[PART I: Financial Information](index=2&type=section&id=PART%20I%3A%20Financial%20Information) This section provides an overview of the company's financial performance and position, including statements and detailed notes [ITEM 1: Financial Statements](index=3&type=section&id=ITEM%201%3A%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive income (loss), statements of changes in stockholders' equity (deficit), and statements of cash flows, along with detailed notes explaining the company's financial position, performance, and accounting policies for the periods ended September 30, 2023, and December 31, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates **Condensed Consolidated Balance Sheets (in thousands)** | Metric | Sep 30, 2023 (Unaudited) (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------------- | :-------------------------- | | **Assets** | | | | Cash and cash equivalents | $55,759 | $35,793 | | Short term investments, net | $69,648 | $108,222 | | Total current assets | $146,140 | $161,200 | | Total assets | $154,065 | $177,673 | | **Liabilities** | | | | Total current liabilities | $17,302 | $31,471 | | Long-term debt and notes payables, net | $40,485 | $56,383 | | Derivative liabilities | $245 | $52,050 | | Total liabilities | $64,344 | $142,593 | | **Stockholders' Equity (Deficit)** | | | | Total stockholders' equity (deficit) | $52,065 | $(2,576) | - Total assets decreased from **$177.7 million** at December 31, 2022, to **$154.1 million** at September 30, 2023. Total liabilities decreased significantly from **$142.6 million** to **$64.3 million**, primarily due to a reduction in derivative liabilities and long-term debt. Stockholders' equity shifted from a deficit of **$2.6 million** to a positive **$52.1 million**[8](index=8&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) This section outlines the company's revenues, expenses, and net income or loss over specific reporting periods **Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands)** | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $6,097 | $4,622 | $14,360 | $10,818 | | Gross profit | $1,172 | $756 | $2,002 | $2,107 | | Operating loss | $(19,022) | $(17,569) | $(58,599) | $(49,766) | | Total other (expense) income, net | $(5,081) | $(42,822) | $15,397 | $180,324 | | Net (Loss) Income | $(24,103) | $(60,391) | $(43,202) | $130,558 | | Basic net (loss) income per common share | $(0.04) | $(0.13) | $(0.08) | $0.28 | | Diluted net loss per common share | $(0.04) | $(0.13) | $(0.08) | $(0.10) | - For the three months ended September 30, 2023, total revenue increased by **$1.5 million** to **$6.1 million**, and net loss decreased significantly from **$(60.4) million** to **$(24.1) million**, primarily due to a substantial reduction in other expenses, net. For the nine months ended September 30, 2023, total revenue increased to **$14.4 million**, but the company reported a net loss of **$(43.2) million**, a significant shift from the **$130.6 million** net income in the prior year, mainly due to changes in fair value adjustments of options and derivatives[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) This section details changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit **Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (in thousands)** | Metric (in thousands) | Balance, Dec 31, 2022 | Balance, Sep 30, 2023 | | :------------------------------------ | :-------------------- | :-------------------- | | Common Stock (Shares) | 479,637 | 528,176 | | Common Stock (Amount) | $480 | $528 | | Additional Paid-In Capital | $806,488 | $903,665 | | Accumulated Deficit | $(808,866) | $(852,069) | | Total Stockholders' Equity (Deficit) | $(2,576) | $52,065 | - The company's total stockholders' equity shifted from a deficit of **$2.6 million** at December 31, 2022, to a positive **$52.1 million** at September 30, 2023. This improvement was driven by an increase in additional paid-in capital by **$97.2 million**, primarily from the issuance of common stock, warrants, and the exchange of **2025 Notes**, despite an increase in accumulated deficit[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash inflows and outflows from operating, investing, and financing activities over specific periods **Unaudited Condensed Consolidated Statements of Cash Flows (in thousands)** | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(55,096) | $(48,925) | | Net cash provided by investing activities | $53,518 | $19,532 | | Net cash provided by financing activities | $21,544 | $31,416 | | Net increase in cash, cash equivalents | $19,966 | $2,023 | | Cash, cash equivalents, at ending of period | $55,759 | $35,484 | - Net cash used in operating activities increased to **$55.1 million** for the nine months ended September 30, 2023, from **$48.9 million** in the prior year. However, net cash provided by investing activities significantly increased to **$53.5 million** (from **$19.5 million**), and net cash provided by financing activities was **$21.5 million** (down from **$31.4 million**), resulting in a net increase in cash and cash equivalents of **$19.9 million**, compared to **$2.0 million** in the prior year[15](index=15&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. Organization and Nature of Operations](index=10&type=section&id=1.%20Organization%20and%20Nature%20of%20Operations) This note describes the company's primary business as a medical technology firm focused on continuous glucose monitoring systems - Senseonics Holdings, Inc. is a medical technology company focused on developing and manufacturing long-term, implantable continuous glucose monitoring (CGM) systems to improve diabetes management[17](index=17&type=chunk) [2. Liquidity and Capital Resources](index=10&type=section&id=2.%20Liquidity%20and%20Capital%20Resources) This note discusses the company's financial resources, funding strategies, and ability to meet short-term and long-term obligations - The company has incurred substantial losses and negative cash flows from operations since inception, with an accumulated deficit of **$852.1 million** as of September 30, 2023. Operations have been funded primarily through preferred stock, common stock, warrants, convertible notes, and debt[19](index=19&type=chunk) **Key Liquidity Metrics (in millions)** | Metric | Sep 30, 2023 | | :-------------------------------- | :----------- | | Cash, cash equivalents, and marketable securities | $125.4 | - On September 8, 2023, the company entered into a Loan and Security Agreement for up to **$50.0 million** in senior secured term loans, with an initial **$25.0 million** funded. Additionally, in August 2023, the company exchanged **$30.8 million** of **2025 Notes** for **$7.5 million** cash and **35.1 million** common shares[20](index=20&type=chunk)[21](index=21&type=chunk) - The company also entered into an Equity Distribution Agreement with Goldman Sachs & Co. LLC in August 2023 to sell up to **$106.6 million** of common stock in an 'at the market' offering, with no sales made as of September 30, 2023. The previous **2021 Sales Agreement** with Jefferies LLC was terminated in August 2023, after generating **$7.4 million** in net proceeds from common stock sales in **2023**[22](index=22&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [3. Summary of Significant Accounting Policies](index=14&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimation methods used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information, with certain disclosures condensed or omitted as permitted by SEC rules. The company operates in one segment: glucose monitoring products[30](index=30&type=chunk)[31](index=31&type=chunk) - The company adopted **ASU 2016-13** (Credit Losses) as of January 1, 2023, which did not have a material impact on the financial statements. Management uses estimates for various items, including stock-based compensation, derivative liabilities, and inventory obsolescence[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk) [4. Revenue Recognition](index=16&type=section&id=4.%20Revenue%20Recognition) This note details how and when the company recognizes revenue from its product sales and related agreements - Revenue is generated from sales of the Eversense system and components to Ascensia, third-party distributors, and strategic fulfillment partners. Revenue is recognized when customers obtain control of the product, with some revenue recognized through a consignment program when the product is consumed by a patient[37](index=37&type=chunk)[150](index=150&type=chunk) **Net Revenue by Geographic Region (in thousands)** | Region | Three Months Ended Sep 30, 2023 | % of Total (3M) | Three Months Ended Sep 30, 2022 | % of Total (3M) | | :---------------------- | :------------------------------ | :-------------- | :------------------------------ | :-------------- | | United States | $3,930 | 64.5% | $1,934 | 41.8% | | Outside of the United States | $2,167 | 35.5% | $2,688 | 58.2% | | **Total** | **$6,097** | **100.0%** | **$4,622** | **100.0%** | | Region | Nine Months Ended Sep 30, 2023 | % of Total (9M) | Nine Months Ended Sep 30, 2022 | % of Total (9M) | | :---------------------- | :------------------------------ | :-------------- | :------------------------------ | :-------------- | | United States | $7,885 | 54.9% | $3,908 | 36.1% | | Outside of the United States | $6,475 | 45.1% | $6,910 | 63.9% | | **Total** | **$14,360** | **100.0%** | **$10,818** | **100.0%** | - Ascensia accounted for **93%** and **97%** of total revenue for the three months ended September 30, 2023 and 2022, respectively, and **92%** and **95%** for the nine months ended September 30, 2023 and 2022, respectively, indicating a high concentration of revenue from this single customer[41](index=41&type=chunk)[154](index=154&type=chunk) [5. Net Income (Loss) per Share](index=18&type=section&id=5.%20Net%20Income%20%28Loss%29%20per%20Share) This note presents the calculation of basic and diluted net income or loss per common share for the reporting periods **Net (Loss) Income Per Common Share** | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic net (loss) income per common share | $(0.04) | $(0.13) | $(0.08) | $0.28 | | Diluted net loss per common share | $(0.04) | $(0.13) | $(0.08) | $(0.10) | | Basic weighted-average shares outstanding | 592,452,262 | 472,475,747 | 552,703,546 | 464,244,736 | | Diluted weighted-average shares outstanding | 592,452,262 | 472,475,747 | 552,703,546 | 608,345,713 | - Basic and diluted net loss per common share for the three and nine months ended September 30, 2023, were **$(0.04)** and **$(0.08)**, respectively, an improvement from **$(0.13)** for the three months ended September 30, 2022, but a decline from **$0.28** basic net income per share for the nine months ended September 30, 2022. The increase in weighted-average shares outstanding reflects recent equity issuances and warrant exchanges[46](index=46&type=chunk) - In periods of net loss, all potentially dilutive common shares are excluded from diluted EPS calculation as their effect would be anti-dilutive[44](index=44&type=chunk) [6. Marketable Securities](index=20&type=section&id=6.%20Marketable%20Securities) This note provides details on the company's marketable securities, including their fair value and changes over time **Marketable Securities Available for Sale (in thousands)** | Type | Sep 30, 2023 (Estimated Market Value) | Dec 31, 2022 (Estimated Market Value) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Commercial Paper | $26,281 | $41,503 | | Corporate debt securities | $7,920 | $32,142 | | Government and agency securities | $35,447 | $38,570 | | **Total** | **$69,648** | **$120,475** | - The total estimated market value of marketable securities decreased from **$120.5 million** at December 31, 2022, to **$69.6 million** at September 30, 2023. Unrealized losses on available-for-sale securities were not significant and were primarily due to changes in interest rates, not increased credit risk[47](index=47&type=chunk) [7. Inventory, net](index=20&type=section&id=7.%20Inventory%2C%20net) This note details the composition of the company's inventory, including finished goods, work-in-process, and raw materials **Inventory, net (in thousands)** | Category | Sep 30, 2023 | Dec 31, 2022 | | :--------------- | :----------- | :----------- | | Finished goods | $2,440 | $1,697 | | Work-in-process | $5,981 | $4,057 | | Raw materials | $1,305 | $1,552 | | **Total** | **$9,726** | **$7,306** | - Total inventory, net, increased from **$7.3 million** at December 31, 2022, to **$9.7 million** at September 30, 2023, driven by increases in finished goods and work-in-process. The company charged less than **$0.1 million** to cost of sales for inventory obsolescence for the three and nine months ended September 30, 2023, a decrease from **$0.5 million** in the prior year[48](index=48&type=chunk)[49](index=49&type=chunk) [8. Prepaid Expenses and Other Current Assets](index=22&type=section&id=8.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note outlines the company's prepaid expenses and other current assets, including contract manufacturing and tax credits **Prepaid Expenses and Other Current Assets (in thousands)** | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Contract manufacturing | $4,577 | $4,097 | | Tax credits receivable | $1,793 | $0 | | Insurance | $340 | $1,243 | | Clinical and Preclinical | $180 | $924 | | **Total prepaid expenses and other current assets** | **$7,557** | **$7,428** | - Total prepaid expenses and other current assets remained relatively stable at **$7.6 million** as of September 30, 2023, compared to **$7.4 million** at December 31, 2022. A notable change is the recognition of **$1.8 million** in tax credits receivable (refundable employee retention credits) in **2023**[50](index=50&type=chunk) [9. Accrued Expenses and Other Current Liabilities](index=22&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details the company's accrued expenses and other current liabilities, categorized by type of service or obligation **Accrued Expenses and Other Current Liabilities (in thousands)** | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | Research and development | $4,168 | $3,502 | | Professional and administrative services | $3,947 | $1,053 | | Compensation and benefits | $3,569 | $4,699 | | Contract manufacturing | $1,396 | $2,480 | | Sales and marketing services | $242 | $2,050 | | **Total accrued expenses and other current liabilities** | **$14,633** | **$15,453** | - Total accrued expenses and other current liabilities decreased slightly from **$15.5 million** at December 31, 2022, to **$14.6 million** at September 30, 2023. Significant changes include an increase in professional and administrative services accruals and decreases in compensation and benefits, contract manufacturing, and sales and marketing services accruals[51](index=51&type=chunk) [10. Leases](index=22&type=section&id=10.%20Leases) This note describes the company's lease arrangements, including its corporate headquarters, and related assets and liabilities - The company leases approximately **33,000** square feet for its corporate headquarters. In May 2023, the lease was amended and extended through May 31, 2033, resulting in a **$2.5 million** increase to the Right-of-Use (ROU) asset and a **$3.8 million** increase to the lease liability[52](index=52&type=chunk) **Operating Lease Assets and Liabilities (in thousands)** | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Operating lease ROU assets | $5,261 | $3,032 | | Non-current operating lease liabilities | $6,312 | $2,689 | | **Total operating lease liabilities** | **$6,725** | **$3,414** | - Operating lease expense for the nine months ended September 30, 2023, was **$0.6 million**, up from **$0.5 million** in the prior year[53](index=53&type=chunk) [11. Product Warranty Obligations](index=24&type=section&id=11.%20Product%20Warranty%20Obligations) This note explains the company's product warranty policy and the associated reserve for estimated replacement costs - The company provides a one-year warranty on its smart transmitters and may replace Eversense system components. Estimated replacement costs are recorded as a charge to cost of sales at the time of shipment[55](index=55&type=chunk) **Warranty Reserve (in thousands)** | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Balance at end of the period | $517 | $781 | | Provision for warranties during the period (9M/12M) | $136 | $166 | | Settlements made during the period (9M/12M) | $(400) | $(108) | [12. Notes Payable, Preferred Stock and Stock Purchase Warrants](index=25&type=section&id=12.%20Notes%20Payable%2C%20Preferred%20Stock%20and%20Stock%20Purchase%20Warrants) This note details the company's debt instruments, preferred stock, and warrants, including terms and recent transactions - On September 8, 2023, the company entered into a Loan and Security Agreement for up to **$50.0 million** in senior secured term loans, with an initial **$25.0 million** funded. The loans mature on September 1, 2027, bear interest at prime rate plus **1.40%** (or **9.90%**), and are secured by substantially all company assets[57](index=57&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk) - In connection with the Tranche **1 Loan**, the company issued warrants to lenders to acquire **832,362** common shares at **$0.6007** per share, recorded in equity as a debt discount[64](index=64&type=chunk) - In March 2023, the company exchanged **$35.0 million** of **PHC Notes** for a pre-funded warrant to purchase **68,525,311** common shares, resulting in a net gain on exchange of **$18.8 million**. Additionally, PHC purchased a pre-funded warrant for **15,425,750** common shares for **$15.0 million**[27](index=27&type=chunk)[29](index=29&type=chunk)[93](index=93&type=chunk) - In August 2023, the company exchanged **$30.8 million** of **2025 Notes** for **$7.5 million** cash and **35.1 million** common shares, resulting in a **$4.6 million** extinguishment loss. Approximately **$20.4 million** of **2025 Notes** remain outstanding[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) **Notes Payable Carrying Amounts (in thousands)** | Note Type | Sep 30, 2023 (Carrying Amount) | Dec 31, 2022 (Carrying Amount) | | :-------------------------- | :----------------------------- | :----------------------------- | | 2025 Notes | $16,605 | $35,918 | | Loan and Security Agreement | $23,880 | $0 | | 2023 Notes | $0 | $15,579 | | PHC Notes | $0 | $20,465 | | **Total** | **$40,485** | **$71,962** | **Interest Expense Related to Notes Payable (in thousands)** | Note Type | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | 2023 Notes | $189 | $1,640 | | 2025 Notes | $6,770 | $6,104 | | PHC Notes | $2,230 | $6,053 | | Loan and Security Agreement | $199 | $0 | | **Total** | **$9,388** | **$13,803** | [13. Stockholders' Equity (Deficit)](index=38&type=section&id=13.%20Stockholders%27%20Equity%20%28Deficit%29) This note provides an overview of the components of stockholders' equity, including common stock and capital transactions - During the nine months ended September 30, 2023, the company received **$7.4 million** in net proceeds from the sale of **9,944,663** common shares under the **2021 Sales Agreement**, which was terminated in August 2023. A new Equity Distribution Agreement with Goldman Sachs & Co. LLC allows for the sale of up to **$106.6 million** of common stock, with no sales as of September 30, 2023[108](index=108&type=chunk)[109](index=109&type=chunk) [14. Stock-Based Compensation](index=38&type=section&id=14.%20Stock-Based%20Compensation) This note describes the company's equity incentive plans and the accounting for stock-based compensation expenses - The company has several equity incentive plans: the Amended and Restated **2015 Plan** (**28.97 million** shares available), the Inducement Plan (**172,256** shares available), and the **2023 Commercial Equity Plan** (**7.06 million** shares available). The **2016 Employee Stock Purchase Plan (ESPP)** had **17.62 million** shares available, with **222,312** shares purchased in **2023**[111](index=111&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) [15. Fair Value Measurements](index=42&type=section&id=15.%20Fair%20Value%20Measurements) This note details the fair value hierarchy used for financial assets and liabilities, including derivative instruments **Fair Value Hierarchy of Financial Assets and Liabilities (in thousands)** | Category | Sep 30, 2023 (Total) | Dec 31, 2022 (Total) | | :------------------------------------ | :------------------- | :------------------- | | **Assets** | | | | Money market funds | $52,696 | $34,658 | | Commercial paper | $26,281 | $41,503 | | Corporate debt securities | $7,920 | $32,142 | | Government and agency securities | $35,447 | $38,570 | | **Liabilities** | | | | Embedded features of the 2025 Notes | $245 | $7,859 | | Embedded features of the PHC Notes | $0 | $44,191 | | Embedded features of the 2023 Notes | $0 | $20 | - The fair value of embedded features of the **PHC Notes** and **2023 Notes** decreased to **$0** at September 30, 2023, due to their exchange and repayment, respectively. The embedded features of the **2025 Notes** decreased from **$7.9 million** to **$0.2 million**. Level **3** fair value measurements for embedded features use unobservable inputs like stock price volatility, conversion probabilities, and credit spread[121](index=121&type=chunk)[122](index=122&type=chunk) [16. Income Taxes](index=43&type=section&id=16.%20Income%20Taxes) This note explains the company's income tax position, including deferred tax assets and the valuation allowance - The company has not recorded any tax provision or benefit for the nine months ended September 30, 2023 or 2022, due to a full valuation allowance against its net deferred tax assets, as realization of future benefits is not considered more-likely-than-not[123](index=123&type=chunk) [17. Related Party Transactions](index=43&type=section&id=17.%20Related%20Party%20Transactions) This note discloses transactions and balances with related parties, primarily PHC and its subsidiary Ascensia - PHC, a noncontrolling owner with board representation, and its subsidiary Ascensia, are related parties. Revenue from Ascensia was **$13.2 million** for the nine months ended September 30, 2023, up from **$10.3 million** in the prior year. The company also purchases medical supplies from Ascensia[124](index=124&type=chunk) **Related Party Balances (in millions)** | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Amount due from Ascensia | $2.7 | $2.3 | | Amount due to Ascensia | $0.5 | $0.9 | [18. Subsequent Events](index=43&type=section&id=18.%20Subsequent%20Events) This note reports on events occurring after the balance sheet date that may require disclosure or adjustment - The company evaluated subsequent events through the filing date of the Form **10-Q** and found no events requiring recognition or disclosure[126](index=126&type=chunk) [ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=ITEM%202%3A%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance for the three and nine months ended September 30, 2023, and an assessment of liquidity and capital resources [Overview](index=44&type=section&id=Overview) This section provides a high-level summary of the company's business, product development, and commercialization efforts - Senseonics is a medical technology company developing long-term implantable continuous glucose monitoring (CGM) systems, Eversense, for diabetes management. The Eversense **E3 CGM** system, with a six-month sensor life, received **FDA** approval in February 2022 and **CE** mark in June 2022[129](index=129&type=chunk) - The company is in early commercialization, focusing on driving awareness among intensively managed patients and healthcare providers. Reimbursement is crucial, with approximately **300 million** covered lives in the U.S. through positive insurance payor decisions, including UnitedHealthcare effective July 1, 2023[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk) - The ENHANCE pivotal study for the Eversense **365-day** system completed adult cohort enrollment in **Q3 2023**, with data expected by end of **2023** to support an **FDA** submission in early **2024**. Pediatric patient enrollment began in **Q2 2023**[133](index=133&type=chunk)[143](index=143&type=chunk) [United States Development and Commercialization of Eversense](index=46&type=section&id=United%20States%20Development%20and%20Commercialization%20of%20Eversense) This section details the regulatory approvals and commercialization strategy for Eversense CGM systems in the U.S. market - The **90-day Eversense CGM** system received **FDA PMA** approval in June 2018 and non-adjunctive indication (dosing claim) in June 2019, allowing it to replace fingerstick blood glucose measurements for treatment decisions. The **180-day Eversense E3 CGM** system was **FDA** approved in February 2022[135](index=135&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk)[142](index=142&type=chunk) - In August 2020, the company entered into an exclusive collaboration and commercialization agreement with Ascensia for worldwide distribution of Eversense CGM systems. Ascensia assumed commercial responsibilities for the **90-day Eversense** product in the U.S. during **Q2 2021** and began commercializing Eversense **E3** in **Q2 2022**[141](index=141&type=chunk)[142](index=142&type=chunk) - The Eversense **XL** received **MRI** approval in the **EEA** in April 2020, a first for the **CGM** category, meaning the sensor does not need to be removed during **MRI** scanning[140](index=140&type=chunk) [European Commercialization of Eversense](index=48&type=section&id=European%20Commercialization%20of%20Eversense) This section outlines the regulatory approvals and commercialization efforts for Eversense CGM systems in European markets - The Eversense **XL CGM** system received **CE** mark in September 2017 for up to **180-day** sensor life and began commercialization in Europe in **Q4 2017**. The Eversense **E3 CGM** system received **CE** mark in June 2022, with Ascensia commencing commercialization in European markets in **H2 2022**[144](index=144&type=chunk)[148](index=148&type=chunk) - A distribution agreement with Roche, which covered **EMEA** and other regions, concluded on January 31, 2021, transitioning distribution to Ascensia[145](index=145&type=chunk)[147](index=147&type=chunk) [Financial Overview](index=50&type=section&id=Financial%20Overview) This section summarizes the company's financial performance, including revenue recognition and customer concentration [Revenue](index=50&type=section&id=Revenue) This section explains the sources and recognition policies for the company's product revenue, including variable consideration - Product revenue is generated from sales of the Eversense system to Ascensia, third-party distributors, and strategic fulfillment partners. Revenue is recognized when customers obtain control of the product, or when consumed by a patient under consignment[149](index=149&type=chunk)[150](index=150&type=chunk) - Variable consideration, such as discounts and revenue share (for Ascensia), is included in revenue to the extent that a significant reversal is improbable. Contract assets consist of unbilled receivables related to the Ascensia Commercialization Agreement[151](index=151&type=chunk)[153](index=153&type=chunk) [Concentration of Revenue and Customers](index=50&type=section&id=Concentration%20of%20Revenue%20and%20Customers) This section highlights the company's reliance on key customers for a significant portion of its total revenue - Ascensia remains the primary customer, accounting for **93%** and **97%** of total revenue for the three months ended September 30, 2023 and 2022, respectively, and **92%** and **95%** for the nine months ended September 30, 2023 and 2022, respectively[154](index=154&type=chunk) [Revenue by Geographic Region](index=52&type=section&id=Revenue%20by%20Geographic%20Region) This section breaks down the company's net revenue by geographic region, showing market performance trends **Net Revenue by Geographic Region (in thousands)** | Region | Three Months Ended Sep 30, 2023 | % of Total (3M) | Three Months Ended Sep 30, 2022 | % of Total (3M) | | :---------------------- | :------------------------------ | :-------------- | :------------------------------ | :-------------- | | United States | $3,930 | 64.5% | $1,934 | 41.8% | | Outside of the United States | $2,167 | 35.5% | $2,688 | 58.2% | | **Total** | **$6,097** | **100.0%** | **$4,622** | **100.0%** | | Region | Nine Months Ended Sep 30, 2023 | % of Total (9M) | Nine Months Ended Sep 30, 2022 | % of Total (9M) | | :---------------------- | :------------------------------ | :-------------- | :------------------------------ | :-------------- | | United States | $7,885 | 54.9% | $3,908 | 36.1% | | Outside of the United States | $6,475 | 45.1% | $6,910 | 63.9% | | **Total** | **$14,360** | **100.0%** | **$10,818** | **100.0%** | - U.S. revenue significantly increased its share of total revenue, reaching **64.5%** for the three months and **54.9%** for the nine months ended September 30, 2023, compared to **41.8%** and **36.1%** in the prior year periods, respectively. This indicates a shift towards stronger U.S. market performance[155](index=155&type=chunk) [Results of Operations for the Three Months Ended September 30, 2023 and 2022](index=53&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) This section analyzes the company's financial performance for the three-month periods, including revenue, expenses, and net loss **Summary of Operations (Three Months Ended September 30, in thousands)** | Metric | 2023 | 2022 | Period-to-Period Change | | :------------------------------------ | :----- | :----- | :---------------------- | | Total revenue | $6,097 | $4,622 | $1,475 | | Gross profit | $1,172 | $756 | $416 | | Research and development expenses | $12,769 | $10,985 | $1,784 | | Selling, general and administrative expenses | $7,425 | $7,340 | $85 | | Operating loss | $(19,022) | $(17,569) | $(1,453) | | Total other (expense) income, net | $(5,081) | $(42,822) | $37,741 | | Net (Loss) Income | $(24,103) | $(60,391) | $36,288 | - Total revenue increased by **$1.5 million (32%)** to **$6.1 million**, primarily due to higher shipments of Eversense **E3** in the U.S. Gross profit increased by **$0.4 million (55%)** to **$1.2 million**, with gross margin improving from **16.4%** to **19.2%**[158](index=158&type=chunk)[159](index=159&type=chunk) - Research and development expenses increased by **$1.8 million (16%)** to **$12.8 million**, driven by investments in next-generation technologies and personnel costs. Selling, general and administrative expenses remained relatively stable[160](index=160&type=chunk)[161](index=161&type=chunk) - Net loss significantly decreased by **$36.3 million**, from **$(60.4) million** to **$(24.1) million**, primarily due to a **$37.7 million** increase in other income, net, largely from changes in fair value adjustments of options and derivatives[156](index=156&type=chunk)[162](index=162&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2023 and 2022](index=54&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) This section analyzes the company's financial performance for the nine-month periods, including revenue, expenses, and net loss **Summary of Operations (Nine Months Ended September 30, in thousands)** | Metric | 2023 | 2022 | Period-to-Period Change | | :------------------------------------ | :----- | :----- | :---------------------- | | Total revenue | $14,360 | $10,818 | $3,542 | | Gross profit | $2,002 | $2,107 | $(105) | | Research and development expenses | $38,003 | $28,088 | $9,915 | | Selling, general and administrative expenses | $22,598 | $23,785 | $(1,187) | | Operating loss | $(58,599) | $(49,766) | $(8,833) | | Total other (expense) income, net | $15,397 | $180,324 | $(164,927) | | Net (Loss) Income | $(43,202) | $130,558 | $(173,760) | - Total revenue increased by **$3.5 million (32.7%)** to **$14.4 million**, driven by higher Eversense **E3** shipments in the U.S. Gross profit decreased by **$0.1 million (5%)** to **$2.0 million**, with gross margin declining from **19.5%** to **13.9%** due to increased revenue share percentage to Ascensia, sales channel mix, and higher manufacturing/logistics costs[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Research and development expenses increased by **$9.9 million (35.3%)** to **$38.0 million**, primarily due to a **$6.1 million** increase in clinical studies and **$3.8 million** in personnel/support services for next-generation technologies. Selling, general and administrative expenses decreased by **$1.2 million (5%)** due to reduced personnel and other G&A costs[167](index=167&type=chunk)[168](index=168&type=chunk) - The company reported a net loss of **$(43.2) million**, a significant decrease of **$173.8 million** from the **$130.6 million** net income in the prior year. This change was primarily driven by a **$145.7 million** change in fair value of derivatives and a **$41.3 million** change in fair value of options, partially offset by a **$14.2 million** net extinguishment loss on notes exchange[163](index=163&type=chunk)[169](index=169&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, detailing funding sources and future requirements [Sources of Liquidity](index=56&type=section&id=Sources%20of%20Liquidity) This section identifies the primary means by which the company obtains cash to fund its operations and investments - The company has incurred substantial losses and cumulative negative cash flows from operations since inception, with an accumulated deficit of **$852.1 million** as of September 30, 2023. Operations have been funded primarily through preferred stock, common stock, warrants, convertible notes, and debt[170](index=170&type=chunk) **Key Liquidity Metrics (in millions)** | Metric | Sep 30, 2023 | | :-------------------------------- | :----------- | | Cash, cash equivalents, and marketable securities | $125.4 | - Recent financing activities include a **$25.0 million** initial term loan from Hercules Capital (part of a **$50.0 million** facility), exchange of **$30.8 million** of **2025 Notes** for cash and common stock, and a new Equity Distribution Agreement with Goldman Sachs & Co. LLC for up to **$106.6 million** in common stock sales[171](index=171&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - The company also exchanged **$35.0 million** of **PHC Notes** for a pre-funded warrant to purchase **68,525,311** common shares and sold a Purchase Warrant to PHC for **$15.0 million** to maintain beneficial ownership[181](index=181&type=chunk)[182](index=182&type=chunk) [Indebtedness](index=60&type=section&id=Indebtedness) This section details the company's outstanding debt obligations, including term loans and convertible notes - The company's indebtedness includes the Term Loan Facility from Hercules Capital, with an initial **$25.0 million** funded, maturing September 1, 2027. The **PPP Loan** of **$5.8 million** was fully repaid in April 2022[184](index=184&type=chunk)[186](index=186&type=chunk) **Outstanding Convertible Notes (as of Sep 30, 2023)** | Note Type | Coupon | Issuance Date | Aggregate Principal (in millions) | Maturity Date | Initial Conversion Rate per $1,000 Principal Amount | Conversion Price per Share | | :-------------------------- | :----- | :------------ | :-------------------------------- | :------------ | :-------------------------------------------------- | :------------------------- | | 2025 Notes | 5.25% | July 1, 2019 | $20.4 | January 15, 2025 | 757.5758 | $1.32 | - A series of exchange agreements in August 2023 converted **$30.8 million** of **2025 Notes** into cash and common stock[187](index=187&type=chunk) [Funding Requirements and Outlook](index=61&type=section&id=Funding%20Requirements%20and%20Outlook) This section discusses the company's future capital needs and its strategy for securing necessary funding - The company's ability to grow revenues and achieve profitability depends on successful commercialization, adoption of Eversense **CGM** systems, future product development, and regulatory approvals. These activities require significant working capital[188](index=188&type=chunk) - Existing cash, cash equivalents, and future cash flows are expected to be sufficient to meet operating plans into **2025**. The company will continue to monitor its capital structure and may seek additional funding through debt and equity markets[189](index=189&type=chunk) [Cash Flows](index=61&type=section&id=Cash%20Flows) This section provides a summary of cash inflows and outflows from operating, investing, and financing activities **Summary of Cash Flows (Nine Months Ended September 30, in thousands)** | Cash Flow Activity | 2023 | 2022 | | :------------------------------------ | :--------- | :--------- | | Net cash used in operating activities | $(55,096) | $(48,925) | | Net cash provided by investing activities | $53,518 | $19,532 | | Net cash provided by financing activities | $21,544 | $31,416 | | Net increase in cash and cash equivalents | $19,966 | $2,023 | [Net cash used in operating activities](index=61&type=section&id=Net%20cash%20used%20in%20operating%20activities) This section details the cash generated or consumed by the company's core business operations - Net cash used in operating activities increased to **$55.1 million** for the nine months ended September 30, 2023, from **$48.9 million** in the prior year. This was primarily due to a net loss of **$43.2 million** and a **$14.2 million** net loss from the partial exchange of **2025 Notes**, partially offset by non-cash adjustments and stock-based compensation[192](index=192&type=chunk)[194](index=194&type=chunk) [Net cash provided by investing activities](index=63&type=section&id=Net%20cash%20provided%20by%20investing%20activities) This section outlines cash flows related to the purchase and sale of long-term assets and investments - Net cash provided by investing activities significantly increased to **$53.5 million** for the nine months ended September 30, 2023, from **$19.5 million** in the prior year. This was mainly driven by **$122.2 million** in proceeds from the sale and maturity of marketable securities, exceeding **$68.5 million** in purchases[195](index=195&type=chunk)[196](index=196&type=chunk) [Net cash provided by financing activities](index=63&type=section&id=Net%20cash%20provided%20by%20financing%20activities) This section describes cash flows from debt, equity, and dividend transactions with investors and creditors - Net cash provided by financing activities was **$21.5 million** for the nine months ended September 30, 2023, down from **$31.4 million** in the prior year. Key inflows included **$7.4 million** from common stock issuance, **$14.7 million** from **PHC Warrants**, and **$24.5 million** from the **Loan** and **Security Agreement**. Outflows included **$15.7 million** for **2023 Notes** repayment and **$7.5 million** for partial **2025 Notes** repayment[197](index=197&type=chunk)[198](index=198&type=chunk) [Contractual Obligations](index=63&type=section&id=Contractual%20Obligations) This section summarizes the company's commitments under various contracts and agreements - As of September 30, 2023, there were no material changes in contractual obligations and commitments from those disclosed in the Annual Report on Form **10-K** filed on March 16, 2023[199](index=199&type=chunk) [ITEM 3: Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=ITEM%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Senseonics Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this Quarterly Report on Form 10-Q - The company is exempt from providing quantitative and qualitative disclosures about market risk in this Form **10-Q** due to its status as a 'smaller reporting company'[201](index=201&type=chunk) [ITEM 4: Controls and Procedures](index=64&type=section&id=ITEM%204%3A%20Controls%20and%20Procedures) This section details the management's evaluation of the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting during the quarter ended September 30, 2023 [Evaluation of Disclosure Controls and Procedures](index=64&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's controls for ensuring timely and accurate financial disclosures - Management, with the assistance of the **CEO** and **CFO**, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023[202](index=202&type=chunk) [Changes in Internal Control over Financial Reporting](index=64&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports any material changes to the company's internal controls during the reporting period - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[203](index=203&type=chunk) [PART II: Other Information](index=65&type=section&id=PART%20II%3A%20Other%20Information) This section includes additional disclosures not covered in the financial statements, such as legal matters and risk factors [ITEM 1: Legal Proceedings](index=65&type=section&id=ITEM%201%3A%20Legal%20Proceedings) This section outlines the legal proceedings the company is involved in, specifically detailing a False Claims Act lawsuit and its current status - The company is subject to a civil complaint filed under the federal **False Claims Act** and **Texas Medicaid Fraud Prevention Law**, alleging violations related to marketing practices for its Eversense **CGM** system. The court dismissed the amended complaint in March 2023, and the relator filed an appeal to the **Fifth Circuit**, which is currently awaiting a decision[206](index=206&type=chunk)[207](index=207&type=chunk) [ITEM 1A: Risk Factors](index=65&type=section&id=ITEM%201A%3A%20Risk%20Factors) This section updates the risk factors, specifically addressing the potential dilution and stock price decline resulting from recent exchange agreements involving the company's 2025 Notes - Recent exchange agreements for **$30.8 million** of **2025 Notes**, which resulted in the issuance of **35.1 million** common shares, will cause additional dilution to common stockholders. The immediate resale eligibility of these shares could increase market supply and potentially cause the stock price to decline[209](index=209&type=chunk) [ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=ITEM%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the unregistered sales of equity securities, specifically the issuance of common stock in exchange for 2025 Notes, and confirms the exemption under the Securities Act of 1933 - On August 10, 2023, the company exchanged up to **$30.8 million** in **2025 Notes** for **$7.5 million** cash and **35.1 million** newly issued common shares. These shares were offered and sold under the exemption provided by Section **4(a)(2)** of the **Securities Act of 1933**, as a transaction not involving a public offering[210](index=210&type=chunk)[212](index=212&type=chunk) [ITEM 3: Defaults Upon Senior Securities](index=67&type=section&id=ITEM%203%3A%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is not applicable[213](index=213&type=chunk) [ITEM 4: Mine Safety Disclosures](index=67&type=section&id=ITEM%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is not applicable[214](index=214&type=chunk) [ITEM 5: Other Information](index=67&type=section&id=ITEM%205%3A%20Other%20Information) This item is not applicable to the company for the reporting period - This item is not applicable[215](index=215&type=chunk) [ITEM 6: Exhibits](index=67&type=section&id=ITEM%206%3A%20Exhibits) This section lists all exhibits filed or incorporated by reference as part of this Quarterly Report on Form 10-Q, including organizational documents, agreements, and certifications - The exhibits include various corporate documents such as the Amended and Restated Certificate of Incorporation, Bylaws, and Certificates of Designation for preferred stock. Key agreements listed are the Form of Exchange Agreement (August 10, 2023), Loan and Security Agreement (September 8, 2023), and Form of Warrant Agreement[216](index=216&type=chunk)[217](index=217&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer under Sections **302** and **906** of the **Sarbanes-Oxley Act** are also included[217](index=217&type=chunk)[219](index=219&type=chunk) [SIGNATURES](index=69&type=section&id=SIGNATURES) This section contains the required signatures, confirming the due authorization and filing of the report - The report is signed by Rick Sullivan, Chief Financial Officer (Principal Financial Officer), on behalf of Senseonics Holdings, Inc., dated November 9, 2023[223](index=223&type=chunk)[224](index=224&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2023, total revenue was $4.1 million, an 11% increase compared to the prior year period, with U.S. revenue at $1.8 million and international revenue at $2.3 million [7][26] - Operating loss for Q2 2023 was $19.9 million, compared to $17 million in Q2 2022, primarily due to increased R&D investments [29] - Net loss for Q2 2023 was $20.4 million or $0.04 loss per share, compared to a net income of $104.2 million or $0.22 gain per share in Q2 2022 [29] - Gross profit in Q2 2023 was $0.4 million, a decrease from $0.8 million in the prior year period, driven by an increase in revenue share percentage due to Ascensia [37] Business Line Data and Key Metrics Changes - Over 12% of total insertions in Q2 2023 were completed by MPG, more than double the prior quarter, with Eversense insertions in over 30 cities [9] - The dedicated salesforce is planned to increase to 50 professionals, currently at about 45 reps [8] Market Data and Key Metrics Changes - UnitedHealthcare began covering Eversense as of July 1, adding 45 million lives to the coverage population [5][18] - The company is seeing attractive growth in Italy, its second-largest European market, while addressing reimbursement issues in Germany [10] Company Strategy and Development Direction - The company is focused on increasing awareness and access to Eversense through enhanced branding and consumer-facing materials [3] - A pivotal trial for a 365-day sensor is nearing completion, with expectations for positive results to transform diabetes management [24] - The company aims to extend the wear time of Eversense to one year and has submitted for iCGM designation to integrate with insulin delivery devices [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a significant ramp in U.S. growth in the second half of the year, driven by additional sales reps and new coverage from UnitedHealthcare [50] - The company reiterated its full-year 2023 global net revenue guidance to be in the range of $20 million to $24 million, reflecting expected patient growth [42] Other Important Information - Research and development expenses in Q2 2023 were $12.8 million, an increase of $3.5 million compared to the prior year, due to investments in product pipeline and clinical trials [28] - The company entered into exchange agreements to reduce outstanding indebtedness to approximately $20.4 million, providing additional financial flexibility [30][31] Q&A Session Summary Question: Was there any outsized Ascensia destocking domestically? - Management indicated that Ascensia was optimizing their stocking levels as anticipated, and a significant ramp is expected in the second half of the year [49] Question: What gives confidence in the full-year guidance reiteration? - Confidence is based on expected U.S. growth driven by additional sales reps and new coverage from UnitedHealthcare [50] Question: What percent of new users are taking advantage of the patient assistance program? - Less than 50% were utilizing the patient assistance program in the first half of the year, with expectations for a decrease following UnitedHealthcare coverage [57] Question: What is the current mix of inserters between endocrinology and non-endocrinology? - The majority of inserters are still endocrinology, but the non-endocrinology segment is growing rapidly [60] Question: Will the 365-day data be press released? - Management indicated it is not advisable to press release data before it is peer-reviewed and submitted to the FDA [61] Question: What is the impact of GLP-1s on the business? - No impact has been observed to date, and management does not foresee any significant effect on market opportunities in the near term [63]

```markdown [PART I: Financial Information](index=2&type=section&id=PART%20I%3A%20Financial%20Information) This section presents the company's unaudited condensed consolidated financial information [ITEM 1: Financial Statements](index=3&type=section&id=ITEM%201%3A%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Changes in Stockholders' Equity (Deficit), and Statements of Cash Flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies for the periods ended June 30, 2023, and December 31, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 (Unaudited) | December 31, 2022 | | :-------------------------------- | :------------------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | $28,551 | $35,793 | | Short term investments, net | $89,067 | $108,222 | | Total current assets | $138,229 | $161,200 | | Total assets | $153,362 | $177,673 | | **Liabilities and Stockholders' Equity (Deficit)** | | | | Total current liabilities | $15,861 | $31,471 | | Long-term debt and notes payables, net | $39,108 | $56,383 | | Derivative liabilities | $1,792 | $52,050 | | Total liabilities | $63,169 | $142,593 | | Total stockholders' equity (deficit) | $52,537 | $(2,576) | | Total liabilities and stockholders' equity | $153,362 | $177,673 | - **Total assets decreased by** **$24.3 million** from **$177.7 million** at December 31, 2022, to **$153.4 million** at June 30, 2023, **primarily due to** decreases in cash, cash equivalents, and short-term investments[8](index=8&type=chunk) - **Total liabilities significantly decreased by** **$79.4 million** from **$142.6 million** at December 31, 2022, to **$63.2 million** at June 30, 2023, **largely driven by** reductions in derivative liabilities and long-term debt[8](index=8&type=chunk) - **Stockholders' equity shifted from** a deficit of **$(2.6) million** at December 31, 2022, to a **positive equity** of **$52.5 million** at June 30, 2023[8](index=8&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section presents the company's financial performance, including revenue, expenses, and net income or loss Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $4,126 | $3,714 | $8,263 | $6,196 | | Cost of sales | $3,709 | $2,890 | $7,433 | $4,845 | | Gross profit | $417 | $824 | $830 | $1,351 | | Research and development expenses | $12,830 | $9,299 | $25,235 | $17,103 | | Selling, general and administrative expenses | $7,455 | $8,561 | $15,173 | $16,445 | | Operating loss | $(19,868) | $(17,036) | $(39,578) | $(32,197) | | Total other (expense) income, net | $(555) | $121,267 | $20,479 | $223,146 | | Net (Loss) Income | $(20,423) | $104,231 | $(19,099) | $190,949 | | Basic net (loss) income per common share | $(0.04) | $0.22 | $(0.04) | $0.42 | | Diluted net loss per common share | $(0.04) | $(0.03) | $(0.04) | $(0.06) | - **Total revenue increased by** **$0.4 million** (**11.1%**) for the three months ended June 30, 2023, and by **$2.1 million** (**33.4%**) for the six months ended June 30, 2023, **primarily due to the launch of Eversense E3 outside the United States**[11](index=11&type=chunk)[142](index=142&type=chunk)[149](index=149&type=chunk) - **Gross profit decreased by** **$0.4 million** (**49.4%**) for the three months and **$0.5 million** (**38.6%**) for the six months ended June 30, 2023, with **gross margin falling to 10.1% and 10.0% respectively**, mainly due to increased revenue share percentage to Ascensia, sales channel mix, and higher manufacturing/logistics costs[11](index=11&type=chunk)[143](index=143&type=chunk)[150](index=150&type=chunk) - The company reported a **net loss of** **$(20.4) million** for the three months and **$(19.1) million** for the six months ended June 30, 2023, a **significant decrease** from net income in the prior year periods, **largely due to** changes in fair value adjustments of options and derivatives[11](index=11&type=chunk)[147](index=147&type=chunk)[153](index=153&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20(Deficit)) This section outlines changes in the company's equity, reflecting transactions affecting capital and retained earnings - **Total stockholders' equity (deficit) improved from** **$(2.6) million** at December 31, 2022, to **$52.5 million** at June 30, 2023[13](index=13&type=chunk) - **Key drivers for the change in equity include issuance of common stock** (net of costs) for **$7.4 million**, **issuance of warrants** (net of costs) for **$63.3 million**, and **stock-based compensation expense** of **$4.7 million** for the six months ended June 30, 2023[13](index=13&type=chunk) - The company recorded a **net loss of** **$(19.1) million** for the six months ended June 30, 2023, which **reduced accumulated deficit**[13](index=13&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(37,832) | $(34,341) | | Net cash provided by investing activities | $25,871 | $42,108 | | Net cash provided by financing activities | $4,719 | $4,197 | | Net (decrease) increase in cash and cash equivalents | $(7,242) | $11,964 | | Cash and cash equivalents, at ending of period | $28,551 | $45,425 | - **Net cash used in operating activities increased to** **$(37.8) million** for the six months ended June 30, 2023, from **$(34.3) million** in the prior year, driven by a **net loss** and changes in operating assets and liabilities, partially offset by non-cash adjustments[14](index=14&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - **Net cash provided by investing activities decreased to** **$25.9 million** in 2023 from **$42.1 million** in 2022, **primarily due to a higher volume of marketable securities purchases** in the current period[14](index=14&type=chunk)[179](index=179&type=chunk) - **Net cash provided by financing activities remained relatively stable at** **$4.7 million** in 2023, compared to **$4.2 million** in 2022, with **proceeds from common stock and warrant issuances offsetting debt repayments**[14](index=14&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. Organization and Nature of Operations](index=8&type=section&id=1.%20Organization%20and%20Nature%20of%20Operations) This section describes the company's business, its primary activities, and its organizational structure - **Senseonics Holdings, Inc. is a medical technology company focused on developing and manufacturing long-term, implantable continuous glucose monitoring (CGM) systems for diabetes management**[15](index=15&type=chunk) [2. Liquidity and Capital Resources](index=8&type=section&id=2.%20Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet short-term and long-term obligations and its sources of funding - The Company has **incurred substantial losses and cumulative negative cash flows from operations** since its inception and **expects additional losses in the near future**[17](index=17&type=chunk) - As of June 30, 2023, the Company had **cash, cash equivalents, and marketable securities totaling** **$125.1 million**[17](index=17&type=chunk) - **Subsequent to June 30, 2023, the Company entered into exchange agreements for up to $30.8 million of 2025 Notes for cash and common stock, and a new 'at the market' offering program with Goldman Sachs for up to $106.6 million in common stock**[18](index=18&type=chunk)[19](index=19&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [3. Summary of Significant Accounting Policies](index=12&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and methods used in preparing the financial statements - The **unaudited consolidated financial statements are prepared in accordance with U.S. GAAP** for interim financial information, with certain disclosures condensed or omitted as permitted by SEC rules[28](index=28&type=chunk) - The Company operates and manages its business as a **single segment: glucose monitoring products**[29](index=29&type=chunk) - The adoption of ASU 2016-13 (Credit Losses) as of January 1, 2023, **did not have a material impact** on the consolidated financial statements[30](index=30&type=chunk) [4. Revenue Recognition](index=14&type=section&id=4.%20Revenue%20Recognition) This section details how and when the company recognizes revenue from its various sales channels and products - **Revenue is generated from sales** of the Eversense system and components to Ascensia, third-party distributors, and strategic fulfillment partners, **recognized when customers obtain control** of the product[34](index=34&type=chunk) Revenue by Geographic Region (in thousands) | Geographic Region | Three Months Ended June 30, 2023 | % of Total (3M 2023) | Six Months Ended June 30, 2023 | % of Total (6M 2023) | | :------------------ | :------------------------------- | :------------------- | :----------------------------- | :------------------- | | United States | $1,793 | 43.5% | $3,955 | 47.9% | | Outside of the US | $2,333 | 56.5% | $4,308 | 52.1% | | **Total** | **$4,126** | **100.0%** | **$8,263** | **100.0%** | | | Three Months Ended June 30, 2022 | % of Total (3M 2022) | Six Months Ended June 30, 2022 | % of Total (6M 2022) | | United States | $1,207 | 32.5% | $1,974 | 31.9% | | Outside of the US | $2,507 | 67.5% | $4,222 | 68.1% | | **Total** | **$3,714** | **100.0%** | **$6,196** | **100.0%** | - Ascensia **accounted for** **89%** and **91%** of total revenue for the three and six months ended June 30, 2023, respectively, indicating **high customer concentration**[37](index=37&type=chunk) [5. Net Income (Loss) per Share](index=15&type=section&id=5.%20Net%20Income%20(Loss)%20per%20Share) This section presents the calculation and impact of net income or loss on a per-share basis for common stockholders - **Basic net loss per common share was** **$(0.04)** for both the three and six months ended June 30, 2023[11](index=11&type=chunk)[42](index=42&type=chunk) - **Diluted net loss per common share was also** **$(0.04)** for both periods ended June 30, 2023, as **all potentially dilutive common shares were excluded due to the net loss making their effect anti-dilutive**[11](index=11&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) - The calculation of basic EPS for June 30, 2023, **included 83,951,061 shares from the Exchange Warrant and Purchase Warrant held by PHC, treated as outstanding due to their 'penny warrant' nature**[38](index=38&type=chunk) [6. Marketable Securities](index=17&type=section&id=6.%20Marketable%20Securities) This section provides details on the company's short-term investments, including their composition and fair value Marketable Securities Available for Sale (in thousands) | Type | June 30, 2023 (Estimated Market Value) | December 31, 2022 (Estimated Market Value) | | :-------------------------- | :------------------------------------- | :--------------------------------------- | | Commercial Paper | $43,242 | $41,503 | | Corporate debt securities | $11,836 | $32,142 | | Asset backed securities | $7,453 | $8,260 | | Government and agency securities | $33,989 | $38,570 | | **Total** | **$96,520** | **$120,475** | - **Total marketable securities decreased** from **$120.5 million** at December 31, 2022, to **$96.5 million** at June 30, 2023[43](index=43&type=chunk) - **Unrealized losses on available-for-sale securities** at June 30, 2023, were **not significant and primarily attributed to changes in interest rates, not increased credit risk**[43](index=43&type=chunk) [7. Inventory, net](index=18&type=section&id=7.%20Inventory%2C%20net) This section details the composition and valuation of the company's inventory, including finished goods and raw materials Inventory, net (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--------------- | :------------ | :---------------- | | Finished goods | $2,379 | $1,697 | | Work-in-process | $5,408 | $4,057 | | Raw materials | $1,407 | $1,552 | | **Total** | **$9,194** | **$7,306** | - **Total inventory, net, increased by** **$1.9 million** from **$7.3 million** at December 31, 2022, to **$9.2 million** at June 30, 2023, primarily in finished goods and work-in-process[45](index=45&type=chunk) - The Company **charged less than $0.1 million to cost of sales for inventory obsolescence** for the three and six months ended June 30, 2023, a decrease from **$0.6 million** in the prior year period[45](index=45&type=chunk) [8. Prepaid Expenses and Other Current Assets](index=18&type=section&id=8.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This section outlines the company's short-term assets that represent future economic benefits Prepaid Expenses and Other Current Assets (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Contract manufacturing | $4,026 | $4,097 | | Tax credits receivable | $1,793 | — | | Insurance | $625 | $1,243 | | Unsettled stock issuance proceeds | $369 | — | | Clinical and Preclinical | $255 | $924 | | Interest receivable | $241 | $336 | | Rent and utilities | $150 | $132 | | Accounting and Audit | $48 | $270 | | Other | $235 | $426 | | **Total** | **$7,742** | **$7,428** | - **Total prepaid expenses and other current assets increased by** **$0.3 million** to **$7.7 million** at June 30, 2023, **primarily due to the recognition of $1.8 million in refundable employee retention tax credits**[46](index=46&type=chunk)[47](index=47&type=chunk) [9. Accrued Expenses and Other Current Liabilities](index=18&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This section details the company's short-term obligations for expenses incurred but not yet paid Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Research and development | $5,367 | $3,502 | | Compensation and benefits | $2,558 | $4,699 | | Professional and administration services | $2,381 | $1,053 | | Contract manufacturing | $2,105 | $2,480 | | Interest on notes payable | $1,232 | $2,050 | | Product warranty and replacement obligations | $494 | $781 | | Operating lease | $483 | $725 | | Sales and marketing services | $266 | $149 | | Other | — | $14 | | **Total** | **$14,886** | **$15,453** | - **Total accrued expenses and other current liabilities decreased by** **$0.6 million** to **$14.9 million** at June 30, 2023, **primarily due to decreases in compensation and benefits and interest on notes payable, partially offset by an increase in research and development accruals**[48](index=48&type=chunk) [10. Leases](index=19&type=section&id=10.%20Leases) This section describes the company's lease agreements, including right-of-use assets and lease liabilities - The Company **amended its operating lease for corporate headquarters** in May 2023, **extending the term through May 31, 2033, and increasing the ROU asset by $2.5 million and lease liability by $3.8 million**[49](index=49&type=chunk) Operating Lease Assets and Liabilities (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :------------ | :---------------- | | Operating lease ROU assets | $5,340 | $3,032 | | Tenant improvement allowance receivable | $1,312 | — | | Current operating lease liabilities | $483 | $725 | | Non-current operating lease liabilities | $6,408 | $2,689 | | **Total operating lease liabilities** | **$6,891** | **$3,414** | - **Operating lease expense for the six months ended June 30, 2023, was $0.4 million, an increase from $0.3 million in the prior year**[50](index=50&type=chunk) [11. Product Warranty Obligations](index=20&type=section&id=11.%20Product%20Warranty%20Obligations) This section details the company's liabilities related to product warranties and replacement commitments - The Company **provides a one-year warranty on smart transmitters and may replace non-functioning Eversense system components**[51](index=51&type=chunk) Change in Estimated Warranty Liabilities (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Balance at beginning of the period | $781 | $723 | | Provision for warranties during the period | $62 | $166 | | Settlements made during the period | $(349) | $(108) | | **Balance at end of the period** | **$494** | **$781** | - The **warranty reserve decreased** from **$0.8 million** at December 31, 2022, to **$0.5 million** at June 30, 2023, **primarily due to settlements made during the period**[52](index=52&type=chunk) [12. Notes Payable, Preferred Stock and Stock Purchase Warrants](index=20&type=section&id=12.%20Notes%20Payable%2C%20Preferred%20Stock%20and%20Stock%20Purchase%20Warrants) This section provides details on the company's debt instruments, preferred stock, and outstanding warrants [Term Loans](index=20&type=section&id=Term%20Loans) This section details the company's term loan obligations and their repayment status - The **PPP Loan of $5.8 million, received in April 2020, was fully repaid in April 2022**[53](index=53&type=chunk)[54](index=54&type=chunk) [Convertible Preferred Stock and Warrants](index=20&type=section&id=Convertible%20Preferred%20Stock%20and%20Warrants) This section describes the company's convertible preferred stock and equity warrants, including their issuance and impact - **Energy Capital exercised its right to purchase $12.0 million of Series B Preferred Stock in November 2022, with the excess of purchase price and fair value of the option ($37.6 million) recorded as additional paid-in-capital**[23](index=23&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - In March 2023, the Company **issued a Purchase Warrant to PHC for 15,425,750 common shares, generating $15.0 million in gross proceeds, classified as equity**[25](index=25&type=chunk)[27](index=27&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - Also in March 2023, **PHC exchanged its $35.0 million PHC Notes for an Exchange Warrant to purchase 68,525,311 common shares, resulting in a net gain on exchange of $18.8 million**[24](index=24&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[78](index=78&type=chunk) [Convertible Notes](index=24&type=section&id=Convertible%20Notes) This section details the company's convertible debt instruments, their terms, and related financial impacts - The **PHC Notes, with an aggregate principal of $35.0 million, were exchanged for an Exchange Warrant in March 2023, extinguishing the debt and resulting in an $18.8 million net gain on exchange**[24](index=24&type=chunk)[76](index=76&type=chunk)[78](index=78&type=chunk) - The **2025 Notes had an aggregate principal of $51.2 million outstanding as of June 30, 2023, with an embedded conversion option classified as a derivative liability**[80](index=80&type=chunk)[87](index=87&type=chunk) - The **2023 Notes, with an aggregate principal of $15.7 million, were fully repaid on January 31, 2023, resulting in an extinguishment gain of $0.02 million**[86](index=86&type=chunk)[87](index=87&type=chunk) Interest Expense Related to Notes Payable (in thousands) | Note Type | Six Months Ended June 30, 2023 (Total Interest Expense) | Six Months Ended June 30, 2022 (Total Interest Expense) | | :---------- | :-------------------------------------- | :-------------------------------------- | | 2023 Notes | $189 | $1,085 | | 2025 Notes | $4,543 | $3,999 | | PHC Notes | $2,230 | $3,914 | | PPP Loan | — | $6 | | **Total** | **$6,962** | **$9,005** | [13. Stockholders' Equity (Deficit)](index=29&type=section&id=13.%20Stockholders%27%20Equity%20(Deficit)) This section outlines the components of stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit - During the six months ended June 30, 2023, the Company **received $7.4 million in net proceeds from the sale of 9,944,663 common shares under the 2021 Sales Agreement with Jefferies**[89](index=89&type=chunk) [14. Stock-Based Compensation](index=29&type=section&id=14.%20Stock-Based%20Compensation) This section details the company's equity incentive plans and the accounting for stock-based compensation expenses - As of June 30, 2023, **28,775,002 shares remained available for grant under the Amended and Restated 2015 Equity Incentive Plan**[91](index=91&type=chunk) - The Company **adopted the 2023 Commercial Equity Plan, reserving 10,000,000 shares for non-employees, including Ascensia employees, with 7,475,000 shares remaining available as of June 30, 2023**[93](index=93&type=chunk) - The **2016 Employee Stock Purchase Plan (ESPP) had 17,760,078 shares available for issuance as of June 30, 2023, with 86,816 shares purchased during the six months ended June 30, 2023**[94](index=94&type=chunk) [15. Fair Value Measurements](index=33&type=section&id=15.%20Fair%20Value%20Measurements) This section describes the valuation methods and hierarchy used for financial assets and liabilities measured at fair value Fair Value Hierarchy of Financial Assets and Liabilities (in thousands) | Category | June 30, 2023 (Total) | December 31, 2022 (Total) | | :-------------------------------- | :-------------------- | :---------------------- | | **Assets** | | | | Money market funds | $25,007 | $34,658 | | Commercial paper | $43,242 | $41,503 | | Corporate debt securities | $11,836 | $32,142 | | Asset backed securities | $7,453 | $8,260 | | Government and agency securities | $33,989 | $38,570 | | **Liabilities** | | | | Embedded features of the 2025 Notes | $1,792 | $7,859 | | Embedded features of the 2023 Notes | — | $20 | | Embedded features of the PHC Notes | — | $44,191 | - **Level 3 liabilities, primarily embedded features of convertible notes, decreased significantly from $52.1 million at December 31, 2022, to $1.8 million at June 30, 2023, mainly due to gains on changes in fair value of PHC Notes and 2025 Notes embedded features**[100](index=100&type=chunk) [16. Income Taxes](index=34&type=section&id=16.%20Income%20Taxes) This section outlines the company's income tax position, including deferred tax assets and liabilities, and valuation allowances - The Company has **not recorded any tax provision or benefit** for the six months ended June 30, 2023 or 2022[102](index=102&type=chunk) - A **full valuation allowance has been provided for net deferred tax assets, as realization of future benefits is not considered more-likely-than-not**[102](index=102&type=chunk) [17. Related Party Transactions](index=34&type=section&id=17.%20Related%20Party%20Transactions) This section discloses transactions and relationships with parties that have the ability to influence the company's operations - **PHC has a noncontrolling ownership interest and board representation in the Company, and Ascensia (PHC's parent company) is a related party**[103](index=103&type=chunk) - **Revenue from Ascensia was $7.5 million for the six months ended June 30, 2023, compared to $5.7 million in the prior year**[103](index=103&type=chunk) - **Amounts due from Ascensia were $3.0 million at June 30, 2023, and amounts due to Ascensia were $0.6 million**[104](index=104&type=chunk) [18. Subsequent Events](index=34&type=section&id=18.%20Subsequent%20Events) This section reports significant events that occurred after the balance sheet date but before the financial statements were issued - On August 10, 2023, the Company **entered into exchange agreements to exchange up to $30.8 million of 2025 Notes for $7.5 million cash and newly issued common stock, expected to close around September 5, 2023**[106](index=106&type=chunk)[107](index=107&type=chunk) - The Company **terminated its 'at the market' offering program with Jefferies on August 7, 2023, with $106.6 million remaining available**[108](index=108&type=chunk) - A **new 'at the market' offering program was established with Goldman Sachs on August 10, 2023, for up to $106.6 million in common stock, pending SEC registration statement effectiveness**[109](index=109&type=chunk)[110](index=110&type=chunk) [ITEM 2: Management Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=ITEM%202%3A%20Management%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, including an overview of its business, product development and commercialization efforts, detailed analysis of revenue, cost of sales, operating expenses, and other income/expense for the three and six months ended June 30, 2023 and 2022, and a discussion of liquidity and capital resources [Overview](index=37&type=section&id=Overview) This section provides a general description of the company's business, products, and strategic initiatives - **Senseonics is a medical technology company focused on long-term implantable continuous glucose monitoring (CGM) systems, including Eversense, Eversense XL, and Eversense E3, offering up to six months of glucose monitoring**[114](index=114&type=chunk) - The **Eversense E3 CGM system received FDA approval in February 2022 and CE mark in June 2022, with commercialization by Ascensia in the US and Europe**[114](index=114&type=chunk)[127](index=127&type=chunk)[132](index=132&type=chunk) - The **ENHANCE pivotal study for the Eversense 365-day system completed enrollment in Q3 2022, with data expected in H2 2023, and pediatric patient enrollment began in Q2 2023**[118](index=118&type=chunk)[128](index=128&type=chunk) - The Company has **achieved approximately 300 million covered lives in the United States through positive insurance payor coverage decisions, including UnitedHealthcare effective July 1, 2023**[117](index=117&type=chunk) [United States Development and Commercialization of Eversense](index=39&type=section&id=United%20States%20Development%20and%20Commercialization%20of%20Eversense) This section details the development and commercialization efforts for the Eversense system in the United States - The **90-day Eversense CGM system received FDA PMA approval in June 2018 and non-adjunctive indication (dosing claim) approval in June 2019, allowing it to replace fingerstick blood glucose measurements**[120](index=120&type=chunk)[122](index=122&type=chunk) - The **180-day extended life Eversense E3 CGM system was approved by the FDA in February 2022 and commercialized by Ascensia in the US during Q2 2022**[114](index=114&type=chunk)[127](index=127&type=chunk) - The **ENHANCE clinical study, evaluating the Eversense 365 System, completed enrollment in September 2022 and began enrolling pediatric patients in Q2 2023**[128](index=128&type=chunk) [European Commercialization of Eversense](index=41&type=section&id=European%20Commercialization%20of%20Eversense) This section outlines the commercialization strategy and progress for the Eversense system in European markets - The **Eversense XL, with a 180-day sensor life, received CE mark in September 2017 and began commercialization in Europe in Q4 2017**[129](index=129&type=chunk) - The **Eversense E3 CGM system received CE mark in June 2022, with Ascensia commencing commercialization in European markets in the second half of 2022**[132](index=132&type=chunk) - The **Company's distribution agreement with Roche concluded on January 31, 2021, transitioning distribution to Ascensia**[130](index=130&type=chunk) [Financial Overview](index=43&type=section&id=Financial%20Overview) This section provides a summary of the company's financial performance and key financial metrics - **Revenue is primarily generated from sales of Eversense systems to Ascensia and other distributors, recognized upon transfer of control, with variable consideration like revenue share treated as an addition to revenue**[133](index=133&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk) - **Ascensia remains the primary customer, contributing 89% and 91% of total revenue for the three and six months ended June 30, 2023, respectively**[138](index=138&type=chunk) Revenue by Geographic Region (in thousands) | Geographic Region | Three Months Ended June 30, 2023 | % of Total (3M 2023) | Six Months Ended June 30, 2023 | % of Total (6M 2023) | | :------------------ | :------------------------------- | :------------------- | :----------------------------- | :------------------- | | United States | $1,793 | 43.5% | $3,955 | 47.9% | | Outside of the US | $2,333 | 56.5% | $4,308 | 52.1% | | **Total** | **$4,126** | **100.0%** | **$8,263** | **100.0%** | | | Three Months Ended June 30, 2022 | % of Total (3M 2022) | Six Months Ended June 30, 2022 | % of Total (6M 2022) | | United States | $1,207 | 32.5% | $1,974 | 31.9% | | Outside of the US | $2,507 | 67.5% | $4,222 | 68.1% | | **Total** | **$3,714** | **100.0%** | **$6,196** | **100.0%** | [Results of Operations for the Three Months Ended June 30, 2023 and 2022](index=45&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) This section analyzes the company's financial results for the three-month periods ended June 30, 2023 and 2022 Key Financial Results (Three Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Period-to-Period Change | | :--------------------------------------- | :----- | :----- | :---------------------- | | Total revenue | $4,126 | $3,714 | $412 | | Gross profit | $417 | $824 | $(407) | | Research and development expenses | $12,830 | $9,299 | $3,531 | | Selling, general and administrative expenses | $7,455 | $8,561 | $(1,106) | | Operating loss | $(19,868) | $(17,036) | $(2,832) | | Total other income (expense), net | $(555) | $121,267 | $(121,822) | | Net (Loss) Income | $(20,423) | $104,231 | $(124,654) | - **Total revenue increased by** **$0.4 million**, **primarily driven by the launch of Eversense E3 outside the United States**[142](index=142&type=chunk) - **Gross profit decreased by** **$0.4 million**, with **gross margin falling from 22.2% to 10.1%**, due to increased revenue share to Ascensia, sales channel mix, and higher manufacturing/logistics costs[143](index=143&type=chunk) - **Research and development expenses increased by** **$3.5 million**, mainly due to **investments in next-generation technologies and clinical studies activities**[144](index=144&type=chunk) - **Selling, general and administrative expenses decreased by $1.1 million, primarily from reduced personnel spend and insurance premiums**[145](index=145&type=chunk)[146](index=146&type=chunk) - **Net loss was $(20.4) million, a significant decrease from net income of $104.2 million in the prior year, largely due to a $121.8 million decrease in total other income (expense), net, driven by changes in fair value adjustments of options and derivatives**[140](index=140&type=chunk)[147](index=147&type=chunk) [Results of Operations for the Six Months Ended June 30, 2023 and 2022](index=47&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) This section analyzes the company's financial results for the six-month periods ended June 30, 2023 and 2022 Key Financial Results (Six Months Ended June 30, in thousands) | Metric | 2023 | 2022 | Period-to-Period Change | | :--------------------------------------- | :----- | :----- | :---------------------- | | Total revenue | $8,263 | $6,196 | $2,067 | | Gross profit | $830 | $1,351 | $(521) | | Research and development expenses | $25,235 | $17,103 | $8,132 | | Selling, general and administrative expenses | $15,173 | $16,445 | $(1,272) | | Operating loss | $(39,578) | $(32,197) | $(7,381) | | Total other (expense) income, net | $20,479 | $223,146 | $(202,667) | | Net (Loss) Income | $(19,099) | $190,949 | $(210,048) | - **Total revenue increased by** **$2.1 million**, **primarily due to the launch of Eversense E3 outside the United States**[149](index=149&type=chunk) - **Gross profit decreased by** **$0.5 million**, with **gross margin falling from 21.8% to 10.0%**, due to increased revenue share to Ascensia, sales channel mix, and higher manufacturing/logistics costs[150](index=150&type=chunk) - **Research and development expenses increased by** **$8.1 million**, driven by **investments in next-generation technologies, clinical studies, and personnel costs**[151](index=151&type=chunk) - **Selling, general and administrative expenses decreased by $1.3 million, mainly due to reductions in personnel costs, recruiting, and other general and administrative expenses**[152](index=152&type=chunk) - **Net loss was $(19.1) million, a significant decrease from net income of $190.9 million in the prior year, largely due to a $202.7 million decrease in total other income (expense), net, primarily from changes in fair value of derivatives and options, partially offset by a net gain on extinguishment of PHC notes**[148](index=148&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding sources, and ability to meet its financial obligations - The Company has **historically incurred substantial losses and negative operating cash flows, funding operations through equity, warrants, convertible notes, and debt**[154](index=154&type=chunk) - As of June 30, 2023, **cash, cash equivalents, and marketable securities totaled $125.1 million**[154](index=154&type=chunk) - **Subsequent to the quarter, the Company initiated an exchange of up to $30.8 million of 2025 Notes for cash and common stock, and established a new 'at the market' offering program with Goldman Sachs for up to $106.6 million**[155](index=155&type=chunk)[158](index=158&type=chunk) - **Management believes existing cash, cash equivalents, and future operations cash flows will be sufficient to meet operating plans into 2025**[172](index=172&type=chunk) Summary of Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(37,832) | $(34,341) | | Net cash provided by investing activities | $25,871 | $42,108 | | Net cash provided by financing activities | $4,719 | $4,197 | | Net (decrease) increase in cash and cash equivalents | $(7,242) | $11,964 | [ITEM 3: Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=ITEM%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Senseonics Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this Quarterly Report on Form 10-Q - The Company is **exempt from providing detailed market risk disclosures due to its status as a 'smaller reporting company'**[183](index=183&type=chunk) [ITEM 4: Controls and Procedures](index=56&type=section&id=ITEM%204%3A%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting during the quarter ended June 30, 2023 [Evaluation of Disclosure Controls and Procedures](index=56&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's disclosure controls and procedures - Management, with the assistance of the CEO and CFO, concluded that the Company's **disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023**[184](index=184&type=chunk) [Changes in Internal Control over Financial Reporting](index=58&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting - There were **no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting**[186](index=186&type=chunk) [PART II: Other Information](index=59&type=section&id=PART%20II%3A%20Other%20Information) This section provides additional information not covered in the financial statements [ITEM 1: Legal Proceedings](index=59&type=section&id=ITEM%201%3A%20Legal%20Proceedings) This section outlines the Company's involvement in legal proceedings, including a specific civil complaint under the federal False Claims Act, and generally states that the Company does not expect ordinary course matters to have a material adverse effect - The Company is **currently involved in an appeal to the United States Court of Appeals for the Fifth Circuit regarding a civil complaint alleging False Claims Act violations related to marketing practices, which was previously dismissed by the district court**[190](index=190&type=chunk) - **Management believes that the final outcome of ordinary course litigation and claims will not have a material adverse effect on the business**[189](index=189&type=chunk) [ITEM 1A: Risk Factors](index=59&type=section&id=ITEM%201A%3A%20Risk%20Factors) This section highlights specific risks that could adversely affect the Company's financial condition and stock price, particularly focusing on the potential dilution and market impact from recent exchange agreements involving the 2025 Notes - The **recent exchange agreements for 2025 Notes will result in additional dilution to common stockholders, as the number of shares issued will exceed those currently underlying the exchanged notes**[192](index=192&type=chunk) - The **immediate resale eligibility of newly issued shares could increase market supply and potentially cause the Company's stock price to decline**[192](index=192&type=chunk) - If the total amount of 2025 Notes repurchased is less than anticipated due to stock price declines, the Company may **not fully realize the expected benefits, including debt reduction and elimination of restrictive covenants**[192](index=192&type=chunk) [ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=ITEM%202%3A%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for this quarterly report [ITEM 3: Defaults Upon Senior Securities](index=59&type=section&id=ITEM%203%3A%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for this quarterly report [ITEM 4: Mine Safety Disclosures](index=59&type=section&id=ITEM%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable for this quarterly report [ITEM 5: Other Information](index=61&type=section&id=ITEM%205%3A%20Other%20Information) This section provides additional disclosures regarding significant events occurring after the reporting period, specifically detailing the 2025 Notes Exchange Agreements and the new 'at the market' offering program - On August 10, 2023, the Company **entered into exchange agreements to exchange up to $30.8 million in 2025 Notes for $7.5 million cash and newly issued common stock, with the number of shares determined by a 15-day volume-weighted average price, capped at 10% of outstanding common stock**[196](index=196&type=chunk) - The Company **terminated its previous 'at the market' offering program with Jefferies on August 7, 2023, with approximately $106.6 million remaining available**[199](index=199&type=chunk) - A **new 'at the market' offering program was established with Goldman Sachs on August 10, 2023, allowing the issuance and sale of common stock for up to $106.6 million, pending SEC registration statement effectiveness**[200](index=200&type=chunk)[201](index=201&type=chunk) [ITEM 6: Exhibits](index=62&type=section&id=ITEM%206%3A%20Exhibits) This section lists all exhibits filed or incorporated by reference as part of this Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and XBRL data files - The **exhibits include corporate documents (e.g., Certificate of Incorporation, Bylaws), the Form of Exchange Agreement dated August 10, 2023, and certifications under the Sarbanes-Oxley Act**[202](index=202&type=chunk)[203](index=203&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) This section contains the required signatures, certifying the filing of the Quarterly Report on Form 10-Q on behalf of Senseonics Holdings, Inc. by its Chief Financial Officer - The **report was signed by Rick Sullivan, Chief Financial Officer, on August 10, 2023**[207](index=207&type=chunk) ```

Senseonics Holdings, Inc. (NYSE:SENS) Q2 2023 Earnings Conference Call May 9, 2023 4:30 PM ET Company Participants Philip Taylor - IR Tim Goodnow - President and CEO Rick Sullivan - CFO Mukul Jain - COO Conference Call Participants Sam Eiber - BTIG Colin Clark - Stifel Operator Good day, and welcome to the Senseonics First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Op ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 001-37717 Table of Contents Senseonics Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware ...

Any statements in this presentation about future expectations, plans and prospects for Senseonics and its business, including statements regarding managements plans, objectives and goals for future operations (including preliminary targets for future financial performance and cash projections of Senseonics Holdings, Inc.), statements about the commercial launch of Eversense® E3, statements regarding increasing patient access, adoption and market share and the future growth of the CGM market, statement regar ...

Product Overview - The Eversense CGM system includes versions with a lifespan of 90 days, 180 days (Eversense E3), and is designed for continuous glucose monitoring, significantly longer than non-implantable systems which last 7 to 14 days[18]. - The Eversense CGM system became the first CGM technology reimbursed through the Part B Medical Services benefit for Medicare beneficiaries in November 2019[28]. - The Eversense CGM system is sold in two kits: the disposable Eversense Sensor Pack and the durable Eversense Smart Transmitter Pack[34]. - The Eversense E3 CGM system was commercialized in all EEA markets during Q3 and Q4 of 2022 following CE mark approval[22]. - The Eversense XL CGM system received CE mark in September 2017 and began commercialization in the U.S. in Q2 2022 after FDA PMA approval for Eversense E3[40]. - The mobile app provides real-time glucose readings and alerts, enhancing user experience and management of diabetes[57]. - The Eversense system offers advantages such as exceptional accuracy, longest sensor duration of up to six months, and continuous glucose monitoring capabilities[53]. Regulatory Approvals and Compliance - The FDA approved the Eversense E3 CGM system for marketing in the U.S. in February 2022, with commercialization beginning in the second quarter of 2022[22]. - The Eversense System is classified as a Class III medical device and requires pre-market approval (PMA) from the FDA[88]. - The company is subject to extensive regulation by the FDA, including compliance with quality system regulations and post-market surveillance requirements[90][91]. - Medical devices must comply with the General Safety and Performance Requirements (GSPRs) to obtain the CE mark, which is essential for marketing in the EEA[95]. - The Medical Device Regulation (MDR) entered into application on May 26, 2021, replacing previous directives and establishing new compliance requirements for medical devices[94]. - The FDA mandates Post Approval Studies and tracking systems for products, enforcing compliance through periodic inspections and market surveillance[99]. - Non-compliance with regulatory requirements can lead to severe penalties, including fines, product recalls, and potential criminal prosecution[102]. Market and Competition - The market for CGM systems is competitive, with significant players including Dexcom, Medtronic, and Abbott, all of which have received FDA approval for their systems[72]. - The company faces potential competition from various sources, including companies developing real-time intermittent sensing devices and non-invasive CGM systems[75]. - Competition in the CGM market is intense, with established players like Dexcom and Abbott having significant advantages, including FDA approvals and established market presence[178]. - The company anticipates increased competition from companies integrating CGM with insulin pumps, which could impact market share[179]. - The company operates in a highly competitive market for diabetes monitoring devices, facing risks from technological breakthroughs by competitors[144]. Financial Performance and Projections - The company incurred total net income (loss) of $142.1 million, ($302.5) million, and ($175.2) million for the years ended December 31, 2022, 2021, and 2020, respectively, with an accumulated deficit of $808.9 million as of December 31, 2022[145]. - The company has never been profitable in past years and does not expect to be profitable for at least the next several years, with future operating losses anticipated[146]. - The company expects that a substantial majority of future revenue will result from the Commercialization Agreement with Ascensia, which grants Ascensia exclusive rights to distribute Eversense worldwide[147]. - The company plans to derive nearly all revenue from Eversense sales in the U.S. and Europe for the next several years, making reimbursement from third-party payors essential for product acceptance[168]. - Significant sales generation is necessary for the company to achieve profitable operations, but there is uncertainty regarding the ability to do so[217]. - If sales growth is slower than expected or operating expenses exceed expectations, financial performance will be adversely affected[217]. Employee Engagement and Company Culture - As of December 31, 2022, the company had 121 full-time employees, with over half holding advanced degrees[130]. - The company emphasizes employee engagement and has implemented initiatives to strengthen connections between employees and the company's mission[131]. - The company has invested in new human resource software to collect weekly employee feedback and enhance engagement[131]. - The company has launched a new platform to improve employee health and safety training programs in 2022[132]. - The company recognizes the importance of diversity and collaboration in driving success[131]. - As of the end of 2022, the employee base comprised 40% female and 60% male, reflecting the company's commitment to diversity, equity, and inclusion[135]. Risks and Challenges - The company faces challenges in securing adequate reimbursement for Eversense, which could adversely affect its financial condition and operating results[168]. - The ongoing military action by Russia in Ukraine and surging energy costs in Europe pose risks to the company's operations and supply chain[144]. - The company is vulnerable to disruptions in its information technology systems, which could adversely affect its operations and financial results[201]. - The company acknowledges that economic downturns, inflation, and public health crises like COVID-19 could negatively impact its business and financial performance[213]. - The company may face challenges in integrating acquired products or technologies, which could adversely affect its business and financial condition[208]. - The company relies on third-party manufacturers for Eversense production, exposing it to risks related to quality, reliability, and production capacity[187]. Research and Development - The ENHANCE pivotal study for the Eversense 365-day system completed enrollment in Q3 2022, with data expected in the second half of 2023[19]. - Future product development aims to reduce calibration frequency to once per week and extend sensor duration to 365 days, targeting Type 2 diabetes patients[59]. - The company is exploring applications of its technology for measuring other analytes beyond glucose, indicating potential for future growth[59]. - The company intends to increase operating expenses for the commercialization of Eversense and ongoing R&D activities, including next-generation products[217]. Insurance and Reimbursement - Approximately 250 million people in the United States may have coverage and access to the Eversense E3 product via commercial or government payors[65]. - Some commercial payors have denied coverage for Eversense, labeling it as "experimental and investigational," which may limit patient access[66]. - The Health Technology Assessment (HTA) process in the EU may require additional studies for medical device candidates, influencing pricing and reimbursement decisions[173]. - The Eversense Bridge Program, launched in March 2019, provided financial assistance to uninsured patients but was terminated in December 2020, potentially affecting sales[175]. - Future coverage and reimbursement for Eversense products may face increased restrictions, impacting sales and profitability[172].

Financial Data and Key Metrics Changes - In Q3 2022, total revenue was $4.6 million, a 31% increase compared to $3.5 million in the prior year period [5][22] - Gross profit in Q3 2022 was $0.8 million, an increase of $2 million from a gross loss of $1.2 million in the prior year [23] - Net loss for Q3 2022 was $60.4 million, compared to a net income of $42.9 million in Q3 2021 [27][28] - Cash, cash equivalents, and short and long-term investments totaled $163 million as of September 30, 2022 [28] - The company narrowed its full year 2022 global net revenue guidance to $15 million to $17 million [29] Business Line Data and Key Metrics Changes - U.S. revenue for Q3 2022 was $1.9 million, while revenue outside the U.S. was $2.7 million [22] - The transition from the Eversense 90-day product to the Eversense six-month product contributed to the increase in gross profit [23] - The company reported a retention rate of 80% or higher for patients transitioning from the first to the second sensor, with long-term users seeing retention rates exceeding 90% [48] Market Data and Key Metrics Changes - Over half of the patients using Eversense have type 2 diabetes, indicating a growing market segment [7][36] - The partnership with the Nurse Practitioner Group aims to expand patient access to Eversense through both in-office and at-home sensor insertions [9][10] - Commercial coverage for Eversense is expanding, with significant health insurance providers issuing positive coverage decisions [11][12] Company Strategy and Development Direction - The company is focused on increasing patient adoption of Eversense through strategic partnerships and marketing efforts [6][13] - Future product development includes advancements in the Eversense 365-day sensor and the Gemini program, which aims to incorporate a battery into the sensor [16][17] - The company is working to improve manufacturing scale and margins while enhancing access to its products [31][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing expansion of covered lives and the potential impact of new product offerings [31] - The company anticipates continued investment in research and development, particularly for clinical trials related to next-generation technologies [45] - Management is optimistic about the long-term growth potential of the CGM market and the company's position within it [33] Other Important Information - The company has established a patient assistance program to help reduce costs for patients with insurance coverage [12] - The Eversense E3 system has been successfully launched across all markets in Europe, enhancing global distribution efficiency [14][15] Q&A Session Summary Question: How comfortable is the company with consensus for 2023 and the impact of the recent CMS proposal? - Management refrained from discussing 2023 specifics but expressed pride in the product's performance among type 2 diabetes patients [36] Question: How will the partnership with nurse practitioners help address basal patients? - The partnership is expected to facilitate referrals for patients whose primary care physicians do not perform insertions, leveraging existing CPT codes for reimbursement [37] Question: Any updates on the Gemini product development? - The company is working with experts in implantable batteries to develop a custom battery for the Eversense sensor, allowing for autonomous measurements [42][44] Question: How is the patient assistance program affecting adoption rates? - The program is showing good acceptance and utilization, particularly as deductibles reset in Q1 [48] Question: Is there increased interest from pump manufacturers now that the 180-day product is available? - There has been an uptick in interest from pump manufacturers, with ongoing conversations regarding integration [52]

Financial Data and Key Metrics Changes - In Q2 2022, total revenue was $3.7 million, an increase from $3.3 million in the prior year period [27] - U.S. revenue for Q2 was $1.2 million, while revenue outside the U.S. was $2.5 million [27] - Gross profit for Q2 2022 was $0.8 million, up from $0.4 million in the prior year [27] - Operating loss for Q2 2022 was $17 million, compared to a loss of $15.9 million in Q2 2021 [29] - Net income for Q2 2022 was $104.2 million, or $0.22 per share, compared to a net loss of $180.3 million, or $0.42 loss per share in Q2 2021 [31] Business Line Data and Key Metrics Changes - The successful commercial launch of the E3 system in the U.S. and the receipt of CE Mark for E3 in Europe were highlighted as significant achievements [9][21] - The transition to the 6-month E3 product has been completed for the current commercial base [12] - Ascensia's dedicated CGM team has been expanded to enhance sales coverage and patient awareness [13] Market Data and Key Metrics Changes - The company reported that Anthem, a major health insurance provider, is now covering the E3 system, increasing the total covered lives to approximately 250 million [18] - The transition of payer policies to cover the 6-month product is expected to continue, with most payers anticipated to complete the transition by the end of the year [16] Company Strategy and Development Direction - The company is focused on executing the E3 launch and advancing its technology pipeline, including the development of a 1-year CGM sensor [10][36] - There is a commitment to operational and manufacturing efficiency to support growth and patient adoption [10] - The company is also enhancing digital connectivity by allowing data sharing through Apple Health [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the unique features of the E3 system to meet patient needs and drive adoption [6] - The company anticipates continued growth in commercial investments and sales force expansion [41] - Management acknowledged macroeconomic challenges but indicated that they have been managing these dynamics effectively [55] Other Important Information - The company has made significant progress in establishing programs to improve patient access to the E3 system [19] - The E3 system will be launched in phases across Europe, with ongoing efforts to enhance market uptake [22] Q&A Session Summary Question: On Ascensia's investments and timing for acceleration - Management confirmed that Ascensia's commercial investment is significant and expected to ramp up as products are placed in the market [41] Question: Update on the 365-day system and sensor design - Management indicated that improvements are ongoing based on clinical experience, with plans to start clinical trials by the end of the year [42] Question: Confirmation of covered lives for the 180-day sensor - Management confirmed that approximately 250 million lives are now covered for the E3 system, with ongoing transitions expected to complete by year-end [47] Question: Inventory situation at Ascensia - Management stated that the plan is to maintain about six weeks of inventory, with revenue recognized at the point of shipment [48] Question: Update on the iCGM and filing timing - Management confirmed that additional clinical data collection is underway, with plans to file for iCGM in the first half of next year [54] Question: Impact of macro conditions on sales - Management acknowledged some impact from macro conditions but noted that revenue continues to grow based on market progress [56]

PART I: Financial Information [ITEM 1: Financial Statements](index=3&type=section&id=ITEM%201%3A%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Changes in Stockholders' Equity (Deficit), Statements of Cash Flows, and accompanying notes, providing a detailed financial overview for the periods ended June 30, 2022, and December 31, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from **$198.9 million** at December 31, 2021, to **$175.3 million** at June 30, 2022, primarily due to a reduction in long-term investments and derivative liabilities. Total liabilities significantly decreased from **$384.5 million** to **$159.4 million**, while stockholders' equity shifted from a deficit of **$185.5 million** to a positive **$15.9 million** | Metric | Dec 31, 2021 (in thousands) | Jun 30, 2022 (in thousands) | Change (in thousands) | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $198,928 | $175,325 | $(23,603) | | Total Liabilities | $384,463 | $159,384 | $(225,079) | | Total Stockholders' Equity (Deficit) | $(185,535) | $15,941 | $201,476 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For the three months ended June 30, 2022, the company reported a net income of **$104.2 million**, a significant improvement from a net loss of **$180.3 million** in the prior year, driven by substantial gains on fair value adjustments of options and derivatives. Total revenue increased slightly to **$3.7 million** from **$3.3 million**. For the six months ended June 30, 2022, net income was **$190.9 million**, compared to a net loss of **$429.8 million** in 2021, with total revenue remaining consistent at **$6.2 million** | Metric (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Total Revenue | $3,714 | $3,289 | $425 | | Gross Profit | $824 | $392 | $432 | | Operating Loss | $(17,036) | $(15,890) | $(1,146)| | Net Income (Loss) | $104,231 | $(180,306) | $284,537| | Basic EPS | $0.22 | $(0.42) | $0.64 | | Diluted EPS | $(0.03) | $(0.42) | $0.39 | | Metric (in thousands) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Total Revenue | $6,196 | $6,135 | $61 | | Gross Profit | $1,351 | $918 | $433 | | Operating Loss | $(32,197) | $(27,206) | $(4,991)| | Net Income (Loss) | $190,949 | $(429,820) | $620,769| | Basic EPS | $0.42 | $(1.08) | $1.50 | | Diluted EPS | $(0.06) | $(1.08) | $1.02 | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) The company's total stockholders' equity (deficit) significantly improved from a deficit of **$185.5 million** at December 31, 2021, to a positive **$15.9 million** at June 30, 2022. This change was primarily driven by a net income of **$190.9 million** and an increase in additional paid-in capital from common stock issuances and stock-based compensation, partially offset by other comprehensive losses | Metric (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Common Stock | $447 | $465 | $18 | | Additional Paid-In Capital | $765,215 | $776,640 | $11,425| | Accumulated Deficit | $(950,985) | $(760,036) | $190,949| | Total Stockholders' Equity (Deficit) | $(185,535) | $15,941 | $201,476| [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash used in operating activities was **$34.3 million**, an increase from **$30.4 million** in the prior year. Investing activities provided **$42.1 million** in cash, a significant shift from **$145.3 million** used in 2021, primarily due to marketable securities sales. Financing activities provided **$4.2 million**, a substantial decrease from **$227.3 million** in 2021, mainly due to lower common stock issuances. Overall, cash and cash equivalents increased by **$12.0 million** to **$45.4 million** | Cash Flow Activity (in thousands) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash used in operating activities | $(34,341) | $(30,407) | $(3,934)| | Net cash provided by (used in) investing activities | $42,108 | $(145,318) | $187,426| | Net cash provided by financing activities | $4,197 | $227,274 | $(223,077)| | Net increase in cash and cash equivalents | $11,964 | $51,549 | $(39,585)| | Cash and cash equivalents, at ending of period | $45,425 | $69,754 | $(24,329)| [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's financial position, operations, and cash flows, covering significant accounting policies, liquidity, revenue recognition, debt, equity, and fair value measurements. Key updates include capital raising activities, changes in derivative valuations, and the repayment of the PPP Loan [Note 1. Organization and Nature of Operations](index=8&type=section&id=Note%201.%20Organization%20and%20Nature%20of%20Operations) Senseonics Holdings, Inc. is a medical technology company specializing in long-term, implantable continuous glucose monitoring (CGM) systems - Senseonics Holdings, Inc. is a medical technology company specializing in **long-term, implantable continuous glucose monitoring (CGM) systems**[15](index=15&type=chunk) [Note 2. Liquidity and Capital Resources](index=8&type=section&id=Note%202.%20Liquidity%20and%20Capital%20Resources) The company has an accumulated deficit of **$760.0 million** and **$150.5 million** in cash and marketable securities as of June 30, 2022, having raised **$8.0 million** from common stock sales - The Company has an accumulated deficit of **$760.0 million** as of June 30, 2022, and has never been profitable from operations[17](index=17&type=chunk) - As of June 30, 2022, the Company had **$150.5 million** in cash, cash equivalents, and marketable securities[17](index=17&type=chunk) - During the six months ended June 30, 2022, the Company received **$8.0 million** in net proceeds from the sale of 3,077,493 shares of common stock under the 2021 Sales Agreement[18](index=18&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=10&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) The company's financial statements adhere to U.S. GAAP, with management estimates impacting reported amounts, and operates as a single segment focused on glucose monitoring products - The Company's financial statements are prepared under U.S. GAAP for interim reporting, with management's estimates affecting various reported amounts[25](index=25&type=chunk)[31](index=31&type=chunk) - The Company operates as a **single segment** focused on glucose monitoring products[26](index=26&type=chunk) - Adoption of ASU 2020-06 on January 1, 2022, had **no material impact**; ASU 2016-13 (effective Jan 1, 2023) is not expected to have a significant impact[28](index=28&type=chunk)[30](index=30&type=chunk) [Note 4. Revenue Recognition](index=12&type=section&id=Note%204.%20Revenue%20Recognition) Revenue is primarily generated from Eversense system sales to Ascensia and other partners, with the majority of revenue coming from outside the United States - Revenue is generated from sales of the Eversense system to Ascensia, EU distributors, and US strategic fulfillment partners[34](index=34&type=chunk) | Customer | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Ascensia Revenue % | 96% | 87% | 93% | 85% | | Geographic Region (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Outside of the United States | $2,507 (67.5%) | $2,310 (70.2%) | $4,222 (68.1%) | $4,843 (78.9%) | | United States | $1,207 (32.5%) | $979 (29.8%) | $1,974 (31.9%) | $1,292 (21.1%) | | Total Revenue | $3,714 | $3,289 | $6,196 | $6,135 | [Note 5. Net Income (Loss) per Share](index=13&type=section&id=Note%205.%20Net%20Income%20%28Loss%29%20per%20Share) Basic EPS for the six months ended June 30, 2022, was **$0.42**, while diluted EPS was **$(0.06)**, with potentially dilutive shares excluded during net loss periods | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.22 | $(0.42) | $0.42 | $(1.08) | | Diluted EPS | $(0.03) | $(0.42) | $(0.06) | $(1.08) | - Potentially dilutive common shares are excluded from diluted EPS calculations during net loss periods as they would be anti-dilutive[39](index=39&type=chunk)[41](index=41&type=chunk) [Note 6. Marketable Securities](index=14&type=section&id=Note%206.%20Marketable%20Securities) Total marketable securities decreased by **$43.2 million** to **$105.1 million** at June 30, 2022, with unrealized losses primarily due to interest rate fluctuations | Security Type (in thousands) | Dec 31, 2021 Market Value | Jun 30, 2022 Market Value | Change | | :--------------------------- | :------------------------ | :------------------------ | :----- | | Commercial Paper | $57,369 | $14,532 | $(42,837)| | Corporate Debt Securities | $39,748 | $36,897 | $(2,851)| | Asset Backed Securities | $26,707 | $14,734 | $(11,973)| | Government and Agency Securities | $24,503 | $38,929 | $14,426| | Total Marketable Securities | $148,327 | $105,092 | $(43,235)| - Unrealized losses of **$1.1 million** at June 30, 2022, were primarily due to interest rate fluctuations, not increased credit risk[42](index=42&type=chunk)[43](index=43&type=chunk) [Note 7. Inventory, net](index=15&type=section&id=Note%207.%20Inventory%2C%20net) Total inventory increased by **$0.9 million** to **$7.3 million** at June 30, 2022, with a **$0.6 million** charge for obsolete/excess inventory recorded in Q2 and H1 2022 | Inventory Category (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Finished goods | $1,012 | $1,020 | $8 | | Work-in-process | $3,770 | $4,705 | $935 | | Raw materials | $1,534 | $1,526 | $(8) | | Total | $6,316 | $7,251 | $935 | - A **$0.6 million** charge was recorded to cost of sales for obsolete/excess inventory in Q2 and H1 2022, compared to no charge in 2021[44](index=44&type=chunk) [Note 8. Prepaid Expenses, Other Current Assets, and Deposits and other assets](index=15&type=section&id=Note%208.%20Prepaid%20Expenses%2C%20Other%20Current%20Assets%2C%20and%20Deposits%20and%20other%20assets) Total prepaid and other current assets increased by **$1.6 million** to **$7.8 million**, and deposits and other assets increased by **$2.2 million** due to a lease extension | Category (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :---------------------- | :----------- | :----------- | :----- | | Contract manufacturing | $5,036 | $5,314 | $278 | | Insurance | $74 | $913 | $839 | | Clinical and Preclinical| $142 | $669 | $527 | | Total Prepaid & Other Current Assets | $6,218 | $7,818 | $1,600 | - Deposits and other assets increased by **$2.2 million**, primarily due to a **$3.2 million** right-of-use asset from a five-year lease extension for corporate headquarters[45](index=45&type=chunk) [Note 9. Accrued Expenses, Other Current Liabilities, and Other Liabilities](index=16&type=section&id=Note%209.%20Accrued%20Expenses%2C%20Other%20Current%20Liabilities%2C%20and%20Other%20Liabilities) Total accrued expenses and other current liabilities increased slightly to **$14.4 million**, while other liabilities increased to **$3.1 million** due to a non-current operating lease liability | Category (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :---------------------- | :----------- | :----------- | :----- | | Compensation and benefits | $3,484 | $3,251 | $(233) | | Research and development | $2,145 | $2,254 | $109 | | Sales and marketing services | $1,962 | $2,276 | $314 | | Total Accrued Expenses & Other Current Liabilities | $14,264 | $14,423 | $159 | - Other liabilities increased from **$0.6 million** to **$3.1 million** due to the non-current portion of the operating lease liability after a five-year extension[46](index=46&type=chunk) [Note 10. Product Warranty Obligations](index=16&type=section&id=Note%2010.%20Product%20Warranty%20Obligations) The product warranty reserve increased from **$0.7 million** to **$0.8 million** from December 31, 2021, to June 30, 2022 - The warranty reserve increased from **$0.7 million** to **$0.8 million** from December 31, 2021, to June 30, 2022[48](index=48&type=chunk) | Warranty Activity (in thousands) | 6 Months Ended Jun 30, 2022 | 12 Months Ended Dec 31, 2021 | | :------------------------------- | :-------------------------- | :--------------------------- | | Balance at beginning of period | $723 | $646 | | Provision for warranties | $47 | $781 | | Settlements made | $(6) | $(704) | | Balance at end of period | $764 | $723 | [Note 11. Notes Payable, Preferred Stock and Stock Purchase Warrants](index=16&type=section&id=Note%2011.%20Notes%20Payable%2C%20Preferred%20Stock%20and%20Stock%20Purchase%20Warrants) The company repaid its **$5.8 million** PPP Loan in April 2022, and outstanding convertible notes include **$15.7 million** for 2023 Notes, **$51.2 million** for 2025 Notes, and **$35.0 million** for PHC Notes - The **$5.8 million** PPP Loan was fully repaid in April 2022[50](index=50&type=chunk) | Note Type | Principal (in thousands) as of Jun 30, 2022 | Maturity Date | Interest Rate | | :-------- | :---------------------------------------- | :------------ | :------------ | | 2023 Notes | $15,700 | Feb 1, 2023 | 5.25% | | 2025 Notes | $51,199 | Jan 15, 2025 | 5.25% | | PHC Notes | $35,000 | Oct 31, 2024 | 8.00% (decreased from 9.5%) | - The fair value of the Energy Capital Option liability decreased from **$69.4 million** to **$19.5 million**, and the PHC Option asset increased from **$0.2 million** to **$1.1 million**[52](index=52&type=chunk)[61](index=61&type=chunk) [Note 12. Stockholders' Equity (Deficit)](index=24&type=section&id=Note%2012.%20Stockholders%27%20Equity%20%28Deficit%29) The company received **$8.0 million** in net proceeds from common stock sales in H1 2022, following significant capital raises in H1 2021 - **$8.0 million** in net proceeds were received from the sale of 3,077,493 common shares under the 2021 Sales Agreement during H1 2022[74](index=74&type=chunk) - In H1 2021, the company raised **$48.4 million** from the 2019 Sales Agreement, **$106.1 million** from the 2021 Public Offering, and **$46.1 million** from the Registered Direct Offering[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 13. Stock-Based Compensation](index=25&type=section&id=Note%2013.%20Stock-Based%20Compensation) As of June 30, 2022, **19.7 million shares** were available for grant under the 2015 Plan, with **28,944 shares** purchased under the 2016 ESPP during H1 2022 - As of June 30, 2022, **19.7 million shares** were available for grant under the 2015 Plan, **0.8 million** under the Inducement Plan, and **13.1 million** under the 2016 ESPP[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - **28,944 shares** of common stock were purchased under the 2016 ESPP during the six months ended June 30, 2022[80](index=80&type=chunk) [Note 14. Fair Value Measurements](index=27&type=section&id=Note%2014.%20Fair%20Value%20Measurements) Total Level 3 instruments decreased by **$158.9 million** to **$65.2 million**, driven by significant gains on fair value adjustments of options and derivatives | Level 3 Instruments (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :--------------------------------- | :----------- | :----------- | :----- | | Total Level 3 Instruments | $224,037 | $65,151 | $(158,886)| - The decrease in Level 3 instruments was driven by a **$49.9 million** gain on fair value adjustment of option and a **$107.7 million** gain on change in fair value of derivatives[86](index=86&type=chunk) [Note 15. Income Taxes](index=29&type=section&id=Note%2015.%20Income%20Taxes) No tax provision or benefit was recorded for H1 2022 or H1 2021 due to a full valuation allowance on net deferred tax assets - No tax provision or benefit was recorded for H1 2022 or H1 2021 due to a full valuation allowance on net deferred tax assets[87](index=87&type=chunk) [Note 16. Related Party Transactions](index=29&type=section&id=Note%2016.%20Related%20Party%20Transactions) Revenue from Ascensia, a related party, increased to **$5.7 million** in H1 2022, with balances due from and to Ascensia also increasing - Revenue from Ascensia, a related party, increased to **$5.7 million** in H1 2022 from **$5.2 million** in H1 2021[89](index=89&type=chunk) | Related Party Balances (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :------------------------------------ | :----------- | :----------- | :----- | | Due from Ascensia | $1,800 | $4,300 | $2,500 | | Due to Ascensia | $2,500 | $3,600 | $1,100 | [Note 17. Subsequent Events](index=29&type=section&id=Note%2017.%20Subsequent%20Events) No subsequent events requiring financial statement adjustments or disclosures were identified through the filing date - No subsequent events requiring financial statement adjustments or disclosures were identified through the filing date[91](index=91&type=chunk) [ITEM 2: Management Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202%3A%20Management%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the commercialization progress of Eversense CGM systems, financial performance for the three and six months ended June 30, 2022, and an assessment of liquidity and capital resources [Overview](index=31&type=section&id=Overview) Senseonics is a medical technology company focused on long-term implantable continuous glucose monitoring (CGM) systems, including Eversense, Eversense XL, and Eversense E3. The Eversense E3 system, with a six-month sensor life, received CE mark in June 2022 and FDA approval in February 2022, with commercialization by Ascensia beginning in Q2 2022 in the US and Q3 2022 in Europe. The company has achieved approximately **250 million** covered lives in the U.S. through positive insurance payor coverage decisions - Senseonics develops and manufactures **long-term implantable CGM systems** (Eversense, Eversense XL, Eversense E3) for diabetes management[94](index=94&type=chunk) - Eversense E3, offering a **six-month sensor life**, received FDA approval in February 2022 and CE mark in June 2022, with commercialization by Ascensia in the US (Q2 2022) and Europe (Q3 2022)[94](index=94&type=chunk)[110](index=110&type=chunk) - The company has secured coverage for approximately **250 million lives** in the U.S. through positive insurance payor decisions[96](index=96&type=chunk) [United States Development and Commercialization of Eversense](index=35&type=section&id=United%20States%20Development%20and%20Commercialization%20of%20Eversense) The Eversense CGM system received FDA PMA approval for **90-day use** in June 2018, and the **180-day Eversense E3 system** was FDA approved in February 2022 and commercialized by Ascensia in Q2 2022. A clinical trial for a **365-day sensor** is planned for the second half of 2022 - Eversense CGM received FDA PMA approval for **90-day use** in June 2018 and non-adjunctive indication in June 2019[101](index=101&type=chunk)[103](index=103&type=chunk) - The **180-day Eversense E3 CGM system** was FDA approved in February 2022 and commercialization by Ascensia began in Q2 2022[102](index=102&type=chunk)[107](index=107&type=chunk) - A clinical trial for a **365-day sensor**, including a pediatric population, is targeted for enrollment in the second half of 2022[104](index=104&type=chunk) [European Commercialization of Eversense](index=36&type=section&id=European%20Commercialization%20of%20Eversense) The Eversense XL CGM system received CE mark in September 2017 for **180-day sensor life**, and the Eversense E3 system also received CE mark in June 2022, with European commercialization by Ascensia starting in Q3 2022 - Eversense XL received CE mark in September 2017 for **180-day sensor life** and launched in Europe in Q4 2017[108](index=108&type=chunk) - Eversense E3 received CE mark in June 2022, with Ascensia commencing European commercialization in Q3 2022[110](index=110&type=chunk) [Financial Overview (Revenue, Cost of Sales, Gross Profit)](index=36&type=section&id=Financial%20Overview%20%28Revenue%2C%20Cost%20of%20Sales%2C%20Gross%20Profit%29) The company's revenue is primarily from sales of Eversense systems to distributors and partners, with Ascensia accounting for the majority. Revenue recognition occurs upon product control transfer, with variable consideration (discounts, revenue share) estimated and constrained. Contract assets include unbilled receivables from Ascensia's revenue share - Revenue is generated from Eversense system sales to Ascensia, EU distributors, and US strategic fulfillment partners, with Ascensia being the primary customer[111](index=111&type=chunk)[115](index=115&type=chunk) - Revenue recognition is at the point of control transfer, with variable consideration (discounts, revenue share) estimated and constrained[112](index=112&type=chunk)[113](index=113&type=chunk) - Contract assets consist of unbilled receivables from Ascensia's revenue share[114](index=114&type=chunk) [Results of Operations for the Three Months Ended June 30, 2022 and 2021](index=39&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202022%20and%202021) Total revenue increased by **$0.4 million** to **$3.7 million**, gross profit more than doubled to **$0.8 million** with a **22.2%** gross margin, and net income significantly improved to **$104.2 million** from a net loss of **$180.3 million**, driven by fair value adjustments | Metric (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Total Revenue | $3,714 | $3,289 | $425 | | Cost of Sales | $2,891 | $2,897 | $(6) | | Gross Profit | $824 | $392 | $432 | | Gross Margin | 22.2% | 11.9% | 10.3 pp| | R&D Expenses | $9,299 | $7,107 | $2,192 | | SG&A Expenses | $8,561 | $9,175 | $(614) | | Operating Loss | $(17,036) | $(15,890) | $(1,146)| | Total Other Income (Expense), net | $121,267 | $(164,416) | $285,683| | Net Income (Loss) | $104,231 | $(180,306) | $284,537| - Gross margin improved significantly due to the utilization of previously written-off inventory and a favorable sales mix[121](index=121&type=chunk) - R&D expenses increased by **$2.2 million** due to investments in next-generation technologies, clinical studies, and workforce expansion[122](index=122&type=chunk) [Results of Operations for the Six Months Ended June 30, 2022 and 2021](index=40&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) Total revenue remained consistent at **$6.2 million**, gross profit increased to **$1.4 million** with a **21.8%** gross margin, and net income significantly improved to **$190.9 million** from a net loss of **$429.8 million**, driven by fair value adjustments | Metric (in thousands) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Total Revenue | $6,196 | $6,135 | $61 | | Cost of Sales | $4,845 | $5,217 | $(372) | | Gross Profit | $1,351 | $918 | $433 | | Gross Margin | 21.8% | 15.0% | 6.8 pp | | R&D Expenses | $17,103 | $12,362 | $4,741 | | SG&A Expenses | $16,445 | $15,762 | $683 | | Operating Loss | $(32,197) | $(27,206) | $(4,991)| | Total Other Income (Expense), net | $223,146 | $(402,614) | $625,760| | Net Income (Loss) | $190,949 | $(429,820) | $620,769| - R&D expenses increased by **$4.7 million** due to investments in next-generation technologies, clinical studies, personnel, and consulting services[129](index=129&type=chunk) - SG&A expenses increased by **$0.6 million** due to higher general and administrative costs, partially offset by lower sales and marketing costs as Ascensia assumed commercialization[130](index=130&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) The company has an accumulated deficit of **$760.0 million** and **$150.5 million** in cash and marketable securities as of June 30, 2022, with management expecting existing liquidity to be sufficient through 2023 - Accumulated deficit was **$760.0 million** as of June 30, 2022, with no historical profitability from operations[132](index=132&type=chunk) - Cash, cash equivalents, and marketable debt securities totaled **$150.5 million** as of June 30, 2022[132](index=132&type=chunk) - Management expects existing liquidity to be sufficient through 2023 and may seek additional capital for strategic flexibility[143](index=143&type=chunk)[159](index=159&type=chunk) [Indebtedness](index=45&type=section&id=Indebtedness) The company repaid its **$5.8 million** PPP Loan in April 2022, with outstanding convertible notes including **$15.7 million** for 2023 Notes, **$51.2 million** for 2025 Notes, and **$35.0 million** for PHC Notes, whose interest rate decreased to **8.0%** in April 2022 - The **$5.8 million** PPP Loan was fully repaid in April 2022[147](index=147&type=chunk) | Convertible Note | Principal (in millions) as of Jun 30, 2022 | Maturity Date | Coupon Rate | | :--------------- | :--------------------------------------- | :------------ | :---------- | | 2023 Notes | $15.7 | Feb 1, 2023 | 5.25% | | 2025 Notes | $51.2 | Jan 15, 2025 | 5.25% | | PHC Notes | $35.0 | Oct 31, 2024 | 8.00% | - The interest rate on PHC Notes decreased to **8.0%** in April 2022 due to FDA approval of the 180-day Eversense E3 product[152](index=152&type=chunk) [Funding Requirements and Outlook](index=46&type=section&id=Funding%20Requirements%20and%20Outlook) Future profitability depends on successful commercialization and adoption of Eversense CGM systems, requiring significant working capital through 2022 and beyond for product development and expanding insurance coverage, with existing cash expected to cover needs through 2023 - Future profitability hinges on successful commercialization, adoption, product development, and regulatory approvals of Eversense CGM systems[157](index=157&type=chunk) - Significant working capital is required through 2022 and beyond for activities like expanding insurance coverage and developing the Eversense 365-day product[157](index=157&type=chunk) - Existing cash and future operations are expected to cover operating needs through 2023, with potential for additional capital market access[159](index=159&type=chunk) [Cash Flows](index=47&type=section&id=Cash%20Flows) Net cash used in operating activities increased to **$34.3 million**, investing activities provided **$42.1 million**, a significant positive swing, and financing activities decreased substantially to **$4.2 million** due to lower common stock issuances | Cash Flow Activity (in thousands) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash used in operating activities | $(34,341) | $(30,407) | $(3,934)| | Net cash provided by (used in) investing activities | $42,108 | $(145,318) | $187,426| | Net cash provided by financing activities | $4,197 | $227,274 | $(223,077)| - Investing activities shifted from a significant cash outflow in 2021 to a substantial inflow in 2022, driven by marketable securities sales[164](index=164&type=chunk) - Financing cash flow decreased significantly due to reduced common stock issuances compared to the prior year[165](index=165&type=chunk)[166](index=166&type=chunk) [Contractual Obligations](index=49&type=section&id=Contractual%20Obligations) No material changes in contractual obligations and commitments were reported as of June 30, 2022, compared to the prior Annual Report on Form 10-K - No material changes in contractual obligations and commitments were reported as of June 30, 2022, compared to the prior Annual Report on Form 10-K[167](index=167&type=chunk) [ITEM 3: Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=ITEM%203%3A%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a "smaller reporting company" under SEC rules, Senseonics Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this Quarterly Report on Form 10-Q - The company is exempt from providing market risk disclosures in this 10-Q due to its status as a "smaller reporting company"[168](index=168&type=chunk) [ITEM 4: Controls and Procedures](index=49&type=section&id=ITEM%204%3A%20Controls%20and%20Procedures) Management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, concluding they were effective, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed effective at a reasonable assurance level as of June 30, 2022[169](index=169&type=chunk) - No material changes in internal control over financial reporting occurred during Q2 2022[170](index=170&type=chunk) PART II: Other Information [ITEM 1: Legal Proceedings](index=49&type=section&id=ITEM%201%3A%20Legal%20Proceedings) The company faces ongoing litigation, including an amended False Claims Act complaint filed in May 2022, and was assessed a **EUR 45,000** fine by the Italian Data Protection Authority for GDPR breaches, which it intends to settle for **EUR 22,500** - A False Claims Act civil complaint was dismissed without prejudice on March 31, 2022, but an amended complaint was filed on May 27, 2022, to which the company filed another motion to dismiss on July 11, 2022[173](index=173&type=chunk)[175](index=175&type=chunk) - The Italian Data Protection Authority (Garante) found GDPR breaches, assessing a **EUR 45,000** fine, which the company intends to settle for **EUR 22,500** by updating its privacy notice and not appealing[176](index=176&type=chunk) [ITEM 1A: Risk Factors](index=51&type=section&id=ITEM%201A%3A%20Risk%20Factors) Risk factors remain consistent with the Annual Report on Form 10-K, with new emphasis on the potential negative impact of the Russia-Ukraine conflict and macroeconomic conditions like inflation and rising interest rates - Risk factors remain largely consistent with the Annual Report on Form 10-K, with new emphasis on the Russia-Ukraine conflict[177](index=177&type=chunk) - The Russia-Ukraine military action could adversely affect the global economy, the company's business, operations, and financial condition, including supply chains and capital raising[178](index=178&type=chunk)[179](index=179&type=chunk) - Economic downturns, inflation, and rising interest rates are identified as macroeconomic conditions that could negatively impact the business and financial performance[180](index=180&type=chunk)[181](index=181&type=chunk) [ITEM 2: Unregistered Sales of Equity and Securities and Use of Proceeds](index=53&type=section&id=ITEM%202%3A%20Unregistered%20Sales%20of%20Equity%20and%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the company for this reporting period - Not applicable for this reporting period[182](index=182&type=chunk) [ITEM 3: Defaults Upon Senior Securities](index=53&type=section&id=ITEM%203%3A%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for this reporting period - Not applicable for this reporting period[183](index=183&type=chunk) [ITEM 4: Mine Safety Disclosures](index=53&type=section&id=ITEM%204%3A%20Mine%20Safety%20Disclosures) This item is not applicable to the company for this reporting period - Not applicable for this reporting period[184](index=184&type=chunk) [ITEM 5: Other Information](index=53&type=section&id=ITEM%205%3A%20Other%20Information) No other information is reported under this item for the current period - No other information to report[185](index=185&type=chunk) [ITEM 6: Exhibits](index=53&type=section&id=ITEM%206%3A%20Exhibits) This section lists the exhibits filed or incorporated by reference as part of this Quarterly Report on Form 10-Q, including corporate governance documents, agreements, and certifications - Lists exhibits filed or incorporated by reference, including corporate documents, agreements, and certifications[186](index=186&type=chunk)[187](index=187&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) The report is duly signed on behalf of Senseonics Holdings, Inc. by Nick B. Tressler, Chief Financial Officer, on August 9, 2022 - Report signed by Nick B. Tressler, CFO, on August 9, 2022[193](index=193&type=chunk)