UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
SENSEONICS HOLDINGS, INC.
(Exact name of registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
47-1210911
(I.R.S. Employer
Identification No.)
20451 Seneca Meadows Parkway
Germantown, MD 20876-7005
(301) 515-7260
(Address and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Common Stock, par value $0.001 per share
Trading
Symbol (s)
SENS
Name of Each Exchange on which Registered
NYSE American
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of June 30, 2023, the last business day of the registrant’s last completed second quarter, the aggregate market value of the common stock held by non-affiliates of
the registrant was approximately $357 million based on the closing price of the registrant’s common stock, as reported by the NYSE American on such date.
As of February 23, 2024, 530,668,435 shares of common stock, $0.001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference in Part III, Items
10-14 of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15. Exhibit and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements that involve
substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 1:
“Business,” Part I, Item 1A: “Risk Factors,” and Part II, Item 7: “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” but are also contained elsewhere in this Annual Report. In some cases, you can
identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,”
“intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue”, “target”,
“seek”, “contemplate”, and “ongoing,” or the negative of these terms, or other comparable terminology intended to
identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance or achievements to be materially different from the
information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable
basis for each forward-looking statement contained in this Annual Report, we caution you that these statements are based
on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot
be certain. All statements other than statements of historical fact could be deemed forward-looking, including but not
limited to statements about:
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the success of our collaboration and commercialization agreement with Ascensia Diabetes Care Holdings
AG (“Ascensia”);
the timing of product launches;
the clinical utility of Eversense;
our ability to develop future generations of Eversense;
our ability to service our outstanding indebtedness;
the timing and availability of data from our clinical trials;
the timing of our planned regulatory filings and potential regulatory approvals and CE Certificates of
Conformity;
our future development priorities;
our ability to obtain adequate reimbursement and third-party payor coverage for Eversense;
our expectations about the willingness of healthcare providers to recommend Eversense to people with
diabetes;
our commercialization, marketing and manufacturing capabilities and strategy;
our ability to comply with applicable regulatory requirements;
our ability to maintain our intellectual property position;
our estimates regarding the size of, and future growth in, the market for continuous glucose monitoring
systems;
our estimates regarding the period of time for which our current capital resources will be sufficient to fund
our continued operations; and
our estimates regarding our future expenses and needs for additional financing.
Forward-looking statements are based on our management's current expectations, estimates, forecasts and
projections about our business and the industry in which we operate, and our management's beliefs and assumptions are
not guarantees of future performance or development and involve known and unknown risks, uncertainties and other
factors that are in some cases beyond our control. You should refer to “Item 1A. Risk Factors” in this Annual Report for
a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by
our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in
this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the
inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not
regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and
plans in any specified time frame, or at all. The forward-looking statements in this Annual Report represent our views as
of the date of this Annual Report. We anticipate that subsequent events and developments may cause our views to
change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake
no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or
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otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing
our views as of any date subsequent to the date of this Annual Report.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed
as exhibits to this Annual Report completely and with the understanding that our actual future results may be materially
different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless otherwise indicated or the context otherwise requires, all references in this Annual Report to "the
Company," "we," "our," "ours," "us" or similar terms refer to Senseonics Holdings, Inc. and its subsidiary. "Senseonics,"
the Senseonics logo, 90-day Eversense, Eversense XL and Eversense E3 continuous glucose monitoring and other
trademarks or service marks of Senseonics Holdings, Inc. appearing in this Annual Report are the property of Senseonics
Holdings, Inc. This Annual Report contains additional trade names, trademarks and service marks of others, which are
the property of their respective owners.
PART I
Item 1. Business
Overview
We are a medical technology company focused on the development and manufacturing of glucose monitoring
products designed to transform lives in the global diabetes community with differentiated, long-term implantable glucose
management technology. Our implantable CGM (“Eversense”), including the Eversense E3 continuous glucose
monitoring (“CGM”) system version is designed to continually and accurately measure glucose levels in people with
diabetes via an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time
diabetes monitoring and management for a period of up to six months as compared to seven to 14 days for non-
implantable CGM systems. We affixed the CE mark to the original 90-day Eversense CGM system in June 2016, which
marked the first certification for the product to be sold within the European Economic Area (being the European Union
plus Norway, Iceland, and Liechtenstein) (“EEA”). Subsequently, we affixed the CE mark to the extended life Eversense
XL CGM system in September 2017 to be sold in select markets in Europe and the Middle East. In June 2022, we
affixed the CE mark to the Eversense E3 CGM system and Ascensia began commercialization in select markets in
Europe during the third quarter of 2022. In June 2018, the U.S. Food and Drug Administration (“FDA”), approved the
90-day Eversense CGM system for distribution throughout the United States. In June 2019, we received FDA approval
for the non-adjunctive indication (dosing claim) for the 90-day Eversense system. With this approval and the availability
of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the United States to
replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing. In February 2022,
the 180-day extended life Eversense E3 CGM system was approved by the FDA and Ascensia began commercializing
Eversense E3 in the United States in the second quarter of 2022.
In February 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to continue
for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-set of 30
participants was left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.
Information gathered from this sub-set and additional development efforts provided us the confidence to start the Pivotal
study for the Eversense 365-day System. The ENHANCE pivotal study for the Eversense 365-day system has completed
enrollment, the last patient of the adult cohort completed the study and we completed analysis of the data. Based on this
analysis we determined to advance to the next generation sensor platform as the underlying technology used in the
365-day and future products. We expect that this data will support an FDA submission to be made in the coming weeks
for a new product with a target 365-day duration and once per week calibration.
We are in the early commercialization stages of the Eversense brand and are focused on driving awareness of
our CGM system amongst people with diabetes and their healthcare providers. During 2020, we initiated a new
commercialization strategy and collaboration to bring our product to market. As described in detail below, in August
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2020, we entered into a collaboration and commercialization agreement (“Commercialization Agreement”), with
Ascensia pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense CGM system and
our 180-day Eversense E3 CGM system worldwide, with certain initial exceptions. While Ascensia is responsible for
sales, marketing, market access, patient and provider onboarding and first level customer support, we remain responsible
for product development and manufacturing, including regulatory submissions, approvals, conformity assessment and
requests for CE Certificates of Conformity and registrations and second level customer support.
Significant Recent Developments
Global Commercialization of Eversense E3 CGM System
In February 2022, the FDA approved the Eversense E3 CGM system for marketing and sale in the U.S. As
described in this report, Ascensia has the exclusive right to distribute the Company’s Eversense E3 system worldwide for
people with diabetes. Ascensia began commercializing Eversense E3 in the U.S. during the second quarter of 2022. In
June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system, and Ascensia began
commercialization in all EEA markets during the third and fourth quarters of 2022.
In October 2023, Ascensia and the Company announced a new direct to consumer U.S. marketing campaign
launched on television in select markets, in addition to social and digital media platforms. ‘The CGM for Real Life’
campaign expanded market awareness of the Eversense E3 system's unique benefits among people with diabetes and
healthcare professionals. ‘The CGM for Real Life’ campaign aims to highlight the reality of the diabetes experience,
through everyday complexities, successes, and challenges that people with diabetes face. The campaign demonstrates
how Eversense E3 provides a differentiated CGM option, with unparalleled flexibility and long-term use that allows it to
seamlessly integrate into real life.
The continued success of the commercial launch of the Eversense E3 product globally will continue to depend
on several factors such as: (1) growing the installed base of users, (2) increasing patient awareness of Eversense above
current levels in order to expand the population of Eversense users, through driving sales and marketing efforts on the
Eversense E3 system, (3) increasing awareness and adoption of Eversense by healthcare providers, including high
volume CGM prescribers, through expanded targeted marketing efforts, (4) educating patients and prescribers regarding
the six-month and future generation products and its benefits relative to legacy products, (5) continuing to grow the base
of the authorized inserters through geographically targeted efforts so that potential users locating a qualified inserter of
Eversense is not an impediment to adoption, (6) timely establishing and maintaining favorable payor coverage for the
product, including transitioning commercial payors from six month to one year coverage, (7) more effective tender
participation outside the U.S. and (8) Ascensia’s continued organizational development of its sales and marketing
capabilities relative to CGM.
In February 2024, we announced that Medicare coverage was expanded for Eversense E3 to include all people
with diabetes using insulin and non-insulin users who have a history of problematic hypoglycemia providing access to
millions of Medicare patients. The first Medicare administrative contractor (“MAC)” expansion became effective on
February 25, 2024 with the remaining MAC’s expected to become effective in the near future.
In November 2022, we announced a collaboration with the Nurse Practitioner Group (“NPG”) designed to
expand U.S. patient access to the Eversense E3 System by providing additional convenient in-office and at-home sensor
insertion options utilizing NPG’s broad network in over 30 states. Under the agreement between Senseonics and NPG,
NPG providers will be certified to perform Eversense procedures in the specified geographies and will offer its services
for patients who have been prescribed Eversense. During 2023, we expanded the inserter network by setting up
Eversense procedure capabilities in additional select geographic areas.
Background
Diabetes is a chronic, life-threatening disease for which there is no known cure. The disease is caused by the
body's inability to produce or effectively utilize the hormone insulin, which prevents the body from adequately
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regulating blood glucose levels. If diabetes is not managed properly, it can lead to serious health conditions and
complications, including heart disease, limb amputations, loss of kidney function, blindness, seizures, coma and even
death. According to the 2021 International Diabetes Federation Atlas, an estimated 537 million people worldwide had
diabetes as of the date of the report. The number of people with diabetes worldwide is estimated to grow to 783 million
by 2045, driven primarily by growth in type 2 diabetes and due to various reasons, including changes in dietary trends,
an aging population and increased prevalence of the disease in younger people. Diabetes is typically classified into two
primary types. Type 1 diabetes is an autoimmune disorder that usually develops during childhood and is characterized by
the inability of the body to produce insulin, resulting from destruction of the insulin producing beta cells of the pancreas.
Type 2 diabetes is a metabolic disorder that results when the body is unable to produce sufficient amounts of
insulin or becomes insulin resistant. People with type 1 diabetes must administer insulin, either by injection or insulin
pump, to survive. People with type 2 diabetes may require diet and nutrition management, exercise, oral medications or
the administration of insulin to regulate blood glucose levels. We expect the growth in sales of CGM systems to be
driven by increased penetration of CGM in both the type 1 and type 2 patient populations.
In an attempt to maintain blood glucose levels within the normal range, many people with diabetes seek to
actively monitor their blood glucose levels. The traditional self-monitoring of blood glucose, (“SMBG”), method of
glucose monitoring requires lancing the fingertips, commonly referred to as fingersticks, multiple times per day and
night to obtain a blood drop to be applied to a test strip inside a blood glucose meter. This method of monitoring glucose
levels is inconvenient and can be painful and, because each measurement represents a single blood glucose value at a
single point in time, it provides limited information regarding trends in blood glucose levels. In contrast, CGM systems
are generally less painful and involve the insertion of sensors into the body to measure glucose levels in the interstitial
fluid throughout the day and night, providing real-time data that shows trends in glucose measurements. As a result,
CGMs improve glycemic control and quality of life, particularly in patients with type 1 diabetes treated with continuous
subcutaneous insulin infusion or multiple daily insulin injection therapy, and support avoidance of hypoglycemia.
Historically, the FDA and other foreign regulatory authorities required that CGMs be labeled and marketed as
"adjunctive" to test-strip measurements, with instructions that patients confirm CGM measurements with test-strip
measurements using blood obtained from fingersticks prior to self-medicating. However, given the broader clinical
indications for the use of CGM systems, including real-time alerts and multi-device integration, the FDA issued the first
“non-adjunctive” label in 2016. In June 2019, an updated Eversense CGM system received a non-adjunctive label from
the FDA and can now be used as a replacement to fingerstick glucose testing for treatment decisions. This non-
adjunctive indication also enabled our pathway to access patients on Medicare.
In November 2019, the Eversense CGM system became the first CGM technology to be reimbursed through the
Part B Medical Services benefit for Medicare beneficiaries and expands access to our product. In November 2022, the
Centers for Medicare and Medicaid Services (“CMS”) released its Calendar Year 2023 Medicare Physician Fee Schedule
Proposed Rule that updates the payment amounts for the three CPT© Category III codes to account for the longer
6-month sensor. The Calendar Year 2024 Medicare Physician Fee Schedule continues to include the three CPT©
Category III codes.
We are headquartered in Germantown, Maryland. The members of our management team have held senior
leadership positions at a number of medical technology and biopharmaceutical companies, including Abbott Diabetes
Care and Medtronic. Members of our team have contributed to the development, regulatory approval and
commercialization of several glucose monitoring systems and insulin pumps.
Commercial Strategy
Our Eversense CGM systems are primarily sold through Ascensia globally. Ascensia sells our products directly
to strategic fulfillment partners, who provide our Eversense CGM systems to healthcare providers and patients through a
prescribed request and invoice insurance payors for reimbursement. Sales of the Eversense E3 CGM system and future
models are widely dependent on the ability of patients to obtain coverage and adequate reimbursement from third-party
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payors or government agencies. Ascensia is leveraging and targeting regions where we have coverage decisions for
patient device use and provider insertion and removal procedure payment.
Addressing reimbursement and access barriers has been a top priority for us and during 2023, we reached
approximately 300 million covered lives in the U.S. through positive insurance payor coverage decisions including
UnitedHealthcare, the largest healthcare insurance company in the U.S. In efforts to address these priorities, Ascensia, in
consultation with us, initiated the Patient Assistance and Simple Savings (PASS) program to provide financial assistance
for patients adopting Eversense E3. Additionally, as discussed above, we announced a collaboration with NPG designed
to expand U.S. patient access the Eversense E3 System by providing additional convenient in-office and at-home sensor
insertion options utilizing NPG’s broad network in over 30 states.
Our net revenues are derived from sales of the Eversense CGM system which is sold in two separate kits: the
disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable
Eversense Smart Transmitter Pack which includes the transmitter and charger.
Collaboration and Commercialization Agreement with Ascensia Diabetes Care Holdings AG
On August 9, 2020, we entered into a Commercialization Agreement with Ascensia pursuant to which we have
granted Ascensia the exclusive right to distribute the Company’s 90-day Eversense CGM system and our Eversense
180-day (XL) CGM system worldwide for use in people with diabetes, with the following initial exceptions: (1) until
January 31, 2021, the territory did not include countries covered by our then existing distribution agreement with Roche
Diagnostics International AG and Roche Diabetes Care GmbH (collectively “Roche”), which are the Europe, Middle
East and Asia, excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China,
as well as select markets in the Asia Pacific and Latin American regions; (2) until September 13, 2021, the territory did
not include countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and
Denmark; and (3) until May 31, 2022, the territory did not include Israel. Pursuant to the Commercialization Agreement,
in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and
Ascensia ramped up sales activities and assumed commercial responsibilities for 90-day Eversense product during the
second quarter of 2021. The distribution rights under the Roche agreement expired January 31, 2021 after Roche
provided certain transition and wind-down services.
In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and Ascensia began
commercializing Eversense E3 in the United States during the second quarter of 2022. Ascensia receives a portion of net
revenue at specified tiered percentages ranging from the mid-teens to the mid-forty’s based on levels of global net
revenues. Ascensia is obligated to achieve specified minimum annual revenue targets and meet specified levels of sales
and marketing spend. Ascensia will purchase Eversense products from us at prices which have been negotiated based on
parameters set forth in the commercialization agreement. We are responsible for product development and
manufacturing, including regulatory submissions, approvals, certifications and registrations and second level customer
support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and level one
customer support. We have agreed to establish a joint alliance committee and joint marketing committee, each with equal
representation from each party, in order to collaborate.
Clinical Development and Regulatory Pathway
Overview
Our Promise pivotal trial in the U.S. was completed during 2020. We received a Premarket Approval (“PMA”)
supplement, from the FDA for the Eversense E3 system in February 2022 and Ascensia began commercializing
Eversense E3 in the United States during the second quarter of 2022. We affixed the CE mark to Eversense E3 in the
EEA in June 2022 and Ascensia began commercializing Eversense in all oversea markets by the end of 2022.
We are also continuing to conduct a number of post-approval and feasibility studies.
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United States Pivotal Trials
PRECISE II Trial
In 2016, we conducted our U.S. 90-day pivotal trial. The trial was a prospective, single-arm, multi-center trial
designed to determine the accuracy and safety of the Eversense system. Ninety subjects were enrolled in eight centers
across the United States. Eighty-seven of the ninety enrollees completed the 90-day trial.
The clinical trial population consisted of subjects at least 18 years of age who had a clinically confirmed
diagnosis of diabetes. Subjects who had a history of severe hypoglycemia, defined as hypoglycemia resulting in loss of
consciousness or seizure, or diabetic ketoacidosis, in the six months prior to the trial, were excluded from participation in
the clinical trial. Accuracy measurements were taken at 1 day, 30 days, 60 days, and 90 days post-insertion. These sensor
measurements were continued through the earlier of the failure of the sensor or 90 days post-insertion.
The purpose of this clinical trial was to evaluate the accuracy of Eversense measurements, measured by the
mean absolute relative difference (“MARD”), when compared with bed-side blood glucose measurements obtained using
the YSI glucose analyzer over successive periods of 30 days through 90 days, as well as to assess the safety of
Eversense. YSI in vitro analyzers are bed-side instruments used in hospitals and clinics to accurately measure blood
glucose levels and are commonly used as comparators of glucose monitoring systems in clinical trials. MARD is a
statistical calculation that measures the average absolute value of the differences, expressed as a percentage, between
glucose measurements taken from interstitial fluid based on our CGM system and blood glucose measurements from
YSI. The lower the MARD of a glucose monitoring system, the more accurate the system and, therefore, the more
reliable the system's readings.
During the trial, 75 subjects underwent unilateral sensor insertions and 15 subjects underwent bilateral sensor
insertions in the clinic and used Eversense’s smart transmitter and mobile app at home for the next 90 days. Subjects
were blinded to the real-time glucose readings and trends during home-use and sensor readings were not used to adjust
their treatment. Clinic visits were scheduled at approximately 30-day intervals in order to obtain lab reference glucose
values for comparison with the sensor values and to evaluate hyperglycemic and hypoglycemic challenges in a controlled
setting.
In the trial, we observed a MARD of 8.8% for Eversense across the 40-400 mg/dL range when compared to YSI
blood reference values during the 90-day continuous wear period. We conducted a second study, the PRECISION study,
to collect supplementary data early in sensor life with two additional in-clinic visits in the first 30 days after insertion.
Study participants were able to see their real-time glucose readings during this study. The accuracy and safety observed
in PRECISE II was confirmed in this study. In addition, the data from PRECISE II study was also analyzed using an
updated glucose calculation algorithm which improved the MARD to 8.5%. Based on the data from both of these trials,
we submitted a PMA application to the FDA to market Eversense in the United States for 90-day use. On June 21, 2018,
we received PMA approval from the FDA for the 90-day Eversense system and received Category III CPT codes for the
insertion and removal of the Eversense sensor.
PROMISE Trial
In December 2018, we began enrollment for the U.S. 180-day pivotal trial. The trial is a prospective, single-
arm, multi-center trial designed to evaluate the accuracy and safety of the Eversense system up to six months using the
methods described above for the 90-day system. Over 180 subjects were enrolled in eight centers across the United
States. We completed enrollment in September 2019 and had our last patient complete their 180-day visit during the first
quarter of 2020.
The clinical trial population consists of subjects at least 18 years of age who have had a clinically confirmed
diagnosis of diabetes for at least one year. Subjects with a history of unexplained severe hypoglycemia, defined as
hypoglycemia resulting in loss of consciousness or seizure, or diabetic ketoacidosis, in the six months prior to the trial
were excluded from participation in the clinical trial. After screening, sensor(s) were inserted and accuracy
measurements were taken at multiple visits during the first 30 days and then every 30 days to 180 days post-insertion or
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until sensor failure, if earlier than 180 days post-insertion. In the trial, we observed performance matching that of the
90-day Eversense system available in the United States, with MARD of 8.5%-9.6%. This result was achieved with
reduced calibration, down to one per day, while also doubling the sensor life to 180 days. Following the results of the
PROMISE trial, on September 30, 2020 a Premarket Approval Application Supplement, or PMA supplement to extend
the wearable life of the Eversense CGM System to six months was submitted to the FDA. As described elsewhere, we
received PMA approval from the FDA for the Eversense E3 CGM system in February 2022, Ascensia began
commercializing Eversense E3 in the United States during the second quarter of 2022.
On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to
continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-set of
30 participants who all had sensors with the modified chemistry were left undisturbed for 365 days with the goal of
measuring accuracy and longevity over the full 365 days. Information gathered from this sub-set and continued
development efforts provided us the confidence to start the pivotal study for the Eversense 365 day System.
ENHANCE Trial
In March 2022, we began enrollment for the U.S. 365-day pivotal trial. The trial is a prospective, single-arm,
multi-center trial designed to evaluate the accuracy and safety of the Eversense system up to one year using the methods
described above for the 90-day and 180-day systems. Over 165 subjects were inserted with Eversense systems in four
centers across the United States. In mid-2023, the data gathered in this trial was used to submit an application to the FDA
for the integrated continuous glucose monitoring (“iCGM”) designation. The iCGM designation will enable our ability to
integrate with insulin delivery devices like pens and pumps to create systems that would use Eversense for autonomous
control and we expect approval in the first half of 2024. In 2022, we submitted and received approval for an
investigational device exemption (“IDE”) for an extension of the trial to allow for pediatric patients and we began
enrolling patients in the first half of 2023. The ENHANCE pivotal study for the Eversense 365-day system has been
fully enrolled, the last patient of the adult cohort completed the study and we completed analysis of the data. Based on
this analysis we determined to advance the next generation sensor platform as the underlying technology used in the
365-day and future products. We expect that this data will support an FDA submission to be made in the coming weeks
for a new product with a target 365-day duration and once per week calibration.
Our Technology
Eversense consists of three primary components: a small sensor inserted subcutaneously under the skin by a
healthcare provider; an external removable smart transmitter that receives, assesses and relays data from the sensor and
provides vibratory alerts; and a mobile app that receives data from the transmitter and provides real-time glucose
readings, alerts and other data on the person's mobile device. All of these components work together to provide sensor
glucose values, trends and alerts to a user's mobile device within 20 milliseconds. We have designed this reliable, long-
term and implantable CGM system to continually and accurately measure a person's glucose levels for up to six months.
Eversense requires once daily fingerstick calibrations after day 21. In June 2019, we received FDA approval for the non-
adjunctive indication for the 90-day Eversense system. With this approval, the Eversense system can be used as a
therapeutic CGM to replace fingerstick blood glucose measurement for dosing decisions and was launched in
December 2019.
We believe our implantable CGM system offers the following advantages to support the management of diabetes:
• Accuracy: Exceptional accuracy particularly in the low glucose range throughout the sensor life.
• Duration: Longest available sensor duration at up to six months.
• Convenience: Our Eversense CGM system supports the patient’s lifestyle; the smart transmitter is water
resistant, rechargeable and can be removed and replaced without disturbing the sensor, strong but gentle-on-skin
adhesive patches, wireless communication to patient’s mobile device or Apple Watch ®, including readings
every five minutes whether the patient has their mobile device or not, remote monitoring that can be shared with
up to five people, including health care providers, and tracking of meals and workouts for further diabetes
treatment management.
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• Vibe Alerts: Added safety of an on-body vibration alert when low or high glucose threshold is reached, or
importantly before low or high threshold is reached, even when the mobile device is not nearby.
• Continuous Support: Patient and healthcare provider hotline support 24/7.
Sensor
The sensor is approved and CE marked to be inserted under the skin, in the upper arm, and measures the
glucose in the interstitial fluid. These glucose levels are then communicated wirelessly to the smart transmitter. We have
designed the sensor to last up to six months, as compared to other currently available CGM sensors labeled for use for
between seven and 14 days.
The sensor consists of an optical system, known as a micro-fluorometer, encased in a rigid, translucent polymer
capsule, which is 3.3 mm in diameter and 15 mm in length. The capsule is coated with a glucose-indicating hydrogel that
is bound to the surface of the capsule through polymerization. This hydrogel is energized, or excited, by a light-emitting
diode (“LED”), contained in the optical system of the sensor, causing the hydrogel to fluoresce, or glow. Two
photodiodes within the optical system of the sensor measure the degree of fluorescence of the hydrogel, which is
proportional to the level of glucose present in the interstitial fluid. The sensor then communicates the amount of
fluorescence via a near field communication (“NFC”) interface to the transmitter. NFC is a high frequency wireless
communication technology that enables the exchange of data and energy between devices over a short range. The sensor
does not have a power source and remains electrically dormant (powered off) between readings every five minutes, and
it is remotely and discretely powered, as needed, by an inductive NFC link between the sensor and the transmitter. On
power-up, the LED source is energized for approximately five milliseconds to excite the hydrogel.
Smart Transmitter
The removable smart transmitter is a rechargeable, external device that is worn over the sensor implantation site
using a daily adhesive patch. The transmitter supplies wireless power to the sensor through an inductive NFC link, which
activates a measurement sequence every five minutes. The transmitter then receives data from the sensor and calculates
glucose concentrations and trends. Based on these calculations and on the user's individual settings for glucose levels, the
transmitter determines if an alert condition exists, in which case the transmitter communicates the condition to the user
through the mobile app and through on-body vibration. The information from the transmitter is also transmitted for
display to the user's mobile device via Bluetooth Low-Energy (“BLE”). Our transmitter is functional for at least 24 hours
following a full charge and can be fully charged in fifteen minutes.
Mobile App
Our mobile app is a software application that runs on both platforms; iOS mobile devices, including iPhones,
iPads and Apple Watches, and Android mobile devices. The mobile app receives information from the transmitter via
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BLE and displays that information discreetly to the user. This user-friendly, intuitive app provides real-time glucose
readings, alerts, trends, and graphs. Within the mobile app, users can set alerts based on, among other things, glucose
levels. The mobile app also allows for cloud-based storage.
Future Product Development
We intend to continue to expand our line of product offerings to benefit people with diabetes and healthcare
providers. We expect these product development initiatives to include system modifications and next generation
enhancements that we believe will further increase the convenience and appeal of our products to the diabetes
community.
We are focusing our future development efforts on enhancing current product offerings by reducing calibrations
towards a once per week calibration. Our next generation sensor which recently completed pivotal testing is designed to
extend the sensor duration even longer at up to 365 days. We expect the next generation sensor to support our goal of
extending the market for long-term implantable CGM to include Type 2 patients not on intensive insulin therapy. We are
also developing our “Gemini” product variation to allow for a 2-in-1 glucose monitoring system combining the
functionality of CGM and Flash Glucose Monitoring, in an implantable sensor with battery that may be utilized with a
smart transmitter to get continuous glucose readings and alerts, or be utilized through a swipe over the sensor with a
smart phone to get on-demand glucose reading without a smart transmitter. We are also developing our “Freedom”
product variation which would include Bluetooth in the sensor eliminating the on-body component. We are seeking to
ensure that we meet the growing and unique needs of people with diabetes utilizing our core and proprietary sensor
technology. The company’s technology also has potential applications measuring analytes other than glucose, such as
oxygen, and the company may consider opportunities for the development or out-licensing of such applications.
Sales and Marketing
We are in the early commercialization stages of Eversense and are focused on driving awareness and adoption
of our CGM system amongst intensively managed patients and their healthcare providers with our commercial partner
Ascensia.
We are party to a commercialization agreement with Ascensia, pursuant to which we have granted Ascensia the
exclusive right to distribute our prior 90-day Eversense CGM system and our current six-month Eversense CGM system
worldwide for use in people with diabetes, with certain exceptions. Pursuant to the Commercialization Agreement, in the
United States, Ascensia began providing sales support for the 90-day Eversense system on October 1, 2020 and Ascensia
ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense system during the second
quarter of 2021. In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and Ascensia
began commercializing Eversense E3 in the United States in the second quarter of 2022.
As a result of our strategic partnership, Ascensia is responsible for sales, marketing, market access, patient and
provider onboarding and level one customer support. We have established a joint alliance committee and joint marketing
committee, each with equal representation from each party, in order to collaborate.
Building strong adoption with an implantable device requires a strong network of healthcare providers trained
on the Eversense sensor placement procedure. In the first few quarters of our commercial launch, our focus was ensuring
the Endocrinology providers obtained the necessary training needed to support their diabetes patients. In 2019, we began
our second phase of establishing a large network of Eversense proceduralists with the launch of the Certified Eversense
Specialist (“CES”) network. This group of healthcare providers includes specialists who have strong familiarity with
conducting in-office procedures such as dermatologists and plastic surgeons. The CES network offers an alternative for
healthcare providers who want to prescribe Eversense for their patients but prefer to refer the procedure to a specialist. In
2022, we announced a collaboration with NPG designed to expand U.S. patient access to the Eversense E3 System by
providing additional convenient in-office and at-home sensor insertion options utilizing NPG’s broad network in over 30
states. Under the agreement between Senseonics and NPG, NPG providers will be certified to perform Eversense
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procedures in the specified geographies and will offer its services for patients who have been prescribed Eversense. We
will continue to expand the inserter network by setting up Eversense procedure capabilities in additional select
geographic areas.
As people with diabetes often consult with their healthcare providers about treatment options, we believe that
educating healthcare providers regarding the benefits of Eversense compared to SMBG and other currently available
CGM systems is an important step in promoting its use in people with diabetes. Our European experience and our
feedback in the United States indicates healthcare providers highly value the accuracy and sensor duration of our CGM
system and the majority of physicians surveyed considered the insertion process to be fairly simple or feasible. We
intend to continue educating healthcare providers and people with diabetes on the advantages of Eversense compared to
SMBG and other currently available CGM systems.
In October 2023, Ascensia and the Company announced a new direct to consumer U.S. marketing campaign
launched on television in select markets, in addition to social and digital media platforms. ‘The CGM for Real Life’
campaign expanded market awareness of the Eversense E3 system's unique benefits among people with diabetes and
healthcare professionals. ‘The CGM for Real Life’ campaign aims to highlight the reality of the diabetes experience,
through everyday complexities, successes, and challenges that people with diabetes face. The campaign demonstrates
how Eversense E3 provides a differentiated CGM option, with unparalleled flexibility and long-term use that allows it to
seamlessly integrate into real life.
Reimbursement
Coverage in the United States
In the U.S. market, it is essential to obtain third-party payor coverage policies, coding mechanisms, and
adequate payment for medical technology to expand market acceptance and adoption. CGM as a class of products has
been broadly accepted by commercial third-party payors, such as health insurers and health maintenance organizations,
and more recently by Medicare for patients who require the use of insulin to manage their diabetes. We approach the
U.S. commercial third-party payor community in efforts to establish coverage for Eversense. To date, approximately 300
million people in the United States may have coverage and access to the Eversense E3 product via commercial (for
example, UnitedHealthcare) or government (for example, Medicare) payors.
Some commercial payors have denied coverage deeming Eversense as an “experimental and investigational”
technology electing to wait for further clinical evidence, more safety data, or time in market. We disagree with this
position as the CGM class has already proven to improve health outcomes and Eversense is another product that fits into
the class. Additionally, in 2019 we published several sets of real-world data, which show Eversense provides the same
clinical benefits as other CGM systems and has a favorable safety profile. However, until payment for the Eversense
sensor placement becomes consistent, some patients will be required to bear the financial cost for the placement of the
sensor by their healthcare provider. As a result, some patients and their healthcare provider may choose not to use
Eversense on a widespread basis. Patient access programs and patient appeals support have been key initiatives to
expanding payor policy and acceptance through case-by-case review and eventual denial overturn and Ascensia has
continued similar programs for this purpose. This can be a long process with varying results in each case but is a prudent
step to challenge payor positions of non-coverage given the strong evidence that supports CGM and Eversense. Further,
coverage policies and third-party payor reimbursement rates may change at any time. Therefore, even if favorable
coverage and reimbursement status is attained, less favorable coverage policies and reimbursement rates may be
implemented in the future.
Coverage Outside the United States
In countries outside the United States, coverage for CGM systems is obtained from various sources, including
governmental authorities, national healthcare systems, private health insurance plans, and hospital funds. Coverage
systems in international markets vary significantly by country and, within some countries, by region. Coverage approvals
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must be obtained on a country-by-country, region-by-region or, in some instances, a case-by case basis. The
responsibility for securing this coverage resides with our third-party distributors in the respective markets.
Manufacturing and Quality Assurance
We currently outsource the manufacturing of all components of the Eversense system to contract manufacturers
across North America and Europe. We plan to continue with an outsourced manufacturing arrangement for the
foreseeable future. Our contract manufacturers are all recognized in their field for their competency to manufacture the
respective portions of our system and have quality systems established that meet FDA and, to the extent required,
international regulatory requirements. We believe the manufacturers we currently utilize have sufficient capacity to meet
our requirements. We believe that, as we increase our demand in the future, our per unit costs will decrease materially.
We have received certification from BSI, our Notified Body to the International Standards Organization
(“ISO”) for our quality system. This ISO 13485:2016 certification includes design control requirements. As a medical
device manufacturer, the facilities of our sterilization and other critical suppliers are subject to periodic inspection by the
FDA and corresponding state and foreign regulatory authorities and Notified Bodies. We believe that our quality systems
and those of our suppliers are robust and achieve high product quality.
Typically, our outside vendors produce the components to our specifications and in many instances to our
designs. Our suppliers are audited periodically by our quality department to ensure conformity with the specifications,
policies and procedures for our devices. We believe that, if necessary, alternative sources of supply would be available in
a relatively short period of time and on commercially reasonable terms. Most of the raw materials we use in our
manufacturing operations are available from more than one source. However, we obtain certain raw material components
are obtained principally from one supplier. In the event one of these suppliers was unable to provide the materials or
product, we generally seek to maintain sufficient inventory to supply the market until an alternative source of supply can
be implemented. However, in the event of an extended failure of a supplier, it is possible that we could experience an
interruption in supply until we established new sources or, in some cases, implemented alternative processes.
Competition
The market for CGM systems is developing and competitive, subject to rapid change and significantly affected
by new product introductions. We compete with well-capitalized companies, some of which are publicly traded, that
manufacture CGM systems including Dexcom, Medtronic and Abbott. Each of these companies has received FDA
approval, CE Certificates of Conformity and CE Marked their products, permitting them to market their respective CGM
systems across the United States and EEA. Dexcom’s CGM system was the first CGM system to be approved by the
FDA for marketing as a non-adjunctive device, and Abbott’s Freestyle Libre was also approved for non-adjunctive use.
Both Dexcom (G6 and G7) and Abbott (Freestyle Libre 2 and 3) systems have factory calibration, and do not require
user calibration.
Dexcom has also received the first FDA iCGM indication allowing its Dexcom G6 and G7 to be interoperable
with other diabetes tech devices such as insulin pumps. As the industry evolves, we anticipate encountering increasing
competition from companies that integrate CGM with insulin pumps. Abbott also received an iCGM indication for their
Freestyle Libre 2 and 3 products and we expect all other CGM companies besides Dexcom to pursue an iCGM indication
including Medtronic.
In addition to CGM providers, we also compete with providers of SMBG systems. Three companies currently
account for a substantial share of the worldwide sales of SMBG systems: Roche Diabetes Care, a division of Roche
Diagnostics; Abbott; and Ascensia.
We may also compete with companies who are developing real-time intermittent sensing devices, low cost
transcutaneous CGM systems, fully implantable CGM devices and non-invasive CGM system to measure a user's
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glucose level. There are also a number of academic and other institutions involved in various phases of our industry's
technology development.
Although we face potential competition from many different sources, we believe that our technology,
knowledge, experience and scientific resources provide us with competitive advantages. The key competitive factors
affecting the success of Eversense are accuracy, duration, convenience, alert functionality, and customer support.
Many of the companies which we compete with have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals,
certifications and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,
biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number
of our competitors. Smaller or earlier stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These competitors also compete with us in recruiting
and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration
for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our development.
Intellectual Property
Protection of our intellectual property is a strategic priority for our business. We rely on a combination of
patents, trademarks, copyrights, trade secrets as well as nondisclosure and assignment of invention agreements, material
transfer agreements, confidentiality agreements and other measures to protect our intellectual property and other
proprietary rights.
Patents
As of December 31, 2023, we held a total of approximately 508 issued patents and pending patent applications
that relate to our CGM system. Our intellectual property portfolio includes 105 issued United States patents, 204 patents
issued in countries outside the United States and 199 pending patent applications worldwide. Our patents expire between
2024 and 2042, subject to any patent term extensions or adjustments that may be available for such patents. If patents are
issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2032 to
2043, subject to any patent term extensions or adjustments that may be available for such patents.
Our patents and patent applications cover certain aspects of our core sensor technologies and our product
concepts for CGM systems. However, our patent applications may not result in issued patents, and any patents that have
been issued or may be issued in the future may not protect the commercially important aspects of our technology.
Furthermore, the validity and enforceability of our issued patents may be challenged by third parties and our patents
could be invalidated or modified by the issuing governmental authority. Third parties may independently develop
technology that is not covered by our patents that is similar to or competes with our technology. In addition, our
intellectual property may be infringed or misappropriated by third parties, particularly in foreign countries where the
laws and governmental authorities may not protect our proprietary rights as effectively as those in the United States.
The medical device industry in general, and the glucose testing sector of this industry in particular, are
characterized by the existence of a large number of patents and frequent litigation based on assertions of patent
infringement. We are aware of numerous patents issued to third parties that may relate to the technology used in our
business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous
glucose monitoring. Each of these patents contains multiple claims, any one of which may be independently asserted
against us. The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or
CGM systems infringes one or more claims of their patents. Furthermore, there may be additional patents issued to third
parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert
against us and materially and adversely affect our business. In addition, because patent applications can take many years
to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued
patents that third parties could assert against us and materially and adversely affect our business.
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Any adverse determination in litigations, post grant trial proceedings, including interference proceedings, at the
Patent Office relating to intellectual property to which we are or may become a party could subject us to significant
liabilities to third parties or require us to seek licenses from third parties, and result in the cancellation and/or
invalidation of our intellectual property. Furthermore, if a court finds that we have willfully infringed a third party's
intellectual property, we could be required to pay treble damages and/or attorney fees for the prevailing party, in addition
to other penalties. Although intellectual property disputes in the medical device area are often settled through licensing
or similar arrangements, costs associated with such arrangements can be substantial and often require ongoing royalty
payments. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we do not obtain necessary
licenses, we may not be able to redesign our products to avoid infringement; if we are able to redesign our products to
avoid infringement, we may not receive FDA approval in a timely manner. Adverse determinations in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our
products, which could have a significant adverse impact on our business.
Trademarks
We have two pending U.S. trademark applications and five pending foreign trademark applications, as well as
12 U.S. trademark registrations and 129 foreign trademark registrations.
Trade Secrets
We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our
competitive position. We seek to protect such intellectual property and proprietary information by generally requiring
our employees, consultants, contractors, scientific collaborators and other advisors to execute non-disclosure and
assignment of invention agreements upon the commencement of their employment or engagement as the case may be.
Our agreements with our employees prohibit them from providing us with any intellectual property or proprietary
information of third parties. We also generally require confidentiality agreements or material transfer agreements with
third parties that receive or have access to our confidential information, data or other materials. Notwithstanding the
foregoing, there can be no assurance that our employees and third parties that have access to our confidential proprietary
information will abide by the terms of their agreements. Despite the measures that we take to protect our intellectual
property and confidential information, unauthorized third parties may copy aspects of our products or obtain and use our
proprietary information.
Government Regulation
The Eversense system is a medical device subject to extensive and ongoing regulation by the FDA, CMS, the
European Union, competent authorities of the EEA countries, Notified Bodies and regulatory bodies in other countries.
Regulations cover virtually every critical aspect of a medical device company's business operation, including research
activities, product development, contracting, reimbursement, medical communications, and sales and marketing. In the
United States, the Federal Food, Drug and Cosmetic Act (“FDCA”), and the implementing regulations of the FDA
govern product design and development, preclinical and clinical testing, premarket clearance or approval, product
manufacturing, import and export, product labeling, product storage, recalls and field safety corrective actions,
advertising and promotion, product sales and distribution, and post-market clinical surveillance. Our business is subject
to federal, state, local, and foreign regulations and standards, such as ISO 13485, ISO 14971, FDA's Quality System
Regulation (“QSR”) contained in 21 CFR Part 820, Directive 90/385/EEC concerning active implantable medical
devices and, Regulation 2017/745 on Medical Devices, as amended.
Regulation by the FDA
The FDA classifies medical devices into one of three classes according to the degree of risk the FDA
determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s
safety and effectiveness. The Eversense System is a Class III device and subject to pre-market approval (“PMA”)
application under section 515 of the FDCA in order to obtain a marketing approval. A PMA application must be
supported by valid scientific evidence that typically includes extensive technical, preclinical, clinical, manufacturing and
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labeling data, to demonstrate to the FDA's satisfaction the safety and efficacy of the device. A PMA application also
must include a complete description of the device and its components, a detailed description of the methods, facilities
and controls used to manufacture the device, and proposed labeling. After a PMA application is submitted and found to
be sufficiently complete, the FDA begins an in-depth review of the submitted information.
New PMA applications or PMA supplements may be required for modifications to the manufacturing process,
labeling, device specifications, materials or design of a device that has been approved through the PMA process. PMA
supplements often require submission of the same type of information as an initial PMA application, except that the
supplement is limited to information needed to support any changes from the device covered by the approved PMA
application and may or may not require as extensive technical or clinical data or the convening of an advisory panel.
Any devices we manufacture and distribute pursuant to clearance or approval by the FDA are subject to
pervasive and continuing regulation by the FDA and certain state agencies. These include product listing and
establishment registration requirements, which help facilitate FDA inspections and other regulatory actions. As a medical
device manufacturer, all of our manufacturing facilities are subject to inspection on a routine basis by the FDA. We are
required to adhere to applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which
require, manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation
and other quality assurance procedures during all phases of the design and manufacturing process. Noncompliance with
these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total
or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA approval of devices,
withdrawal of marketing approvals and criminal prosecutions. We believe that our design, manufacturing and quality
control procedures are in compliance with the FDA’s regulatory requirements.
We must also comply with post-market surveillance regulations, including medical device reporting, or MDR,
requirements which require that we review and report to the FDA any incident in which our products may have caused or
contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that
malfunction would likely cause or contribute to a death or serious injury if it were to recur.
Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the
Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or
uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-
label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.
International Regulation
International sales of medical devices are subject to national, supra-national, and local government regulations,
which may vary substantially from country to country. The time required to obtain approval or certification in another
country may be longer or shorter than that required for FDA approval, and the requirements may differ. There is a trend
towards harmonization of quality system standards among the European Union, United States, Canada and various other
industrialized countries.
On May 26, 2021, Regulation (EU) 2017/745 on Medical Devices, or the Medical Device Regulation, entered
into application, repealing and replacing both Directive 93/42/EEC concerning medical devices, or MDD, and Directive
90/385/EEC concerning active implantable medical devices, or AIMD. The Medical Device Regulation and its
associated guidance documents and harmonized standards govern, among other things, device design and development,
preclinical and clinical or performance testing, premarket conformity assessment, registration and listing, manufacturing,
labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market
surveillance. Medical devices must comply with the General Safety and Performance Requirements, or GSPRs, set out in
Annex I of the Medical Device Regulation. Compliance with these requirements is a prerequisite to be able to affix the
CE mark to devices, without which they cannot be marketed or sold in the EEA. To demonstrate compliance with the
GSPRs provided in the Medical Device Regulation and obtain the right to affix the CE mark, medical devices
manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device
and its classification. Apart from low risk medical devices (Class I with no measuring function and which are not sterile),
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in relation to which the manufacturer may issue an EC Declaration of Conformity based on a self-assessment of the
conformity of its products with the GSPRs, a conformity assessment procedure requires the intervention of a Notified
Body, which is an organization designated by a Competent Authority of an EEA country to conduct conformity
assessments. Depending on the relevant conformity assessment procedure, the Notified Body audits and examines the
technical documentation and the quality system for the manufacture, design and final inspection of the medical devices.
The Notified Body issues a CE Certificate of Conformity following successful completion of a conformity assessment
procedure conducted in relation to the medical device and its manufacturer and their conformity with the GSPRs. This
Certificate and the related conformity assessment process entitles the manufacturer to affix the CE mark to its medical
devices after having prepared and signed a related EC Declaration of Conformity.
As a general rule, demonstration of conformity of medical devices and their manufacturers with the GSPRs
must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the
products during normal conditions of use. Specifically, a manufacturer must demonstrate that the device achieves its
intended performance during normal conditions of use and that the known and foreseeable risks, and any adverse events,
are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made
about the performance and safety of the device (e.g., product labeling and instructions for use) are supported by suitable
evidence. This assessment must be based on clinical data, which can be obtained from (1) clinical studies conducted on
the devices being assessed, (2) scientific literature from similar devices whose equivalence with the assessed device can
be demonstrated or (3) both clinical studies and scientific literature. The conduct of clinical studies in the EEA is
governed by detailed regulatory obligations. These may include the requirement of prior authorization by the Competent
Authorities of the country in which the study takes place and the requirement to obtain a positive opinion from a
competent Ethics Committee. This process can be expensive and time-consuming. After a device is placed on the market,
it remains subject to significant regulatory requirements.
The Medical Device Regulation provides a transitional provision. Accordingly, CE Certificates of Conformity
issued by Notified Bodies in accordance with the MDD or the AIMD from May 25, 2017, and which remained valid on
May 26, 2021 and have not since been withdrawn will, with certain exceptions, remain valid until December 31, 2027
for Class III and Class IIb implantable medical devices and until December 31, 2028 for other Class IIb, Class IIa and
Class I devices with a measuring function or which are sterile. Class I medical devices, for which the conformity
assessment procedure in accordance with the MDD or the AIMD did not require the involvement of a Notified Body but
will require the involvement of a Notified Body in accordance with the Medical Device Regulation and for which an EU
Declaration of Conformity was issued in accordance with the MDD or the AIMD prior to May 26, 2021, can continue to
be placed on the EEA market until December 31, 2028. Manufacturers of medical devices may only benefit from the
above extended transitional provisions deadlines if the following conditions are fulfilled: (i) the devices continue to
comply with the requirements of the MDD or AIMD, (ii) there are no significant changes in the design and intended
purpose, (iii) the devices do not present an unacceptable risk to the health or safety of patients, users or other persons, or
to other aspects of the protection of public health, (iv) the manufacturer implements a quality management system by
May 26, 2024 which complies with the requirements of the Medical Devices Regulation, (v) by May 26, 2024 an
application is lodged with a Notified Body for conduct of the conformity assessment of the devices covered by the CE
Certificate of Conformity, or the devices intended to substitute for such devices, in accordance with the Medical Device
Regulation and a related written agreement is signed with the Notified Body by September 26, 2024, and (vi) from
May 26, 2021, compliance with the Medical Device Regulation relating to post-market surveillance, market surveillance,
vigilance, registration of economic operators and of devices is ensured in place of the corresponding requirements in the
MDD or AIMD.
In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD
from May 25, 2017, which were valid on May 26, 2021 and have not been withdrawn since but which expired before
March 20, 2023, will only continue to be valid in accordance with the extended transitional deadlines above if either
(i) the manufacturer signed a written agreement with a Notified Body for the conformity assessment of the device
covered by the expired CE Certificate of Conformity, or the device intended to substitute that device, in accordance with
the Medical Device Regulation before the date of expiry of the CE Certificate of Conformity, or (ii) a competent
authority of an EU Member State has granted a derogation from the application conformity assessment procedure in
accordance with Article 59(1) or Article 97(1) of the Medical Device Regulation.
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Class III custom-made implantable medical devices may be placed on the market until May 26, 2026 without a
CE Certificate of Conformity issued by Notified Body, provided that (i) by May 26, 2024, an application is lodged with a
Notified Body for the conformity assessment of the devices, in accordance with the Medical Device Regulation and a
related written agreement is signed with the Notified Body by September 26, 2024.
The advertising and promotion of medical devices in the EU is subject to the national laws of the individual EU
Member States that implemented the MDD, the AIMD and that apply the Medical Device Regulation, Directive
2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial
practices, as well as other national legislation of individual EU Member States governing the advertising and promotion
of medical devices. EU Member States’ national legislation may also restrict or impose limitations on our ability to
advertise our products directly to the general public. In addition, voluntary EU and national industry Codes of Conduct
provide guidelines on the advertising and promotion of our products to the general public and may impose limitations on
our promotional activities with healthcare professionals. Accordingly, CE Certificates of Conformity issued by Notified
Bodies in accordance with the MDD or the AIMD from May 25, 2017, and which remained valid on May 26, 2021 and
have not since been withdrawn will, with certain exceptions, remain valid until December 31, 2027 for Class III and
Class IIb implantable medical devices and until 31 December 2028 for other Class IIb, Class IIa and Class I devices with
a measuring function or which are sterile. Class I medical devices, for which the conformity assessment procedure in
accordance with the MDD or the AIMD did not require the involvement of a Notified Body but will require the
involvement of a Notified Body in accordance with the Medical Device Regulation and for which an EU Declaration of
Conformity was issued in accordance with the MDD or the AIMD prior to May 26, 2021, can continue to be placed on
the EEA market until December 31, 2028. Manufacturers of medical devices may only benefit from the above extended
transitional provisions deadlines if the following conditions are fulfilled: (i) the devices continue to comply with the
requirements of the MDD or AIMD, (ii) there are no significant changes in the design and intended purpose, (iii) the
devices do not present an unacceptable risk to the health or safety of patients, users or other persons, or to other aspects
of the protection of public health, (iv) the manufacturer implements a quality management system by May 26, 2024
which complies with the requirements of the Medical Devices Regulation, (v) by May 26, 2024 an application is lodged
with a Notified Body for conduct of the conformity assessment of the devices covered by the CE Certificate of
Conformity, or the devices intended to substitute for such devices, in accordance with the Medical Device Regulation
and a related written agreement is signed with the Notified Body by September 26, 2024, and (vi) from May 26, 2021,
compliance with the Medical Device Regulation relating to post-market surveillance, market surveillance, vigilance,
registration of economic operators and of devices is ensured in place of the corresponding requirements in the MDD or
AIMD.
In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD
from May 25, 2017, which were valid on May 26, 2021 and have not been withdrawn since but which expired before
March 20, 2023, will only continue to be valid in accordance with the extended transitional deadlines above if either
(i) the manufacturer signed a written agreement with a Notified Body for the conformity assessment of the device
covered by the expired CE Certificate of Conformity, or the device intended to substitute that device, in accordance with
the Medical Device Regulation before the date of expiry of the CE Certificate of Conformity, or (ii) a competent
authority of an EU Member State has granted a derogation from the application conformity assessment procedure in
accordance with Article 59(1) or Article 97(1) of the Medical Device Regulation.
Class III custom-made implantable medical devices may be placed on the market until May 26, 2026 without a
CE Certificate of Conformity issued by Notified Body, provided that (i) by May 26, 2024, an application is lodged with a
Notified Body for the conformity assessment of the devices, in accordance with the Medical Device Regulation and a
related written agreement is signed with the Notified Body by September 26, 2024.
The advertising and promotion of medical devices in the EU is subject to the national laws of the individual EU
Member States that implemented the MDD, the AIMD and that apply the Medical Device Regulation, Directive
2006/114/EC concerning misleading and comparative advertising, and Directive 2005/29/EC on unfair commercial
practices, as well as other national legislation of individual EU Member States governing the advertising and promotion
of medical devices. EU Member States’ national legislation may also restrict or impose limitations on our ability to
advertise our products directly to the general public. In addition, voluntary EU and national industry Codes of Conduct
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provide guidelines on the advertising and promotion of our products to the general public and may impose limitations on
our promotional activities with healthcare professionals.
Other Regulatory Requirements
Even after a device receives clearance, certification or approval and is placed in commercial distribution,
numerous regulatory requirements apply. These include, but are not limited to:
establishment registration and device listing;
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• QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing,
production, control, supplier/contractor selection, complaint handling, documentation and other quality
assurance procedures during all aspects of the manufacturing process;
• MDR regulations, which require that manufacturers report to the FDA, competent authorities of the EEA
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countries and Notified Bodies, and foreign regulatory authorities, when applicable, if their device may have
caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or
contribute to a death or serious injury if the malfunction were to recur;
voluntary and mandatory device recalls addressing problems when a device is defective and could be a risk to
health; and
corrections and removals reporting regulations, which require that manufacturers report to the FDA, competent
authorities of the EEA countries and Notified Bodies, and foreign regulatory authorities, when applicable, field
corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to
remedy a violation of the FDCA that may present a risk to health.
Also, the FDA requires us to conduct Post Approval Studies (post-market surveillance studies) and establish
and maintain a system for tracking our products through the chain of distribution to the patient level. The FDA and
applicable regulatory authorities enforce regulatory requirements by conducting periodic, unannounced inspections and
market surveillance. Inspections may include the manufacturing facilities of our subcontractors.
Moreover, the FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory
authorities, when applicable, strictly regulates marketing, labeling, advertising and promotion of medical products.
Medical products may be promoted only for the approved indications and in accordance with the provisions of the
approved label, although physicians, in the practice of medicine, may prescribe approved medical products for
unapproved indications. Companies may also share truthful and not misleading information that is otherwise consistent
with the labeling. The FDA, competent authorities of the EEA countries and Notified Bodies, and foreign regulatory
authorities, when applicable, and other agencies actively enforce the laws and regulations prohibiting the promotion of
off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant
liability.
In the United States, failure to comply with applicable regulatory requirements can result in enforcement actions
by the FDA and other regulatory agencies. These may include, among other things, any of the following sanctions or
consequences:
fines and civil penalties;
unanticipated expenditures;
delays in approving or refusal to approve future products;
• warning letters or untitled letters that require corrective action;
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• FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries;
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suspension or withdrawal of FDA clearance or approval;
product recall or seizure;
interruption of production;
operating restrictions;
injunctions; and
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criminal prosecution.
In the EEA, similar regulatory requirements apply once a device has been CE marked and placed on the EEA
Market. EEA countries are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant
medical devices are placed on the market or put into service in their jurisdictions. In addition, similar actions and
obligations may be imposed by the competent authorities of an EEA country, or a foreign regulatory authority. If a
Notified Body suspects or discovers any non-compliance, this may also result in Notified Bodies revoking, suspending
or varying a CE Certificate of Conformity that they have issued for a device or the manufacturer’s quality system.
Our contract manufacturers, specification developers and some suppliers of components or device accessories,
also are required to manufacture our products in compliance with current good manufacturing practice requirements set
forth in the QSR. The QSR requires a quality system for the design, manufacture, packaging, labeling, storage,
installation and servicing of marketed devices, and it includes extensive requirements with respect to quality
management and organization, device design, buildings, equipment, purchase and handling of components or services,
production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint
handling, servicing, and record keeping. The FDA evaluates compliance with the QSR through periodic unannounced
inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that any of our
contract manufacturers or regulated suppliers are not in compliance with these requirements, it can shut down such
manufacturing operations, require recall of our products, refuse to approve new marketing applications, institute legal
proceedings to detain or seize products, enjoin future violations or assess civil and criminal penalties against us or our
officers or other employees.
Health Insurance Portability and Accountability Act of 1996 and Other Foreign and State Laws and
Regulations Affecting the Transmission, Security and Privacy of Personal Information
We may also be subject to data privacy and security regulation by both the federal government and the states in
which we conduct our business. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as
amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective
implementing regulations, imposes specified requirements relating to the privacy, security and transmission of
individually identifiable health information. Among other things, HITECH makes HIPAA's security standards directly
applicable to business associates, defined as service providers of covered entities, which include certain healthcare
providers, health plans and healthcare clearinghouses, that create, receive, maintain or transmit protected health
information in connection with providing a service for or on behalf of a covered entity, and their covered subcontractors.
HITECH also created four new tiers of civil monetary penalties and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and
costs associated with pursuing federal civil actions. Accordingly, state attorneys general (along with private plaintiffs)
have brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and
security rules. In addition, many state laws govern the privacy and security of health information in certain
circumstances, many of which differ from HIPAA and each other in significant ways and may not have the same effect.
In the EEA, the General Data Protection Regulation (2016/679) (“EU GDPR”) and in the United Kingdom
(“UK”), the United Kingdom’s GDPR (“UK GDPR”) (together the “GDPR”), applies to personal data about identified or
identifiable data subjects processed by automated means and data contained in, or intended to be part of, non-automated
filing systems (traditional paper files) as well as transfer of such data to a country outside of the EEA or UK. Under the
EU GDPR companies may face temporary of definitive bans on data processing and other corrective actions, fines of up
to €20 million or up to 4% of the annual global turnover, whichever is greater; or private litigation related to processing
of personal data brought by classes of data subject or consumer protection organizations authorized at law to represent
their interests. The GDPR includes more stringent operational requirements for data processors and data controllers and
creates additional rights for data subjects.
Fraud and Abuse Laws
In addition to FDA restrictions, there are numerous U.S. federal and state laws and equivalent third country
laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws. Our
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relationships with healthcare providers and other third parties are subject to scrutiny under these laws. Violations of these
laws are punishable by significant criminal, civil, and administrative sanctions, including, in some instances,
imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare,
Medicaid and Veterans Administration health programs, or similar comparable foreign programs.
Federal Anti-Kickback and Self-Referral Laws
The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering
or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce
either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which
payment may be made under a federal healthcare program such as Medicare and Medicaid or other federal healthcare
programs. The term "remuneration" has been broadly interpreted to include anything of value, including such items as
gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments and providing
anything at less than its fair market value. Although there are a number of statutory exceptions and regulatory safe
harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly and
require strict compliance to provide protection. Practices that involve remuneration that may be alleged to be intended to
induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or
safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor
does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement
will be evaluated on a case-by-case basis based on a review of all its relevant facts and circumstances. Several courts
have interpreted the statute's intent requirement to mean that if any one purpose of an arrangement involving
remuneration is to induce referrals of (or purchases, or recommendations related to) federal healthcare covered business,
the federal Anti-Kickback Statute has been implicated and potentially violated.
The penalties for violating the federal Anti-Kickback Statute include imprisonment for up to ten years, criminal
fines of up to $100,000 per violation, possible exclusion from federal healthcare programs such as Medicare and
Medicaid and other penalties, including significant civil monetary penalties and integrity oversight and reporting
obligations to resolve allegations of non-compliance. Many states have adopted prohibitions similar to the federal Anti-
Kickback Statute, some of which do not have the same exceptions or safe harbors and apply to the referral of patients for
healthcare services reimbursed by any source, not only by the Medicare and Medicaid programs. Further, the federal
Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act (collectively “PPACA”). Specifically, as noted above, under the federal Anti-
Kickback Statute, the government must prove the defendant acted "knowingly" to prove a violation occurred. The
PPACA added a provision to clarify that with respect to violations of the federal Anti-Kickback Statute, "a person need
not have actual knowledge" of the statute or specific intent to commit a violation of the statute. This change effectively
overturns case law interpretations that set a higher standard under which prosecutors had to prove the specific intent to
violate the law. In addition, the PPACA codified case law that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil
False Claims Act.
Federal law also includes a provision commonly known as the "Stark Law," which prohibits a physician from
referring Medicare or Medicaid patients to an entity providing "designated health services," including a company that
furnishes durable medical equipment, in which the physician has an ownership or investment interest or with which the
physician has entered into a compensation arrangement. Violation of the Stark Law could result in denial of payment,
disgorgement of reimbursements received under a noncompliant arrangement, civil penalties, and exclusion from
Medicare, Medicaid or other governmental programs. We believe that we have structured our provider arrangements to
comply with current fraud and abuse law requirements.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on
our ability to operate in these jurisdictions.
Additionally, as some of these laws are still evolving, we lack definitive guidance as to the application of
certain key aspects of these laws as they relate to our arrangements with providers with respect to patient training. As a
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result, our provider and training arrangements may ultimately be found to be not in compliance with applicable federal
law.
Federal False Claims Act & HIPAA
The federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any
person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment
from the federal government, or who has made a false statement or used a false record to get a claim approved. In
addition, amendments in 1986 to the federal False Claims Act have made it easier for private parties to bring "qui tam"
whistleblower lawsuits against companies under the federal False Claims Act. Penalties include significant civil
monetary penalties for each false claim, plus three times the amount of damages that the federal government sustained
because of the act of that person. Qui tam actions have increased significantly in recent years, causing greater numbers of
healthcare companies to have to defend a false claim action, pay fines, be excluded from Medicare, Medicaid or other
federal or state healthcare programs, or be subject to integrity oversight and reporting obligations to resolve allegations
of non-compliance, as a result of an investigation arising out of such action.
There are other federal anti-fraud laws that that prohibit, among other actions, knowingly and willfully
executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party
payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a
criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or
payment for healthcare benefits, items or services.
Additionally, HIPAA established two federal crimes for healthcare fraud and false statements relating to
healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any
healthcare benefit program, including private payors. The false statements statute prohibits knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for healthcare benefits, items or services. A violation of either of these
statutes is a felony and may result in fines, imprisonment, exclusion from Medicare, Medicaid or other federal or state
healthcare programs, or integrity oversight and reporting obligations to resolve allegations of non-compliance.
Civil Monetary Penalties Law
In addition to the federal Anti-Kickback Statute and the civil and criminal false claims laws, including the
federal False Claims Act, the federal government has the authority to seek civil monetary penalties, or CMPs,
assessments, and exclusion against an individual or entity based on a wide variety of prohibited conduct. For example,
the Civil Monetary Penalties Law authorizes the imposition of substantial CMPs against an entity that engages in
activities including, but not limited to: (1) knowingly presenting or causing to be presented, a claim for services not
provided as claimed or which is otherwise false or fraudulent in any way; (2) knowingly giving or causing to be given
false or misleading information reasonably expected to influence the decision to discharge a patient; (3) offering or
giving remuneration to any beneficiary of a federal health care program likely to influence the receipt of reimbursable
items or services; (4) arranging for reimbursable services with an entity which is excluded from participation from a
federal health care program; (5) knowingly or willfully soliciting or receiving remuneration for a referral of a federal
health care program beneficiary; or (6) using a payment intended for a federal health care program beneficiary for
another use. Noncompliance can result in significant civil money penalties for each wrongful act, assessment of three
times the amount claimed for each item or service and exclusion from the federal healthcare programs.
State Fraud and Abuse Provisions
Many states have also adopted some form of anti-kickback and anti-referral laws and a false claims act, some of
which apply regardless of source of payment and do not have the same exceptions as the federal laws. We believe that
we are in conformance to such laws. Nevertheless, a determination of liability under such laws could result in fines and
penalties and restrictions on our ability to operate in these jurisdictions.
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Physician Payments Sunshine Act
Transparency laws regarding payments or other items of value provided to healthcare providers and teaching
hospitals may also impact our business practices. The federal Physician Payment Sunshine Act requires most medical
device manufacturers to report annually to CMS financial arrangements, payments, or other transfers of value made by
that entity to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other
healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as
ownership and investment interests held by physicians and their immediate family members. The payment information is
made publicly available in a searchable format on a CMS website. Failure to comply with the reporting requirements can
result in significant civil monetary penalties. Similar laws have been enacted or are under consideration in many states
and foreign jurisdictions.
Outside the United States, interactions between medical device companies and health care professionals are also
governed by strict laws, such as national anti-bribery laws of European countries, national sunshine rules, regulations,
industry self-regulation codes of conduct and physicians’ codes of professional conduct.
Healthcare and Regulatory Reform
Federal and state governments continue to propose and pass new legislation and regulations designed to contain
or reduce the cost of healthcare. Such new laws may result in decreased reimbursement for medical devices, which may
further exacerbate industry-wide pressure to reduce the prices charged for medical devices. For example. in March 2010,
the PPACA, was enacted, which substantially changes the way healthcare is financed by both governmental and private
insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical
device industry. In the years since its enactment, there have been significant developments in, and continued legislative
activity around, attempts to repeal or repeal and replace the PPACA. While Congress has not passed comprehensive
repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into
law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the
tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying
health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, the 2020
federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated medical device tax
and the “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminated
the health insurer tax. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that
argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Further,
on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law, which amount other
things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces
through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025
by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount
program. It is possible that the PPACA will be subject to judicial or Congressional challenges in the future. It is unclear
how such challenges and the healthcare reform measures of the Biden administration will impact the PPACA.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. In
August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, included
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013 and, due to
subsequent legislative amendments, will remain in effect until 2032 unless additional congressional action is taken.
Additionally, in January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which,
among other things, reduced Medicare payments to several providers and increased the statute of limitations period for
the government to recover overpayments to providers from three to five years.
It is uncertain whether and how future legislation could affect prospects for our product candidates or what
actions federal, state, or private payors for healthcare treatment and services may take in response to any such healthcare
reform proposals or legislation.
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Brexit and the Regulatory Framework in the United Kingdom
Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31,
2020, commonly referred to as Brexit. Pursuant to the formal withdrawal arrangements agreed between the United
Kingdom and the European Union, the United Kingdom, or the UK, was subject to a transition period until
December 31, 2020, or the Transition Period, during which European Union rules continued to apply. The United
Kingdom and the European Union have signed an EU-UK Trade and Cooperation Agreement, or TCA, which became
provisionally applicable on January 1, 2021 and entered into force on May 1, 2021. This agreement provides details on
how some aspects of the United Kingdom and European Union’s relationship will operate going forwards however there
are still many uncertainties. The TCA primarily focuses on ensuring free trade between the European Union and the UK
in relation to goods. The TCA does not, however, specifically address medical devices. Among the changes that will now
occur are that Great Britain (England, Scotland and Wales) will be treated as a "third country," a country that is not a
member of the European Union and whose citizens do not enjoy the European Union right to free movement. Northern
Ireland will continue to follow many aspects of the European Union regulatory rules, particularly in relation to trade in
goods, including the Medical Device Regulation.
On May 26, 2021, the Medical Device Regulation entered into application in the EU. However, the Medical
Device Regulation is not applicable in the UK. In the UK, medical devices are governed by the Medical Devices
Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which retains a regulatory framework similar to the
framework set out by the MDD. In light of the fact that the CE Marking process is set out in EU law, which no longer
applies in the UK, the UK has devised a new route to market culminating in a UKCA Mark to replace the CE Mark.
Northern Ireland will, however, continue to be covered by the regulations governing CE Marks. The UK Government
has established transitional provision to recognize the acceptance of CE marked medical devices on the Great Britain
market. Accordingly, Class III and Class IIb implantable medical devices which have been CE marked in accordance
with the MDD or AIMD and for which a CE Certificate of Conformity has been delivered by a Notified Body in
accordance with the MDD or AIMD, can be placed on the Great Britain market until the sooner of the expiry of the
related CE Certificate of Conformity or June 30, 2028. However, in light of the extended transitional provisions of the
Medical Device Regulation, related CE Certificates of Conformity will expire, at the latest, on December 31, 2027. Other
Class IIb, Class IIa and Class I devices with a measuring function which have been CE marked in accordance with the
MDD or AIMD and for which a CE Certificate of Conformity has been delivered by a Notified Body in accordance with
the MDD or AIMD, can be placed on the Great Britain market until the sooner of the expiry of the related CE Certificate
of Conformity or June 30, 2028. Class I medical devices, for which the conformity assessment procedure in accordance
with the MDD or the AIMD did not require the involvement of a Notified Body but will require the involvement of a
Notified Body in accordance with the Medical Device Regulation and for which an EU Declaration of Conformity was
issued in accordance with the MDD or the AIMD prior to May 26, 2021, can continue to be placed on the Great Britain
market until June 30, 2028. Medical devices which have been CE marked in accordance with the Medical Device
Regulation may be placed on the Great Britain market until June 30, 2030.
The UK government plans on introducing new legislation governing medical devices with an aim for core
aspects of the future regime for medical devices to apply from July 1, 2025. New legislation is also anticipated to bring
into force strengthened post-market surveillance requirements ahead of the wider future regulatory regime. These post-
market surveillance requirements are expected to apply from mid-2024.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits U.S. corporations and their representatives from
offering, promising, authorizing or making corrupt payments, gifts or transfers to any foreign government official,
government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The
FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions
requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result
in criminal and civil fines, imprisonment, disgorgement, oversight, and debarment from government contracts.
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UK Bribery Act and other anti-corruption laws
The UK Bribery Act 2010 and other applicable foreign anti-corruption laws that apply in countries where we do
business, generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or
providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or
other persons to obtain or retain business or gain some other business advantage. Under the UK’s Bribery Act, we may
also be liable for failing to prevent a person associated with us from committing a bribery offense.
We are also subject to other laws and regulations governing our international operations, including regulations
administered by the governments of the UK and authorities in the EU, including applicable export control regulations,
economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs
requirements and currency exchange regulations, collectively referred to as trade control laws. Failure to comply with the
UK’s Bribery Act, and other anti-corruption laws and trade control laws could subject us to criminal and civil penalties,
disgorgement and other sanctions and remedial measures, and legal expenses.
Environmental Health and Safety Regulations
We are also subject to various environmental health and safety rules and regulations both within the U.S. and
internationally relating to pollution or protection of human health and the environment. Our research and development,
manufacturing, and clinical processes involve handling potentially harmful or hazardous materials regulated under
environmental laws. We may be held liable for damages, penalties and other remedial actions and legal costs if we fail to
comply with these laws. These expenses or this liability could have a significant negative impact on our financial
condition and reputation.
Employees and Human Capital Resources
We believe that our future success depends upon our continued ability to attract and retain highly skilled and
qualified employees who share in our mission to transform lives in the global diabetes community with differentiated,
long-term implantable glucose monitoring technology. As of December 31, 2023, we had 132 full-time employees, of
whom over half hold Ph.D., M.D., master’s degree, or other post graduate degrees, and all of whom are in the United
States. Most employees are in Operations and Research and Development positions aligned with our corporate focus of
designing, developing and manufacturing glucose monitoring products. None of our employees are represented by a
labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be
good.
Culture
Employee engagement is always important to us, and improving our employee engagement with a remote, in-
person and hybrid workforce remained a strategic imperative for us in 2023. Throughout the year, we committed to
employ initiatives and communications to build close connections between our employees and the company mission,
vision, and values. Our values define the behaviors of our existing employees, and the new hires that we welcomed to
our organization during 2023:
• Customer Inspired emphasizes how we put the customer first while we use our talents, passion,
empathy, and hard work to build technology solutions for the unmet needs of our customers.
• Game-Changing Innovation affects everything we do from how we think, design, and manufacture
advanced technology that makes a difference.
• Learn Fast highlights our respect for the process of discovery and supports intelligent risk-taking
knowing that all outcomes are learning opportunities to iterate and improve.
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• Thrive Together reflects the deep respect and trust in the diversity of our backgrounds, knowledge,
skills, ideas and capabilities and our belief in each other and our partners to drive success.
• Get It Done represents working with a sense of urgency to go above and beyond to get the job done
right through quality, compliance, and timeliness.
We utilize a human resource software which collects weekly employee feedback on work experience, culture,
communications, interaction with their managers and other topics enabling us to react and address real time feedback.
This software also provides opportunities for peer-to-peer recognition and valuable insights for managers to better lead
their teams. We also conduct company calls twice per month to update all employees on progress towards our company
objectives, initiatives, what is happening in various departments and to celebrate employee achievements and company
milestones. We also conduct quarterly employee engagement events to recognize the value of our employees and their
contributions.
Employee Health & Wellbeing
We are committed to the health and safety of our employees and have safety training programs that ensure our
workforce knows how to do their jobs safely and in compliance with laws and regulations. We operate in modern,
efficient, and safe facilities, and have minimal accident and injury rates. In 2022, we launched a platform to improve
harassment training efforts and in 2023 added Diversity, Equity, and Inclusion training for all employees to this effort.
We continued the momentum with our wellness program “A Healthier You”, which focuses on three pillars: financial,
physical, and workplace wellness. Each pillar is supported by specific tools and resources to educate and reinforce the
importance of wellness. This program includes a stipend to further support healthy behaviors and to demonstrate our
commitment to employee well-being. To further demonstrate our focus on employee wellness, in 2023, we sponsored
our first Senseonics Wellness Fair, which included speakers, workshops, and vendors to support our workplace wellness.
Organizational Development
We are committed to attracting, developing, and retaining employees by promoting an environment to
continuously develop and learn. As part of our performance management process, all levels of employees are formally
required to meet with their managers at least quarterly to receive feedback on their established objectives, identify
opportunities for skill development, discuss opportunities to support their career goals, and reflect on how their behaviors
demonstrate our corporate values. The executive team meets routinely to discuss key initiatives for strategic, operational,
and organizational planning. Many of these meetings were focused on organizational development including reviewing
demographic data and employment engagement data to better understand our employee profiles and address their
specific needs. We celebrated our revised technical leadership pathway with a formal awards program to recognize and
reward our 2023 patent inventors. We continue to encourage professional certification and continuing education by
reimbursement for professional certification classes, testing, maintenance, and tuition reimbursement of up to $5,250
annually. We deliver training and engage in development conversations with our managers and directors regularly to
reinforce best practices and ensure effective performance management.
Diversity, Equity, and Inclusion
As stated in our company values, our success thrives on the diversity of backgrounds, knowledge, skills, ideas,
and capabilities within our workforce. We deeply respect each other and trust the diversity we have. We aspire to create
a diverse and inclusive culture that reflects the diversity of the customers we serve and fosters an environment where all
employees feel welcomed, respected, and valued. In 2022, we began a focused diversity, equity, and inclusion, or DEI
journey by reviewing demographic data for a baseline and our senior management participated in a customized DEI
development program. In 2023, we trained all employees on the basics of Diversity, Equity, and Inclusion.
Total Rewards
We provide competitive compensation and benefits to attract and retain the best people. We engage nationally
recognized compensation and benefits consulting firms to evaluate our total rewards programs and to provide
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benchmarking against our peers within the industry. We provide our employees with market competitive pay and
bonuses. In 2021, we implemented a year-end market adjustment review process to ensure we maintain our competitive
pay and pay equity between active employees and new hires and to align to the highly competitive labor market. As a
result of this review process, we evaluate any market adjustments required to stay on track with the everchanging labor
market and align with individual employee performance. Annual increases and incentive compensation are based on
merit and documented through our performance management process as part of our annual review procedures. All
employees are issued stock options and/or restricted stock units under our broad-based stock incentive programs. We
offer an employee stock purchase program to all employees. Finally, we offer comprehensive benefits to all eligible
employees, including health insurance, paid time off, a retirement plan with company match, health savings accounts,
flexible spending accounts, life and disability coverage, voluntary accident, and critical illness.
Corporate Information
We were originally incorporated as ASN Technologies, Inc. in Nevada on June 26, 2014. In 2015, we acquired
Senseonics, Incorporated, a medical technology company focused on the design, development and commercialization of
glucose monitoring systems to improve the lives of people with diabetes by enhancing their ability to manage their
disease with relative ease and accuracy. From its inception in 1996 until 2010, Senseonics, Incorporated devoted
substantially all of its resources to researching various sensor technologies and platforms. Beginning in 2010, the
company narrowed its focus to designing, developing and refining a commercially viable glucose monitoring system.
In connection with the acquisition of Senseonics, Incorporated, we reincorporated in Delaware and changed our
name to Senseonics Holdings, Inc. Upon the closing of the acquisition, Senseonics, Incorporated merged with a wholly
owned subsidiary of ours formed solely for that purpose and became our wholly owned subsidiary.
Our principal executive offices are located at 20451 Seneca Meadows Parkway, Germantown, Maryland
20876-7005 and our telephone number is (301) 515-7260. Our common stock is listed on the NYSE American under the
symbol “SENS.”
Available Information
Our website address is www.senseonics.com. In addition to the information contained in this Annual Report,
information about us can be found on our website. Information contained in, or accessible through, our website is not a
part of this Annual Report on Form 10-K, and the inclusion of our website address in this prospectus is only as an
inactive textual reference.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, are available free of charge through our website as soon as reasonably practicable after they are
electronically filed with or furnished to the Securities and Exchange Commission, or SEC. Additionally the SEC
maintains an internet site that contains reports, proxy and information statements and other information. The address of
the SEC’s website is www.sec.gov.
Item 1A. Risk Factors
Our business is subject to numerous risks. You should carefully consider the following risks and all other
information contained in this Annual Report, as well as general economic and business risks, together with any other
documents we file with the SEC. If any of the following events actually occur or risks actually materialize, it could have
a material adverse effect on our business, operating results and financial condition and cause the trading price of our
common stock to decline.
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Summary of Risks Affecting Our Business
Our business is subject to numerous risks. The following summary highlights some of the risks you should
consider with respect to our business and prospects. This summary is not complete, and the risks summarized below are
not the only risks we face. You should review and consider carefully the risks and uncertainties described in the “Risk
Factors” section of this Annual Report on Form 10-K, which includes a more complete discussion of the risks
summarized below as well as a discussion of other risks related to our business and an investment in our common stock,
as well as our other public filings with the Securities and Exchange Commission, or SEC.
Any of the following risks could have a material adverse effect on our business, financial condition, results of
operations and prospects and cause the trading price of our common stock to decline:
• We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or
sustain profitability. Our results of operations may fluctuate significantly from quarter to quarter or year to year.
• We expect that a substantial majority of our future revenue will result from our Commercialization Agreement
with Ascensia. If Ascensia fails to perform satisfactorily under this agreement, including among other things if
they are delayed or unsuccessful in growing the adoption of our product, our commercialization efforts and
financial results would be directly and adversely affected.
• The markets in which we participate are highly competitive, and our primary competitors, as well as a number
of other companies, medical researcher and existing medical device companies, are pursuing new delivery
devices, delivery technologies, sensing technologies, procedures, drugs and other therapies for the monitoring,
treatment and prevention of diabetes. Any technological breakthroughs in diabetes monitoring, treatment or
prevention could reduce the potential market for Eversense or render Eversense less competitive or obsolete,
which would significantly reduce our potential sales.
• We have limited operating history as a commercial-stage company and may face difficulties encountered by
companies early in their commercialization in competitive and rapidly evolving markets.
• Our actual operating results may differ significantly from any guidance provided. If our actual results of
operations fall below the expectations of investors or securities analysts, the price of our common stock could
decline significantly.
• Medical device development involves a lengthy and expensive process, with an uncertain outcome. We may
incur additional costs or experience delays in completing, or ultimately be unable to complete, ongoing
development for lifecycle management of our products.
• Our products and operations are subject to extensive governmental regulation, and failure to comply with
applicable requirements could cause our business to suffer. In particular, the FDA and other foreign regulatory
clearance, certification, or approval processes are expensive, time-consuming and uncertain, and the failure to
maintain required regulatory clearances, certifications and approvals could prevent us from commercializing
Eversense and future versions of Eversense.
• The ongoing military action by Russia in Ukraine and Israel in Gaza could have negative impact on the global
economy which could materially adversely affect our business, operations, operating results and financial
condition. There is uncertainty regarding the ultimate impact the conflict, including any escalation or further
expansion of the conflict’s current scope, will have on our customers, the global economy, supply chains,
logistics, fuel prices, raw material pricing and our business.
• Surging natural gas and electricity costs in Europe poses a threat to our contract manufacturers ability to
maintain operations in Europe which can adversely affect or business supply chain. If the energy crisis or other
supply chain challenges impact our ability to obtain raw materials on a timely basis or without significant
increases in costs, our financial results and business operations may be adversely affected.
• Failure to secure or retain coverage or adequate reimbursement for Eversense or future versions of Eversense
systems, including the related insertion and removal procedures, by third-party payors could adversely affect
our business, financial condition and operating results.
• We have partnerships with companies such as NPG to establish broad inserter networks and as the number of
insertions increase so does our reliance on these companies. If NPG or other partners fail to perform
satisfactorily under these agreements our commercialization efforts and financial results would be directly and
adversely affected.
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• Our stock price has been highly volatile and may continue to be highly volatile. The stock market in general and
the market for innovative, emerging medtech and biotechnology companies in particular, has experienced
volatility that has often been unrelated to the operating performance of particular companies. We cannot predict
the action of market participants and, therefore, can offer no assurances that the market for our common stock
will be stable or appreciate over time.
• Our operating results are subject to significant fluctuations.
• We contract with third parties for the manufacture of Eversense. Risks associated with the manufacturing of our
products, loss of key suppliers or disruption to their facilities could reduce our gross margins and negatively
affect our operating results.
• We operate in a regulated industry and our business, operations and the business and operations of our third-
party manufacturers are subject to various foreign, U.S. federal, state and local laws and regulations, including
those promulgated by the FDA and equivalent foreign regulatory authorities, among others. Failure to comply
with applicable laws and regulations should harm our business and we may incur significant expenditures
related to compliance efforts.
• Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory
schemes, standards, and other obligations related to data privacy and security (including security incidents)
could harm our business. Compliance or the actual or perceived failure to comply with such obligations could
increase the costs to our products, limit their use or adoption, and otherwise negatively affect our operating
results and business.
• Holders of debt instruments may exert substantial influence over us and may exercise their control in a manner
adverse to the interests of our common stockholders.
Risks Relating to our Business and our Industry
We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or
sustain profitability.
Since our inception, we have incurred significant net losses and expect to incur additional losses in the near
future. We incurred total net (loss) income of ($60.4) million and $142.1 million for the years ended December 31, 2023,
and 2022, respectively. Positive net income during 2022 was substantially the result of fair value gains due to embedded
derivatives in our convertible notes. As of December 31, 2023, we had an accumulated deficit of $869.3 million. To date,
we have financed our operations primarily through sales of our equity securities and debt financings. We have devoted
substantially all of our resources to the research and development of our products, including conducting clinical trials,
and the commercial launch of Eversense in the United States, select markets in Europe, the Middle East, and Africa
(EMEA).
To implement our business strategy we need to, among other things, gain regulatory approval or certification in
other regions where we intend to sell our products, expand our commercial launch in the United States and Europe, and
develop future generations of Eversense. We have never been profitable from operations and do not expect to be
profitable for at least the next several years. We expect our expenses to increase significantly as we pursue these
objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, and we expect to
continue incurring expenses and operating losses over the next several years. Any additional operating losses may have
an adverse effect on our stockholders' equity, and we cannot assure you that we will ever be able to achieve profitability.
Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Our failure to become and remain profitable would depress the value of our company and could impair our ability to
raise capital, expand our business, maintain our development efforts, obtain regulatory approvals or certificates, diversify
our product offerings or continue our operations.
Our Commercialization Agreement with Ascensia to market Eversense may not be successful.
We have entered into a Commercialization Agreement with Ascensia, pursuant to which we have granted
Ascensia the exclusive right to distribute Eversense worldwide, subject to initial exceptions based on our other current
exclusive distribution agreements. Pursuant to this agreement, our future success will be dependent on Ascensia
effectively marketing and selling Eversense. We expect that the substantial majority of our future revenue will come
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pursuant to this agreement in future years. Prior to our Commercialization Agreement with Ascensia, Ascensia had
limited experience with marketing durable medical equipment and no experience marketing CGM systems. In order to
strengthen commercial execution, Ascensia has recently established an independent dedicated business unit responsible
for commercializing Eversense, which reports directly to Ascensia’s parent company, PHC Holdings Corporation
(“PHC”), and Ascensia has engaged a new president of CGM to lead that business unit. However, there can be no
assurance that these efforts will be successful. If Ascensia fails to perform satisfactorily under this agreement, including
among other things if they are delayed or unsuccessful in growing the adoption of our product, our commercialization
efforts and financial results would be directly and adversely affected.
The Commercialization Agreement is terminable by Ascensia under a number of circumstances, including if we
undergo a change of control. The agreement is terminable by either party if the other party materially breaches its
obligations under the agreement; provided, however, that if Ascensia is unable to achieve the specified minimum
spending or revenue targets described above, then we will only have the right to covert Ascensia’s exclusive rights to
nonexclusive rights, which may make it difficult for us to successfully engage with another commercial partner. The
agreement is also terminable by either party if the other party undergoes bankruptcy, dissolution or winding up.
We cannot guarantee this agreement with Ascensia will be successful, that it will continue, or that we will be
able to achieve or maintain any particular volume of sales under the agreement or increase the volume of sales at a
satisfactory pace or at all from this relationship in the future.
Our Commercialization Agreement with Ascensia and the terms of our debt may discourage a change of control of
our company.
The terms of our agreements with Ascensia and PHC may discourage a third party from acquiring, or
attempting to acquire, control of our company, even if a change of control was considered favorable by some or all of
our stockholders. For example, because of the exclusivity of the distribution arrangements with Ascensia and the
minimum five-year term of that exclusivity (which may be extended under certain circumstances), prospective strategic
acquirors may be unwilling to undertake an acquisition of our company.
We have limited operating history as a commercial-stage company and may face difficulties encountered by
companies early in their commercialization in competitive and rapidly evolving markets.
Our experience as a commercial-stage company upon which to evaluate our business, future sales expectations
and operating results is limited. In assessing our business prospects, you should consider the various risks and difficulties
frequently encountered by companies early in their commercialization in competitive and rapidly evolving markets,
particularly companies that develop and sell medical devices. These risks include our ability to:
•
•
•
•
•
obtain regulatory clearance, certification or approval to commercialize our products;
perform clinical trials with respect to current Eversense or future versions of Eversense;
implement and execute our business strategy;
expand and improve the productivity of our sales and marketing infrastructure to grow sales of Eversense or
future versions of Eversense;
increase awareness of our brand and Eversense and build loyalty among people with diabetes, their caregivers
and healthcare providers;
• manage expanding operations;
• manage and secure effective sales of our product through our new collaboration with Ascensia, including its
establishment of required commercial infrastructure in the U.S. and elsewhere, and its adapting to a new
product category in which it has limited experience;
expand the capabilities and capacities of our third-party manufacturers, including increasing production of
current products efficiently and having our vendors adapt their manufacturing facilities to the production of new
products;
respond effectively to competitive pressures and developments;
enhance Eversense and develop future versions of Eversense; and
attract, retain and motivate qualified personnel in various areas of our business.
•
•
•
•
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Due to our limited operating history as a commercial-stage company, we may not have the institutional
knowledge or experience to be able to effectively address these and other risks that may face our business. In addition,
we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to
respond effectively to those trends. As a result of these or other risks, we may not be able to execute key components of
our business strategy, and our business, financial condition and operating results may suffer.
If we are unable to successfully expand our commercialization of Eversense in the United States and Europe through
our Commercialization Agreement with Ascensia, our business will be harmed.
We have limited commercialization experience in both the United States and Europe. We have invested
substantially all of our efforts and financial resources to the development and commercialization of Eversense. Our
ability to generate revenue from our products will depend heavily on successful commercialization of products in the
United States and Europe, which is entirely dependent on our collaboration with Ascensia, and on continuing
development of future generations of our Eversense system. The success of any products that we develop will depend on
several factors, including:
•
•
receipt of timely marketing approvals from applicable regulatory authorities or CE Certificates Conformity
from Notified Bodies in the EEA;
our ability to procure and maintain suppliers and manufacturers of the components of Eversense and future
versions of Eversense;
• market acceptance of Eversense by people with diabetes, the medical community and third-party payors;
•
our ability to obtain and maintain coverage and adequate reimbursement for Eversense and the related insertion
and removal procedures from third-party payors;
our success in educating healthcare providers and people with diabetes about the benefits, administration and
use of Eversense and future versions of Eversense;
the prevalence and severity of adverse events experienced with Eversense and future versions of Eversense;
the perceived advantages, cost, safety, convenience and accuracy of alternative diabetes management therapies;
obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for Eversense
and otherwise protecting our rights in our intellectual property portfolio;
•
•
•
•
• maintaining compliance with regulatory requirements, including current good manufacturing practices; and
• maintaining a continued acceptable accuracy, safety, duration and convenience profile of Eversense.
Our revenue is dependent, in part, upon the size of the markets in the territories for which we have regulatory
approval or certification, the accepted price for the product, the ability to obtain coverage and reimbursement, and
whether we own the commercial rights for that territory. If the number of people with diabetes we target is not as
significant as we estimate or the treatment population is narrowed by competition, physician choice or treatment
guidelines, we may not generate significant revenue from sales of such products.
Our revenue is dependent on the success of Ascensia in commercializing our product and its future versions.
Our product is a new product for Ascensia globally and they must continue to establish certain functions of their U.S.
commercial organization to successfully market and sell our CGM system. Ascensia’s continued organizational
development of its sales and marketing capabilities will be critical to successful commercialization of our Eversense
systems. If Ascensia is unable to maintain effective sales, marketing and other functions that are required to support the
product, it will have a materially negative impact on our net revenues from Eversense.
Approval in the United States by the FDA or approval, or certification by a regulatory agency or Notified Body
in another country does not guarantee approval, or certification by the regulatory authorities or Notified Bodies in other
countries or jurisdictions or ensure approval, or certification for the same conditions of use. In addition, clinical trials
conducted in one country may not be accepted by regulatory authorities in other countries. Approval or certification
processes vary among countries and can involve additional product testing and validation and additional administrative
review periods. If we do not achieve one or more of these approvals, or certifications in a timely manner or at all, we
could experience significant delays or an inability to fully commercialize Eversense and achieve profitability.
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Both before and after a product is commercially released, we will have ongoing responsibilities under U.S. and
EU regulations. We will also be subject to periodic inspections by the FDA, the Notified Bodies in the EEA and
comparable foreign authorities to determine compliance with regulatory requirements, such as the QSR, of the FDA,
medical device reporting regulations, vigilance in reporting of adverse events and regulations regarding notification,
corrections, and recalls. These inspections can result in observations or reports, warning letters or other similar notices or
forms of enforcement action. If the FDA, or any comparable foreign regulatory authority concludes that we are not in
compliance with applicable laws or regulations, or that any of our products are ineffective or pose an unreasonable health
risk, such authority could ban these products, suspend, vary or cancel our marketing authorizations or CE Certificates of
Conformity, impose "stop-sale" and "stop-import" orders, refuse to issue export certificates, detain or seize adulterated or
misbranded products, order a recall, repair, replacement, correction or refund of such products, or require us to notify
health providers and others that the products present unreasonable risks of substantial harm to the public health.
Discovery of previously unknown problems with our product's design or manufacture may result in restrictions on the
use of Eversense, restrictions placed on us or our suppliers, or withdrawal or variation of an existing regulatory clearance
or CE Certificate of Conformity for Eversense. The FDA, competent authorities of EEA countries and comparable
foreign regulatory authorities may also impose operating restrictions, enjoin and restrain certain violations of applicable
law pertaining to medical devices, assess civil or criminal penalties against our officers, employees or us, or recommend
criminal prosecution of our company. Adverse regulatory action may restrict us from effectively marketing and selling
our products. In addition, negative publicity and product liability claims resulting from any adverse regulatory action
could have a material adverse effect on our business, financial condition, and operating results.
Foreign governmental regulations have become increasingly stringent and more extensive, and we may become
subject to even more rigorous regulation by foreign governmental authorities in the future. Penalties for a company's
noncompliance with foreign governmental regulation could be severe, including revocation or suspension of a company's
business license and civil or criminal sanctions. In some jurisdictions, such as Germany, any violation of a law related to
medical devices is also considered to be a violation of unfair competition law. In such cases, governmental authorities,
our competitors and business or consumer associations may then file lawsuits to prohibit us from commercializing
Eversense in such jurisdictions. Our competitors may also sue us for damages. Any domestic or foreign governmental
law or regulation imposed in the future may have a material adverse effect on our business, financial condition and
operating results.
We are dependent on one product, Eversense. Our success depends on our ability to continue to develop,
commercialize and gain market acceptance for our products.
Our current business strategy is highly dependent on the successful commercialization of Eversense by
Ascensia and achieving and maintaining market acceptance. In order to sell Eversense to people with diabetes, we and
Ascensia must educate them, their caregivers and healthcare providers that Eversense is an attractive alternative to
competitive products for the monitoring of glucose levels, including SMBG, as well as other competitive CGM systems
and alternatives to CGM methodologies. Market acceptance and adoption of Eversense depends on educating people
with diabetes, as well as their caregivers and healthcare providers, as to the distinct features, ease-of-use, positive
lifestyle impact, and other perceived benefits of Eversense as compared to competitive products.
Achieving and maintaining market acceptance of Eversense could be negatively impacted by many factors,
including:
•
•
•
•
•
•
•
the failure of Eversense to achieve wide acceptance among people with diabetes, their caregivers, healthcare
providers, third-party payors and key opinion leaders in the diabetes treatment community;
lack of evidence supporting the accuracy, duration, safety, ease-of-use or other perceived benefits of Eversense
over competitive products or other currently available diabetes management therapies;
perceived risks associated with the use of Eversense or similar products or technologies generally;
the introduction of competitive products and the rate of acceptance of those products as compared to Eversense;
adverse results of clinical trials relating to Eversense or similar competitive products;
loss of regulatory approval or CE Certificates of Conformity for Eversense, adverse publicity or other adverse
events including any product liability lawsuits; and
any limitations in the ability of Ascensia to effectively communicate and promote product benefits.
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In addition, Eversense may be perceived by people with diabetes, their caregivers or healthcare providers to be
more complicated or less effective than traditional monitoring methodologies, including SMBG or CGM systems which
require less calibration, and people may be unwilling to change their current regimens.
Moreover, healthcare providers tend to be slow to change their medical treatment practices because of perceived
liability risks arising from the use of new products and the uncertainty of third-party payor reimbursement. Accordingly,
healthcare providers may not recommend Eversense unless and until there is sufficient evidence to convince them to
alter the treatment methods they typically recommend, such as receiving recommendations from prominent healthcare
providers or other key opinion leaders in the diabetes treatment community.
If we are not successful in educating people with diabetes of the benefits of Eversense, or if we are unable to
achieve the support of caregivers and healthcare providers or widespread market acceptance for Eversense, then our sales
potential, strategic objectives and profitability could be negatively impacted, which would adversely affect our business,
financial condition and operating results.
We contract with third parties for the manufacture of Eversense. Risks associated with the manufacturing of our
products could reduce our gross margins and negatively affect our operating results.
We do not have any manufacturing facilities or direct manufacturing personnel. We currently rely, and expect to
continue to rely, on third parties for the manufacture of Eversense for commercial sale and development of future CGM
products. Our business strategy depends on our third-party manufacturers' ability to manufacture Eversense in sufficient
quantities and on a timely basis so as to meet consumer demand, while adhering to product quality standards, complying
with regulatory requirements and managing manufacturing costs. We are subject to numerous risks relating to our
reliance on the manufacturing capabilities of our third-party manufacturers, including:
•
•
•
•
•
•
•
quality or reliability defects in Eversense;
inability to secure product components in a timely manner, in sufficient quantities or on commercially
reasonable terms;
failure to increase production of Eversense to meet demand;
inability to modify production lines to enable us to efficiently produce future products or implement changes in
current products in response to regulatory requirements;
difficulty identifying and qualifying alternative manufacturers in a timely manner;
inability to establish agreements with current or future third-party manufacturers or to do so on acceptable
terms; or
potential damage to or destruction of our manufacturers' equipment or facilities.
These risks are likely to be exacerbated by our limited experience with Eversense and its manufacturing
process. As demand for our products increases, our third-party suppliers will need to invest additional resources to
purchase components, hire and train employees, and enhance their manufacturing processes. If our manufacturers fail to
increase production capacity efficiently, our sales may not increase in line with our expectations and our operating
margins could fluctuate or decline. Further, we may be required to fund capital investments at our third-party suppliers to
support increased production capacity. In addition, although we expect some of our future versions of Eversense to share
product features and components with our current Eversense E3 product, manufacturing future versions of Eversense
may require the modification of production lines, the identification of new manufacturers for specific components, or the
development of new manufacturing technologies. It may not be possible for us to manufacture these products at a cost or
in quantities sufficient to make these future versions of Eversense commercially viable.
We depend on a limited number of third-party suppliers for the components of Eversense and the loss of any of these
suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
We rely on third-party suppliers to supply and manufacture the components of our Eversense system. For our
business strategy to be successful, our suppliers must be able to provide us with components and Eversense systems in
sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with
agreed upon specifications, at acceptable costs and on a timely basis. Future increases in sales of Eversense, whether
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expected or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components
and Eversense systems in a manner that meets these various requirements.
We generally use a small number of suppliers of components for our products. Depending on a limited number
of suppliers exposes us to risks, including limited control over pricing, availability, quality and delivery schedules.
Generally, we do not have long-term supply agreements with our suppliers, and, in many cases, we make our purchases
on a purchase order basis. Under most of our supply and manufacturing agreements, we have no obligation to buy any
given quantity of products, and our suppliers have no obligation to sell us or to manufacture for us any given quantity of
components or products. As a result, our ability to purchase adequate quantities of components or our products may be
limited, and we may not be able to convince suppliers to make components and products available to us. Additionally,
our suppliers may encounter problems that limit their ability to supply components or manufacture products for us,
including financial difficulties, damage to their manufacturing equipment or facilities, or product discontinuations. As a
result, there is a risk that certain components could be discontinued and no longer available to us. We may be required to
make significant "last time" purchases of component inventory that is being discontinued by the supplier to ensure
supply continuity. If we fail to obtain sufficient quantities of high-quality components to meet demand for our products
in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors
such as the proprietary nature of our products, our quality control standards and regulatory requirements, we may not be
able to quickly engage additional or replacement suppliers for some of our critical components. Failure of any of our
suppliers to deliver components at the level our business requires could disrupt the manufacturing of our products and
limit our ability to meet our sales commitments, which could harm our reputation and adversely affect our business.
We may also have difficulty obtaining similar components from other suppliers that are acceptable to the FDA
or other foreign regulatory authorities, and the failure of our suppliers to comply with strictly enforced regulatory
requirements could expose us to regulatory action including warning letters, product recalls, and termination of
distribution, product seizures or civil penalties. It could also require us to cease using the components, seek alternative
components or technologies and modify our products to incorporate alternative components or technologies, which could
result in a requirement to seek additional regulatory approvals or certifications. Any disruption of this nature or increased
expenses could harm our commercialization efforts and adversely affect our operating results.
Our third-party suppliers operate primarily at facilities in a single location, and any disruption to these facilities could
adversely affect our business and operating results.
Each of our third-party suppliers operates at a facility in a single location and substantially all of our inventory
of component supplies and finished goods is held at these locations. We, and our suppliers, take precautions to safeguard
facilities, including acquiring insurance, employing back-up generators, adopting health and safety protocols and
utilizing off-site storage of computer data. However, vandalism, terrorism or a natural or other disaster, such as an
earthquake, health epidemic, such as the coronavirus, fire or flood, could damage or destroy equipment or our inventory
of component supplies or finished products, cause substantial delays in our operations, result in the loss of key
information, or cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In
addition, regardless of the level of insurance coverage, damage to our or our suppliers' facilities could harm our business,
financial condition and operating results.
If we do not enhance our product offerings through our research and development efforts, we may fail to effectively
compete or become profitable.
In order to capture and grow market share in the intensively managed diabetes market, we will need to enhance
and broaden our product offerings in response to the evolving demands of people with diabetes and healthcare providers,
as well as competitive pressures and technologies. These development needs include additional features, extended
product life and other attributes we believe may be desired by patients. We may not be successful in developing,
obtaining regulatory approval or certification for, or marketing future versions of Eversense. In addition, notwithstanding
our market research efforts, our future products may not be accepted by people with diabetes, their caregivers, healthcare
providers or third-party payors who reimburse people with diabetes for Eversense and healthcare providers for their
services. The success of Eversense or future versions of Eversense will depend on numerous factors, including our
ability, and the ability of our commercial partners, to:
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identify the product features that people with diabetes, their caregivers and healthcare providers are seeking in a
CGM system and successfully incorporate those features into our products;
develop and introduce future generations of Eversense in a timely manner;
offer products at a price that is competitive with other products then available;
adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third
parties;
demonstrate the accuracy and safety of Eversense or future versions of Eversense;
obtain coverage and adequate reimbursement for Eversense or future versions of Eversense and the related
insertion and removal procedures; and
obtain the necessary regulatory approvals or certifications for Eversense and future versions of Eversense.
However, if regulatory authorities or Notified Bodies were to disagree, this would adversely impact our ability
to commercialize that product enhancement.
If we fail to generate demand by developing products that incorporate features requested by people with
diabetes, their caregivers or healthcare providers, or if we do not obtain regulatory clearance, certification or approval for
future versions of Eversense in time to meet market demand, we may fail to generate sales sufficient to achieve or
maintain profitability. We have in the past experienced, and we may in the future experience, delays in various phases of
product development, approval, certification and commercial launch, including during research and development,
regulatory submission and approval or certification, manufacturing, limited release testing, marketing and customer
education efforts. Any delays in our anticipated product launches may significantly impede our ability to successfully
compete in our markets. In particular, such delays could cause customers to delay or forego purchases of our products, or
to purchase our competitors' products. Even if we are able to successfully develop future versions of Eversense when
anticipated, these products may not produce sales in excess of the costs of development, and they may be quickly
rendered obsolete by the changing preferences of people with diabetes or the introduction by our competitors of products
embodying new technologies or features.
Failure to secure or retain coverage or adequate reimbursement for Eversense or future versions of Eversense
systems, including the related insertion and removal procedures, by third-party payors, and an inability of patients to
be able to access the product, could adversely affect our business, financial condition and operating results.
We plan to derive nearly all of our revenue from sales of Eversense in the United States and Europe and expect
to do so for the next several years. Patients who receive treatment for their medical conditions and their healthcare
providers generally rely on third party payors to reimburse all or part of the costs associated with their medical treatment,
including healthcare providers' services. As a result, access to coverage and adequate reimbursement for Eversense by
third-party payors is essential to the acceptance of our products by people with diabetes. Similarly, healthcare providers
may choose not to order a product unless third-party payors cover and reimburse a substantial portion of the product.
Coverage determinations and reimbursement levels of both our products and the healthcare provider's performance of the
insertion and removal procedures are critical to the commercial success of our product, and if we or our commercial
partners are not able to secure positive coverage determinations and reimbursement levels for our products or the
insertion and removal procedures, our business would be materially adversely affected.
Within and outside the United States, reimbursement is obtained from a variety of sources, including
government sponsored and private health insurance plans. These third-party payors determine whether to provide
reimbursement for specific products and procedures. A third-party payor's decision to provide coverage for our products
does not imply that an adequate reimbursement rate will be obtained. Further, one third-party payor's decision to cover
our products does not assure that other payors will also provide coverage for the products or will provide coverage at an
adequate reimbursement rate. In addition, there may be significant delays in obtaining a reimbursement determination,
and coverage, if granted, may be more limited than the purposes for which the product is cleared or certified by the FDA,
a Notified Body in the EEA or other foreign regulatory authorities. Moreover, eligibility for reimbursement does not
imply that any product will be paid for in all cases or at a rate that covers its associated costs, including research,
development, manufacture, sale and distribution. For example, payment rates may vary according to the use of the
product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are
already reimbursed, and may be incorporated into existing payments for other services. Net prices for products may be
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reduced by mandatory discounts or rebates required by government healthcare programs or third-party payors and by any
future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower
prices.
Private insurance companies and other private, third-party payors set payor-specific reimbursement policies.
The extent of coverage and the rate of reimbursement varies on a payor-by-payor basis. Most of the largest private third-
party payors, in terms of the number of covered lives, have issued coverage policies for the category of CGM devices.
These policies include varied coverage requirements regarding patient condition and characteristics. Many of these
coverage policies reimburse for CGM systems under durable medical equipment benefits, which are restrictive in nature
and require the healthcare provider or supplier to comply with extensive documentation and other requirements. In
addition, those third-party payors that cover CGM products may and have included limitations as to the patient
conditions and characteristics eligible for coverage and may adopt different coverage and reimbursement policies for our
products, which could also diminish payments for Eversense. It is possible that some third-party payors will not offer
any coverage for our products. Even if favorable coverage and reimbursement status is attained for Eversense, less
favorable coverage policies and reimbursement rates may be implemented in the future.
Eversense is an implantable medical device in the clinic setting and thus follows a different reimbursement path
when compared to the current CGM class. Some payors will adopt a payment methodology that will bundle payment of
device and procedure back to the implanting clinic. Other payors may choose to reimburse device and procedure
separately. Without a Category 1 code to define the payment process, there will be some heterogeneity in this process.
Given this heterogeneity, we will have to work closely with certified clinics to keep abreast of which process to follow
and what to expect. This will be disruptive to some clinics and could delay product uptake until the process of payment
becomes more homogenous and well defined for clinics to follow. Until a steady state is reached, delays in processing
and clinic operating coordination could result in the loss of sales, which could negatively affect our business, financial
condition and operating results.
Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly
sophisticated methods of controlling healthcare costs by imposing lower payment rates and negotiating reduced contract
rates, among others. As such, we believe that future coverage and reimbursement may be subject to increased
restrictions, such as additional preauthorization requirements, both in the United States and in international markets. Our
dependence on the commercial success of our Eversense products makes us particularly susceptible to any cost
containment or reduction efforts. If third-party coverage and reimbursement of products for which we may receive
regulatory approval or certification is not available or adequate in either the United States or international markets, or if
our production costs increase faster than increases in reimbursement levels, we or our commercial partners may be
unable to sell Eversense or future versions of Eversense profitably and our business would be adversely impacted.
Moreover, in the EU some countries may require the completion of additional studies that compare the cost-
effectiveness of a particular medical device candidate to currently available therapies. This Health Technology
Assessment, or HTA process, which is currently governed by the national laws of the individual EU Member States, is
the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and
societal impact of use of a given medical device in the national healthcare systems of the individual country is
conducted. The outcome of HTA regarding specific medical device will often influence the pricing and reimbursement
status granted to these products by the competent authorities of individual EU Member States. On January 31, 2018, the
European Commission adopted a proposal for a regulation on health technologies assessment. The Regulation is
intended to boost cooperation among EU Member States in assessing health technologies, including new medical
devices, and providing the basis for cooperation at EU level for joint clinical assessments in these areas. In
December 2021 the HTA Regulation was adopted and entered into force on January 11, 2022. It will apply from 2025.
In April 2022, as a part of commercialization efforts, our partner Ascensia implemented the PASS program
designed to enhance affordability and access to Eversense for patients who do not have insurance coverage for
Eversense, or whose insurance is denied or is insufficient. The program’s design being ineffective, or a lack of a patient
assistance program could adversely impact the sales of Eversense and, consequently our net revenues. In addition, we
may not be able to recognize a substantial portion of the revenue related to Eversense insertions for the patients
participating in these access programs. The amount of time required to obtain favorable coverage and reimbursement
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decisions, including navigating the appeals process with third-party payors, is uncertain, and we may see increased
product utilization without corresponding recognized revenue. Our operating results may be adversely impacted if we are
unable to obtain successful appeals or favorable coverage decisions by insurance providers, or if there are not effective
patient access programs in place.
If important assumptions we have made about what people with intensively managed diabetes are seeking in a CGM
system are inaccurate, our business and operating results may be adversely affected.
Our business strategy was developed based on a number of important assumptions about the diabetes industry in
general, and the diabetes market for CGM in particular, any one or more of which may prove to be inaccurate. For
example, we believe that the benefits of CGM will continue to drive increased rates of market acceptance for products in
this space. However, this trend is uncertain and limited sources exist to obtain reliable market data.
Another key element of our business strategy is utilizing market research to understand how people with
diabetes are seeking to improve their diabetes therapy management. This strategy underlies our entire product design,
marketing and customer support approach and is the basis on which we developed Eversense. However, our market
research is based on interviews, focus groups and online surveys involving people with diabetes on insulin, their
caregivers and healthcare providers that represent only a small percentage of the overall diabetes market. As a result, the
attributes we incorporated into the Eversense system may not be reflective of what is desired by the various constituents
in the diabetes market. Consequently, our estimates of our future market share and penetration may not be accurate and
our sales may be less than estimated.
We operate in a very competitive industry and if we fail to compete successfully against our existing or potential
competitors, many of whom have greater resources than we have, our sales and operating results may be negatively
affected.
The market for CGM systems is developing and competitive, subject to rapid change and significantly affected
by new product introductions. We compete with well-capitalized companies, some of which are publicly traded, that
manufacture CGM systems including Dexcom, Medtronic and Abbott. Each of these companies has received approval
from the FDA to market their respective CGM system. Dexcom’s CGM system was the first CGM system to be
approved by the FDA for marketing as a non-adjunctive device, and Abbott’s Freestyle Libre was also approved for non-
adjunctive use. Both Dexcom (G6 and G7) and Abbott (Freestyle Libre) systems have factory calibration, and do not
require user calibration.
Dexcom has also received the first FDA iCGM indication allowing its Dexcom G6 and G7 to be interoperable
with other diabetes tech devices such as insulin pumps. As the industry evolves, we anticipate encountering increasing
competition from companies that integrate CGM with insulin pumps. Abbott also received an iCGM indication for their
Freestyle Libre 2 and 3 products and we expect all other CGM companies to pursue an iCGM indication including
Medtronic.
In addition to CGM providers, we also compete with providers of SMBG systems. Three companies currently
account for a substantial share of the worldwide sales of SMBG systems: Roche Diabetes Care, a division of Roche
Diagnostics; Abbott; and Ascensia Diabetes Care Holdings AG. There are also a number of academic and other
institutions involved in various phases of our industry’s technology development.
Many of these competitors enjoy several advantages over us, including:
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greater financial and human resources for sales and marketing, and product development;
established relationships with healthcare providers and third-party payors;
established reputation and name recognition among healthcare providers and other key opinion leaders in the
diabetes industry;
in some cases, an established base of long-time customers;
products supported by long-term clinical data;
larger and more established sales, marketing and distribution networks;
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greater ability to cross-sell products or provide incentives to healthcare providers to use their products; and
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regulatory approval or clearance and certification.
In addition, mergers and acquisitions in the diabetes industry may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and
establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies
complementary to, or that may be necessary for, our programs.
If we are unable to effectively compete with our competitors, we may fail to meet our strategic objectives, and
our business, financial condition and operating results could be harmed.
Competitive products or other technological innovations for the monitoring, treatment or prevention of diabetes may
render our products less competitive or obsolete.
Our ability to achieve our strategic objectives will depend, among other things, on our ability to develop and
commercialize products for the monitoring and management of diabetes that offer distinct features, have a longer
duration than available alternatives, are easy-to-use, receive adequate coverage and reimbursement from third-party
payors, include essential safety features and are more appealing than available alternatives. Our primary competitors, as
well as a number of other companies, medical researchers and existing medical device companies are pursuing new
delivery devices, delivery technologies, sensing technologies, procedures, drugs and other therapies for the monitoring,
treatment and prevention of diabetes. For example, the National Institutes of Health and other supporters of diabetes
research are continually seeking ways to prevent, cure or improve treatment of diabetes, which if successful could render
glucose monitoring devices, like Eversense, obsolete. Any technological breakthroughs in diabetes monitoring, treatment
or prevention could reduce the potential market for Eversense or render Eversense less competitive or obsolete
altogether, which would significantly reduce our potential sales.
Because of the size of the diabetes market, we anticipate that companies will continue to dedicate significant
resources to developing competitive products. The frequent introduction by competitors of products that are, or claim to
be, superior to our products may create market confusion that may make it difficult to differentiate the benefits of our
products over competitive products. In addition, the entry of multiple new products may lead some of our competitors to
employ pricing strategies that could adversely affect the pricing of our products. If a competitor develops a product that
competes with or is perceived to be superior to Eversense, or if a competitor employs strategies that place downward
pressure on pricing within our industry, our sales may decline significantly or may not increase in line with our
expectations, either of which would harm our business, financial condition and operating results.
The size and future growth in the market for CGM systems and CGM-related products has not been established with
precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the
size of this market, our sales growth may be adversely affected.
Our estimates of the size and future growth in the market for CGM systems and CGM-related products,
including the number of people currently managing their diabetes with insulin who may benefit from and be amenable to
using Eversense, is based on a number of internal and third-party studies, reports and estimates. In addition, our internal
estimates are based in large part on current treatment patterns by healthcare providers using CGM systems and our belief
that the incidence of diabetes in the United States and worldwide is increasing. While we believe these factors have
historically provided and may continue to provide us with effective tools in estimating the total market for CGM systems
and CGM related products and our products, these estimates may not be correct and the conditions supporting our
estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. The actual
incidence of diabetes, and the actual demand for our products or competitive products, could differ materially from our
projections if our assumptions are incorrect. As a result, our estimates of the size and future growth in the market for our
CGM systems may prove to be incorrect. If the actual number of people with diabetes who would benefit from Eversense
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and the size and future growth in the market for Eversense is smaller than we have estimated, it may impair our projected
sales growth and have an adverse impact on our business.
Our ability to maintain and grow our revenue will depend on establishing a customer base and retaining a high
percentage of our customer base.
A key to maintaining and growing our revenue will be establishing a customer base and retaining a high
percentage of our customers due to the potentially significant revenue generated from ongoing purchases of disposable
sensors. Ascensia intends to continue developing customer loyalty programs to help with retention aimed at patients,
their caregivers and healthcare providers, which include patient ambassadors, training specific to Eversense, ongoing
support by sales and clinical employees and 24/7 technical support and customer service. If demand for our products
fluctuates as a result of the introduction of competitive products, changes in reimbursement policies, manufacturing
problems, perceived safety issues with our or our competitors' products, the failure to secure regulatory clearance or
approvals, certifications or for other reasons, our ability to attract and retain customers could be harmed. The failure to
retain a high percentage of our customers would negatively impact our business, financial condition and operating
results.
Various factors outside our direct control may adversely affect manufacturing, sterilization and distribution of our
products.
The manufacture, sterilization and distribution of our products is challenging. Changes that our suppliers may
make outside the purview of our direct control can have an impact on our processes, quality of our products and the
successful delivery of products to our customers. Mistakes and mishandling are not uncommon and can affect supply and
delivery. Some of these risks include:
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failure to complete sterilization on time or in compliance with the required regulatory standards;
transportation and import and export risk, particularly given the international nature of our supply and
distribution chains;
delays in analytical results or failure of analytical techniques that we will depend on for quality control and
release of products;
natural disasters, labor disputes, financial distress, raw material availability, issues with facilities and equipment
(including through cyberattacks or other security incidents) or other forms of disruption to business operations
affecting our manufacturers or suppliers; and
latent defects that may become apparent after products have been released and that may result in a recall of such
products.
If any of these risks were to materialize, our ability to provide our products to customers on a timely basis would be
adversely impacted.
Potential complications from Eversense or future versions of Eversense may not be revealed by our clinical
experience.
Based on our experience, complications from use of Eversense may include sensor errors, sensor failures or skin
irritation under the adhesive dressing of the transmitter. Inflammation or redness, swelling, minor infection, and minor
bleeding at the sensor insertion site are also possible risks with an individual's use of the device. However, if
unanticipated side-effects result from the use of Eversense or future versions of Eversense, we could be subject to
liability and our systems would not be widely adopted. Additionally, we have limited clinical experience with repeated
use of our CGM system in the same patient or the same insertion site. We cannot assure you that long-term use would
not result in unanticipated complications, even after the device is removed.
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Undetected errors or defects in Eversense or future versions of Eversense could harm our reputation, decrease the
market acceptance of Eversense or expose us to product liability claims.
Eversense or future versions of Eversense may contain undetected errors or defects. Disruptions or other
performance problems with Eversense or future versions of Eversense, including our sensors not lasting for the full
approved or certified duration of use, may harm our reputation. If that occurs, we may incur significant costs, the
attention of our key personnel could be diverted, or other significant customer relations problems may arise. We may
also be subject to increased warranty and liability claims for damages related to errors or defects in Eversense or future
versions of Eversense. A material liability claim or other occurrence that harms our reputation or decreases market
acceptance of Eversense could harm our business and operating results. This risk exists even if a device is cleared,
certified or approved for commercial sale and manufactured in facilities licensed and regulated by the FDA or an
applicable foreign regulatory authority. Any side effects, manufacturing defects, misuse or abuse associated with
Eversense or future versions of Eversense systems could result in patient injury or death. The medical device industry
has historically been subject to extensive litigation over product liability claims, and we cannot offer any assurance that
we will not face product liability lawsuits.
The sale and use of Eversense or future versions of Eversense could lead to the filing of product liability claims
if someone were to allege that Eversense or one of our products contained a design or manufacturing defect. A product
liability claim could result in substantial damages and be costly and time consuming to defend, either of which could
materially harm our business or financial condition. Product liability claims may be brought against us by people with
diabetes, healthcare providers or others selling or otherwise coming into contact with our products, among others. If we
cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational
harm. In addition, regardless of merit or eventual outcome, product liability claims may result in:
costs of litigation;
distraction of management's attention from our primary business;
the inability to commercialize Eversense or future versions of Eversense;
decreased demand for Eversense;
damage to our business reputation;
product recalls or withdrawals from the market;
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• withdrawal of clinical trial participants;
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substantial monetary awards to patients or other claimants; or
loss of revenue.
While we currently maintain product liability insurance covering claims up to $10.0 million per occurrence, we
cannot assure you that such insurance would adequately protect our assets from the financial impact of defending a
product liability claim. Any product liability claim brought against us, with or without merit, could increase our product
liability insurance rates or prevent us from securing such insurance coverage in the future.
We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with
third parties that may not result in the development of commercially viable products or the generation of significant
future revenues.
In the ordinary course of our business, we may enter into collaborations, in-licensing arrangements, joint
ventures, strategic alliances, partnerships or other arrangements to develop products and to pursue new markets.
Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or
partnerships may be a lengthy and complex process. Other companies, including those with substantially greater
financial, marketing, sales, technology or other business resources, may compete with us for these opportunities or
arrangements. We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a
cost-effective basis, on acceptable terms or at all. We have limited institutional knowledge and experience with respect
to these business development activities, and we may also not realize the anticipated benefits of any such transaction or
arrangement. In particular, these collaborations may not result in the development of products that achieve commercial
success or result in significant revenues and could be terminated prior to developing any products.
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Additionally, we may not be in a position to exercise sole decision-making authority regarding the transaction
or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may
have economic or business interests or goals that are, or that may become, inconsistent with our business interests or
goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of
performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial
obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise
with any future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may
breach their obligations to us. For example, one of our vendors who provides a component to the Eversense sensor has
communicated to us its belief that one of its employees should be named as a co-inventor on a related patent application.
We have communicated to the third party that its employee should not be named as a co-inventor and its employee has
not been named as a co-inventor to date. In addition, we may have limited control over the amount and timing of
resources that any future collaborators devote to our or their future products. Disputes between us and our collaborators
may result in litigation or arbitration which would increase our expenses and divert the attention of our management.
Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the
terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such
transaction or arrangement or may need to purchase such rights at a premium.
If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the
licensed intellectual property rights or maintain those licenses. Future licensors could retain the right to prosecute and
defend the intellectual property rights licensed to us, in which case we would depend on the ability of our licensors to
obtain, maintain and enforce intellectual property protection for the licensed intellectual property. These licensors may
determine not to pursue litigation against other companies or may pursue such litigation less aggressively than we would.
Further, entering into such license agreements could impose various diligence, commercialization, royalty or other
obligations on us. Future licensors may allege that we have breached our license agreement with them, and accordingly
seek to terminate our license, which could adversely affect our competitive business position and harm our business
prospects.
We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to
manage acquisitions, or the failure to integrate them with our existing business, could harm our business, financial
condition and operating results.
From time to time, we may consider opportunities to acquire other companies, products or technologies that
may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our
business strategies. Potential acquisitions involve numerous risks, including:
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problems assimilating the acquired products or technologies;
issues maintaining uniform standards, procedures, controls and policies;
unanticipated costs associated with acquisitions;
diversion of management's attention from our existing business;
risks associated with entering new markets in which we have limited or no experience;
increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters; and
unanticipated or undisclosed liabilities of any target.
We have no current commitments with respect to any acquisition. We do not know if we will be able to identify
acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable
terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential
inability to integrate any acquired products or technologies effectively may adversely affect our business, operating
results and financial condition.
The ongoing military action by Russia in Ukraine and by Hamas in Gaza could have negative impact on the global
economy which could materially adversely affect our business, operations, operating results and financial condition.
On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained
conflict and disruption in the region is possible. The impact to Ukraine as well as actions taken by other countries,
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including new and stricter sanctions imposed by Canada, the United Kingdom, the European Union, the U.S. and other
countries and companies and organizations against officials, individuals, regions, and industries in Russia and Ukraine,
and actions taken by Russia in response to such sanctions, and each country’s potential response to such sanctions,
tensions, and military actions could adversely affect the global economy and financial markets and thus could affect our
business, operations, operating results and financial condition as well as the price of our common stock and our ability to
raise additional capital when needed on acceptable terms. Separately, in early October 2023, Hamas, a militant group in
control of Gaza, and Israel began an armed conflict in Israel, the Gaza Strip, and surrounding areas, which threatens to
spread to other Middle Eastern countries including Lebanon, Syria, and Iran. The Hamas-Israel military conflict is
ongoing, and its length and outcome are highly unpredictable. The extent and duration of the military action, sanctions
and resulting market disruptions are impossible to predict, but could be substantial.
While our suppliers may source certain raw materials from areas with ongoing military conflict, to date we have
not been notified that the supply of these materials has been significantly impacted by these conflicts. We continue to
monitor potential disruptions closely and are proactively assessing and evaluating alternative sources to bolster supply of
these materials moving forward, in addition to working closely with our suppliers in any product re-qualification that
may be required. Revenue relating to products manufactured from raw materials sourced from regions with current
ongoing international conflict does not constitute a material portion of our business. Further, there is uncertainty
regarding the ultimate impact these conflicts, including any escalation or further expansion of the conflict’s current
scope, will have on our customers, the global economy, supply chains, logistics, fuel prices, raw material pricing and our
business.
Surging natural gas and electricity costs in Europe poses a threat to our contract manufacturers ability to maintain
operations in Europe which can adversely affect or business supply chain
Europe’s energy crisis driven by the impacts of Russia’s military action in Ukraine is quickly soaring and
causing extreme disruption to the manufacturing industry across the continent. The reduced natural gas supply to Europe
has resulted in higher gas costs which have been unsustainable for energy intensive companies that operate across
Europe. Several manufacturers have shut down, suspended or reduced operations amidst the skyrocketing prices. Several
of our suppliers operate in Europe and may be impacted by the energy crisis as the result of increased production costs.
Across Europe, these energy constraints could result in nations or regions enacting emergency energy related policies,
limiting energy availability for manufacturers. The impact of these developments cannot be predicted with certainty,
however, any such production constraints could further exacerbate an already ailing supply chain and could have a
material, adverse effect on our operations and our ability to source materials that are required to manufacture our
products. We continue to monitor the situation closely and continue to have discussions with our suppliers to determine
whether there may be any uncertainty with regards to our ability to source materials that are required to manufacture our
products. If the energy crisis or other supply chain challenges impact our ability to obtain raw materials on a timely basis
or without significant increases in costs, our financial results and business operations may be adversely affected.
Our business could be adversely affected by economic downturns, inflation, increases in interest rates, natural
disasters, public health crises such as pandemics, political crises, geopolitical events, such as the crisis in Ukraine, or
other macroeconomic conditions, which have in the past and may in the future negatively impact our business and
financial performance.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions,
including, among other things, severely diminished liquidity and credit availability, declines in consumer confidence,
declines in economic growth, supply chain shortages, increases in inflation rates, higher interest rates and uncertainty
about economic stability.
A widespread public health crisis such as a pandemic could result in significant disruption of global financial
markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or
market correction resulting from the effects of public health crises could materially affect our business and the value of
our common stock. It may have further negative impacts, such as (a) a global or U.S. recession or other economic crisis;
(b) credit and capital markets volatility (and access to these markets, including by our suppliers and customers);
(c) manufacturing supply disruption due to travel restrictions or other government actions; (d) disruptions in raw material
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supply, our manufacturing operations, or in our distribution and supply chain; and (e) our ability to conduct planned
clinical trials and commercialization activities. The ultimate impact of a public health crisis is highly uncertain.
The Federal Reserve recently raised interest rates multiple times in response to concerns about inflation and it
may raise them again. Higher interest rates, coupled with reduced government spending and volatility in financial
markets may increase economic uncertainty and affect consumer spending. If the equity and credit markets deteriorate,
including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to
obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely
affect us by increasing our costs, including labor and employee benefit costs.
Risks Related to our Financial Results and Need for Financing
We will need to generate significant sales to achieve profitable operations.
We intend to continue to increase our operating expenses in connection with the commercialization of
Eversense with our collaboration partner Ascensia, our ongoing research and development activities including the
development of next generation products and the clinical trials for those products, and the commensurate development of
our management and administrative functions. We will need to generate significant sales to achieve profitability, and we
might not be able to do so. Even if we do generate significant sales, we might not be able to achieve, sustain or increase
profitability on a quarterly or annual basis in the future. If our sales grow more slowly than we expect, or if our operating
expenses exceed our expectations, our financial performance and operating results will be adversely affected.
Our operating results may fluctuate from quarter to quarter or year to year.
We have limited operating history as a commercial-stage company and we anticipate that there will be
meaningful variability in our operating results among years and quarters, as well as within each year and quarter. Our
operating results, and the variability of these operating results, will be affected by numerous factors, including:
regulatory clearance, certification or approvals affecting our products or those of our competitors;
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• Ascensia’s ability to increase sales of Eversense and to commercialize and sell our future products, and the
number of our products sold in each quarter;
• Ascensia’s ability to establish and grow an effective sales and marketing infrastructure and third-party
distribution network;
acceptance of our products by people with diabetes, their caregivers, healthcare providers and third-party
payors;
the pricing of our products and competitive products, and the effect of third-party coverage and reimbursement
policies;
the amount of, and the timing of the payment for, insurance deductibles required to be paid by our customers
and potential customers under their existing insurance plans;
interruption in the manufacturing or distribution of our products;
seasonality and other factors affecting the timing of purchases of Eversense;
timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;
results of clinical research and trials on our products in development;
the ability of our suppliers to timely provide us with an adequate supply of components and CGM systems that
meet our requirements;
changes in the fair value of embedded derivative instruments in the terms of some of our financings, which are
subject to potentially wide fluctuations from period to period as a result of changes in our stock price; and
the timing of revenue recognition associated with our product sales pursuant to applicable accounting standards.
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As a result of our lack of operating history as a commercial-stage company and Ascensia’s lack of experience
selling CGM systems, and Eversense in particular, and due to the complexities of the industry and regulatory framework
in which we operate, it will be difficult for us to forecast demand for our future products and to forecast our sales with
any degree of certainty. For example, many of the products we will seek to develop and introduce in the future will
require regulatory approval, certification or clearance and import licenses before we can sell such products and given that
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the timing of such approvals, certification, clearances or licenses may be uncertain, it will be difficult for us to predict
sales projections for these products with any degree of certainty before such approvals, certifications, clearances or
licenses are obtained. In addition, we will be increasing our operating expenses as we expand our business. Accordingly,
we may experience substantial variability in our operating results from year to year and quarter to quarter. If our
quarterly or annual operating results fall below the expectations of investors or securities analysts, the price of our
common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our operating results
may, in turn, cause the price of our common stock to fluctuate substantially. We believe that quarterly comparisons of
our financial results are not necessarily meaningful and should not be relied upon as an indication of our future
performance.
Covenants under the Loan and Security Agreement and the 2025 Notes may result in the acceleration of outstanding
indebtedness and limit the manner in which we operate.
In September 2023, we entered into a loan agreement (the “Loan and Security Agreement”) with several
institutions (collectively, the “Lenders") and Hercules Capital, Inc. (“Hercules”), as administrative agent. The Loan and
Security Agreement contains customary terms and covenants, including financial covenants, such as operating within an
approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such as limitations on
indebtedness, liens, mergers, asset transfers, certain investing activities and other matters customarily restricted in such
agreements. Most of these restrictions are subject to certain minimum thresholds and exceptions. The Loan and Security
Agreement also contains customary events of default, after which borrowings under the Loan and Security Agreement
will be due and payable immediately, including defaults related to payment compliance, material inaccuracy of
representations and warranties, covenant compliance, material adverse changes, bankruptcy and insolvency proceedings,
cross defaults to certain other agreements, judgments against the Company, change of control or delisting events,
termination of any guaranty, governmental approvals, and lien priority.
In addition, the indentures related to the 2025 Notes contain, and any future indebtedness we incur may contain,
various negative covenants that restrict, among other things, our ability to:
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incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such
subsidiaries, preferred stock;
declare or pay dividends on, repurchase or make distributions in respect of, their capital stock or make other
restricted payments;
• make investments or acquisitions;
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create liens;
enter into agreements restricting certain subsidiaries' ability to pay dividends or make other intercompany
transfers;
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets and the assets of our
restricted subsidiaries;
enter into transactions with affiliates;
sell, transfer or otherwise convey certain assets; and
prepay certain types of indebtedness.
As a result, we are limited in the manner in which we conduct our business and we may be unable to engage in
favorable business activities, repurchase shares of our common stock or finance future operations or capital needs.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business
to pay our substantial debt.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness
depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our
control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make
necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more
alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous
or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial
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condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable
terms, which could result in a default on our debt obligations.
Despite our current debt levels, subject to certain conditions and limitations, we may still incur substantially more
debt or take other actions which would intensify the risks discussed above.
Despite our current consolidated debt levels, subject to certain conditions and limitations in the indentures
related to the 2025 Notes and the Loan and Security Agreement, we may be able to incur substantial additional debt in
the future, some of which may be secured debt. We may not be subject to any restrictions on incurrence of additional
indebtedness under the terms of any future indebtedness. If new debt is added to our current debt levels, the related risks
that we and they now face could intensify.
Prolonged negative economic conditions could adversely affect us, our customers and third-party suppliers, which
could harm our financial condition.
We are subject to the risks arising from adverse changes in general economic and market conditions.
Uncertainty about future economic conditions could negatively impact our existing and potential customers, adversely
affect the financial ability of health insurers to pay claims, adversely impact our expenses and ability to obtain financing
of our operations, and cause delays or other problems with key suppliers.
Healthcare spending in the United States and Europe has been, and is expected to continue to be, under
significant pressure and there are many initiatives to reduce healthcare costs. As a result, we believe that some insurers
are scrutinizing insurance claims more rigorously and delaying or denying coverage and reimbursement more often.
Because the sale of Eversense will generally depend on the availability of third-party coverage and reimbursement, any
delay or decline in coverage and reimbursement will adversely affect our sales.
Our business may be exposed to foreign exchange risks.
We incur some of our expenses and derive revenues from the Eversense system in currencies other than the U.S
dollar. As a result, we are exposed to foreign currency exchange risk as our results of operations and cash flows are
subject to fluctuations in foreign currency exchange rates. We currently do not engage in hedging transactions to protect
against uncertainty in future exchange rates between particular foreign currencies and the U.S. dollar. Therefore, for
example, an increase in the value of the U.S. dollar against the euro or the British pound could have a negative impact on
our revenue and earnings growth as euro and British pound revenue and earnings, if any, are translated into U.S. dollars
at a reduced value. We cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in
the future may adversely affect our financial condition, results of operations and cash flows.
Risks Related to Development of our Products
If we modify our approved product or CE marked, we may need to seek additional approvals or CE Certificates of
Conformity, which, if not granted, would prevent us from selling our modified products.
A component of our strategy is to continue to modify and upgrade our Eversense system, which requires
approval or certification by the FDA and analogous regulatory bodies in other jurisdictions. We may not be able to
obtain additional regulatory approvals or certifications for new products or for modifications to, or additional indications
for, our existing products in a timely fashion, or at all. Delays in obtaining future approvals or certification, including
potential delays in obtaining approval of our currently pending applications, would adversely affect our ability to
introduce new or enhanced products in a timely manner, which in turn would harm our revenue and potential future
profitability.
Any modifications to the Eversense that could significantly affect its safety or effectiveness, including
significant design and manufacturing changes, or that would constitute a major change in its intended use, manufacture,
design, components, or technology requires approval of a new PMA, or PMA supplement or similar modifications in
other jurisdictions. However, certain changes to a PMA-approved device do not require submission and approval of a
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new PMA or PMA supplement, or appropriate modifications in other jurisdictions, and may only require notice to FDA
in a PMA Annual Report, or similar notifications in other jurisdictions. In the U.S., the FDA requires every manufacturer
to make this determination in the first instance, but the FDA may review any such decision. The FDA may not agree
with our decisions regarding whether new approvals are necessary. Our products could be subject to recall if the FDA
determines, for any reason, that our products are not safe or effective or that appropriate regulatory submissions were not
made. Similar regulatory considerations apply outside the U.S. If new regulatory approvals or certifications are required,
this could delay or preclude our ability to market the modified system.
For those medical devices sold in the EEA, we must notify our Notified Body if significant changes are made to
the products or if there are substantial changes to our quality assurance systems affecting those products. Obtaining
variation of existing CE Certificates of Conformity or a new Certificate can be a time-consuming process, and delays in
obtaining required future clearances or approvals would adversely affect our ability to introduce new or enhanced
products in a timely manner, which in turn would harm our future growth.
Medical device development involves a lengthy and expensive process, with an uncertain outcome. We may incur
additional costs or experience delays in completing, or ultimately be unable to complete, ongoing development for
lifecycle management of our products.
While we have completed pivotal trials in Europe and the United States, we are and may need to conduct future
clinical trials in order to develop new versions of our system or to comply with requirements for post-approval studies.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently
uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. Further, the outcomes
of our earlier clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical
trial do not necessarily predict final results. Moreover, clinical data is often susceptible to varying interpretations and
analyses, and many companies that have believed their products performed satisfactorily in clinical trials have
nonetheless failed to obtain marketing approval or certification.
If we are unable to successfully complete clinical trials of Eversense or other testing, if the results of these trials
or tests are not favorable or if there are safety concerns, we may:
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not obtain marketing approval or certification for such modifications;
be delayed in obtaining marketing approval or certification for such modifications;
be subject to additional post-marketing testing requirements; or
have Eversense removed from the market after obtaining marketing approval.
Our development costs will also increase if we experience delays in testing, marketing approvals, or
certification. Significant clinical trial delays also could allow our competitors to bring innovative products to market
before we do and impair our ability to successfully commercialize our products.
Risks Related to Employee Matters and Managing our Growth
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified
personnel.
We are highly dependent on the management, research and development, clinical, financial and business
development expertise of Tim Goodnow, our Chief Executive Officer, Rick Sullivan, our Chief Financial Officer, Mukul
Jain, our Chief Operating Officer, and Ken Horton, our General Counsel and Corporate Development Advisor, as well as
the other members of our scientific and clinical teams. Although we have employment agreements with our executive
officers, each of them may terminate their employment with us at any time and will continue to be able to do so. We do
not maintain "key person" insurance for any of our executives or employees.
Recruiting and retaining qualified scientific and clinical personnel and, as we progress the development of our
product pipeline toward scaling up for commercialization, manufacturing and sales and marketing personnel, will also be
critical to our success. The loss of the services of our executive officers or other key employees could impede the
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achievement of our research, development and commercialization objectives and seriously harm our ability to
successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be
difficult and may take an extended period of time because of the limited number of individuals in our industry with the
breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize our
products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate
these key personnel on acceptable terms given the competition among numerous medical device companies for similar
personnel, many of which have greater financial and other resources dedicated to attracting and retaining personnel. We
also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our
research and development and commercialization strategy. Our consultants and advisors may be employed by employers
other than us and may have commitments under consulting or advisory contracts with other entities that may limit their
availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our
growth strategy will be limited.
Although it will be subject to restrictions on trading, a portion of the equity of our management team will not
contain other contractual transfer restrictions. This liquidity may represent material wealth to such individuals and
impact retention and focus of existing key members of management.
We expect to expand our development and regulatory capabilities and our marketing and distribution capabilities,
and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
As of December 31, 2023, we had 132 full-time employees. As our commercialization progresses, we expect to
experience significant growth in the number of our employees and the scope of our operations, particularly in the areas
of research, product development, clinical sciences, regulatory affairs, supply chain, and marketing. To manage our
anticipated future growth, we must continue to implement and improve our managerial, operational and financial
systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited
financial resources and the limited experience of our management team in managing a company with such anticipated
growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional
qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and
business development resources. Any inability to manage growth could delay the execution of our business plans or
disrupt our operations.
Additionally, we have and may undertake cost reduction plans, which may include reorganization of our
workforce. These actions could disrupt the employee base, our ability to attract and retain qualified personnel, or cause
other operational and administrative inefficiencies.
Our employees, independent contractors, consultants, manufacturers and distributors may engage in misconduct or
other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk that our employees, independent contractors, consultants, manufacturers and
distributors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include
intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates FDA regulations,
including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing
standards, federal and state healthcare laws and regulations, and laws that require the true, complete and accurate
reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare
industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other
abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing
and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these
parties could also involve the improper use of individually identifiable information, including, without limitation,
information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our
reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter
misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming
from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are
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not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our
business, including the imposition of significant civil, criminal and administrative penalties, including, without
limitation, damages, fines, disgorgement of profits, individual imprisonment, exclusion from participation in government
healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, and the curtailment
or restructuring of our operations.
We may incur product liability losses, and insurance coverage may be inadequate or unavailable to cover these losses.
Our business exposes us to potential product liability claims that are inherent in the design, manufacture, testing
and sale of medical devices. We could become the subject of product liability lawsuits alleging that component failures,
manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information
resulted in an unsafe condition, injury or death to customers. In addition, the misuse of our products or the failure of
customers to adhere to operating guidelines could cause significant harm to customers, including death, which could
result in product liability claims. Product liability lawsuits and claims, safety alerts or product recalls, with or without
merit, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the
attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain
customers, any of which could harm our business, financial condition and operating results.
Although we maintain third-party product liability insurance coverage, it is possible that claims against us may
exceed the coverage limits of our insurance policies. Even if any product liability loss is covered by an insurance policy,
these policies typically have substantial deductibles for which we are responsible. Product liability claims in excess of
applicable insurance coverage would negatively impact our business, financial condition and operating results. In
addition, any product liability claim brought against us, with or without merit, could result in an increase of our product
liability insurance premiums. Insurance coverage varies in cost and can be difficult to obtain, and we cannot guarantee
that we will be able to obtain insurance coverage in the future on terms acceptable to us or at all.
Risks Related to our Intellectual Property
Our ability to protect our intellectual property and proprietary technology is uncertain.
We rely primarily on patent, trademark and trade secret laws, as well as confidentiality and non-disclosure
agreements, to protect our proprietary technologies. As of December 31, 2023, we held a total of approximately 508
issued patents and pending patent applications that relate to our CGM system. Our intellectual property portfolio
includes 105 issued United States patents, 204 patents issued in countries outside the United States, and 199 pending
patent applications worldwide. Our patents expire between 2024 and 2042, subject to any patent extensions that may be
available for such patents. If patents are issued on our pending patent applications, the resulting patents are projected to
expire on dates ranging from 2032 to 2043, subject to any patent term extensions or adjustments that may be available
for such patents. We are also seeking patent protection for our proprietary technology in Europe, Japan, China, Canada,
India, Australia and other countries and regions throughout the world. We have two pending U.S. trademark application
and 5 pending foreign trademark applications, as well as 12 U.S. trademark registrations and 129 foreign trademark
registrations.
We have applied for patent protection relating to certain existing and proposed products and processes.
Currently, several of our issued U.S. patents as well as various pending U.S. and foreign patent applications relate to the
structure and operation of our CGM sensor and CGM systems, which are important to the functionality of our products.
If we fail to timely file a patent application in any jurisdiction, we may be precluded from doing so at a later date.
Furthermore, we cannot assure you that any of our patent applications will be approved in a timely manner or at all. The
rights granted to us under our patents, and the rights we are seeking to have granted in our pending patent applications,
may not provide us with any meaningful commercial advantage. In addition, those rights could be opposed, contested or
circumvented by our competitors, or be declared invalid or unenforceable in judicial or administrative proceedings. The
failure of our patents to adequately protect our technology might make it easier for our competitors to offer the same or
similar products or technologies. Even if we are successful in receiving patent protection for certain products and
processes, our competitors may be able to design around our patents or develop products that provide outcomes which
are comparable to ours without infringing on our intellectual property rights. Due to differences between foreign and
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U.S. patent laws, our patented intellectual property rights may not receive the same degree of protection in foreign
countries as they would in the United States. Even if patents are granted outside the United States, effective enforcement
in those countries may not be available.
We rely on our trademarks and trade names to distinguish our products from the products of our competitors
and have registered or applied to register many of these trademarks. For example, we have two pending applications in
the United States for the "Eversense" trademark. We cannot assure you that our trademark applications will be approved
in a timely manner or at all. Third parties also may oppose our trademark applications, or otherwise challenge our use of
the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products,
which could result in loss of brand recognition, and could require us to devote additional resources to marketing new
brands. Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have
adequate resources to enforce our trademarks.
We also rely on trade secrets, know-how and technology, which are not protectable by patents, to maintain our
competitive position. We try to protect this information by entering into confidentiality agreements and intellectual
property assignment agreements with our officers, employees, temporary employees and consultants regarding our
intellectual property and proprietary technology. In the event of unauthorized use or disclosure or other breaches of those
agreements, we may not have an adequate remedy to compensate us for our trade secrets or other proprietary
information. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by
others in their work for us, disputes may arise as to the rights in the related or resulting know-how and inventions. If any
of our trade secrets, know-how or other technologies not protected by a patent were to be disclosed to or independently
developed by a competitor, our business, financial condition and results of operations could be materially adversely
affected.
If a competitor infringes upon one of our patents, trademarks or other intellectual property rights, enforcing
those patents, trademarks and other rights may be difficult and time consuming. Patent law relating to the scope of
claims in the industry in which we operate is subject to rapid change and constant evolution and, consequently, patent
positions in our industry can be uncertain. Even if successful, litigation to defend our patents and trademarks against
challenges or to enforce our intellectual property rights could be expensive and time consuming and could divert
management's attention from managing our business. Moreover, we may not have sufficient resources or desire to defend
our patents or trademarks against challenges or to enforce our intellectual property rights. Litigation also puts our patents
at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we
may provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the
damages or other remedies awarded, if any, may not be commercially material. The occurrence of any of these events
may harm our business, financial condition and operating results.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and
applications will be due to be paid to the United States Patent and Trademark Office (“USPTO”) the European Patent
Office (“EPO”), and other foreign patent agencies over the lifetime of our owned patents and applications. The USPTO,
the EPO and various foreign governmental patent agencies require compliance with several procedural, documentary, fee
payment, and other similar provisions during the patent application process. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in
which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or
lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-
payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaboration
partners fail to maintain the patents and patent applications covering our proprietary technologies, our competitors might
be able to enter the market earlier with similar products or technology, which would have an adverse effect on our
business.
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The medical device industry is characterized by patent litigation, and we could become subject to litigation that
could be costly, result in the diversion of management's time and efforts, stop our development and commercialization
measures, harm our reputation or require us to pay damages.
Our success will depend in part on not infringing the patents or violating the other proprietary rights of third
parties. Significant litigation regarding patent rights exists in our industry. Our competitors in both the United States and
abroad, many of which have substantially greater resources and have made substantial investments in competing
technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit
or otherwise interfere with our ability to make and sell our products. The large number of patents, the rapid rate of new
patent issuances, and the complexities of the technology involved increase the risk of patent litigation.
The medical device industry in general, and the glucose testing sector of this industry in particular, are
characterized by the existence of a large number of patents and frequent litigation based on assertions of patent
infringement. We are aware of numerous patents issued to third parties that may relate to the technology used in our
business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous
glucose monitoring. Each of these patents contains multiple claims, any one of which may be independently asserted
against us. The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or
CGM systems infringes one or more claims of their patents. Furthermore, there may be additional patents issued to third
parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert
against us and materially and adversely affect our business. In addition, because patent applications can take many years
to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued
patents that third parties could assert against us and harm our business.
In preparation for commercializing our Eversense products, we are performing an analysis, the purpose of
which is to review and assess publicly available information to determine whether third parties hold any valid patent
rights that a well-informed court would more likely than not find that we would infringe by commercializing our
products, understanding that there are risks and uncertainties associated with any litigation and no predictions or
assurances can be made regarding the outcome of any such litigation. Although our review and analysis are not complete
and subject to the express limitations in the preceding sentence, we are not aware of any such valid patent rights.
Moreover, we have not previously performed an exhaustive review of this type, and we cannot be certain that it will not
result in our locating patent rights relating to our products of which we were not previously aware.
In the future, we could receive communications from various industry participants alleging our infringement of
their intellectual property rights. Any potential intellectual property litigation could force us to do one or more of the
following:
•
•
•
•
•
stop selling our products or using technology that contains the allegedly infringing intellectual property;
incur significant legal expenses;
pay substantial damages to the party whose intellectual property rights we are allegedly infringing;
redesign those products that contain the allegedly infringing intellectual property; or
attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on
reasonable terms or at all, and if available, may be non-exclusive, thereby giving our competitors access to the
same technology.
Patent litigation can involve complex factual and legal questions, and its outcome is uncertain. Any litigation or
claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on
our financial resources, divert the attention of management from our core business, stop our development and
commercialization measures and harm our reputation. Further, as the number of participants in the diabetes market
increases, the possibility of intellectual property infringement claims against us increases.
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We may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed
alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our
competitors.
Many of our employees were previously employed at other medical device companies, including those that are
our direct competitors or could potentially be our direct competitors. In some cases, those employees joined our
company recently. We may be subject to claims that we, or our employees, have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of these former employers or competitors. In addition, we may in
the future be subject to allegations that we caused an employee to breach the terms of his or her non-competition or non-
solicitation agreement. Litigation may be necessary to defend against these claims. Even if we successfully defend
against these claims, litigation could cause us to incur substantial costs, and could place a significant strain on our
financial resources, divert the attention of management from our core business and harm our reputation. If our defense to
those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel. There can be no assurance that this type of litigation will not occur, and any future litigation or the threat
thereof may adversely affect our ability to hire additional direct sales representatives. A loss of key personnel or their
work product could hamper or prevent our ability to commercialize Eversense or future versions of Eversense, which
could have an adverse effect on our business, financial condition and operating results.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We may be subject to claims that former employees, collaborators or other third parties have an interest in our
owned patent rights, trade secrets, or other intellectual property as an inventor or co-inventor. For example, inventorship
disputes may arise from conflicting obligations of employees, consultants or others who are involved in developing our
medical devices or other technologies. Litigation may be necessary to defend against these and other claims challenging
inventorship or our patent rights, trade secrets or other intellectual property. If we fail in defending any such claims, in
addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of,
or right to use, intellectual property that is important to our medical devices and other technologies. Even if we are
successful in defending against such claims, litigation could result in substantial costs and be a distraction to
management and other employees. Any of the foregoing could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We are subject to the patent laws of countries other than the United States, which may not offer the same level
of patent protection and whose rules could seriously affect how we draft, file, prosecute and maintain patents, trademarks
and patent and trademark applications.
Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent
owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to "work" the
invention in that country, or the third party has patented improvements). In addition, many countries limit the
enforceability of patents against government agencies or government contractors. In these countries, the patent owner
may have limited remedies, which could materially diminish the value of the patent. Moreover, the legal systems of
certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other
intellectual property protection which makes it difficult to stop infringement.
We cannot be certain that the patent or trademark offices of countries outside the United States will not
implement new rules that increase costs for drafting, filing, prosecuting and maintaining patents, trademarks and patent
and trademark applications or that any such new rules will not restrict our ability to file for patent protection. For
example, we may elect not to seek patent protection in some jurisdictions in order to save costs. We may be forced to
abandon specific patents due to a lack of financial resources.
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Our intellectual property rights do not necessarily address all potential competitive threats or confer meaningful
competitive benefits.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual
property rights have limitations, and may not adequately protect our business, or permit us to maintain any competitive
advantage. The following examples are illustrative:
•
others may be able to make devices that are the same as or similar to Eversense but that are not covered by the
claims of the patents that we own;
• we or any collaborators might not have been the first to make the inventions covered by the issued patents or
•
•
pending patent applications that we own and, therefore, we may be unable to enforce them;
• we might not have been the first to file patent applications covering certain of our inventions;
•
others may independently develop similar or alternative technologies or duplicate any of our technologies
without infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own may not provide us with any competitive advantages, or may be held invalid or
unenforceable as a result of legal challenges;
our competitors might conduct research and development activities in the United States and other countries that
provide a safe harbor from patent infringement claims for certain research and development activities, as well as
in countries where we do not have patent rights, and then use the information learned from such activities to
develop competitive products for sale in our major commercial markets; and
• we may not develop additional proprietary technologies that are patentable.
•
Risks Related to our Legal and Regulatory Environment
Our products and operations are subject to extensive governmental regulation, and failure to comply with
applicable requirements could cause our business to suffer.
The medical device industry is regulated extensively by governmental authorities, principally the FDA and
corresponding state regulatory agencies in the United States, foreign regulatory authorities and the Notified Bodies in the
EEA. The regulations are very complex and are subject to rapid change and varying interpretations. Regulatory
restrictions or changes could limit our ability to carry on or expand our operations or result in higher than anticipated
costs or lower than anticipated sales. These governmental authorities enforce laws and regulations that are meant to
assure product safety and effectiveness, including the regulation of, among other things:
product design and development;
preclinical studies and clinical trials;
product safety;
establishment registration and product listing;
labeling and storage;
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• marketing, manufacturing, sales and distribution;
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pre-market clearance, certification or approval;
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servicing and post-market surveillance;
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advertising and promotion; and
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recalls and field safety corrective actions.
The regulations to which we are subject are complex and have tended to become more stringent over time.
Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than
anticipated costs or lower than anticipated revenues. Failure to comply with applicable regulations could jeopardize our
ability to sell our products and result in enforcement actions such as fines, civil penalties, injunctions, warning letters,
recalls of products, delays in the introduction of products into the market, refusal of the regulatory agency or other
regulators or Notified Bodies to grant future clearances, CE Certificates of Conformity or approvals, and the suspension,
variation or withdrawal of existing approvals or CE Certificates of Conformity by such regulatory bodies. For example,
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in September 2019 we voluntarily initiated a recall of Eversense sensors that had not yet been implanted, due to
premature loss of function due to inadequate hydration of the sensor’s glucose-sensing surface. This recall, as well as any
of the above sanctions, could result in higher than anticipated costs or lower than anticipated sales and harm our
reputation, business, financial condition and operating results.
The FDA regulatory clearance process and regulatory processes in other countries are expensive, time-consuming
and uncertain, and the failure to obtain and maintain required regulatory clearances, certification and approvals
could prevent us from commercializing Eversense and future versions of Eversense.
Products that are approved through a PMA application generally need FDA approval before they can be
modified, and similar approval or certification processes are required in other jurisdictions where we may want to market
our products. The process of obtaining regulatory approvals or certifications to market a medical device can be costly
and time-consuming, and we may not be able to obtain these approvals or certifications on a timely basis, or at all for our
products.
If the FDA requires us to go through a more rigorous examination for future products or modifications to
existing products than we had expected, our product introductions or modifications could be delayed or canceled, which
could cause our sales to decline or to not increase in line with our expectations.
The FDA or comparable foreign regulatory authorities and Notified Bodies can delay, limit or deny approval or
certification of a device for many reasons, including:
• we may not be able to demonstrate that our products are safe and effective for their intended users;
•
•
the data from our clinical trials may be insufficient to support approval or certification; and
the manufacturing process or facilities we use may not meet applicable requirements.
In addition, the FDA or comparable foreign regulatory authorities may change approval or certification policies,
adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or
certification of our product modifications under development.
Any delay in, or failure to receive or maintain, approval or certifications for our products could prevent us from
generating revenue from these products or achieving profitability.
If we or our third-party suppliers fail to comply with the FDA's or other foreign regulatory authorities’ good
manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely
manner.
We and our third-party suppliers are required to comply with the FDA's QSR, which covers the methods and
documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage
and shipping of our products. The FDA audits compliance with the QSR through periodic announced and unannounced
inspections of manufacturing and other facilities. The FDA may impose inspections or audits at any time. If we or our
suppliers have significant non-compliance issues or if any corrective action plan that we or our suppliers propose in
response to observed deficiencies is not sufficient, the FDA could take enforcement action against us. We are subject to
equivalent limitations and penalties in foreign countries. Any of the foregoing actions could impair our reputation,
business, financial condition and operating results.
A recall of our products, or the discovery of serious safety issues with our products, could have a significant negative
impact on us.
The FDA has the authority to require the recall of commercialized products in the event of material deficiencies
or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Our third-party
suppliers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-
mandated or voluntary recall by us or one of our third-party distributors could occur as a result of an unacceptable risk to
health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. For
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example, in September 2019 we voluntarily initiated a recall of Eversense sensors that had not yet been implanted, due to
premature loss of function due to inadequate hydration of the sensor’s glucose-sensing surface. Recalls of any of our
products would divert managerial and financial resources and have an adverse effect on our reputation, financial
condition and operating results, which could impair our ability to produce our products in a cost-effective and timely
manner.
Further, under the FDA's medical device reporting regulations, we are required to report to the FDA any
incident in which our product may have caused or contributed to a death or serious injury or in which our product
malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated
product malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and
financial resources, impair our ability to manufacture our products in a cost-effective and timely manner and have an
adverse effect on our reputation, financial condition and operating results.
Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or
customer notifications, or regulatory agency action, which could include inspection, mandatory recall or other
enforcement action. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and
capital, distract management from operating our business and may harm our reputation and financial results.
In addition, we may be required to conduct costly post-market testing and surveillance to monitor the safety or
effectiveness of our products in the EEA. We must comply with medical device reporting requirements, including the
reporting of adverse events and malfunctions related to our products. Later discovery of previously unknown problems
with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency,
manufacturing problems, or failure to comply with regulatory requirements may result in changes to labeling, restrictions
on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory
recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines,
suspension, variation or withdrawal of CE Certificates of Conformity, product seizures, injunctions or the imposition of
civil or criminal penalties which would adversely affect our business, operating results and prospects.
We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption and anti-
money-laundering laws in foreign jurisdictions, as well as export control laws, customs laws, sanctions laws and other
laws governing our future global operations. If we fail to comply with these laws, we could be subject to civil or
criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of
operations and financial condition.
Our current and future global operations will expose us to trade and economic sanctions and other restrictions
imposed by the United States, the European Union and other governments and organizations. The U.S. Departments of
Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and
criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions
laws, export control laws, the Foreign Corrupt Practices Act (“FCPA”) and other federal statutes and regulations,
including those established by the Office of Foreign Assets Control (“OFAC”). In addition, the U.K. Bribery Act of 2010
(“Bribery Act”) prohibits both domestic and international bribery, as well as bribery across both private and public
sectors. An organization that "fails to prevent bribery" by anyone associated with the organization can be charged under
the Bribery Act unless the organization can establish the defense of having implemented "adequate procedures" to
prevent bribery. Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws,
export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies
may require export licenses, may seek to impose modifications to business practices, including cessation of business
activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which
may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or
regulations could adversely impact our business, results of operations and financial condition.
We will implement and maintain policies and procedures designed to ensure compliance by us, and our
directors, officers, employees, representatives, third-party distributors, consultants and agents with the FCPA, OFAC
restrictions, the Bribery Act and other export control, anticorruption, anti-money-laundering and anti-terrorism laws and
regulations, including in foreign jurisdictions. We cannot assure you, however, that our policies and procedures will be
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sufficient or that directors, officers, employees, representatives, third-party distributors, consultants and agents have not
engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business
partners have not engaged and will not engage in conduct that could materially affect their ability to perform their
contractual obligations to us or even result in our being held liable for such conduct. Violations of the FCPA, OFAC
restrictions, the Bribery Act or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or
regulations, including in foreign jurisdictions, may result in severe criminal or civil sanctions, and we may be subject to
other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of
operations.
We are subject to additional federal, state and foreign laws and regulations relating to our healthcare business; our
failure to comply with those laws could have an adverse impact on our business.
Although we will not provide healthcare services, submit claims for third-party payor reimbursement, or receive
payments directly from government health insurance programs or other third-party payors for Eversense, we are subject
to broadly applicable federal, state, and foreign healthcare laws, including health care fraud and abuse and health
information privacy and security laws, which could adversely impact our business. Such healthcare laws potentially
applicable to our operations include:
•
•
the federal Anti-Kickback Statute, which will apply to our marketing practices, educational programs, pricing
policies and relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving,
offering or providing remuneration intended to induce the purchase or recommendation of an item or service
reimbursable under a federal healthcare program, such as the Medicare or Medicaid programs. A person or
entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a
violation;
federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act,
which is enforceable through civil whistleblower or qui tam actions, prohibit, among other things, knowingly
presenting, or causing to be presented, claims for payment or approval to the federal government that are false
or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or
property to the federal government or knowingly concealing or knowingly and improperly avoiding or
decreasing an obligation to pay or transmit money or property to the federal government. The government may
assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the false claims statutes;
• HIPAA, and its implementing regulations, which created federal criminal and civil statutes that prohibit, among
other things, executing a scheme to defraud any healthcare benefit program or making false statements relating
to healthcare matters;
• HIPAA, as amended by HITECH, and their implementing regulations, which also imposes obligations on
•
•
•
“covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well
as their respective “business associates” that create, receive, maintain or transmit individually identifiable health
information for or on behalf of a covered entity and their subcontractors, regarding the privacy, security and
transmission of such individually identifiable health information;
federal "sunshine" requirements imposed by the PPACA, on device manufacturers regarding the annual
reporting to CMS, of any "transfer of value" made or distributed to physicians (defined to include doctors,
dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician
assistants and nurse practitioners, and teaching hospitals, and ownership and investment interests held by
physicians and their immediate family members. Failure to timely submit required information may result in
significant civil monetary penalties;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and
activities that potentially harm consumers;
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may
apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that
require device companies to comply with the industry's voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government or otherwise restrict payments that may be made
to healthcare providers; state laws that require device manufacturers to report information related to payments
and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state
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•
laws governing the privacy and security of certain health information, many of which differ from each other in
significant ways and often are not preempted by HIPAA; and
equivalent foreign legislation and requirements including in relation to interactions between medical devices
companies and healthcare professionals, such as national anti-bribery laws of European countries, national
sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional
conduct. Failure to comply with these requirements could result in reputational risk, public reprimands,
administrative penalties, fines or imprisonment
The risk of our being found in violation of these laws and regulations is increased by the fact that the scope and
enforcement of these laws is uncertain, many of them have not been fully interpreted by the regulatory authorities or the
courts, their provisions are open to a variety of interpretations, or they vary country by country. We are unable to predict
what additional federal, state or foreign legislation or regulatory initiatives may be enacted in the future regarding our
business or the healthcare industry in general, or what effect such legislation or regulations may have on us. Federal,
state or foreign governments may (i) impose additional restrictions or adopt interpretations of existing laws that could
have a material adverse effect on us or (ii) challenge our current or future activities under these laws. Any of these
challenges could impact our reputation, business, financial condition and operating results.
Our activities, including our research, sales and marketing, and patient reimbursement support activities, may be
subject to scrutiny under these laws. If our operations are found to be in violation of any of the laws described above or
any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including
significant civil, criminal, and administrative penalties, damages, fines, disgorgement of profits, imprisonment, exclusion
from governmental health care programs, such as Medicare and Medicaid, and the curtailment or restructuring of our
operations, any of which could adversely affect our ability to operate our business and our financial results. Any federal,
state or foreign regulatory review to which we may become subject, regardless of the outcome, would be costly and
time-consuming.
For example, to enforce compliance with the federal laws, the U.S. Department of Justice has recently increased
its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of
investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be
time and resource consuming and can divert management's attention from our core business. Additionally, if we settle an
investigation with law enforcement or other regulatory agencies, we may be forced to agree to additional onerous
compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such
investigation or settlement could increase our costs or otherwise have an adverse effect on our business.
We are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual
obligations, industry standards, policies and other obligations related to data privacy and security. Our actual or
perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation
(including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations;
reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make
accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive
information, including proprietary and confidential business data, trade secrets, intellectual property, data we collect
about trial participants in connection with clinical trials, and sensitive third-party data. Our data processing activities
subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry
standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to
data privacy and security.
In the United States, federal, state, and local governments have enacted numerous data privacy and security
laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of
the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).
In the past few years, numerous U.S. states have enacted comprehensive privacy laws that impose certain
obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents
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with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or
delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling,
and automated decision-making. The exercise of these rights may impact our business and ability to provide our products
and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive
information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for
noncompliance.
The collection and use of personal health data in the EEA and UK is governed by the EU and UK GDPR
(collectively, GDPR). The GDPR applies to the processing of personal data by any company established in the EEA or
UK and to companies established outside the EEA to the extent they process personal data in connection with the
offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA or
UK. Under the GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;
fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR, or 4% of annual
global revenue, whichever is greater; or private litigation related to processing of personal data brought by classes of data
subjects or consumer protection organizations authorized at law to represent their interests. The GDPR enhances data
protection obligations for data controllers of personal data, including stringent requirements relating to the consent of
data subjects, expanded disclosures about how personal data is used, requirements to conduct privacy impact
assessments for “high risk” processing, limitations on retention of personal data, mandatory data breach notification and
“privacy by design” requirements, and creates direct obligations on service providers acting as processors. The Swiss
Federal Act on Data Protection, or the FADP, also applies to the collection and processing of personal data, including
health-related information, by companies located in Switzerland, or in certain circumstances, by companies located
outside of Switzerland. The GDPR also imposes strict rules on the transfer of personal data outside of the EEA and UK
to countries that do not ensure an adequate level of protection, like the United States. In the ordinary course of business,
we may transfer personal data from the EEA and UK or other jurisdictions to the United States or other countries.
Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK or
other jurisdictions to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s
International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension
thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in
the Framework, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on
these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer
personal data from the EEA or UK or other jurisdictions to the United States, or if the requirements for a legally-
compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or
degradation of our operations, the need to relocate part of or all of our business or data processing activities to other
jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability
to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or
transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of
the EEA and UK to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators,
individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or
permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer
limitations.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by
industry groups and, we are, or may become subject to such obligations in the future. We are also bound by contractual
obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations
of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and
security obligations. We publish privacy policies and other statements regarding data privacy and security. If these
policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our
practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
Our employees and personnel use generative artificial intelligence (“AI”) technologies to perform their work,
and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other
privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of
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this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are
unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
Additionally, under various privacy laws and other obligations, we may be required to obtain certain consents to
process personal data. For example, some of our data processing practices may be challenged under wiretapping laws, if
we obtain consumer information from third parties through various methods, including chatbot providers. These
practices may be subject to increased challenges by class action plaintiffs. Our inability or failure to obtain consent for
these practices could result in adverse consequences, including class action litigation and mass arbitration demands.
Obligations related to data privacy and security (and consumers’ expectations) are quickly changing, becoming
increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications
and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these
obligations requires us to devote significant resources, which may necessitate changes to our services, information
technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
If we or our parties on which we rely fail to comply or are alleged to have failed to comply with applicable data
privacy obligations, we could face significant consequences, including but not limited to; government enforcement
actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims)
and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data;
orders to destroy or not use personal data and imprisonment of company officials. In particular, plaintiffs have become
increasingly more active in bringing privacy-related claims against companies, including class claims and mass
arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if
viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of
violations.
Any associated claims, inquiries, or investigations or other government actions could lead to unfavorable
outcomes that have a material impact on our business including through significant penalties or fines, monetary
judgments or settlements including criminal and civil liability for us and our officers and directors, increased compliance
costs, delays or impediments in the development of new products, inability to process personal data or to operate in
certain jurisdictions; negative publicity, increased operating costs, diversion of management time and attention, or other
remedies that harm our business, including orders that we modify or cease existing business practices.
Moreover, governments and regulators in certain jurisdictions, including Europe, are increasingly seeking to
regulate the use, transfer and other processing of non-personal information (for example, under the European Union’s
Data Act). This means that, if and to the extent such regulations are relevant to our operations or those of our customers,
certain of the above risks and considerations may apply equally to our processing of both personal and non-personal
information.
If our information technology systems or those third parties upon which we rely or our data, are or were
compromised, we could experience adverse consequences resulting from such compromise, including but not limited
to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations;
reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
In the ordinary course of our business, we and the third parties upon which we rely, process proprietary,
confidential, and sensitive data, including personal data (such as health-related data), intellectual property and trade
secrets (collectively, sensitive information). Cyber-attacks, malicious internet-based activity, online and offline fraud,
and other similar activities threaten the confidentiality, integrity, and availability of our sensitive information and
information technology systems, and those of the third parties upon which we rely. Such threats are prevalent and
continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer
“hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse),
sophisticated nation states, and nation-state-supported actors. We and the third parties upon which we rely are subject to
a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which
may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and
worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential
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stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software
bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware,
telecommunications failures, attacks enhanced or facilitated by AI, and other similar threats. In particular, severe
ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss
of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative
impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example,
applicable laws or regulations prohibiting such payments.
Because of our hybrid work policies, sensitive information that is normally protected may be less secure as
more of our employees utilize network connections, computers and devices outside our premises or network, including
working at home, while in transit and in public locations.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional
cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired
or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found
during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our
information technology environment and security program.
We rely on third-parties and technologies to operate critical business systems to process sensitive information in
a variety of contexts. Our ability to monitor these third parties’ information security practices is limited, and these third
parties may not have adequate information security measures in place. If the third-parties upon whom we rely on
experience a security incident or other interruption, we could experience adverse consequences. While we may be
entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us,
any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-
chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our
supply chain or our third-party partners’ supply chains have not been compromised.
While we have implemented security measures designed to protect against security incidents, there can be no
assurance that these measures will be effective. We take steps designed to detect, mitigate, and remediate vulnerabilities
in our information systems (such as our hardware and/or software, including that of third parties upon which we rely).
We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may
experience delays in developing and deploying remedial measures and patches designed to address identified
vulnerabilities. Vulnerabilities could be exploited and result in a security incident.
Any of the previously identified or similar threats could cause a security incident or other interruption that could
result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption,
disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties
upon whom we rely. A security incident or other interruption could disrupt our ability (and that of third parties upon
whom we rely) to provide our products and services.
We may expend significant resources or modify our business activities to try to protect against security
incidents. Certain data privacy and security obligations may require us to implement and maintain specific security
measures or industry-standard or reasonable security measures to protect our information technology systems and
sensitive information.
Applicable data privacy and security obligations may require us to notify relevant stakeholders, including
affected individuals, customers, regulators, and investors, of security incidents. Such disclosures are costly, and the
disclosure or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party
upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may
experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties,
audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive
information (including personal data); litigation (including class claims); indemnification obligations; negative publicity;
reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations
(including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences
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may prevent or cause customers to stop using our products, deter new customers from using our prodcuts, and negatively
impact our ability to grow and operate our business.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that
limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data
privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect
us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be
available on commercially reasonable terms or at all, or that such coverage will pay future claims. In addition to
experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public
sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be
used to undermine our competitive advantage or market position. Additionally, sensitive information of the Company or
our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or
vendors’ use of generative AI technologies.
We may be liable if the FDA, competent authorities of the EEA countries, or another regulatory agency concludes
that we have engaged in the off-label promotion of our products.
Our promotional materials and training methods must comply with FDA and other applicable laws and
regulations, including the prohibition of the promotion of the off-label use of our products. Healthcare providers may use
our products off-label, as the FDA does not restrict or regulate a physician's choice of treatment within the practice of
medicine. However, if the FDA, competent authorities of the EEA countries, or other foreign regulatory authorities
determine that our promotional materials or training constitute promotion of an off-label use, it could request that we
modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of
an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. It is also possible that other
federal, state or competent authorities of the EEA countries, or foreign enforcement authorities might take action if they
consider our promotional or training materials to constitute promotion of an unapproved use, which could result in
significant fines or penalties. Although we intend to train our marketing and direct sales force to not promote our
products for uses outside of their cleared uses and our policy will be to refrain from statements that could be considered
off-label promotion of our products, the FDA competent authorities of the EEA countries, or another regulatory agency
could disagree and conclude that we have engaged in off-label promotion. In addition, the off-label use of our products
may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in
substantial damage awards against us and harm our reputation.
International sales of medical devices are subject to foreign government regulations, which vary substantially
from country to country. In order to market our products in other countries, we must obtain regulatory approvals or
certifications and comply with extensive safety and quality regulations in other countries.
The advertising and promotion of our products in the EEA is subject to EEA countries' national laws
implementing the AIMD and applying the Medical Device Regulation, Directive 2006/114/EC concerning misleading
and comparative advertising, and Directive 2005/29/EC on unfair commercial practices, as well as other national
legislation of individual EEA countries governing the advertising and promotion of medical devices. EEA countries'
legislation may also restrict or impose limitations on our ability to advertise our products directly to the general public.
In addition, voluntary EU and national industry Codes of Conduct provide guidelines on the advertising and promotion
of our products to the general public and may impose limitations on our promotional activities with healthcare
professionals, which could negatively impact our business, operating results and financial condition.
Off-label use of our product by patients could lead to product liability claims and regulatory action.
Eversense is currently labeled as non-adjunctive; however once a day fingerstick calibrations are still required.
We have no control over whether patients adhere to labeling instructions and confirm blood glucose levels to ensure
calibration with Eversense. If a patient fails to do so and has an adverse reaction to self-medication, the patient might
make a claim against us. While we do not believe that, as a general matter, such a claim would have merit, the possibility
of an adverse result to the manufacturer cannot be dismissed, and in any event, we could incur significant defense costs.
Also, if there should be widespread off-label use of our system by patients, and resulting adverse medical events, the
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FDA, competent authorities of the EEA countries or other foreign regulatory bodies might require us, to implement
additional measures to reduce off-label use, which could be costly or reduce adoption of Eversense.
Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory
clearance, certification or approval of our products.
Recent political, economic and regulatory influences are subjecting the healthcare industry to fundamental
changes. The sales of our products depend in part on the availability of coverage and reimbursement from third-party
payors such as government health administration authorities, private health insurers, health maintenance organizations
and other healthcare-related organizations. Both the federal and state governments in the United States continue to
propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. This legislation
and regulation may result in decreased reimbursement for medical devices, which may further exacerbate industry-wide
pressure to reduce the prices charged for medical devices. This could harm our ability to market our products and
generate sales.
On a global level, the regulatory environment is increasingly stringent and unpredictable. Many countries have
introduced or expanded their existing regulation of medical devices or are planning to expand their existing regulation in
the future. Regulatory requirements continue to differ significantly among countries. We expect this global regulatory
environment will continue to evolve, which could impact the cost, the time needed to approve, and ultimately, our ability
to maintain existing approvals or certifications or obtain future approvals or certifications for our products. For example,
in the EU, on May 26, 2021, the EU Medical Device Regulation entered into application repealing and replacing both
Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical
devices. We affixed the CE mark to the original 90-day Eversense CGM system in June 2016, which marked the first
certification for the product to be sold within the European Economic Area (EEA). Subsequently, we affixed the CE
mark to the extended life Eversense XL CGM system in September 2017 which was sold in select markets in Europe and
the Middle East. The changes to the regulatory system implemented in the EU by the Medical Device Regulation include
stricter requirements for clinical evidence and pre-market assessment of safety and performance, new classifications to
indicate risk levels, requirements for third party testing by Notified Bodies, tightened and streamlined quality
management system assessment procedures and additional requirements for the quality management system, additional
requirements for traceability of products and transparency as well a refined responsibility of economic operators. We are
also required to provide clinical data in the form of a clinical evaluation report. Fulfilment of the obligations imposed by
the Medical Device Regulation may cause us to incur substantial costs. We may be unable to fulfil these obligations, or
our Notified Body may consider that we have not adequately demonstrated compliance with our related obligations to
merit a CE Certificate of Conformity on the basis of the Medical Device Regulation.
In addition, the exit of the UK from the EU, commonly referred to as “Brexit” could lead to regulatory
divergence between the EU and the UK. On May 26, 2021, the MDR entered into application in the EU. However, the
MDR is not applicable in the UK. In the UK, medical devices are governed by the Medical Devices Regulations 2002 (SI
2002 No 618, as amended) (UK MDR 2002) which, for the time being, retains a regulatory framework similar to the
framework set out by the MDD. The UK Medicines and Healthcare products Regulatory Agency plans on introducing
new legislation governing medical devices with an aim to bring the new regulations into force by July 2024. Should the
UK or Great Britain further diverge from the EU from a regulatory perspective, tariffs could be put into place in the
future. We could therefore, both now and in the future, face significant additional expenses to operate our business,
which could significantly and materially harm or delay our ability to generate revenue or achieve profitability of our
business. Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise
may impose unexpected duty costs or other non-tariff barriers on us. These developments, or the perception that any of
them could occur, may significantly reduce global trade and, in particular, trade between the EU and the UK.
Regulations of the FDA and other regulatory agencies, including third country authorities and Notified Bodies,
in and outside the U.S. impose extensive compliance and monitoring obligations on our business. These agencies review
our design and manufacturing practices, labeling, record keeping, manufacturers’ required reports of adverse experiences
and other information to identify potential problems with marketed medical devices. We are subject to unannounced
device inspections by Notified Bodies, as well as other regulatory authorities overseeing the implementation and
adherence of applicable regulations. These inspections may include our suppliers’ facilities. In addition, the competent
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authorities of individual EEA countries have powers to suspend the marketing and use, or demand the recall, of unsafe or
non-compliant devices. They also have the power to bring enforcement action against companies or individuals for
breaches of the device rules. Non-compliance may also result in Notified Bodies revoking, suspending or varying any
CE Certificate of Conformity that they have issued for a device or the manufacturer’s quality system.
In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may
significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing
regulations may impose additional costs or lengthen review times of our products. Delays in receipt of or failure to
receive regulatory clearances or approvals for our products would harm our business, financial condition and operating
results.
While a goal of healthcare reform is to expand coverage to more individuals, it also involves increased
government price controls, additional regulatory mandates and other measures designed to constrain medical costs. For
example, the PPACA was enacted in March 2010. The PPACA substantially changes the way healthcare is financed by
both governmental and private insurers, encourages improvements in the quality of healthcare items and services and
significantly impacts the medical device industries. Among other things, the PPACA:
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establishes a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research; and
implements payment system reforms including value-based payment programs, increased funding for
comparative effectiveness research, reduced hospital payments for avoidable readmissions and hospital acquired
conditions, and pilot programs to evaluate alternative payment methodologies that promote care coordination
(such as bundled physician and hospital payments).
There have been executive, judicial and Congressional challenges to certain aspects of the PPACA. While
Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the
PPACA such as removing penalties, starting January 1, 2019, for not complying with the PPACA’s individual mandate
to carry health insurance and delaying the implementation of certain PPACA-mandated fees. Additionally, the 2020
federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated medical device tax
and “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminated the
health insurer tax. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued
the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Further, on
August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for
individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025. The IRA also
eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the
beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is possible that the
PPACA will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges and the
healthcare reform measures of the Biden administration will impact the PPACA and our business.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On
August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, includes reductions to
Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent
legislative amendments to the statute, will remain in effect through 2032 unless additional Congressional action is taken.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced
Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years.
At this time, we cannot predict which, if any, additional healthcare reform proposals will be adopted, when they
may be adopted or what impact they, or the PPACA, may have on our business and operations, and any of these impacts
may be adverse on our operating results and financial condition.
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Risks Related to our Common Stock
Because our stock price has and will likely continue to be highly volatile, the market price of our common stock may
be lower or more volatile than expected.
Our stock price has been highly volatile. The stock market in general and the market for innovative, emerging
medtech and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. From January 1, 2022 through February 23, 2024, the trading price
of our common stock has been as low as $0.48 per share and as high as $3.71 per share. This extreme stock price
volatility has been accompanied by extremely high trading volume in our common stock in comparison to historical
experience. During this period, the average daily trading volume of our common stock has been approximately 5.2
million shares and on February 11, 2022, our trading volume exceeded 106.3 million shares, whereas the average daily
trading volume from January 1, 2023 to December 31, 2023 was 4.3 million shares.
The extreme increase in trading volume and volatility has not necessarily correlated to the company’s
announcement of material developments and often appears unrelated to changes in actual or expected operating
performance. Purchases or sales of large quantities of our stock, including the establishment and/or closing of significant
short positions in our stock could have an unusual or adverse effect on our market price. Market fluctuations may also
cause short sellers to periodically enter the market in the belief that we will have poor results in the future. Abnormal
trading activity, including activity that is considered market manipulation, can lead to irrational and/or temporary
movements in the price of our common stock, which, in turn, may increase its risk and volatility. We cannot predict the
actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable
or appreciate over time.
The market price of our common stock may also be influenced by many additional factors, including:
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analyst coverage, recommendations or changes in their estimates of our financial performance;
future announcements about us or our competitors, including the results of technological innovations or new
commercial products;
announcement of operating results and other factors relating to the commercialization of our products;
clinical trial and topline data results;
depletion of our cash reserves;
sale of equity securities or issuance of additional debt;
announcement by us of significant strategic partnerships, capital commitments or acquisitions;
changes in government regulations;
impact of competitor successes;
developments in our relationships with our collaboration partners;
global market or financial developments;
announcements relating to health care reform, legislation and reimbursement levels, including third-party payor
coverage decisions;
sales of substantial amounts of our stock by existing stockholders (including stock by insiders or 5%
stockholders);
regulatory approvals, certifications, timelines or other actions;
litigation;
public concern as to the safety of our products or recalls;
the make-up of our shareholder base; and
the other factors described in this Risk Factors section.
The issuance of additional stock in connection with financings, acquisitions, investments, our equity incentive plans,
or otherwise will dilute our existing stockholders.
Our certificate of incorporation authorizes us to issue up to 900,000,000 shares of common stock and up to
5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors.
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Subject to compliance with applicable rules and regulations, we may issue our shares of common stock, including
securities convertible into common stock, in connection with a financing, acquisition, investment, our equity incentive
plans or otherwise. This includes the issuance, from time to time, of non-statutory stock options exercisable for shares of
our common stock and/or restricted stock units that may be settled in shares of our common stock pursuant to the
Senseonics Holdings, Inc. 2023 Commercial Equity Plan. Any such issuance could result in substantial dilution to our
existing stockholders and cause the trading price of our common stock to decline.
Holders of our Series B convertible preferred stock and our 2025 notes may convert their securities into common
stock and, upon conversion, will dilute your percentage of ownership.
The Series B convertible preferred stock and 2025 Notes are convertible into our common stock at the option of
the holders thereof. Accordingly, any conversion of convertible preferred stock or 2025 Notes would dilute the
ownership of our holders of common stock. The potential dilutive effect of the conversion of shares of convertible
preferred stock or convertible notes may also adversely affect our ability to obtain additional financing on favorable
terms or at all.
Certain shareholders may have the ability exert substantial influence over us in a manner adverse to your interests.
Subject to maintaining specified ownership thresholds, PHC continues to hold the right to designate up to two
individuals to serve on our board of directors as outlined in their Investor Rights Agreement.
As a result, PHC may be able to significantly influence our decisions, including the election and removal of
directors, any merger, consolidation, sale of all or substantially all of our assets, or other significant corporate
transactions. PHC may have interests different the interests of the other holders of our common stock.
Our GAAP operating results could fluctuate substantially due to changes in fair value of the derivatives related to the
embedded conversion option, interest make-whole provision and make-whole fundamental change provision features
of the notes.
Our 2025 Notes contain certain embedded features that require bifurcation of the embedded conversion option
along with the fundamental change make-whole provision and the cash settled fundamental make-whole shares
provision, and recorded the fair value of these embedded features as a derivative liability in the Company’s consolidated
balance sheets in accordance with Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging.
ASC 815 requires companies to bifurcate certain embedded derivatives from their host instruments and account
for them as free-standing derivative financial instruments according to certain criteria. The fair value of the derivative is
remeasured to fair value at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair
value of the derivative being charged to earnings (loss). We utilize a third-party valuation expert and the binomial option
pricing method to determine the fair value of the derivative instruments at each reporting date using inputs based on
recent trading prices (Level 2) and other observable inputs, including our common stock price, implied volatility, and
interest rates, or unobservable inputs (Level 3) where there is an absence of recent trading prices.
We cannot predict the effect that the accounting for the options and notes and the associated fluctuations in the
fair value of the liability options and embedded features of the 2025 Notes will have on our future GAAP financial
results, the trading of our common stock and the trading price of the 2025 Notes, which could be material. Continued
extreme volatility in our stock price, as we have experienced recently, could exacerbate such effects.
If our estimates relating to our critical accounting policies are based on assumptions or judgments that change or
prove to be incorrect, our operating results could fall below expectations of financial analysts and investors, resulting
in a decline in our stock price.
The preparation of financial statements in conformity with U.S. GAAP requires our management to make
estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and
accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to
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be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Our operating
results may be adversely affected if our assumptions change or if actual circumstances differ from those in our
assumptions, which could cause our operating results to fall below the expectations of financial analysts and investors,
resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our consolidated
financial statements include those related to revenue recognition and variable consideration, reserves for inventory
obsolescence and warranties, stock-based compensation, embedded features of our senior convertible notes and income
taxes.
We do not intend to pay cash dividends in the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available
funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future. In addition, pursuant to our debt agreements, we are precluded from paying any
cash dividends. Accordingly, you may have to sell some or all of your shares of our common stock in order to generate
cash flow from your investment. You may not receive a gain on your investment when you sell shares and you may lose
the entire amount of the investment.
Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our
stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market
price of our common stock may be lower as a result.
There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to
acquire, or attempt to acquire, control of our company, even if a change of control was considered favorable by some or
all of our stockholders. For example, our board of directors has the authority to issue up to 5,000,000 shares of preferred
stock. The board of directors can fix the price, rights, preferences, privileges, and restrictions of the preferred stock
without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a
change of control transaction. As a result, the market price of our common stock and the voting and other rights of our
stockholders may be adversely affected. An issuance of shares of preferred stock may result in the loss of voting control
to other stockholders.
Our charter documents also contain other provisions that could have an anti-takeover effect, including:
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only one of our three classes of directors is elected each year;
stockholders are not entitled to remove directors other than by a 66 2/3% vote and only for cause;
stockholders are not permitted to take actions by written consent;
stockholders are not permitted to call a special meeting of stockholders; and
stockholders are required to give advance notice of their intention to nominate directors or submit proposals for
consideration at stockholder meetings.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which regulates corporate acquisitions by prohibiting Delaware corporations from engaging in specified business
combinations with particular stockholders of those companies. These provisions could discourage potential acquisition
proposals and could delay or prevent a change of control transaction. They could also have the effect of discouraging
others from making tender offers for our common stock, including transactions that may be in your best interests. These
provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.
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Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery
of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for
substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable
judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is
the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
(1) any derivative action or proceeding brought on our behalf;
(2) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers or other
employees to us or our stockholders;
(3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our
amended and restated certificate of incorporation or our amended and restated bylaws; or
(4) any action asserting a claim governed by the internal affairs doctrine. However, this exclusive forum provision
would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act.
Our amended and restated bylaws further provide that the federal district courts of the United States of America will
be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. We note that
investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our
directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any interest in any of our
securities shall be deemed to have notice of and consented to these provisions. There is uncertainty as to whether a court would
enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents
has been challenged in legal proceedings. While the Delaware courts have determined that such choice of forum provisions are
facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive
forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If
a court were to find these types of provisions to be inapplicable or unenforceable, and if a court were to find the exclusive
forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving the dispute in other jurisdictions, which could materially adversely affect our business.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely
basis could be impaired.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley
Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations of the
NYSE American. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and
procedures and internal control over financial reporting and perform system and process evaluation and testing of our internal
control over financial reporting to allow management to report on the effectiveness of our internal control over financial
reporting. This requires that we incur substantial additional professional fees and internal costs to expand our accounting and
finance functions and that we expend significant management efforts.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in
our internal control over financial reporting that exists at the reporting date, we will be unable to assert that our internal control
over financial reporting is effective. We have no material weaknesses in our internal control over financial reporting at
December 31, 2023. While we have established certain procedures and controls over our financial reporting processes, we
cannot assure you that these efforts will prevent future material weaknesses or restatements of our financial statements. For
future reporting periods, our independent registered public accounting firm may issue a report that is adverse in the event it is
not satisfied with the level at which our controls are documented, designed or operating. We may not be able to remediate any
future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion.
Any failure to maintain effective internal control over financial reporting could severely inhibit our ability to
accurately report our financial condition or results of operations. If we are unable to conclude that our internal control
over financial reporting is effective, or if our independent registered public accounting firm determines we have a
material weakness or significant deficiency in our internal control over financial reporting, we could lose investor
confidence in the accuracy and completeness of our financial reports, the market price of our common stock could
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decline, and we could be subject to sanctions or investigations by the NYSE American, the SEC or other regulatory
authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or
maintain other effective control systems required of public companies, could also restrict our future access to the capital
markets.
If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports, about
us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that securities or industry
analysts publish about us or our business, our market and our competitors. Securities or industry analysts may elect not
to initiate or continue to provide coverage of our common stock, and such lack of coverage may adversely affect the
market price of our common stock. Even if we have securities or industry analyst coverage, we will not have any control
over the analysts, or the content and opinions included in their reports. The price of our stock could decline if one or
more securities or industry analysts downgrade our stock or issue other unfavorable commentary or research. If one or
more securities or industry analysts ceases coverage of our company or fails to publish reports on us regularly, demand
for our stock could decrease, which in turn could cause our stock price or trading volume to decline.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
We are subject to taxation for US Federal and numerous U.S. states. As a result, our effective tax rate is derived
from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements,
we estimate the amount of tax that will become payable in each of such jurisdictions. Nevertheless, our effective income
tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted
federal or state income tax laws, changes in the mix of our profitability from state to state, the results of examinations
and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in
accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax
rate significantly different from previous periods or our current expectations and may result in tax obligations in excess
of amounts accrued in our financial statements.
We may be unable to utilize our tax attribute carryforwards to reduce our income taxes.
At December 31, 2023, we had federal and state net operating loss, or NOL, carryforwards of $656.9 million
and had research and experimental credit carryforwards of $15.3 million. NOL carryforwards in the amount of $196.4
million will expire in varying amounts between 2024 and 2037 and tax credits of $15.3 million will expire in varying
amounts between 2024 and 2043. These net operating loss carryforwards and credits could expire unused and be
unavailable to offset future income tax liabilities. Under the Tax Cuts and Jobs Act of 2017 (“TCJA”), as modified by
the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, federal NOL carryforwards generated in tax years
beginning after December 31, 2017 may be carried forward indefinitely, but limited to offset 80% of our taxable income
annually. In addition, under Section 382/383 of the Internal Revenue Code of 1986, as amended, or the Code, and
corresponding provisions of state law, if a corporation undergoes an "ownership change," which generally occurs if the
percentage of the corporation's stock owned by 5% stockholders increases by more than 50% over a three-year period,
the corporation's ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-
change income may be limited. We have not determined if we have experienced Section 382/383 ownership changes and
if a portion of our NOL and tax credit carryforwards are subject to an annual limitation under Section 382/383. In
addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership,
which may be outside of our control. If we determine that an ownership change has occurred and our ability to use our
historical NOL and tax credit carryforwards is materially limited, it would harm our future operating results by
effectively increasing our future tax obligations.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse
effect on our business, cash flow, financial condition, or results of operations.
New tax laws, statutes, rules, regulations, or ordinances could be enacted at any time. Further, existing tax laws,
statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time.
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Any such enactment, interpretation, change, repeal, or modification could adversely affect us, possibly with retroactive
effect. For instance, the Inflation Reduction Act (“IRA”) imposes, among other rules, a 15% minimum tax on the book
income of certain large corporations and a 1% excise tax on certain corporate stock repurchases. The TCJA as amended
by the CARES Act significantly reformed the Code by lowering U.S. federal corporate income tax rates, changing the
utilization of future net operating loss carryforwards, permitting for the expensing of certain capital expenditures,
eliminating the option to currently deduct research and development expenditures and requiring taxpayers to capitalize
and amortize U.S.-based and non-U.S.-based research and development expenditures over five and fifteen years,
respectively and putting into effect significant changes to U.S. taxation of international business activities. The IRA,
TCJA, or any future tax reform legislation could have a material impact on the value of our deferred tax assets, result in
significant one-time charges, and increase our future tax expenses.
Our bank deposits in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits could be
impacted if the underlying financial institutions fail.
Our cash and cash equivalents are held in accounts at US Bank Corp, JPMorgan Chase Bank, Truist Bank, and
Silicon Valley Bank and consist of cash in our operating accounts and cash invested in money market funds. At any
point in time, the funds in our operating accounts may exceed the FDIC insurance limits. While we monitor the cash
balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if
the underlying financial institutions fail. To date, we have not experienced significant losses or lack of access to cash in
our operating accounts or our invested cash or cash equivalents; however, we can provide no assurances that access to
our operating cash or invested cash and cash equivalents will not be impacted by adverse conditions in the financial
markets.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk management and strategy
We have implemented and maintain various information security processes designed to identify, assess and
manage material risks from cybersecurity threats to our critical computer networks, third party hosted services,
communications systems, hardware and software, and our critical data, including intellectual property, and confidential
information that is proprietary, strategic or competitive in nature (collectively, “Information Systems and Data”).
Our information security function is led by our head of IT and supported by our executive team (specifically,
our CEO, COO, and CFO), our engineering department, and third-party service providers, and helps identify, assess and
manage the Company’s cybersecurity threats and risks. This group identifies and assesess risks from cybersecurity
threats by monitoring and evaluating our threat environment using various methods including, for example: manual and
automated tools, conducting scans of the threat environment, subscribing to reports and services that identify
cybersecurity threats, analyzing reports of threats and actors and evaluating threats reported to us, external audits, third
party testing and vulnerability assessments, and tabletop incident response exercises.
Depending on the environment, we implement and maintain various technical, physical, and organizational
measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to
our Information Systems and Data, including, for example: incident detection and response processes; disaster recovery
plan; encryption of certain data; network security controls; segregation of certain data; access and physical security
controls; assess management; tracking, and disposal; systems monitoring; a vendor risk amangmeent program; employee
training; penetration testing by third parties; and maintaining cybersecurity insurance.
Our assessment and management of material risks from cybersecurity threats are integrated into the Company’s
overall risk management processes. For example our executive team evaluates material risks from cybersecurity threats
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against our overall business objectives and reports to the audit committee of the board of directors, which evaluates our
overall enterprise risk.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks
from cybersecurity threats, including for example professional services firms, managed cybersecurity services providers,
penetration testing firms, dark web monitoring services and cybersecurity software providers.
We use third-party service providers to perform a variety of functions throughout our business, such as
application providers, hosting companies, contract manufacturers and distributors. We have vendor management
processes designed to manage cybersecurity risks associated with our use of certain of these providers. The processes in
place include a risk assessment for certain vendors and the imposition of certain contractual obligations related to
cybersecurity on certain providers. Depending on the nature of the services provided, the sensitivity of the Information
Systems and Data at issue, and the identity of the provider, our vendor management processes may involve different
levels of assessment designed to help identify cybersecurity risks associated with these providers.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they
may do so, see our risk factors under Part 1. Item 1A. Risk Factors in this Annual Report on Form 10-K, including the
risk factor entitled “If our information technology systems or those third parties upon which we rely or our data, are or
were compromised, we could experience adverse consequences resulting from such compromise, including but not
limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations;
reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.”
Governance
Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight
function. The board of directors’ audit committee is responsible for overseeing the Company’s cybersecurity risk
management processes, including oversight and mitigation of risks from cybersecurity threats.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain
Company management, including our executive team and head of IT who has over twenty-five years of IT management
experience.
Management is responsible for hiring appropriate personnel and the head of IT is responsible for
communicating key priorities to relevant personnel. The executive team works with the head of IT to help prepare for
cybersecurity incidents, approve cybersecurity processes, and review security assessments and other security-related
reports.
Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to
members of management depending on the circumstances, including the executive team, legal and others. The executive
team works with the head of IT and the Company’s incident response team to help the Company mitigate and remediate
cybersecurity incidents of which they are notified. In addition, the Company’s incident response processes include
reporting to the audit committee of the board of directors for certain cybersecurity incidents.
The audit committee receives regular reports from the IT function concerning the Company’s significant
cybersecurity threats and risk and the processes the Company has implemented to address them. The audit committee
also receives various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
Item 2. Properties
Our principal offices occupy approximately 33,000 square feet of research and office space for our corporate
headquarters in Germantown, Maryland pursuant to a lease that expires in 2033. Additionally, on July 31, 2019, we
entered into a new, non-cancellable operating sub-lease agreement for approximately 30,500 square feet of office space
which commenced on September 2, 2019 and expired in 2023. This facility was decommissioned in 2021 and we made
lease payments until the lease expiration. We believe that our current facilities are suitable and adequate to meet our
current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that
suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.
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Item 3. Legal Proceedings
From time to time, we are subject to litigation and claims arising in the ordinary course of business. In
February 2021, the Company received notice and accepted service of a civil complaint that had been filed in the Western
District of Texas and styled Carew ex rel. United States v. Senseonics, Inc., No. SA20CA0657DAE. The complaint was
filed by a relator under seal in May 2020 pursuant to the qui tam provisions in the federal False Claims Act. Prior to the
unsealing of the complaint, the government declined to intervene in the case. The case, therefore, is being pursued only
by the relator and his counsel. The complaint alleges the Company’s marketing practices with physicians for its product,
Eversense CGM system, violated the False Claims Act, 31 U.S.C. § 3729 and the Texas Medicaid Fraud Prevention
Law, Tex. Hum Res. Code § 36.002. The court granted the Company’s motion to dismiss the complaint on
March 31, 2022 but permitted the plaintiff to file an amended complaint. The court dismissed the amended
complaint and entered judgment in favor of Senseonics Holdings, Inc. on March 30, 2023. The relator filed a notice of
appeal to the United States Court of Appeals for the Fifth Circuit on April 28, 2023. The appeal was fully briefed and the
case was argued before the Fifth Circuit on February 6, 2024. On February 28, 2024 the Fifth Circuit issued a Per
Curiam order affirming the District Court’s decision that Carew failed to state a claim. This order affirms the District
Court’s dismissal of plaintiff’s lawsuit.
Except as described above, we are not currently a party to any material legal proceedings, and we are not aware
of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our
business, operating results or financial condition.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information for Common Stock
Our common stock is listed on the NYSE American under the symbol “SENS.”
Dividend Policy
We have never declared or paid any dividends on our common stock. We anticipate that we will retain all of our
future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash
dividends in the foreseeable future. Our ability to pay dividends on shares of our common stock is further limited by
restrictions on our ability to pay dividends or make distributions under the terms of the agreements governing our
indebtedness and may be limited by future similar agreements.
Stockholders
As of February 23, 2024, we had 530,668,435 shares of common stock outstanding held by 168 holders of
record.
Recent Sales of Unregistered Securities
None.
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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations
together with our consolidated financial statements and related notes in Part II, Item 8 of this Annual Report. Some of
the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including
information with respect to our plans and strategy for our business, includes forward-looking statements that involve
risks and uncertainties. You should review the “Risk Factors” section of this Annual Report for a discussion of
important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
Overview
We are a medical technology company focused on the development and manufacturing of glucose monitoring
products designed to transform lives in the global diabetes community with differentiated, long-term implantable glucose
management technology. Our implantable CGM (“Eversense”), Eversense E3 continuous glucose monitoring (“CGM”)
system version is designed to continually and accurately measure glucose levels in people with diabetes via an under-the-
skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and
management for a period of up to six months as compared to seven to 14 days for non-implantable CGM systems. We
affixed the CE mark to the original 90-day Eversense CGM system in June 2016, which marked the first certification for
the product to be sold within the European Economic Area (being the European Union plus Norway, Iceland, and
Liechtenstein) (“EEA”). Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in
September 2017 to be sold in select markets in Europe and the Middle East. In June 2022, we affixed the CE mark to the
Eversense E3 CGM system and Ascensia Diabetes Care Holdings AG (“Ascensia”) began commercialization in select
markets in Europe during the third quarter of 2022. In June 2018, the U.S. Food and Drug Administration (“FDA”),
approved the 90-day Eversense CGM system for distribution throughout the United States. In June 2019, we received
FDA approval for the non-adjunctive indication (dosing claim) for the 90-day Eversense system. With this approval and
the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the
United States to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing. In
February 2022, the 180-day extended life Eversense E3 CGM system was approved by the FDA and Ascensia began
commercializing Eversense E3 in the United States in the second quarter of 2022.
Our net revenues are derived from sales of the Eversense system which is sold in two separate kits: the
disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable
Eversense Smart Transmitter Pack which includes the transmitter and charger.
We sell directly to our network of distributors and strategic fulfillment partners, who provide the Eversense
system to healthcare providers and patients through a prescribed request and invoice insurance payors for
reimbursement. Sales of the Eversense system are widely dependent on the ability of patients to obtain coverage and
adequate reimbursement from third-party payors or government agencies. We leverage and target regions where we have
coverage decisions for patient device use and provider insertion and removal procedure payment. We have reached
approximately 300 million covered lives in the United States through positive insurance payor coverage decisions. In
June 2023, we received positive payor coverage decision from UnitedHealthcare, the largest healthcare insurance
company in the United States that effective July 1, 2023, Eversense E3 CGM system would be covered. We also gained
coverage expansion through the basal only and hypoglycemic indications across a significant number of commercial
payors in 2023. On August 3, 2020, the Center for Medicare and Medicaid Services (“CMS”) released its Calendar Year
2021 Medicare Physician Fee Schedule Proposed Rule that announces proposed policy changes for Medicare payments,
including the proposed establishment of national payment amounts for the three CPT© Category III codes describing the
insertion (CPT 0446T), removal (0447T), and removal and insertion (0048T) of an implantable interstitial glucose
sensor, which describes our Eversense CGM systems, as a medical benefit, rather than as part of the Durable Medical
Equipment channel that includes other CGMs. In December 2021, CMS released its Calendar Year 2022 Medicare
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Physician Fee Schedule that updated global payments for the device cost and procedure fees. In July 2022, CMS
provided temporary G-codes to enable immediate access to Eversense E3 for all eligible Medicare beneficiaries. In
November 2022, CMS released its Calendar Year 2023 Medicare Physician Fee Schedule Proposed Rule that updates the
payment amounts for the three CPT© Category III codes to account for the longer 6-month sensor. The Calendar Year
2024 Medicare Physician Fee Schedule continues to include the three CPT© Category III codes. In February 2024, we
announced that Medicare coverage was expanded for Eversense E3 to include all people with diabetes using insulin and
non-insulin users who have a history of problematic hypoglycemia providing access to millions of Medicare patients.
The first MAC expansion became effective on February 25, 2024 with the remaining MAC’s expected to become
effective in the near future.
In February 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to
continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-
set of 30 participants was left undisturbed for 365 days with the goal of measuring accuracy and longevity over the
full 365 days. Information gathered from this sub-set and additional development efforts provided us the
confidence to start the Pivotal study for the Eversense 365-day System. The ENHANCE pivotal study for the
Eversense 365-day system completed enrollment, the last patient of the adult cohort completed the study, and we
completed our analysis of the data. Based on this analysis, we determined to advance to the next generation sensor
platform as the underlying technology used in the 365-day and future products. We expect that this data will support an
FDA submission to be made in the coming weeks for a new product with a target 365-day duration and once per week
calibration.
We are in the early commercialization stages of the Eversense brand and are focused on driving awareness of
our CGM system amongst intensively managed patients and their healthcare providers. In both the United States and our
overseas markets, we have entered into strategic partnerships and distribution agreements that allow third party
collaborators with direct sales forces and established distribution systems to market and promote Eversense.
United States Development and Commercialization of Eversense
In 2016, we completed our PRECISE II pivotal clinical trial in the United States. This trial, which was fully
enrolled with 90 subjects, was conducted at eight sites in the United States. In the trial, we measured the accuracy of
Eversense measurements through 90 days after insertion. We also assessed safety through 90 days after insertion or
through sensor removal. In the trial, we observed a mean absolute relative difference (“MARD”) of 8.5% utilizing two
calibration points for Eversense across the 40-400 mg/dL range when compared to YSI blood reference values during the
90-day continuous wear period. Based on the data from this trial, in October 2016 we submitted a pre-market approval
(“PMA”) application to the FDA to market Eversense in the United States for 90-day use. On June 21, 2018, we received
PMA approval from the FDA for the Eversense system. In July 2018, we began distributing the 90-day Eversense system
directly in the United States through our own direct sales and marketing organization. We have received Category III
CPT codes for the insertion and removal of the Eversense sensor.
In December 2018, we initiated the PROMISE pivotal clinical trial to evaluate the safety and accuracy of
Eversense for a period of up to six months in the United States and in September 30, 2019, we completed enrollment of
the PROMISE trial. In the trial, we observed performance matching that of the then current Eversense 90-day product
available in the United States, with a MARD of 8.5%. This result was achieved with reduced calibration, down to one
per day, while also doubling the sensor life to six months. Following the results of the PROMISE trial, on September 30,
2020, a PMA supplement application to extend the wearable life of the Eversense CGM System to six months was
submitted to the FDA. In February 2022, the extended life Eversense E3 CGM system was approved by the FDA.
In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense
system and launched with an updated app in December 2019. With this approval, the Eversense system can be used as a
therapeutic CGM to replace fingerstick blood glucose measurement for treatment decisions, including insulin dosing.
On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to
continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor. This sub-set of
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30 participants were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365
days. Information gathered from this sub-set and additional development efforts provided us the confidence to start the
Pivotal study for the Eversense 365 System.
In April 2020, we announced that we received an extension to our CE Certificate of Conformity in the EEA
such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed
from under the skin during MRI scanning. We had previously obtained this indication for Eversense in the United States
in 2019. This MRI approval is a first for the CGM category, as all other sensors are required to be removed during an
MRI scan.
On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia (the
“Commercialization Agreement”) pursuant to which we granted Ascensia the exclusive right to distribute our 90-day
Eversense CGM system and our 180-day Eversense E3 CGM system worldwide, with the following initial exceptions:
(i) until January 31, 2021, the territory did not include territories covered by our then existing distribution agreement
with Roche Diagnostics International AG and Roche Diabetes Care GmbH, which are the Europe, Middle East and Asia,
excluding Scandinavia and Israel, and 17 additional countries, including Brazil, Russia, India and China, as well as select
markets in the Asia Pacific and Latin American regions; (ii) until September 13, 2021, the territory did not include
countries covered by our current distribution agreement with Rubin Medical, which are Sweden, Norway and Denmark;
and (iii) until May 31, 2022, the territory did not include Israel. Pursuant to the Commercialization Agreement, in the
United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and
Ascensia ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense product during
the second quarter of 2021.
In February 2022, we received approval from the FDA for the Eversense E3 CGM System. The approval for our
third-generation sensor, with proprietary sacrificial boronic acid (“SBA”) technology doubles the sensor life to six
months with MARD of 8.5%. Ascensia began commercializing Eversense E3 in the United States during the second
quarter of 2022.
The ENHANCE clinical study was initiated as a pivotal study with the purpose of gathering additional clinical
data to support an integrated continuous glucose monitoring (“iCGM”) submission for the Eversense E3 system using
the SBA technology. In March 2022, we extended the ongoing ENHANCE clinical study to evaluate the safety and
accuracy of the Eversense 365 System for a period of up to one year in the United States. In mid-2023, the data gathered
in this trial was used to submit an application to the FDA for the integrated continuous glucose monitoring (“iCGM”)
designation. The iCGM designation will enable our ability to integrate with insulin delivery devices like pens and pumps
to create systems that would use Everesense for automous control and we exepect approval in the first half of 2024. In
2022, we submitted and received approval for an investigational device exemption (“IDE”) for an extension of the trial
to allow for pediatric patients and we began enrolling patients in the first half of 2023. The ENHANCE pivotal study for
the Eversense 365-day system has been fully enrolled, the last patient of the adult cohort completed the study and we
completed the preliminary analysis of the data. Based on this analysis we determined to advance to the next generation
sensor platform as the underlying technology used in the 365-day and future products. We expect that this data will
support an FDA submission to be made in the coming weeks for a new product with a target 365-day duration and once
per week calibration.
European Commercialization of Eversense
In September 2017, we affixed the CE mark for Eversense XL, which permits the product to be sold freely in
any part of the European Economic Area (“EEA”). The Eversense XL is indicated for a sensor life of up to 180 days.
Eversense XL began commercialization in the EEA in the fourth quarter of 2017. All such commercialization and
marketing activities remain subject to applicable government approvals.
We previously held a distribution agreement with Roche and granted Roche the exclusive right to market, sell
and distribute Eversense in certain territories within EMEA and other countries outside of the United States. The
distribution rights under the agreement expired January 31, 2021.
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In June 2022, we affixed the CE mark for the Eversense E3 CGM system, and Ascensia began
commercialization in certain European markets during the second half of 2022.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with generally accepted accounting principles in the
United States.
The preparation of our consolidated financial statements requires us to make estimates, assumptions and
judgments that affect the reported amounts of assets, liabilities and equity and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period. These estimates, particularly estimates relating to accounting for variable consideration related to revenue and
embedded derivatives, have a material impact on our financial statements and are discussed in detail throughout our
analysis of the results of operations discussed below. We did not make any material changes to these assumptions for the
year ended December 31, 2023. We do not expect any material changes in the near term to the underlying assumptions
during the year ended December 31, 2024.
We base our estimates on historical experience and various other assumptions that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying value of assets,
liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ from
these estimates and assumptions.
Revenue
We generate product revenue from sales of the Eversense system and related components and supplies to
Ascensia, through the Commercialization Agreement, third-party distributors in the European Union and to strategic
fulfillment partners in the United States (collectively “Customers”), who then resell the products to health care providers
and patients. We are generally paid for our sales directly to the Customers, regardless of whether or not the Customers
resell the products to health care providers and patients.
Revenue from product sales is recognized at a point in time when the Customers obtain control of our product
based upon the delivery terms as defined in the contract at an amount that reflects the consideration which we expect to
receive in exchange for the product. Contracts with our distributors contain performance obligations, mostly for the
supply of goods, and is typically satisfied upon transfer of control of the product. Customer contracts do not include the
right to return unless there is a product issue, in which case we may provide replacement product. Product conformity
guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance
with guarantee and loss contingency accounting guidance.
In addition, we sell small quantities of our products directly to healthcare provider locations within the United
States. In these direct sales, inventory is purchased on consignment to ensure availability when a patient is identified. No
revenue is recognized upon delivery of our products to the healthcare provider locations, as we retain the ability to
control the inventory. Rather, revenue is recognized when the product is consumed by a patient. Consignment sales
represent approximately five percent of our net sales in 2023.
Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price
discounts and for the Commercialization Agreement, revenue share. Variable consideration, such as discounts and
prompt-pay incentives, are treated as a reduction in revenue and variable considerations, such as revenue share, is treated
as an addition in revenue when the product sale is recognized. The amount of variable consideration that is included in
the transaction price may be constrained and is included in revenue only to the extent that it is probable that a significant
reversal in the amount of the cumulative revenue recognized will not occur in a future period, when the uncertainty
associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related
constraint requires the use of significant management judgment. Depending on the variable consideration, we develop
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estimates for the expected value based on the terms of the agreements, historical data, geographic mix, reimbursement
rates, and market conditions.
Contract assets consist of trade receivables and unbilled receivables from customers and are recorded at net
realizable value. Unbilled receivables relate to the revenue share variable consideration from the Commercialization
Agreement.
Derivative Financial Instruments
In connection with our issuance of the convertible senior subordinated notes due 2023, or the 2023 Notes in
January 2018, we bifurcated the embedded conversion option, along with the interest make-whole provision and make-
whole fundamental change provision, and recorded the embedded conversion option as a derivative liability in our
consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging. The 2023 Notes were paid in
full in January 2023 and the derivative liability was derecognized.
In connection with our issuance of the convertible senior subordinated notes due 2025, or the 2025 Notes in
July 2019, we bifurcated the embedded conversion option along with the fundamental change make-whole provision and
the cash settled fundamental make-whole shares provision, and recorded the fair value of these embedded features as a
derivative liability in our consolidated balance sheets in accordance with Accounting Standards Codification, or ASC,
Topic 815, Derivatives and Hedging.
In August 2020, we issued convertible senior secured notes due 2024, or the PHC Notes. The Note Purchase
Agreement also contained several provisions requiring bifurcation as a separate derivative liability including an
embedded conversion feature, mandatory prepayment upon event of default that constitutes a breach of the minimum
revenue financial covenant, optional redemption upon an event of default, change in interest rate after PMA approval and
default interest upon an event of default. We recorded the fair value of the embedded features as a derivative liability in
our consolidated balance sheets in accordance with ASC Topic 815, Derivatives and Hedging. The PHC notes were
cancelled in full on March 31, 2023 in exchange for a pre-funded warrant to acquire shares of our common stock (“the
PHC Exchange Warrant”) and the derivative liability was derecognized.
The derivative instruments are remeasured at the end of each reporting period with changes in fair value
recorded in the consolidated statements of operations and comprehensive loss in other income (expense) as a change in
fair value of the derivative liability. The fair value assessment incorporates management’s assumptions for probabilities
of conversion occurrence through maturity, stock price, volatility, risky bond rate, and trade data when available. We
engage a third-party valuation specialist to perform the valuation using the binomial option pricing model.
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Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
The following table sets forth our results of operations for the years ended December 31, 2023 and 2022.
Revenue, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue, net - related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2023
2022
656 $
$
(in thousands)
1,655
20,735
22,390
19,299
3,091
15,733
16,389
13,663
2,726
Period Change
(in thousands)
999
5,002
6,001
5,636
365
Expenses:
Research and development expenses . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on fair value adjustment of option . . . . . . . . . . . . . . . . . . .
Exchange related gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt and option . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on change in fair value of derivatives . . . . . . . . . . . . . . . .
Impairment cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48,752
29,942
(75,603)
5,362
—
14,109
—
(11,110)
6,648
—
202
15,211
(60,392)
$
39,719
31,634
(68,627)
1,824
43,745
—
(101)
(18,703)
184,221
(138)
(102)
210,746
142,119 $
$
9,033
(1,692)
(6,976)
3,538
(43,745)
14,109
101
7,593
(177,573)
138
304
(195,535)
(202,511)
Components of Results of Operations
Total revenue
Our total net revenue increased to $22.4 million for the year ended December 31, 2023, compared to $16.4
million for the year ended December 31, 2022, an increase of $6.0 million. This increase was primarily the result of
increased commercial activities driving new patients and awareness and a full year of Eversense E3 revenue in 2023,
partially offset by slightly lower sales outside of the United States during 2023.
Cost of sales and gross profit
Our cost of sales increased to $19.3 million for the year ended December 31, 2023, compared to $13.7 million
for the year ended December 31, 2022. Our gross profit increased to $3.1 million for the year ended December 31, 2023,
compared to $2.7 million for the year ended December 31, 2022. Gross profit as a percentage of revenue, or gross
margin, was 13.8% and 16.6% for the years ended December 31, 2023 and 2022, respectively. The decrease in gross
margin was primarily due to sales channel mix and increased contract manufacturing costs driven by raw material prices.
Research and development expenses
Research and development expenses were $48.8 million for the year ended December 31, 2023, compared to
$39.7 million for the year ended December 31, 2022, an increase of $9.1 million. The increase was primarily due to
investments for next generation technologies including a $4.0 million increase in clinical studies activities, an increase of
$2.2 million in personnel related costs due to the expansion of our research and development workforce, an increase of
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$1.4 million for consulting and other support services, an increase of $1.0 million in design and prototype development
costs, and an increase of $0.5 million in other administrative R&D expenses.
Selling, general and administrative expenses
Selling, general and administrative expenses were $29.9 million for the year ended December 31, 2023,
compared to $31.6 million for the year ended December 31, 2022, a decrease of $1.7 million. The decrease was primarily
the result of a $1.0 million decrease in personnel costs, a $0.8 million decrease in other general and administrative costs
to include recruiting and associated employee overhead, local tax expenses, and legal expenses, partially offset by a $0.1
million increase in other selling and marketing costs.
Total other income, net
Total other income, net, was $15.2 million for the year ended December 31, 2023, compared to $210.7 million
for the year ended December 31, 2022, a reduction of $195.5 million. The change was primarily due to a $177.6 million
reduction in gains on the fair value of derivatives primarily driven by debt settlement and the decrease in our stock price,
and a $43.7 million reduction in the gain on fair value of options primarily driven by the decrease in our stock price,
partially offset by a $3.5 million increase in interest income, a $7.6 million decrease in interest expense, a $14.1 million
gain on exchange of debt, and $0.6 million increase in other income (expense) items, net.
Liquidity and Capital Resources
Since our inception, we have incurred significant net losses and expect to incur additional losses in the near
future. We incurred total net (loss) income of ($60.4) million and $142.1 million for the years ended December 31, 2023
and 2022, respectively. Positive net income during 2022 was substantially the result of fair value gains due to embedded
derivatives in our convertible notes. As of December 31, 2023, we had an accumulated deficit of $869.3 million. To date,
we have financed our operations primarily through sales of our equity securities and debt financings. As of December 31,
2023, we had cash, cash equivalents and marketable securities of $109.5 million.
During 2023, we undertook a number of financing transactions designed to strengthen our balance sheet,
including the repayment of our 2023 Notes, the issuance of additional pre-funded warrant to PHC for cash in a private
placement, the exchange of our PHC Notes for a newly issued pre-funded warrant, the exchange of a portion of our 2025
Notes for cash and newly issued common stock in a series of private exchanges, the entry into a new term loan facility
and the issuance of shares of common stock pursuant to an at the market offering program. These transactions are
described in greater detail below.
On March 13, 2023, we issued and sold to PHC in a private placement a warrant (the “Purchase Warrant”) to
purchase an aggregate of 15,425,750 shares of common stock (the “Purchase Warrant Shares”). The purchase price of
the Purchase Warrant was approximately $0.97 per Purchase Warrant Share. The Purchase Warrant is a “pre-funded”
warrant with a nominal exercise price of $0.001 per Purchase Warrant Share. We received aggregate gross proceeds of
$15.0 million in the transaction, before deducting private placement expenses payable by us.
On September 8, 2023, we entered into a loan agreement (the “Loan and Security Agreement”) with several
institutions (collectively, the “Lenders") and Hercules Capital, Inc. (“Hercules”) in its capacity as administrative agent
and collateral agent for itself and the Lenders, pursuant to which the Lenders agreed to make available up to
$50.0 million in senior secured term loans (the “Term Loan Facility”), consisting of (i) an initial term loan of
$25.0 million (the “Tranche 1 Loan”), which was funded on September 8, 2023 and (ii) two additional tranches of term
loans in the amounts of up to $10.0 million (the “Tranche 2 Loan”) and $15.0 million (the “Tranche 3 Loan”),
respectively, which will become available to us upon our satisfaction of certain terms and conditions set forth in the Loan
and Security Agreement. In December 2023, we met the terms and conditions to draw on Tranche 2 Loan and the loan
was funded on January 2, 2024 in an amount of $10.0 million. The loans under the Loan and Security Agreement mature
on September 1, 2027.
77
On August 10, 2023, we entered into separate, privately negotiated exchange agreements (the “Exchange
Agreements”) with a limited number of holders (the “Noteholders”) of our outstanding 5.25% Convertible Senior Notes
due 2025 (the “2025 Notes”). Under the terms of the Exchange Agreements, the holders of the 2025 Notes agreed to
exchange up to $30.8 million in aggregate principal amount of the 2025 Notes (the “Exchanged Notes”) for a
combination of $7.5 million of cash and newly issued shares of common stock. The number of shares issued was
determined based upon the volume-weighted average price per share of the common stock during a 15-day averaging
period. Based on the volume-weighted average price per share of the common stock during the averaging period, we
issued a total of 35.1 million shares of common stock in the exchanges.
In August 2023, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with
Goldman Sachs & Co. LLC (“GS”), under which we could offer and sell, from time to time, at our sole discretion, shares
of our common stock having an aggregate offering price of up to $106.6 million through GS as our sales agent in an “at
the market” offering, which represented the remaining capacity under our then-existing at the market program with
Jefferies LLC, as described below. GS will receive a commission up to 3.0% of the gross proceeds of any common stock
sold through GS under the Equity Distribution Agreement. The shares will be offered and sold pursuant to an effective
shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on
August 10, 2023. As of the date of this Annual Report on Form 10-K, no sales have been made under the Equity
Distribution Agreement.
In November 2021, we entered into an Open Market Sale Agreement (the “2021 Sales Agreement”) with
Jefferies LLC (“Jefferies”) under which we could offer and sell, from time to time, at our sole discretion, shares of our
common stock having an aggregate offering price of up to $150.0 million through Jefferies as our sales agent in an “at
the market” offering. Jefferies received commissions up to 3.0% of the gross proceeds of any common stock sold
through Jefferies under the 2021 Sales Agreement. For the twelve months ending December 31, 2023 and 2022, we
received $7.4 million and $34.2 million in net proceeds from the sale of 9,944,663 shares and 15,160,899 shares,
respectively, of our common stock under the 2021 Sales Agreement. Effective August 7, 2023, in connection with the
transactions described above, we and Jefferies mutually agreed to terminate the 2021 Sales Agreement. At the time of
termination, approximately $106.6 million remained available for issuance pursuant to the 2021 Sales Agreement.
On November 9, 2020, we entered into the Equity Line Agreement with Energy Capital, pursuant to which
Energy Capital committed to purchase up to an aggregate of $12.0 million of shares of our newly designated Series B
convertible Preferred Stock (“Series B Preferred Stock”), at our request from time to time during the 24-month term of
the Equity Line Agreement. Beginning on January 1, 2022, since there had been no sales of the Series B Preferred Stock
pursuant to the Equity Line Agreement, Energy Capital had the right, at its sole discretion to purchase up to $12.0
million of Series B Preferred Stock under the Equity Line Agreement at a purchase price of $1,000 per share of Series B
Preferred Stock initially convertible into common stock, beginning six months after the date of its issuance, at a
conversion price of $0.3951 per share. On November 7, 2022, Energy Capital exercised in full its right to purchase $12.0
million of Series B Preferred Stock.
Concurrently with entry into the Equity Line Agreement, we issued a warrant to Energy Capital, exercisable
beginning May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of $0.3951 per share,
(the “Warrant”). The Warrant was exercised in full in February 2022.
On August 9, 2020, we entered into a financing agreement with Ascensia’s parent company, PHC Holdings
Corporation (“PHC”), pursuant to which we issued $35.0 million in aggregate principal amount of Senior Secured
Convertible Notes due on October 31, 2024 (the “PHC Notes”), to PHC on the Closing Date. We also issued PHC
2,941,176 shares of common stock to PHC as a financing fee. We also had the option to sell and issue PHC up to $15.0
million of convertible preferred stock on or before December 31, 2022, contingent upon obtaining approval for the
180-day Eversense E3 product for marketing in the United States before such date. Upon the closing of the PHC Notes,
we prepaid in full the First Lien Notes, issued and sold pursuant a loan agreement with Highbridge Capital Management,
LLC (“Highbridge”) (the “Highbridge Loan Agreement”), in the amount of approximately $17.6 million. As described in
Note 21, on March 13, 2023, we entered into an agreement with PHC, whereby PHC has agreed to exchange the PHC
Notes for a warrant (the “PHC Exchange Warrant”) to purchase up to 68,525,311 shares of common stock. The
78
Exchange Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per share. On March 31, 2023 (6:00
am Japan Standard Time on April 1, 2023), the PHC Exchange was consummated, and the Company issued the PHC
Exchange Warrant in consideration for the cancellation of the PHC Notes.
Warrants
In connection with certain of our historical financing transactions, we have issued warrants to investors and
providers of debt financing, as described below.
On June 30, 2016, we entered into a loan agreement with Oxford Finance and Silicon Valley Bank (collectively,
the “Lenders”) and issued to the Lenders 10-year stock purchase warrants to purchase an aggregate of 116,581, 63,025
and 80,645 shares of common stock at an exercise price of $3.86, $2.38 and $1.86 per share, respectively (“Oxford/SVB
Warrants”). The Oxford/SVB warrants expire on June 30, 2026, November 22, 2026 and March 29, 2027, respectively.
On April 24, 2020, we entered into a loan agreement with Highbridge and issued the lender warrants to
purchase an aggregate of 4,500,000 shares of the Company’s common stock with an exercise price of $0.66 per share
(“Highbridge Warrants”). The Highbridge Warrants are exercisable until April 24, 2030. During the year ended
December 31, 2021, the warrant holders exercised 1,750,000 warrants. There were no warrants exercised for the years
ended December 31, 2023 or 2022.
On November 9, 2020, we entered into the Equity Line Agreement and issued Energy Capital warrants to
purchase up to 10,000,000 shares of our common stock with an exercise price of $0.3951 per share (“Energy Capital
Warrants”). The Energy Capital Warrants vested on May 9, 2021. The warrants were recorded within equity based on
their fair value of $3.4 million. In February 2022, the Energy Capital Warrants were exercised in full, on a net basis and
Energy Capital received 8,917,535 shares of common stock upon the net exercise of the warrants.
On March 13, 2023, we issued to PHC, the Purchase Warrant to purchase 15,425,750 shares of common stock.
The Purchase Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per Purchase Warrant Share.
We received aggregate gross proceeds of $15.0 million, before deducting private placement expenses payable by us. The
warrants were recorded in equity based on their fair value of $14.3 million. Because PHC was an existing stockholder of
the company at the time of the transaction, the $0.7 million excess of the purchase price over the fair value of the
Purchase Warrant was recognized as an equity transaction and recorded as a capital contribution made by PHC to us as
additional paid-in-capital. All or any part of the Purchase Warrant shall is exercisable by the holder at any time and from
time to time.
In addition, on March 13, 2023, we entered into an exchange agreement with PHC, pursuant to which PHC
agreed to exchange $35.0 million aggregate principal amount of the PHC Notes, including all accrued and unpaid
interest thereon, for a warrant (the “PHC Exchange Warrant”) to purchase up to 68,525,311 shares of common stock. On
March 31, 2023, the exchange was consummated, and we issued the PHC Exchange Warrant in consideration for the
cancellation of the PHC Notes. The PHC Exchange Warrant is a “pre-funded” warrant with a nominal exercise price of
$0.001 per PHC Exchange Warrant Share. The PHC Exchange Warrant was recorded in equity based on its fair value of
$48.6 million.
On September 8, 2023, we entered into the Loan and Security Agreement and issued the Tranche 1 Warrants to
acquire an aggregate of 832,362 shares of common stock at an exercise price of $0.6007 per share. The Tranche 1
Warrants may be exercised through the earlier of (i) September 8, 2030 and (ii) the consummation of certain acquisition
transactions involving the company, as set forth in the warrant agreement. The Tranche 1 Warrants were recorded in
equity based on their fair value of $0.4 million. The number of shares for which the Tranche 1 Warrants are exercisable
and the associated exercise price are subject to certain customary proportional adjustments for fundamental events,
including stock splits and reverse stock splits, as set forth in the warrant agreement.
On January 2, 2024, we issued the Tranche 2 Warrants to acquire an aggregate of 347,887 shares at an exercise
price of $0.5749 per share. The Tranche 2 Warrants may be exercised through the earlier of (i) September 8, 2030 and
(ii) the consummation of certain acquisition transactions involving the company, as set forth in the warrant agreement.
79
The number of shares for which the Tranche 1 Warrants are exercisable and the associated exercise price are subject to
certain customary proportional adjustments for fundamental events, including stock splits and reverse stock splits, as set
forth in the warrant agreement.
Indebtedness
Loan and Security Agreement
On September 8, 2023, we entered into the Loan and Security Agreement with the Lenders and Hercules,
pursuant to which the Lenders agreed to make available to us the Term Loan Facility, consisting of (i) an initial Tranche
1 Loan, which was funded in the amount of $25.0 million on the Effective Date and (ii) the Tranche 2 Loan and Tranche
3 Loan, respectively, which would become available to the Company upon our satisfaction of certain terms and
conditions set forth in the Loan and Security Agreement. The loans under the Loan and Security Agreement mature on
September 1, 2027. In December 2023, we met the terms and conditions to draw on Tranche 2 Loan and the loan was
funded on January 2, 2024 in an amount of $10.0 million.
PPP Loan
On April 22, 2020, we received $5.8 million in loan funding from the PPP pursuant to the CARES Act, as
amended by the Flexibility Act, and administered by the Small Business Administration (“SBA”). The unsecured loan
(the “PPP Loan”) was evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”) in the principal amount of $5.8
million with Silicon Valley Bank (“SVB”).
Under the terms of the PPP Note and the PPP Loan, interest accrued on the outstanding principal at a rate of
1.0% per annum. The term of the PPP Note was two years. In April 2022, we repaid the outstanding principal and
accrued interest in full.
Convertible Notes
The following table summarizes our outstanding senior convertible note obligations at December 31, 2023:
Convertible
Note
Issuance
Date
2025 Notes . . . . . . July 1, 2019 5.25 %$
Aggregate
Principal
Coupon (in millions)
20.4
Initial Conversion Conversion Price
Maturity
Date
January 15, 2025
Rate per $1,000
per Share of
Principal Amount Common Stock
1.32
757.5758
$
See Note 13 in the accompanying notes to our consolidated financial statements included elsewhere in this
Annual Report for further discussion of the 2025 Notes.
Funding Requirements and Outlook
Our ability to generate revenue and achieve profitability depends on the successful commercialization and
adoption of our Eversense CGM systems by diabetes patients and healthcare providers, along with future product
development, regulatory approvals, certifications and post-approval requirements. These activities, including our
ongoing focus to grow covered lives through positive insurance payor policy decisions and continued development of
Eversense 365-day product in the United States, will require significant uses of working capital through 2024 and
beyond.
Management has concluded that based on our current operating plans, existing cash and cash equivalents and
cash flows from our future operations will be sufficient to meet our anticipated operating needs through twelve months
after issuance of the financial statements. As part of our liquidity strategy, we will continue to monitor our capital
structure and operating plans and we may access the capital markets or debt markets for additional funding if the
opportunity arises to enhance our capital structure for changes to our operating plans, for financing strategic initiatives
and to provide financial flexibility.
80
Cash Flows
The following is a summary of cash flows for each of the periods set forth below (in thousands):
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities
Year Ended
December 31,
2023
$ (70,163) $
89,713
20,366
39,916 $
$
2022
(66,312)
26,882
41,762
2,332
Net cash used in operating activities was $70.2 million for the year ended December 31, 2023, and consisted of
a net loss of $60.4 million, a $14.1 million exchange-related gain, a $6.6 million gain in the fair value of derivatives on
convertible notes, and a $4.0 million net change in operating assets and liabilities, partially offset by $8.7 million of
stock-based compensation, and $6.3 million related to depreciation/amortization and other non-cash items.
Net cash used in operating activities was $66.3 million for the year ended December 31, 2022, and consisted of
a $184.2 million gain in the fair value of derivatives on convertible notes, a $43.7 million gain on fair value adjustment
of options, a $2.5 million net change in operating assets and liabilities, partially offset by net income of $142.1 million,
$13.3 million related to depreciation/amortization and other non-cash items, $8.6 million of stock-based compensation,
and $0.1 million of loss on extinguishment of options.
Net cash provided by investing activities
Net cash provided by investing activities was $89.7 million for the year ended December 31, 2023, and
consisted of $158.6 million from the sale and maturity of marketable securities, offset by $68.5 million from the
purchase of marketable securities and $0.4 million of capital expenditures for laboratory equipment and leasehold
improvements.
Net cash provided by investing activities was $26.9 million for the year ended December 31, 2022, and
consisted of $131.9 million from the sale and maturity of marketable securities, offset by $104.7 million from the
purchase of marketable securities and $0.3 million of capital expenditures for laboratory equipment.
Net cash provided by financing activities
Net cash provided by financing activities was $20.4 million for the year ended December 31, 2023, and
primarily consisted of $7.4 million in proceeds related to the issuance of common stock and the exercise of stock options
and warrants, $14.7 million in proceeds from the issuance of the PHC Purchase Warrant, and $24.4 million in net
proceeds from borrowings pursuant to the Loan and Security Agreement, partially offset by $15.7 million and $7.5
million in repayment of the 2023 and 2025 notes, respectively, $2.7 million taxes paid related to net share settlement of
equity awards, and $0.4 million in debt issuance costs.
Net cash provided by financing activities was $41.8 million for the year ended December 31, 2022, and
primarily consisted of $12 million in proceeds from the issuance of Series B preferred stock related to the Energy Capital
option exercise, $34.2 million from issuance of common stock, and $1.1 million for proceeds related to exercise of stock
options and warrants, offset by $2.9 million in repayment of the PPP loan and $2.6 million taxes paid related to net share
settlement of equity awards.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The market risk inherent in our financial instruments and in our financial position represents the potential loss
arising from adverse changes in interest rates. As of December 31, 2023, we had cash, cash equivalents and marketable
securities of $109.5 million and at December 31, 2022 we had cash, cash equivalents and marketable securities of $156.3
million. We generally hold our cash in interest-bearing money market accounts or short-term investments that meet our
policy for cash equivalents. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes
in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile
of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair
market value of our cash equivalents. The interest rate on all of our notes payable are fixed. We do not currently engage
in hedging transactions to manage our exposure to interest rate risk.
Foreign Currency Risk
The majority of our international sales are denominated in Euros. Therefore, our U.S. dollar value of sales is
impacted by exchange rates versus the Euro. Currency fluctuations or a strengthening U.S. dollar can decrease our
revenue from these Euro-denominated international sales. To date, foreign currency transaction gains and losses and
exchange rate fluctuations have not been material to our consolidated financial statements, and we do not believe that the
effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have had a
material impact on our operating results or financial condition. We do not currently engage in any hedging transactions
to manage our exposure to foreign currency exchange rate risk.
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Item 8. Financial Statements and Supplementary Data
SENSEONICS HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
Table of Contents
Report of KPMG LLP, Auditor ID:185, Independent Registered Public Accounting Firm . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2023 and 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2023 and 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,
2023 and 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022. . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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85
86
87
88
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
Senseonics Holdings, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Senseonics Holdings, Inc. and subsidiary (the
Company) as of December 31, 2023 and 2022, the related consolidated statement of operations and comprehensive (loss)
income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended
December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year
period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit matters.
/s/ KPMG LLP
We have served as the Company’s auditor since 2022.
McLean, Virginia
February 29, 2024
84
Senseonics Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except for share and per share data)
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short term investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net - related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long term investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities, related parties . . . . . . . . . . . . . . . . . . . . . .
Note payable, current portion, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative liability, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt and notes payables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
December 31,
2023
2022
$
$
$
75,709 $
33,747
808
3,724
8,776
7,266
130,030
7,006
—
1,184
138,220 $
4,568 $
11,744
945
—
—
17,257
41,195
102
6,214
64,768
35,793
108,222
127
2,324
7,306
7,428
161,200
3,108
12,253
1,112
177,673
419
14,616
837
15,579
20
31,471
56,383
52,050
2,689
142,593
Preferred stock and additional paid-in-capital, subject to possible redemption: $0.001
par value per share; 12,000 shares and 12,000 shares issued and outstanding as of
December 31, 2023 and December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total temporary equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,656
37,656
37,656
37,656
Stockholders’ equity (deficit):
Common stock, $0.001 par value per share; 900,000,000 shares authorized as of
December 31, 2023 and December 31, 2022; 530,364,237 shares and
479,637,138 shares issued and outstanding as of December 31, 2023
and December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders' equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities, temporary equity and stockholders’ equity (deficit) . . . . . . . . . . . . . . .
530
904,535
(11)
(869,258)
35,796
138,220 $
480
806,488
(678)
(808,866)
(2,576)
177,673
$
The accompanying notes are an integral part of these consolidated financial statements.
85
Senseonics Holdings, Inc.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(in thousands, except for share and per share data)
Years Ended
December 31,
2023
2022
Revenue, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue, net - related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,655 $
20,735
22,390
19,299
3,091
Expenses:
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (Loss) on fair value adjustment of option . . . . . . . . . . . . . . . . . . . . . . . .
Exchange related gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (Loss) on extinguishment of debt and option . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (Loss) on change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . .
Impairment cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net (loss) income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted-average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . .
656
15,733
16,389
13,663
2,726
39,719
31,634
(68,627)
1,824
43,745
—
(101)
(18,703)
184,221
(138)
(102)
210,746
48,752
29,942
(75,603)
5,362
—
14,109
—
(11,110)
6,648
—
202
15,211
(60,392)
142,119
667
667
(59,725) $
(466)
(466)
141,653
(0.11) $
567,974,492
0.30
467,952,475
(0.11) $
567,974,492
(0.11)
618,205,605
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
86
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T
Senseonics Holdings, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and ROU amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on fair value adjustment of option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) Loss on extinguishment of option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange-related gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale and maturity of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options and ESPP issuances, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes paid related to net share settlement of equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of 2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of 2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of Loan and Security Agreement, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of warrants, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of preferred stock, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, at ending of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of cash flow information
Cash paid during the period for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities arising from obtaining right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases included in accounts payable and accrued expenses . . . . . . . . . . . . . . . .
Conversion of options into redeemable convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of warrants in exchange for PHC Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of warrants for Loan and Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock converted from 2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
December 31,
2023
2022
$
(60,392)
$
142,119
1,277
4,734
(6,648)
—
—
(14,109)
—
8,673
174
5
89
(2,191)
162
(1,644)
(438)
2,297
(1,061)
31
(1,122)
(70,163)
(350)
(68,537)
158,600
89,713
7,376
73
(2,672)
(15,700)
(7,500)
—
24,446
(355)
14,698
—
20,366
39,916
35,793
75,709
3,678
3,831
173
—
48,564
364
21,002
$
$
985
12,164
(184,221)
(43,745)
101
—
138
8,618
—
—
—
(478)
(1,210)
(989)
381
(785)
1,462
(95)
(757)
(66,312)
(312)
(104,706)
131,900
26,882
34,174
1,084
(2,570)
—
—
(2,926)
—
—
—
12,000
41,762
2,332
33,461
35,793
6,568
2,689
—
25,656
—
—
—
$
$
The accompanying notes are an integral part of these consolidated financial statements.
88
Senseonics Holdings, Inc.
Notes to Consolidated Financial Statements
1. Organization
Senseonics Holdings, Inc., a Delaware corporation, is a medical technology company focused on the
development and manufacturing of long-term, implantable continuous glucose monitoring system to improve the lives of
people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy.
Senseonics, Incorporated is a wholly owned subsidiary of Senseonics Holdings, Inc. and was originally
incorporated on October 30, 1996 and commenced operations on January 15, 1997. Senseonics Holdings, Inc. and
Senseonics, Incorporated are hereinafter collectively referred to as the “Company” unless otherwise indicated or the
context otherwise requires.
2. Liquidity and Capital Resources
The Company’s operations are subject to certain risks and uncertainties including, among others, current and
potential competitors with greater resources, lack of operating history as a commercial-stage company and uncertainty of
future profitability. Since inception, the Company has suffered substantial operating losses, principally from expenses
associated with the Company’s research and development programs and commercial launch of the Eversense® E3 CGM
System (for use up to six months) in both the United States and Europe, and the launch of our legacy versions, including
Eversense CGM System in the United States (for use up to 90 days) and the Eversense CGM and Eversense XL CGM
Systems (for use up to six months) in Europe, the Middle East, and Africa.
The Company has not generated significant profit from the sale of products and its ability to generate revenue
and achieve profitability largely depends on the Company’s ability to successfully expand the commercialization of
Eversense, continue the development of its products and product upgrades, and to obtain necessary regulatory approvals
or certifications for the sale of those products. These activities will require significant uses of working capital through
2024 and beyond. The Company generated total gross profit of $3.1 million for the twelve months ended December 31,
2023 and had an accumulated deficit of $869.3 million at December 31, 2023. To date, the Company has funded its
operations principally through the issuance of preferred stock, common stock, convertible note issuance and debt. As of
December 31, 2023, the Company had cash, cash equivalents and marketable securities of $109.5 million.
On September 8, 2023 (the “Effective Date”), the Company entered into a loan agreement (the “Loan and
Security Agreement”) with the several institutions or entities party thereto (collectively, the “Lenders") and Hercules
Capital, Inc., a Maryland corporation (“Hercules”) in its capacity as administrative agent and collateral agent for itself
and the Lenders, pursuant to which the Lenders have agreed to make available to the Company up to $50.0 million in
senior secured term loans (the “Term Loan Facility”), consisting of (i) an initial term loan of $25.0 million (the “Tranche
1 Loan”), which was funded on the Effective Date and (ii) two additional tranches of term loans in the amounts of up to
$10.0 million (the “Tranche 2 Loan”) and $15.0 million (the “Tranche 3 Loan”), respectively, which will become
available to the Company upon the Company’s satisfaction of certain terms and conditions set forth in the Loan and
Security Agreement. In December 2023, the Company met the terms and conditions to draw on Tranche 2 Loan and the
loan was funded on January 2, 2024 in an amount of $10.0 million. The loans under the Loan and Security Agreement
mature on September 1, 2027 (the “Maturity Date”).
On August 10, 2023, the Company entered into separate, privately negotiated exchange agreements (the
“Exchange Agreements”) with a limited number of holders (the “Noteholders”) of the Company’s currently outstanding
5.25% Convertible Senior Notes due 2025 (the “2025 Notes”). Under the terms of the Exchange Agreements, the
Noteholders agreed to exchange with the Company (the “Exchanges”) up to $30.8 million in aggregate principal amount
of the 2025 Notes (the “Exchanged Notes”) for a combination of $7.5 million of cash and newly issued shares of
common stock (the “Exchange Shares”). The number of Exchange Shares was determined based upon the volume-
weighted average price per share of the common stock during a 15-day averaging period commencing on
August 11, 2023 and ending August 31, 2023. Based on the volume-weighted average price per share of the common
stock
89
during the averaging period, a total of 35.1 million shares of common stock were issued in the Exchanges. The
Exchanges were settled on the initial share issuance date of August 14, 2023 and the final settlement date of
September 5, 2023.
In August 2023, the Company entered into an Equity Distribution Agreement (the “Equity Distribution
Agreement”) with Goldman Sachs & Co. LLC (“GS”), under which the Company could offer and sell, from time to time,
at its sole discretion, shares of its common stock having an aggregate offering price of up to $106.6 million through GS
as its sales agent in an “at the market” offering. GS will receive a commission up to 3.0% of the gross proceeds of any
common stock sold through GS under the Equity Distribution Agreement. The shares will be offered and sold pursuant
to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange
Commission on August 10, 2023. As of December 31, 2023, no sales have been made under the Equity Distribution
Agreement.
In November 2021, the Company entered into an Open Market Sale Agreement (the “2021 Sales Agreement”)
with Jefferies LLC (“Jefferies”), under which the Company could offer and sell, from time to time, at its sole discretion,
shares of its common stock having an aggregate offering price of up to $150.0 million through Jefferies as the sales agent
in an “at the market” offering. Jefferies received commissions up to 3.0% of the gross proceeds of any common stock
sold through Jefferies under the 2021 Sales Agreement. For the twelve months ending December 31, 2023 and 2022, the
Company received $7.4 million and $34.2 million in net proceeds from the sale of 9,944,663 shares and 15,160,899
shares of its common stock under the 2021 Sales Agreement, respectively. Effective August 7, 2023, the Company and
Jefferies mutually agreed to terminate the 2021 Sales Agreement. At the time of termination, approximately $106.6
million remained available for issuance pursuant to the 2021 Sales Agreement.
On November 9, 2020, the Company entered into an Equity Line Agreement (the “Equity Line Agreement”)
with Energy Capital, LLC, a Florida limited liability company (“Energy Capital”), which provided that, upon the terms
and subject to the conditions and limitations set forth therein, Energy Capital was committed to purchase up to an
aggregate of $12.0 million of shares of the Company’s newly designated series B convertible preferred stock (the “Series
B Preferred Stock”) at the Company’s request from time to time during the 24-month term of the Equity Line
Agreement. Under the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain
conditions, including that the Company have less than $8.0 million of cash, cash equivalents and other available credit
(aside from availability under the Equity Line Agreement), the Company had the right, at its sole discretion, to present
Energy Capital with a purchase notice (each, a “Regular Purchase Notice”) directing Energy Capital (as principal) to
purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares)
once per month, up to an aggregate of $12.0 million of the Company’s Series B Preferred Stock at a per share price (the
“Purchase Price”) equal to $1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock
initially convertible into common stock, beginning six months after the date of its issuance, at a conversion price of
$0.3951 per share, subject to customary anti-dilution adjustments, including in the event of any stock split. The Equity
Line Agreement provided that the Company was not permitted to affect any Regular Purchase Notice under the Equity
Line Agreement on any date where the closing price of the Company’s common stock on the NYSE American is less
than $0.25 without the approval of Energy Capital. In addition, beginning on January 1, 2022, since there had been no
sales of the Series B Preferred Stock pursuant to the Equity Line Agreement, Energy Capital had the right, at its sole
discretion, by its delivery to the Company of a Regular Purchase Notice, to purchase up to the $12.0 million of Series B
Preferred Stock under the Equity Line Agreement at the Purchase Price. On November 7, 2022, Energy Capital exercised
in full its right to purchase $12.0 million of shares of Series B Preferred Stock. The excess of the Purchase Price and the
fair value of the Energy Capital option in the total amount of $37.6 million was recorded in additional-paid-in-capital as
convertible preferred stock.
On August 9, 2020, the Company entered into a financing agreement with the parent company of Ascensia
Diabetes Care Holdings AG (“Ascensia”), PHC Holdings Corporation (“PHC”), pursuant to which the Company issued
$35.0 million in aggregate principal amount of Senior Secured Convertible Notes due on October 31, 2024 (the “PHC
Notes”), to PHC. The Company also issued 2,941,176 shares of common stock to PHC as a financing fee. The Company
also has the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or before December 31,
2022, contingent upon obtaining U.S. Food and Drug Administration (“FDA”) approval for the 180-day Eversense
product for marketing in the United States before such date. The Company successfully obtained FDA approval in
90
February 2022 and the option was not exercised. As described in Note 13, on March 13, 2023, the Company entered into
an Exchange Agreement (the “PHC Exchange Agreement”) with PHC, pursuant to which PHC agreed to exchange (the
“PHC Exchange”) its $35.0 million aggregate principal amount of the PHC Notes, including all accrued and unpaid
interest thereon, for a warrant (the “PHC Exchange Warrant”) to purchase up to 68,525,311 shares of the Company’s
common stock, $0.001 par value per share (the “PHC Exchange Warrant Shares”). The PHC Exchange Warrant is a
“pre-funded” warrant with a nominal exercise price of $0.001 per PHC Exchange Warrant Share. On March 31, 2023,
the PHC Exchange was consummated, and the Company issued the PHC Exchange Warrant in consideration for the
cancellation of the PHC Notes.
On March 13, 2023, the Company entered into a securities purchase agreement (the “Securities Purchase
Agreement”) with PHC, pursuant to which the Company issued and sold to PHC in a private placement (the “Private
Placement”) a warrant (the “Purchase Warrant”) to purchase 15,425,750 shares of the Company’s common stock, $0.001
par value per share (the “Purchase Warrant Shares”). The purchase price of the Purchase Warrant was approximately
$0.97 per Purchase Warrant Share, representing the undiscounted, trailing 10-day volume weighted average price of the
Company’s common stock through March 10, 2023. The Purchase Warrant is a “pre-funded” warrant with a nominal
exercise price of $0.001 per Purchase Warrant Share. The issuance of the Purchase Warrants enabled PHC to maintain,
as of the closing of the transaction, a 15% beneficial ownership for purposes of the Investor Rights Agreement, dated
August 9, 2020, between the Company and PHC. The Private Placement closed on March 13, 2023 (the “Private
Placement Closing Date”) and the Company received aggregate gross proceeds of $15.0 million, before deducting
private placement expenses payable by the Company.
The Company believes that these agreements provide the financial resources and mutual commitment to support
the growth of the new Eversense E3 product and subsequent product versions. The timing and success of these
collaborations and financings are dependent on certain events occurring in accordance with the Company’s plans, and
may be influenced by uncontrollable external factors. Management has concluded that based on the Company’s current
operating plans, its existing cash and cash equivalents will be sufficient to meet the Company’s anticipated operating
needs through twelve months after issuance of the financial statements.
3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements
reflect the accounts of Senseonics Holdings and its wholly owned operating subsidiary Senseonics, Incorporated. All
intercompany balances and transactions have been eliminated in consolidation. The Company views its operations and
manages its business in one segment, glucose monitoring products. Operating segments are defined as components of an
enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of
revenue and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are
used for, but not limited to, stock-based compensation, recoverability of long-lived assets, deferred taxes and valuation
allowances, derivative assets and liabilities, obsolete inventory, warranty obligations, variable consideration related to
revenue, allowance for credit losses, depreciable lives of property and equipment, and accruals for clinical study costs,
which are accrued based on estimates of work performed under contract. The Company bases these estimates on
historical and anticipated results, trends, and various other assumptions that it believes are reasonable, including
assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets
and liabilities and recorded revenues and expenses. Actual results could differ from those estimates; however,
management does not believe that such differences would be material.
91
Cash and Cash Equivalents and Concentration of Credit Risk
The Company considers highly liquid investments with original maturities of three months or less from the date
of purchase to be cash equivalents. These investments are carried at cost, which approximates fair value. Cash, cash
equivalents and restricted cash consisted of the following (in thousands):
Cash ⁽¹⁾ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2023
2,756 $
72,953
75,709 $
2022
1,135
34,658
35,793
December 31, December 31,
(1) Includes overnight repurchase agreements.
There was no restricted cash held as of December 31, 2023 and December 31, 2022.
Marketable Securities
Marketable securities consist of commercial paper, corporate debt securities, asset backed securities and
government and agency securities. The Company’s investments are classified as available for sale. Such securities are
carried at fair value, with any unrealized holding gains or losses reported, net of any tax effects reported, as accumulated
other comprehensive income. Realized gains and losses and declines in value judged to be other-than-temporary, if any,
are included in consolidated results of operations. A decline in the market value of any available for sale security below
cost that is deemed to be other-than-temporary results in a reduction in fair value, which is charged to earnings in that
period, and a new cost basis for the security is established. Dividend and interest income is recognized when earned. The
cost of securities sold is calculated using the specific identification method. We classify all available-for-sale marketable
securities with maturities greater than one year from the balance sheet date as non-current assets. We do not generally
intend to sell these investments and it is not more likely than not that we will be required to sell the investments before
recovery of their amortized cost bases, which may be at maturity.
Inventory and Obsolescence
Inventory is valued at the lower of cost or net realizable value. Cost is determined using the standard cost
method that approximates first in, first out. The Company records an adjustment to reduce the value of inventory for
items that are potentially obsolete, where standard costs require adjustment to the net realizable value, and are in excess
of future demand taking into consideration the product shelf life. The sensor manufacturing process can span several
months, involves various contract manufacturers and includes raw components with long lead times, often resulting in
significant work-in-progress inventory. However, expiry does not commence until the chemistry is applied to the sensor.
The Company is able to isolate pre-chemistry sensor inventory in progress from post-chemistry sensor inventory in
progress and finished goods to assess against demand forecasts and customer dating requirements for potential excess or
obsolete inventory. The Company’s estimates are based on information known as of the balance sheet date and include
factors such as anticipated future usage and sales, potential for external unfavorable conditions such as import holds or
quality issues, and planned product upgrades. However, if actual product quality or conditions differ from the
Company’s assumptions, additional inventory adjustments that would increase cost of sales could be required.
Accounts Receivable
The Company grants credit to various customers in the normal course of business. Accounts receivable consist
of amounts due from distributors and are reduced by an allowance for doubtful accounts at the time potential collection
risk is identified. Uncollectible accounts are written off against the allowance after appropriate collection efforts have
been exhausted and when it is deemed that a balance is uncollectible. The Company does not have a history of
collectability concerns, and the allowance for uncollectible accounts was $0.1 million as of December 31, 2023. There
was no allowance recorded as of December 31, 2022.
92
Property and Equipment, net
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated
useful lives of the assets, which is generally between three to seven years, and is recorded within operating expenses and
cost of goods sold in the consolidated statements of operations and comprehensive loss. Upon disposition of the assets,
the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included
in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statement of
operations.
Leases
The Company evaluates whether contractual arrangements contain leases at the inception of such arrangements.
Specific considerations include whether the Company can control the underlying asset and has the right to obtain
substantially all of the economic benefits or outputs from the asset. Substantially all of the Company’s leases are long-
term operating leases with fixed payment terms. The Company currently does not have financing leases. Right-of-use
(“ROU”) operating lease assets represent the Company’s right-to-use an underlying asset for the lease term, and
operating lease liabilities represent the Company’s obligation to make lease payments. Operating lease expense is
recognized on a straight-line basis over the lease term and is included in general and administrative expenses on the
Company’s consolidated statement of operations and comprehensive loss. Options to extend the leases or terminate the
leases early are only included in the lease term when it is reasonably certain that the option will be exercised.
The Company recognizes a ROU lease asset and liability as of the lease commencement date at the present
value of the lease payments over the lease term. If the discount rate in the lease agreement is not implicit, the Company
estimates the incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a
similar amount on a collateralized basis over a similar term. Lease and non-lease components are accounted for as a
single component for facility leases. Leases with an initial term of 12 months or less are expensed to rent expense over
the related term.
Impairment of Long-lived Assets
Management reviews long-lived assets, including property and equipment and right-of-use assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to
future undiscounted net cash flows expected to be generated by the asset. If the undiscounted cash flows are less than the
carrying amount, the impairment to be recognized is measured by the amount by which the carrying amount of the assets
exceeds the estimated fair value of the assets. There were no impairment indicators identified in 2023 or 2022.
Derivative Financial Instruments
The Company accounts for conversion options embedded in convertible notes in accordance with ASC Topic
815, Derivatives and Hedging. ASC Topic 815 generally requires companies to bifurcate conversion options embedded
in convertible notes from their host instruments and to account for them as free standing derivative financial instruments.
We review the terms of convertible debt issues to determine whether there are embedded derivative instruments,
including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative
financial instruments. In circumstances where the host instrument contains more than one embedded derivative
instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are
accounted for as separate derivative instruments.
The fair value of the embedded features are accounted for as a derivative liability in the Company’s
consolidated balance sheets and adjusted to fair value each reporting period. The change in fair value of derivatives is
recorded as a component of other income (expense) in the Company’s consolidated statements of operations and
comprehensive loss.
93
Product Warranty Obligations
The Company provides a warranty of one year on its smart transmitters. Additionally, the Company may also
replace Eversense system components that do not function in accordance with the product specifications. Estimated
replacement costs are recorded at the time of shipment as a charge to cost of sales in the consolidated statement of
operations and are developed by analyzing product performance data and historical replacement experience, including
comparing actual return management authorizations to revenue.
At December 31, 2023 and December 31, 2022, the warranty reserve was $0.5 million and $0.8 million,
respectively. The following table provides a reconciliation of the change in estimated warranty liabilities for the years
ended December 31, 2023 and 2022 (in thousands):
Balance at beginning of the period. . . . . . . . . . . . .
Provision for warranties during the period . . . . . .
Settlements made during the period. . . . . . . . . . . .
Balance at end of the period . . . . . . . . . . . . . . . . . .
$
$
781
242
(509)
514
$
$
723
166
(108)
781
December 31,
2023
December 31,
2022
Revenue Recognition
We generate the majority of our product revenue from sales of the Eversense system and related components
and supplies to Ascensia, through the Commercialization Agreement, third-party distributors in the European Union and
to strategic fulfillment partners in the United States (collectively “Customers”), who then resell the products to health
care providers and patients. We are paid for our sales directly to the Customers, regardless of whether or not the
Customers resell the products to health care providers and patients.
Revenue from product sales is recognized at a point in time when the Customers obtain control of our product
based upon the delivery terms as defined in the contract at an amount that reflects the consideration which we expect to
receive in exchange for the product. Contracts with our distributors contain performance obligations, mostly for the
supply of goods, and is typically satisfied upon transfer of control of the product. Customer contracts do not include the
right to return unless there is a product issue, in which case we may provide replacement product. Product conformity
guarantees do not create additional performance obligations and are accounted for as warranty obligations in accordance
with guarantee and loss contingency accounting guidance.
In addition, we sell small quantities of our products directly to healthcare provider locations within the United
States. In these direct sales, inventory is purchased on consignment to ensure availability when a patient is identified. No
revenue is recognized upon delivery of our products to the healthcare provider locations, as we retain the ability to
control the inventory. Rather, revenue is recognized when the product is consumed.
Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price
discounts and for the Commercialization Agreement, revenue share. Variable consideration, such as discounts and
prompt-pay incentives, are treated as a reduction in revenue and variable considerations, such as revenue share, is treated
as an addition in revenue when the product sale is recognized. The amount of variable consideration that is included in
the transaction price may be constrained and is included in revenue only to the extent that it is probable that a significant
reversal in the amount of the cumulative revenue recognized will not occur in a future period, when the uncertainty
associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related
constraint requires the use of management judgment. Depending on the variable consideration, we develop estimates for
the expected value based on the terms of the agreements, historical data, geographic mix, reimbursement rates and
market conditions.
Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate
to the revenue share variable consideration from the Commercialization Agreement.
94
Cost of Sales
The Company uses third-party contract manufacturers to manufacture Eversense and related components and
supplies. Cost of sales includes raw materials, contract manufacturing service fees, expected warranty costs, recall costs,
product obsolescence, scrap, third-party warehousing, shipping and handling expenses associated with product delivery,
and employee-related costs of the internal supply chain and manufacturing team.
Research and Development Expenses
Research and development expenses consist of expenses incurred in performing research and development
activities in developing Eversense, including clinical trials and feasibility studies, and partnerships for strategic
initiatives including insulin delivery and new indications. Research and development expenses include compensation and
benefits for research and development employees including stock-based compensation, cost of laboratory supplies,
clinical trial and related clinical manufacturing expenses, costs related to regulatory operations, fees paid to contract
research organizations and other consultants, and other outside expenses. Research and development expenses are
expensed as incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, commissions, and other related costs,
including stock-based compensation, for personnel in the Company’s sales and marketing, executive, finance,
accounting, business development, information technology, and human resources functions. Other significant costs
include information technology, website design and advertising, educational and promotional materials, tradeshow
expenses, marketing programs, facility costs, legal fees relating to patent and corporate matters, and fees for accounting
and consulting services.
Stock-Based Compensation
The Company accounts for stock-based compensation related to stock option grants and restricted stock units
under stock incentive plans, purchases under the employee stock purchase plan, as well as inducement stock grants,
based on the fair value of those awards at the date of grant. The estimated fair value of stock options on the date of grant
is amortized on a straight-line basis over the requisite service period of the individual award, which typically equals the
vesting period. Forfeitures are accounted for in the period in which they occur.
The Company uses the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) to determine the
fair value of stock-option awards. Valuation of stock awards requires management to make assumptions and to apply
judgment to determine the fair value of the awards. These assumptions and judgments include estimating the fair value
of the Company’s common stock, the risk-free interest rate, future volatility of the Company’s stock price, dividend
yields, and the expected life of the stock-option awards. Changes in these assumptions can affect the fair value estimate.
The risk-free interest rate assumption is based on observed interest rates for constant maturity U.S. Treasury
securities consistent with the expected life of employee stock options. The expected life represents the period of time the
stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the
expected life of an option is presumed to be the mid-point between the vesting date and the end of the contractual term.
The Company uses the simplified method due to the lack of sufficient historical exercise data to provide a reasonable
basis upon which to otherwise estimate the expected life of the stock options. Expected volatility is based on the daily
closing prices of the Company as well as the daily closing prices of a peer group of comparable publicly traded
companies in similar stages of development. The Company has assumed no dividend yield because it does not expect to
pay dividends in the future, which is consistent with its history of not paying dividends.
95
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and
liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that are in effect when the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes
are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will not be realized.
Management uses a recognition threshold and a measurement attribute for the financial statement recognition
and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition,
classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a
tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In the ordinary course
of business, transactions occur for which the ultimate outcome may be uncertain. Management does not expect the
outcome related to accrued uncertain tax provisions to have a material adverse effect on the Company’s financial
position, results of operations or cash flows. The Company recognizes interest and penalties accrued on any
unrecognized tax exposures as a component of income tax expense.
The Company is subject to taxation in various jurisdictions in the United States and remains subject to
examination by taxing jurisdictions for the year 2003 and all subsequent periods due to the availability of NOL and tax
credit carryforwards. In addition, all of the net operating losses and research and development credit carryforwards that
may be used in future years are still subject to adjustment.
Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses
approximate fair value because of their short maturities. The Company’s term loan under the 2025 Notes, Loan and
Security Agreement and warrants are recorded at historical cost, net of discounts. The associated embedded conversion
features in the Notes are derivative instruments and along with Options are remeasured at fair value each reporting
period.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit
Losses on Financial Instruments (“ASU 2016-13”), which requires entities to record expected credit losses for certain
financial instruments, including trade receivables, as an allowance that reflects the entity's current estimate of credit
losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard
requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company currently
holds investments in available-for sale securities. The Company has not historically experienced collection issues or bad
debts with trade receivables. Accordingly, the Company does not expect this to have a significant impact on its
consolidated financial statements and related disclosures at this time. The Company adopted this guidance as of
January 1, 2023 and its adoption did not have a material impact on the consolidated financial statements and related
disclosures.
96
4. Revenue Recognition
Revenues by geographic region
The following table sets forth net revenues derived from the Company’s two primary geographical markets, the
United States and outside of the United States, based on the geographic location to which the Company delivers the
product, for the years ended December 31, 2023 and 2022:
(Dollars in thousands)
Revenue, net:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outside of the United States . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract Assets
December 31, 2023
%
of Total
Amount
December 31, 2022
%
of Total
Amount
$
$
14,053
8,337
22,390
62.8 % $
37.2
100.0 % $
7,512
8,877
16,389
45.8 %
54.2
100.0 %
Contract assets consist of unbilled receivables from customers and are recorded at net realizable value and relate
to the revenue share variable consideration from the Ascensia Commercialization Agreement. Accounts receivable –
related parties, net as of December 31, 2023 and 2022 included unbilled accounts receivable of $1.5 million and $1.7
million, respectively. The Company expects to invoice and collect all unbilled accounts receivable within 12 months.
Concentration of Revenues and Customers
Net revenue from the Company’s distribution arrangement with Ascensia, a related party, accounted for 93%,
and 96% of total net revenues for the years ended December 31, 2023 and 2022, respectively.
5. Net Income (Loss) per Share
Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income
(loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the
period. An aggregate of 83,951,061 shares of common stock issuable upon the exercise of the PHC Exchange Warrant
Shares and the Purchase Warrant Shares held by PHC are included in the number of outstanding shares used for the
computation of basic net income (loss) per share for the year ended December 31, 2023. Since the shares are issuable for
little or no consideration, sometimes referred to as “penny warrants”, they are considered outstanding in the context of
earnings per share, as discussed in ASC 260-10-45-13.
Dilutive net income (loss) per share is computed using the weighted average number of common shares
outstanding during the period and, when dilutive, potential common share equivalents. Potentially dilutive common
shares consist of shares issuable from restricted stock units, stock options, warrants and the Company’s convertible
notes. Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of stock options
and warrants are determined using the average share price for each period under the treasury stock method. Potentially
dilutive common shares issuable upon conversion of the Company’s convertible notes are determined using the if
converted method. The if-converted method assumes conversion of convertible securities at the beginning of the
reporting period. Interest expense, dividends, and the changes in fair value measurement recognized during the period
are added back to the numerator. The denominator includes the common shares issuable upon conversion of convertible
securities.
97
In periods of net loss, all potentially dilutive common shares are excluded from the computation of the diluted
net loss per share for those periods, as the effect would be anti-dilutive.
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of conversion of dilutive securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
(60,392)
—
(60,392)
(0.11)
(0.11)
142,119
(209,269)
(67,150)
0.30
(0.11)
Basic weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common stock outstanding
Stock-based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PHC Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average shares outstanding . . . . . . . . . . . . . . . . . . . .
567,974,492
467,952,475
—
—
—
—
—
—
567,974,492
6,000,572
4,617,646
39,689,142
67,162,375
30,372,058
2,411,337
618,205,605
Outstanding anti-dilutive securities not included in the diluted net income per share calculations were as
follows:
Stock-based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 Notes
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PHC Notes
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total anti-dilutive shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
27,609,566
—
15,813,176
—
30,372,058
1,260,183
75,054,983
2022
11,917,529
—
—
—
—
427,821
12,345,350
98
6. Marketable Securities
Marketable securities available for sale, were as follows (in thousands):
December 31, 2023
Gross
Gross
Amortized Unrealized Unrealized
Gains
Losses
Cost
Estimated
Market
Value
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government and agency securities . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
7,598
7,980
18,180
33,758
$
—
1
—
$
1
— $
— $
(12) $
(12) $
7,598
7,981
18,168
33,747
December 31, 2022
Gross
Gross
Amortized Unrealized Unrealized
Gains
Losses
Cost
Estimated
Market
Value
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government and agency securities . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
41,503
32,331
8,363
38,956
121,153
$
—
—
—
—
— $
— $
(189) $
(103) $
(386) $
(678) $
41,503
32,142
8,260
38,570
120,475
The following are the scheduled maturities as of December 31, 2023 (in thousands):
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net
Carrying Amount
33,758 $
$
33,758 $
$
Fair
Value
33,747
33,747
The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due
to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than
the amortized cost basis, the Company assesses at the individual security level, for various quantitative factors including,
but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst
reports, and the severity of impairment. Unrealized losses on available-for-sale securities at December 31, 2023 were not
significant and were primarily due to changes in interest rates and not due to increased credit risk associated with
specific securities. The Company does not intend to sell these impaired investments and it is not more likely than not that
we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.
7.
Inventory, net
Inventory, net consisted of the following (in thousands):
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
December 31,
2023
2022
2,160 $
5,332
1,284
8,776 $
1,697
4,057
1,552
7,306
99
The Company recorded $0.2 million and $1.4 million in cost of sales for the years ended December 31, 2023
and 2022, respectively, to reduce the value of inventory for items that are potentially obsolete, to adjust costs to their net
realizable value, and for inventory in excess of product demand.
8. Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following as of December 31, 2023 and 2022 (in
thousands):
Contract manufacturing⁽¹⁾ . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits receivable(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clinical and Preclinical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IT and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent and utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting and Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total prepaid expenses and other current assets. . . . . . . . .
$
$
December 31,
2023
2022
4,244
1,793
343
272
242
122
95
73
61
20
1
7,266
$
$
4,097
—
924
336
189
132
67
1,243
270
158
12
7,428
(1) Includes deposits to contract manufacturers for manufacturing process
(2) Refundable employee retention credits, enacted under the CARES Act.
9. Property and Equipment, net
Property and equipment, net consisted of the following as of December 31, 2023 and 2022 (in thousands):
Machinery and laboratory equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2023
2022
$
$
2,783 $
354
530
3,667
(2,483)
1,184 $
2,668
354
128
3,150
(2,038)
1,112
Depreciation expense for the years ended December 31, 2023 and 2022 was $0.4 million and $0.5 million,
respectively. There were no material disposals during 2023 or 2022.
100
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of December 31, 2023 and 2022 (in
thousands):
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional and administration services . . . . . . . . . . . . . . . . . .
Product warranty and replacement obligations . . . . . . . . . . . . .
Operating lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing services . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accrued expenses and other current liabilities . . . . . . . .
$
$
December 31,
2023
2022
4,799 $
3,846
1,457
704
673
514
368
301
27
12,689 $
4,699
3,502
2,480
2,050
1,053
781
725
149
14
15,453
11. Leases
The Company leases approximately 33,000 square feet of research and office space for its corporate
headquarters under a non-cancelable operating lease. In May 2023, the Company amended our lease, extending the lease
term through 2033, and obtained a tenant improvement allowance of $1.3 million. The Company accounted for the
amendment as a lease modification and remeasured the ROU asset and lease liability as of the amendment date, which
resulted in an increase of $2.5 million to the ROU asset, and an increase of $3.8 million to the lease liability. The
Company has one option to extend the term for an additional period of five years beginning on June 1, 2033. The rent
expense is recognized on a straight-line basis through the end of the lease term, excluding option renewals. The
difference between the straight-line rent amounts and amounts payable under the lease is recorded as deferred rent.
On July 31, 2019, the Company entered into a non-cancellable operating lease agreement for approximately
30,500 square feet of office space commencing on September 2, 2019 and expiring in 2023. The Company did not have
any lease related payments made to the lessor before the commitment date, lease incentives received from the lessor or
initial direct cost adjustments to be added to the initial measurement of the liability. This facility was decommissioned in
2021 and an impairment charge of $0.5 million was recorded. The Company continued to make lease payments through
the lease expiration date.
Operating lease expense for the years ended December 31, 2023 and 2022 was $0.8 million and 0.7 million,
respectively.
The following table summarizes the lease assets and liabilities as of December 31, 2023 and 2022 (in
thousands):
Balance Sheet Classification
Operating Lease Assets and Liabilities
Assets
Operating lease ROU assets . . . . . . . . . . . . . Deposits and other assets
Liabilities
Current operating lease liabilities . . . . . . . . . Accrued expenses and other current liabilities $
Non-current operating lease liabilities . . . . . Other non-current liabilities
Total operating lease liabilities . . . . . . . . . . .
$
$
December 31,
2023
2022
5,180
3,032
368
6,214
6,582
725
2,689
3,414
101
The following table summarizes the maturity of undiscounted payments due under operating lease liabilities and
the present value of those liabilities as of December 31, 2023 (in thousands):
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Threafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
$
912
939
967
996
1,026
4,908
9,748
(3,166)
6,582
The following table summarizes the weighted-average lease term and weighted-average discount rate as of
December 31, 2023 and 2022:
Remaining lease term (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
9.4
2022
5.0
Discount rate
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.5 %
9.1 %
During the years ended December 31, 2023 and 2022, the Company made cash payments of $1.1 million and
$1.0 million included in the measurement of its operating lease liabilities, respectively.
12. 401(k) Plan
The Company has a defined contribution 401(k) plan available to all full-time employees. Employee
contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal
income tax regulations. Participants are fully vested in their contributions. The Company has provided a discretionary
match of up to 3% of the participant’s contributions. Employer match expenses during the years ended
December 31, 2023 and 2022 were $0.5 million and $0.4 million, respectively. Administrative expenses for the plan,
which are paid by the Company, were not material in 2023 or 2022.
13. Notes Payable, Preferred Stock and Stock Purchase Warrants
Term Loans
Loan and Security Agreement
On September 8, 2023 (the “Effective Date”), the Company entered into a loan agreement (the “Loan and
Security Agreement”) with Hercules Capital, Inc. and its managed fund (collectively, the “Lenders"), pursuant to which
the Lenders have agreed to make available to Senseonics up to $50.0 million in senior secured term loans (the “Term
Loan Facility”), consisting of (i) an initial term loan of $25.0 million (the “Tranche 1 Loan”), which was funded on the
Effective Date and (ii) two additional tranches of term loans in the amounts of up to $10.0 million (the “Tranche 2
Loan”) and $15.0 million (the “Tranche 3 Loan”), respectively, which will become available to Senseonics upon
Senseonics’ satisfaction of certain terms and conditions set forth in the Loan and Security Agreement. In
December 2023, the Company met the terms and conditions to draw on Tranche 2 Loan and the loan was funded on
January 2, 2024 in an amount of $10.0 million. The loans under the Loan and Security Agreement mature on
September 1, 2027 (the “Maturity Date”).
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The loans under the Loan and Security Agreement bear interest at an annual rate equal to the greater of (i) the
prime rate as reported in The Wall Street Journal plus 1.40% and (ii) 9.90%. Borrowings under the Loan and Security
Agreement are repayable in monthly interest-only payments through (a) initially, September 1, 2026 and (b) if the
Company satisfies the Interest Only Extension Conditions (as defined in the Loan and Security Agreement), the Maturity
Date. After the interest-only payment period, borrowings under the Loan and Security Agreement are repayable in equal
monthly payments of principal and accrued interest until the Maturity Date.
At the Company’s option, the Company may prepay all or any portion of the outstanding borrowings under the
Loan and Security Agreement, subject to a prepayment fee equal to (a) 3.0% of the principal amount being prepaid if the
prepayment occurs within one year of the Effective Date, 2.0% of the principal amount being prepaid if the prepayment
occurs during the second year following the Effective Date, and 1.00% of the principal amount being prepaid if the
prepayment occurs more than two years after the Effective Date and prior to the Maturity Date. In addition, the Company
paid a $375,000 facility fee upon closing and will pay additional facility charges in connection with any borrowing of the
Tranche 2 Loan or Tranche 3 Loan, in each case in the amount of 0.50% of the amount of such tranche of loans. The
Loan and Security Agreement also provides for an end of term fee in an amount equal to 6.95% of the aggregate
principal amount of loan advances actually made under the Loan and Security Agreement, which fee is due and payable
on the earliest to occur of (i) the Maturity Date, (ii) the date the Company prepays the outstanding loans in full, and (iii)
the date that the secured obligations become due and payable. The end of term fee is accreted to interest expense over the
term of the loans.
The Company’s obligations under the Loan and Security Agreement are secured, by a first-priority security
interest in substantially all of its assets. The Loan and Security Agreement contains a minimum cash covenant that
requires the Company to hold unrestricted cash equal to 30% of the outstanding loan amount under the Loan and
Security Agreement. The Loan and Security Agreement also contains a performance covenant, commencing on July 1,
2024, that requires the Company to generate net product revenue on a trailing six-month basis in excess of specified
percentage for applicable measuring periods, subject to certain exceptions.
In addition, the Loan and Security Agreement contains customary representations and warranties and customary
affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments,
mergers, corporate changes, dispositions, prepayment of other indebtedness, and dividends and other distributions,
subject to certain exceptions. The Loan and Security Agreement also contains events of default including, among other
things, payment defaults, breach of covenants, material adverse effect, breach of representations and warranties, cross-
default to material indebtedness, bankruptcy-related defaults, judgment defaults, revocation of certain government
approvals, and the occurrence of certain adverse events. Following an event of default and any applicable cure period, a
default interest rate equal to the then-applicable interest rate plus 4.0% may be applied to the outstanding amount, and
the Lenders will have the right to accelerate all amounts outstanding under the Loan and Security Agreement, in addition
to other remedies available to them as secured creditors of the Company.
In addition, in connection with the issuance of the Tranche 1 Loan the Company issued warrants to the Lenders
(collectively, the “Tranche 1 Warrants”) to acquire an aggregate of 832,362 shares of the Company’s common stock at
an exercise price of $0.6007 per share (the “Tranche 1 Warrant Shares”). The Warrants may be exercised through the
earlier of (i) the seventh anniversary of the Effective Date and (ii) the consummation of certain acquisition transactions
involving the Company, as set forth in the Tranche 1 Warrants. The number of Tranche 1 Warrant Shares for which the
Tranche 1 Warrants are exercisable and the associated exercise price are subject to certain customary proportional
adjustments for fundamental events, including stock splits and reverse stock splits, as set forth in the Tranche 1
Warrants. The proceeds from the Loan and Security Agreement were allocated between the Tranche 1 Loan and the
Tranche 1 Warrants based on their respective fair value of $25.0 million and $0.4 million, and the amount allocated to
the Tranche 1 Warrants was recorded in equity resulting in a debt discount to the Tranche 1 Loan that is being amortized
as additional interest expense over the term of the loan agreement using the effective interest method. On January 2,
2024, in connection with the issuance of the Tranche 2 Loan the Company issued additional warrants to the Lenders
(collectively, the Tranche 2 Warrants”) to acquire an aggregate of 347,887 shares at an exercise price of $0.5749 per
share (the “Tranche 2 Warrant Shares”).
103
In connection with Loan and Security Agreement, the Company incurred $1.1 million in debt issuance costs and
debt discounts which are netted against the principal balance of the initial term loan and amortized as interest expense
over the term of the initial term loan using an effective interest rate of 13.17%. The fair value of the Company’s Loan
and Security Agreement was $26.2 million as of December 31, 2023.
Pursuant to the Loan and Security Agreement, the Company also agreed to issue additional seven year term
warrants upon the funding of the Tranche 2 Loan and Tranche 3 Loan, which warrants would be exercisable for an
aggregate number of shares equal to 2.0% of the funded loan amount divided by the exercise price equal to the three-day
volume-weighted average price at the time of the advance.
PPP Loan
On April 22, 2020, the Company received $5.8 million in loan funding from the PPP pursuant to the CARES
Act, as amended by the Flexibility Act, and administered by the Small Business Administration (“SBA”). The unsecured
loan (the “PPP Loan”) is evidenced by the PPP Note dated April 21, 2020 (the “PPP Note”) in the principal amount of
$5.8 million with Silicon Valley Bank (“SVB.”)
Under the terms of the PPP Note and the PPP Loan, interest accrued on the outstanding principal at a rate of
1.0% per annum. The term of the PPP Note was two years. In April 2022, the Company repaid the outstanding principal
and accrued interest in full.
Convertible Preferred Stock and Warrants
Equity Line Agreement
On November 9, 2020, the Company entered into an equity line agreement with Energy Capital, which provides
that, upon the terms and subject to the conditions and limitations set forth therein, Energy Capital was committed to
purchase up to an aggregate of $12.0 million of shares of the Company’s newly designated Series B Preferred Stock at
the Company’s request from time to time during the 24-month term of the Equity Line Agreement. Under the Equity
Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, the Company had the
right, at sole discretion, to present Energy Capital with a Regular Purchase Notice directing Energy Capital (as principal)
to purchase shares of Series B Preferred Stock at a price of $1,000 per share (not to exceed $4.0 million worth of shares)
once per month, up to an aggregate of $12.0 million of our Series B Preferred Stock at the Purchase Price equal to
$1,000 per share of Series B Preferred Stock, with each share of Series B Preferred Stock initially convertible into
common stock, beginning six months after the date of its issuance, at a conversion price of $0.3951 per share, subject to
customary anti-dilution adjustments, including in the event of any stock split. The Equity Line Agreement provided that
we shall not affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of
the Company’s common stock on the NYSE American is less than $0.25 without the approval of Energy Capital. In
addition, beginning on January 1, 2022, since there have been no sales of the Series B Preferred Stock pursuant to the
Equity Line Agreement, Energy Capital had the right, at its sole discretion, by its delivery to the Company of a Purchase
Notice, to purchase up to $12.0 million of Series B Preferred Stock under the Equity Line Agreement at the Purchase
Price. On November 7, 2022, Energy Capital exercised in full its right to purchase $12.0 million of Series B Preferred
Stock.
The Company accounted for the Equity Line Agreement as a put/call option (the “Energy Capital Option”).
This put/call option was classified as a liability in accordance with ASC 480 on the Company’s balance sheet and was
recorded at the estimated fair value of $4.2 million upon issuance. In connection with the issuance of the Equity Line
Agreement, the Company incurred and expensed $7.6 million in debt issuance costs in fiscal year 2020. The put/call
option was required to be remeasured to fair value at each reporting period with the change recorded in change in fair
value of derivatives that is a component of other income (expense). The fair value of the Energy Capital Option as of
December 31, 2021 was $69.4 million. The Company adjusted the Energy Capital Option to its fair value of $25.7
million on the exercise date, recognizing a fair value adjustment gain of $43.7 million.
Concurrently with entry into the Equity Line Agreement, the Company issued a warrant to Energy Capital,
104
exercisable beginning on May 9, 2021, to purchase up to 10,000,000 shares of common stock at an exercise price of
$0.3951 per share (the “Warrant”). The Warrant was exercised on a net basis in February 2022 and Energy Capital
received 8,917,535 shares of common stock upon the net exercise of the Warrants.
Securities Purchase Agreement
On March 13, 2023, pursuant to the Securities Purchase Agreement with PHC, the Company issued and sold to
PHC in a private placement a warrant (the “Purchase Warrant”) to purchase 15,425,750 shares of common stock (the
“Purchase Warrant Shares”). The Purchase Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001
per Purchase Warrant Share. On the private placement closing date, the Company received aggregate gross proceeds of
$15.0 million, before deducting private placement expenses payable by the Company. All or any part of the Purchase
Warrant shall is exercisable by the holder at any time and from time to time.
The Company determined that the Purchase Warrant shall be classified as equity in accordance with ASC Topic
480, Distinguishing Liabilities from Equity and ASC Topic 815. At issuance, the Company recorded the estimated fair
value of the Purchase Warrant in the amount of $14.3 million as additional paid-in-capital in the Company’s
consolidated balance sheets.
Because PHC was an existing stockholder of the Company at the time of the transaction, the $0.7 million excess
of the purchase price over the fair value of the Purchase Warrant was recognized as an equity transaction and recorded as
a capital contribution made by PHC to the Company as additional paid-in-capital in the Company’s consolidated balance
sheets.
Additionally, on March 13, 2023, the Company entered into the Exchange Agreement with PHC, pursuant to
which PHC agreed to exchange (the “PHC Exchange”) its $35.0 million aggregate principal amount of the PHC Notes,
including all accrued and unpaid interest thereon, for a warrant (the “PHC Exchange Warrant”) to purchase up to
68,525,311 shares of common stock (the “PHC Exchange Warrant Shares”). The PHC Exchange Warrant is a “pre-
funded” warrant with a nominal exercise price of $0.001 per PHC Exchange Warrant Share. All or any part of the PHC
Exchange Warrant is exercisable by the holder at any time and from time to time. The number of PHC Exchange
Warrant Shares represents the number of shares of common stock previously issuable upon conversion of the PHC
Notes, in accordance with the original terms of the notes, including a number of shares in respect of accrued and unpaid
interest through the closing date, plus additional shares with a value of $675,000 reflecting a portion of the future interest
payments forgone by PHC. On March 31, 2023 (6:00 am Japan Standard Time on April 1, 2023), the PHC Exchange
was consummated, and the Company issued the PHC Exchange Warrant in consideration for the cancellation of the PHC
Notes.
The Company determined that the PHC Exchange Warrant shall be classified as equity in accordance with ASC
480 and ASC 815. At March 31, 2023, the Company recorded the estimated fair value of the PHC Exchange Warrant in
the amount of $48.6 million as additional paid-in-capital in the Company’s consolidated balance sheets.
As of December 31, 2023, the Purchase Warrant and the PHC Exchange Warrant remained unexercised and
outstanding. As they are prefunded warrants, the Company included the entirety of the warrant shares as weighted
average outstanding shares in the calculation of its basic earnings per share.
Convertible Notes
PHC Notes
On August 9, 2020, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”)
with PHC, as the purchaser (together with the other purchasers from time to time party thereto, the “Note Purchasers”)
and Alter Domus (US) LLC, as collateral agent. Pursuant to the Note Purchase Agreement, the Company borrowed
$35.0 million in aggregate principal through the issuance and sale of PHC Notes on August 14, 2020 (the “Closing
Date”). The Company also issued 2,941,176 shares of its common stock, $0.001 par value per share to PHC as a
105
financing fee (the “Financing Fee Shares”) on the Closing Date. The Financing Fee Shares were recorded as debt
discount in the amount of $1.5 million.
The PHC Notes were senior secured obligations of the Company and were guaranteed on a senior secured basis
by the Company’s wholly owned subsidiary, Senseonics, Incorporated. Interest at the annual rate of 9.5% was payable
semi-annually in cash or, at the Company’s option, payment in kind. The interest rate decreased to 8.0% in April 2022 as
a result of the Company having obtained FDA approval for the 180-day E3 Eversense system for marketing in the United
States. The maturity date for the PHC Notes is October 31, 2024 (the “Maturity Date”). The obligations under the PHC
Notes were secured by substantially all of the Company’s and its subsidiary’s assets.
Each $1,000 of principal of the PHC Notes (including any interest added thereto as payment in kind) was
convertible into 1,901.7956 of shares of the Company’s stock, equivalent to a conversion price of approximately $0.53
per share, subject to specified anti-dilution adjustments, including adjustments for the Company’s issuance of equity
securities on or prior to April 30, 2022 below the conversion price. In addition, following a notice of redemption or
certain corporate events that occur prior to the maturity date, the Company would have been required, in certain
circumstances, to increase the conversion rate for a holder who elects to convert its PHC Notes in connection with such
notice of redemption or corporate event. In certain circumstances, the Company would have been required to pay cash in
lieu of delivering make whole shares unless the Company obtained stockholder approval to issue such shares.
Subject to specified conditions, on or after October 31, 2022, the PHC Notes would have become redeemable
by the Company if the closing sale price of the common stock exceed 275% of the conversion price for a specified
period of time and subject to certain conditions upon 10 days prior written notice at a cash redemption price equal to the
then outstanding principal amount (including any payment in kind interest which has been added to such amount), plus
any accrued but unpaid interest. On or after October 31, 2023, the PHC Notes would have been redeemable by the
Company upon 10 days prior written notice at a cash redemption price equal to the then outstanding principal amount
(including any payment in kind interest which has been added to such amount), plus any accrued but unpaid interest, plus
a call premium of 130% if redeemed at least six months prior to the Maturity Date or a call premium of 125% if
redeemed within six months of the Maturity Date.
The Note Purchase Agreement contained customary terms and covenants, including financial covenants, such as
operating within an approved budget and achieving minimum revenue and liquidity targets, and negative covenants, such
as limitations on indebtedness, liens, mergers, asset transfers, certain investing activities and other matters customarily
restricted in such agreements. Most of these restrictions were subject to certain minimum thresholds and exceptions. The
Note Purchase Agreement also contained customary events of default, after which the PHC Notes be due and payable
immediately, including defaults related to payment compliance, material inaccuracy of representations and warranties,
covenant compliance, material adverse changes, bankruptcy and insolvency proceedings, cross defaults to certain other
agreements, judgments against the Company, change of control or delisting events, termination of any guaranty,
governmental approvals, and lien priority.
The Company also had the option to sell and issue PHC up to $15.0 million of convertible preferred stock on or
before December 31, 2022 (the “PHC Option”), which was initially contingent upon obtaining FDA approval for the
180-day Eversense E3 product for marketing in the United States before such date, and which the Company successfully
obtained in February 2022. The Company developed an estimated fair value at December 31, 2021 to be $0.2 million,
and an impairment loss of $1.6 million was recognized in net income as the difference between the fair value of the
investment and its carrying amount. The PHC option was not exercised and expired on December 31, 2022 and the
Company recognized a loss on extinguishment of $0.1 million.
The Note Purchase Agreement also contained several provisions requiring bifurcation as a separate derivative
liability including an embedded conversion feature, mandatory prepayment upon event of default that constitutes a
breach of the minimum revenue financial covenant, optional redemption upon an event of default, change in interest rate
after PMA approval and default interest upon an event of default. The Company recorded the fair value of the embedded
features in the amount of $25.8 million as a derivative liability in the Company’s consolidated balance sheets in
accordance with ASC Topic 815, Derivatives and Hedging. The derivative is adjusted to fair value at each reporting
106
period, with the change in the fair value recorded in change in fair value of derivatives that is a component of other
income (expense) in the Company’s consolidated statement of operations and comprehensive loss.
In connection with the issuance of the Note Purchase Agreement, the Company incurred $2.9 million in debt
issuance costs and debt discounts. The associated debt issuance costs were recorded as a contra liability in the amount of
$1.4 million and are deferred and amortized as additional interest expense over the term of the notes at an effective
interest rate of 29.19%. There were no conversions of the PHC Notes prior to the exchange of the PHC Notes for the
PHC Exchage Warrant described above.
As described above, the PHC Exchange Agreement with PHC was consummated on March 31, 2023, whereby
PHC exchanged the PHC Notes in $35.0 million principal amount and all accrued and unpaid interest for the PHC
Exchange Warrant. On March 31, 2023, the Company was released from its obligation under the PHC Notes.
Upon execution of the PHC Exchange Agreement, the exercise of the original conversion feature of the PHC
Notes became remote. Accordingly, the Company remeasured the embedded derivative to its fair value of $0. The
Company recognized a change in fair value of the embedded derivative of $44.2 million in the caption “Exchange related
gain (loss), net” that is a component of other income (expense) in the Company’s consolidated statement of operations
and comprehensive loss.
The Company accounted for the PHC Exchange as an extinguishment of the PHC Notes, and thus, it
derecognized the PHC Notes in its consolidated balance sheets and recognized a loss of $25.4 million as the difference
between the carrying value plus accrued interest of the PHC Notes of $23.2 million and the $48.6 million fair value of
the PHC Exchange Warrant as an extinguishment loss in the caption “Exchange related gain (loss), net” that is a
component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.
As a result of the PHC Exchange, the Company recognized a total net gain on exchange of the PHC notes of $18.8
million representing the gain on change in the fair value of the PHC Notes conversion feature recognized as an
embedded derivative and the loss on extinguishment of the PHC Notes in exchange for the PHC Exchange Warrant.
2025 Notes
In July 2019, the Company issued $82.0 million in aggregate principal amount of 2025 Notes. The 2025 Notes
are general, unsecured, senior subordinated obligations of the Company and bear interest at a rate of 5.25% per year,
payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The 2025 Notes
will mature on January 15, 2025, unless earlier repurchased or converted.
The Company used $37.9 million of the net proceeds from the issuance of the 2025 Notes to repurchase $37.0
million aggregate principal amount of the Company’s outstanding 2023 Notes, at a purchase price equal to the principal
amount thereof, plus accrued and unpaid interest thereon.
The 2025 Notes are convertible, at the option of the holders, into shares of the Company’s common stock, at an
initial conversion rate of 757.5758 shares per $1,000 principal amount of the 2025 Notes (equivalent to an initial
conversion price of approximately $1.32 per share).
The Company may redeem for cash all or part of the 2025 Notes, at its option, if (1) the last reported sale price
of the Company’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days
(whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period)
ending on, and including, the trading day immediately preceding the date on which the Company provides notice of
redemption and (2) a registration statement covering the resale of the shares of the Company’s common stock issuable
upon conversion of the 2025 Notes is effective and available for use and is expected to remain effective and available for
use during the redemption period as of the date of the redemption notice date. The redemption price will be equal to
100% of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the
redemption date.
107
If the Company undergoes a fundamental change, such as a merger, sale, greater than 50% ownership change,
liquidation, dissolution or delisting, holders may require the Company to repurchase for cash all or any portion of their
2025 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Notes to be
repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition,
following a notice of redemption or certain corporate events that occur prior to the maturity date, the Company will, in
certain circumstances, increase the conversion rate for a holder who elects to convert its 2025 Notes in connection with
such notice of redemption or corporate event. In certain circumstances, the Company will be required to pay cash in lieu
of delivering make whole shares unless the Company obtains stockholder approval to issue shares.
The 2025 Notes are guaranteed on a senior unsecured basis by the Company’s wholly owned subsidiary,
Senseonics, Incorporated, and may be guaranteed by certain future subsidiaries. The subsidiary guarantor is 100%
owned, the guarantee is full and unconditional and joint and several and the parent company has no independent assets or
operations and any subsidiaries of the parent company other than the subsidiary guarantor are minor.
In connection with the issuance of the 2025 Notes, the Company incurred $4.3 million in debt issuance costs
and debt discounts. Several note holders of the 2025 Notes were also note holders of the 2023 Notes, and as a result,
these transactions qualified as loan modifications. The associated debt issuance costs were allocated between the portion
of 2025 Notes purchased by new note holders, and of 2025 Notes purchased by existing 2023 Note holders. Loan
modifications require third-party debt related costs to be expensed immediately, whereas fees paid to lenders of the
modified loans are deferred. The third-party costs associated with the new note holders are also deferred as discounts that
are amortized as additional interest expense over the term of the notes. Of the $4.3 million, $3.3 million were expensed
for loan modifications were recorded within other income (expense) on the consolidated statement of operations and
comprehensive loss and $1.0 million were deferred as discounts to the debt in 2019.
The 2025 Notes also contained an embedded conversion option requiring bifurcation as a separate derivative
liability, along with the fundamental change make-whole provision and the cash settled fundamental make-whole shares
provision. The Company recorded the fair value of the embedded features in the amount of $38.3 million as a debt
discount and derivative liability in the Company’s consolidated balance sheets in accordance with ASC Topic 815,
Derivatives and Hedging. The derivative is adjusted to fair value at each reporting period, with the change in the fair
value recorded to other income (expense) in the Company’s consolidated statement of operations and comprehensive
loss.
The 2025 Notes do not have current observable inputs such as recent trading prices (Level 3) and are measured
at fair value using the binomial option pricing model and incorporate management’s assumptions for probabilities of
conversion occurrence through maturity, stock price, volatility, risky (bond) rate, credit spread and recovery rates.
On April 21, 2020, $24.0 million in principal on the 2025 Notes were settled pursuant to an exchange
agreement. Between September 3, 2020 and January 27, 2021, $6.8 million in aggregate principal on the 2025 Notes
were converted into 5,152,259 shares of common stock.
On August 10, 2023, the Company entered into separate, privately negotiated exchange agreements (the
“Exchange Agreements”) with a limited number of holders (the “Noteholders”) of the Company’s currently outstanding
2025 Notes. Under the terms of the Exchange Agreements, the Noteholders agreed to exchange with the Company (the
“Exchanges”) up to $30.8 million in aggregate principal amount of the 2025 Notes (the “Exchanged Notes”) for a
combination of $7.5 million of cash and newly issued shares of common stock (the “Exchange Shares”). The number of
Exchange Shares was determined based upon the volume-weighted average price per share of the common stock during
a 15-day averaging period commencing on August 11, 2023 and ending August 31, 2023. Based on the volume-
weighted average price per share of the common stock during the averaging period, a total of 35.1 million shares of
common stock were issued in the Exchanges. The Exchanges were settled on the initial share issuance date of August 14,
2023 and the final settlement date of September 5, 2023.
The Company accounted for the Exchanges as an extinguishment of the Exchanged Notes and the associated
embedded derivative and recognized a loss of $4.6 million in the caption “Exchange related gain (loss), net” that is a
component of other income (expense) in the Company’s consolidated statement of operations and comprehensive loss.
The extinguishment loss represents the difference between (i) the carrying value of the Exchanged Notes (inclusive of
108
the fair value of the embedded derivative) and (ii) the sum of $7.5 million cash payment, the fair value of the Exchanged
Shares, and transaction costs incurred in the Exchange.
Following the Exchanges, approximately $20.4 million aggregate principal amount of the 2025 Notes remain
outstanding. The remaining unamortized debt discount and debt issuance costs are amortized as interest expense over the
term of the loan at an effective interest rate of 15.54%. The fair value of the Company’s 2025 Notes, excluding the
embedded features, was $19.1 million as of December 31, 2023 and $41.3 million at December 31, 2022. The fair value
of the derivative at December 31, 2023 and December 31, 2022 was $0.1 million and $7.9 million, respectively.
2023 Notes
In January 2018, the Company issued $50.0 million in aggregate principal amount of the 2023 Notes. In
February 2018, the Company issued an additional $3.0 million in aggregate principal amount of the 2023 Notes,
pursuant to the partial exercise of the overallotment option by the underwriter. The 2023 Notes were general, unsecured,
senior subordinated obligations and bear interest at a rate of 5.25% per year, payable semiannually in arrears on
February 1 and August 1 of each year. The net proceeds from the issuance of the 2023 Notes, after deducting transaction
costs, were $50.7 million. The Company paid interest semiannually in arrears on February 1 and August 1 of each year,
beginning on August 1, 2018. In July 2019, the Company used the net proceeds from the issuance of the 2025 Notes to
repurchase $37.0 million aggregate principal amount of the outstanding 2023 Notes.
Each $1,000 of principal of the 2023 Notes were initially convertible into 294.1176 shares of the Company’s
common stock, which is equivalent to an initial conversion price of approximately $3.40 per share, subject to adjustment
upon the occurrence of specified events. Holders may convert at any time prior to February 1, 2023. Holders who
convert on or after the date that is six months after the last date of original issuance of the 2023 Notes but prior to
February 1, 2021, may also be entitled to receive, under certain circumstances, an interest make-whole payment payable
in shares of common stock. If specific corporate events occur prior to the maturity date, the Company will increase the
conversion rate pursuant to the make-whole fundamental change provision for a holder who elects to convert their 2023
Notes in connection with such an event in certain circumstances. Additionally, if a fundamental change occurs prior to
the maturity date, holders of the 2023 Notes may require the Company to repurchase all or a portion of their 2023 Notes
for cash at a repurchase price equal to 100% of the principal amount plus any accrued and unpaid interest.
The Company bifurcated the embedded conversion option, along with the interest make-whole provision and
make-whole fundamental change provision, and in January 2018 recorded the embedded features as a debt discount and
derivative liability in the Company’s consolidated balance sheets at its initial fair value of $17.3 million. Additionally,
the Company incurred transaction costs of $2.2 million. The debt discount and transaction costs were amortized to
interest expense over the term of the 2023 Notes at an effective interest rate of 9.30%. The derivative was adjusted to fair
value at each reporting period, with the change in the fair value recorded to other income (expense) in the Company’s
consolidated statement of operations and comprehensive loss. On January 31, 2023, the Company repaid the outstanding
principal and accrued interest in full. The derivative was unexercised upon maturity and the fair value in the amount of
$0.02 million was recognized as an extinguishment gain in the caption “Other income (expense)” in Company’s
consolidated statement of operations and comprehensive loss.
The following carrying amounts are outstanding under the Company’s notes payable as of December 31, 2023
and December 31, 2022 (in thousands):
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan and Security Agreement . . . . . . . . . . . . . . . . . .
December 31, 2023
Principal ($)
20,399
25,000
Debt (Discount)
Premium ($)1
(3,090)
(733)
Issuance Costs ($) Carrying Amount ($)
17,257
23,938
(52)
(329)
109
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PHC Convertible Notes . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022
Principal ($)
15,700
51,199
35,000
Debt (Discount)
Premium ($)1
(121)
(15,029)
(13,698)
Issuance Costs ($) Carrying Amount ($)
15,579
35,918
20,465
—
(252)
(837)
(1) Includes accretion of end of term fees payable at maturity
Interest expense related to the notes payable for the periods presented below is as follows (in thousands):
Twelve Months Ended December 31, 2023
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PHC Convertible Notes . . . . . . . . . . . . . . . . . .
Loan and Security Agreement . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Rate
5.25%
5.25%
8.00%
9.90%
Interest ($)
69
2,149
700
791
3,709
Debt
Discount &
Fees ($)1
121
5,451
1,442
184
7,198
Issuance Costs ($)
—
91
88
24
203
Total Interest
Expense ($)
189
7,691
2,230
999
11,110
Twelve Months Ended December 31, 2022
2023 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PHC Convertible Notes . . . . . . . . . . . . . . . . . .
PPP Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest Rate
5.25%
5.25%
8.00%
1.00%
Interest ($)
824
2,674
3,035
6
6,539
(1) Includes accretion of end of term fees payable at maturity
Debt
Discount &
Fees ($)1
1,378
5,506
4,889
—
11,773
Issuance Costs ($)
—
92
299
—
391
Total Interest
Expense ($)
2,202
8,272
8,223
6
18,703
The following are the scheduled maturities of the Company’s notes payable (including end of term fees) as of
December 31, 2023:
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
20,399
7,397
19,341
47,137
14. Stockholders’ Deficit
In connection with the Company’s acquisition of Senseonics, Incorporated in December 2015 (the
“Acquisition”), (1) all outstanding shares of common stock of Senseonics, $0.01 par value per share, were exchanged for
1,955,929 shares of the Company's common stock, $0.001 par value per share (reflecting an exchange ratio of 2.0975),
(2) all outstanding shares of preferred stock were converted into shares of common stock of Senseonics, and exchanged
into 55,301,674 shares of the Company’s common stock, $0.001 par value per share, and (3) all outstanding options and
warrants to purchase shares of common stock of Senseonics were exchanged for or replaced with options and warrants to
acquire shares of the Company’s common stock using the same exchange ratio.
Common Stock
As of December 31, 2023 and December 31, 2022, the Company’s authorized capital stock included
900,000,000 shares of common stock, par value $0.001 per share. The Company had 530,364,237 and 479,637,138
shares of common stock issued and outstanding at December 31, 2023 and December 31, 2022, respectively.
110
Preferred Stock
As of December 31, 2023 and 2022, the Company’s authorized capital stock included 5,000,000 shares of
undesignated preferred stock, par value $0.001 per share. The Company had 12,000 shares of Series B Preferred Stock
outstanding as of December 31, 2023 and 2022.
Voting Rights
The holders of Series B Preferred Stock generally are entitled to vote with the holders of the shares of common
stock on all matters submitted for a vote of holders of shares of common stock (voting together with the holders of shares
of common stock as one class) on an as-converted basis and shall be entitled to a number of votes per share equal to
$1,000 divided by $1.24, subject to a cap of 29.0% of total voting power.
Dividends
The Series B Preferred Stock is not entitled to dividends.
Conversion Rights
Each share of Series B Preferred Stock is initially convertible into the number of shares of the common stock of
the Company, $0.001 par value per share, equal to $1,000 divided by the conversion price of $0.3951 per share, subject
to customary anti-dilution adjustments, including in the event of any stock split.
Stock Purchase Warrants
On June 30, 2016, the Company issued the Oxford/SVB Warrants to purchase an aggregate of 116,581, 63,025
and 80,645 shares of common stock at an exercise price of $3.86, $2.38 and $1.86 per share, respectively. The warrants
were recorded within equity based on their fair value of $0.5 million. These warrants expire on June 30, 2026,
November 22, 2026, and March 29, 2027, respectively, and are classified in equity.
On November 9, 2020, the Company issued the Energy Capital Warrants to purchase an aggregate of
10,000,000 shares of the Company’s common stock with an exercise price of $0.3951 per share. The Energy Capital
Warrants are exercisable until November 9, 2030. The warrants were recorded within equity based on their fair value of
$3.4 million. In February 2022, the Energy Capital Warrants were exercised in full, on a net basis and Energy Capital
received 8,917,535 shares of common stock upon the net exercise of the warrants.
On March 13, 2023, the Company issued to PHC, the Purchase Warrant to purchase 15,425,750 shares of
common stock. The Purchase Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per Purchase
Warrant Share. The Company received aggregate gross proceeds of $15.0 million, before deducting private placement
expenses payable by the Company. The warrant was recorded in equity based on its fair value of $14.3 million. Because
PHC was an existing stockholder of the Company at the time of the transaction, the $0.7 million excess of the purchase
price over the fair value of the Purchase Warrant was recognized as an equity transaction and recorded as a capital
contribution made by PHC to the Company as additional paid-in-capital. All or any part of the Purchase Warrant is
exercisable by the holder at any time and from time to time.
In addition, on March 13, 2023, the Company entered into an Exchange Agreement with PHC, and, on
March 31, 2023, issued the PHC Exchange Warrant to purchase up to 68,525,311 shares of common stock in exchange
for the cancellation in full of the PHC Notes, including accrued interest thereon. The PHC Exchange Warrant is a “pre-
funded” warrant with a nominal exercise price of $0.001 per PHC Exchange Warrant Share. The warrant was recorded in
equity based on its fair value of $48.6 million. All or any part of the Purchase Warrant is exercisable by the holder at any
time and from time to time.
111
On September 8, 2023, Company entered into the Loan and Security Agreement and issued the Tranche 1
Warrants to acquire an aggregate of 832,362 shares of the Company’s common stock at an exercise price of $0.6007 per
share. The Tranche 1 Warrants may be exercised through the earlier of (i) the seventh anniversary of the Effective Date
and (ii) the consummation of certain acquisition transactions involving the Company, as set forth in the warrant
agreement. The Tranche 1 Warrants were recorded in equity based on their fair value of $0.4 million. The number of
shares for which the Tranche 1 Warrants are exercisable and the associated exercise price are subject to certain
customary proportional adjustments for fundamental events, including stock splits and reverse stock splits, as set forth in
the warrant agreement.
15. Stock-Based Compensation
2015 Plan
In December 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), under which
incentive stock options and non-qualified stock options may be granted to the Company’s employees and certain other
persons in accordance with the 2015 Plan provisions. In February 2016, the Company’s board of directors adopted and
the Company’s stockholders approved an Amended and Restated 2015 Equity Incentive Plan (the “amended and restated
2015 Plan”), which became effective on February 20, 2016. The Company’s board of directors may terminate the
amended and restated 2015 Plan at any time. Options granted under the amended and restated 2015 Plan expire ten years
after the date of grant.
Pursuant to the amended and restated 2015 Plan, the number of shares of the Company’s common stock
reserved for issuance will automatically increase on January 1 of each year, beginning on January 1, 2017 and ending on
January 1, 2026, by 3.5% of the total number of shares of its common stock outstanding on December 31 of the
preceding calendar year, or a lesser number of shares as may be determined by its board of directors. As of December 31,
2023, 30,593,882 shares remained available for grant under the amended and restated 2015 Plan. Effective January 1,
2024, by virtue of the automatic increase described above, the total number of shares remaining available for grant under
the amended and restated 2015 Plan was increased to 49,156,630 shares.
Inducement Plan
On May 30, 2019, the Company adopted the Senseonics Holdings, Inc. Inducement Plan (the “Inducement
Plan”) pursuant to which the Company reserved 1,800,000 shares of the Company’s common stock for issuance. The
only persons eligible to receive grants of awards under the Inducement Plan are individuals who satisfy the standards for
inducement grants in accordance with NYSE American Company Guide Section 711(a), including individuals who were
not previously an employee or director of the Company, or following a bona fide period of non-employment, as an
inducement material to such persons entering into employment with the Company. An “Award” is any right to receive
the Company’s common stock pursuant to the Inducement Plan, consisting of non-statutory options, restricted stock unit
awards and other equity incentive awards. As of December 31, 2023, 233,825 shares remained available for grant under
the Inducement Plan.
Commercial Equity Plan
On January 30, 2023, the Company adopted the Senseonics Holdings, Inc. 2023 Commercial Equity Plan (the
“Commercial Equity Plan”), pursuant to which the Company reserved 10,000,000 shares of common stock for issuance.
Eligible recipients under the plan are non-employees of Senseonics, including employees of our global commercial
partner, Ascensia, who assist with the commercialization of our products. An “Award” is any right to receive the
Company’s common stock pursuant to the Commercial Equity Plan, consisting of non-statutory options and restricted
stock unit awards. As of December 31, 2023, 7,537,500 shares remained available for grant under the Commercial
Equity Plan.
112
2016 Employee Stock Purchase Plan
In February 2016, the Company adopted the 2016 Employee Stock Purchase Plan (the “2016 ESPP”). The 2016
ESPP became effective on March 17, 2016. The maximum number of shares of common stock that may be issued under
the 2016 ESPP was initially 800,000 shares and will automatically increase on January 1 of each year, beginning on
January 1, 2017 and ending on and including January 1, 2026, by 1.0% of the total number of shares of common stock
outstanding on December 31 of the preceding calendar year; provided, however, the Board of Directors may act prior to
the first day of any calendar year to provide that there will be no January 1 increase in the share reserve for such calendar
year or that the increase in the share reserve for such calendar year will be a lesser number of shares of common stock.
At December 31, 2023 there were 17,624,582 shares of common stock available for issuance under the 2016 ESPP.
Effective January 1, 2024, by virtue of the automatic increase described above, the total number of shares remaining
available for issuance under the 2016 ESPP was increased to 22,928,224 shares.
The 2016 ESPP permits participants to purchase shares of the Company’s common stock through payroll
deductions of up to 15% of their earnings. Unless otherwise determined by the administrator, the purchase price of the
shares will be 85% of the lower of the fair market value of common stock on the first day of an offering or on the date of
purchase. Participants may end their participation at any time. The Company initiated its first 2016 ESPP offering period
on August 1, 2019. On February 1, 2023, there were 86,816 shares purchased in connection with the offering period. On
August 1, 2023, there were 135,496 shares purchased in connection with the offering period. The 2016 ESPP is
considered compensatory for financial reporting purposes.
1997 Plan
On May 8, 1997, the Company adopted the 1997 Stock Option Plan (the “1997 Plan”), under which incentive
stock options, non-qualified stock options, and restricted stock awards may be granted to the Company’s employees and
certain other persons in accordance with the 1997 Plan provisions. All awards issued under the 1997 plan are fully
vested. Approximately 1,026,870 shares of the Company’s common stock underlying remain outstanding under the 1997
Plan. Upon the effectiveness of the 2015 Plan, the Company no longer grants any awards under the 1997 Plan.
Stock Options
The Company recognizes the cost of employee and non-employee services received in exchange for awards of
equity instruments, such as stock options, based on the fair value of those awards at the date of grant. The estimated fair
value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each
separately vesting portion of the award for those awards with service conditions only. For awards that also contain
performance conditions, expense is recognized beginning at the time the performance condition is considered probable of
being met over the remaining vesting period.
113
Stock option activity under the plans during the years ended December 31, 2023 and 2022 is as follows:
Number of
Shares in
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (in years)
5.71
Options outstanding as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,384 $ 2.38
1.48
449
0.98
(974)
2.52
(1,080)
2.45
11,779
0.64
3,589
0.46
(6)
(1,622)
1.22
13,740 $ 2.12
Options vested and expected to vest as of December 31, 2023 . . . . . . . . . . . . . . .
Options exercisable as of December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,740 $ 2.12
10,638 $ 2.52
5.07
5.18
3.97
The weighted average grant-date fair value of stock option awards granted in 2023 and 2022 was $0.47 and
$1.04 per share, respectively.
For the years ended December 31, 2023 and 2022, 5,925, and 974,285, options were exercised, respectively,
with an aggregate intrinsic value at the time of exercise of approximately $0.1 million and $1.0 million, respectively.
The total fair value of options that vested during 2023 and 2022 were approximately $0.5 million and $2.1
million, respectively.
The aggregate intrinsic value of the options currently exercisable at December 31, 2023 was $0.03 million. The
aggregate intrinsic value of stock options outstanding at December 31, 2023 was $0.03 million, which approximated the
aggregate intrinsic value of options vested and expected to vest as of December 31, 2023.
The weighted average grant date fair value of the unvested stock option awards outstanding at
December 31, 2023 and 2022 was $0.54 and $1.29 per share, respectively. The weighted average grant date fair value of
the stock option awards vested, exercised, and forfeited/cancelled for the year ended December 31, 2023 were $1.31,
$0.27 and $0.51 per share, respectively.
Fair value is estimated at each grant date under the plans using the Black-Scholes Model with assumptions
summarized in the following table:
Expected term of options (in years) . . . . . . . . . .
Expected volatility rate . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . .
For the year ended December 31,
2023
6.0 - 6.5
2022
6.5
82.55 - 94.38 % 71.20 - 92.61 %
- 3.84 %
3.37 - 4.73 % 0.57
0 %
%
0
The risk-free interest rate assumption is based upon observed U.S. treasury yields for a period consistent with
the expected term of the Company’s employee and non-employee stock options. The expected term is the period of time
for which the stock-based options are expected to be outstanding. The expected term is determined using the “simplified
method” which is defined as the mid-point between the vesting date and the end of the contractual term. The Company
does not pay a dividend, and is not expected to pay a dividend in the foreseeable future.
114
The Company utilizes comparable public companies’ volatility rates as a proxy of its expected volatility for
purposes of the Black-Scholes Model. Stock-based compensation expense is recorded monthly and is adjusted
periodically for actual forfeitures as they occur.
Stock-based compensation expense for employee and non-employee stock options was $0.7 million and $2.1
million, for the years ended December 31, 2023 and 2022, respectively, classified as follows (in thousands):
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2023
2022
41
46
712
322
290
1,381
658 $ 2,133
$
$
As of December 31, 2023, there was $0.7 million of total unrecognized compensation cost related to non-vested
stock option awards, which is expected to be recognized over a weighted average period of 2.13 years.
Restricted Stock Units
The Company issued 327,171 and 156,272 restricted stock units in lieu of cash payment for board and director
fees to members of the Board of Directors during 2023 and 2022, respectively, under the non-employee director
compensation policy. These restricted stock units were immediately vested upon issuance. In addition, the Company
issued a total of 9,451,628 and 7,707,027 restricted stock units to employees of the Company during 2023 and 2022,
respectively, as incentive compensation.
Restricted stock units granted annually to members of the Board of Directors vest on the earlier of the first
anniversary of the grant date or the next year’s annual meeting of stockholders. New members of the Board of Directors
may be granted initial restricted stock units which vest over a three-year period. Restricted stock units granted to
employees in 2023 and 2022 vest in eight equal installments beginning with an initial accelerated vesting tranche in the
month following the grant, followed by seven vesting dates every six months.
Restricted stock units activity under the Plans during the years ended December 31, 2023 and 2022, is as
follows:
Number of
Shares in
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (in years)
2.44
RSU's outstanding as of December 31, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RSU's outstanding as of December 31, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RSU's outstanding as of December 31, 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,756 $ 0.82
1.17
7,863
0.77
(9,414)
1.08
(1,426)
1.10
9,779
0.74
13,633
0.89
(9,309)
0.97
(234)
13,869 $ 0.89
2.19
2.29
For the year ended December 31, 2023, the weighted average grant date fair value of the restricted stock units
granted, vested, and forfeited were $0.74, $0.89 and $0.97 per share, respectively. The weighted average grant date fair
value of total restricted stock units outstanding at December 31, 2023 was $0.89 per share.
115
For the year ended December 31, 2022, the weighted average grant date fair value of the restricted stock units
granted, vested, and forfeited were $1.17, $0.77 and $1.08 per share, respectively. The weighted average grant date fair
value of restricted stock units outstanding at December 31, 2022 was $1.10 per share.
For the years ended December 31, 2023 and 2022, 9,309, and 9,414, restricted stock units were vested,
respectively, with an aggregate intrinsic value at the time of vest of $6.4 million and $20.3 million, respectively.
The total fair value of the restricted stock units that vested during 2023 and 2022 were approximately $8.3
million and $7.3 million, respectively.
The aggregate intrinsic value of the restricted stock units currently outstanding at December 31, 2023 was $7.9
million.
Employee stock-based compensation expense for employee granted restricted stock units was $8.0 million and
$6.5 million, for the years ended December 31, 2023 and 2022, respectively, classified as follows (in thousands):
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
63
1,523
6,429
8,015 $
31
1,128
5,326
6,485
As of December 31, 2023, there was $11.1 million of total unrecognized compensation cost related to non-
vested restricted stock units, which is expected to be recognized over a weighted average period of 2.29 years.
December 31,
2023
2022
116
16. Income Taxes
No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net
operating losses since inception and provides a full valuation allowance against its net deferred income tax assets. The
tax effect of temporary differences that give rise to the net deferred income tax asset at December 31, 2023 and 2022 is
as follows (in thousands):
Deferred income tax assets (liabilities )
Deferred Tax Assets:
Net operating loss carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized start-up costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credit carryforwards . . . . . . . . . . . . . .
Research and development expenditures . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of derivative liability. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Right of use asset amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2023
2022
$ 139,610
5,721
15,326
16,284
1,684
22
3,181
181,828
(179,517)
133,031
6,538
13,121
8,853
1,695
5,136
2,143
170,517
(163,255)
7,262
2,311 $
(1,774)
(537)
(2,311)
— $
(896)
(6,366)
(7,262)
—
$
$
The net change in valuation allowance for the years ended December 31, 2023 and 2022 was a net increase of
$16.3 million and a net increase of $16.8 million, respectively.
The increase in valuation allowance is primarily due to deferred tax assets generated from net operating losses,
research and experimental costs capitalized, and tax credits generated in 2023 and is partially offset by a decrease in the
deferred tax assets related to the fair value of derivative liability. This increase in valuation allowance is based on
management's assessment that it is more likely than not that the Company will not realize these deferred tax assets. At
December 31, 2023, the Company had NOL carryforwards of $656.9 million and research and experimental credit
carryforwards of $15.3 million. Research and experimental credit carryforwards will expire in varying amounts between
2024 and 2043. NOL carryforwards in the amount of $196.4 million will expire in varying amounts between 2024 and
2037. NOL carryforwards incurred in tax years 2018 and forward have an indefinite carryforward period. Under the
provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a
limitation on the amount of NOL carryforwards and research and development credit carryforwards which can be
available in future years.
117
A reconciliation of the Company’s estimated U.S. federal statutory rate to the Company’s effective income tax
rate for years ended December 31, 2023 and 2022 is as follows:
Tax at U.S. Federal Statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax rates changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Officers compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
December 31,
2023
2022
21.00 %
0.25
3.83
(1.75)
5.73
(0.62)
(0.99)
(0.75)
(26.70)
0.00 %
21.00 %
0.40
(1.32)
—
(31.68)
(2.00)
1.68
0.21
11.71
0.00 %
Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting
and financial statement purposes. Deferred tax liabilities and assets are adjusted for changes in tax laws or tax rates of
the various tax jurisdictions as of the enacted date. The federal tax rate remained unchanged at 21% for the 2023 tax
year. The change in state tax rate from 2022 to 2023 is primarily due to changes in applicable state apportionment factors
and change in jurisdictions.
A breakdown of the Company’s uncertain tax position during 2023 and 2022 is as follows (in thousands):
Gross unrecognized tax benefit at beginning of year . . . . . . . . . . . . . . .
Increase from tax positions taken in prior years . . . . . . . . . . . . . . . . . . .
Increase from tax positions in current year . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations / expiration . . . . . . . . . . . . . . . . . . . . . . .
Gross unrecognized tax benefit at end of year . . . . . . . . . . . . . . . . . . . .
2022
2023
$ 3,280
(27)
617
(38)
2,813
—
505
(38)
$ 3,832 $ 3,280
During 2022 and 2023, the Company incurred minor penalties and interest for filed tax returns due to taxing
authorities.
If recognized, the entire amount of gross unrecognized tax benefit would favorably affect the effective income
tax rate, although, due to the Company’s valuation allowance there would be no net impact. The Company does not expect
a significant change in its unrecognized tax positions to occur in the next twelve months.
The Company’s U.S. Federal and state income tax returns from 2003 to 2023 remain subject to examination by
the tax authorities. The Company’s prior tax years remain open for examination, even though the statute of limitations
has expired, due to the net operating losses and credits carried forward for use in prospective years.
17. Related Party Transactions
PHC has a noncontrolling ownership interest in the Company. In addition, PHC has representation on the
Company’s board of directors. The Company entered into a financing agreement with PHC on August 9, 2020 (see Note
13 for further discussion of the PHC Notes). Ascensia, through the ownership interests of its parent company, PHC is a
related party. For the year ended December 31, 2023, revenue from Ascensia was $20.7 million and the amount due from
Ascensia was $3.7 million. At December 31, 2023, the Company had estimated replacement obligations under warranties
in the amount of $0.5 million and other amounts due to Ascensia of $0.5 million. We also purchase certain medical
supplies from Ascensia for our clinical trials. We paid Ascensia $0.6 million for the year ended December 31, 2023
under this arrangement.
118
For the year ended December 31, 2022, revenue from Ascensia was $15.7 million and the amount due from
Ascensia was $2.3 million. At December 31, 2022, the Company had estimated replacement obligations under warranties
in the amount of $0.8 million and other amounts due to Ascensia of less than $0.1 million. We also purchase certain
medical supplies from Ascensia for our clinical trials. We paid Ascensia $0.3 million for the year ended December 31,
2022 under this arrangement.
18. Fair Value Measurements
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and
liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company
defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for
assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most
advantageous market in which the Company would transact and the market-based risk measurements or assumptions that
market participants would use to price the asset or liability, such as risks inherent in valuation techniques, transfer
restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used
to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input
that is available and significant to the fair value measurement:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices
for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
Cash and Cash Equivalents
The fair value of money market funds and other investments classified as cash and cash equivalents are based
on period-end statements supplied by the various banks and brokers that hold the majority of the funds.
Derivative Financial Instruments
The valuation technique used to measure the fair value of the Company’s embedded derivative instruments is
valued using the binomial lattice model to estimate the fair value of the notes. Using this lattice model, the Company
values the embedded derivative using the “with” and “without” approach to determine the fair value of the embedded
derivatives associated with the convertible note. Under this approach, the instrument is valued “with” and “without” the
bifurcated feature and the fair value of the derivative is the difference in value between the two scenarios. The lattice
model incorporates assumptions such as management’s assumptions for probabilities of conversion occurrence through
maturity, stock price, volatility, risk-free rate, estimated credit spread, bond recovery rates and trade data when available.
119
The following table represents the fair value hierarchy of the Company’s financial assets and liabilities
measured at fair value on a recurring basis at December 31, 2023 and 2022 (in thousands):
Assets
Money market funds⁽¹⁾ . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . .
Government and agency securities. . . . . . . . . .
Liabilities
Embedded features of the 2025 Notes . . . . . . .
Assets
Money market funds⁽¹⁾ . . . . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
Asset backed securities . . . . . . . . . . . . . . . . . . .
Government and agency securities . . . . . . . . . .
Liabilities
Embedded features of the 2023 Notes. . . . . . . .
Embedded features of the PHC Notes. . . . . . . .
Embedded features of the 2025 Notes. . . . . . . .
Total
$ 72,953
7,598
7,982
18,167
December 31, 2023
Level 1
Level 2 Level 3
72,953
—
—
18,167
—
7,598
7,982
—
—
—
—
—
102
—
—
102
Total
$ 34,658
41,503
32,142
8,260
38,570
$
20
44,191
7,859
December 31, 2022
Level 1
Level 2 Level 3
$ 34,658
—
—
—
31,627
—
41,503
32,142
8,260
6,943
—
—
—
—
—
—
—
—
20
—
—
—
44,191
7,859
(1) Classified as cash and cash equivalents due to their short-term maturity
The following table provides a reconciliation of the beginning and ending balances of items measured at fair
value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):
Beginning Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on fair value adjustment of option . . . . . . . . . . . . . . . . . . . . . . .
Gain on change in fair value of derivatives . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of option . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial asset impairment cost, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31
2023
52,050
$
(1,109)
—
(50,839)
—
—
—
—
102
$
2022
224,037
(25,656)
(43,745)
(178,425)
101
138
81,417
(5,817)
52,050
$
$
The recurring Level 3 fair value measurements of the embedded features of the 2025 Notes include the
following significant unobservable inputs:
Unobservable Inputs
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Probabilities of conversion provisions. . . . . . . . . . . . . . . . .
Credit spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 Notes
Assumptions
45.0
5.0 - 95.0
8.80
%
%
%
Significant changes to these assumptions would result in increases/decreases to the fair value of the liability.
120
The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to
observe valuation inputs may result in a reclassification of levels for certain financial instruments within the fair value
hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end
of the fiscal quarter in which the actual event or change in circumstances that caused the transfer occurs. When a
determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of
the unobservable inputs to the overall fair value measurement. During the year ended December 31, 2023, there were no
transfers between Level 1, Level 2, or Level 3.
During the year ended December 31, 2022, transfers into Level 2 of liabilities previously classified in Level 3
were due to increased trade activity associated with these instruments providing better price transparency, permitting
classification to Level 2. In addition, transfers into Level 3 of liabilities previously classified in Level 2 were an increase
in unobservable inputs, permitting classification to Level 3.
19. Litigation
From time to time, the Company is subject to litigation and claims arising in the ordinary course of business.
The Company accrues for litigation and claims when it is probable that a liability has been incurred and the amount of
loss can be reasonably estimated. The Company has evaluated claims in accordance with the accounting guidance for
contingencies that it deems both probable and reasonably estimable, and for the periods ended December 31, 2023 and
2022 has no such contingencies.
20. Subsequent Events
The Company has evaluated all subsequent events through the filing date of this Form 10-K with the SEC, to
ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of
December 31, 2023, and events which occurred subsequently but were not recognized in the financial statements. Except
as described below there were no other subsequent events which required recognition, adjustment to or disclosure in the
financial statements.
As previously disclosed in Note 13, on Septembr 8, 2023 (“the Effective Date”), the Company entered into a
Loan and Security Agreement with Hercules Capital, Inc. and the Lenders, pursuant to which the Lenders agreed to
make available to the Company up to $50.0 million in senior secured term loans consisting of (i) an initial term loan of
$25.0 million, which was funded on the Effective Date and (ii) two additional tranches of term loans in the amounts of
up to $10.0 million (the “Tranche 2 Loan”) and $15.0 million (the “Tranche 3 Loan”), respectively. On January 2, 2024,
the Tranche 2 Loan was funded in an amount of $10.0 million following the Company’s satisfaction of certain terms and
conditions set forth in the Loan and Security Agreement in the fourth quarter of 2023. In connection with the Loan and
Security Agreement, the Company issued additional warrants to the Lenders to acquire an aggregate of 347,887 shares at
an exercise price of $0.5749 per share.
121
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision of and with the participation of our management, including our chief executive officer,
who is our principal executive officer, and our chief financial officer, who is our principal financial officer, we
conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2023, the end
of the period covered by this Annual Report. The term “disclosure controls and procedures,” as set forth in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls
and other procedures of a company that are designed to provide reasonable assurance that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms promulgated by the Securities and Exchange
Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of
December 31, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure
controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31,
2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
As we are no longer an emerging growth company and adapted our system of internal controls over financial reporting
pursuant to Section 404(a) of the Sarbanes-Oxley Act, we did not identify any material weakness in our internal control
over financing reporting at December 31, 2023.
Management’s Report on Internal Control over Financial Reporting and Attestation Report of the Registered Public
Accounting Firm
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our
management concluded that our internal control over financial reporting was effective as of December 31, 2023.
This Annual Report does not include an attestation report with respect to the effectiveness of our internal
control over financial reporting as of December 31, 2023 due to the Company’s SOX 404(b) exemption based on
Smaller Reporting Company status.
122
Item 9B. Other Information
During the fiscal quarter ended December 31, 2023, none of our officers or directors, as defined in Rule
16a-1(f), adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading
arrangement," as those terms are defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
We will file a definitive Proxy Statement for our 2024 Annual Meeting of Stockholders, or the 2024 Proxy
Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year.
Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K.
Only those sections of the 2024 Proxy Statement that specifically address the items set forth herein are incorporated by
reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 is hereby incorporated by reference to the sections of the 2024 Proxy
Statement under the captions “Information Regarding the Board of Directors and Corporate Governance,” “Election of
Directors,” “Information about our Executive Officers” and “Section 16(a) Beneficial Ownership Reporting
Compliance.”
Item 11. Executive Compensation
The information required by Item 11 is hereby incorporated by reference to the sections of the 2024 Proxy
Statement under the captions “Executive Compensation” and “Non-Employee Director Compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is hereby incorporated by reference to the sections of the 2024 Proxy
Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities
Authorized for Issuance under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 is hereby incorporated by reference to the sections of the 2024 Proxy
Statement under the captions “Transactions with Related Persons” and “Independence of the Board of Directors.”
Item 14. Principal Accounting Fees and Services
The information required by Item 14 is hereby incorporated by reference to the sections of the 2024 Proxy
Statement under the caption “Ratification of Selection of Independent Registered Public Accounting Firm.”
123
Item 15. Exhibit and Financial Statement Schedules
(a)(1) Financial Statements.
PART IV
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part
II, Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules.
All financial schedules have been omitted because the required information is either presented in the
consolidated financial statements or the notes thereto or is not applicable or required.
(a)(3) Exhibits
The exhibits listed below are filed as part of this Annual Report on Form 10-K, or are
incorporated herein by reference, in each case as indicated below.
Exhibit
Number
Description of Document
3.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-37717) filed on March 23,
2016).
3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the
Quarter ended June 30, 2018 (File No. 001-37717) filed on August 8, 2018).
3.3 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-37717) filed on October 26, 2020).
3.4 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred
Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-37717) filed on August 18, 2020).
3.5 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred
Stock (incorporated by reference to Exhibit 3.5 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-37717) filed with the Commission on November 8, 2022).
3.6 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717) filed on March 23, 2016).
3.7 Amendment to Bylaws of Senseonics Holdings, Inc. (incorporated by reference to Exhibit 3.7 to the
4.1
Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed on March 5, 2021).
Indenture, dated July 25, 2019, between the Registrant and U.S. Bank National Association, as Trustee
(incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-37717) filed on July 29, 2019).
4.2 Form of Note representing the Company’s 5.25% Convertible Senior Notes due 2025 (incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with
the Commission on July 29, 2019).
4.3 Registration Rights Agreement, dated as of July 25, 2019, by and among the Company, the Subsidiary
and Jefferies LLC (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K (File No. 001-37717), filed with the Commission on July 29, 2019).
4.4 Registration Rights Agreement, dated as of August 9, 2020, by and between the Registrant and PHC
Holding Corporation (incorporated herein by reference to Exhibit 4.1 to Amendment No. 1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on
August 31, 2020).
124
Exhibit
Number
4.5
Investor Rights Agreement, dated as of August 9, 2020, by and between the Registrant and PHC
Holding Corporation (incorporated herein by reference to Exhibit 4.3 to Amendment No. 1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on
August 31, 2020).
Description of Document
4.6 Description of Senseonics Holdings, Inc. Common Stock (incorporated by reference to Exhibit 4.7 to
the Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed on March 16, 2020).
4.7 Registration Rights Agreement, by and between Senseonics Holdings, Inc. and PHC Holdings
Corporation, dated as of March 13, 2023 (incorporated herein by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on March 15,
2023).
10.1 Lease Agreement, dated as of February 4, 2008, by and between Senseonics, Incorporated and Seneca
Meadows Corporate Center III Limited Partnership, as amended by the First Amendment to Lease,
dated as of September 25, 2012 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K (File No. 333-198168) filed on December 10, 2015).
10.1.1 Second Amendment to Lease, by and between Senseonics, Incorporated and Seneca Meadows
Corporate Center III L.L.L.P., dated as of January 21, 2016 (incorporated by reference to Exhibit 10.1.1
to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-208984)
filed on February 17, 2016).
10.2+ Amended and Restated 1997 Stock Option Plan of Senseonics, Incorporated, as amended to date
(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File
No. 333-198168) filed on December 10, 2015).
10.3+ Form of Incentive Stock Option Agreement under Senseonics, Incorporated Amended and Restated
1997 Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on
Form 8-K (File No. 333-198168) filed on December 10, 2015).
10.4+ Form of Nonqualified Stock Option Agreement under Senseonics, Incorporated Amended and Restated
1997 Stock Option Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on
Form 8-K (File No. 333-198168) filed on December 10, 2015).
10.5+ Amended and Restated 2015 Equity Incentive Plan, (incorporated by reference to Exhibit 4.7 to the
Registrant’s Registration Statement on Form S-8 (File No. 333-210586) filed on April 4, 2016).
10.6+ Form of Stock Option Grant Notice and Stock Option Agreement under 2015 Equity Incentive Plan
(incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K (File
No. 333-198168) filed on December 10, 2015).
10.7+ Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under 2015
Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on
Form 8-K (File No. 333-198168) filed on December 10, 2015).
10.8+ Form of Indemnification Agreement between the Registrant and its directors and executive officers
(incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K (File
No. 333-198168) filed on December 10, 2015).
10.9+ Amended and Restated Executive Employment Agreement by and between Senseonics, Incorporated
and Timothy T. Goodnow, dated as of July 24, 2015 (incorporated by reference to Exhibit 10.10 to the
Registrant’s Current Report on Form 8-K (File No. 333-198168) filed on December 10, 2015).
10.10+ Amended and Restated Executive Employment Agreement by and between Senseonics, Incorporated
and Mukul Jain, dated as of August 12, 2017 (incorporated by reference to Exhibit 10.10+ to the
Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed with the Commission on
March 16, 2023).
10.11+ Amended and Restated Executive Employment Agreement by and between Senseonics, Incorporated
and Kenneth L. Horton, dated as of April 1, 2023 (incorporated by reference to Exhibit 10.11+ to the
Registrant’s Annual Report on Form 10-K (File No. 001-37717) filed with the Commission on
March 16, 2023).
10.12 Form of Replacement Warrant to Purchase Common Stock issued to Oxford Finance LLC by
Senseonics, Incorporated, dated as of December 7, 2015 (incorporated by reference to Exhibit 10.17 to
the Registrant’s Current Report on Form 8-K (File No. 333-198168) filed on December 10, 2015).
125
Exhibit
Number
Description of Document
10.13+ Form of 2016 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.10 to the
Registrant’s Registration Statement on Form S-8 (File No. 333-210586) filed on April 4, 2016).
10.14 Form of Warrant to Purchase Stock issued by the Registrant to Oxford Finance LLC and Silicon Valley
Bank, dated as of June 30, 2016 (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
Report on Form 10-Q (File No. 001-37717) filed on August 9, 2016).
10.15# Senseonics Holdings, Inc. Inducement Plan (incorporated herein by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on June 5,
2019).
10.16+ Form of Stock Option Grant Notice and Stock Option Agreement used in connection with the
Senseonics Holdings, Inc. Inducement Plan (incorporated herein by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717), filed with the Commission on June 5,
2019).
10.17 Form of Warrant to Purchase Common Stock issued to Highbridge Tactical Credit Master Fund, L.P.
(incorporated herein by reference to Exhibit 10.8 to Amendment No. 1 to the Registrant’s Annual
Report on Form 10-K (File No. 001-37717) filed with the Commission on April 28, 2020).
10.18# Collaboration and Commercialization Agreement, by and between the Subsidiary and Ascensia Diabetes
Care Holdings AG, dated as of August 9, 2020 (incorporated herein by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q (File No. 001-37717) filed with the Commission on
November 9, 2020).
10.19# First Amendment to Collaboration and Commercialization Agreement, by and between the Subsidiary
and Ascensia Diabetes Care Holdings AG, dated as of March 31, 2021 (incorporated herein by reference
to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37717) filed with the
Commission on August 9, 2021).
10.20# Second Amendment to Collaboration and Commercialization Agreement, by and between Senseonics
10.21
Incorporated and Ascensia Diabetes Care Holdings AG, dated as of June 21, 2022 (incorporated herein
by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37717)
filed with the Commission on August 9, 2022).
2023 Commercial Equity Plan, dated as of January 10, 2023 (incorporated herein by reference to Exhibit
4.1 to the Registration Statement on Form S-3 (File No. 333-269177 filed with the Commission on
January 10, 2023).
10.22 Securities Purchase Agreement, by and between Senseonics Holdings, Inc. and PHC Holdings
Corporation, dated as of March 13, 2023 (incorporated herein by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on March 15,
2023).
10.23 Form of Warrant to Purchase Common Stock issued to PHC Holdings Corporation (incorporated herein
by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-37717) filed
with the Commission on March 15, 2023).
10.24 Form of Stock Option Grant Notice and Stock Option Agreement under Senseonics Holdings, Inc. 2023
Commercial Equity Plan (incorporated herein by reference to Exhibit 4.2 to the Registration Statement
on Form S-3 (File No.333-269177) filed with the Commission on January 10, 2023).
10.25 Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under
Senseonics Holdings, Inc. 2023 Commercial Equity Plan (incorporated herein by reference to Exhibit
4.3 to the Registration Statement on Form S-3 (File No. 333-269177) filed with the Commission on
January 10, 2023).
10.26 Common Stock Purchase Warrant, dated April 1, 2023 (incorporated herein by reference to Exhibit 10.2
to the Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on
March 15, 2023).
10.27+ Non-Employee Director Compensation Policy (As amended on May 25, 2021) (incorporated herein by
reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37717) filed
with the Commission on May 9, 2023).
10.28 Loan and Security Agreement, dated September 8, 2023, by and among the Company and Hercules
Capital, Inc. (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K (File No. 001-37717) filed with the Commission on September 11, 2023).
126
Exhibit
Number
Description of Document
10.29 Form of Warrant Agreement (incorporated herein by reference to Exhibit 10.2 to the Registrant’s
Current Report on Form 8-K (File No. 001-37717) filed with the Commission on September 11, 2023).
16.1 Letter from Ernst & Young LLP dated March 15, 2022 to the Securities and Exchange Commission
regarding change in certifying accountant (incorporated herein by reference to Exhibit 16.1 to the
Registrant’s Current Report on Form 8-K (File No. 001-37717) filed with the Commission on March 15,
2022).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Registrant's Current
Report on Form 8-K (File No. 333-198168) filed on December 10, 2015).
23.1* Consent of KPMG LLP, independent registered public accounting firm.
31.1* Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated
under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002.
31.2* Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated
under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of the Sarbanes-Oxley
Act of 2002.
32.1* † Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-
14(b) and 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
Incentive Compensation Recoupment Policy, approved October 25, 2023.
97.1*
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
† These certifications are being furnished herewith solely to accompany this Annual Report pursuant to 18 U.S.C.
Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after
the date hereof, regardless of any general incorporation language in such filing.
Indicates management contract or compensatory plan.
+
# Certain portions of this exhibit, indicated by asterisks, have been omitted because they are not material and are the
type that the registrant treats as private and confidential.
Item 16. Form 10-K Summary
Not applicable.
127
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SENSEONICS HOLDINGS, INC.
By:
/s/ Timothy T. Goodnow, Ph.D.
Timothy T. Goodnow, Ph.D.
President and Chief Executive Officer
Date: February 29, 2024
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Timothy T. Goodnow, Ph.D., and Rick Sullivan, jointly and severally, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Senseonics Holdings, Inc., and
any or all amendments (including post-effective amendments) thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be
done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ TIMOTHY T. GOODNOW,
PH.D.
Timothy T. Goodnow, Ph.D.
/s/ RICK SULLIVAN
Rick Sullivan
/s/ STEPHEN P. DEFALCO
Stephen P. DeFalco
/s/ STEVEN EDELMAN, M.D.
Steven Edelman, M.D.
/s/ EDWARD J. FIORENTINO
Edward J. Fiorentino
/s/ DOUGLAS S. PRINCE
Douglas S. Prince
/s/ DOUGLAS A. ROEDER
Douglas A. Roeder
/s/ FRANCINE KAUFMAN,
M.D.
Francine Kaufman, M.D.
President, Chief Executive Officer and Director
February 29, 2024
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
February 29, 2024
Chairman of the Board of Directors
February 29, 2024
Director
Director
Director
Director
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
Director and Chief Medical Officer
February 29, 2024
128
/s/ ROBERT SCHUMM
Robert Schumm
/s/ ANTHONY RAAB
Anthony Raab
/s/ KOICHIRO SATO
Koichiro Sato
/s/ SHARON D. LARKIN
Sharon D. Larkin
Director
Director
Director
Director
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
129