Q2 2020 T2 Biosystems Inc Earnings Call
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Thank you operator, thank you for joining.
The team to buy it systems second quarter 2020 financial results conference call I'd like to remind everyone that comments made by management today and answers to questions will include forward looking statements.
Good statements related to teach you biosystems future financial and operating results and plans for developing and marketing new products forward looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these statements.
Including the risks and uncertainties described in key to Biosystems annual report on form 10-K filed with the FCC March 16th 2020, and other filings the company makes with the FTC from time to time. The company undertakes no obligation to publicly update or revise any forward looking statements except as required by.
With that I'd like to turn the call over to President and CEO John Sperzel.
Huh.
Thanks for joining up second quarter 2000, <unk> earnings call.
I'll start by acknowledging the ongoing cobot 19 pandemic and its widespread impact on our communities.
Our team achieved you biosystems, we'd like to thank all healthcare workers for their tireless service.
I also want to thank my colleagues to Dubai systems for their commitment to our mission.
Unprecedented challenges.
On today's call I'll start with a review of our performance during the second quarter.
And then discuss the progress made toward each of our corporate priorities, including the recent U.S. commercial launch of our code at Nike molecular diagnostic test the T. Two summers koby to Pat.
And how it is well aligned with our mission.
And our corporate priorities.
John spreads will provide the detailed second quarter financial results.
I will make some closing remarks, and then open the call for questions and answers.
As we announced at the end of June the teacher Biosystems team generated total revenues of $2.6 million in the second quarter 2020.
An increase of 41% compared to the prior year period.
Growth was driven by increased revenue from the product development contract awarded by the U.S. government in late 2019.
On June Thirtyth, we commenced sales of our teacher Sars Koby to panel in New York market.
And we significantly strengthened our balance sheet during and subsequent to the under the second quarter.
I want to take a moment to emphasize teacher Biosystems mission.
To fundamentally change the way medicine, this practice to transformative diagnostics group.
The lives of patients around the world.
I also want reiterate the threeq corporate priorities, we set at the beginning of this year.
One accelerating our sales.
Improving our operations and three advancing our pipeline.
We remain laser focused on our mission.
Fully committed to our corporate priorities.
This pandemic provides us with an opportunity to dramatically increase our U.S. installed base appear to be actually instruments and supply U.S. hospital systems with high quality Cobot 19, molecular diagnostic tests that deliver results in less than two hours.
Our plan is the subsequently leverage a much larger installed base of instruments.
Dan starts up to this business going forward.
Sepsis represents nearly $41 billion, an annual U.S. health care costs and causes the death of nearly 270000 people in the United States, each year and 11 million globally.
We deliver lifesaving innovations to achieve faster targeted therapy.
Reduce unnecessary use a broad spectrum into politics.
And help to prevent and come back to growth in its own microbial resistance.
We continue to supply our Judy actually instruments, and our teacher bacteria seek to Canada. If you do resistance barrels to hospitals around the globe.
<unk> clinicians in the rapid detection of substance, causing pathogens.
Teach biosystems offers the only after you get cleared products to identify sepsis, causing pathogens directly from whole blood in three five hours.
Without the need to wait dates for a positive blood culture.
Hi matters when it comes to sepsis as each hour of delayed targeted treatment can increase mortality by up to 8%.
Data has shown that cobot 19 patients are susceptible to co infections and secondary infections that can cause substance.
Our hospital customers understand this connection.
I've been using our sepsis diagnostic panels to help manage patients more effectively.
As such expanding our test menu to include a molecular diagnostic test to allow the detection Sars koby too.
Barack was responsible for causing primary Cobra 19 infections.
Okay, great strategic fit.
With greater clarity around the impacts of coded 19, you on demand for our products and our initial experience in the launch of the teachers Sars Koby to panel in the United States will be issuing guidance for the full year 2020 as follows.
We expect full year 2020, total revenues of $18 million to $20 million, including product revenues of $13 billion to $14 billion and research and contribution revenues of $5 million just $6 million.
We expect 60 U.S.T. to Dx instrument sales contracts in 2020.
Well now shift gears to discuss the three corporate priorities, we established at the beginning of this year to drive long term success for the company.
Accelerating our sales.
Our operations and advancing our pipeline.
Let's start by addressing our first priority accelerating our sales.
Prioritizing adoption and increased test utilization.
Product sales during the second quarter decreased compared to the prior year period.
Primarily due to fewer international sales a teacher Dx instruments.
Consistent with the first quarter hospital customers continued to focus on coated 19 patient management delayed the evaluations of technologies to address non cobiz illnesses.
As such our second quarter product revenue was driven primarily by sales of T to Canada and she do bacteria panels.
We were very pleased that U.S. test utilization per instrument increased by 51% during the second quarter compared the prior quarter.
In large part <unk> increased testing of Kobin 19 patients that were risk for developing co infections and secondary infections that can lead to sepsis.
We don't want to provide an update on the cobot 19, molecular diagnostic test the teach you sorry koby to panel.
Which we launched commercially in the United States on June Thirtyth 2020 last day of the second quarter.
We believe this new test will have any significant positive impact our business.
Putting a new growth vehicle and driving increased sales a P to be actually instruments in the United States.
Which are being pretty position for future adoption of our existing such as products.
The teachers stars Koby to panel uses a neat apparently swab samples and runs our F.D.A. cleared TDX instrument.
Which can perform seven test simultaneously and provides result in less than two hours.
Based upon testing in a clinical setting using known positive and negative patient samples.
The teacher Sars Koby to panel demonstrated sensitivity of 95% and specificity of 100%.
To understand how we plan to succeed in a growing kobin 19 diagnostic testing market.
It's important to understand the types of tests currently available as well as the locations where kobin routine testing is being performed.
The FDA issued a document in July 2020, titled Corona virus testing basics, describing two types of test.
I'll stick to us an antibody test.
According to the FDA diagnostic test can show up you have active infection.
Include molecular tests that detect the virus this genetic material such as the she two stars could be two panel.
Antigen tests that detect specific proteins on the surface and the virus.
Antibody or Surajit cats look for antibodies that are made by your immune system in response to the threat such as the specific virus.
Actual virus.
Antibodies could several days or weeks to develop after an infection and they stay in your blood for several weeks or more apt to recovery.
According to the FDA molecular tests can be used diagnose an active cobot infection.
Well the antigen tests may also be used to diagnose cobot 19 infections. The FDA cautions that antigen tests are more likely to miss an activity reduction compared to molecular test therefore should not be used to definitively rule out an active cobot 19 infection.
Finally, according to the FDA antibody test cannot be used to diagnose active cobot 19 infections.
Today Cobot 19 tests are performed in numerous locations, including large high volume reference laboratories.
Hospital laboratories long term care care facilities urgent care centers, dr. offices, which drives protesting sites.
We're also seeing new testing scenarios, just or professional sports teams universities schools and employers.
All locations the need for diagnostic tests and the need for rapid results.
Outpacing industry capabilities.
While it's true that our to do stars Koby to panel used to detect and help diagnose active opened 19 infections in any of the aforementioned testing locations, especially given its two hour time to result.
We plan to stay true to our mission and our target customer.
Which is U.S. hospital systems.
It's important to remember that these are this and target customers for our sepsis panels teach Canada and teacher bacteria.
Our objective is to significantly increased the installed base of teach you Dx instruments in the watch market during the cold in 19 pandemic.
Delivering high quality could 19, molecular test and leverage a much larger installed base to revolutionize the sepsis market going forward.
We are experiencing high demand from U.S. hospital systems for our teachers Sars Koby to panel.
I'm teach you Dx instrument following the recent commercial launch.
Hospital systems also experiencing high demand for molecular diagnostic tests and because diagnostic tests manufacturers are unable to supply sufficient quantities of just many hospitals acquired multiple testing platforms in an effort to me cobot 19 testing demand.
We believe our ability to guaranteed customers the supply and liberty of specific quantities of our keep you started scobey to panel is a significant competitive advantage.
This new demand has allowed us to shift our U.S. commercial model from previous practice of leasing or placing keytruda gets instruments to.
To selling instruments self service contracts, obtaining large upfront purchase orders and it's in customers on standing orders for teachers first koby to panels.
We're also actively working to convert existing reagent rental customers over to capital purchases.
At the same Tom we're rebuilding our U.S. sales team with experience diagnostic sales professionals, we've already made positive impact on our business.
Moving to our second priority, improving our operations, but I would ties in cost of goods expense reductions.
Over the past six months, we've made significant progress in changing the cost structure of the organization.
We've taken several steps to eliminate cost the did not support our corporate properties, including headcount reduction.
Facility consolidation and finding efficiencies in manufacturing and logistics.
We reduced our real estate footprint by approximately 22% during the second quarter. Following the exit of one of our leased facilities.
At the beginning of this second quarter, we implemented a number of initiatives to reduce the manufacturing cost about products.
We're beginning to see benefit of these improvements in our second quarter financials in the form of reduce cost of product revenue reduced selling general and administrative expenses, which is also driving a reduction in cash burn.
We both can be increased volume associated with T. Two Sars Toby too will improve overhead absorption.
It allows to leverage our supply chain and implement additional improvements.
Combined with other initiatives and volume benefits overtime, we believe the cost of product sales as a percentage of revenue should continue to improve.
Related to our cobot 19 operational initiatives, we're significantly scaling 32, Dx instruments and teachers Sars koby to panel manufacturing to meet the current and anticipated demand.
We're taking measures to secure our supply chain in the form of increased inventory impair hiring personnel in instrument manufacturing test manufacturing and quality assurance.
Our goal is to be in a position to deliver up to 62 DXP instruments in the United States during the second half of 2020.
This represents a seven fold increase over last year.
As a reminder, each two dx instrument has the capacity to consume up to 60 teach you Sars koby to panel per day, depending on workflow.
That coupled with our standing water process, which were implementing with customers enables us to accurately calculate and forecast test demand based on our installed base of instruments.
Moving to our third priority advancing our pipeline.
By prioritizing our programs under the $69 million milestone based product development contract awarded by the U.S. government in September 2019.
I'm pleased to report that we are on schedule to create a next generation instrument expanded panel and bio flat panel.
We believe the next generation instrument and expanded panel under development have the potential to revolutionize the blood diagnostic space.
And could potentially replacing post cultures perform for species identification.
I have to be a little results.
As a reminder, our expanded panel is being designed to potentially called up to or greater than 99% of all blood borne infections and detect more than 250 species.
In addition to all blood borne antibiotic resistant threats identified by the centers for disease control and prevention.
The government contract also includes a bio threat that.
We believe will be the first high sensitivity whole blood test for the detection of multiple bile threat patterns and talks in jeans.
Based on our progress to date, we're optimistic that the U.S. government will decide to bond the next phase of the contract.
In May 2020, we set ambitious goal to develop validate and commercialize a coated 19 molecular diagnostic test as early as the end of June.
We're very pleased with the efforts of our team to develop a new class a test on our platform during the pandemic on June Thirtyth, we completed development validation of our to do Sars Koby to panel to meet requirements for an emergency use authorization or any way request to the food drug administration.
We submitted our E rate request did you have today on July 1020.
Given the significant number of Eway submissions were pleased to have recently been assigned an FDA review where.
We are actively engaged with the FDA.
In interactive review of the submission look forward to completing process.
As a reminder.
System would that be guidelines, we are actively selling marketing and shipping the two sars, probably two panel for clinical use by our customers.
I want to inform you of an organizational change that will occur later this month.
On August 21st 2020, Dethomas Lowery will step down as Chief scientific officer to build a new cell therapy company.
Tom's leadership has been instrumental in developing our technology and building our strong scientific team.
The timing of his departure follows the completion of a number of important milestones.
Turning obtaining a multiyear government contract to advance our technology.
Developing and commercially launching a sars can be to test.
And strengthening our balance sheet to continue our commercial advancements.
I want to publicly thank Tom for his leadership and commitment from our mission.
And wish him the best in his next Dexter.
Moving forward Dr., Roger Smith, who most recently led the development of our team Sars Koby to panel has been promoted the vice President and will lead our scientific team.
Roger has been with T. Two biosystems for six years, it's worked in a leadership capacity on our scientific team on T. to bacteria C line teacher resistance and our government funded by a threat and comprehensive panels.
Now I'll turn the call over the bond spreads to provide details on our second quarter financial results.
Thank you John.
Total revenue for the second quarter of 2020 was $2.6 million, an increase of 41% compared to the prior year period product working for the second quarter 2020 was $1 billion, a decrease of 18% compared to the prior year period, driven by lower international instrument sales research and contribution revenue for the second quarter 2020.
Was $1.5 million increase 185% compared to the prior year period, driven by increased funding under our U.S. government contract.
<unk> operating expenses for the second core quarter of 2020 were $11.4 million, a decrease of $4.2 million compared to the prior year period, driven by lower cost of product revenue and lower selling general administrative expenses on lower international instrument sales.
Net loss for the second quarter of 2020 was $10.7 million.09 per share compared to a net loss of $15.6 million.35 per share in the prior year period.
We completed the ATM offering in July 2020, and there is no remaining availability.
Cash cash equivalents and marketable securities as of July 30, Onest 2020 were $69.1 billion, we remain compliant with the terms of RCR cheap debt facility.
Thank you in back to John Sperzel for closing remarks.
While the company 19 pandemic remains a significant global challenge diagnostic testing continues to be center stage.
We have an incredible opportunity created by the flexibility about patented technology platform.
Our ability to provide clinicians with critical diagnostic information it hours rather than days is unique.
To help to save lives and improve outcomes for cold 19 patients and those under intensive care well susceptible to bacterial or fungal infections that may lead to status.
We're excited to continue to drive the adoption of our technology, while providing a powerful solution to clinicians in their efforts to combat this pandemic.
With significant progress across all three of our corporate priorities.
Improve the position of company, both financially and in that market.
We believe customer demand created through the recent U.S. commercial launch of our teachers stars could be two panel will have a significant positive impact on our business moving forward.
We have a strong balance sheet.
An improved cost structure I potentially disruptive product pipeline, and then experienced management team and board of directors.
We look forward to providing updates on our progress towards these priorities throughout the year.
I'll open it up the questions operator.
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One moment, please let me pull for questions.
The first question is some who neat sota.
SBB Leerink. Please go ahead Sir.
Yeah, Thanks, and thanks, Sean and congrats on a strong results here first question on.
Trying to understand what the you pick up in sepsis.
Means as a result, you know coal would how sustainable is that trend.
And correct me if I'm wrong that this is a rule of test for sepsis.
Can you elaborate the growth that you're seeing there appears to be coming from that during the quarter. How sustainable is that trend longer term and what sort of contribution do you expect from that especially typically not necessarily covert testing what do you expect from that sepsis.
In coven patients in the second half because you have a significant ramp up here and the sales in second half.
The uptick that we've seen in test utilization for our sepsis panels is largely driven by customers who have fully implemented the test into their sepsis protocols and we saw that in particular in some of the hot spots in Florida, and New York City and the discussions.
With those customers, there's simply testing be kogan patients or those that are in critical care more frequently because of the risk of co infections in secondary infections. So that part of it we believe sustainable so long as be as the cobot pandemic is in front of us.
In terms of the ramp in the second half the year. The instrument sales that we have planned in the back half of which is approximately 60 instruments are largely coke live in placements and they will be fully utilized by the T. Two stars Coca to panel the transition obviously is as the.
Back to co bid winds down some points in the future we plan to transition those instruments that were installed during the coated pandemic to our sepsis panels and as I mentioned in the prepared remarks, we are pre positioning that with every single customer that's adopting our teacher Dx instrument with the did you saw scope.
As for test.
Okay. That's it that's very helpful.
And on the co bid ask they could you elaborate.
Thank you gave a number of 60 tests per day, a is that a metric that can potentially increase and how are you thinking about the next instrument is that you know could you accelerate you know a higher volume testing on data instrument. If you can provide any details up there.
The next instrument is designed for greater throughput I think it's important to say that we are focused on the products that we have today for the moment and so when we book at the two do you actually instrument. It has a theoretical group what just north of 80 test per day, and I'm, assuming that we can deliver it.
Just in a little under two hours.
However, when we look at the practical throughput running three shifts and some of our customers are running three shifts today. The practical throughput is about 60 tests per day.
In terms of thinking about a model, we modeled that with customers moving to skip spurred.
So you could call that a little bit conservative, but that's where we've done it.
Okay, that's great.
And then on the sales team can you elaborate where do you stand currently and what are the additions what our expectations for additions into the second half and overall a this is maybe a question for John Sprague or if you can provide youre a summit on cash burn into the into the second half.
Thank you.
So I'll take the sales team and then John can handle the up piece I think it's important just remember where we came from in the very end of Q1, we decided to eliminate the sales team was in place and in the midst of the cobot pandemic I think we've talked about this before.
Deal was a period of time, where hospital system simply would not allow sales were up to enter the building and in many cases. That's that's still occurs so a lot of our selling efforts have been using other vehicles, a remote vehicles and we've been done very successful with that I can tell you that the inbound demand for our.
I would tell us is significant.
And we only need a few outsized sales, perhaps in order to execute on that which is what we have rehired we hired three.
Regional account manager, so far and we'll continue to scale that how does the pandemic winds down and as appropriate John if you want to handle the cash question that'd be great.
Sure. So our cash burn was about 8.9 million in the second quarter.
We see that as extending for the rest of the year, although we are adding a manufacturing capacity as well as to the commercial sales team, but it wont.
Dramatic increase in burn we are investing in inventory levels as John mentioned and that will utilize cash, but we see that starting to turn as we exit the year.
Okay, great. Thank you.
Next question is from X Masucci Canaccord Genuity. Please go ahead Sir.
Hi, Thanks for taking the questions.
So it's nice to see the reinstated guidance for the year can you just speak to some of the key embedded assumptions and then the potential swing factors and the guidance calls for for 60 instrument contracts for the year, what does the guidance assumed for the mix of capital sales versus reach.
Rental.
100% capital packs.
One of the great things that have occurred in the shift is we were able to sell instruments were able to put customers on standing orders with the sale of an instrument comes the sale of a service contract. So our commercial model has has done a 180 from reagent rentals to capital equipment now I would say that will make.
You get attractive for customers to adopt our instrument technology, because there's both the short term effort, which is to drive future Sars koby to test as well as to meet significant demand in the market and there is a long term play which is to really revolution I used the sepsis market as coded pans out.
Great and then just any initiatives to reduce the timeline to get the instrument up and running wants their placed just be helpful to understand what sort of assumptions are baked in there.
It's a three weeks right now.
It's been a massively improved.
Three weeks, great and then what sort of runway do you have to expand your manufacturing capacity organically and are you still exploring manufacturing partners to help you extend the capacity and then there's your 2020 guidance assume what is the 2020 guidance assume for Ben.
Factoring capacity is that maybe is it a constraining factor or is there any sort of dependency there.
So we plan to sell 60 instruments in two U.S. customers in the second half of 2020, which I mentioned in the prepared remarks is this sevenfold increase compared to last year. So we're ramping our instrument manufacturing to stay ahead of that anticipated demand. We have ordered a lot of mature girls Jones.
John sort of highlighted that that's going to show up in increased inventory in the second half of the year ramping our test manufacturing as well to meet what we believe is significant customer demand the beauty about having the installed base that we have knowing exactly where it is and what we plan to.
Place in terms of cobot, driven placements is we can very accurately forecast the number of cats and our installed base actually can consume.
So so so the maximum number that that installed base that can consume some customers are going to want to order more than that because they're experiencing.
Allocations delayed shipments were back orders, but other manufacturers so while we're making promises to customers on delivery because we know that we can stay ahead of our installed base in terms of the scalability of our house some customers don't believe that they're going to order more than than what the instrument.
Actually consume on a day well be core monthly basis. So we feel very good about our ability to scale manufacturing instruments, we feel very good about our ability to scale manufacturing on the test and our model is a go it alone model, we are still pursuing opportunities for government funding scale up pure.
Meant that we hope would be Nondilutive of course, we can't make any guarantees that that that will occur.
Great. That's it for me and congrats on on the new opportunity ahead.
Thanks Max.
[noise] flavor question from Ben Haynor Alliance Global Please go ahead Sir.
Good afternoon gentleman, thanks for taking my questions and ER, congrats on being able to offer guidance when a lot of firms so far a pull back and not been able to reinstate it [noise].
So just thinking about the 60 system number you know are those kind of what's kind of the mix in terms of no new accounts existing accounts that might need additional systems.
And then the you know how it sounds like you've got the incoming demand.
You know, how many orders or or indications do you have in hand at the moment.
I would say that it's about 80% new customers, 20% existing so far we're still six weeks into the launch so definitely number.
And we're confident enough in that 60 instrument number to give guidance did you started without it was a comic them. So so thanks for deleveraging that and you know where we're pretty confident in these figures enough to give that guidance.
And maybe you're not the thanks for that and then you know maybe maybe you're not seeing doesn't mean that does that you've got a incoming interest but.
Do you get a sense of what other solutions on the on the covert Dustin front the that these hospitals might be evaluating.
Well, obviously there are a lot of players in the cold the diagnostic space as I as I mentioned in some of my prepared remarks that supply molecular test that supply antigen test antibody test there lots of different testing locations that frankly leads to a lot of confusion and misunderstand.
So I wanted to be very clear about where we're going to compete and how we're going to win we're going to compete in the hospital market.
We're going to be focused on on supplying them with a number of tests that that meets their expectations about our platform and we're going to make commitments to what we're seeing from other from many of our customers is that they buy a system from a competitive company and we didn't want.
There there on allocation.
So so discussions taking place about about turnaround time on instrument somebody might say well two hours. There that's out there that that can get result in less time than that that's great. If you get those steps I mean, what we're hearing if you watch the news every day is its turnaround time as measured in days not ours, we're going.
It's a very focused on the hospital market I think we've all heard the outage that what you say no too often as important as what you say, yes to that rule applies for us we're not going to chase other market segments that are outside of our long term objective to revolutionize the sepsis place. This is a catalyst for us.
To go out and significantly increased our installed base.
Generate revenue.
Product gross margin and then flip that down the road to to building a really strong sensors business.
Okay. That's very helpful. Thanks for the color there and then maybe following up a little bit on my first question.
You know under 60 units is do you expect a a lot of these accounts just given the throughput to need multiple units or is it.
You know kind of you know one 1.21 0.5 systems per account on average.
We are in discussions with many customers that want multiple systems and that's great.
Okay. Thanks, a lot gentlemen, that's all I have.
Thanks for that.
Thanks Ben.
We have a question I'm sure Steve Brozak WBB Securities. Please go ahead Sir.
Hi, Thank you for taking the question I'm just got a one follow up I know, it's too early for you to tell us in terms of what you're seeing with the covert testing, but can you tell us anything anecdotally about what's your what's the different hospitals different clinicians are giving you as far as feedback.
Any light you can do would be would be terrific. Thank you.
I think one thing that I'd like to pull to Steve is the fact that we already have a handful of customers that are using our sepsis panels as well as our teachers Sars coffee to panel those or customers that already exist. It.
They were one bit asked us really once we announce that we're going to develop.
Cobot 19 test.
To be to be early adopters of that.
Because they saw the connection clinically between critically ill kobin patients and the risk of sepsis. So that was a thesis that we had when we license this technology prone Hackensack Meridian health and it's really exciting to see it play out that way that we're meeting customer needs at.
And and we're helping patients have been for outcomes.
And I actually [laughter]. Thank you John that actually makes me to the next question in terms of the the cobot sepsis correlation because that that's something that obviously you know we're reading about in the newspapers all the time.
Can you give us any insight as to what you're seeing as far as how clinicians are practicing and how they understand this and anything you can you can give us some not front that'd be terrific and I'll hop back into queue. Thank you.
So I might ask Tom I'll return to just comment about the the clinical application between the.
Sepsis panels and to covert test from do you mind responding to that.
Sure happy to so we've seen data on a more data or emerging about the presence of super infections co infections.
There's a lot of our customers where utilization is up or customers that have been after centers of the outbreak.
Such as New York City in other places.
And so we're seeing that add these patients who are suffering from cold it or in the I see you. They really the screen them rapidly and quickly for the presence of bloodstream infection persistent fungal infections and a they turn to our appeal to do came to them to do battery to do that.
Great well, thank you again, John and Tom and congrats on obviously all this progress.
Thank you Steve.
Thank you.
As a reminder, extinguished ask the question. Please press star one or a phone keypad that's star one.
We have a question for Mark Massaro P.T.I.E.G. Please go ahead Sir.
Hey, guys congrats on a good quarter and thanks for taking my questions.
You know I guess before I start.
For Tom Lowery I, just want I congratulate you for your long tenure at the company and all the successful development milestones you had to take T. Two to this level.
Thank you appreciate it.
And okay. So my first question guys. If you could just help me with the guidance. So obviously you know 60 placements in the back half of the year is you know something that I don't think anyone on this line was expecting.
John Sperzel, you talked about receiving some you know orders in the quarter you know just doing the math relative to the initial guy that you provided earlier in the year you know that would assume you know an incremental step up.
I think it's four and a half million a product revenue relative to the initial guide. So can you just give us a sense for.
You know have you received somewhere near 20 or 30 orders.
For the teacher Dx system, just you know some sense on that tracks and you have on the order side.
Sure Mark up it first of all it's an even bigger step up than that because because by this time in our initial guidance, we would've expected to be further along in product sales than we work through the end of.
Q2.
Because of the headwinds related to Kobin, mostly in the international markets and mostly moving from the valuations to close so so we're where we expect a significant step up from the first half of the here to Q3, and then an even bigger step up to before now what drives that is instrument placement.
The the number of instruments that we have installed.
At the end of the given quarter, it's really what's going to drive revenue in the following quarter. So if you look at the 60 units, we already have a significant pipeline customers in our sales funnel that are in the contracting process and we already have a number of customers.
That have gone live with RTP, Sars koby to test and new customers as well existing customers. So we didnt plan to get into the specific number on this call, but just in terms of the way we think about two to be in Q4, we expect for to be two x. about Q3.
In terms of the way, we think about that that guidance for the full year.
That's super helpful. And then on the successful increase in an annuity per system. I think you said, 51% sequentially. How sustainable do you think that is and you know can you give us any commentary about what July look like.
Sure. So I don't have July in front me I'm quite frankly, but where we were in Q2 versus Q1, just important to <unk> to go back up a bit at the beginning here, we said that the the utilization in terms of number of test per instrument per year measured in dollars.
It was approximately 50000.
Yeah, that's about what it was at the end of Q1 I think at each north of 50, 152000, and it's north of 70000 in the second quarter.
So so we obviously saw an uptick and as I mentioned before we saw in hot spots. We sought in New York, We saw in Florida, We saw it with some are international customers in Italy, as well, although we don't count that in our utilization for the U.S. So we think that that part is sustainable we set a target to get $200000.
By the end of this year in utilization now that's pre cobot, but I think our prospects just got substantially better to even out do that number because we're now adding a code to test.
Dart platform got it yeah, I know that's remarkable and then Europe two large G.P.O. as a premier in vision I can you talk about the traction you've had within their large networks, presumably some of the conveyed contracts or orders you've received likely might be stemming from those gpos.
We have not added the teachers Sars koby to panel to the Vizient premier contracts, yet that's something that we're going to look out in the back half the year, but quite frankly, we have so much inbound demand right now I don't think that that's something that we need to address at the moment for a number of reasons.
In terms of our sepsis business.
Obviously coded impacted the implementation with BG and premier to starting here, but if we expect that to be strong and go forward.
Okay and you said you now have ever reviewer at the F.D.A. on the coveted test you know do you think this is for 812 weeks away I mean do you have a sense on you know roughly when we can expect to see anyway approval.
It's really hard to predict that Mark I can tell you that you are.
Active review process, where where exchange goes back and forth.
What we can do this is control our response time and I can tell you that we're going to be very prompt.
Yeah, I think said, it's not slowing down our commercialization of the test I mean, we're still able to market. So ship for commercial use and we are.
Yep understood.
You know your Ah you now have I think you guys said 69 million of cash at the end of July it's the highest cash balance you've had in a long time or how does that change. How you think about you know John you haven't been at the company for that long you know you announced restructuring I know not all of your sale.
People have been in place in their seats, a long time, but you do have a lot of Tailwinds you have a lot of new products. I think you have a relatively small salesforce is there any chance you know we could get you to quantify how many reps you have now and then how many you think you might have a year for now.
So I.
Having strong balance sheet, obviously is a blessing we thank our shareholders for supporting Matt.
It doesn't change the fact that we have to be good stewards of capital and we intend to be.
On the other hand.
We do that for reason, so that we could mean into commercial opportunities and and we have a great one standing in front of US force for sepsis as well as for Cobot and we intend to do that we have we hired to we knew regional account managers. These are experienced people from.
Very successful diagnostic companies and I don't have a number yet and the year Mark will scale that as it makes sense quite frankly, if we had 50 salespeople today they'd be sitting at home and that's not the best use of our capital. So we're going to be slow in rebuilding that.
But we won't let it get ahead of us.
Got it. Thank you on the T. to resistance panel I think you have CE mark.
It's commercializing our you own the U.S. can you give us a sensor timing you know what the F.D.A. understanding I believe you have breakthrough device designation, just where are you in conversations with the agent.
Tom can you comment on that.
Yeah. So you didn't see they have these weekly town hall meetings and they communicated that everything not Cobra do you need is on the back burner.
So unfortunately that affects a lot of its program. So we really are positioned deal with saying sort of each day as to our discussions with them and took all of our pivotal study.
Yes that makes sense understood and then Oh, sorry for all the questions last one for me you guys have a lot on your plate.
My suspicion is that maybe the Lyme disease test might be on hold given focusing on you know the task at hand, with Covance and everything else going on is that right or do you continue to.
Pursue maybe an L.D.T. launch with the lab partner.
So the only t. launch with the lab partner is still honor strategy and you're absolutely right in characterizing that as we're keeping that in our back pocket given the other opportunities that we have in front of us at the moment. So it's it's a little bit back Burnered, if you will.
Great. Thanks, guys.
Thank you Mark.
The next question is from the knows some.
Please go ahead Sir.
I'm sorry, he is not he's.
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Gentlemen that they didnt that Weve reached the end of the question to ask it sounds like the turn the call back over to Don Sperzel CEO. Please go ahead Sir.
Thank you very much for your participation in today's call and your supported T to look forward to updating you on the next quarter.
Have a great day everyone.
This concludes todays conference you may disconnect you lines at this time, thank you for your participation.
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