Good day and welcome to the Senseonics Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Philip Taylor, Investor Relations. Please go ahead.

Thank you. This is Philip Taylor from the Gilmartin Group. Before we begin today, let me remind you that the company’s remarks include forward-looking statements. These statements reflect management’s expectations about future events, operating plans, regulatory matters, product enhancements, company performance and other matters and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to be materially different from expressed or implied by any of these forward-looking statements is detailed under Risk Factors and elsewhere in our annual report on Form 10-K for the year ended December 31, 2021, our 10-Q for the quarter ended June 30, 2022 and other reports filed with the SEC. These documents are available in the Investor Relations of our website at www.senseonics.com. We undertake no obligation to update publicly or revise these forward-looking statements for any reason, except as required by law. Also on this call, we will be discussing our 2022 outlook. Joining me from Senseonics are Tim Goodnow, President and Chief Executive Officer; and Nick Tressler, Financial Officer. With that, I would like to turn the call over to Tim Goodnow, President and CEO. Tim?

Thank you, Trip and thank you all for joining us this afternoon. On the call today, we will focus on our recent activity to support the Eversense E3 product launch in the U.S., preparations for E3 launch in our European markets and progress advancing our technology pipeline. Nick will then discuss the second quarter financials in detail and then we will open up the call for questions. Senseonics was founded with the vision to advance highly differentiated cutting-edge technologies by providing people with diabetes, implantable sensors that extend the boundaries for sensor duration. In that spirit, we continue today designing, developing and manufacturing the most innovative, continuous glucose monitoring products in the market. Over the first half of 2022 in the United States, Senseonics and our commercial partner, Ascensia Diabetes Care, have led patients and healthcare providers through a successful transition into the next generation of long-term implantable CGM with the approval and launch of the 6-month Eversense E3. We are confident the unique features of Eversense can compellingly address patient needs and that a 6-month sensor can offer unrivaled convenience for people with diabetes. Currently, we are focused, together with our partner on executing the launch plan to introduce more doctors and patients to E3 and on ensuring that we have the structure and support in place to successfully grow our product. We are now 4 months into a new product launch that represents a fundamental advancement in diabetes management and 1 that requires a new workflow in clinics given the implanted nature of our unique technology. While we made meaningful headway with the 90-day Eversense system, the provider and patient universe in the U.S. was only briefly exposed to our product before the beginning of the pandemic, significantly limited our ability to go into physicians’ offices and introduce…

Thank you, Tim, and good afternoon, everyone. We appreciate the opportunity today to update you on our business. In the second quarter of 2022, net revenue was $3.7 million compared to $3.3 million in the prior year period. U.S. revenue for the second quarter was $1.2 million, and revenue outside the U.S. was $2.5 million. Gross profit in the second quarter of 2022 was $0.8 million an increase of $0.4 million from a gross profit of $0.4 million in the prior year period. Research and development expenses in the second quarter of 2022 were $9.3 million, an increase of $2.2 million compared to $7.1 million in the prior year period. The increase was primarily due to investments in product development and clinical trials for next-generation technologies. Second quarter 2022 selling, general and administrative expenses were $8.6 million, a decrease of $0.6 million compared to $9.2 million in the prior year period. The decrease was primarily the result of reduced payroll expenses related to stock-based compensation. For the 3 months ended June 30, 2022, operating loss was $17 million compared to a loss of $15.9 million in the second quarter of 2021. The decline in the company’s share price at the end of the second quarter as compared to the company’s share price at the end of the first quarter of 2022, led to significant non-cash gains in Q2. As a result, total other income increased by $285.7 million compared to the prior year period, primarily related to non-cash charges resulting from the accounting for embedded derivatives and fair value adjustments related to the company’s financings, including the 2023 and 2025 notes along with the PHC 2024 notes, and the Energy Capital equity line of credit. As required by U.S. generally accepted accounting principles or GAAP, we mark the value of…

Thank you, Nick. The first half of the year was highly productive for Senseonics, the next-generation 6-month E3 system received FDA approval and the CE Mark. The U.S. commercial launch has begun with the transition of the patient base to E3 and preparations for the launch in Europe are progressing. We have realized operational efficiencies as we prepare to have the same product generation available globally for the first time. We see this as translating into further improved positive gross margins. We continue to advance Eversense patient access with CMS-issued G-codes and the positive coverage decision from Anthem providing access to eligible Medicare beneficiaries and 45 million additional commercial covered lives. On the technology pipeline front, we continue to make progress on the development of our 1-year sensor and have expanded data accessibility for patients to share their Eversense data across apps through Apple Health. Looking forward, we remain focused on executing the E3 launch with Ascensia, driving the development of longer-duration sensors and continuously improving our manufacturing scale and margins. We believe that we are well positioned to grow our franchise and look forward to updating you on our progress as we execute our plans. Thank you for your time today. Also joining us for questions is Mukul Jain, our Chief Operating Officer. Operator, let’s now open the call for questions.

[Operator Instructions] Our first question comes from Marie Thibault with BTIG. Please go ahead.

Hey. Good afternoon everyone. This is Sam Eiber on for Marie. Appreciate you taking the questions and congrats on a nice quarter here. Maybe I can start here on some of the investments Ascensia is making. I appreciate the color on the DTC efforts and the dedicated sales team. But sitting here now with products approved in both the U.S. and Europe and growing broad-based coverage here in the U.S. is maybe now the right time to maybe accelerate some of these investments? And are you guys aligned on maybe how you are thinking about that?

Yes. We certainly – as have agreed, right, from the very beginning that the commercial investment by Ascensia is significant, it’s important. And as you suggest, is certainly ramping. The original contract, as we have described, commits to about to $250 million over the 5-year horizon with that initiating here now with a 180-day product and obviously continuing to grow and ramp as the products get placed into the market and as we continue to do the innovation. So, we certainly do expect that we will continue to grow. As we said, we have started off with a dedicated sales force of just about, I think it’s 19 sales reps today, and that will grow significantly over the coming quarters and years. And then there is a shared sales force outside the United States that frankly, in all regions, adds up to a couple of hundred folks. So, it is a significant investment. Ascensia is committed to make that. And we do expect there to be further growth in that investment.

Great. Appreciate some of the added color there. And then maybe I can ask one more on the 365-day system. You saw some of that encouraging data at ADA earlier in June. I was wondering if the sensor design is complete at this point or are there still modifications being made to it before you submit an IDE here?

Yes. At this point, we are continuing to make improvements. Much of this is dictated by clinical experience that we do get out of Europe. So, those clinical trials are underway, human trials. And as we gain experience with those configurations, we do anticipate making the final call here and within this quarter, frankly, so that we can be prepared to start the clinical trial at the end of the year.

Great. Thanks for taking the questions.

Thank you.

[Operator Instructions] Our next question comes from Alex Nowak with Craig-Hallum Capital Group. Please go ahead.

Great. Good afternoon everyone and congrats on the Anthem coverage decision. Just want to confirm, did you say there was 250 million lives are now covered for the 180-day sensor? And if that’s wrong, just what is the current number and the process there to complete that transition from 90 days to 180 days with the payers?

So, we are completing the transition, Alex, as I said. I would expect that, that will continue to happen between now and the end of the year. There are some administrative steps, a number has already occurred, as we mentioned, with CMS and their issuance of the G-codes. Anthem specifically came right out with this new coverage from them for the E3, a 180-day product and many of the others have converted over. Not all yet, but the majority, and we expect essentially everyone to be completed certainly by the end of the year.

Okay. Understood. And then maybe just an update on the inventory situation at Ascensia, just how much inventory is currently sitting out there. And I think in the 10-Q that was filed, it mentioned that Ascensia owes guidance of $4.3 million that was at the end of this quarter. Just what’s the best way to think about that number? Is that a three-month forward look of revenue, or how does it get paid down to Senseonics?

Yes. So, on the inventory, our plan, our joint plan is to keep just about six weeks of inventory, and we have generally done a pretty good job of that. Sometimes there are markets where because of dynamics, you will have a little bit more, a little bit less. But the joint goal that we are working to and have generally been successful is that week – the six-week time period. So, Nick, I will let you speak to anything in the queue.

Yes. No, you have captured it correctly, Tim.

So, the $4.3 million is over the next six weeks then, or how is that $4.3 million recognized in the revenue?

Yes. So, the way we are recognizing revenue is that there is a recognition of revenue at the point of shipment when we ship to Ascensia. There is also additional revenue based on – because of our contract being a shared revenue arrangement, once that revenue is done by Ascensia or taken by Ascensia, then we get our portion of that. So, based on just uncertainties around timing as well as the economics, we make sure that we are clear and can recognize that revenue before it’s taken.

Okay. Understood. And then just lastly, it looked like in the 10-Q, this was with regards to a lawsuit that happened I think last year, but it looks like there was another filing against the Federal False Claims Act, just maybe details on the first complaint there that was dismissed and then a summary of what the new complaint is referring to?

Same complaint, I think it was dismissed from what I understand. I don’t have a lot of direct details that are more than there, but that’s the same, I think with – although dismissed in the law firm’s start. I think the individual re-filed with a different law firm, so.

Okay. Understood. Thank you.

The next question comes from Jayson Bedford from Raymond James. Please go ahead.

Hi. This is Tom Scarvy [ph] on for Jayson. I had a quick question about the iCGM. Does that require any modifications to the existing E3 sensor and also if you guys could provide an update on what the next steps are? And any update to the timing of the filing? Is it still on pace for first half of next year, or how should we think about the timing for the iCGM?

Yes. Simply, it is on pages. It is the same E3. Recall that the agency did give us approval on the E3 configuration with a 43-patient sample set. So, we do need to collect additional clinical data, which is actively underway right now.

Great. Thank you. If I could ask one more quick one about the macro conditions. Some of the other players in the diabetes have mentioned macro weighing on sales. Have you guys noticed any of that with your own patient base? Has there been any reluctance to commit to a longer duration sensor, or have you guys been mostly free of any kind of recession worries?

Yes. I certainly wouldn’t say we have been free of it, but we have been actively managing upsides and downsides. Nick, anything else that you want to add to macro dynamics?

No. Just certainly, as we think about foreign exchange rates, the euro to the dollar as that has weakened, there is those dynamics, certainly, as we think about inflation, how that has affected the broader economy. We have been able to absorb that from the efficiency standpoint. So, there is just some of the macro dynamics. Obviously, where our revenue is at, it’s continued to grow based on the progress with Ascensia in the marketplace.

Great. Thank you very much.

[Operator Instructions] As we have no questions at this time, this concludes the question-and-answer session. I would like to turn the conference back over to Tim Goodnow for any closing remarks.

Well, I would like to thank everybody for their participation and interest today. We certainly look forward to updating you in the coming quarters on future progress. So, with that, I will wish everyone a good afternoon, and thank you for your support. Good day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.