Senseonics Holdings, Inc. — Q1 2020 Form 10-Q
Business context and period. The unaudited quarter ended March 31, 2020 covers Senseonics, a medical technology company developing and commercializing implantable Eversense continuous glucose monitoring systems. The filing was delayed under SEC COVID-19 relief provisions; the company cited pandemic-related operational disruption and staff commitments to financing and cost-reduction work.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $36,000 | $3.423 million |
| Gross loss / gross margin | $(19.634) million / (545.4)% | $(3.310) million / (96.7)% |
| Operating loss | $(43.831) million | $(29.768) million |
| Net loss | $(42.593) million | $(29.365) million |
| Net loss per share | $(0.21) | $(0.17) |
| Cash used in operating activities | $(29.048) million | $(30.152) million |
- Cash, cash equivalents and restricted cash were $18.805 million at March 31, down from $95.938 million at December 31, 2019. Total assets were $35.269 million; stockholders’ deficit was $48.961 million.
- Senseonics paid $48.5 million to terminate and repay its Solar term loan on March 22, including fees and premiums; the repayment generated a $4.546 million debt-extinguishment loss. At quarter-end, the company reported $15.7 million face value of 2023 Notes and $82 million of 2025 Notes outstanding.
- Cost of sales was $19.670 million, including substantial inventory and related-asset impairment, scrap and write-offs. The filing reports a $15.0 million inventory charge in the notes and $16.3 million of inventory and related-asset charges in MD&A.
- Sales and marketing expense was $11.145 million, R&D expense $7.362 million, and G&A expense $5.690 million. The reported $10.311 million gain from changes in derivative fair value partly offset other expenses.
Material changes and management commentary
- Revenue fell by $3.387 million year over year. Roche placed no commercial sales orders in Q1, compared with Roche accounting for 59% of revenue in Q1 2019. The company also cited excess distributor inventory, COVID-related demand disruption, customer concessions and Bridge Program costs.
- Senseonics reduced its workforce by approximately 60% on March 26, with over half of the reductions among sales personnel; it accrued $1.6 million in one-time termination benefits. U.S. commercial sales to new patients were temporarily suspended, and operations were refocused on supporting existing users and developing and seeking U.S. regulatory approval for Eversense XL, designed for use up to 180 days.
- Management reported substantial doubt about the company’s ability to meet obligations over the next twelve months, even after subsequent financings. It said liquidity depends on additional capital and favorable outcomes from potential strategic alternatives; financing may not be available on acceptable terms or at all.
- After quarter-end, the company received a $5.8 million PPP loan and $15 million of Highbridge first-lien financing, with up to another $5 million potentially available. First-lien notes carry 12% cash interest or 13% payment-in-kind interest and are secured by substantially all assets.
- In an April exchange, $24 million face value of 2025 Notes was exchanged for $15.7 million of second-lien notes, 11.026 million common shares, warrants for up to 4.5 million shares, and $0.3 million accrued interest. The second-lien notes carry 7.5% cash or 8.25% payment-in-kind interest. As of June 5, holders had converted $4.8 million of principal into 10.502 million shares. The filing also describes limits on additional share issuance pending stockholder approval.
- Management planned to analyze PROMISE trial results and, if positive, submit for U.S. 180-day use in late summer 2020 and pursue an iCGM designation in the second half of 2020. COVID-19 could delay clinical, regulatory and commercialization timelines. The filing reports positive coverage decisions and proposals, but does not provide a quantified sales forecast or earnings guidance.
- As of June 9, the company expected approximately $1.9 million of costs related to paused manufacturing and a further $0.6 million if specified manufacturing timelines were missed. It said some material costs might be credited upon later use.
Key investor verification points
- Current cash runway, subsequent cash use, access to further financing and compliance with Highbridge minimum-cash, budget and other covenants.
- Status and terms of strategic alternatives, stockholder approval for additional share issuance, and potential dilution from note conversions, warrants and equity financing.
- PPP loan forgiveness eligibility and amount, particularly given the workforce reduction and the filing’s disclosure of possible SBA review.
- Actual patient insertions, distributor inventory and orders, the duration of the U.S. sales suspension, and the effect of customer concessions on future revenue.
- PROMISE trial results, FDA submission and review timing, and any effects of COVID-19 on clinical work, manufacturing and suppliers.
- Final inventory impairment and manufacturing-related charges, including whether the filing’s $15.0 million inventory charge and $16.3 million inventory-and-related-asset figure reflect different scopes.