Senseonics Holdings, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports fourth-quarter results; it is an annual report, not a standalone quarterly filing.
Business context
Senseonics develops and commercializes Eversense, an implantable continuous glucose monitoring system. The U.S.-approved system provides up to 90 days of sensor use; Eversense XL is approved for up to 180 days in select international markets. A U.S. application to extend sensor life to 180 days was pending at year-end.
In August 2020, Senseonics granted Ascensia exclusive worldwide distribution rights, subject to existing distributor transitions and other exceptions. Senseonics retains responsibility for product development and manufacturing; Ascensia is responsible for commercialization and frontline support.
Financial performance and liquidity
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Total revenue | $4.9 million | $21.3 million |
| Gross loss | $17.4 million | $19.4 million |
| Gross margin | (350.9)% | (91.3)% |
| Operating loss | $79.1 million | $130.7 million |
| Net loss | $175.2 million | $115.5 million |
| Cash used in operating activities | $67.4 million | $136.0 million |
Revenue fell 76.8%, primarily due to lower sales outside the United States. Cost of sales was $22.3 million, including $15.1 million of inventory write-downs and adjustments. Lower sales and inventory impairment contributed to the deeply negative gross margin. Operating expenses declined substantially following restructuring and reduced commercial and clinical activity. Net loss widened largely because of financing-related and noncash items, including fair-value losses, debt extinguishment and issuance costs, and interest expense.
Fourth quarter: Revenue was $3.9 million, gross profit $2.6 million, operating loss $10.3 million, and net loss $101.6 million. The sharp quarterly net loss reflected significant financing and fair-value effects; the filing does not present these results as a standalone Q4 filing.
At December 31, 2020, cash, cash equivalents and restricted cash totaled $18.2 million, versus $95.9 million a year earlier. Current assets were $30.2 million and current liabilities $16.6 million. Notes payable had $115.5 million of aggregate principal outstanding, with a net carrying amount of approximately $60.4 million. The debt included $57.7 million of 2025 Notes, $36.3 million of PHC Notes, $15.7 million of 2023 Notes and $5.8 million of PPP borrowing. Total liabilities exceeded total assets, and stockholders’ deficit was $144.1 million.
After year-end, the company raised approximately $46.1 million net in a registered direct offering and $106.1 million net in a public offering; it also completed Series A preferred-stock sales totaling $25.8 million. Management stated that available resources under its operating plans were expected to fund operations through 2022. The company remains loss-making and says it does not expect profitability for at least several years.
Material changes and management commentary
- In March 2020, Senseonics temporarily suspended U.S. sales and marketing to new patients and reduced its workforce by approximately 60%, focusing resources on existing users and the 180-day product submission.
- COVID-19 reduced clinic access and sensor insertions; volumes remained below pre-pandemic levels late in 2020. Management noted some encouraging distributor orders but uncertainty about the pandemic’s duration and impact.
- Sales and marketing expense declined to $20.6 million from $49.6 million, and research and development expense declined to $20.4 million from $38.4 million, reflecting restructuring and changed operating priorities.
- The Ascensia transition was underway: Ascensia began U.S. sales support in October 2020, with a fuller transfer of commercial responsibilities planned for the second quarter of 2021. Ascensia receives tiered revenue shares and must meet minimum sales and marketing commitments.
- The company reported approximately 200 million U.S. covered lives through positive payer coverage decisions. The Eversense Bridge Program ended December 31, 2020; an Ascensia patient-assistance program was expected.
Outlook, risks and unusual items
- FDA timing: The 180-day U.S. PMA supplement was submitted September 30, 2020. The FDA said it expected to assign a reviewer and place the application under review no later than April 15, 2021. Management anticipated approval no earlier than the second half of 2021, while emphasizing uncertainty. Ascensia may terminate the agreement if U.S. 180-day approval is not obtained by August 31, 2021.
- Product development: Senseonics planned to seek an IDE for a 365-day sensor study in the second half of 2021, with trial enrollment targeted for the first half of 2022 if approved. These are plans, not assured milestones.
- Commercial and reimbursement risks: Future revenue depends heavily on Ascensia’s execution, patient and provider adoption, clinic capacity, and continued coverage and adequate reimbursement for both the device and insertion/removal procedures.
- Financing and dilution: The company has substantial debt, secured-note covenants and convertible securities, and may need additional capital. Post-year-end equity and preferred financings increased available funds but diluted, or may dilute, common shareholders. Fair-value changes in derivatives and financing options can materially affect reported earnings.
- Other unusual matters: The 2020 results include $21.1 million of debt-extinguishment losses, $30.7 million of fair-value adjustment losses, $12.7 million of debt issuance and other issuance costs, and $2.3 million of impairment expense. In 2019, the company voluntarily recalled unimplanted sensors after premature loss of function associated with inadequate sensor-surface hydration.
- Contingencies and compliance: A relator-only False Claims Act and Texas Medicaid Fraud Prevention Law case alleges improper physician marketing; the government declined to intervene, and the company says it has meritorious defenses. In February 2021, an unintended disclosure of certain Italian users’ email addresses was reported to the relevant authorities. Potential GDPR consequences were not clear in the filing.
Important facts for investors to verify
- Progress and outcome of the FDA review of the U.S. 180-day product, including implications for Ascensia’s contractual rights.
- Post-financing cash position, actual cash burn, debt service and compliance with PHC and other debt covenants.
- Ascensia’s commercial ramp, revenue targets, patient support plans and resulting sales to end users—not just distributor purchases.
- Whether payer coverage translates into consistent reimbursement for the device and clinical procedures, and whether insertion volumes recover.
- Potential dilution from convertible notes, preferred stock, warrants and other equity-linked arrangements.
- Resolution and financial or regulatory implications of the False Claims Act case and the Italian data disclosure.