Q4 2021 T2 Biosystems Inc Earnings Call
Hello, and welcome to the <unk> Biosystems fourth quarter and full year 2021 earnings call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Reminder, this conference is being recorded its now my pleasure to turn the call over to Philip Taylor Investor Relations. Please go ahead.
Thank you operator, I'd like to remind everyone that comments made by management today and answers to questions will include forward looking statements.
Those include statements related to <unk> 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 <unk>.
The risks and uncertainties described in <unk> Biosystems annual report on Form 10-K filed with the SEC on March 31, 2021, and other filings the company makes with the SEC from time to time. The company undertakes no obligation to publicly update or revise any forward looking statements except as required by law.
With that I would like to turn the call over to chairman and CEO John <unk> John .
Thank you for joining our fourth quarter and full year 2021 earnings conference call.
Today I will highlight the company's strong performance in 2021.
Provide details on the progress across our three corporate priorities and share our 2022 priorities.
We'll then turn the call over to John Sprague, Our Chief Financial Officer, who will review, our fourth quarter and full year 2021 financial results and share our 2022 financial guidance before I make some closing remarks, and we open the call to questions and answers.
In 2021, the <unk> biosystems team generated total revenue of $28 $1 million, including product revenue of $16 $6 million.
Representing growth of 55% and 43% respectively compared to the prior year.
We entered into contracts for 32 T to Dx instruments in 2021 <unk>.
Including contracts for 17 instruments during the fourth quarter.
Which exceeded the expectations, we set at the beginning of the year.
We have made considerable progress across our three corporate priorities accelerating our sales enhancing our operations and advancing our pipeline.
We strengthened our leadership sales marketing clinical and medical affairs teams.
Expanded commercial distribution in Asia Pacific Latin America and Europe .
Increased manufacturing capacity and improved product gross margins.
Finalized a lease that will significantly reduce future rent expenses.
Initiated U S clinical trials for the <unk> resistance and tissue bio threat panels ahead of schedule.
And advanced our next generation product pipeline.
We also made meaningful progress toward our mission.
To fundamentally change the way medicine is practiced through transformative culture independent diagnostics that improve the lives of patients around the world.
We have our sights set on sepsis.
The current standard of care for patients at risk of sepsis relies on broad empiric protocols to administer antimicrobial therapy <unk>.
Despite the fact that such protocols are only optimal.
Approximately one half of cases.
To further complicate matters. The current standard of care continues to rely on a positive blood culture to identify the presence of a blood stream infection and target therapy for patients suspected of sepsis.
Due to their poor sensitivity what cultures, often require multiple samples of blood from critically ill patients and take anywhere from one to five days to achieve the growth necessary for pathogen identification.
Additional testing such as traditional microbiology or post culture molecular diagnostic tests may then be required for determination of species identification and susceptibility.
In the United States Sepsis is the number one cost of hospitalization.
Costing our health care system, nearly $62 billion annually.
The number one cause of death in hospitals, claiming nearly 270000 lives each year.
And the number one cause of 30 day Hospital Readmissions.
Wiring nearly 20% of survivors to be re hospitalized in 30 days.
By these measures it would be reasonable to conclude that the current sepsis standard of care for diagnosing and treating patients.
Failing patients payors and providers.
I teach you biosystems, we're commercializing the first and only FDA cleared products able to detect sepsis, causing pathogens directly in whole blood.
Three to five hours.
Without the need to wait days for a positive blood culture.
The rapid detection of sepsis, causing pathogens as critical.
As each hour of delayed targeted treatment increases mortality risk by up to 8%.
Our value proposition is based on our ability to rapidly identify sepsis, causing pathogens and antibiotic resistance genes within hours with.
With high sensitivity and specificity, enabling clinicians to achieve targeted antimicrobial therapy faster.
The T. Two bacteria panel is designed for the detection of most of the escape pathogens.
As innovative.
<unk> must first address the top clinical need.
And escaped pathogens are a major health care burden.
Escaped pathogens are responsible for the majority of nosocomial infections.
And are capable of escaping.
The buyers see the action of anti microbial agents.
Also a systematic review of the clinical and economic impact of the antibiotic resistance levels that escaped pathogens are associated with the highest risk of mortality, thereby resulting in increased health care costs.
Our current positioning.
Is thats, our sepsis panels are used in conjunction with blood culture.
And detecting the escape pathogens directly from whole blood in three to five hours enables targeted therapy to these organisms, which are resistant to common empiric therapies.
Detecting these commonly resistant organisms in three to five hours pre culture is more critical than rapidly detecting those organisms, which are typically respond to common empiric therapies.
We believe our product pipeline the comprehensive sepsis panel will replace most blood cultures for patients at risk of sepsis.
When we launched that product, our positioning will likely shift from being an adjunct test to our primary test to detect sepsis, causing pathogens and antibiotic resistance genes.
To advance our mission and create value across our stakeholders, we're focused on three corporate priorities.
Accelerating our sales.
Enhancing our operations and advancing our pipeline.
I'll now discuss our recent progress and our 'twenty to 'twenty two plans as it pertains to each of these corporate priorities.
Starting with our first priority accelerating our sales.
Our sales strategy consists of two primary objectives.
One significantly expanding our <unk> dx instrument installed base by selling or placing new instruments.
And to doubling our sepsis test panel revenue.
By driving broad utilization, among new and existing customers.
We ended the year with strong momentum on both fronts.
Giving strong instrument adoption and increased sepsis test panel utilization by our hospital customers.
In 2021, we entered into contracts for 32 T to Dx instruments, including 17 instruments during the fourth quarter.
Our installed base of <unk> instruments includes 89 instruments in the United States and 55 instruments internationally.
We generated sepsis test panel revenue of $5 1 million.
<unk>, an increase of 46% compared to the prior year.
In the United States, we achieved annualized sepsis test utilization of $118000 for legacy <unk> Dx instrument.
An increase of 37% compared to the prior year.
We continue to believe that over time annualized sepsis test utilization will reach $200000 per instrument in the United States and we're pleased that utilization is trending in that direction.
To further penetrate the market we have materially expanded our commercial team.
In the U S. We have 20 sales territories, providing geographic hospital coverage.
Increase from just two sales territories in 2020.
We recently hired Brett given as Chief commercial officer, and he leads our commercial growth initiatives and is directly responsible for global sales marketing service and customer support.
We're excited to have Bret leading the team and we feel great about the size and structure of the commercial team and the quality of the regional account managers, we have hired.
At the beginning of 2021, we hired Dr. Parnell illusion as Chief Medical Officer.
She has led a total rebuild of our medical clinical and regulatory teams in.
In the past our team was limited to Pharm DS.
And today, we have a highly diverse and talented team of infectious disease doctors laboratory professionals and Pharm DS.
Our clinical and medical affairs teams are raising awareness by amplifying clinical value messaging for our products.
The team is actively engaged with key opinion leaders to generate and share real world data via a scientific journal publications at medical conferences and at industry trade shows.
During 2021 Q2 biosystems products were mentioned in over 50 publications posters and presentations.
As recently announced we continue to expand our international distribution network, which allows our products to be marketed and sold in more countries.
Hospitals around the world they similar challenges when carrying for patients suspected of sepsis and we're leaning into this opportunity.
In the second half of 2021, we initiated commercialization and Singapore, South Korea, Taiwan, and Mexico by entering into distributor agreements in each of these countries.
Shipments to our distribution partners were initiated in the second half of 2021 with two T. G. B X instruments shipped to Singapore during the third quarter and for teacher Dx instruments shipped to South Korea during the fourth quarter.
Early in 2022, we've continued to expand our distribution networks with agreements in Norway, Finland and Turkey.
While sepsis remains the core competency and a top commercial priority for <unk> biosystems, the introduction of our T to Sars Cov two panel in 2020 has allowed us to significantly increase our installed base of <unk> instruments and gain access to U S hospitals that were previously unfamiliar with our.
<unk> and services.
The expanded installed base of 45 to two Dx instruments being used for COVID-19 testing will eventually play a meaningful role in increasing sepsis test panel sales because each of these customers has committed to evaluating our sepsis test.
We're optimistic that many of these hospitals will have the capacity to evaluate our subsys products. This year.
And we fully expect that these customers will convert to our sepsis panels over time.
Despite the broad use of at home COVID-19 antigen tests.
Hospitals continue to rely on molecular or PCR tests, including the T. Two Sars cov two panel to identify acute COVID-19 infections.
The early 2021 surge in COVID-19 infection rates has translated to strong demand for our T to Sars Cov two panel from U S hospitals during the first quarter of 2021.
And while we believe there will be continued demand for our <unk> panel, we expect a decrease in sales of our COVID-19 test compared to 2021.
Taking into account our current installed base of instruments.
Our expanded sales and medical affairs team and growing international distributor network, we expect to double our core steps this business in 2022 as compared to 2021.
Including doubling our T to Dx instruments from 32 to between 60, and 70 and doubling our sepsis test revenue from five one to $10 $2 million.
Encouragingly in the first quarter, we are seeing customers with an increased ability to evaluate new technology.
And several of our new U S hospital customers that we closed during the first quarter, we will implement our sepsis test panels immediately.
Moving to our second corporate priority enhancing our operations.
This sustained growth and drive adoption and utilization of our products over the long term, we continue to implement changes to our operations that enable a more efficient business model.
Throughout 2021, we are focused on scaling our manufacturing capabilities and strengthening our supply chain.
Over the past year, we have scaled our manufacturing from being able to produce 2000 tests per week.
Over 7000 tests per day.
To achieve this level of production, we've reviewed business and manufacturing processes as well as our business tools.
We assessed multiple tools and determined one of the best ways to improve our efficiency by implementing a new Oracle ERP system, which we implemented during the third quarter of 2021.
As a result of these initiatives, we are seeing significant improvement in our product gross margins.
In the third quarter of 2021, we signed a lease that will consolidate our existing operations into a single 70000 square foot state of the art lifestyle facility in Billerica, Massachusetts to accommodate current and future growth.
This new facility will serve as our corporate headquarters and main manufacturing hub.
It will also house all of our R&D labs that will aid in the advancement of our future products.
This move which we expect will commence in the second half of 2022 will produce a significant reduction in rent expense.
Accommodate our manufacturing expansion and reduced costs through efficiencies gained in working in a minute and maintaining one facility.
During 2022, we also plan to make strategic investments in tooling automation and efficiency projects to further scale, our manufacturing capabilities and continue to improve cost of goods.
Moving to our third priority advancing our pipeline.
We made significant progress advancing our product pipeline throughout 2021.
We're continuing to prioritize the programs under our milestone based product development contract awarded by the U S. Biomedical advanced research development authority or BARDA, which is valued at up to $69 million.
The four products that we are advancing under the BARDA contract of the teacher resistance panel. The T. Two bio threat panel the comprehensive sepsis panel.
And the next generation instrument.
As a reminder, during the third quarter, our scientific team successfully completed the milestones described under option one of the BARDA contract.
Subsequently chose to exercise option to a of the contract which is planned for the period between October 2021, and March 2022, and is valued at $6 4 million.
Upon the successful completion of option two way.
We are optimistic that BARDA will choose to exercise options to be.
In December 2021, we initiated the U S clinical trials for the teacher resistance panel.
And the T. Two biotech panel.
Both ahead of our previously announced schedule.
The clinical trials are designed to evaluate the performance of the teacher resistance at two two bio threat panels and support submissions to the U S food and drug administration.
The teacher resistance panel, which runs on our <unk> instrument is a direct from blood test panel that detects 13 antibiotic resistant genes from both Gram positive and Gram negative bacterial pathogens, which are known to cause antibiotic resistant infections that may lead to sepsis.
It provides accurate results in three to five hours without the need to wait days for a positive blood culture.
The teacher resistance panel, which is currently marketed and sold in Europe under our CE Mark was granted breakthrough device designation from the food and drug administration, which provides for a prioritized FDA review process.
Clinical trial, which will include up to 1500 patients across 10 U S. Hospitals is estimated to cost <unk> biosystems $2 $5 million and is expected to be completed in 2022 <unk>.
Enabling filing of an FDA submission potentially during 2022.
The teacher bio threat panel, which also runs on our <unk> instrument.
As a direct from blood test panel that provides results in three to five hours and simultaneously detects six bio threat panels pathogens.
Identified as threats by the U S government.
The clinical trial, which includes positive samples being prepared and analyzed at a high containment biosafety level III laboratory and negative samples being analyzed at a single site is estimated to cost <unk> biosystems $450000 and is expected to be completed in 2022 and <unk>.
<unk> filing of an FDA submission potentially during 2022.
The comprehensive sepsis panel is a direct from blood test panel that will run on our next generation instrument.
The new test panel is designed to detect greater than 95% of all bloodstream infections caused by bacterial and Canada species and antibiotic resistant markers identified as stretched by the CDC.
In a single test with a time to result of approximately three hours.
We believe this test panel can be positioned as the primary test for patients at risk of sepsis and substantially change the blood culture based laboratory workflow.
The next generation instrument, which is being developed in conjunction with our comprehensive <unk> panel.
It's designed to be fully automated on demand and random access.
This is similar to our current <unk> Dx instrument, but incorporates faster turnaround times and is designed to detect an increased number of pathogens and resistance genes from a single whole blood samples.
The design is approaching completion and based on the currently outlined schedule, we expect to have a fully functioning beta unit in the first half of 2022.
Once the build out is complete we will merge prototypes with assay and began full scale system what testing.
We're planning to provide additional information on our new product pipeline during an investor and analyst day in the second quarter of 2022, where we will take a deeper dive into each of these product development initiatives as well as our commercial and medical affairs plans and initiatives.
With that I'll now turn the call over to John Sprague to go over the details of our fourth quarter and full year 2021 financial results and our financial outlook for 2022.
Thank you John .
Total revenue for the fourth quarter of 2021 was $7 million a decrease of 10% compared to the prior year period, driven by increased sepsis panel test sales and BARDA contract activities offset by decrease COVID-19 test panel sales.
Revenue was $4 million, a decrease of 31% compared to the prior year period.
Research and contribution revenues were $3 million, an increase of 52% compared to the prior year period.
Product costs for the fourth quarter of 2021 were $5 $4 million.
A decrease of $2 $1 million compared to the prior year period, driven by decreased COVID-19 test panel sales and manufacturing cost efficiency initiatives.
Research and development expenses were $5 $4 million, an increase of $1 $6 million driven by increased BARDA contract activity.
Selling general and administrative expenses were $6 $5 million, an increase of $1 $7 million driven by increased commercial and medical affairs head count.
Yeah.
Net loss for the fourth quarter of 2021 was $12 $1 billion seven per share compared to a net loss of $9 $9 million seven per share for the prior year period.
Cash marketable securities and restricted cash were $33 8 million as of December 31, 2021.
We did not use the ATM facility in the third or fourth quarter of 2021, and we've used it minimally in 2022.
CRB has extended the interest only period end loan maturity to December 31, 2023, and we were in compliance with the remaining covenants of our loan agreement.
Total revenue for 2021 was $28 $1 million, an increase of 55% compared to the prior year driven by increased sepsis test panel sales and BARDA contract activities offset by decrease COVID-19 test panel sales.
Product revenue was $16 $6 million, an increase of 43% compared to the prior year reset.
Research contribution revenue was $11 $4 million, an increase of 77% compared to the prior year.
Product costs for 2021 were $27 million, a decrease of 600000 compared to the prior year driven by decreased COVID-19 test panel sales and manufacturing cost efficiency initiatives.
Research and development expenses were $21 $8 million, an increase of $5 $7 billion driven by increased BARDA contract activity.
Selling general and administrative expenses were $28 $5 million, an increase of $6 $4 million driven by increased commercial and medical affairs head count.
Net loss for 2021 was $49 $2 million 31 per share compared to a net loss of $46 $8 million 39 per share for the prior year.
As we previously disclosed we are not in compliance with nasdaq's $1 listing requirement, we plan to regain compliance by executing our operating plans and organically drive our share price compliance and we currently have no plans for a reverse stock split.
We expect full year 2022, total revenue of $28 million to $31 million, including.
Revenue of $16 billion to $17 billion and research and contribution revenues up 12% to $14 million.
We expect to close 60 to 70 T to Dx instrument contracts in 2022, and COVID-19 revenue decreased from $9 five to $3 $5 billion.
Thank you and back to John <unk> for closing remarks.
Thank you John .
We made meaningful progress across the business during 2021 and.
And as expressed in our financial outlook, we're confident in our ability to build on this momentum.
As we look ahead in 2022, we believe there are numerous catalysts to create value for stakeholders, including plans to double our <unk> Dx instrument placements and sepsis test revenue compared to last year.
Expand our international distribution network.
Build a world class scientific Advisory Board and increase awareness of our sepsis products through key opinion leader engagement.
Generate additional evidence to support the clinical and economic value of our products.
Complete the U S clinical trials for the teacher resistance panel and tissue bio threat panel.
And final submissions with the FDA.
And advance the next generation instrument and comprehensive subs panel under the BARDA contract.
We're off to a great start in 2022 with strong demand for our teacher Dx instrument and test panels. We've.
We've entered into eight instrument contracts in the U S. In the first six weeks of the year.
And our team has a strong sales funnel.
We're extremely excited about the future for <unk> biosystems and confident in our ability to change the standard of care for patients at risk of sepsis.
Now, let's open it up to questions operator.
Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one at this time one moment, please while we poll for questions.
Our first question today is coming from Carl Mixon from Canaccord Genuity. Your line is now live.
Thanks, Hey, guys. Thanks for taking my questions congrats on the quarter and the year and the guidance. So I wanted to focus on the guidance first.
60% to 70 placements I think that would be the highest in the company's history I believe.
Basically.
It implies youre going to.
See this fourth quarter level to persist throughout 2022, I'm just wondering what gives you the confidence that those placements will be more than double 21 levels and if you could tell us what the pacing of the instrument placements that are kind of baked into the guidance and then the rough mix of U S versus O U S to be that'd be good. Thank you.
Sure I'll start that Kyle and Brett <unk>, our Chief commercial officer is on the call you may want to weigh in on this as well we expect the pacing to be about 48% front half, 52% back half and similarly distributed within each have quarter by quarter, So kind of.
48% of the 48% Q1, 52% of the 48% Q2, and so on and so forth.
Our confidence level was driven by a number of things first it is a substantially larger sales team than we had in the past and that's something I'm sure Brett will want to comment on as well as the rigor we're putting around the sales process for forecasting process and funnel management process as well as the fact that we have significantly.
We expanded internationally and we expect to continue to do that on top of that we see COVID-19 being more under control both outside the U S and within the U S. During 2022 and that creates more opportunity for our sales team to get into more accounts. So Bret would you like to add anything to that.
Yeah sure John Thank you, yes, as John mentioned.
The sales funnel is quite strong both in the U S as well as internationally and I think in the U S. Specifically as was mentioned.
We embarked on a on an aggressive head Count addition, sort of in the latter part of 2021, which now has carried US early into 2022 and I think in the in the hiring of that we've been I think we've been very diligent about a the types of people, we're bringing in folks that have.
A significant amount of experience being able to work multiple departments. In addition to the laboratory, we've doubled down on that quite a bit as John mentioned through some very extensive and very in depth sales process. We've we've got we engaged in a program called Forest management that we've trained the team down to very serious amount of rigor.
Qualifying accounts developing champions in accounts forecasting accuracy, all of that and what's and on top of that we've been very aggressive in the targeting effort again in the U S where a lot of our team is targeting not we're certainly continuing to work a lot of the larger institutions, but we've added to that a significant amount of focus on meat.
<unk> and even some smaller hot.
Signature.
Bye now.
Okay.
From a.
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Okay.
We've had.
Yeah.
Really we've really.
Ladies and gentlemen, please standby were expecting some technical difficulty.
Yeah.
Please carry on.
Bret.
Hello speakers I believe we're having some technical difficulty with Mr. <unk> line. So I just have him he's got that noise sure.
How would you like a follow up question.
Our next question is actually coming from Mark Massaro from BTG. Your line is now live.
Hey, guys. Thanks for the questions John can you hear me okay.
Hi, Mark.
Hey.
Yes so.
Wanted to ask if you guys could maybe help me parse out.
How much.
Totally saw your COVID-19 guidance for the year.
<unk> 6 million to $3 5 million.
And so you did a nice job of laying things out.
Yes. My question is what are you assuming for sepsis.
Product revenue for 2022, I'm coming I'm coming up with something around $8 million to $10 million or so which is growth of $60 to 80% I guess it all depends on the piece of your instruments.
And so that kind of piggy backs on Kyle's question about mix of systems O U S.
Yes.
Anyway, it's my $8 million to $10 million in the right ballpark and what do you think it will take.
To help helped drive that utilization, which really marks an acceleration compared to 2021.
So we think that our sepsis test revenue just the test revenue will grow from $5 1 million, which is where we ended 2021 to $10 2 million in 2022, So that's where we talk about doubling our sepsis test revenue, but you may not have been able to hear some of <unk> comments, but in terms of the <unk>.
Mix of the instruments in our guide, we expect them to be even in terms of.
Within the United States and outside the United States.
Okay understood.
Thank you for that clarification and then what are you guys seeing with respect to hospital access.
I've recently in the last two weeks or so have heard some positive things.
From some other players in the space.
But I would love to hear like.
What the hospital lab access looks like.
Now here in mid February compared to like the end of December .
We think it is very good in fact, it was even good for our team in December we have had pretty good access sense.
The second half of 2021, so we thought last year that we'd start to see access opening up around July and it was a couple of months later than that but we've had good access through the back half of 'twenty, one and we've got excellent access through the early part of 'twenty. Two that's also part of what gives us confidence that.
Greater access means greater sales opportunities and with the rigor that Brett has put into the sales team.
Gives us confidence overall in the instrument number and as I said earlier in the prepared remarks, we're off to a good start we already have eight contract side in the U S. In the first six weeks.
Expect a lot more before the end of the quarter.
Great Congrats on a firm Brett by the way I'm, sorry, I don't think I'm back I apologize for my volume problem. There before so yeah. Thanks, John So yeah.
No worries Brett yes.
Yes, I was just wanted my third question is on the sales territories I think you said 'twenty up from two.
Are all those sales territories filled and then.
These folks have been trained and like what is your expectation on sometimes it takes one or two quarters for people to ramp.
How should we think about.
The new reps contributing to the topline.
Sure John I'm happy to take that one if you'd like me to so yeah. So actually very it's been a very positive picture. So to answer specifically we have the 20 territories. We currently have we currently have 17 that are filled.
As of the 17th this week and we have aggressive recruiting activities, which we expect to get the other three in place here relatively quickly so.
And to your question about the training what we we do a combination of saying clearly, we obviously spent significant time with folks right in the beginning.
From a product and technology training perspective, but then what we did additionally, as I was mentioning earlier getting apologies hopefully you can hear me talking about it but we invested in a program called Forest management.
It's very much a sales qualification very metric driven a very detailed program that gives us a common language that we speak all through the management ranks and the sales team in terms of qualifying opportunities there stage likelihood of closes all of that so we've we've trained the team on that and to your last part of it I think.
I think the general expectation is that it takes some amount of time for a sales person in a territory to impact. However, what I'm really pleased to report we've seen and I think part of this has been through some of this enhanced targeting we've done with a wider array of hospitals, but we've had some really fantastic closes early in the year than they've been.
Done by people, who started as is there as late as sort of in the August September even into October timeframe. So we're finding that we're having success with people that normally what you would assume a couple of quarters are having success.
Really quickly like within a quarter, which is very encouraging so.
That's terrific I will hop back in the queue. Thanks, guys.
Thank you. Thank you thank.
Thank you. Our next question is coming from Ben Hayner from Alliance Global Partners. Your line is now live.
Good afternoon, gentlemen, thanks for taking the questions and congrats on the progress.
Just first.
First off for me on the regulatory front.
You've got the two trials kicked off.
Is that.
Youre on track to file with the FDA this year, particularly with the <unk> bio threat.
That seems like something that could go relatively quickly it would be filed.
Relatively soon.
Kind of correct in that thinking or is there any more color that you can provide in terms of win.
These.
These might be before the agency.
And Youre, absolutely right to think about it that way.
Fortunately these pathogens don't exist out in the open generally.
And so we're dealing with comprise samples that are being prepared and tested in a BSL three labs. So that part of it goes pretty quickly and the negative samples are being done in one site that also can go quickly. So I think it's fair to think about it.
Happening faster, obviously than future resistance and.
Straightforward clinical trial.
I mean is that something that.
We should expect and maybe the first half are.
I mean.
Any more color that you can provide there.
I think it's generally risky to start putting timeline when we've just started the clinical trial, but what we could absolutely plan to do is provide an update at the appropriate time I will say that that is a product that is not going to go into the hands of our sales team that product. Obviously is limited to the U S government.
And it would likely be sold to one or more government entities directly. So we're going to keep our sales team focused on our on our sepsis products keeping focused on the hospital market both in the U S or international.
Yes, okay.
And then that kind of.
Flows into my next question.
It seems like obviously that would be something that could be in.
U S strategic national stockpile.
I think your shelf life is around 12 months.
I presume that would be recurring orders every year or even more often.
Should you guys.
Get that across the finish line successfully are they are there.
Correct in that and then are there maybe.
Maybe examples of other sorts of.
Products or tests that you can point to I'd say.
This could look similar to <unk>.
Test X Y Z out there.
I'm aware that there are.
Single test for Anthrax for example that are part of the National strategic stockpile. This would be the first ever multi target direct from blood bio threat pathogens system. It would certainly be a goal to have it would be part of the national strategic stockpile, but it's a little bit early can have those negotiations until we have completed.
<unk>.
Okay.
Fair enough and then lastly for me and maybe I missed this the technical difficulties, but on the the distribution contracts do any of those have.
Minimums.
With that.
Yes, there are presumably that those also give you some of the some confidence.
60 to 70 instrument number.
Yes, Brent would you like to take that.
Yes, certainly so yes, so when we when we act we enter into an agreement with a distributor and one of the international markets.
First of all they buy the instrument so there's.
So it was an investment on their part upfront in that part of that we agreed to minimum performance requirements that are contained in each of the agreements and as a matter of fact, we just concluded a program here, where some of those had somewhat not been maybe it's quite quite as quickly closely police during the sort of the height of the Covid period, we've gone back and pretty.
<unk> brought in all of those back up to the level and in some cases negotiated a few of them, but yeah, but simple answer is yes. We have we have that in all of our agreements minimum performance requirements as well as as I said, they they buy the instruments.
We don't buy them to have them have them just sort of sit in their warehouse, they're tied directly to either a tender or an anticipated say.
Account that they have that they have in mind so.
That makes sense that's very helpful.
Great well, that's all I had.
Thanks, gentlemen, and looking forward to the analyst day, perhaps.
Thank you Ben.
Thank you. Our next question today is coming from Steve Brozak from <unk>. Your line is now live.
Hey, Thank you gentlemen for the granularity and congratulations on the progress in the quarter and the year of course I just have one question.
The last two years, you've obviously had a focus on COVID-19 , which is now transitioning to sepsis can you tell us what the clinicians the facilities are saying as far as what has made it easier for you or not maybe in terms of understanding the T. Two system is using it for Covid and how.
How much advantage do you have now in switching it over to sepsis and also not that long ago. There were some presentations that were done showing a significant linkage between.
Covid and unfortunately, ultimately folks that wind up in the ICU.
Having sepsis whatever you can tell us on that would be greatly appreciate it. Thank you.
Sure. Thanks, Steve Brett I'll start and feel free to add some commentary to it sure I think if we start at a high level. Steve we saw data early on when the pandemic first hit linking from a clinical perspective critically ill hospitalized COVID-19 patients with sepsis.
To the degree of 30% between 20, and 30% I recently had a conversation with a key opinion leader and he said that.
That one third one out of every three of the patients admitted to his ICU with Covid ended up becoming subject. So that statistic has been true for the last two years and we see more and more stories were relatively healthy patient comes down with Covid becomes critical ends up in.
The hospital and become septic. So there is a clear link its been their clinicians understand it it's been part of the reason that we've been successful selling or placing instruments into U S. Microbiology labs, because they are the same ones that are doing the testing, whether it's for COVID-19 or perception.
And I would say that while we benefited from Covid. The biggest benefit that we've received is that we've been able to place a significantly larger number of instruments that we might not have been able to place into accounts, where we had no. Prior relationship. They didn't know T. Two they didn't know our salespeople they didn't know anything about our products or services. So.
It's been a real door opener for the company.
And as those accounts get better control in their communities of Covid, and we see Covid cases going down.
We believe that those accounts are going to have more bandwidth to address their sepsis protocols and implement our sepsis test panels. So Brent may want to add something to it but at a high level. That's what we're seeing yes, I think John pretty well said it right I think it's actually it has created an opportunity for us and it's I think.
As part of our as John mentioned earlier, we've had we really had experienced I think quite excellent by comparisons access to hospitals.
That has been a part of it obviously with the increased feet on the street and the extra push of doing that but I think I believe our team has gotten more access from that and as John said I think that you know the highest hospitals understand that linkage and it's they're.
They are really encouraging element and we certainly were well drilled with our team every conversation we have with them and our entire approach even if even if we're in the discussions of Covid because the hospital is say stress because they had a had a primary supplier that put them on allocation without getting it we're able to fill that need.
It's created that door up remember what it's also done is every one of these opportunities that you heard US mention every one of them is earmarked for even if COVID-19 is involved there all earmarks for in the accounts have all.
Sort of a green or bought into an ultimate moved to sepsis. So we're very much doing that on the front end with earmarking. These towards sepsis and very encouragingly about a third of the instruments, we've already put in so far and we have several more in the pipeline that have stay have a stated interest of implementing sepsis really right out of it right.
Out of the gates just at the same time with Covid. So that's been a very positive and we start to feel like the we occurred perhaps some some goodwill to where we've been able to help some institutions that were really have kind of struggled with getting the need for COVID-19 testing and we've been able to step in and fill that and we have as John mentioned, we've got.
Instrumentation in there and some footprint. So it's been a it's been a positive development and I think it bodes really well for us going forward with the <unk> business.
Well again, thank you for that are quote unquote granularity and obviously the good news in 2021 and the details for 2022.
I'll hop back in the queue. Thanks again.
Thank you Steve.
Thank you we reached end of our question and answer session I would like to turn the floor back over to management for any further or closing comments.
Thank you for joining our fourth quarter 2021, and full year earnings call. We look forward to updating you in the future have a great day.
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