Senseonics Holdings Inc. (SENS) is a medical technology company that is focused on the commercialization and development of an implantable continuous glucose monitoring (CGM) system. I am neutral on this stock.
The company has developed two such CGM systems, Eversense and Eversense XL, that measure glucose levels in people with diabetes through “an under-the-skin sensor, a removable and rechargeable smart transmitter, and a convenient app for real-time diabetes monitoring and management.”
Now let’s look at why H.C. Wainwright analyst Vernon Bernardino is upbeat about the company’s Eversense CGM system. (See Senseonics stock charts on TipRanks)
The analyst pointed out in a recent report that historically, CGM systems had poor uptake due to higher costs, barriers to accessibility, lack of insurance coverage, and unfamiliarity with CGMs.
However, the analyst said that these barriers to the adoption of Eversense have dissipated. This is because, according to the analyst, “with tremendous advances in technology, such as size (i.e., the Eversense sensor is the size of a grain of rice) and longevity (i.e., the sensor may remain implanted for up to 90 days vs. 6-14 days with competitor sensors)”, the accuracy of CGM values has also improved “approaching 90% of reference glucose values…”
Bernardino initiated coverage of the stock this month with a Buy rating, and a price target of $6 (54.6% upside) on the stock. He noted that Eversense was the only long-term CGM system on the market in both the U.S. and Europe, and was highly differentiated from other systems.
Growth Potential in the CGM market
Bernardino pointed out that the COVID-19 pandemic resulted in exponential growth in the area of telehealth and digital health technology. He added, “CGM systems became recognized as ideal for monitoring blood glucose levels and remotely sharing data with a patient’s caregiver.”
Furthermore, according to the analyst, the recent operational results from Dexcom (DXCM) and Abbott Labs (ABT) indicate that the market penetration for Type 1 Diabetes is almost 50%. Bernardino further elaborated, “Thus, with prospects for growth in CGM uptake remain very promising, nearly every major player in the CGM and insulin pump space has launched or has planned product launches this year.”
The analyst also cited Dexcom’s CGM revenues of $595 million in its most recent quarter, a growth of 31.6% year-over-year to suggest “that growth in CGM adoption may be insulated from challenges in marketing and education that result from restrictions posed by COVID-19-associated lockdown conditions.”
Commercialization Agreement with Ascensia
Last year, Senseonics entered into a commercialization agreement with Ascensia. As a result of this agreement, SENS granted the company exclusive rights to distribute its 90-day and 180-day Eversense CGM systems, with certain geographical territory exceptions.
Bernardino expects that Ascensia will “assume commercial full responsibilities later this year,” while the U.S. Food and Drug Administration (FDA) approval for Eversense’s 180-day sensor is likely to come in later this year.
The analyst believes that the FDA approval could result in “accelerated Eversense revenue growth” and projects that sales of Eversense CGM systems could reach $595 million annually, at a Compounded Annual Growth Rate (CAGR) of 15% through 2031.
In Q2, Senseonics generated revenues of $3.3 million, versus $0.26 million in the same quarter last year. However, the company’s net loss widened to $180.32 million in Q2, from $7.52 million in the same period last year. The rise in net loss was primarily a result of non-cash accounting charges.
The company had cash and cash equivalents of $215 million as of June 30.
For FY21, SENS has projected revenues to be in the range of $12 million to $15 million.
Turning to the rest of the Street, consensus is that Senseonics Holdings is a Strong Buy, based on three Buys and one Hold. The average Senseonics Holdings price target of $4.50 implies an approximately 12.5% upside potential from current levels.
Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article.
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