However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report.

TABLE OF CONTENTS

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PART I

Item 1. Business

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Overview

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We are a medical technology company focused on the design, development and commercialization of a long-term, implantable continuous glucose monitoring, productsor CGM, system to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy. Our continuous glucose monitoring, or CGM, systems, Eversense and Eversense XL are reliable, long-term, implantable CGM systems that we haveare 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 90 and 180 days, respectively, as compared to sixseven to fourteen14 days for currently availablenon-implantable CGM systems. We believe that Eversense and Eversense XL will provide people with diabetes withprovides a more convenient method to monitor their glucose levels in comparison to the traditional method of self-monitoring of blood glucose, or SMBG, as well as currently available CGM systems. In our U.S. pivotal clinical trial, we observed that Eversense measured glucose levels over 90 days with a degree ofby providing longer duration, superior accuracy, superior to that of other currently available CGM systems. On June 21, 2018, the U.S. Food and Drug Administration, or FDA, approved our Eversense system for marketing in the United States and we began distributing Eversense in the United States through our direct sales forcewireless communication, on-body vibratory alerts, gentle-on-the-skin adhesive patch, data sharing capability, and a network of strategic fulfillment partners in July 2018.removable smart transmitter. The original Eversense CGM system received a CE mark in June 2016, which marked the first approval for the product to be sold within the European Economic Area. Eversense andSubsequently, the extended life Eversense XL areCGM system received its CE mark in September 2017 and is currently available in select markets in Europe, the Middle East, and Africa, (EMEA).or EMEA. In June 2018, the U.S. Food and Drug Administration, or FDA, approved the Eversense CGM system and it is currently available throughout the United States. In June 2019, we received FDA approval for the non-adjunctive indication (dosing claim) for the Eversense system. With this approval and the availability of a new app in December 2019, the Eversense system can now be used as a therapeutic CGM in the United States to replace fingerstick blood glucose measurement to make treatment decisions, including insulin dosing.

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Our focus on the development and approval of the extended life Eversense 180-day product for the U.S. market is ongoing. On September 30, 2019, we completed enrollment of the PROMISE trial and had our last patient complete their 180-day visit during the first quarter of 2020. The 181 participants in the trial had the Eversense sensor inserted subcutaneously at eight sites across the United States where the safety and efficacy of the system was evaluated over a 180-day period. 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%. 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, or PMA, supplement application to extend the wearable life of the Eversense CGM System to 180 days was submitted to the FDA. If approved by the FDA, this new product would approximately double sensor duration of Eversense in the United States, reducing by half the number of insertion and removal procedures required, and would provide more than 12 times longer sensor duration than other CGM systems available in the United States. Following the submission of the PMA, we have received communication from the FDA advising us that the reallocation of agency resources to address Emergency Use Authorization (EUA) applications for products related to the COVID-19 public health emergency is affecting marketing application reviews, including the Eversense 180-day product. Based on a February 19, 2021 communication, we understand that the FDA expects to assign a reviewer, and that our PMA will be placed under review no later than April 15, 2021. Based on the passage of time and this new expectation from the FDA, we are anticipating approval no earlier than the second half of the year and note that the timing to completion and outcome of such a review is uncertain. If we receive a positive decision and product approval, we expect to begin transitioning patients in the United States to the new 180-day Eversense product shortly thereafter. Further reallocation of agency resources, shelter-in-place orders and other impacts from the COVID-19 pandemic are difficult to predict and could alter or delay the timing of response by the FDA regarding our submission.

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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 second half of 2021 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 first half of 2022.

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In April 2020, we announced that we received regulatory approval in Europe such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed from under the skin during MRI scanning. We had previously obtained this indication for Eversense in the United States in 2019. This MRI approval is a first for the CGM category as all other sensors are required to be removed during an MRI scan.

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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 with Ascensia Diabetes Care Holdings AG, or Ascensia, pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring 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 and registrations and second level customer support.

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2020 and Significant Recent Developments

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COVID-19

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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 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. Although the state of Maryland is gradually undergoing a phased reopening plan, 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 the initial outbreak.

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During the latter half of 2020, several new order requests from our distributors led to adjustments to concession allowances previously provided to some of our customers in the United States to reflect actual product usage. While these trends are promising, insertion volumes are still below pre-COVID-19 levels. Additionally, the COVID-19 pandemic infection rates in the United States are still high, vaccine distribution has only just begun, and it is difficult to predict the longevity and severity COVID-19 will have on our business.

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Restructuring and Transition of Commercial Strategy

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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.

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On August 9, 2020, we entered into a collaboration and commercialization agreement with Ascensia pursuant to which we granted Ascensia the exclusive right to distribute our 90-day Eversense continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring system worldwide for 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 does 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 the parties have been planning and making arrangements for Ascensia to ramp up sales activities and more fully assume commercial responsibilities in the second quarter of 2021. The Eversense 180-day product is planned to be marketed upon receipt of marketing approval from the FDA. In Germany, Italy and Switzerland, Spain, Poland and the Netherlands, Ascensia assumed commercial responsibilities for Eversense XL beginning on February 1, 2021. For Sweden and Norway, Ascensia will assume commercial responsibilities later this year. Ascensia is entitled to 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. Ascensia is obligated to achieve specified minimum annual revenue targets and meet specified levels of sales and marketing spend in order to maintain its exclusive distribution rights. Ascensia purchases Eversense and Eversense XL from us at negotiated prices. We remain responsible for product development and manufacturing, including regulatory submissions, approvals and registrations and second level customer support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and first level customer support. We have agreed to establish a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

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Background

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Diabetes is a chronic, life-threatening disease for which there is no known cure. The disease is caused by the body's inability to produce or effectively utilize the hormone insulin, which prevents the body from adequately regulating blood glucose levels. 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 20172019 International Diabetes Federation, or IDF, Atlas, an estimated 425463 million people worldwide had diabetes as of the date of the report. The number of people with diabetes worldwide is estimated to grow to 629700 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. Diabetes is typically classified into two primary types. typeType 1 diabetes is an autoimmune disorder that usually develops during childhood and is characterized by the inability of the body to produce insulin, resulting from destruction of the insulin producing beta cells of the pancreas. typeType 2 diabetes is a metabolic disorder that results when the body is unable to produce sufficient amounts of insulin or becomes insulin resistant. People with type 1 diabetes must administer insulin, either by injection or insulin pump, to survive. 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.

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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. 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. In contrast, CGM systems are generally less painful and involve the insertion of sensors into the body to measure glucose levels in the interstitial fluid throughout the day and night, providing real-time data that shows trends in glucose measurements. Since CGM measurements from interstitial tissue are inherently less accurate than test-strip measurements made directly from the blood,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.

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Historically, the FDA and other device regulators historically have 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. Recent improvements inHowever, given the accuracybroader clinical indications for the use of CGM systems, have led toincluding real-time alerts and multi-device integration, the FDA issuingissued the first “non-adjunctive” label in 2016. The approvalIn 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.

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In November 2019, the Centers for Medicare and Medicaid Services, or CMS, finalized a national payment rate for Eversense pre-market application, or PMA,that was issued with an “adjunctive” label. We have filed a PMA supplement seeking approval for a “non-adjunctive” label. We also recently received approvalpublished in the United Statescalendar 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 Europeexpands access to expandour product. In December 2020, the Eversense certification to nurse practitionersCenters for Medicare and physician assistants, expandingMedicaid Services, or CMS, released its Calendar Year 2021 Medicare Physician Fee Schedule that establishes global payment for the number of professionals who can perform Eversense insertions.

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 expire in 2021, with the Roche agreement having expired January 31, 2021. Upon conclusion of each of these agreements, Ascensia is assuming commercialization activities in select countries where Eversense XL has already launched, beginning February 1, 2021 for Germany, Italy, Switzerland, Spain, Poland, and Netherlands. Roche will continue to support certain transition activities for approximately six months in other markets. The transition of Rubin markets is planned to occur later in 2021.

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Our net revenues are derived from sales of the Eversense CGM system which is sold in two separate kits: the disposable Eversense Sensor Pack which includes the sensor, insertion tool, and adhesive patches, and the durable Eversense Smart Transmitter Pack which includes the transmitter and charger.

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Distribution Agreement with Roche Diabetes Care

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On May 24, 2016, we entered into an exclusive distribution agreement with Roche Diagnostics International AG and Roche Diabetes Care GmbH, or 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. In addition, Roche had exclusive distribution rights in 17 additional countries, including Brazil, Russia, India and China, as well as select markets in the Asia Pacific and Latin American regions.

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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.

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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.

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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 ADC is not initiating distribution.

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Collaboration and Commercialization Agreement with Ascensia Diabetes Care Holdings AG

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On August 9, 2020, we entered into a collaboration and 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 continuous glucose monitoring system and our 180-day Eversense continuous glucose monitoring system worldwide for use in people with diabetes, with the following initial exceptions: 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 does 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 the parties have been planning and making arrangements for Ascensia to ramp up sales activities and more fully assume commercial responsibilities in the second quarter of 2021. 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. Ascensia is obligated to achieve specified minimum annual revenue targets and meet specified levels of sales and marketing spend. Ascensia will purchase Eversense and Eversense XL from us at prices which have been negotiated based on parameters set forth in the commercialization agreement. We are responsible for product development and manufacturing, including regulatory submissions, approvals and registrations and second level customer support, and Ascensia is responsible for sales, marketing, market access, patient and provider onboarding and level one customer support. We have agreed to establish a joint alliance committee and joint marketing committee, each with equal representation from each party, in order to collaborate.

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Clinical Development and Regulatory Pathway

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Overview

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In support of our regulatory submissions, we have expended considerable resources designing, developing and refining a glucose monitoring system. We have completed both our European and U.S. pivotal trials. The Eversense and Eversense XL systems haveCGM system received a CE mark in Europe in September 2017 and are currentlyis being sold commercially.commercially in our overseas markets. Our PRECISE II U.S. pivotal trial was completed during 2016 and we2016. We received PMA approval from the FDA for the Eversense system onin June 21,2018 for up to 90 days and began selling commercially in the third quarter of 2018.

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We have initiatedIn September 2019, we announced the enrollment completion for the PROMISE pivotal trial to evaluate the safety and accuracy of Eversense for a clinical trialperiod of up to 180 days in the United States forStates. In September 2020, we filed with the purpose of submittingFDA a Premarket Approval, or PMA, supplement application to extend the FDA for Eversense XL, an extended versionwearable life of the Eversense system extending its use for a period ofCGM System to up to 180 days. We are also continuing to conduct a number of post-approval and feasibility studies in which we are evaluating various configurations of our CGM system. These studies are intended to assess the performance of different system configurations in a small population of subjects before enrolling a large clinical trial.studies.

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United States Pivotal Trials

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PRECISE II Trial

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In 2016, we conducted our U.S. 90-day pivotal trial. The trial was a prospective, single-arm, multi-center trial designed to determine the accuracy and safety of the Eversense system. Ninety subjects were enrolled in eight centers across the United States. Eighty-seven of the ninety enrollees completed the 90-day trial.

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The clinical trial population consisted of subjects at least 18 years of age who had a clinically confirmed diagnosis of diabetes. Subjects who had a history of severe hypoglycemia, defined as hypoglycemia resulting in loss of consciousness or seizure, or diabetic ketoacidosis, in the six months prior to the trial, were excluded from participation in the clinical trial. Accuracy measurements were taken at 1 day, 30 days, 60 days, and 90 days post-insertion. These sensor measurements were continued through the earlier of the failure of the sensor or 90 days post-insertion.

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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. 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. MARD is a statistical calculation that measures the average absolute value of the differences, expressed as a percentage, between glucose measurements taken from interstitial fluid based on our CGM system and blood glucose measurements from YSI. The lower the MARD of a glucose monitoring system, the more accurate the system and, therefore, the more reliable the system's readings.

the United States through our own direct sales and marketing organization.organization. We have received Category III CPT codes for the insertion and removal of the Eversense sensor and intend to pursue a Category I CPT code in the future.sensor.

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PROMISE Trial

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In December 2018, we began enrollment for the U.S. 180-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 180 days using the methods described above for the 90-day system. ApproximatelyOver 180 subjects will bewere enrolled in up to 15eight centers across the United States. We expect thatcompleted enrollment will be completed in September 2019 and had our last patient complete their 180-day visit during the thirdfirst quarter of 2019 and we expect to report data through 180 days in the first half of 2020.

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The clinical trial population will consistconsists of subjects at least 18 years of age who have had a clinically confirmed diagnosis of diabetes for at least one year. Subjects with a history of unexplained severe hypoglycemia, defined as hypoglycemia resulting in loss of consciousness or seizure, or diabetic ketoacidosis, in the six months prior to the trial arewere excluded from participation in the clinical trial. After screening, sensor(s) will bewere inserted and accuracy measurements will bewere 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%. 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, a Premarket Approval Application Supplement, or PMA supplement to extend the wearable life of the Eversense CGM System to 180 days was submitted to the FDA. If approved by the FDA, this new product would double sensor duration of Eversense in the United States, reducing by half the number of insertion and removal procedures required, and would provide more than 12 times longer sensor duration than other CGM systems available in the United States.

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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 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 second half of 2021 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 first half of 2022.

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In April 2020, we announced that we received regulatory approval in Europe such that the Eversense XL is no longer contraindicated for MRI, which means the sensor does not need to be removed from under the skin during MRI scanning. We had previously obtained this indication for Eversense in the United States in 2019. This MRI approval is a first for the CGM category as all other sensors are required to be removed during an MRI scan.

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diode, or 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. NFC is a high frequency wireless communication technology that enables the exchange of data and energy between devices over a short range. The entire capsule is coated by a glucose-permeable membrane for biocompatibility.

The sensor does not usehave a battery or other stored power source. Instead,source and remains electrically dormant (powered off) between readings every five minutes, and it is remotely and discretely powered, as needed, by an inductive NFC link between the sensor and the transmitter. On power-up, the LED source is energized for approximately five milliseconds to excite the hydrogel. Between readings every five minutes, the sensor remains electrically dormant and fully powered down.

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Smart Transmitter

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The removable smart transmitter is a rechargeable, external device that is worn over the sensor implantation site using a daily adhesive patch or band, such as an armband or waistband.patch. The transmitter supplies wireless power to the sensor through an inductive NFC link, which activates a measurement sequence every five minutes. The transmitter then receives data from the sensor and calculates glucose concentrations and trends. 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, Bluetooth, or BLE. Our transmitter is functional for at least 3624 hours without rechargingfollowing a full charge and can be fully charged in fifteen minutes.

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Mobile App

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Our mobile app is a software application that runs on both platforms; iOS mobile devices, including iPhones, iPads and Apple Watches, and Android mobile devices. The mobile app receives information from the transmitter via BLE and displays that information discreetly to the user. This user-friendly, intuitive app provides real-time glucose readings, alerts, trends, graphs and alarms.graphs. Within the mobile app, users can set alarmsalerts based on, among other things, glucose levels. The mobile app also allows for cloud-based storage.

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Future Product Development

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Following the potential approval of Eversense XL in the United States, weWe intend to continue to expand our line of product offerings to benefit both people with diabetes and healthcare providers. We expect these product development initiatives to include system modifications and next generation enhancements that we believe will further increase the convenience and appeal of our products to the diabetes community.

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We are focusing our future development efforts on enhancing current product offerings by reducing the twice daily calibrations to once a day calibration, and further progressing to 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. 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 seeking to ensure that we meet the growing and unique needs of people with diabetes utilizing our core and healthcare providers.

Future developments includeproprietary sensor technology. The company’s technology also has potential applications measuring analytes other than glucose, such as oxygen, and the submission of a PMA-supplement application for a “non-adjunctive” dosing claim, which would permit users to dose with insulin without first confirming the blood glucose measure via a fingerstick, submitting an IDE for a pediatric trial in the United States, submitting a PMA-supplement application for a one calibration per day calibration scheme following the review of our PMA-supplement applicationcompany may consider opportunities for the “non-adjunctive” dosing claim, potential further reductionsdevelopment or out-licensing of significantly reducing calibration requirements, continuing to improve accuracy, and initiating clinical trials for On-Demand, or “swipe”, and technology for both type 1 and type 2

an implantable device requires a strong network of healthcare providers trained on the Eversense sensor placement procedure. In the first few quarters of our commercial activities in Europe. We currently marketlaunch, 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 in 15 European countries where there is an understanding and market acceptance of CGM. We have an exclusive arrangementproceduralists with Rubin Medical for sales in Scandinavia. We have an exclusive arrangement with Roche Diabetes Care for sales in the rest of Europe, the Middle East and Africa, excluding Israel and Finland, and in 17 additional countries, including Brazil, Russia, India, and China, as well as select markets in the Asia Pacific and Latin American regions.

Based on the size and maturitylaunch of the U.S. market, we are investing in developingCertified Eversense Specialist, or CES, network. This group of healthcare providers includes specialists who have strong familiarity with conducting in-office procedures such as dermatologists and plastic surgeons. The CES network offers an alternative for healthcare providers who want to prescribe Eversense for their patients but prefer to refer the procedure to a direct sales team consisting regional and district managers, medical educators, and a customer care organization to support the continued commercialization of the product in the United States in order to target what we estimate to be approximately 2,100 endocrinologists in the United States who are clinically active and diabetes-focused. We utilize a network of strategic fulfillment partners in the United States who resell the products to health care providers and patients.specialist.

We recently announced that we would be launching a patient access program, the Eversense Bridge Program, in March 2019 to assist those patients who do not have insurance coverage for Eversense, or whose insurance is denied or insufficient. Pursuant to this program, we will provide financial assistance to eligible patients purchasing Eversense, which may be substantial depending on a patient’s insurance coverage. The program establishes maximum limits per patient in the program and excludes certain patients as ineligible, including government-insured patients and residents of certain states. We believe this patient access program will enable more patients to utilize the Eversense system.

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As people with diabetes often consult with their healthcare providers about treatment options, we believe that educating healthcare providers regarding the benefits of Eversense compared to SMBG and other currently available CGM systems is an important step in promoting its use in people with diabetes. Our European experience and our initial feedback in the United States indicates healthcare providers highly valuedvalue the accuracy and sensor duration of our CGM system and the majority of physicians surveyed considered the insertion process to be fairly simple or feasible. We intend to continue educating healthcare providers and people with diabetes on the advantages of Eversense compared to SMBG and other currently available CGM systems.

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Distribution Agreement with Rubin Medical

              In September 2015, we entered intoAs a distribution agreement with Rubin Medical, or Rubin, pursuant to which we granted Rubin the exclusive right to market, sell and distribute Eversense in Sweden, Norway and Denmark. Pursuant to the agreement, Rubin is obligated to purchase from us specified minimum volumesresult of Eversense components at pre-determined prices, which are subject to potential amendment upon the occurrence of specified events. Rubin isour strategic partnership, Ascensia will be responsible for the promotion, salesales, marketing, market access, patient and distribution of Eversenseprovider onboarding and level one customer support. We have established a joint alliance committee and joint marketing committee, each with equal representation from each party, in Sweden, Norway and Denmark at such prices as Rubin determines in its sole discretion, subjectorder to specified exceptions.collaborate.

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              The distribution agreement has an initial term of five years and is subject to renewal for up to two additional five year periods if, at least 180 days prior to the expiration of a term, we and Rubin agree to minimum purchase requirements for the additional term and we do not increase the purchase price of Eversense components that are subject to existing publicly procured contracts unless Rubin can pass through the price increase to the customer.​

Reimbursement

              The distribution agreement is terminable by us upon 30 days' notice under a number of circumstances, including if Rubin fails to make required payments, Rubin competes with us or Rubin seeks to distribute Eversense outside of Sweden, Norway or Denmark. The agreement is terminable by Rubin upon 30 days' notice under a number of circumstances, including if we breach the warranties of the agreement, fail to obtain marketing approval or fail to satisfy our supply obligations. The agreement is terminable by either party if the other party fails to comply with marketing laws, violates the confidentiality or intellectual property protection provisions of the agreement, becomes insolvent, or becomes subject to specified convictions, injections or enforcement actions. The termination rights contained in the

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Manufacturing and Quality Assurance

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We currently outsource the manufacturing of all components of our system.the Eversense system to contract manufacturers across North America and Europe. We plan to continue with an outsourced manufacturing arrangement for the foreseeable future. Our contract manufacturers are all recognized in their field for their competency to manufacture the respective portions of our system and have quality systems established that meet FDA and, to the extent required, international regulatory requirements. We believe the manufacturers we currently utilize have sufficient capacity to meet our requirements and are able to scale up their capacity relatively quickly with minimal capital investment.requirements. We believe that, as we increase our demand in the future, our per unit costs will decrease materially.

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We have received certification from BSI, our Notified Body to the International Standards Organization, or ISO, for our quality system. This ISO 13485:2016 certification includes design control requirements. As a medical device manufacturer, the facilities of our sterilization and other critical suppliers are subject to periodic inspection by the FDA and corresponding state and foreign agencies. We believe that our quality systems and those of our suppliers are robust and achieve high product quality.

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Our suppliers are managed through our supplier management program that is focused on reducing supply chain risk. Key aspects of this program include managing component inventory at the supplier, contractual requirements for last time buy opportunities and second sourcing approaches for specific suppliers. Typically, our outside vendors produce the components to our specifications and in many instances to our designs. Our suppliers are audited periodically by our quality department to ensure conformity with the specifications, policies and procedures for our devices. We believe that, if necessary, alternative sources of supply would be available in a relatively short period of time and on commercially reasonable terms. 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. 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. However, in the event of an extended failure of a supplier, it is possible that we could experience an interruption in supply until we established new sources or, in some cases, implemented alternative processes.

Although we will face potential competition from many different sources, we believe that our technology, knowledge, experience and scientific resources will provide us with competitive advantages. The key competitive factors affecting the success of Eversense are likely to be: the accuracy, sensor duration, safety, convenience, adherencealert functionality, and price of treatment; the availability of coverage and reimbursement from government and other third-party payors; effective sales, marketing and distribution; brand awareness and acceptance by healthcare providers and people with diabetes; customer service and support and comprehensive education for people with diabetes and their healthcare providers; and rapid product innovation, including insulin pump integration.support.

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Many of the companies against which we may compete in the futurewith have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or earlier stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our development.

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Intellectual Property

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Protection of our intellectual property is a strategic priority for our business. We rely on a combination of patents, trademarks, copyrights, trade secrets as well as nondisclosure and assignment of invention agreements, material transfer agreements, confidentiality agreements and other measures to protect our intellectual property and other proprietary rights.

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intellectual property, we could be required to pay treble damages and/or attorney fees for the prevailing party, in addition to other penalties. Although intellectual property disputes in the medical device area are often settled through licensing or similar arrangements, costs associated with such arrangements can be substantial and often require ongoing royalty payments. We may be unable to obtain necessary licenses on satisfactory terms, if at all. If we do not obtain necessary licenses, we may not be able to redesign our products to avoid infringement; if we are able to redesign our products to avoid infringement, we may not receive FDA approval in a timely manner. 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.

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Trademarks

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We have no pending U.S. trademark applications and 2920 pending foreign trademark applications, as well as 14 U.S. trademark registrations and 65116 foreign trademark registrations.

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Trade Secrets

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We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position. We seek to protect such intellectual property and proprietary information by generally requiring our employees, consultants, contractors, scientific collaborators and other advisors to execute non-disclosure and assignment of invention agreements upon the commencement of their employment or engagement as the case may be. Our agreements with our employees prohibit them from providing us with any intellectual property or proprietary

The FDA can delay, limit or deny approval of a PMA application for many reasons, including:

New PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling, device specifications, materials or design of a device that has been approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the approved PMA application and may or may not require as extensive technical or clinical data or the convening of an advisory panel.

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Any devices we manufacture and distribute pursuant to clearance or approval by the FDA are subject to pervasive and continuing regulation by the FDA and certain state agencies. These include product listing and establishment registration requirements, which help facilitate FDA inspections and other regulatory actions. As a medical device manufacturer, all of our manufacturing facilities are subject to inspection on a routine basis by the FDA. We are required to adhere to applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which require, manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all phases of the design and manufacturing process. Noncompliance with these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA approval of devices, withdrawal of marketing approvals and criminal prosecutions. We believe that our design, manufacturing and quality control procedures are in compliance with the FDA’s regulatory requirements.

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We must also comply with post-market surveillance regulations, including medical device reporting, or MDR, requirements which require that we review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.

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Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

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International Regulation

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

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The European Union, or EU, has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the EU with respect to medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear the CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives, or Essential Requirements, and, accordingly, can be commercially distributed throughout the EU. To assist manufacturers in satisfying the Essential Requirements, the European standards organizations have prepared European standards applicable to medical devices. These include harmonized international quality standards aimed at ensuring that medical devices are correctly designed and manufactured..manufactured. The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by the manufacturer and a third partythird-party assessment by a "Notified Body." Notified Bodies are entities licensed (‘notified’) by the individual European member states to provide independent certification of certain classes of medical device. They apply for and are designated to carry out this function by the relevant national competent authorities, which carry out periodic assessment audits to determine whether the Notified Bodies continue to satisfy the necessary requirements. A conformity assessment conducted by a Notified Body may consist of an audit of the medical device manufacturer's quality system and specific testing of the manufacturer's product to ensure that the medical device complies with the Essential Requirements. Once the appropriate conformity assessment procedure has been completed, the manufacturer must draw up a written declaration of conformity and affix the CE mark to the device. The device can then be marketed throughout the European Economic Area (being the EU, Norway, Iceland

and Liechtenstein) or EEA. Notified Bodies perform surveillance and unannounced audits at the manufacturer and critical suppliers with respect to the devices covered by the certificates issued by them. If non-conformities raised during the audits are not timely remedied by the manufacturer, the Notified Body may (partially or wholly) suspend or withdraw the certificate concerned. Additional local requirements may apply on a country-by-country basis. Outside of the European Union, regulatory approval would need to be sought on a country-by-country basis in order for us to market our products.

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All manufacturers placing medical devices into the market in the EEA must comply with the EU Medical Device Vigilance System. Under this system, incidents must be reported to the relevant authorities of the Member States of the EEA, and manufacturers are required to take Field Safety Corrective Actions, or FSCAs, to reduce a risk of death or serious deterioration in the state of health associated with the use of a medical device that is already placed on the market. An incident is defined as any malfunction or deterioration in the characteristics and/or performance of a device, as well as any inadequacy in the labeling or the instructions for use which, directly or indirectly, might lead to or might have led to the death of a patient or user or of other persons or to a serious deterioration in their state of health. An FSCA may include the recall, modification, exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.

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In May 2017, the European Commission finalized and adopted the text of the Medical Device Regulation (EU) 2017/745, or the EU Medical Device Regulation, which will repeal and replace both Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical devices. The majority of the provisions in the EU Medical Device Regulation were to apply from Spring 2020, however, the enforcement has been postponed by a year due to the COVID-19 pandemic. The current CE certificate will continue to be in effect, while the Company works to ensure compliance with the EU Medical Device Regulation and transitions the CE certificate from current 90/385/EEC Directive to MDR.

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Other Regulatory Requirements

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Even after a device receives clearance or approval and is placed in commercial distribution, numerous regulatory requirements apply. These include:

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off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

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In the United States, failure to comply with applicable regulatory requirements can result in enforcement actions by the FDA and other regulatory agencies. These may include any of the following sanctions or consequences:

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In the European Union, member states are responsible for enforcing the EU’s medical device rules and for ensuring that only compliant medical devices are placed on the market or put into service in their jurisdictions. They have powers to suspend the marketing and use, or demand the recall, of unsafe or non-compliant devices. They also have the power to bring enforcement action against companies or individuals for breaches of the device rules. Non-compliance may also result in Notified Bodies revoking any certificate of conformity that they have issued for a device or the manufacturer’s quality system.

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

security rules. 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.

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On April 5, 2017, the European Parliament passed the Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EEA member States, the regulations would be directly applicable (i.e., without the need for adoption of EEA member State laws implementing them) in all EEA member States and are intended to eliminate current differences in the regulation of medical devices among EEA member States. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and in vitro diagnostic devices and ensure a high level of safety and health while supporting innovation.

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The Medical Devices Regulation will however only become applicable three years after publication in May 2020. Once applicable, the new regulations will among other things:

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These modifications may have an impact on the way we design and manufacture products and the way we conduct our business in the EEA.

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In the European Union (and, specifically the European Economic Area) (EU/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. The GDPR includes more stringent operational requirements for data processors and data controllers and creates additional rights for data subjects. Additionally, in June 2016,January 2020, the United Kingdom voters approved an exitwithdrew from the EU,European Union, commonly referred to as “Brexit,” which“Brexit”. The implications of Brexit and the future trading relationship between the United Kingdom and the EU are still uncertain and could also lead to further legislative and regulatory changes. In March 2017, the United Kingdom began the process to leave the EU by April 2019. While the Data Protection Act of 2018, that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under GDPR. We may incur liabilities, expenses, costs, and other operational losses under GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to comply with them.

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Additionally, California recently 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. When it goes into effect on January 1, 2020, theThe CCPA will requirerequires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allowallows for a new causes of action for data breaches. Legislators have stated that amendments will be proposed to the CCPA before it goes into effect, but it remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted. 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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Fraud and Abuse Laws

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In addition to FDA restrictions, there are numerous U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws. Our relationships with healthcare providers and

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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.

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Federal False Claims Act & HIPAA

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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. 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. Qui tam actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, pay fines, be excluded from Medicare, Medicaid or other federal or state healthcare programs, or be subject to integrity oversight and reporting obligations to resolve allegations of non-compliance, as a result of an investigation arising out of such action.

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There are other federal anti-fraud laws that that prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

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Additionally, HIPAA established two federal crimes for healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of either of these statutes is a felony and may result in fines, imprisonment, exclusion from Medicare, Medicaid or other federal or state healthcare programs, or integrity oversight and reporting obligations to resolve allegations of non-compliance.

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Civil Monetary Penalties Law

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In addition to the federal Anti-Kickback Statute and the civil and criminal false claims laws, including the federal False Claims Act, the federal government has the authority to seek civil monetary penalties, or CMPs, assessments, and exclusion against an individual or entity based on a wide variety of prohibited conduct. For example, the Civil Monetary Penalties Law authorizes the imposition of substantial CMPs against an entity that engages in activities including, but not limited to: (1) knowingly presenting or causing to be presented, a claim for services not provided as claimed or which is otherwise false or fraudulent in any way; (2) knowingly giving or causing to be given false or misleading information reasonably expected to influence the decision to discharge a patient; (3) offering or giving remuneration to any beneficiary of a federal health care program likely to influence the receipt of reimbursable items or services; (4) arranging for reimbursable services with an entity which is excluded from participation from a federal health care program; (5) knowingly or willfully soliciting or receiving remuneration for a referral of a federal health care program beneficiary; or (6) using a payment intended for a federal health care program beneficiary for another use. Noncompliance can result in significant civil money penalties for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.

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State Fraud and Abuse Provisions

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Many states have also adopted some form of anti-kickback and anti-referral laws and a false claims act, some of which apply regardless of source of payment and do not have the same exceptions as the federal laws. We believe that

we are in conformance to such laws. Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions.

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Physician Payments Sunshine Act

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Transparency laws regarding payments or other items of value provided to healthcare providers and teaching hospitals may also impact our business practices. The federal Physician Payment Sunshine Act requires most medical device manufacturers to report annually to CMS financial arrangements, payments, or other transfers of value made by that entity to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and other transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives during the previous year. 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.

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Healthcare Reform

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Federal and state governments continue to propose and pass new legislation and regulations designed to contain or reduce the cost of healthcare. Such new laws may result in decreased reimbursement for medical devices, which may further exacerbate industry-wide pressure to reduce the prices charged for medical devices. For example. in March 2010, the PPACA, was enacted, which substantially changes the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical device industry. In the years since its enactment, there have been and continue to be, significant developments in, and continued legislative activity around, attempts to repeal or repeal and replace the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated medical device tax and the “Cadillac” tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminated the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. WhileAdditionally, on December 18, 2019, the Texas U.S. Court of Appeals for the 5th Circuit upheld the District Court Judge, as well as the Trump administration and CMS, have statedruling that the ruling will have no immediate effect pending appealindividual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unknown when a decision will be made. Further, it is unclear how this decision, subsequent appeals,the Supreme Court ruling, other such litigation, and other efforts to repeal and replace the PPACAhealthcare reform measures of the Biden administration will impact the PPACA.

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In May 2017, the European Commission finalized and adopted the text of the Medical Device Regulation (EU) 2017/745, or the EU Medical Device Regulation, which will repeal and replace both Directive 93/42/EEC concerning medical devices and Directive 90/385/EEC concerning active implantable medical devices. The majority of the provisions in the EU Medical Device Regulation apply from spring 2020. The Company will need to ensure compliance with the EU Medical Device Regulation in the future if it is to place a medical device on the EU market after this regulation comes into force.

Brexit and the Regulatory Framework in the United Kingdom

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On June 23, 2016, the electorate inJanuary 31, 2020, the United Kingdom, or UK, voted in favor of leavingformally withdrew from the EU, commonly referred to as “Brexit”. Thereafter, on March 29, 2017, the country formally notifiedThe United Kingdom and the EU of its intention to withdraw pursuant to Article 50are currently in a transition period during which the United Kingdom and the EU are negotiating additional arrangements, including their future trading arrangement. In December 2020, the U.K. and E.U. agreed on a trade and cooperation agreement that will apply provisionally after the end of the Lisbon Treaty.transition period until it is ratified by the parties to the agreement. On December 31, 2020, the U.K. passed legislation giving effect to the trade and cooperation agreement, with the E.U. expected to formally adopt the agreement in early 2021. The agreement sets out certain procedures for approval and recognition of medical products in each jurisdiction. 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 is expected to take effect on March 29, 2019 unless this is postponed or an agreement that the UK remainwould have and how such withdrawal would affect us. Several of our contract manufacturers are located in the EU is reached. Since the regulatory framework for medical devices in the UK covering quality, safetyUK. Any of these effects of Brexit,

among others, could adversely affect our business, financial condition and efficacy, clinical trials, CE marking, commercial sales and distribution is derived from EU directives and regulations, immediately following Brexit, it is expected that the UK’s regulatory regime will remain aligned to European regulations. The guidance provided by the UK confirms that, for an unspecified time-limited period, medical devices approved for the EU market and appropriately CE marked will be recognized by the UK, should the UK leave the EU without an agreement in place. Any medical devices which have been certified by UK-based Notified Bodies will need to be re-certified in the EU as UK-based Notified Bodies will not be recognized by the EU after March 29, 2019, unless an agreement to the contrary is reached between the UK and the EU. The UK has also confirmed that it will comply with all key elements of the EU Medical Device Regulation when they apply in the EU and, subject to parliamentary approval, is proposing to introduce a UK equivalent to the CE mark, to be known as the UKCA (UK Conformity Assessed) mark. However, it remains to be seen exactly how Brexit will impact regulatory requirements for medical devices in the UK.operating results. In the longer term, Brexit could materially impact the future regulatory regime which applies to medical devices and their approval in the UK.

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Corporate Information

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We were originally incorporated as ASN Technologies, Inc. in Nevada on June 26, 2014. On December 7, 2015, pursuant to the Merger Agreement and the transactions contemplated thereby, or the Acquisition, we acquired Senseonics, Incorporated, a medical technology company focused on the design, development and commercialization of glucose monitoring systems to improve the lives of people with diabetes by enhancing their ability to manage their disease with relative ease and accuracy. From its inception in 1996 until 2010, Senseonics, Incorporated devoted substantially all of its resources to researching various sensor technologies and platforms. Beginning in 2010, the company narrowed its focus to designing, developing and refining a commercially viable glucose monitoring system.

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In connection with the Acquisition, we reincorporated in Delaware and changed our name to Senseonics Holdings, Inc. Upon the closing of the Acquisition, Senseonics, Incorporated merged with a wholly-ownedwholly owned subsidiary of ours formed solely for that purpose and became our wholly-ownedwholly owned subsidiary.

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Our principal executive offices are located at 20451 Seneca Meadows Parkway, Germantown, Maryland 20876-7005 and our telephone number is (301) 515-7260. Our common stock is listed on the NYSE American under the symbol “SENS.”

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Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects and cause the trading price of our common stock to decline:

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Risks Relating to our Business and our Industry

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We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability.

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Since our inception, we have incurred significant net losses, including net losses of $94.0$175.2 million, $59.1$115.5 million, and $43.9$94.0 million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. As of December 31, 2018,2020, we had an accumulated deficit of $357.8$648.5 million. To date, we have financed our operations primarily through sales of our equity securities and debt financings. We have devoted substantially all of our resources to the research and development of our products, including conducting clinical trials, and the commercial launch of Eversense in the United States and Eversense and Eversense XL in Europe.  Europe, the Middle East, and Africa (EMEA).

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To implement our business strategy we need to, among other things, gain regulatory approval in other regions where we intend to sell our products, expand our commercial launch in the United States and Europe, and develop future generations of Eversense. We have never been profitable and do not expect to be profitable infor at least the foreseeable future.next several years. We expect our expenses to increase significantly as we pursue these objectives. The extent of our future operating losses and the timing of profitability are highly uncertain, and we expect to continue incurring significant expenses and operating losses over the next several years. Any additional operating losses may have an adverse effect on our stockholders' equity, and we cannot assure you that we will ever be able to achieve profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, obtain regulatory approvals, diversify our product offerings or continue our operations.

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Our collaboration and commercialization agreement with Ascensia to market Eversense may not be successful.

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We have entered into a collaboration and commercialization agreement with Ascensia, pursuant to which we have granted Ascensia the exclusive right to distribute Eversense worldwide, subject to initial exceptions based on our other current exclusive distribution agreements. Pursuant to this agreement, our future success will be dependent on Ascensia effectively marketing and selling Eversense. We expect that the substantial majority of our future revenue will come pursuant to this agreement in future years. If Ascensia fails to perform satisfactorily under this agreement, including among other things if they are delayed or unsuccessful in growing the adoption of our product, our commercialization efforts and financial results would be directly and adversely affected.

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The agreement is terminable by Ascensia under a number of circumstances, including if Eversense 180-day product is not approved in the United States by August 31, 2021 or if we undergo a change of control. The agreement is terminable by either party if the other party materially breaches its obligations under the agreement; provided, however, that if Ascensia is unable to achieve the specified minimum spending or revenue targets described above, then we will only have the right to covert Ascensia’s exclusive rights to nonexclusive rights, which may make it difficult for us to successfully engage with another commercial partner. The agreement is also terminable by either party if the other party undergoes bankruptcy, dissolution or winding up.

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We cannot guarantee this agreement with Ascensia will be successful, that it will continue, or that we will be able to achieve or maintain any particular volume of sales under the agreement or increase the volume of sales at a satisfactory pace or at all from this relationship in the future.

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Our collaboration and commercialization agreement with Ascensia and the terms of our recent debt and preferred stock transactions may discourage a change of control of our company.

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The terms of our agreements with Ascensia and PHC may discourage a third party from acquiring, or attempting to acquire, control of our company, even if a change of control was considered favorable by some or all of our stockholders. For example, because of the exclusivity of the distribution arrangements with Ascensia and the minimum five-year term of that exclusivity (which may be extended under certain circumstances), prospective strategic acquirors may be unwilling to undertake an acquisition of our company. In addition, under the terms of the PHC Notes

and our convertible preferred stock, we may be required to make significant payments to redeem these notes and to satisfy liquidation preference of our convertible preferred stock upon a change of control.

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Our business, product sales and results of operations could be adversely affected by the effects of health epidemics, including the recent COVID-19 outbreak, in regions where we or third parties distribute our products or where we or third parties on which we rely have significant manufacturing facilities, concentrations, clinical trial sites or other business operations. The COVID-19 pandemic has and may continue to, materially affect our operations, including at our headquarters in Maryland and at our clinical trial sites, as well as the business or operations of our manufacturers, distributors or other third parties with whom we conduct business.

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Our business could be adversely affected by health epidemics in regions where we sell products, where we have concentrations of clinical trial sites or other business operations, and could cause significant disruption in the operations of third-party manufacturers and distributors upon whom we rely.

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For example, in December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States and several European countries. Our headquarters is located in Maryland, and our contract manufacturers are located in Germany, the United Kingdom and the United States. Our distributors are located in the United States and various countries in Europe.

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In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S. government imposed travel restrictions on travel between the United States, Europe and certain other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. Similarly, the Governor of Maryland has issued an order closing all non-essential businesses, which took effect on March 23, 2020. Substantially all of our workforce is now working from home either all or substantially all of the time. The effects of the Maryland order and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs, regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.

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Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. In particular, some of our suppliers of certain materials used in the production of our sensors and transmitters are located in Germany, the United Kingdom, China, Japan and the United States. For example, any manufacturing supply interruption of Eversense or future generation products, could adversely affect our ability to conduct planned clinical trials and commercialization activities.

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Sales and demand for Eversense have been and may be adversely affected by the global COVID-19 pandemic. Disruptions in the distributions of Eversense could result if patients are physically quarantined, if physicians restrict access to their facilities for a material period of time, if we are unable to train new physicians, if patients are unable or unwilling to visit health care providers, or if health care providers prioritize treatment of acute or communicable illnesses over diabetes management. At various times during the COVID-19 pandemic, (i) our or our partners’ ability to visit physician offices have been restricted, and (ii) insertions of Eversense have been adversely impacted. During the pandemic, these and other risks could recur or continue. In addition, in the spring of 2020 we announced changes in our ability to market Eversense in the U.S., substantially reduced our sales and marketing capabilities, and limited or ceased our efforts to secure new Eversense patients in the U.S. The impact of these actions on patients and health care providers could delay or negatively impact our ability to stabilize and grow sales of Eversense in the U.S.

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In addition, our clinical trials may be affected by the COVID-19 pandemic. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic. Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare

services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations.

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The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

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The review of our products by the FDA and other regulators has been and may continue to be adversely affected by the COVID-19 pandemic. On September 30, 2020 we submitted a PMA supplement application to extend the wearable life of the Eversense CGM System to 180 days to the FDA. Following the submission of the PMA, we have received communication from the FDA advising us that the reallocation of agency resources to address Emergency Use Authorization (EUA) applications for products related to the COVID-19 public health emergency is affecting marketing application reviews, including the Eversense 180-day product. Based on a February 19, 2021 communication, we understand that the FDA expects to assign a reviewer, and that our PMA will be placed under review, no later than April 15, 2021. Based on the passage of time and this new information from the FDA, we are anticipating approval no earlier than the second half of 2021. The timing to completion and outcome of such a review is uncertain, as is the impact of COVID-19 on agency review timelines or possible delays. A delay in the approval of our 180-day product in the U.S. could delay Ascensia from being able to market a product with longer duration and other additional patient benefits to the U.S. market and could adversely affect our net revenues and financial results.

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The global pandemic of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, commercialization efforts, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.

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We have limited commercialization experience in the United States and Europe. If we are unable to successfully expand our commercialization of Eversense in the United States and Europe, or if Ascensia experiences difficulties is establishing support for Eversense, our business will be harmed.

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We have limited commercialization experience in both the United States and Europe. We have invested substantially all of our efforts and financial resources to the development and commercialization of Eversense. Our ability to generate revenue from our products will depend heavily on successful commercialization of products in the United States and