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What changed in Senseonics Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Senseonics Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+397 added−372 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-16)

Top changes in Senseonics Holdings, Inc.'s 2023 10-K

397 paragraphs added · 372 removed · 299 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

93 edited+30 added−21 removed164 unchanged
Biggest changeGet 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 invested in a new 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.
Biggest changeOur 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. ​ 25 ● 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.
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 extended life Eversense E3 CGM system and Ascensia began commercialization in select markets in Europe during the third quarter of 2022.
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.
As described in detail below, in August 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 4 our 180-day Eversense E3 CGM system worldwide, with certain initial exceptions.
As described in detail below, in August 4 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. ​ 2022 and 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.
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.
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 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%.
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 8 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%.
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. ● 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.
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. 9 ● 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 include, but are not limited to: ​ ● establishment registration and device listing; 17 ● 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 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.
These include, but are not limited to: ​ ● establishment registration and device listing; ● 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 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.
These may include, among other things, any of the following sanctions or consequences: ​ ● warning letters or untitled letters that require corrective action; ● fines and civil penalties; ● unanticipated expenditures; ● delays in approving or refusal to approve future products; ● FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● suspension or withdrawal of FDA clearance or approval; ● product recall or seizure; ● interruption of production; ● operating restrictions; ● injunctions; and ● criminal prosecution. ​ In the EEA, similar regulatory requirements apply once a device has been CE marked and placed on the EEA Market.
These may include, among other things, any of the following sanctions or consequences: ​ ● warning letters or untitled letters that require corrective action; ● fines and civil penalties; ● unanticipated expenditures; ● delays in approving or refusal to approve future products; ● FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● suspension or withdrawal of FDA clearance or approval; ● product recall or seizure; ● interruption of production; ● operating restrictions; ● injunctions; and 19 ● criminal prosecution. ​ In the EEA, similar regulatory requirements apply once a device has been CE marked and placed on the EEA Market.
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. ​ 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.
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. ​ 24 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.
Our business is subject to federal, state, local, and foreign regulations and standards, such as ISO 13485, ISO 14971, FDA's Quality System 15 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.
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.
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. ​ 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.
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. ​ 14 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.
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. ​ 23 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.
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.
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. ​ 18 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.
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.
Apart from low risk medical devices (Class I with no measuring function and which are not sterile), 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.
Apart from low risk medical devices (Class I with no measuring function and which are not sterile), 16 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.
There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries. ​ On 26 May 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 16 90/385/EEC concerning active implantable medical devices, or AIMD.
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.
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 glucose level.
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 13 glucose level.
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 Diabetes Care Holdings AG 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, 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 does not include Israel.
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.
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 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 “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 aware of numerous patents issued to third parties that may relate to the technology used in our 14 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.
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.
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 Similar Foreign and State Laws and Regulations Affecting the Transmission, Security and Privacy of Health 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.
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.
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. ​ 5 In an attempt to maintain blood glucose levels within the normal range, many people with diabetes seek to actively monitor their 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 FDA and applicable regulatory agencies 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.
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.
The mobile app receives information from the transmitter via 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 receives information from the transmitter via 10 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.
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. ​ 8 PROMISE Trial ​ In December 2018, we began enrollment for the U.S. 180-day pivotal trial.
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.
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 12 sensor by their healthcare provider. As a result, some patients and their healthcare provider may choose not to use Eversense on a widespread basis.
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.
Northern Ireland will continue to follow many aspects of the European Union regulatory rules, particularly in relation to trade in goods. ​ On 26 May 2021, the Medical Device Regulation entered into application in the EU. However, the Medical Device Regulation is not applicable in the UK.
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.
The capsule is coated with a glucose-indicating hydrogel that 10 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.
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.
A PMA application must be supported by valid scientific evidence that typically includes extensive technical, preclinical, clinical, manufacturing and labeling data, to demonstrate to the FDA's satisfaction the safety and efficacy of the device.
A PMA application must be supported by valid scientific evidence that typically includes extensive technical, preclinical, clinical, manufacturing and 15 labeling data, to demonstrate to the FDA's satisfaction the safety and efficacy of the device.
As a 20 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.
As a 21 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.
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. ​ ​ 11 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 90-day Eversense CGM system and our six-month Eversense CGM system worldwide for use in people with diabetes, with certain exceptions.
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.
Coverage systems in international markets vary significantly by country and, within some countries, by region. Coverage approvals must be obtained on a country-by-country, region-by-region or, in some instances, a case-by case basis.
Coverage systems in international markets vary significantly by country and, within some countries, by region. Coverage approvals 12 must be obtained on a country-by-country, region-by-region or, in some instances, a case-by case basis.
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 2031 unless additional congressional action is taken.
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.
If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2032 to 2042, 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.
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.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. ​ 21 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.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. ​ 22 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.
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.
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.
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 the once or twice daily calibrations towards a once per week calibration.
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.
This software also provides opportunities for peer-to-peer recognition and valuable insights for managers to better lead their teams. We continue to conduct company calls twice a 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.
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.
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 agencies and Notified Bodies.
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 launched 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 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.
As of December 31, 2022, we had 121 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.
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.
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, 2022, we held a total of approximately 500 issued patents and pending patent applications that relate to our CGM system.
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.
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 and CE Certificates of Conformity to market their respective CGM systems across the United States and EEA.
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.
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 was a strategic imperative for us in 2022.
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.
In February 2022, the 180-day extended life Eversense E3 CGM system was approved by the FDA and Ascensia Diabetes Care Holdings AG (“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.
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.
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.
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.
We are also developing our “Freedom” product variation which would include an implantable battery and Bluetooth 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.
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.
Our 19 relationships with healthcare providers and other third parties are subject to scrutiny under these laws.
Our 20 relationships with healthcare providers and other third parties are subject to scrutiny under these laws.
Our next generation sensor under pivotal testing now 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.
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.
To date, approximately 250 million people in the United States may have coverage and access to the Eversense E3 product via commercial or government (i.e., 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.
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.
Our implantable CGM (“Eversense”), including 90-day Eversense, Eversense XL and Eversense E3 continuous glucose monitoring (“CGM”) system versions are 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 in the case of Eversense XL and Eversense E3, as compared to seven to 14 days for non-implantable CGM systems.
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.
Our intellectual property portfolio includes 96 issued United States patents, 200 patents issued in countries outside the United States and 204 pending patent applications worldwide. Our patents expire between 2023 and 2042, subject to any patent term extensions or adjustments that may be available for such patents.
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.
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.
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.
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. As a result, there will be some regulatory divergence in the UK from the EU.
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.
On December 7, 2015, pursuant to the Merger Agreement and the transactions contemplated thereby, or the Acquisition, 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.
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.
In efforts to address these priorities, Ascensia, in consultation with us, initiated a broad patient assistance program to provide financial assistance for patients adopting Eversense E3.
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.
The TCA primarily focuses on ensuring free trade between the European Union and the UK in relation to goods.
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.
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. 25 ​ In connection with the Acquisition, we reincorporated in Delaware and changed our name to Senseonics Holdings, Inc.
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.
As a result of this review process, we made market adjustments to many of our employees during the beginning of 2022 and mid-year with efforts to stay on track with the everchanging labor market. Annual increases and incentive compensation are based on merit and documented through our performance management process as part of our annual review procedures.
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.
We continue to deliver training and engage in development conversations with our managers and directors. ​ 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 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 continued to meet with the executive team spending significant time for strategic, operational, and organizational planning. Many of these meetings were focused on organizational development including reviewing new demographic data to better understand our employee profiles and address their specific needs.
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.
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 13 Freestyle Libre 2 product 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.
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.
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 current employees, and the new hires that we welcomed to our organization during 2022.
Throughout the year, we committed to employ initiatives and communications to build close connections between our employees and the company mission, vision, and values.
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. ​ 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.
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.
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 are also continuing to conduct a number of post-approval and feasibility studies. ​ United States Pivotal Trials ​ PRECISE II Trial ​ In 2016, we conducted our U.S. 90-day pivotal trial.
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. ​ ​ 7 United States Pivotal Trials ​ PRECISE II Trial ​ In 2016, we conducted our U.S. 90-day pivotal trial.
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 UK Conformity Assessed ("UKCA") mark to replace the CE Mark for placing medical devices on the market in Great Britain.
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.
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. ​ 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 product 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 90-day coverage to six month 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 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.
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.
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.
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 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 payors or government agencies.
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 6 payors or government agencies.
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.
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 engage nationally recognized compensation and benefits consulting firms to evaluate our total rewards programs and to provide benchmarking against our peers within the industry. We provide our employees with market competitive pay and bonuses.
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 26 benchmarking against our peers within the industry.
As a result, the current timeframes established in the transitional provisions of the Medical Device Regulation may be subject to upcoming amendments. ​ 22 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. ​ 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.
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. ​ ​ ​ 23 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.
We encourage professional certification and continuing education by reimbursement for professional certification classes, testing, maintenance, and tuition reimbursement of up to $5,250 annually.
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 also submitted and received approval for an investigational device exemption (“IDE”) for an extension of the trial to allow for pediatric patients and we plan to begin enrollment of pediatrics in the second quarter of 2023. ​ 9 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.
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.
This group of healthcare providers includes specialists who have strong familiarity with conducting in-office procedures such as dermatologists and plastic surgeons.
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.
Similar laws have been enacted or are under consideration in many states and foreign jurisdictions. ​ 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.
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.
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 Sr.
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.
Each pillar is supported by specific tools and resources to educate and reinforce the importance of wellness. This program included a stipend to further support healthy behaviors and to demonstrate our commitment to employee well-being. ​ Organizational Development ​ We are committed to attracting, developing, and retaining employees by promoting an environment to continuously develop and learn.
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.
During 2022, we have been working with payors to transition their policies to Eversense E3 and have confirmed immediate coverage policy transition from select payors. ​ 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.
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.
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. ​ 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.
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.
The ENHANCE pivotal study for the Eversense 365-day system completed enrollment in the third quarter of 2022 and we expect to have data in the second half of 2023. ​ 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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePreparing 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. ​ 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).
Biggest changeThis 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).
On 26 May 2021, the MDR entered into application in the EU. However, the MDR is not applicable in the UK.
On May 26, 2021, the MDR entered into application in the EU. However, the MDR is not applicable in the UK.
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; ● 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 42 ● the timing of revenue recognition associated with our product sales pursuant to applicable accounting standards. ​ 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.
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; ● 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. ​ 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.
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. ​ ​ 52 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 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.
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; and ● 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. ​ 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.
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. ​ 32 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.
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; 29 ● 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.
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.
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. ​ 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.
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. 30 ​ 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.
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: ​ ● 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; ● greater ability to cross-sell products or provide incentives to healthcare providers to use their products; and ● more experience in conducting research and development, manufacturing, clinical trials, and obtaining 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.
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: ​ ● 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; 37 ● greater ability to cross-sell products or provide incentives to healthcare providers to use their products; and ● more experience in conducting research and development, manufacturing, clinical trials, and obtaining 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.
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. ​ ​ 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.
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. ​ ​ 62 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.
If any such actions are instituted against us, and we are 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.
If any such actions are instituted against us, and we are 47 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 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. ​ 36 These risks are likely to be exacerbated by our limited experience with Eversense and its manufacturing process.
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.
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: ​ ● 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.
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: 34 ​ ● 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.
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. ​ 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.
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. 49 ​ 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.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. ​ 50 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).
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).
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. ​ 53 We are subject to the U.K.
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.
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 notes will have on our future GAAP financial results, the trading of our common stock and the trading price of the notes, which could be material.
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.
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. ​ 45 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.
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.
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. ​ 28 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.
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.
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 54 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.
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 impact to Ukraine as well as actions taken by other countries, 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.
The impact to Ukraine as well as actions taken by other countries, 41 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.
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 intensively managed diabetes market in particular, any one or more of which may prove to be inaccurate.
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.
Also, if there should be widespread off-label use of our system by patients, and resulting adverse medical events, the 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.
Also, if there should be widespread off-label use of our system by patients, and resulting adverse medical events, the 60 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.
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. ​ 35 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 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 the actual number of people with diabetes who would benefit from Eversense 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.
If the actual number of people with diabetes who would benefit from Eversense 38 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.
The occurrence of any of these events may harm our business, financial condition and operating results. ​ 48 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 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.
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; 51 ● preclinical studies and clinical trials; ● product safety; ● establishment registration and product listing; ● labeling and storage; ● marketing, manufacturing, sales and distribution; ● pre-market clearance, certification or approval; ● servicing and post-market surveillance; ● advertising and promotion; and ● recalls and field safety corrective actions. ​ The regulations to which we are subject are complex and have tended to become more stringent over time.
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; ● marketing, manufacturing, sales and distribution; ● pre-market clearance, certification or approval; ● servicing and post-market surveillance; ● advertising and promotion; and ● recalls and field safety corrective actions. ​ The regulations to which we are subject are complex and have tended to become more stringent over time.
Delays in obtaining future approvals or certification, including 44 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.
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.
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 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.
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.
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. ​ 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.
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. ​ 40 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.
Further, as the number of participants in the diabetes market increases, the possibility of intellectual property infringement claims against us increases. ​ 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.
Further, as the number of participants in the diabetes market increases, the possibility of intellectual property infringement claims against us increases. ​ 50 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.
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. 64 ​ 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.
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.
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 decline, and we could be subject to sanctions or investigations by the NYSE American, the SEC or other regulatory authorities.
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 66 decline, and we could be subject to sanctions or investigations by the NYSE American, the SEC or other regulatory authorities.
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. ​ 32 Within and outside the United States, reimbursement is obtained from a variety of sources, including government sponsored and private health insurance plans.
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.
We cannot assure you, however, that our policies and procedures will be 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.
We cannot assure you, however, that our policies and procedures will be 54 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.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition and variable consideration, reserves for inventory 62 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.
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 may be forced to abandon specific patents due to a lack of financial resources. ​ 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.
We may be forced to abandon specific patents due to a lack of financial resources. ​ 51 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.
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 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.
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 43 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.
These actions could disrupt the employee base, our ability to attract and retain qualified personnel, or cause other operational and administrative inefficiencies. ​ 46 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.
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.
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 agencies overseeing the implementation and adherence of applicable regulations. These inspections may include our suppliers’ facilities.
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.
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. ​ 38 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.
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.
Delays in receipt of or failure to 59 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.
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.
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. ​ Both before and after a product is commercially released, we will have ongoing responsibilities under U.S. and EU regulations.
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. ​ 31 Both before and after a product is commercially released, we will have ongoing responsibilities under U.S. and EU regulations.
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 income tax law, 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.
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.
In addition, negative publicity and product liability 30 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.
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.
Net prices for products may be 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.
Net prices for products may be 35 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.
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 condition at such time.
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 44 condition at such time.
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. ​ 49 In the future, we could receive communications from various industry participants alleging our infringement of their intellectual property 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.
We may not identify, secure, or complete any such transactions or arrangements in a timely manner, on a 39 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.
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.
However, vandalism, terrorism or a natural or other disaster, such as an 37 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.
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.
We cannot assure you that long-term use would not result in unanticipated complications, even after the device is removed. ​ 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.
We cannot assure you that long-term use would not result in unanticipated complications, even after the device is removed. ​ 39 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.
We base our estimates on historical experience and on various other assumptions that we believe to 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.
We base our estimates on historical experience and on various other assumptions that we believe to 64 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.
The outcome of HTA regarding specific medical device will often influence the pricing and reimbursement 33 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 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 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.
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.
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 57 time and resource consuming and can divert management's attention from our core business.
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.
Future increases in sales of Eversense, whether 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.
Future increases in sales of Eversense, whether 33 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.
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. ​ Summary of Risks Affecting Our Business ​ Our business is subject to numerous risks.
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. ​ 27 Summary of Risks Affecting Our Business ​ Our business is subject to numerous risks.
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; ● withdrawal of clinical trial participants; ● 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 incident, we cannot assure you that such insurance would adequately protect our assets from the financial impact of defending a product liability claim.
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; ● withdrawal of clinical trial participants; ● 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.
In addition, the competent 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.
In addition, the competent 61 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.
If our actual results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline significantly. 26 ● Medical device development involves a lengthy and expensive process, with an uncertain outcome.
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.
Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time. Any such enactment, interpretation, change, repeal, or modification could adversely affect us, possibly with retroactive effect.
Further, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted differently, changed, repealed, or modified at any time. 67 Any such enactment, interpretation, change, repeal, or modification could adversely affect us, possibly with retroactive effect.
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 agencies, 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.
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.
However, certain changes to a PMA-approved device do not require submission and approval of a 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.
However, certain changes to a PMA-approved device do not require submission and approval of a 45 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.
For 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.
For example, 52 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.
For 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.
For 53 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.
Due to differences between foreign and 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.
Due to differences between foreign and 48 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.
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 58 and other healthcare-related organizations.
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.
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 agencies, among others.
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.
The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.
The loss of the services of our executive officers or other key employees could impede the 46 achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.
Further, 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 ​ 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.
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.
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 2031 unless additional Congressional action is taken.
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.
Some of these risks include: ​ ● 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 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.
Some of these risks include: ​ ● 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.
We have no material weaknesses in our internal control over financial reporting at December 31, 2022. 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.
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.
Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition. ​ 40 The ongoing military action by Russia in Ukraine 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.
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 Note Purchase Agreement also contains 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. ​ In addition, the indentures related to the 2023 Notes and the 2025 Notes contain, and any future indebtedness we incur may contain, various negative covenants that restrict, among other things, our ability to: ​ ● 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; ● 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 . 43 ​ 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.
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: ​ ● 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; ● 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.
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, Truist Bank, and Silicon Valley Bridge Bank (formerly Silicon Valley Bank) and consist of cash in our operating accounts and cash invested in money market funds.
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.
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 intensively managed diabetes, their caregivers and healthcare providers that represent only a small percentage of the overall intensively managed diabetes market.
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.
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 2023 Notes and the 2025 Notes and PHC Notes, we may be able to incur substantial additional debt in the future, some of which may be secured debt.
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.
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 product and we expect all other CGM companies to pursue an iCGM indication including Medtronic. ​ 34 In addition to CGM providers, we also compete with providers of SMBG systems.
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.
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.
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.
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: ​ ● 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, whether due to the global COVID-19 pandemic or otherwise; ● 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.
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: ​ ● 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. 63 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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, 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, expiring in 2023. This facility was decommissioned in 2021 and we will continue making lease payments until the lease expiration.
Biggest changeAdditionally, 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. ​
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. 69 ​
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 2028.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIt is possible under the applicable process that the Garante may, in the future, follow up further regarding the Company’s corrective measures and overall GDPR compliance. ​ 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.
Biggest changeThis 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.
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, we 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.
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 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. Outside counsel, on behalf of the Company, has filed a motion to dismiss the action for failure to state a claim.
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.
Removed
On March 31, 2022, the court granted the motion to dismiss the action without prejudice which allows the plaintiff 60 days to refile the complaint. On May 27, 2022, the plaintiff filed an amended complaint and on July 11, 2022, the Company filed a motion to dismiss the action for failure to state a claim.
Added
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.
Removed
That motion was referred to a magistrate judge. On March 3, 2023, the magistrate judge agreed with Senseonics and recommended that the amended complaint be dismissed. That recommendation to dismiss is now pending before the district court.
Added
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.
Removed
The parties have until March 31, 2023, to respond to any objections to the magistrate judge's report and recommendation. ​ 66 In February 2021, in compliance with the security incident notification obligations laid out in the GDPR, the Company notified the Italian Data Protection Authority (“Garante”), of an unintended disclosure of certain user e-mail addresses to other users in Italy.
Removed
Subsequent to this notification, the Company was able to settle the matter with the Garante.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur 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 March 10, 2023, we had 479,780,414 shares of common stock outstanding held by 173 holders of record. ​ 67 Performance Graph ​ The following graph compares the performance of our common stock since March 18, 2016, the date on which our common stock commenced trading on the NYSE American, with the Nasdaq Composite Index and the Nasdaq Healthcare Index.
Biggest changeOur 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. ​ 70 Item 6. [Reserved] ​ ​ ​
Removed
The comparison assumes a $100 investment on March 18, 2016 in our common stock, the stocks comprising the Nasdaq Composite Index and the Nasdaq Healthcare Index, and assumes reinvestment of the full amount of all dividends, if any.
Removed
Historical stockholder return is not necessarily indicative of the performance to be expected for any future periods. ​ ​ The comparisons in the graph are not intended to forecast or be indicative of possible future performance of our common stock.
Removed
The performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act. ​ Recent Sales of Unregistered Securities ​ As previously announced, on November 9, 2020, we 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 our newly designated series B convertible preferred stock (the “Series B Preferred Stock”) at our request from time to time during the 24-month term of the Equity Line Agreement.
Removed
Pursuant to the Equity Line Agreement, beginning January 21, 2021, subject to the satisfaction of certain conditions, including that we have less than $8.0 million of cash, cash equivalents and other available credit (aside from availability under the Equity Line Agreement), we 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.
Removed
The Equity Line Agreement provided that we were not permitted to affect any Regular Purchase Notice under the Equity Line Agreement on any date where the closing price of our common stock on the NYSE American is less than $0.25 without the approval of Energy Capital.
Removed
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 us 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 68 Price.
Removed
On November 7, 2022, Energy Capital exercised in full its right to purchase $12.0 million of Series B Preferred Stock.
Removed
Each share of Series B Preferred Stock is initially convertible into a number of shares of our common stock 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.
Removed
The issuance of the Series B Preferred Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(a)(2) of the Securities Act as a transaction with a single accredited investor not involving a public offering. ​ Item 6. [Reserved] ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs 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. ​ 77 Cash Flows ​ The following is a summary of cash flows for each of the periods set forth below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2022 ​ 2021 ​ Net cash used in operating activities $ (66,312) $ (56,078) Net cash provided by (used in) investing activities ​ 26,882 ​ (148,749) ​ Net cash provided by financing activities ​ 41,762 ​ 220,083 ​ Net increase in cash and cash equivalents ​ $ 2,332 ​ $ 15,256 ​ ​ Net cash used in operating activities ​ 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 issuance of options. ​ Net cash used in operating activities was $56.1 million for the year ended December 31, 2021, and consisted of a net loss of $302.5 million, a net change in operating assets and liabilities of $1.5 million, and $0.3 million of loss on extinguishment of debt, offset by a change in fair value of derivative liabilities of $174.2 million, a change of $53.2 million in the fair value adjustment related to the Energy Capital transactions, other non-cash charges, net of $9.6 million, stock-based compensation expense of $9.0 million, and $2.2 million of impairment costs. ​ ​ Net cash provided by (used in) investing activities ​ 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 used in investing activities was $148.7 million for the year ended December 31, 2021, and consisted of $154.5 million from the purchase of marketable securities and $0.2 million of capital expenditures for laboratory equipment, offset by $6.0 million form sale and maturity of marketable securities. ​ Net cash provided by financing activities ​ Net cash provided by financing activities was $41.8 million for the year ended December 31, 2022, and primarily consisted of $12 million 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. ​ Net cash provided by financing activities was $220.1 million for the year ended December 31, 2021, and primarily consisted of $200.4 million from issuance of common stock, proceeds of $22.8 million for the issuance of Series A preferred stock and $5.0 million for proceeds related to exercise of stock options and warrants, offset by repayment of $2.8 million of PPP loan and $5.3 million taxes paid related to net share settlement of equity awards. ​ 78
Biggest changeAs 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ Net cash used in operating activities $ (70,163) $ (66,312) Net cash provided by investing activities ​ 89,713 ​ 26,882 ​ Net cash provided by financing activities ​ 20,366 ​ 41,762 ​ Net increase in cash and cash equivalents ​ $ 39,916 ​ $ 2,332 ​ ​ Net cash used in operating activities ​ 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. ​ 81
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.
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.
The Warrant was exercised in full in February 2022. ​ 75 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.
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.
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 trade receivables and unbilled receivables from customers and are recorded at net realizable value.
Depending on the variable consideration, we develop 74 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.
We do not expect any material changes in the near term to the underlying assumptions during the year ended December 31, 2023. ​ 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.
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.
We also issued PHC 2,941,176 shares of common stock to PHC as a financing fee. We also have 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.
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.
In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the 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 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.
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, 2022.
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.
This sub-set of 30 participants were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.
This sub-set of 72 30 participants were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.
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 6 months in the United States. In September 30, 2019, we completed enrollment of the PROMISE trial.
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.
Based on the data from this trial, in October 2016 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.
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.
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 “Exchange Warrant”) to purchase up to 68,525,311 shares of common stock. The Exchange Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per share.
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.
We had previously obtained this indication for Eversense in the United States 70 in 2019.
We had previously obtained this indication for Eversense in the United States in 2019.
On August 3, 2020, 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.
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.
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 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 for people with diabetes, with the following initial exceptions: (1) 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; (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.
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.
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.
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.
The Highbridge Warrants are exercisable until April 24, 2023. During the year ended December 31, 2021, the warrant holders exercised 1,750,000 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.
In the trial, we observed performance matching that of the 90-day Eversense system 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.
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.
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 2023 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 2024.
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.
In December 2021, CMS released its Calendar Year 2022 Medicare Physician Fee Scheduled that update 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 December 2021, CMS released its Calendar Year 2022 Medicare 71 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.
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 iCGM submission for the Eversense E3 system using the SBA technology.
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.
The distribution rights under the agreement expired January 31, 2021. ​ In June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system, and Ascensia began commercialization in select European markets during the third quarter of 2022, with the commercialization in all European markets in the fourth quarter 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 71 liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
The distribution rights under the agreement expired January 31, 2021. 73 ​ 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.
In the trial, we observed a 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.
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.
Our implantable CGM (“Eversense”) including, 90-day Eversense, Eversense XL and Eversense E3 continuous glucose monitoring (“CGM”) systems are 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 in the case of Eversense E3 and Eversense XL, as compared to seven to 14 days for non-implantable CGM systems.
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.
The increase was due to investments for next generation technologies including a $7.1 million increase in clinical studies activities, an increase of $3.3 million in personnel related costs due to the expansion of our research and development workforce, an increase of $1.6 million for consulting and other research and development support services and an increase of $0.5 million in other administrative R&D expenses. ​ Selling, general and administrative expenses ​ Selling, general and administrative expenses were $31.6 million for the year ended December 31, 2022, compared to $29.1 million for the year ended December 31, 2021, an increase of $2.5 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 76 $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.
Unbilled receivables relate to the revenue share variable consideration from the Ascensia commercial 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. ​ In July 2019, we issued $82.0 million in aggregate principal amount of convertible senior subordinated notes due 2025, or the 2025 Notes.
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 purchase price of the Purchase Warrant was approximately $0.97 per Purchase Warrant Share. The Purchase Warrant is a “pre-funded” 74 warrant with a nominal exercise price of $0.001 per Purchase Warrant Share.
The Purchase Warrant is a “pre-funded” warrant with a nominal exercise price of $0.001 per Purchase Warrant Share.
There were no warrants exercised for the year ended December 31, 2022. ​ On November 9, 2020, the Company entered into the Equity Line Agreement and issued Energy Capital warrants to purchase up to 10,000,000 shares of Company’s common stock with an exercise price of $0.3951 per share (“Energy Capital Warrants”). The Energy Capital Warrants vested on May 9, 2021.
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”).
In both the United States and our overseas markets, we have entered into a strategic partnerships and distribution agreements that allow third party collaborators with direct sales forces and established distribution systems to market and promote Senseonics CGM systems, including 90-day Eversense, Eversense XL, Eversense E3 and future generation products. ​ ​ United States Development and Commercialization of Eversense ​ In 2016, we completed our PRECISE II pivotal clinical trial in the United States.
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.
Our gross profit increased to $2.7 million for the year ended December 31, 2022, compared to ($0.8 million) for the year ended December 31, 2021. Gross profit as a percentage of revenue, or gross margin, was 16.6% and (5.9%) for the years ended December 31, 2022 and 2021, respectively.
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.
In June 2022, we affixed the CE mark to the Eversense E3 CGM system and Ascensia began commercializing Eversense E3 in Europe in the third 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.
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.
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).
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”).
In connection with the 2025 Notes, 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. ​ 72 In August 2020, we issued $35.0 million in aggregate principal amount of convertible senior secured notes due 2024, or the PHC Notes.
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 increase was primarily the result of a $3.4 million increase in personnel costs, a $1.4 million increase in other general and administrative costs to include recruiting and associated employee overhead, local tax expenses, and legal expenses partially offset by a $2.3 million decrease in sales and marketing costs. ​ Total other income (expense), net ​ Total other income (expense), net, was $210.7 million for the year ended December 31, 2022, compared to ($245.3) million for the year ended December 31, 2021, a change of $456.0 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.
Jefferies will receive a commission up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement.
Jefferies received commissions up to 3.0% of the gross proceeds of any common stock sold through Jefferies under the 2021 Sales Agreement.
In April 2022, the Company repaid the outstanding principal and accrued interest in full. ​ Convertible Notes ​ The following table summarizes our outstanding senior convertible note obligations at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate ​ ​ ​ Initial Conversion ​ Conversion Price ​ Convertible ​ Issuance ​ ​ Principal ​ Maturity ​ Rate per $1,000 ​ per Share of ​ Note ​ Date Coupon (in millions) Date Principal Amount Common Stock 2023 Notes ​ January 1, 2018 ​ 5.25% ​ $ 15.7 ​ ​ February 1, 2023 ​ ​ 294.1176 ​ $ 3.40 ​ 2025 Notes ​ July 1, 2019 ​ 5.25% ​ $ 51.2 ​ ​ January 15, 2025 ​ ​ 757.5758 ​ $ 1.32 ​ PHC Notes ​ August 14, 2020 ​ 8.00% ​ $ 35.0 ​ ​ October 31, 2024 ​ ​ 1901.7956 ​ $ 0.53 ​ ​ See Note 13 in the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report for further discussion of the 2023 Notes, PHC Notes and 2025 Notes, as well as Note 21 in the accompanying notes to our consolidated financial statements for a discussion of our agreement with PHC, whereby PHC has agreed to exchange the PHC Notes for the Exchange Warrant. ​ 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.
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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate ​ ​ ​ Initial Conversion ​ Conversion Price ​ Convertible ​ Issuance ​ ​ Principal ​ Maturity ​ Rate per $1,000 ​ per Share of ​ Note ​ Date Coupon (in millions) Date Principal Amount Common Stock 2025 Notes ​ July 1, 2019 ​ 5.25% ​ $ 20.4 ​ ​ January 15, 2025 ​ ​ 757.5758 ​ $ 1.32 ​ ​ 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.
As of the date of this Annual Report on Form 10-K, we have received $34.4 million in net proceeds from the sale of 15,160,899 shares of our common stock under the 2021 Sales Agreement. ​ In November 2019, we entered into an Open Market Sale Agreement (“2019 Sales Agreement”) with 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 $50.0 million through Jefferies as our sales agent in an “at the market” offering.
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.
The Oxford/SVB warrants expire on June 30, 2026, November 22, 2026 and March 29, 2027, respectively. ​ On July 16, 2019, the Company entered into a loan agreement with Solar Capital, Ltd. (“Solar”) and issued Solar warrants to purchase an aggregate of 1,125,000 shares of the Company’s common stock with an exercise price of $1.20 per share (“Solar 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”).
Our positive income in the current year is substantially the result of fair value gains due to embedded derivatives in our convertible notes. We incurred total net income (loss) of $142.1 million, ($302.5) million, and ($175.2) million for the years ended December 31, 2022, 2021 and 2020, respectively.
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.
All shares of Series A Preferred Stock have been converted to common stock as of December 31, 2021. ​ Warrants ​ On June 30, 2016, the Company 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”).
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”).
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 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.
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.
As of December 31, 2022, we had an accumulated deficit of $808.9 million. To date, we have financed our operations primarily through sales of our equity securities and debt financings.
To date, we have financed our operations primarily through sales of our equity securities and debt financings.
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 September 2022, we completed enrollment of the ENHANCE study.
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.
We engage a third-party valuation specialist to perform the valuation using the binomial option pricing model. ​ Results of Operations ​ Comparison of the Years Ended December 31, 2022 and 2021 ​ The following table sets forth our results of operations for the years ended December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Period-to- ​ ​ 2022 ​ 2021 ​ Period Change ​ ​ (in thousands) ​ ​ (in thousands) Revenue, net $ 656 $ 1,394 $ (738) ​ Revenue, net - related parties ​ ​ 15,733 ​ ​ 12,281 ​ ​ 3,452 ​ Total revenue ​ ​ 16,389 ​ ​ 13,675 ​ ​ 2,714 ​ Cost of sales ​ ​ 13,663 ​ ​ 14,486 ​ ​ (823) ​ Gross profit ​ ​ 2,726 ​ ​ (811) ​ ​ 3,537 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development expenses ​ 39,719 ​ 27,217 ​ 12,502 ​ Selling, general and administrative expenses ​ 31,634 ​ 29,154 ​ 2,480 ​ Operating loss ​ (68,627) ​ (57,182) ​ (11,445) ​ Other (expense) income, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ 1,824 ​ ​ 243 ​ ​ 1,581 ​ Gain (Loss) on fair value adjustment of option ​ ​ 43,745 ​ ​ (53,152) ​ ​ 96,897 ​ Gain (Loss) on extinguishment of debt and option ​ ​ (101) ​ ​ 330 ​ ​ (431) ​ Interest expense ​ (18,703) ​ (16,720) ​ (1,983) ​ Gain (Loss) on change in fair value of derivatives ​ ​ 184,221 ​ ​ (174,173) ​ ​ 358,394 ​ Impairment cost ​ ​ (138) ​ ​ (1,647) ​ ​ 1,509 ​ Other expense ​ (102) ​ (173) ​ 71 ​ Total other (expense) income, net ​ 210,746 ​ (245,292) ​ 456,038 ​ Net Income (loss) ​ $ 142,119 ​ $ (302,474) ​ $ 444,593 ​ ​ ​ Components of Results of Operations ​ Total revenue ​ Our total net revenue increased to $16.4 million for the year ended December 31, 2022, compared to $13.7 million for the year ended December 31, 2021, an increase of $2.7 million.
We engage a third-party valuation specialist to perform the valuation using the binomial option pricing model. ​ 75 ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ Period Change ​ ​ (in thousands) ​ ​ (in thousands) Revenue, net $ 1,655 $ 656 $ 999 ​ Revenue, net - related parties ​ ​ 20,735 ​ ​ 15,733 ​ ​ 5,002 ​ Total revenue ​ ​ 22,390 ​ ​ 16,389 ​ ​ 6,001 ​ Cost of sales ​ ​ 19,299 ​ ​ 13,663 ​ ​ 5,636 ​ Gross profit ​ ​ 3,091 ​ ​ 2,726 ​ ​ 365 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development expenses ​ 48,752 ​ 39,719 ​ 9,033 ​ Selling, general and administrative expenses ​ 29,942 ​ 31,634 ​ (1,692) ​ Operating loss ​ (75,603) ​ (68,627) ​ (6,976) ​ Other income (expense), net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ ​ 5,362 ​ ​ 1,824 ​ ​ 3,538 ​ Gain on fair value adjustment of option ​ ​ — ​ ​ 43,745 ​ ​ (43,745) ​ Exchange related gain, net ​ ​ 14,109 ​ ​ — ​ ​ 14,109 ​ Loss on extinguishment of debt and option ​ ​ — ​ ​ (101) ​ ​ 101 ​ Interest expense ​ (11,110) ​ (18,703) ​ 7,593 ​ Gain on change in fair value of derivatives ​ ​ 6,648 ​ ​ 184,221 ​ ​ (177,573) ​ Impairment cost ​ ​ — ​ ​ (138) ​ ​ 138 ​ Other income (expense) ​ 202 ​ (102) ​ 304 ​ Total other income, net ​ 15,211 ​ 210,746 ​ (195,535) ​ Net (Loss) Income ​ $ (60,392) ​ $ 142,119 ​ $ (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 due to the launch of Eversense E3 in the United States beginning in the second quarter of 2022 and the launch of Eversense E3 outside the United States during the fourth quarter of 2022, partially offset by slightly lower sales outside of the United States for the twelve-month period. ​ 73 Cost of sales and gross profit ​ Our cost of sales decreased to $13.7 million for the year ended December 31, 2022, compared to $14.5 million for the year ended December 31, 2021.
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.
The net proceeds to us from the Registered Direct Offering, after deducting fees and expenses and the estimated offering expenses payable by us, are approximately $46.1 million. ​ 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. ​ 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 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.
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.
As of December 31, 2022, the Energy Capital have been exercised in full, on a net basis. ​ As described above, on March 13, 2023, we issued the Purchase Warrant to PHC, which is exercisable for up to 15,425,750 shares of common stock.
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.
As of December 31, 2022, we had cash, cash equivalents and marketable securities of $156.3 million. ​ 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”).
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.
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. In June 2018, the U.S. Food and Drug Administration, or FDA, approved the 90-day Eversense CGM system and it is currently available throughout the United States.
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.
We received aggregate gross proceeds of $15.0 million in the transaction, before deducting private placement expenses payable by us. ​ 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.
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.
The increase in gross margin was primarily driven by the transition from the Eversense 90-day product to the 180-day Eversense E3 product, sales channel mix, lower inventory write-offs, reduced warranty and replacement costs, and manufacturing efficiencies. ​ Research and development expenses ​ Research and development expenses were $39.7 million for the year ended December 31, 2022, compared to $27.2 million for the year ended December 31, 2021, an increase of $12.5 million.
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 change was primarily due to a $358.4 million gain in fair value of derivatives, a $96.9 million gain in the fair value of options primarily driven by the decrease on our stock price, a $1.5 million gain on impairment cost, and a $1.6 million increase in interest income, offset by $2.0 million decrease in interest expense and $0.4 million loss on extinguishment of option. ​ Comparison of the Years Ended December 31, 2021 and 2020 ​ For the discussion of our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. ​ Liquidity and Capital Resources ​ Since our inception, we have incurred significant net losses and expect to incur additional losses in the near future.
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.
The Shares were offered and sold by us pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on November 27, 2019.
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.
The Purchase Warrant is, and the Exchange Warrant will be, a “pre-funded” warrant with a nominal exercise price of $0.001 per share and no expiration date. ​ Indebtedness ​ 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”).
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”).
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. ​ Our contracts may contain some form of variable consideration such as prompt-pay discounts, tier-volume price discounts and for the Ascensia commercial agreement, revenue share.
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.
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 or certification. ​ In May 2016, we entered into a distribution agreement with Roche.
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.
In 2022, we have been working with payors to transition their policies to Eversense E3 and have confirmed immediate coverage policy transition from select payors. ​ 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.
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 February 2022, the extended life Eversense E3 CGM system was approved by the FDA and Ascensia Diabetes Care Holdings AG (“Ascensia”) began commercializing Eversense E3 in the United States in the second quarter of 2022.
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.
Additionally, on March 13, 2023, we entered into another agreement with PHC, whereby PHC agreed to exchange the PHC Notes for the Exchange Warrant, which will be exercisable for up to 68,525,311 shares of common stock, with such exchange closing on April 1, 2023, subject to the satisfaction of 76 customary closing conditions for a transaction of this type.
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.
Removed
We have reached more than 250 million covered lives in the U.S. through positive insurance payor coverage decisions. In August 2022, we 69 received positive payor coverage decision from Elevance Health, formerly Anthem, who has more than 45 million covered lives.
Added
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.
Removed
In November 2022, we submitted an IDE for the enrollment of a pediatric cohort in the ENHANCE study and, pending approval, plan to begin enrolling pediatric patients in the first half of 2023. ​ European Commercialization of Eversense ​ In September 2017, we affixed the CE mark to the Eversense XL, which is indicated for a sensor life of up to six months.
Added
We also gained coverage expansion through the basal only and hypoglycemic indications across a significant number of commercial payors in 2023.
Removed
Pursuant to the agreement, as amended, we had granted Roche the exclusive right to market, sell and distribute Eversense in the EMEA, excluding Scandinavia and Israel. In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions.
Added
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.
Removed
Roche was obligated to purchase from us specified minimum volumes of Eversense XL CGM components at pre-determined prices. On November 30, 2020 we entered into a final amendment and settlement agreement with Roche to facilitate the transition of distribution to Ascensia as sales concluded on January 31, 2021, including final purchases, and transition support activities.
Added
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.
Removed
In June 2021, we received $48.4 million in net proceeds from the sale of 12,830,333 shares of our common stock utilizing the full capacity under the 2019 Sales Agreement. ​ On January 21, 2021, we entered into an underwriting agreement, which was subsequently amended and restated on the same day (“the Underwriting Agreement) with H.C.
Added
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.
Removed
Wainwright & Co., LLC, as representative of the underwriters (the “Underwriters”), to issue and sell 51,948,052 shares of common stock, in an underwritten public offering pursuant to effective registration statements on Form S-3, including and a related prospectus and prospectus supplement, in each case filed with the Securities and Exchange Commission, the Offering.
Added
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.
Removed
The price to the public in the Offering was $1.925 per share of common stock. The Underwriters agreed to purchase the shares from the Company pursuant to the Underwriting Agreement at a price of $1.799875 per share and the Company also agreed to reimburse them for customary fees and expenses.
Added
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.
Removed
The initial closing of the Offering occurred on January 26, 2021. Subsequent to the initial closing, the Underwriters exercised their option to purchase an additional 7,792,207 shares of Common Stock.
Added
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.
Removed
Total net proceeds from the 2021 Public Offering were $106.1 million after deducting underwriting discounts and commissions and estimated offering expenses. ​ On January 17, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional purchasers (“the Purchasers”), pursuant to which we sold to the Purchasers, in a registered direct offering, (“the Registered Direct Offering”), an aggregate of 40,000,000 shares, (“the Shares”), of common stock, $0.001 par value per share.
Added
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.
Removed
The Shares were sold at a purchase price of $1.25 per share for aggregate gross proceeds to the us of $50 million, before deducting fees to the placement agent and other estimated offering expenses payables.
Added
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”).
Removed
This exchange is expected to close on April 1, 2023, subject to the satisfaction of customary closing conditions for a transaction of this type. ​ Additionally, on August 9, 2020, we entered into a Stock Purchase Agreement with Masters Special Solutions, LLC and certain affiliates thereof (collectively “Masters”), pursuant to which we issued and sold to Masters 3,000 shares of convertible preferred stock, designated as Series A Preferred Stock (the “Series A Preferred Stock”), at a price of $1,000 per share in an initial closing.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, we had cash, cash equivalents and marketable securities of $156.3 million and at December 31, 2021 we had cash, cash equivalents and restricted cash of $181.8 million. We generally hold our cash in interest-bearing money market accounts or short-term investments that meet our policy for cash equivalents.
Biggest changeAs 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.
We do not currently engage in any hedging transactions to manage our exposure to foreign currency exchange rate risk. ​
We do not currently engage in any hedging transactions to manage our exposure to foreign currency exchange rate risk. ​ 82 ​ ​

Other SENS 10-K year-over-year comparisons