and now that we've had our physicians insert it is, they're going -- as always, they're going to give -- this as another option for their diabetes treatment and people they treat with diabetes. I have heard one physician say, if someone is coming in after -- for their 3-month visit and they're on a G5, they're going to talk about Eversense because they're moving from one newer technology to the other, and the conversation may go, there's a new product out there that actually last for 90 days when this new-generation product will give you an additional 3. And we've actually heard that verbatim on several occasions where those patients coming in on G5 will certainly be offered an opportunity to take advantage of Eversense.

The same thing is with a Libre patient where that Libre patient is, as Tim talked about earlier, where now you have flash systems that are actually a good thing for the market, it's actually increasing CGM usage, those patients also would be offered, and the conversation would go with them to say, are you interested in moving to a full-featured system that actually goes from 14 days to 90 days. So we really believe that, that long-term sensor will become a very strong conversation. Of course, Eversense is the only product that can offer that 90 days.

In terms of those patients that are not on CGM, we talk about this quite frequently that there is roughly around 6 million patients that are on insulin alone or insulin and orals. And those patients for whatever reason haven't adopted CGM, and often time, it is because of the burden of inserting a sensor every 7 to 10 to 14 days, the tape that goes along with it. And so when physicians actually see how the patch system works with our transmitter and how easy it is to use post-procedure, those will be patients that they've talked to before about CGM who would have said no, who they now are going to offer Eversense. And really then, anyone who we believe will take advantage of this product on insulin before who have been offered other CGMs. And then we're also seeing different categories of patients that are coming up through conversations with patients.

In terms of how physicians are thinking about actually putting patients on, what we do is we actually certify them on Eversense with 3 patients, then they can perform the procedure. We do recommend that a few weeks later that they actually do another 3 kind of to build up that muscle memory of how to do the procedure. It's very simple, but you want to build a little bit of a repetition of it. And then, from there, we think that physicians will think about 3 per week that they will be able to do in terms of insertions, especially these top 300 that we mentioned earlier, who are used to doing procedures and have the capability and the interest to use CGM.

That's really interesting. And I guess my other question, my follow-up was, it's great to hear that the plans for XL in the U.S. are moving ahead. Can you offer any more details on what the IDE study design might look like? And when we might get started there?

It's a traditional CGM regulatory trial. And what the agency is looking for is the confirmation of accurately measuring glucose throughout the full life of the sensor. So whether you do a 7-day, 10-day, 90-day or an 180-day trial, they're all very similar throughout varying periods of the sensor life, certainly including the beginning and the very end, patients who come to the clinic, they will be monitored for 12 to 16 hours. They go through glycemic variations that are induced with carbohydrates and insulin and you monitor the tracking of your new device versus what the laboratory standard analyzers do. And you submit that data, agency reviews it, that's the basis of the claims extension. So very, very similar to what we've done before, very, very similar to know what's not in the market. The complexity, of course, is that we have an 180-day sensor. So we'll be evaluating the sensor for 180 days that would be well into 2019 when the clinical trial was completed and then submission to the agency is about 6 months or approval after that as a supplement now.

And ladies and gentlemen, we have time for one more question, and that comes from Chad McCauley from Merrill Lynch.

A couple of quick questions. How long does the insertion process take for the physician?

The insertion process averaged about 2.5 minutes, it's about 4.5 minutes to remove it.

And then, the marketing strategy overall, can you speak a little bit to that? How many states it's presently available? And how many you expect it to be available in by year-end, number of reps hired?

Sure. Well, it's -- it is available pan the United States. So there is no particular state preference. Obviously, as we indicated, our focus has been on reimbursement, which can be regional in many cases. And therefore, your opportunity, obviously, increases as a big regional plan gives authorization to cover the product. So that's the focus. There is approximately 100 plans that one will go to. As Mike had indicated, we anticipated this typically and we expect to be in the time frame about 2 years to cycle through all of those plans.

And what I referred to that, in a specific state, without giving a specific example, basically there is not a physician in multiple states that is doing the process right now, so that's what I referred too. It might be available and approved by the FDA, but you can't get your hands on hold of one to get a physician to insert it. So that's what I was referring to there. Your closed loop system on the insulin pump, you're working with Roche. Do you have plans to work with any other pump providers?

We've announced partnership with Roche and Beta Bionics at this point.

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

Well, thank you. We appreciate everyone's time this evening and all of the interest. We're honestly very excited as we said to be launching it here in the United States, much work to do, but the early reception has been very positive. We look forward to updating you in approximately November with the initial performance in the United States.

With that, I wish everyone a good evening, and thanks for your time.

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