SENS (32% shorted) can be a 10x candidate from here. Warning extreme DD, requires wrinkled brain.
Senseonics Holdings, Inc., is a medical technology company, that develops and manufactures a unique implantable continuous glucose monitoring (CGM) system. Its products include Eversense and Eversense XL, which are implantable CGM systems to measure glucose levels in people with diabetes for a period of up to 90 and 180 days. The Eversense (90 days) has FDA approval since 2018 and the Eversense XL (180 days) is already approved in Europe and FDA approval is expected by the end of the third quarter. A CGM system provides glucose measurements regularly and gives the user an alarm when sugar levels drop too low or go too high, it can also be used in connection with an insulin pump to automatically deliver insulin when needed.
Eversense technology is unique as it is a long-term CGM system that can last up to 180 days, versus 7 to 14 days from the competition, and it is the only one implantable under the skin and works with a removable transmitter (in competing products you cannot remove the transmitter; otherwise, you have to replace the whole device). It is a CGM system that allows for freedom of movement and the user can decide when to use it and all this with even better accuracy than all other CGM systems in the market.
The almost demise of Senseonics in 2020 was due to some self inflicted errors and bad luck. The company tried to commercialize Eversense on its own in the USA and that consumed much of its economic resources without much success and then, when COVID hit, the company stopped commercializing Eversense as it couldn’t get physicians to perform the sensor implant procedure. In March 2020, Senseonics was forced to make a $48.5 MM repayment to one of its lenders that panicked and that pushed the company into the limits of insolvency and forced it to look for a partner or outright sale.
Enter Ascensia Diabetes
On August 10th, 2020, the company announced a strategic collaboration with Ascensia Diabetes Care. This is a transformational alliance for Senseonics, as Ascensia is a dedicated diabetes company with a presence in 125 countries and 10 MM customers. It has the trust and reliability of being in this business for over 70 years. Ascensia is the market leader in the Blood Glucose Monitoring (BGM) market with its COUNTOUR portfolio of devices and it is the combination of several important companies with interests in the Diabetes market. Ascensia is based in Switzerland and it was established in 2016 through the acquisition of Bayer Diabetes Care by PHC Holdings (formerly known as Panasonic Healthcare Holdings), which is a KKR portfolio company.
Ascensia Diabetes Care is betting big on Senseonics. Not only are they providing 35 MM in convertible debt financing but will also invest an approximate $250 MM over the next five years to commercialize and market Eversense in exclusivity all over the world. So why would such a company with approximately $1 Billion in annual sales is interested in a $4 MM revenue company?
I believe Ascensia recognizes the enormous potential of this technology, which could eventually make redundant even their current business. Ascensia business is CONTOUR, a razor/razor blade business model in which the company sells blood glucose measuring devices for a low price and makes money selling the small lancets that are replaceable. Make a tour through Amazon or simply Google "Blood glucose monitoring" and you will find that this market is over saturated with dozens of suppliers competing in price. Ascensia prices its wares at a premium over competitors but the technology is mature so I am not so sure if new diabetes clients will be choosing Contour going forward. Basically, they need a new product that can reinvigorate the brand and put them once again at the leading edge of the diabetes market.
Currently the Senseonics Eversense device requires calibration twice a day, that could be done using a Contour device to measure the glucose level and input the result in the Eversense device via an iPhone or Android Phone. But as the following slide shows, the company has a product pipeline with next generation devices that will require increasingly less calibration. The Eversense XL submitted for approval to the FDA requires only one calibration a day and the Eversense 365 will require only one rebalancing a week reducing considerably the use of lancets for blood monitoring systems.
The technology has huge potential to disrupt the current CGM market, which is a $5-plus billion market today growing at about a 35% CAGR (according to SENS management) and dominated by three large companies: DexCom (DXCM), Abbott Labs (ABT) and Medtronic (MDT). This market is exclusively focused on the Type 1 and Type 2 diabetes patients which are intensively managed, that means they need insulin shots and many even use insulin pumps as they cannot produce any insulin themselves. The number of people with diagnosed diabetes in the USA in 2020 was 34.2 of which 1.6 MM have Type I Diabetes, unfortunately the number of people with Diabetes is growing very rapidly as can be seen from this National Diabetes Statistics Report, 2020.
With FDA approval for the Eversense XL expected by the end of the third quarter, Senseonics will start to eat at the market share of the incumbent companies in the industry, but the real game changer will come with the Eversense 365, as it will open up the Type II market to this new type of CGM devices. Here the opportunity is really huge and they face no competition and none is expected anytime soon either.
Currently, people with Type II diabetes have only BGM devices like CONTOUR to help them monitor their blood levels, but that requires pricking a finger to get blood and only provides a measurement at that particular moment. The 365 device will require only a 5 minute intervention every year to remove and replace the sensor and if the company gets to the point that won’t need a transmitter, as you scan your smartphone over the sensor, then I believe the sky is the limit for Senseonics as there are 420 MM people with diabetes in the world.
The company is providing the current guidance as to future revenues, I believe these numbers to be conservative once the Eversense XL gets approval in the USA. I am confident it will be approved, it has already been approved in Europe and the 90 days device was unanimously approved in 2018 by the FDA’s Clinical Chemistry and Clinical Toxicology Devices Panel of independent medical experts that voted, 8 to 0, that the system not only was safe and effective, but also that its benefits outweighed the risks.
Senseonics is a high risk/high reward type of investment, but the type of risk I like, basically there is a small chance that the company will file for insolvency anytime soon and with the Ascencia alliance it stands a very good shot at disrupting the diabetes market. In my opinion, Senseonics has the makings of a potential multi-bagger from here and aggressive investors would be advised to initiate a position at the current levels. Next catalysts for the company will be information of progress in the commercialization in Europe and from April 1st in the USA, then it will be the Eversense XL approval by the end of September.
via r/wallstreetbets https://ift.tt/3qhG8Zq
June 10, 2021 at 03:03PM