What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-01 · 190 added, 205 removed, 413 unchanged (49% of the section changed)

We are a medical technology company focused on the development and manufacturing of glucose monitoring products designed to transform lives in the global diabetes community with differentiated, long-term implantable glucose management technology.

Our Eversense, Eversense XL and Eversense E3 continuous glucose monitoring, or 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, as compared to seven to 14 days for non-implantable CGM systems.

We believe that Eversense provides a more convenient method of CGM by providing longer duration, superior accuracy, wireless communication, on-body vibratory alerts, gentle-on-the-skin adhesive patch, data sharing capability, and a removable smart transmitter.

We affixed the CE mark to the original Eversense CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area, or EEA.

Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in September 2017 which is currently available in select markets in Europe and the Middle East.

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.

We affixed the CE mark to the original 90-day Eversense CGM system in June 2016, which marked the first certification for the product to be sold within the European Economic Area (being the European Union plus Norway, Iceland, and Liechtenstein) (“EEA”).

Subsequently, we affixed the CE mark to the extended life Eversense XL CGM system in September 2017 to be sold in select markets in Europe and the Middle East.

In June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system and Ascensia began commercialization in select markets in Europe during the third quarter of 2022.

In June 2018, the U.S.

Food and Drug Administration, or FDA, approved the Eversense CGM system.

In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system.

Food and Drug Administration (“FDA”), approved the 90-day Eversense CGM system for distribution throughout the United States.

In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the 90-day Eversense system.

With this approval and the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the United States to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia Diabetes Care Holdings AG, or Ascensia, to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

On February 26, 2020, we announced that the FDA approved a subgroup of PROMISE trial participants to continue for a total of 365 days to gather feasibility data on the safety and accuracy of a 365-day sensor.

This sub-set of 30 participants were left undisturbed for 365-days with the goal of measuring accuracy and longevity over the full 365 days.

Following information gathered from this sub-set and continued development efforts and pending developments at the FDA relating to the ongoing COVID-19 pandemic, in the first half of 2022 we plan to seek Investigational Device Exemption, or IDE, from the FDA to explore the 365 day sensor in a clinical trial.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, which we also intend to include a pediatric population, in the second half of 2022.

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.

This sub-set of 30 participants was left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.

Information gathered from this sub-set and additional development efforts provided us the confidence to start the Pivotal study for the Eversense 365-day System.

The ENHANCE pivotal study for the Eversense 365-day system completed enrollment 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.

During 2020, we initiated a new commercialization strategy and collaboration to bring our product to market.

As described in detail below, in August 2020, we entered into a collaboration and commercialization agreement, or 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 CGM system worldwide, with certain initial exceptions.

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

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

Eversense E3 CGM System Regulatory Approval

In February 2022, the U.S.

Food and Drug Administration (“FDA”) approved the Eversense E3 CGM system for marketing and sale in the U.S.

As described in this report, Ascensia has the exclusive right to distribute the Company’s 90-day Eversense CGM system and the six-month Eversense E3 system worldwide for people with diabetes, with certain initial exceptions.

The Company and Ascensia have been designing the go-to-market strategy for the U.S.

six-month product, and the Company expects that Ascensia will begin commercializing Eversense E3 in the U.S.

in the second quarter of 2022.

As with any new product, the success of the commercial launch of the Eversense E3 product in the U.S.

will be subject to significant uncertainty and risks, and will require time to ramp up.

Key areas of strategic focus in the U.S.

commercial launch of the six month product where performance will impact the success of the launch will be:

(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 the 90-day product, (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, and (7) Ascensia’s continued organizational development of its U.S.

sales and marketing capabilities relative to CGM.

The Company and Ascensia are also developing plans for the roll-out of the Eversense E3 next generation six-month product in Europe, which, subject to receipt of regulatory approval or certification, including CE Certificates of Conformity and affixing the CE mark for the EEA, is expected to offer reduced calibration requirements from the Eversense XL six-month product currently marketed in Europe.

The roll-out of this next generation product in Europe is similarly subject to uncertainties and potential delays, including regulatory approval and certification and launch timing, and European revenues are dependent, among other things, on success of the following:

(1) Ascensia’s continued organizational development of its European sales and marketing capabilities relative to CGM, and (2) more effective tender participation, particularly in Italian markets which favor an integrated offering.

and European commercialization plans are being designed with a goal of minimizing the impact to patients, providers, and ongoing sales of Eversense CGM systems.

On January 30, 2020, the World Health Organization, or the WHO, announced a global health emergency because of a new strain of coronavirus, or COVID-19, and the risks to the international community as the virus spreads globally.

On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

In response to the pandemic, many states and jurisdictions have issued stay-at-home orders and other measures aimed at slowing the spread of the coronavirus.

The state of Maryland, where we are headquartered, has been affected by COVID-19.

The Governor of Maryland issued an order closing all non-essential businesses, which took effect on March 23, 2020.

Beginning with the initial outbreak and through 2021 substantially all of our workforce is still working from home either all or substantially all of the time.

Additionally, because our sensor requires an in-clinic procedure, we saw a reduction in access to clinics and sensor insertions during multiple periods during the pandemic.

The COVID-19 pandemic infection rates in the United States are still high, vaccine distribution is ongoing, and it is difficult to predict the longevity and severity COVID-19 will have on our business.

Restructuring and Transition of Commercial Strategy

As a result of the COVID-19 pandemic’s disruption to our operations, suppliers, employees, and the healthcare community in which we sell to and support, and our limited cash resources, we made significant reductions in our cost structure and operations to improve cash flow and generate future expenditure savings to ensure the long-term success of Eversense.

Specifically, in the first quarter of 2020, we temporarily suspended commercial sales and marketing of the Eversense CGM System in the United States to new patients to solely focus our resources on supporting existing users, including ensuring broader insurance coverage for Eversense, and the development and regulatory submission of our new 180-day Eversense product in the United States.

In connection with these actions, on March 26, 2020, we reduced our workforce by approximately 60%, over half of which were sales personnel.

As discussed further below, on August 9, 2020, we entered into the 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 CGM system worldwide for people with diabetes.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and assumed commercial responsibilities in the second quarter of 2021.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

Global Commercialization of Eversense E3 CGM System

In February 2022, the FDA approved the Eversense E3 CGM system for marketing and sale in the U.S.

As described in this report, Ascensia has the exclusive right to distribute the Company’s Eversense E3 system worldwide for people with diabetes.

Ascensia began commercializing Eversense E3 in the U.S.

during the second quarter of 2022.

In June 2022, we affixed the CE mark to the extended life Eversense E3 CGM system, and Ascensia began commercialization in all EEA markets during the third and fourth quarters of 2022.

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.

Under the agreement between Senseonics and NPG, NPG providers will be certified to perform Eversense procedures in the specified geographies and will offer its services for patients who have been prescribed Eversense.

Senseonics will initially assist NPG as they set up their Eversense procedure capabilities in select geographic areas.

Diabetes is a chronic, life-threatening disease for which there is no known cure.

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If diabetes is not managed properly, it can lead to serious health conditions and complications, including heart disease, limb amputations, loss of kidney function, blindness, seizures, coma and even death.

According to the 2021 International Diabetes Federation, or IDF, Atlas, an estimated 537 million people worldwide had diabetes as of the date of the report.

According to the 2021 International Diabetes Federation, Atlas, an estimated 537 million people worldwide had diabetes as of the date of the report.

The number of people with diabetes worldwide is estimated to grow to 783 million by 2045, driven primarily by growth in type 2 diabetes and due to various reasons, including changes in dietary trends, an aging population and increased prevalence of the disease in younger people.

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People with type 2 diabetes may require diet and nutrition management, exercise, oral medications or the administration of insulin to regulate blood glucose levels.

In the next few years, we expect the growth in sales of CGM systems to be driven primarily by increased penetration of CGM in the type 1 patient population.

We expect the growth in sales of CGM systems to be driven by increased penetration of CGM in both the type 1 and type 2 patient populations.

In an attempt to maintain blood glucose levels within the normal range, many people with diabetes seek to actively monitor their blood glucose levels.

The traditional self-monitoring of blood glucose, or SMBG, method of glucose monitoring requires lancing the fingertips, commonly referred to as fingersticks, multiple times per day and night to obtain a blood drop to be applied to a test strip inside a blood glucose meter.

The traditional self-monitoring of blood glucose, (“SMBG”), method of glucose monitoring requires lancing the fingertips, commonly referred to as fingersticks, multiple times per day and night to obtain a blood drop to be applied to a test strip inside a blood glucose meter.

This method of monitoring glucose levels is inconvenient and can be painful and, because each measurement represents a single blood glucose value at a single point in time, it provides limited information regarding trends in blood glucose levels.

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As a result, CGMs improve glycemic control and quality of life, particularly in patients with type 1 diabetes treated with continuous subcutaneous insulin infusion or multiple daily insulin injection therapy, and support avoidance of hypoglycemia.

Historically, the FDA and other foreign regulatory authorities required that CGMs be labeled and marketed as "adjunctive"

to test-strip measurements, with instructions that patients confirm CGM measurements with test-strip measurements using blood obtained from fingersticks prior to self-medicating.

However, given the broader clinical

indications for the use of CGM systems, including real-time alerts and multi-device integration, the FDA issued the first “non-adjunctive” label in 2016.

Historically, the FDA and other foreign regulatory authorities required that CGMs be labeled and marketed as "adjunctive" to test-strip measurements, with instructions that patients confirm CGM measurements with test-strip measurements using blood obtained from fingersticks prior to self-medicating.

However, given the broader clinical indications for the use of CGM systems, including real-time alerts and multi-device integration, the FDA issued the first “non-adjunctive” label in 2016.

In June 2019, an updated Eversense CGM system received a non-adjunctive label from the FDA and can now be used as a replacement to fingerstick glucose testing for treatment decisions.

This non-adjunctive indication also enabled our pathway to access patients on Medicare.

In November 2019, the Centers for Medicare and Medicaid Services, or CMS, finalized a national payment rate for Eversense that was published in the calendar year 2020 Physician Fee Schedule Final Rule.

The Eversense CGM system became the first CGM technology to be reimbursed through the Part B Medical Services benefit for Medicare beneficiaries and expands access to our product.

In August 2020, the Centers for Medicare and Medicaid Services, or CMS, released its Calendar Year 2021 Medicare Physician Fee Schedule that establishes global payment for the device cost and procedure fees for healthcare providers across the United States.

This includes the establishment of national payment amounts for the three CPT© Category III codes describing the insertion (CPT 0446T), removal (0447T), and removal and insertion (0048T) of an implantable interstitial glucose sensor, which describes our Eversense CGM systems, as a medical benefit, rather than as part of the Durable Medical Equipment channel that includes other CGMs.

In December 2021, CMS released its Calendar Year 2022 Medicare Physician Fee Schedule that updates global payment for the device cost and procedure fees.

In November 2019, the Eversense CGM system became the first CGM technology to be reimbursed through the Part B Medical Services benefit for Medicare beneficiaries and expands access to our product.

In November 2022, the Centers for Medicare and Medicaid Services (“CMS”) released its Calendar Year 2023 Medicare Physician Fee Schedule Proposed Rule that updates the payment amounts for the three CPT© Category III codes to account for the longer 6-month sensor.

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, Medtronic and Johnson and Johnson.

The members of our management team have held senior leadership positions at a number of medical technology and biopharmaceutical companies, including Abbott Diabetes Care and Medtronic.

Members of our team have contributed to the development, regulatory approval and commercialization of several glucose monitoring systems and insulin pumps.

Commercial Strategy

Historically, we have sold our product directly to our network of distributors and strategic fulfillment partners, who provide the Eversense CGM system to healthcare providers and patients through a prescribed request and invoice insurance payors for reimbursement.

As noted above, we have now transitioned to selling our product globally through Ascensia and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

Sales of the Eversense CGM system are widely dependent on the ability of patients to obtain coverage and adequate reimbursement from third-party payors or government agencies.

Our Eversense CGM systems are primarily sold through Ascensia globally.

Ascensia sells our products directly to strategic fulfillment partners, who provide our Eversense CGM systems to healthcare providers and patients through a prescribed request and invoice insurance payors for reimbursement.

Sales of the Eversense E3 CGM system and future models are widely dependent on the ability of patients to obtain coverage and adequate reimbursement from third-party payors or government agencies.

Ascensia is leveraging and targeting regions where we have coverage decisions for patient device use and provider insertion and removal procedure payment.

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In connection with these actions, on March 26, 2020, we reduced our direct sales organization that consists of sales representatives, clinical trainers, customer care, and other specialists to educate, train, and support the patient and healthcare provider in their diabetes management with CGM systems.

In the third quarter of 2020, we announced the formation of a strategic partnership with Ascensia, pursuant to which Ascensia became the exclusive worldwide distribution partner for Senseonics CGM systems, including Eversense®, Eversense® XL and future generations products.

In the third quarter of 2020, we announced the formation of a strategic partnership with Ascensia, pursuant to which Ascensia became the exclusive worldwide distribution partner for Senseonics CGM systems, including the 90-day Eversense®, Eversense® XL and future generations products, now including Eversense® E3.

In the fourth quarter of 2020, Ascensia initiated U.S.

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through positive insurance payor coverage decisions.

In 2020, we continued the Eversense Bridge Program, a patient access program in the U.S.

that provides financial assistance to eligible patients whose insurance coverage either does not yet cover Eversense, or in cases where Eversense is covered but the patient’s co-insurance is limiting their ability to adopt Eversense.

Having played an important role in our journey to obtain broader payor policy and long-term patient retention, the Eversense Bridge Program ended on December 31, 2020.

In 2021, Ascensia initiated to a patient assistance program to provide financial assistance to patients on Eversense.

we expect Ascensia, in consultation with us, to initiate a broad patient assistance program for patients adopting Eversense E3.

In our overseas markets, we had entered into distribution agreements that allow third-party collaborators with direct sales forces and established distribution systems to market and promote Eversense XL primarily in the EMEA.

These distribution arrangements have been replaced by our Commercialization Agreement with Ascensia.

Our exclusive distribution agreement for sales in Scandinavia with Rubin Medical and our exclusive distribution agreement with Roche Diabetes Care for sales in the rest of the EMEA, excluding Israel and Scandinavia, and in 17 additional countries, including Brazil, Russia, India, and China, as well as select markets in the Asia Pacific and Latin American regions expired in 2021.

Upon conclusion of each of these agreements, Ascensia assumed commercialization activities in select countries where Eversense XL has already launched, beginning February 1, 2021 for Germany, Italy, Switzerland, Spain, Poland, and Netherlands.

The transition of Rubin markets began in June 2021.

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.

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:

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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 180-day Eversense CGM system worldwide for use in people with diabetes, with the following initial exceptions:

(i) 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;

(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 does not include Israel.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and Ascensia ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense product during the second quarter of 2021.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

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.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense product on October 1, 2020 and Ascensia ramped up sales activities and assumed commercial responsibilities for 90-day Eversense product during the second quarter of 2021.

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 will receive a portion of net revenue at specified tiered percentages ranging from the mid-teens to the mid-forty’s based on levels of global net revenues.

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Prior Distribution Agreement with Roche Diabetes Care

On May 24, 2016, we entered into an exclusive distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, or collectively, Roche.

On May 24, 2016, we entered into an exclusive distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH (collectively, “Roche”).

Pursuant to the agreement, as amended, we granted Roche the exclusive right to market, sell and distribute Eversense in the EMEA, excluding Scandinavia and Israel.

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On December 12, 2019, we amended the distribution agreement to lower minimum volumes for 2020 and increase pricing for the remaining period of the contract.

support activities, and Roche’s obligation to purchase certain quantities of products at certain prices under the distribution agreement have now terminated.

The distribution rights under the agreement expired January 31, 2021, subject to Roche providing certain transition and wind-down services for approximately six months in markets where Ascensia was not initiating distribution.

On November 20, 2020, we amended the distribution agreement and entered into a settlement agreement to facilitate transition to Ascensia as Roche sales concluded on January 31, 2021, including final purchases and transition support activities, and Roche’s obligation to purchase certain quantities of products at certain prices under the distribution agreement have now terminated.

The distribution rights under the agreement expired January 31, 2021 after to Roche provided certain transition and wind-down services.

Clinical Development and Regulatory Pathway

We affixed the CE mark to the Eversense XL CGM system in the EEA in September 2017.

The Eversense XL CGM system is also being sold commercially in our overseas markets.

The Eversense XL CGM system has historically been sold commercially in our overseas markets.

Our Promise U.S.

pivotal trial was completed during 2020.

We received a Premarket Approval, or PMA, from the FDA for the Eversense E3 system in February 2022 for up to six months and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

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.

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These sensor measurements were continued through the earlier of the failure of the sensor or 90 days post-insertion.

The purpose of this clinical trial was to evaluate the accuracy of Eversense measurements, measured by the Mean Absolute Relative Difference, or MARD, when compared with bed-side blood glucose measurements obtained using the YSI glucose analyzer over successive periods of 30 days through 90 days, as well as to assess the safety of Eversense.

The purpose of this clinical trial was to evaluate the accuracy of Eversense measurements, measured by the mean absolute relative difference (“MARD”), when compared with bed-side blood glucose measurements obtained using the YSI glucose analyzer over successive periods of 30 days through 90 days, as well as to assess the safety of Eversense.

YSI in vitro analyzers are bed-side instruments used in hospitals and clinics to accurately measure blood glucose levels and are commonly used as comparators of glucose monitoring systems in clinical trials.

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Based on the data from both of these trials, we submitted a PMA application to the FDA to market Eversense in the United States for 90-day use.

On June 21, 2018, we received PMA approval from the FDA for the Eversense system.

We are distributing the Eversense system directly in the United States through our own direct sales and marketing organization.

We have received Category III CPT codes for the insertion and removal of the Eversense sensor.

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

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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 current Eversense 90-day product available in the United States, with a mean absolute relative difference, or MARD, of 8.5%-9.6%.

In the trial, we observed performance matching that of the 90-day Eversense system available in the United States, with MARD of 8.5%-9.6%.

This result was achieved with reduced calibration, down to one per day, while also doubling the sensor life to 180 days.

Following the results of the PROMISE trial, on September 30, 2020 a Premarket Approval Application Supplement, or PMA supplement to extend the wearable life of the Eversense CGM System to six months was submitted to the FDA.

As described elsewhere, we received PMA approval from the FDA for the Eversense E3 CGM system in February 2022, and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

As described elsewhere, we received PMA approval from the FDA for the Eversense E3 CGM system in February 2022, Ascensia began commercializing Eversense E3 in the United States during the second quarter of 2022.

This sub-set of 30 participants who all had sensors with the modified chemistry were left undisturbed for 365 days with the goal of measuring accuracy and longevity over the full 365 days.

Following information gathered from this sub-set and continued development efforts, and pending developments at the FDA relating to the ongoing the ongoing COVID-19 pandemic, in the first half of 2022 we plan to seek Investigational Device Exemption, or IDE, from the FDA.

If the IDE is approved in a timely manner, we would target to begin enrollment of a clinical trial, in which we also intend to include a pediatric population, in the second half of 2022.

Information gathered from this sub-set and continued development efforts provided us the confidence to start the pivotal study for the Eversense 365 day System.

ENHANCE Trial

In March 2022, we began enrollment for the U.S.

365-day pivotal trial.

The trial is a prospective, single-arm, multi-center trial designed to evaluate the accuracy and safety of the Eversense system up to one year using the methods described above for the 90-day and 180-day systems.

Over 165 subjects were inserted with Eversense systems in four centers across the United States.

We completed enrollment of the 365-day sensor configuration in September 2022 and expect our last patient to complete their 365-day visit during the third quarter of 2023.

Data gathered in this trial will also be used to submit for the integrated continuous glucose monitoring (“iCGM”) designation in 2023.

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.

Our Technology

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We have designed this reliable, long-term and implantable CGM system to continually and accurately measure a person's glucose levels for up to six months.

Eversense requires twice daily fingerstick calibrations through day 21 and then primarily once daily fingerstick calibrations.

In June 2019, we received FDA approval for the non-adjunctive indication for the Eversense system.

Eversense requires once daily fingerstick calibrations after day 21.

In June 2019, we received FDA approval for the non-adjunctive indication for the 90-day Eversense system.

With this approval, the Eversense system can be used as a therapeutic CGM to replace fingerstick blood glucose measurement for dosing decisions and was launched in December 2019.

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is bound to the surface of the capsule through polymerization.

This hydrogel is energized, or excited, by a light-emitting diode, or LED, contained in the optical system of the sensor, causing the hydrogel to fluoresce, or glow.

This hydrogel is energized, or excited, by a light-emitting diode (“LED”), contained in the optical system of the sensor, causing the hydrogel to fluoresce, or glow.

Two photodiodes within the optical system of the sensor measure the degree of fluorescence of the hydrogel, which is proportional to the level of glucose present in the interstitial fluid.

The sensor then communicates the amount of fluorescence via a near field communication, or NFC, interface to the transmitter.

The sensor then communicates the amount of fluorescence via a near field communication (“NFC”) interface to the transmitter.

NFC is a high frequency wireless communication technology that enables the exchange of data and energy between devices over a short range.

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Based on these calculations and on the user's individual settings for glucose levels, the transmitter determines if an alert condition exists, in which case the transmitter communicates the condition to the user through the mobile app and through on-body vibration.

The information from the transmitter is also transmitted for display to the user's mobile device via Bluetooth Low-Energy, or BLE.

The information from the transmitter is also transmitted for display to the user's mobile device via Bluetooth Low-Energy (“BLE”).

Our transmitter is functional for at least 24 hours following a full charge and can be fully charged in fifteen minutes.

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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.

Our next generation sensor under feasibility testing now is designed to extend the sensor duration even longer at up to 365 days.

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.

We are also developing our “Freedom” product variation to allow for a 2-in-1 glucose monitoring system combining the functionality of CGM and Flash Glucose Monitoring, or FGM, 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 that may be utilized with a smart transmitter to get continuous glucose readings and alerts, or be utilized through a swipe over the sensor with a smart phone to get on-demand glucose reading without a smart transmitter.

We are also developing our “Freedom” product variation which would include 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.

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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.

As described above, 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.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and we expect Ascensia to begin commercializing Eversense E3 in the United States in the second quarter of 2022.

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.

Pursuant to the Commercialization Agreement, in the United States, Ascensia began providing sales support for the 90-day Eversense system on October 1, 2020 and Ascensia ramped up sales activities and assumed commercial responsibilities for the 90-day Eversense system during the second quarter of 2021.

In February 2022, the extended life Eversense E3 CGM system was approved by the FDA and Ascensia began commercializing Eversense E3 in the United States in the second quarter of 2022.

In anticipation of the launch, we and Ascensia have been designing the go-to-market strategy for the U.S.

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In the first few quarters of our commercial launch, our focus was ensuring the Endocrinology providers obtained the necessary training needed to support their diabetes patients.

In 2019, we began our second phase of establishing a large network of Eversense proceduralists with the launch of the Certified Eversense Specialist, or CES, network.

In 2019, we began our second phase of establishing a large network of Eversense proceduralists with the launch of the Certified Eversense Specialist (“CES”) network.

This group of healthcare providers includes specialists who have strong familiarity with conducting in-office procedures such as dermatologists and plastic surgeons.

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commercial third-party payor community in efforts to establish coverage for Eversense.

To date, approximately 200 million people in the United States may have coverage and access to the Eversense 90-day product via commercial or government (i.e., Medicare) payors.

We believe that transitioning commercial payors from 90-day coverage to six-month coverage will be important for the successful commercialization of the Eversense E3 six-month CGM system.

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.

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Additionally, in 2019 we published several sets of real-world data, which show Eversense provides the same clinical benefits as other CGM systems and has a favorable safety profile.

However, until payment for the Eversense sensor placement becomes consistent, some patients will be required to bear the financial cost for the placement of the sensor by their healthcare provider.

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.

Our patient access programs and patient appeals support, including the Eversense Bridge Program, which was discontinued on December 31, 2020, have been key initiatives to expanding payor policy and acceptance through case-by-case review and eventual denial overturn and Ascensia has continued similar programs

for this purpose.

Patient access programs and patient appeals support have been key initiatives to expanding payor policy and acceptance through case-by-case review and eventual denial overturn and Ascensia has continued similar programs for this purpose.

This can be a long process with varying results in each case but is a prudent step to challenge payor positions of non-coverage given the strong evidence that supports CGM and Eversense.

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We believe that, as we increase our demand in the future, our per unit costs will decrease materially.

We have received certification from BSI, our Notified Body to the International Standards Organization, or ISO, for our quality system.

We have received certification from BSI, our Notified Body to the International Standards Organization (“ISO”) for our quality system.

This ISO 13485:2016 certification includes design control requirements.

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Most of the raw materials we use in our manufacturing operations are available from more than one source.

However, we obtain certain raw materials principally from only one source.

However, we obtain certain raw material components are obtained principally from one supplier.

In the event one of these suppliers was unable to provide the materials or product, we generally seek to maintain sufficient inventory to supply the market until an alternative source of supply can be implemented.

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We compete with well-capitalized companies, some of which are publicly traded, that manufacture CGM systems including Dexcom, Medtronic and Abbott.

Each of these companies has received approval from the FDA to market their respective CGM system.

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.

Dexcom’s CGM system was the first CGM system to be approved by the FDA for marketing as a non-adjunctive device, and Abbott’s Freestyle Libre was also approved for non-adjunctive use.

Both Dexcom (G6) and 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 to be interoperable with other diabetes tech devices such as insulin pumps.

Both Dexcom (G6 and G7) and Abbott (Freestyle Libre) systems have factory calibration, and do not require user calibration.

Dexcom has also received the first FDA iCGM indication allowing its Dexcom G6 and G7 to be interoperable with other diabetes tech devices such as insulin pumps.

As the industry evolves, we anticipate encountering increasing competition from companies that integrate CGM with insulin pumps.

Abbott also received an iCGM indication for their Freestyle Libre 2 product and we expect all other CGM companies besides Dexcom to pursue an iCGM indication including Medtronic.

Abbott also received an iCGM indication for their

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.

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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 2021 and 2043, subject to any patent extensions that may be available for such patents.

If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2044 to 2060.

Our patents expire between 2023 and 2042, subject to any patent term extensions or adjustments that may be available for such patents.

If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2032 to 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.

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The medical device industry in general, and the glucose testing sector of this industry in particular, are characterized by the existence of a large number of patents and frequent litigation based on assertions of patent infringement.

We are aware of numerous patents issued to third parties that may relate to the technology used in our business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous glucose monitoring.

We are aware of numerous patents issued to third parties that may relate to the technology used in our

business, including the design and manufacture of CGM sensors and CGM systems, as well as methods for continuous glucose monitoring.

Each of these patents contains multiple claims, any one of which may be independently asserted against us.

The owners of these patents may assert that the manufacture, use, sale or offer for sale of our CGM sensors or CGM systems infringes one or more claims of their patents.

Furthermore, there may be additional patents issued to third

parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business.

Furthermore, there may be additional patents issued to third parties of which we are presently unaware that may relate to aspects of our technology that such third parties could assert against us and materially and adversely affect our business.

In addition, because patent applications can take many years to issue, there may be patent applications that are currently pending and unknown to us, which may later result in issued patents that third parties could assert against us and materially and adversely affect our business.

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Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, which could have a significant adverse impact on our business.

We have one pending U.S.

trademark applications and six pending foreign trademark applications, as well as 14 U.S.

We have two pending U.S.

trademark applications and five pending foreign trademark applications, as well as 12 U.S.

trademark registrations and 129 foreign trademark registrations.

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Regulations cover virtually every critical aspect of a medical device company's business operation, including research activities, product development, contracting, reimbursement, medical communications, and sales and marketing.

In the United States, the Federal Food, Drug and Cosmetic Act, or FDCA, and the implementing regulations of the FDA govern product design and development, preclinical and clinical testing, premarket clearance or approval, product manufacturing, import and export, product labeling, product storage, recalls and field safety corrective actions, advertising and promotion, product sales and distribution, and post-market clinical surveillance.

Our business is subject to federal, state, local, and foreign regulations and standards, such as ISO 13485, ISO 14971, FDA's Quality System Regulation, or 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.

In the United States, the Federal Food, Drug and Cosmetic Act (“FDCA”), and the implementing regulations of the FDA govern product design and development, preclinical and clinical testing, premarket clearance or approval, product manufacturing, import and export, product labeling, product storage, recalls and field safety corrective actions, advertising and promotion, product sales and distribution, and post-market clinical surveillance.

Our business is subject to federal, state, local, and foreign regulations and standards, such as ISO 13485, ISO 14971, FDA's Quality System

Regulation (“QSR”) contained in 21 CFR Part 820, Directive 90/385/EEC concerning active implantable medical devices and, Regulation 2017/745 on Medical Devices, as amended.

Regulation by the FDA

The FDA classifies medical devices into one of three classes according to the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness.

The Eversense System is a Class III device and subject to pre-market approval application under section 515 of the FDCA in order to obtain a marketing approval.

The Eversense System is a Class III device and subject to pre-market approval (“PMA”) application under section 515 of the FDCA in order to obtain a marketing approval.

A PMA application must be supported by valid scientific evidence that typically includes extensive technical, preclinical, clinical, manufacturing and labeling data, to demonstrate to the FDA's satisfaction the safety and efficacy of the device.

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International Regulation

International sales of medical devices are subject to local government regulations, which may vary substantially from country to country.

The time required to obtain approval in another country may be longer or shorter than that required for FDA approval, and the requirements may differ.

International sales of medical devices are subject to national, supra-national, and local government regulations, which may vary substantially from country to country.

The time required to obtain approval or certification in another country may be longer or shorter than that required for FDA approval, and the requirements may differ.

There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries.

On 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 90/385/EEC concerning active implantable medical devices, or AIMD.

The Medical Device Regulation and its associated guidance documents and harmonized standards govern, among other things, device design and development, preclinical and clinical or performance testing, premarket conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and distribution, export and import and post-market surveillance, vigilance, and market

surveillance.

90/385/EEC concerning active implantable medical devices, or AIMD.

Medical devices must comply with the General Safety and Performance Requirements, or GSPRs, set out in Annex I of the Medical Device Regulation.

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In addition, CE Certificates of Conformity issued by Notified Bodies in accordance with the MDD or the AIMD, from 25 May 2017 will remain valid until the expiration of the CE Certificate of Conformity and at the latest on 27 May 2024.

Medical devices with such valid CE Certificates of Conformity issued under the MDD or the AIMD may continue to be placed on the market for the remaining validity of the CE Certificate of Conformity or until May 27, 2024 at the latest, provided that (i) the devices continue to comply with the requirements of the MDD or AIMD, (ii) there are no significant changes in the design or intended purpose and (iii) from 26 May 2021, compliance with the EU Medical Device Regulation relating to post-market surveillance, market surveillance, vigilance, registration of economic operators and of devices is ensured in place of the corresponding requirements in the MDD or AIMD.

Medical devices with such valid CE Certificates of Conformity issued under the MDD or the AIMD may continue to be placed on the market for the remaining validity of the CE Certificate of Conformity or until May 27, 2024 at the latest, provided that (1) the devices continue to comply with the requirements of the MDD or AIMD, (2) there are no significant changes in the design or intended purpose and (3) from 26 May 2021, compliance with the EU Medical Device Regulation relating to post-market surveillance, market surveillance, vigilance, registration of economic operators and of devices is ensured in place of the corresponding requirements in the MDD or AIMD.

Other Regulatory Requirements

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Our contract manufacturers, specification developers and some suppliers of components or device accessories, also are required to manufacture our products in compliance with current good manufacturing practice requirements set forth in the QSR.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage,

installation and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping.

The FDA evaluates compliance with the QSR through periodic unannounced inspections that may include the manufacturing facilities of our subcontractors.

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We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information.

Among other things, HITECH makes HIPAA's security standards directly applicable to business associates, defined as service providers of covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity, and their covered subcontractors.

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In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from HIPAA and each other in significant ways and may not have the same effect.

In the EEA, the General Data Protection Regulation (2016/679), or GDPR, went into effect on May 25, 2018 and replaced Directive 95/46/EC (the EU Privacy Directive).

The GDPR applies to personal data about identified or identifiable data subjects processed by automated means and data contained in, or intended to be part of, non-automated filing systems (traditional paper files) as well as transfer of such data to a country outside of the EU/EEA.

Under the GDPR, fines of up to €20.0 million or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for certain categories of infractions that constitute significant non-compliance.

In the EEA, the General Data Protection Regulation (2016/679) (“EU GDPR”) and in the United Kingdom (“UK”), the United Kingdom’s GDPR (“UK GDPR”) (together the “GDPR”), applies to personal data about identified or identifiable data subjects processed by automated means and data contained in, or intended to be part of, non-automated filing systems (traditional paper files) as well as transfer of such data to a country outside of the EEA or UK.

Under the EU GDPR companies may face temporary of definitive bans on data processing and other corrective actions, fines of up to €20 million or up to 4% of the annual global turnover, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subject or consumer protection organizations authorized at law to represent their interests.

The GDPR includes more stringent operational requirements for data processors and data controllers and creates additional rights for data subjects.

Further, the exit of the United Kingdom, or UK, from the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the UK.

Specifically, the UK exited the EU on January 1, 2020, subject to a transition period that ended December 31, 2020.

The UK has implemented legislation similar to the GDPR, the UK GDPR, including the UK Data Protection Act, which provides for fines of up to the greater of 17.5 million British Pounds or 4% of a company’s worldwide turnover, whichever is higher.

Additionally, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear following Brexit, including with respect to regulation of data transfers between EU Member States and the UK.

On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the UK ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the UK.

Some uncertainty remains, however, as this adequacy determination must be renewed after four years and may be modified or revoked in the interim.

We cannot fully predict how the Data Protection Act, the UK GDPR, and other UK data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfers to and from the UK will be regulated.

Additionally, California recently enacted legislation, effective January 1, 2020, that has been dubbed the first “GDPR-like” law in the United States.

Additionally, California enacted legislation, effective January 1, 2020, that has been dubbed the first “GDPR-like” law in the United States.

Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered

companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for new causes of action for data breaches.

The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allows for new causes of action for data breaches.

As currently written, the CCPA could impact our business activities and is an example of the type of activity in an evolving regulatory environment related to personal data and protected health information that could continue to affect our operations.

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federal and state laws and equivalent third country laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws.

Our relationships with healthcare providers and other third parties are subject to scrutiny under these laws.

relationships with healthcare providers and other third parties are subject to scrutiny under these laws.

Violations of these laws are punishable by significant criminal, civil, and administrative sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs, or similar comparable foreign programs.

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The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid or other federal healthcare programs.

The term "remuneration"

has been broadly interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments and providing anything at less than its fair market value.

The term "remuneration" has been broadly interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments and providing anything at less than its fair market value.

Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly and require strict compliance to provide protection.

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Many states have adopted prohibitions similar to the federal Anti-Kickback Statute, some of which do not have the same exceptions or safe harbors and apply to the referral of patients for healthcare services reimbursed by any source, not only by the Medicare and Medicaid programs.

Further, the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or, collectively, PPACA.

Specifically, as noted above, under the federal Anti-Kickback Statute, the government must prove the defendant acted "knowingly"

to prove a violation occurred.

The PPACA added a provision to clarify that with respect to violations of the federal Anti-Kickback Statute, "a person need not have actual knowledge"

of the statute or specific intent to commit a violation of the statute.

Further, the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively “PPACA”).

Specifically, as noted above, under the federal Anti-Kickback Statute, the government must prove the defendant acted "knowingly" to prove a violation occurred.

The PPACA added a provision to clarify that with respect to violations of the federal Anti-Kickback Statute, "a person need not have actual knowledge" of the statute or specific intent to commit a violation of the statute.

This change effectively overturns case law interpretations that set a higher standard under which prosecutors had to prove the specific intent to violate the law.

In addition, the PPACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Federal law also includes a provision commonly known as the "Stark Law,"

which prohibits a physician from referring Medicare or Medicaid patients to an entity providing "designated health services,"

including a company that furnishes durable medical equipment, in which the physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties, and exclusion from

Medicare, Medicaid or other governmental programs.

Federal law also includes a provision commonly known as the "Stark Law," which prohibits a physician from referring Medicare or Medicaid patients to an entity providing "designated health services," including a company that furnishes durable medical equipment, in which the physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties, and exclusion from Medicare, Medicaid or other governmental programs.

We believe that we have structured our provider arrangements to comply with current fraud and abuse law requirements.

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Additionally, as some of these laws are still evolving, we lack definitive guidance as to the application of certain key aspects of these laws as they relate to our arrangements with providers with respect to patient training.

As a result, our provider and training arrangements may ultimately be found to be not in compliance with applicable federal law.

result, our provider and training arrangements may ultimately be found to be not in compliance with applicable federal law.

Federal False Claims Act & HIPAA

The federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.

In addition, amendments in 1986 to the federal False Claims Act have made it easier for private parties to bring "qui tam"

whistleblower lawsuits against companies under the federal False Claims Act.

In addition, amendments in 1986 to the federal False Claims Act have made it easier for private parties to bring "qui tam" whistleblower lawsuits against companies under the federal False Claims Act.

Penalties include significant civil monetary penalties for each false claim, plus three times the amount of damages that the federal government sustained because of the act of that person.

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The payment information is made publicly available in a searchable format on a CMS website.

Over the next several years, we will need to dedicate significant resources to establish and maintain systems and processes in order to comply with these regulations.

Failure to comply with the reporting requirements can result in significant civil monetary penalties.

Similar laws have been enacted or are under consideration in many states and foreign jurisdictions.

Healthcare Reform

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.

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Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

Thus, the ACA will remain in effect in its current form.

Prior to the U.S.

Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is possible that the ACA will be subject to judicial or Congressional challenges in the future.

Further, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law, which amount other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.

The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program.

It is possible that the PPACA will be subject to judicial or Congressional challenges in the future.

It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact the PPACA.

Congress and the Biden administration are considering additional health reform measures.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted.

In August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013 and, due to subsequent legislative amendments, will remain in effect until 2031 unless additional congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

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.

In addition, regulatory requirements governing medical devices may evolve.

On January 6, 2023, the European Commission adopted a proposal to amend the transitional provisions of the Medical Device Regulation.

The proposal is intended to prevent medical device shortages on the EEA market.

The proposed amendments introduce an extension to the transitional periods established in the Medical Device Regulation to provide medical device manufacturers with more time to bring their devices into conformity with the requirements of the Medical Device Regulation.

The length of the proposed extension is contingent on the risk classification of devices.

As a result, the current timeframes established in the transitional provisions of the Medical Device Regulation may be subject to upcoming amendments.

It is uncertain whether and how future legislation could affect prospects for our product candidates or what actions federal, state, or private payors for healthcare treatment and services may take in response to any such healthcare reform proposals or legislation.

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Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit.

Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom, or the UK, was subject to a transition period until

December 31, 2020, or the Transition Period, during which European Union rules continued to apply.

The United Kingdom and the European Union have signed a EU-UK Trade and Cooperation Agreement, or TCA, which became provisionally applicable on January 1, 2021 and entered into force on May 1, 2021.

Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom, or the UK, was subject to a transition period until December 31, 2020, or the Transition Period, during which European Union rules continued to apply.

The United Kingdom and the European Union have signed an EU-UK Trade and Cooperation Agreement, or TCA, which became provisionally applicable on January 1, 2021 and entered into force on May 1, 2021.

This agreement provides details on how some aspects of the United Kingdom and European Union’s relationship will operate going forwards however there are still many uncertainties.

The TCA primarily focuses on ensuring free trade between the European Union and the UK in relation to goods.

Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a "third country,"

a country that is not a member of the European Union and whose citizens do not enjoy the European Union right to free movement.

Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a "third country," a country that is not a member of the European Union and whose citizens do not enjoy the European Union right to free movement.

Northern Ireland will continue to follow many aspects of the European Union regulatory rules, particularly in relation to trade in goods.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate and may create logistical complications with respect to the movement and delivery of our products, which undergo certain manufacturing steps in the United Kingdom.

Given the lack of comparable precedent, it is unclear what financial, trade, regulatory and legal implications the withdrawal of the UK from the EU would have and how such withdrawal would affect us.

Several of our contract manufacturers are located in the UK.

Any of these effects of Brexit, among others, could adversely affect our business, financial condition and operating results.

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.

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 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.

Northern Ireland will, however, continue to be covered by the regulations governing CE Marks (a CE Mark or a CE Mark and UKNI Mark will be required to place products on the Northern Ireland market).

CE Marks will continue to be recognized in Great Britain for medical devices until June 30, 2024, however all medical devices must be registered with the MHRA, in order to be placed on the Great Britain market.

The EU legal framework, including the Medical Device Regulation, remains applicable in Northern Ireland (any products placed on the market in the NI must be compliant with EU law).

From July 1, 2024, transitional arrangements will apply for CE and UKCA marked devices placed on the Great Britain market.

The UK Medicines and Healthcare products Regulatory Agency also plans on introducing new legislation governing medical devices with an aim to bring the new regulations into force by July 2024.

Foreign Corrupt Practices Act

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Failure to comply with the UK’s Bribery Act, and other anti-corruption laws and trade control laws could subject us to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses.

Environmental Health and Safety Regulations

We are also subject to various environmental health and safety rules and regulations both within the U.S.

and internationally relating to pollution or protection of human health and the environment.

Our research and development, manufacturing, and clinical processes involve handling potentially harmful or hazardous materials regulated under environmental laws.

We may be held liable for damages, penalties and other remedial actions and legal costs if we fail to comply with these laws.

These expenses or this liability could have a significant negative impact on our financial condition and reputation.

Employees and Human Capital Resources

We believe that our future success largely depends upon our continued ability to attract and retain highly skilled and qualified employees who share in our mission to transform lives in the global diabetes community with differentiated, long-term implantable glucose monitoring technology.

As of December 31, 2021, we had 89 employees, of whom over half hold Ph.D., M.D., master’s degree or other post graduate degrees, and all of whom are located in the United States.

Most employees are in operations and research and development positions aligned with our corporate focus of developing and manufacturing glucose monitoring products.

We believe that our future success depends upon our continued ability to attract and retain highly skilled and qualified employees who share in our mission to transform lives in the global diabetes community with differentiated, long-term implantable glucose monitoring technology.

As of December 31, 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.

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.

Employee engagement is important to us, and we focus on continuously enhancing our corporate culture.

In 2021, our employees updated our core values by providing input through workshops and as a result we launched, “It Just Makes Sense,” to describe how our employees are living our corporate values.

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.

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.

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.

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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 continue to survey our employees around culture, engagement, work experience, communication and other topics and incorporate and respond to their feedback.

We will continue to conduct similar surveys and response efforts in the future.

We conduct frequent company calls to update all employees on what is happening in various departments to ensure our employees understand our strategic vision as well as our day-to-day objectives.

After each meeting, we hold separate open question and answer sessions that give our employees an opportunity to question or comment on anything that is on their minds.

Diversity, Equity, and Inclusion

Our success thrives on the diversity of backgrounds, knowledge, skills, ideas, and capabilities within our workforce.

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.

At the end of 2021, our employee base was comprised of approximately one third female and two thirds male.

We work to support our goals of diversifying our workforce through recruiting, retention, people development, and inclusion.

Health and Safety

We are committed to the health and safety of our employees and have safety training programs that ensure our workforce know how to do their jobs safely and in compliance with laws and regulations.

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.

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.

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 operate in modern, efficient, and safe facilities, and have minimal accident and injury rates.

In response to COVID-19, we organized an internal cross-functional task force to manage our response to the pandemic and maintain business continuity while aligning with safety protocols recommended by the World Health Organization (WHO) , the U.S.

Centers for Disease Control and Prevention (CDC), and other local health agencies.

In addition, to ensure the safety of our essential employees who work in our facilities during the pandemic, we implemented social distancing requirements and provided masks, hand sanitizer, and other personal protective equipment (PPE).

Organization Development

In 2022, we launched a new platform to improve

harassment training efforts and obtained 100% compliance.

We invested in a new wellness program “A Healthier You”, which focused 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 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.

As part of our performance management process, all levels of employees are formally required to meet with their managers at least quarterly to receive feedback on their established objectives, identify opportunities for skill development, and discuss opportunities to support their career goals.

During 2021, the executive team spent substantial time meeting routinely for strategic, operational, and organizational planning.

Many of these meetings were focused on organization development including succession planning and the identification of high potential and high performing individuals to create development plans to ensure we foster and retain top talent.

As part of our performance management process, all levels of employees are formally required to meet with their managers at least quarterly to receive feedback on their established objectives, identify opportunities for skill development, discuss opportunities to support their career goals, and reflect on how their behaviors demonstrate our corporate values.

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.

We re-launched our leadership pathways, with an emphasis on the technical leadership path aligning with our corporate focus of designing, developing, and manufacturing glucose monitoring products.

The executive team partnered with our consultants to complete 360-degree feedback and developed a plan to address the identified strengths and opportunities.

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 continue to evaluate and enhance our learning delivery to meet the needs of our workforce.

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 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.

Leaders participated in a customized DEI development program.

At the end of 2022, our employee base was comprised of 40% female and 60% male.

Total Rewards

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In 2021, we implemented a year-end market adjustment review process to ensure we maintain our competitive pay and pay equity between active employees and new hires and to align to the highly competitive labor market.

As a result of this review process, we made market adjustments to many of our employees effective January 1, 2022, to ensure pay equity between existing and new hires and to better position us to retain our valuable employees.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business