Senseonics Holdings, Inc.
Q2 2018 Earnings Call Transcript

Published: 9 Aug 2018

[Operator:]

Good day, and welcome to the Senseonics Second Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Don Elsey, Chief Financial Officer. Please go ahead.

[Don Elsey:]

Thank you very much, and welcome to the second quarter 2018 Senseonics earnings call. Joining me on today's call are Tim Goodnow, President and Chief Executive Officer; and Mike Gill, Vice President and General Manager of the U.S. Region. 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 those expressed or implied by any of these forward-looking statements is detailed under Risk Factors and elsewhere on Form 10-K and our other reports filed with the SEC. These documents are available in the Investor Relations section 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. With that, I will now turn the call over to Tim Goodnow. Tim?

[Tim Goodnow:]

Thank you, Don. I am pleased to have the opportunity to discuss our very important second quarter milestones and plan to further expansion of the Eversense footprint around the globe. In the quarter we finalized our most important achievement today with the FDA approval of the Eversense system on June 21. This facilitated the opportunity for a tremendously successful ADA Conference between our booths, our mobile training units and product theater, the interest and interactions we experienced were remarkable. It was clear that the excitement about Eversense and our ability to provide it with diabetes in the United States is very high. Subsequent to the conference we have hit the ground running and are thrilled with the early reception to our commercial launch in the U.S. At the same time, we continue to drive adoption and awareness of Eversense in Europe, but we also advanced our next-generation products and partnership programs. Additionally in the quarter, we added roughly $150 million to strengthen our balance sheet and ensure a comprehensive U.S. commercial launch. As a result of both increasing adoption in Europe and our early commercial progress with Eversense in the U.S., we are increasing our revenue expectation for 2018. We now expect to realize full year revenues in the range of $19 million to $21 million, up from our previous expectations of $18 million to $20 million. As I am sure, much of the interest is on our early U.S. launch activities, I’ll turn the call over to Mike Gill, Vice President and General Manager of U.S. Region to provide more color about our initial commercial activities and plans for the rest of the year. I will then provide an update on our continued progress in Europe, as well as our development pipeline and clinical progress and Don will wrap up with more details on our second quarter financials. With that, Mike?

[Mike Gill:]

Thank you, Tim. After historic ADA, where Eversense stole the show, we are in full commercialization mode. The ADA started a flurry of interest and exceeded all expectations. We introduced the Eversense Mobile Clinic, a state-of-the-art diabetes clinic and product training suite focused on the technology procedure with diabetic and hands on periphery. As you may recall, the Ever Mobile Clinic was on the ADA exhibit floor. We trained over 500 attendees at our booth and generated close to 1000 leads. The ADA Eversense product theater was standing room only and was met with loud applause from our patients to buyers who had Eversense inserted over six times in Germany. The Eversense product theater started simultaneously with the opening of the ADA exhibit hall immediately following the product theater. There was a line to see the actual procedure in the mobile clinic and that energy sustained throughout the ADA. Quotes from our Ever Mobile Clinic attendee registration book included, I never thought I would want to do a procedure and that’s why I got into endocrinology, but with the procedure as simple as Eversense I am in. Finally, a sensor my patients will want. Senior representatives from leading diabetes institutions were eager to get Eversense Mobile Clinic in their cities to train their physician, staff and patients. From the ADA, we traveled to the ATDC in Keystone, Colorado, sponsored by the Barbara Davis Center and hosted by Dr. Satish Garg. Again, we were met with rare reviews, we trained and demonstrated the procedure to over 500 attendees. To-date the Ever Mobile Clinic has hosted over 1200 participants. After the ADA and ATDC, we started our quest to insert our first patients. As we announced last month, our goal was to insert in July. We are proud to say on July 31, through our fulfillment agents, we delivered sensors to clinics and we professionally inserted our first patients and we continued to insert throughout the week. We called it National Eversense Freedom Week. These people with diabetes and their physicians were delighted by the procedure’s simplicity and ease of starting the system once the sensor was placed. Over 80% of our first patients were previous Dexcom users. Until they were inserted, it didn’t donor them that for three months they will not have to start a new sensor. If they stayed on their G5 or even their G6, they would have had to close to a dozen sensors inserted into their bodies over that same period. One patient stated that it was truly a day of freedom, because each week she would build with anxiety knowing she would have to remove and insert another sensor. She also mentioned how she would always be careful on the first day to monitor blood sugar because day one accuracy could vary. Now, she will only have one day for the full 90-days. Another patient could not believe that all they were taking home was a pack of patches and a charger. One sensor one site, one order, she is absolute freedom. The patients who had not been on CGM before were equally delighted. The procedure was simple and painless. They were thrilled when the first blood sugar appeared on their smartphone and one patient said, my wife finally got a full night’s rest knowing I could feel the on-body vibrations if I was going well. And as he was choking up with joy, he said, this type of freedom is truly priceless. Thank you, Senseonics. We have many more patients like this in our pipeline and look forward to serving these patients with Eversense. In addition to the sales operational activities, we are also making strong progress on coverage. As I’ve mentioned on past calls, our conversations with payers have been very encouraging. We have provided payers with a clinical dossier and the Senseonics access team continues to meet with medical directors, contracting and utilization management teams to establish policies. Two positive themes are reoccurring in these conversations. First, the nature of implantable sensors creates patient adherence and high wearing times. This is supported by real world data from patients in Europe. Secondly, the Category III CPT code which wraps the supply cost and physician time in a bundle is attractive and is attractive payment option. In parallel, diabetes clinics are submitting claims to insurance companies throughout our fulfillment agents. These steady submissions of claims show that there is a demand in clinical need for Eversense which will accelerate coverage policies. While we continue widespread – while we continue to expect widespread reimbursement to develop over time, we are pleased with our progress and excited to announce that in only five weeks after PMA approval, we have obtained our first coverage decision for Eversense from Horizon Blue Cross Blue Shield of New Jersey. Horizon is one of the twenty largest payers in the United States with almost 4 million covered lives. Under this policy, Eversense will be covered exactly the same way as other CGMs. We are excited to see a traditionally conservative plan add Eversense so quickly. We believe this is a validation that the economic buyers see the significant value of Eversense and we are confident that other payers and health systems will follow Horizon Blue. By the next earnings call, we feel strongly that we will be able to announce other payer wins for Eversense. That said, we continue to feel that securing the majority of coverage is a process that could take a couple of years. We understand there are factors out of our control such as annual policy review periods to include new technologies and we are working diligently to answer all their questions and provide any data required for them to make their decisions. There is still much work to do with the payers but we are very excited with the initial interest that we received and of course, our first payer win. Thus what this means, is that we’ve done our job to bring Eversense to the U.S. market. We have an exciting road ahead of us and a lot of work to do to help millions of people with diabetes. Yet, in over a little over 30 days, the Senseonics team has been able to operationalize and execute on our commitments to our customers and shareholders. We are excited and proud to continue the Eversense journey in the U.S. With that, I’ll turn it back to you, Tim.

[Tim Goodnow:]

Thank you, Mike. We are certainly encouraged by our early progress in the U.S. and looking to continue this momentum throughout the rest of the year. None of this would have been possible without the tremendous knowhow we’ve generated commercializing the product in Europe. Our nearly two years of experience in the region has allowed us to not only incrementally improve our products, we’ve gained valuable experience and scale up of the manufacturing process, while also enhancing our training, after sales support, education and marketing program. We are convinced that the result is substantially improved experience for our customers and has enabled us to move so quickly in the United States. And similar to last quarter, this has showed continued growth in our European business. Sensor procedures are up 27% and the installed base increased 38% compared to just the previous quarter. As of June, all of our existing markets has successfully introduced and transitioned to the newer standard life 180 day Eversense XL sensor. In Germany for example, the Eversense XL was featured prominently in our distributor partner Roche’s booth at the country’s Annual DDG Scientific Conference. Interest was very high and a constant flow of attendees were detailed on the product including the ease of the sensor procedure. Importantly, Eversense XL now accounts for over 70% of our installed base. We will continue to support our distribution partner’s efforts in creating awareness and excitement around the longest lasting sensor in the world and looking forward to reporting on patient’s experience six months down the line when removal and reinsertions are happening in various clinic practices. Turning back to the U.S. and the feature programs for this important market. I’d like to now discuss some of our progress on the clinical regulatory front. We are on a clear path for Eversense label expansion to the PMA’s supplement process. We continue to leverage the strength of the underlying technology with a strong analytical performance and best-in-class accuracy. As we have stated previously, one of the first supplements we’ve planned to submit was to expand the labeling for the non-adjunctive claims to allow patients the ability to make treatment decisions based on data provided by Eversense. The accuracy and performance of this system has proven capable of the benchmarks set by the agency. We remain committed and motivated to continually evolving our products to improve patient experience and to that end, we also want to prioritize the reduction of calibration to once per day. As such, we are incorporating calibration reduction and the dosing claim into one supplement to the Eversense system and we aim to submit the supplement within a month and look forward to continuing the productive dialogue with the agency throughout its approval. While executing on the U.S. launch and further expanding the Eversense label remain our primary focus, we are continuing to develop our pipeline of next-generation products. As you know, the second-generation system Eversense DL which is currently available in Europe features our sensor their last 180 days to support the regulatory submission for this product in the U.S., we will similarly be submitting an IDE to the agency in September which will enable us to begin the trial in the coming months. Finally, and on even longer term basis, we have made tremendous progress on the in vivo sensor stabilization out to the one year timeframe. This fall, we expect to see the complete results, which will guide our course of action. We are hoping to finalize the design to start a 365 day trial in the first half of 2019. Senseonics has significantly advanced the science and expertise of in-body sensing technology and I now have every expectation that we will be looking at a one year life of our highly accurate sensor within 2019. With that, I’ll now turn the call over to Don to review our financials.

[Don Elsey:]

Thank you, Tim. For the three months ended June 30, 2018, we generated $3.6 million in revenues, compared to $800,000 in the second quarter of 2017. The increase in revenue was driven by increased sales in Europe. For the three months ended June 30, 2018, total operating expense increased by $8.4 million to $20.1 million from Q2 2017. This increase was driven primarily by a $5 million increase in sales and marketing expense, as we prepared for the U.S. launch and a $2.7 million increase in R&D, driven by FDA panel activity and ongoing product development, compared to the three months ended March 31, 2018 total expense increased by $4.1 million driven by the formation of the U.S. sales team. For the three months ended June 30, 2018, total net loss was $32.5 million or $0.23 per share, compared to $12.4 million or $0.12 per share in the second quarter of 2017. Compared to the three months ended March 31, 2018, total net loss increased by $10.2 million, primarily driven by a $4.1 million increase in operating expense and a $5.3 million increase in the loss from the change in fair value of the embedded derivatives associated with our convertible notes. If the impact of the embedded derivative is removed, the total net loss was $22.3 million or $0.16 per share. Second quarter 2018 net loss per share is based on 138.8 million weighted average shares outstanding, compared to 103.7 million weighted average shares outstanding in the second quarter of 2017. Turning to our balance sheet at quarter end, we had cash, cash equivalents and marketable securities of $192 million, which reflects the proceeds from the equity offering that we completed in June. I will now turn the call back to Tim.

[Tim Goodnow:]

Thanks, Don. As a wrap up, I’d like to take a moment and thank all of the hard working team members that have done so much for Senseonics and for people with diabetes. In a matter of just six short weeks, we’ve accomplished a lot. We’ve received the authorization from the agency to commercialize in the U.S., we launched our U.S. commercial activities including the highly successful Mobile Clinic campaign, we’ve already submitted one PMA supplement for label expansion. Our operations team provided products to our strategic fulfillment partners, we shipped and completed our first commercial sale, we inserted our first patients at multiple clinics in the U.S. during National Eversense Freedom Week and we have received our first positive coverage decision from a payer, all of this in less than 45 days. These are all tremendously important accomplishments for the small and growing company. Our ability to stay focused and action-oriented as we grow will help us to continually meet the needs of our users. It’s with my sincerest gratitude that I thank all of this team that has got this done. This concludes our prepared remarks. Also joining us for questions are Mukul Jain our Chief Operating Officer, and Mirasol Panlilio our Vice President and General Manager of Global Commercial Operations. Operator, let’s open up the call for questions.

[Operator:]

[Operator Instructions] And our first question comes from Chris Pasquale from Guggenheim. Please go ahead.

[Chris Pasquale:]

Thanks and congrats on the progress guys. Tim, I am curious given out early you guys are in the U.S. launch. The decision to go ahead and bump full year guidance up a little bit. Can you just walk through the pieces there and what gives you confidence in that improved outlook at this stage?

[Tim Goodnow:]

It’s really driven by two things, Chris. One is, the product performance in Europe which obviously is the trajectory that we’ve been on. We continue to do extremely well with acceptance of the product. And the other portion of it is just the readiness that we have in the United States and frankly, the acceptance that we’ve gotten from the clinicians and patients to go into the procedures. So, looking at the two of those, it now looks like we are going to be able to do a little bit better than we originally forecasted earlier in the year. So, in the sense of good transparency, we opted to go ahead and set that expectation.

[Chris Pasquale:]

Would you say that the extra $1 million is U.S. revenue or is it really not that kind of drive?

[Tim Goodnow:]

No, as I described, it’s really coming from both the European performance as well as the readiness. We really hit the ground running and the team has done a great job and you heard we launched the product from FDA approval and got it in patients in six weeks. That’s almost unheard of in this environment. Diabetes technology companies tend not to be able to move that fast, but it’s really been a focus for us.

[Chris Pasquale:]

And then, can you just give us an update on where you are with the U.S. sales force headcount at this point? Where would you like to be exiting the year? And how should we think about SG&A expense ramping from here over the next couple quarters? Thanks.

[Tim Goodnow:]

Sure. Mike, why don’t you go ahead and fill folks in on where we are with the commercial expansion plan which is actively underway?

[Mike Gill:]

Sure, thanks for the question, Chris. By the middle of August, we’ll have 20 quota reps, about 15 clinical people and we will have 10 to 12 in customer care. So, in terms of that, commercial support and selling organization will be 45 total people. As we stated on previous calls, we’d ramp to about 30 by the end of the year. And much of that will be determined at our coverage policies based on payer where we deploy resources.

[Tim Goodnow:]

Are you still there?

[Chris Pasquale:]

Yes, thanks, Mike. Great. Don, just want to follow-up on the SG&A expense, cash free model operating expenses from here?

[Don Elsey:]

Sure, we have - as you know, we have not given guidance on OpEx for the year, but as you saw the growth in second quarter for the formation of the sales group, that general increase will continue through the year as we continue to add heads. It’s not going to be linear. It’s going to be somewhat chunky as we probably add them and in groups over the balance of the year. But you are going to see a continued uptrend but not dramatically.

[Chris Pasquale:]

Great. Thanks guys.

[Operator:]

And our next question comes from Alex Nowak from Craig Hallum Capital Group. Please go ahead.

[Alex Nowak:]

Great. Good afternoon everyone and great to hear the positive traction on Eversense so far in the U.S. Hey, Mike, just what is the biggest pushback you are hearing from endos and patients now that the product is approved here in the U.S. since being actively marketed?

[Mike Gill:]

Hi Alex. As I said at the ADA, I thought there was really positive response. In fact, the response has been frankly more positive than we could have either imagined. Procedure is pretty straight-forward, actually simpler than they thing. The clinic is well prepared to put this into their practice. I think they are thinking about those patients that are best suited for Eversense and we continue to see if you will, more and more patients that physicians are thinking of, obviously, I think that reimbursement will be the biggest piece of this in this – as I said earlier, with our first coverage policy, I think the payer community will start that Eversense is a meaningful product that we need to put into the diabetes treating community. So, probably that reimbursement would probably be the biggest thing that we’ve heard so far.

[Tim Goodnow:]

Yes, Alex, let me just echo that, just like we saw in Europe, there is a good expectation on the clinicians that they can get comfortable with the procedure. The real question they have that we don’t have the answer for today, but we are actively, actively working on it, is when can my patients in my particular region get coverage for it. So, we’ve got great progress in New Jersey and Mike has a team that’s working to expand that across the United States as quick as we can. So, that’s actually the biggest area of focus for us as you can imagine.

[Alex Nowak:]

That’s great, and Tim, that’s a great segue into my next question and certainly congrats on the Horizon coverage policy. I also saw that United Help updated its coverage policy at the beginning of August and they still do not cover Eversense and they actually state that there is insufficient events to conclude that Eversense actually improves – control. So, I am just curious what’s your response is? Do you think some payers are going to make a need to run additional clinical trials before getting coverage?

[Tim Goodnow:]

Mike, why don’t you go ahead and speak to what you guys are hearing certainly the standard practice on any new technology for many, many of the payers is to solicit and that’s not covered and we have to fight to get that – to get added in and Mike, why don’t you go through some of that?

[Mike Gill:]

Sure, Yes, Alex, I think what you are referring to healthcare listeners experimental investigational and that’s not just with Eversense. Other technologies coming into the market and actually different feature sets that came into the market, they’ve listed as experimental investigational with local cost of spend. And we have experienced people on the team who can navigate through that experimental investigational and we feel confident one, the utilization will be out there and I think that’s really important that the physician community continues to submit claims to payers. So they can see that utilization and demand that’s out there. And then we have the discussion. We have a discussion with the medical directors and the policy makers within the plans and review the dossier that I talked about. But experimental investigational is not uncommon with new technologies, novel technologies within the diabetes space that it’s a process to work through. That’s why we’ve said, clearly that payer coverage is a journey and each individual payer and plan has their own review process. We’ll work actively, specifically with United Healthcare, we do have some early conversations with that group already and we’ll work through their process and we are confident as I said, we’ll have the majority of coverage policy within the next couple o f years.

[Alex Nowak:]

Okay, understood, Mike. And then, just a last question for me. I believe Roche’s distribution agreement ends at the – or expires at the end of this year. I was just curious where are you with contract renegotiations?

[Mike Gill:]

So, Roche continues to be a very good partner for us. They are a very deep organization and the largest glucose monitoring entity in the world. We are continuing to work with them. We are looking at ways to continue advance the relationships that we are speaking with them right now. And we’ll certainly keep all updated in regards to other contract conversations is going throughout the process. So, nothing new to report, but we are both actively discussing it and both very interested in renewing it.

[Alex Nowak:]

Okay, great. Thank you.

[Operator:]

And our next question comes from Kyle Rose from Canaccord. Please go ahead.

[Kyle Rose:]

Great. Thank you very much. For taking the question. I just wanted to circle back on the increased guidance moving into the second half year. I think on the last call, you characterized the contribution from U.S. is being modest and it sounds like the extra one million here is coming from both the OUS and then I guess, call it a running head start in the U.S. But can you kind of frame what your definition of modest contribution is? I mean, is it $2 million? Is it $3 million? Is it $1 million? And then, more longer-term, when I think about 2019, when I talk to investors, I think there is a fear out there just regarding consensus estimates coming in a wide range. I just wonder if there is – if you wanted to maybe frame how you are thinking about 2019, maybe not so much as on specifics, but maybe just the cadence of growth exiting 2018 and into 2019?

[Tim Goodnow:]

Kyle, I appreciate the question and I know folks are really trying to reconnoiter on where the business is going. Obviously, we think about that every day. But at this point it is just too early for us to make any comments on 2019. We are literally in the market for less than six weeks right now. In regard to the performance in the United States, as you said, it is a combination too as I stated. What we are actively focused on as Mike indicated is getting the fishing licenses, getting the authorizations and approvals to go hunting with the insurance companies and their particular patients. We have one. There are many, many more to go that we are working on. So, as we knock those off, we’ll have better and better visibility. But at this point, I think it’s just too premature to give too much more indication of guidance. In regards to the U.S. versus Europe, as we’ve said it is predominantly the European markets. Remember what we are going through, we are putting patients on the center today in August and they will come up for their first opportunity to reinsert in November. Right, so, if we put a patient on in October, they are not going to come up for a reinsertion until January. So, it’s actually, a pretty modest amount in 2018 just because the nature of our business. So, we’ll ramp up very quickly. But we are obviously starting from a small base. We are excited because we do see some great acceptance and we think there is going to be a lot of opportunities there. Recall that we are focused on the top 300 prescribers in the United States. And when we speak with them and they get the feedback and they start telling us, these are the types of patients, these are the number of patients I would expect to have an interest in the Eversense product, that’s where we get our vision for how this should roll forward. So, we’d love to be able to give some more guidance, but do bear with us that it’s still pretty early in the game for us to go at a fine degree of specificity at this point.

[Kyle Rose:]

Okay, I understand that. Let me just phrase it one other way, just try to get a little more of a directional answer is just, are you comfortable with the – where consensus is currently modeling your 2019 estimates just from – as far as a midpoint of consensus?

[Tim Goodnow:]

Again, I’ll honestly, Kyle, that’s not something that we’ve even got to at this point. We’ll look at as we get a little bit closer. But at this point, we are going to stay focused on that $19 million to $21 million in the United States and we’ll have to get back to you on 2019.

[Kyle Rose:]

Okay, and then, just a last question for me and then I’ll hop back in the queue is just, internationally, obviously, moving over to the XL product, I think you talked about the 70% of the installed base has that XL in plan. Any update from a pricing standpoint as far as how that’s being sold on or are you able to get an increased cost per implant for the respective increase in the days that are being delivered to the patient?

[Tim Goodnow:]

Well, recall that our pricing is static by contract with Roche and all revenue that route forward is that revenue to our distributor. But I’ll let Mirasol speak to the dynamics of pricing in the European market. Mirasol, you want to describe what’s the current price?

[Mirasol Panlilio:]

Yes. Hey, Kyle, I am not sure if I can add more than what Tim had already said. It’s really varies from country-to-country and within the country, whether if reimbursed or tendered business. But what we can see is, on a per day basis, it’s the XL is very similar to the 90-day sensor, maybe slightly lower, but not materially so. And it’s still a parity with the other real-time CGM sensors.

[Kyle Rose:]

Great. Thank you very much for taking the questions.

[Tim Goodnow:]

And Kyle, just a further clarification. We are seeing the predominance of all the action in Europe, something like three quarters of our revenue is still coming from the three key markets of Sweden, Germany and Italy. Those are good reimbursement markets. Places where there is much greater pricing pressure like France. The Roche partner has not commercialized yet. So, it’s still heavily driven by the biggest reimbursed markets.

[Operator:]

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

[Jayson Bedford:]

Thanks and good afternoon. Just a few. I guess, just for clarification, did you recognize any revenue in the U.S. in the second quarter?

[Tim Goodnow:]

No, we did not.

[Don Elsey:]

We did not. We received approval in June and didn’t ship until July.

[Jayson Bedford:]

Okay, okay. Maybe just on the distribution side, how many distributors you have signed up and are these more drug wholesalers or conventional distributors that most of the other device companies in the space is?

[Tim Goodnow:]

We have three. Mike, why don’t you describe? It is obviously, completely different distribution relationship that we have with Roche. Mike, why don’t you describe how they help?

[Mike Gill:]

Yes, sure. So, Jayson, thanks for the question. As Tim mentioned, we have three more, call it strategic fulfillment agents. And these – think about that these are distributors that are distributing the products directly to one or two customers here. If they go through the procedure codes that wrap code that I talked about in my comments earlier. That would be shipped through one specific distributor to the physician offices. And then we have two other distributors that would process a normal DME like you mentioned earlier as other CGMs. And those would go through the DME medical benefit, which would be shipped directly to the physician’s office on behalf of the patient. And those three, we are going to probably billed to a few more than that by the end of the year and those are the agents that we’ve sent to – to recognize that revenue that Tim talked about and then all of our first patients that we inserted those sensors were sent directly to the physician offices. They actually paid for those sensors from the fulfillment agents and then the physicians delivered those sensors to the patients.

[Jayson Bedford:]

Okay, okay, that’s helpful. And so, when I think of the – you mentioned the wrap code, if I am understanding correctly, Blue Cross Blue Field of New Jersey is going more of the DME route and not the wrap code from a reimbursement perspective?

[Mike Gill:]

If you look at the policy coverage statement, it actually shows that we are listed as a provider with – she is not a provider, a manufacturer within the A code which is that DME code, but they also list 04460 which is actually the procedure code for the physician. We are having discussion in terms of their reimbursement channel that they would like to move that through. Whether it is all in the wrap or if they want to go through the procedure code. But, right now, we are submitting claims into Horizon right now through that A code as you mentioned earlier.

[Jayson Bedford:]

Okay. And the goal is to steer more folks or get aligned more on the wrap code side of things, correct?

[Mike Gill:]

Well, we believe that that the CPT code is a more favorable code when you look at the physician actually being the provider rather than a DME company and we’ve had conversations with payers as I said in my comments that, they prefer that. We believe that that’s a more efficient way to actually receive payment because there is only one provider that you are paying rather paying the provider and then the DME company’s physician. And that’s a preference that we’ve heard back from payers. And that it’s a primary strategy for us moves that established category three code, the three different codes that we have for inserted glucose sensing.

[Jayson Bedford:]

Right.

[Tim Goodnow:]

But that said, Jayson, it is an option. We can support either one if that exceeds. It’s a firm prefers through a traditional DME route, we can certainly go in that route. Those that prefer agreement like to move the side of the DME channels, we can do that as well. And we are happy to work with them in either mechanism that works for them.

[Jayson Bedford:]

Okay. How many your top 30 targeted endos are part of the Blue Cross Blue Shield of New Jersey network?

[Mike Gill:]

Jayson, I prefer not to speak specifics there. We are just got to getting through all of the plans to work with Horizon. I prefer not to talk through specific numbers right now.

[Jayson Bedford:]

Okay.

[Tim Goodnow:]

It’s a very small inflow you’d imagine, right four million covered lives. So, part of the top 300 it’s geographically probably a few percent, right.

[Jayson Bedford:]

Okay. And just maybe last from me, in Europe, can you just talk about payer coverage in Germany in terms of percent of covered lives. I don’t know how you want to frame it. But are you fully covered in most of the Germany right now? Or is there is still some geographies or territories within Germany to be opened?

[Tim Goodnow:]

Roche is still working. We’ve got a predominant, Mirasol, do you want to, I think the last update we gave.

[Mirasol Panlilio:]

Yes. Hi, Jayson. We – similar to what we reported at the last earnings call, we have about 80% covered lives in Germany. So the product is reimbursed. The process that we go through in Germany is first you get a prescription from a doc and then that is provided to the manufacturer who then works with insurance company to get that through the system. What we are finding in Germany is that we get a lot of these prescriptions, but the prior authorization process may take a little while some up to several weeks and so that’s part of the challenge that we are working through in Germany and partnered with Roche is how to just speed up that process. But the product is reimbursed in Germany as well as in other markets.

[Jayson Bedford:]

Okay. Thank you.

[Operator:]

And our next question comes from Rebecca Wang from Leerink Partners. Please go ahead.

[Rebecca Wang:]

Hey, good afternoon guys. Thank you for taking my question. This is Rebecca for [Indiscernible] I just want to ask on the competitive landscape, what is management’s view on the U.S. market in terms of competition. Do you see any difference here in the U.S. versus what you have seen in the Europe?

[Tim Goodnow:]

Obviously, the products that are available are identical between the two regions. The advent of the Gen 6 Dexcom is the most recent addition. But obviously the Libre product first got its start in Europe and it’s now available in the United States. So, pretty similar, competitive environment. I will say that it is honestly an advantage to us to have so much going on in the space, right with the expense that Abbott has at bringing out the Libre product, Dexcom has and they are bringing out G6 that is very, very, very high recognition and acceptance of the need of CGM and that’s been frankly attractive for us in coming out. So, obviously the competitive environment is going to be important. We still are seeing the majority of our patients in Europe coming from existing products that we see a pretty good portion coming from new patients that are educated on the opportunity as well. So, that competitive dynamic will certainly be there. But so, well bringing new folks which is most important for all of us to the table.

[Rebecca Wang:]

And if I can just follow-up on that question. So, in the market where you have reimbursement such as Germany, what is Eversense’s market share in that country when you compete against Abbott’s Libre and Dexcom? Thank you.

[Tim Goodnow:]

I frankly don’t have the market share number at this point. It’s something we will have a little bit better handle on in the United States. But given the dynamics of the distribution partnership, I don’t have it yet and we have not funded an independent survey.

[Rebecca Wang:]

Okay, thank you.

[Operator:]

And our next question comes from Jacob Frankel from Paulson Investment. Please go ahead. Your line is open. [Operator Instructions] And our next question comes from Sean Lavin from BTIG. Please go ahead.

[Unidentified Analyst:]

Yes, this is [Indiscernible] on for Sean today. Thanks for taking the questions. Thanks for the positive anecdotal feedback so for on the early days of the U.S. launch. I want to dig into that a little bit more and hear how doctors are introducing patients this technology and how they might adopt from here? I mean, is it the sort of pattern where we think that docs to implant a couple patients and then wait and see how they do or should we expect them to ramp everyone sees there is implanting. Just any color you can offer there.

[Tim Goodnow:]

Mike, why don’t you describe how the – your early conversations are with docs and patients?

[Mike Gill:]

Yes, well, I’ll take the first one first, how they are thinking about it through patients. The way that we have heard physicians talk about it both at the ADA, ATDC and now that we’ve had physicians inserted is, they are going as always they are going to give this as another option for their diabetes treatment and people they treat with diabetes. I heard one physician say, someone is coming in that’s for the three month visit and they are on a G5. They are going to talk about Eversense because they are moving from one newer technology to the other and the conversation they go, there was a new product out that actually last for 90 days, when this new generation product will give an additional three. And we’ve actually heard that – on several occasions where those patients coming in on G5 will certainly be offered an opportunity to take advantage of Eversense. The same thing is with a Libre patient where that Libre patient, as Tim talked about earlier what now he has flat systems that are actually a good thing for the market. It’s actually increase CGM usage. Those patients also would be offered and the conversation would go with them to say are you interested in moving to a full featured system that actually goes from 14 days to 90 days. So, we really believe that that long-term sensor will become a very strong conversation, of course Eversense is the only product that can offer that 90 days. In terms of those patients that are not on CGM, we talk about this quite frequently that there is roughly around 6 million patients that are on insulin alone or insulin in oral. And those patients for whatever reason haven’t adapted CGM and often time it is because of the burden of inserting a sensor every seven to ten to 14 days, the – that goes along with that and so when physicians actually see how the PAT system works with our transmitter and how easy it is to use post-procedure, those will be patients that they have talked to before about CGM and we have said no, who they now are going to offer Eversense. And really then, anyone who we believe will take advantage of this on insulin before or then offered other CGMs. And then we are also seeing different categories of patients that are coming up through conversations with patients. In terms of how physicians are thinking about actually putting patients on, what we do is, we actually certify them on Eversense with three patients then they can perform the procedure. We do recommend that a few weeks later, that to actually do another three to kind of to build up that muscle memory of how to do the procedure. It’s very simple, but you want to build a little bit of repetition in it and then from there, we think that physicians will think about three per week that’s what we able to do in terms of insertions. Especially these top 300 that we mentioned earlier who are used to doing procedures and have the capability and the interest to use CGM.

[Unidentified Analyst:]

That’s really interesting. Thanks for that, Mike. And I guess, my other question, my follow-up was, it’s great to share that the plans for XL in the U.S. moving ahead. Can you offer any more details on what the IDE study design might look like and when we like to start at this?

[Tim Goodnow:]

Yes, it’s a traditional CGM regulatory trial and what the agency is looking for is the confirmation of accurately measuring glucose throughout the full life of the sensor. So whether you do a seven day, 10 day, 90 day or 180 day trial, they are very similar throughout varying periods of the sensor life certainly including the beginning and the very end, the patients will come to the clinic. They will be monitored for 12 to 16 hours. They go through glycemic variations that are induced with carbohydrates and insulins and you monitor the tracking of your new device versus what the laboratory standard analyzers do. And you submit that data, agency review that and that’s a basis of the claim just mentioned. So, very, very similar to what we’ve done before. Very, very similar to what’s now done in the market. The complexity of course is that we have a 180 day sensor. So we will be evaluating the sensor for 180 days, so it would be well into 2019 when the clinical trial was completed. And then submission to the agency is about six months for approval after that as a supplement now.

[Unidentified Analyst:]

Okay, thanks so much.

[Operator:]

And ladies and gentlemen we have time for one more question and that comes from Chad McCauley from Merrill Lynch. Please go ahead.

[Chad McCauley:]

A couple quick questions. How long does the insertion process takes for the physician?

[Tim Goodnow:]

The insertion process has averaged about 2.5 minutes. It’s about 4.5 minutes to remove it.

[Chad McCauley:]

And then, the marketing strategy overall, can you speak a little bit to that how many states is presently available in and how many do you expect it to be available in by year end number of reps hired?

[Tim Goodnow:]

Sure. Well, it is a available in the United States, so that no particular state preference. Obviously, as we indicated, our focus has been on reimbursement which can be regional in many cases and therefore your opportunity obviously increases as a big regional plan gets authorization to cover the product. So, that’s the focus. There is approximately a 100 plans that one will go to. Mike had indicated we anticipated it as typically and we expect to be in that timeframe of about two years to cycle through all of those plans.

[Chad McCauley:]

Do you want to refer to that is in a specific state without giving a specific example, basically, there is not a physician in multiple states that is doing the process right now. So that’s what I refer to. It might be available and approved by the FDA, but you can’t your hands to hold a one and get a physician to insert it. So that’s what I was referring to there. Your closed loop system on the insulin pump you are working with Roche, do you have plans to work with any other pump providers?

[Tim Goodnow:]

We’ve announced partnerships with Roche and Beta Bionics at this point.

[Chad McCauley:]

Thank you.

[Tim Goodnow:]

Thank you.

[Operator:]

And this concludes our question and answer session. I would now like to turn the conference back over to Tim Goodnow for any closing remarks.

[Tim Goodnow:]

Well, thank you. We appreciate everyone’s time this evening and all of the interest. We are obviously very excited as we said to be launching it here in the United States. Much work to do, but the early reception has been very positive. We look forward to updating you in possibly November with the initial performance in the United States. With that, I wish everyone a good evening and thanks for your time.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.