Senseonics Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 13, 2024. Senseonics develops and manufactures implantable Eversense continuous glucose monitoring systems. It sells through distributors and fulfillment partners; Ascensia is its global commercialization partner and largest customer.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $5.0 million | $4.1 million |
| Gross profit / margin | $0.3 million / 6.6% | $0.4 million / 10.0% |
| Operating loss | $18.2 million | $19.7 million |
| Net loss (income) | $18.9 million loss | $1.3 million income |
| Operating cash flow | $20.3 million used | $19.8 million used |
- Revenue rose $0.9 million, or about 22%, driven mainly by increased commercial activity and U.S. sales. Ascensia represented 88% of revenue, down from 92% a year earlier.
- Gross margin declined primarily due to higher fixed manufacturing costs and an increased revenue-share percentage payable to Ascensia. R&D expense fell $2.0 million, mainly because 365-day product trials were completed; SG&A rose $0.4 million.
- Q1 2023 earnings included significant exchange-related and derivative gains. Their absence in 2024 was the main reason for the year-over-year swing to a net loss; Q1 2024 other expense was $0.6 million versus $21.0 million of other income in Q1 2023.
- At March 31, cash and cash equivalents were $90.5 million and short-term investments were $8.2 million; unrestricted cash, cash equivalents and marketable securities totaled $98.7 million. Cash, cash equivalents and restricted cash ended the quarter at $90.9 million.
- Cash from investing activities was $25.4 million, chiefly proceeds from investment maturities and sales. Financing provided $10.0 million, mainly from the $10.0 million Tranche 2 loan funded January 2. Operating cash use was $20.3 million.
- Debt principal included $20.4 million of 5.25% convertible notes due January 2025 and $35.0 million under the senior secured term-loan facility. The term loan bears interest at the greater of prime plus 1.40% or 9.90%, matures September 2027, and is secured by substantially all assets. Reported debt carrying value was $51.9 million; scheduled maturities including end-of-term fees totaled $57.8 million.
Outlook, risks and notable items
- Going concern: Management concluded substantial doubt exists about the company’s ability to continue as a going concern for the year following issuance. The filing says existing liquidity is not expected to fund operations and maintain loan cash and performance covenants through the second quarter of 2025; additional funding will be required. Financing may come from debt, equity, collaborations or other sources, with no assurance it will be available on acceptable terms.
- The loan agreement requires unrestricted cash of at least 30% of outstanding loan principal. A product-revenue performance covenant begins July 1, 2024. Failure to satisfy covenants could lead to default remedies, including acceleration.
- Management expects substantial working-capital needs through 2024 and beyond to support commercialization, product development, regulatory approvals and post-approval requirements. The filing provides no specific revenue or earnings guidance.
- Product developments disclosed after quarter-end: FDA authorized Eversense as an integrated CGM through the De Novo pathway in April 2024; the company said in May 2024 that it submitted a 510(k) for a next-generation 365-day product with once-weekly calibration. These are subsequent developments, not Q1 results.
- Commercial dependence is concentrated: Ascensia accounted for 88% of quarterly revenue. The company also depends on patient reimbursement and adoption of its products.
- A patent-infringement complaint filed in May 2024 alleges infringement of three patents; the company intends to defend itself and says the patents are being challenged in Inter Partes Review proceedings. Separately, the Fifth Circuit affirmed dismissal of a False Claims Act case in February 2024.
- Common shares outstanding were 530.8 million at quarter-end. Weighted-average shares used for Q1 2024 EPS were 614.6 million because certain pre-funded warrants are included as outstanding for EPS purposes.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Track cash burn, financing availability and compliance with the minimum-cash and revenue covenants; reconcile these against management’s stated liquidity outlook.
- Monitor revenue growth, gross margin, U.S. and international sales, reimbursement expansion, and Ascensia’s share of revenue and receivables.
- Review the terms, milestones and availability of the remaining $15 million Tranche 3 loan, as well as the 2025 notes’ maturity and repayment or refinancing plans.
- Verify regulatory progress and commercial adoption of the next-generation 365-day product, and assess the outcome and potential cost of the patent litigation.
- Assess potential dilution from outstanding warrants, equity plans and any future at-the-market or other financing.