Senseonics Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Senseonics develops and commercializes implantable continuous glucose monitoring systems, including Eversense. Eversense E3 received FDA approval in February 2022, and Ascensia began its U.S. commercialization in Q2 2022.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $2.5 million | $2.8 million |
| Gross profit / margin | $0.5 million / 21.2% | $0.5 million / 18.5% |
| Operating loss | $15.2 million | $11.3 million |
| Net income (loss) | $86.7 million | $(249.5) million |
| Operating cash flow | $(20.2) million | $(16.3) million |
- Revenue fell 13% year over year, primarily due to lower Ascensia orders compared with the prior-year quarter, when Ascensia began commercialization. Ascensia accounted for 88% of revenue, up from 81%.
- R&D expense rose $2.5 million to $7.8 million, reflecting clinical activity, workforce expansion and other R&D support costs. G&A increased $1.4 million to $6.4 million. Sales and marketing declined $0.1 million to $1.5 million.
- Net income primarily reflected noncash fair-value gains: $84.6 million on derivatives and $21.7 million on an option. These gains reversed the prior-year quarter’s large fair-value losses; they did not reflect profitable operations. Basic EPS was $0.19, while diluted EPS was $(0.03), reflecting the impact of potentially dilutive securities in the calculation.
Liquidity, cash flow and debt
- At March 31, cash, cash equivalents and marketable securities totaled $166.9 million, versus $181.8 million at December 31, 2021. Current assets were $160.6 million and current liabilities $31.5 million.
- Operating cash use was $20.2 million. Investing activities provided $19.7 million, mainly from sales and maturities of marketable securities; financing provided $6.0 million, including $8.0 million net ATM stock-sale proceeds, partly offset by $2.2 million of PPP loan repayments. Cash and cash equivalents ended at $39.0 million.
- Notes payable had $102.6 million of stated principal outstanding, including $15.7 million of 2023 Notes, $51.2 million of 2025 Notes, $35.0 million of PHC Notes and $0.7 million of PPP debt. The PHC Notes are secured, mature in October 2024 and had a 9.5% initial rate; the rate decreased to 8.0% in April 2022 following E3 approval. Major maturities include $15.7 million in 2023, $35.0 million in 2024 and $51.2 million in 2025.
- Derivative liabilities totaled approximately $150.0 million at quarter end, and the Energy Capital option liability was $47.7 million. These fair-value balances can materially affect reported earnings.
Outlook, risks and other notable items
- Management said existing cash, cash equivalents and expected operating cash flows should fund current operating plans through 2023. The company may seek capital-market or debt financing for flexibility or strategic initiatives.
- Commercial success depends on patient and provider adoption, reimbursement and coverage, continued product development and regulatory approvals. The company said these efforts will require significant working capital through 2022 and beyond.
- Management identified COVID-19 uncertainty and Russia’s war in Ukraine as potential risks to operations, markets and supply chains. The company said it had not been notified of significant supply impacts from materials sourced from the region and was assessing alternatives.
- A False Claims Act and Texas Medicaid-related qui tam complaint was dismissed without prejudice on March 31, 2022; the relator had 60 days to refile. The filing states ordinary-course legal matters are not currently expected to have a material adverse effect.
- The company reported no material change in contractual obligations, no subsequent events, and effective disclosure controls as of March 31, 2022.
Most important facts for investors to verify
- Whether Eversense E3 commercialization, reimbursement transitions and customer orders improve revenue after the Q1 decline.
- How Ascensia’s 88% revenue concentration and related-party relationship affect sales, collections and business risk.
- Cash burn versus management’s stated funding runway through 2023, and whether additional financing or ATM share issuance is needed.
- Debt maturities, PHC covenants and conversion terms, and the effect of large derivative and option fair-value changes on reported earnings and dilution.
- Whether the dismissed complaint is refiled and whether Ukraine-related sourcing or broader supply-chain disruption becomes material.