Senseonics Holdings, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; this is an annual report, not a standalone fourth-quarter report. The December 7 acquisition of Senseonics, Incorporated was accounted for as a reverse recapitalization, so the financial statements principally reflect Senseonics, Incorporated’s historical business. Senseonics develops the Eversense implantable continuous glucose monitoring (CGM) system and had no product approved for commercial sale at year-end.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $38,000 | $0 |
| Research and development expense | $18.3 million | $12.9 million |
| Sales and marketing expense | $0.8 million | $0.1 million |
| Administrative expense | $9.8 million | $5.7 million |
| Operating loss | $28.8 million | $18.7 million |
| Net loss | $29.9 million | $18.9 million |
| Net loss per common share | $4.32 | $9.89 |
| Cash used in operating activities | $25.5 million | $19.3 million |
| Cash and cash equivalents at year-end | $3.9 million | $18.9 million |
| Working capital | $(2.4) million | $17.6 million |
| Notes payable, net of discount, including current portion | $9.9 million | $9.8 million |
2015 revenue was grant income for sensor deliveries, not commercial Eversense sales. Gross margin is not meaningful given negligible revenue and the company’s pre-commercial stage. Loss per share improved year over year, but weighted-average shares rose substantially; net loss increased by $11.0 million.
Cash used in investing activities was $0.2 million, principally laboratory equipment. Financing provided $10.7 million, mainly from Series E preferred stock proceeds; cash decreased by $15.0 million during the year. Total liabilities were $15.2 million versus assets of $5.5 million, leaving a stockholders’ deficit of $9.7 million. Accumulated deficit was $160.8 million.
Material changes and business developments
- R&D expense increased $5.4 million, primarily from European pivotal-trial work, contract manufacturing, and development of future product configurations. Administrative expense rose $4.1 million, mainly from legal and accounting and personnel costs.
- The company completed the acquisition/reverse recapitalization in December 2015. At year-end, 75.8 million common shares were outstanding; options and warrants could result in additional dilution.
- Oxford term loans totaled $10.0 million at 6.95% fixed interest, secured by substantially all assets other than intellectual property, and mature July 2019. The company also had conditional access to an Energy Capital facility of up to $10.0 million; it was not equivalent to cash on hand.
- In January 2016, the company expanded its office lease and extended the term through May 2023; the filing estimates $3.6 million of additional minimum lease payments.
Outlook, risks, and unusual items
- Liquidity and going concern: The auditor’s report and management disclosed substantial doubt about the company’s ability to continue as a going concern. At year-end, cash was $3.9 million, and management said available cash and potential borrowing were expected to fund operations only through early 2016. A proposed equity offering and conditional borrowing were important financing plans, not assured proceeds.
- Regulatory and commercial outlook: The company had applied for a European CE mark and expected a decision and possible launch in select European markets in the first half of 2016. It initiated a U.S. pivotal trial in Q1 2016, with about 90 participants; if results were favorable, it planned to seek FDA PMA approval, potentially filing in the second half of 2016. These were forward-looking expectations, not approvals or guaranteed dates.
- Clinical evidence: In the European pivotal trial, 90-day mean absolute relative difference (MARD) was 11.4% for the first 44 subjects and 11.0% for 71 subjects on the current configuration. The filing reported no device- or procedure-related serious adverse events to date, but noted limited experience with repeated use in the same patient or insertion site. Final 180-day data were expected in Q1 2016.
- Key risks: Dependence on one unapproved product; clinical or regulatory delays or failure; inability to secure sufficient financing; limited reimbursement—Medicare did not cover CGM systems for home use; market adoption and competition; reliance on third-party manufacturers and suppliers; product safety/liability; and intellectual-property challenges.
- Unusual items: A $0.4 million deemed dividend related to the Series E preferred-stock beneficial conversion feature reduced net loss available to common shareholders. The acquisition was treated as a reverse recapitalization, and share and per-share figures were retrospectively adjusted for the exchange ratio.
- The company reported no material pending legal proceedings. Management concluded disclosure controls were effective, but did not provide a management assessment of internal control over financial reporting for 2015 following the reverse acquisition.
Important facts for investors to verify
- Whether the proposed equity financing closed, how much net cash it raised, and whether it satisfied the conditions for Energy Capital or Oxford borrowing.
- Actual CE-mark timing, U.S. pivotal-trial enrollment and results, and any subsequent FDA or European regulatory decisions.
- Subsequent cash burn, working-capital needs, debt-payment schedule, and any updated going-concern disclosures.
- Whether reimbursement and procedure codes were obtained, and whether distributors and commercial operations generated meaningful sales.
- Potential dilution from outstanding options, warrants, planned equity awards, and registration rights.