Senseonics Financials Don’t Support Its Billion-Dollar-Plus Market Cap
Senseonics Holdings (NYSE:SENS) is a medical technology company. It’s core business involves the design and development of an advanced glucose monitoring system for people to help manage diabetes.
The company’s key product line is the Eversense system which, according to the company,
“…in addition to featuring the first long-term and first implantable CGM sensor, the system is also the first to feature a smart transmitter that provides wearers with discreet on-body vibratory alerts for high and low glucose and can be removed, recharged and re-attached to the skin without discarding the sensor.”
Diabetes is historically a very difficult condition to manage and approximately 34 million Americans have some form of the disease. More than 88 million US adults — over a third — have prediabetes, and more than 84% of them don’t know they have it. Diabetes is the seventh leading cause of death in the United States.
Challenge of Glucose Monitoring
SENS’s key product is a long-term glucose monitoring system that lasts for up to 90 days through an under-the-skin sensor, a removal and rechargeable smart transmitter, and an app for real-time monitoring and analysis. Eversense was approved by the FDA in 2018 for use and sale in the U.S. market and the European markets approved the product in 2017. With the approval and the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the U.S. This type of system would replace fingerstick blood glucose measurement to make diabetes related decisions, including insulin dosing.
Senseonics is not the only player in this space and faces competition from bigger companies. There are three other key CGM medical device plays in the US market:
- Abbott Laboratories’ (NYSE:ABT) FreeStyle Libre
- DexCom’s (NASDAQ:DXCM) G6
- Medtronic’s (NYSE:MDT) Guardian Connect and Guardian Sensor 3
However, Senseonics’ Eversense is the FDA’s first long-term implantable continuous glucose monitor.
Deal Takes Eversense Global
In 2020 SENS initiated a new marketing strategy and collaboration to bring Eversense to market on a global scale. This agreement was with Ascensia Diabetes Care Holdings in which they granted Ascensia the exclusive right to distribute the 90-day Eversense GCM system worldwide. Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and first level support. SENS is still responsible for research & development, manufacturing, regulatory approvals and second level customer support.
Having only achieved commercial development and regulatory approvals in the last few years, SENS is still in start-up mode. Although revenues were $21.3 million in 2019, they declined to only $5 million in 2020 due to Covid related issues. For 2021, the company expects revenues in the $12-$15 million range. Long-term revenue goals provided by the company are in the $150-$200 million range by 2025. Operating losses in 2020 were $79 million and the cash burn rate was approximately $68 million.
The good news is that the company was able to raise $152 million from a secondary offering in 2021 and cash at the end of Q1 2021 stood at $176.6 million. The bad news is the offering comes with massive shareholder with fully diluted shares increasing from an average of 228 million in 2020 to 428 million shares as of May 2021. However, management has said the company has adequate cash on the balance sheet to fund the operational needs until 2022 (which is next year by the way).
Bottom Line on SENS Stock
Based on lack of near-term profitability and the almost certain need for a capital raise in 2022 or 2023, SENS stock remains highly speculative. Based on the company’s own revenue projections of only $30 million-$40 million in 2022, a $1.4 billion market cap seems t0o high. Avoid SENS stock at these levels and wait for a better opportunity down the road after the stock retreats.
On the date of publication, Tom Kerr did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tom Kerr has worked in the financial services industry for over 25 years. Currently he is a Senior Portfolio Manager at Rocky Peak Capital Management. Prior to that he was Chief Investment Officer and Director of Research of SGL Investment Advisors, and has served in a number of positions at other investment related organizations. Mr. Kerr has also been a contributing writer to TheStreet.com, RagingBull.com and InvestorPlace.com. He’s a CFA charterholder and obtained a B.B.A in Finance from Texas Tech University.
