Q2 2022 T2 Biosystems Inc Earnings Call
Good day and welcome to keep two biosystems second quarter 2022 earnings conference call all participants will be on listen only mode.
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After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on I've touched on the phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to them I Polo Investor Relations of the company. Please go ahead.
Thank you operator, I would like to remind everyone that comments made by management today and answers. The questions will include forward looking statements. Those include 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 <unk> Biosystems annual report on Form 10-K filed with the SEC on March 23rd 2022, 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 Purcell John .
Thank you all for joining our second quarter 2022 earnings call.
I'll start with an overview of our performance during the second quarter and provide an.
Date on our commercial operational and new product pipeline progress.
I will then turn the call over to our Chief Financial Officer, John Sprague to review, our second quarter financial results before I provide closing remarks, and we open the call for questions and answers.
First I'd like to comment briefly on today's filings, including our press release and Form 10-Q disclosed the results of our business operations during the second quarter of 2022.
And our preliminary proxy to disclose the proposals to be voted on at the annual stockholder meeting to be held on October 11th 2022.
We plan to the filing of these documents to coincide with today's call.
So, we'll take open and transparent communication with our stockholders we.
We will address each of these during our prepared remarks.
During the second quarter, we took actions to improve our cost structure and our balance sheet.
On June 1st we implemented work force and expense reductions, we expect to yield operating expense reductions of approximately 20%.
And should favorably impact the second half of 2022.
It is important to note that we did not reduce positions in sales foreign manufacturing.
We have also recently strengthened our balance sheet by utilizing the ATM facility to raise $27.4 million of net proceeds.
Including $4 5 million during the second quarter.
And $22 9 million after the end of the second quarter.
Together these actions are intended to reduce our cash burn.
Increase our cash runway and shorten our path to profitability.
We continue to focus on three corporate priorities.
Accelerating our sales.
Enhancing our operations and advancing our pipeline.
During the second quarter, our commercial team continued to expand the installed base of teacher Dx instruments to increased sepsis test sales.
Our operations team implemented changes to increase product gross margins.
And our R&D team met key development milestones to advance our new product pipeline.
Before I provide an update on our corporate priorities.
To remind you of the importance behind our mission.
To fundamentally change the way medicine is practiced through transformative culture independent diagnostics to improve the lives of patients around the world.
So that just presents one of the greatest challenges to health systems worldwide.
Claiming approximately 11 million lives each year.
That's more than all cancers combined.
In the United States, such as the number one cause of death in hospitals.
Claiming the lives of approximately 270000 Americans each year.
Such as the number one cost of U S hospitalization.
Costing our health care system, nearly $62 billion annually.
Finally sepsis is the number one cause of 30 day U S Hospital Readmissions.
Requiring nearly 20% of substance survivors to be re hospitalized within 30 days and.
And approximately 40% to be re hospitalized within 90 days.
The current standard of care for patients at risk of sepsis relies on broad empiric protocols to administer antimicrobial therapy.
Despite the fact that such protocols are only optimal.
Really one half of cases.
This is a particular concern given the recent report issued by the centers for disease control and prevention or CDC.
Showing an alarming increase in anti microbial resistance in the United States.
As a result of the widespread use of antibiotics during the COVID-19 pandemic.
The current standard of care also continues to rely on a positive blood culture to identify the presence of a bloodstream infection.
Which can take anywhere from one to five days to turn positive.
And is widely understood to have poor sensitivity.
This presents a serious health challenge.
As each hour of delayed targeted antimicrobial treatment can increase mortality risk by up to 8%.
Demonstrating that early detection of sepsis, causing pathogens and antibiotic resistance genes is crucial for optimal treatment decisions and improving patient outcomes.
Our aim at <unk> biosystems is to advance patient care by enabling faster more accurate detection of sepsis, causing pathogens and antibiotic resistance genes.
We're commercializing the first and only FDA cleared products able to detect sepsis, causing pathogens directly from whole blood.
Within three to five hours eliminating.
Eliminating the need to wait days for a positive blood culture.
Our products empower clinicians to deliver faster targeted antimicrobial therapy by rapidly identifying sepsis, causing pathogens and antibiotic resistance genes.
During the second quarter, the teacher Biosystems team generated total revenue of $5 $9 million.
Including product revenue of $2 $6 million in R&D revenue of $3 $4 million.
We entered into contracts for 12 T to Dx instruments during the second quarter <unk>.
Including six in the United States and six internationally.
I'll now turn to an update on our corporate priorities.
Starting with our first priority accelerating our sales.
We continue to pursue a commercial strategy focused on two objectives, one expanding our global teacher Dx instrument installed base.
And to significantly increasing our sepsis test revenue by driving adoption and increasing utilization among new and existing customers.
During the second quarter, we expanded our installed base by adding 12 new instruments.
Which brings our total instrument installed base to 155 <unk>.
Including 94 in the United States and 61 internationally.
We continued to sell or place instruments across all types of hospitals, including large teaching hospitals.
Large hospital systems as.
As well as smaller community hospitals.
Importantly, and consistent with the previous two quarters all of our instrument sales and placements during the second quarter were for sepsis testing.
Our teams, including sales Medical Affairs service and support are closely aligned to execute on our implementation strategy.
We generated sepsis test panel revenue of $1 $2 million.
Consistent with the prior year period.
I'm pleased to announce that in July we received a $600000 order the largest sepsis order in company history, which included 42 Dx instruments that are expected to ship in the second half of 2022.
And sepsis test panels.
From an instrument pull through perspective in the United States, we achieved annualized sepsis test utilization of $106000 for legacy instrument.
We continue to believe that annualized U S sepsis test utilization will reach $200000 per instrument and.
And we have a number of customers that have already surpassed that target.
We believe there is a significant market opportunity for our products and we're excited to expand our presence in new and existing customers.
During the second quarter, two U S hospital customers ordered their second T to Dx instruments to support their growing subsea sepsis testing needs.
These customers continue to increase their utilization of our sepsis test panels and have expanded the use cases across their sepsis management protocols.
We view this as an important validation of our technology.
The first hospital, a large academic center in the Midwest has adopted both the T. Two bacteria panel and the T. Two Candida panel.
And this account we're closely engaged with a champion who continues to articulate the benefits of our products throughout the hospital.
The second hospital part of a large health system in New Jersey is a long time user of the teacher Candida panel and has implemented its routine use based on their experience with the test and determination of its clinical benefits.
Both hospitals serve as reference accounts supporting our ongoing commercial efforts.
Early in 2022, we set expectations regarding a potential decline in sales of our COVID-19, molecular diagnostic test the T. Two Sars Kobe, two panel, which we experienced during the second quarter.
We view this development as a positive because it allows us to convert COVID-19 driven instruments to sepsis testing.
As a reminder, we sold 47 teacher Dx instruments the hospital microbiology labs during 2020.
Initially for COVID-19 testing with the expectation that approximately 80% would convert to our sepsis test panels over time.
Nearly one half of the Kobe driven instruments reside within two large hospital systems.
So we have the potential to convert a sizeable number of these instruments through a centralized decision making process.
And we're in active discussion regarding their conversion to our surplus cash balance.
Outside the United States, we continue to see a significant opportunity for our products.
As hospitals around the world they similar challenges when caring for patients suspected of sepsis.
Our international go to market strategy includes working with distributors to sell and support our products are.
Our team of international business managers is focused on supporting our existing distributors as well as expanding our international distribution network into more countries.
We're pleased with the initial groundwork in Norway, Finland, and Turkey after expanding our distribution to these countries earlier this year.
We maintain a strong pipeline of geographic expansion opportunities and expect further expansion throughout 2022.
Finally, I'd like to highlight a recent publication from the CDC on antimicrobial resistance and its global impact that reinforces the importance of bio products.
The publication demonstrates the need to invest in proven prevention focused health actions, such as accurate laboratory detection and rapid response and control in order to address current and future antimicrobial resistance threats.
And so microbial resistance is a leading cause of death globally.
As the COVID-19 pandemic weighed on health care facilities.
This didn't hospital onset of infections and deaths both increased by at least 15% during the first year of the pandemic.
We're proud to offer a solution that helps address anti microbial resistance by enabling clinicians to make more informed and timely decisions.
Moving to our second priority enhancing our operations too.
To build a solid foundation for sustainable growth, we continue to take actions to create a more efficient business model.
We have a number of ongoing initiatives to increase efficiencies across the business and we've taken recent actions that we expect to favorably impact future financial results.
In May we implemented an important cost of goods improvement initiatives for teacher bacteria and teach you Candida test panels, resulting a reduction in the manufacturing costs of those two products in future quarters.
This further expands test panel gross margins helps us achieve a faster return on deployed instruments.
And provides an overall benefit for a razor razorblade business model.
In June we made changes to improve our overall cost structure.
<unk>, reducing our workforce and operating expenses by approximately 20%.
We expect these changes to favorably impact our financials during the second half of 2022.
Finally, our operations team has worked diligently to ensure uninterrupted supply of products to our customers.
While supply chain challenges exist across the industry. Our team remains confident in our ability to continue supplying our customers without interruption during the second half of 2022.
Moving to our third priority advancing our pipeline.
We continue to make substantial progress with the programs under our milestone based product development contract awarded by the U S. Biomedical advanced research and development authority or BARDA, which is valued at up to $69 million.
As a reminder, in the first quarter BARDA chose to exercise options to be of the contract.
Growing our team's successful completion of the milestones described under option to a.
We're nearing completion of the milestones required under option to be which is valued at $4 $4 million and we anticipate the award of option three during the third quarter of 2022.
We're very excited about the entire portfolio of products in our pipeline is.
As each one represents a future growth driver.
Under our agreement with BARDA, we're developing for diagnostic products that we believe have the potential to meaningfully advanced standards of care and protect our nation from bio threat attacks.
One the teacher resistance panel too.
To the teacher bio threat panel.
Three the comprehensive panel to detect bloodstream infections and anti microbial resistance and for the next generation instrument.
The teacher resistance panel is a direct from blood tests panel designed to run on the teacher Dx instrument and simultaneously detects 13 antibiotic resistance genes known to cause antibiotic resistant infections in just three to five hours.
We're selling the teacher resistance panel in Europe under CE, Mark and we're on a pathway to apply for U S. Five 10-K prior to U S commercialization.
We initiated a U S clinical trial for the teacher resistance panel in December 2021.
And we're currently enrolling patients at five hospitals.
We plan to increase patient enrollment by adding three additional hospitals during the third quarter.
And we anticipate completion of the trial in 2022.
Which provides the potential to file with the FDA as early as this year.
As a reminder, the teacher resistance panel previously received breakthrough device designation from the FDA, which provides for a prioritized FDA review process.
The teacher bio threat panel is a direct from blood test panel designed to run on the teacher Dx instrument and simultaneously detect six bio threat pathogens identified as threats by the U S government.
Like our sepsis test panels. The T. Two bio threat panel is designed to provide results in three to five hours without the need to wait days for a positive blood culture.
We initiated a clinical evaluation for the teacher bio threat panel in December 2021 to support submission to the FDA.
We have completed the negative arm of the study and we're currently testing positive samples in a high containment BSL three laboratory, we remain on track to file an NDA submission in 2022.
The comprehensive panel to detect bloodstream infections and anti microbial resistance is a direct from blood test panel designed to run on our next generation instrument and detect greater than 95% of all bloodstream infections caused by bacterial and Canada pathogens as well as antibiotic.
Since markers identified as threats by the CDC in a single test with a time to result of approximately three hours.
Think of it as combining our existing T. Two bacteria teach you candida and teacher resistance panels into a single test.
Significantly expanding the pathogen detection capabilities and accelerating the time to result.
We believe the comprehensive panel will establish a new standard of care for the detection of sepsis, causing pathogens and.
Antibiotic resistance genes.
The next generation instrument is being developed in parallel with our comprehensive panel.
The instrument is designed to be fully automated on demand and random access similar to Archie to Dx instrument.
But incorporates faster turnaround times and the ability to detect an increased number of pathogens and resistance genes from a single whole blood samples.
We built multiple development units and are now in the process of conducting qualification testing prior to merging the comprehensive test panel with the instrument to initiate full scale system wet testing.
We believe that our next generation instrument and comprehensive panel have the potential to replace many blood cultures for patients at risk of sepsis.
Let's shift to Lyme disease.
Lyme is a debilitating disease.
Cause by the bacteria Borrelia bird before it.
And is transmitted to humans through the bite of infected ticks.
Typical symptoms include fever, headache, fatigue and skin rash.
If left untreated infection spreads to joints, the heart and the nervous system.
According to the CDC, an estimated 476000 people are treated for Lyme disease, each year in the United States.
New York based Fair Health recently published results using its database of over 36 billion privately build U S health care claims the Carryout and analysis of Lyme disease.
The analysis found diagnosis of Lyme disease rose, 357% in rural areas in the United States between 2007 and 2021.
Prompting fair to conclude that lines disease has become a quote illness of increasing national concern and growth.
Currently there are no FDA cleared diagnostic test for the sensitive detection of early Lyme disease.
Labour tied towards diagnosis of Lyme disease has traditionally used a two tier process for detecting the presence of antibodies in a patient's blood.
In the case of Lyme disease antibodies can take several weeks to develop the patients may touch negative using current FDA cleared diagnostics, if a patient has been recently infected.
We have developed the T. Two line panel of molecular diagnostic tests designed to run on our FDA cleared teacher Dx instrument and simultaneously detect the bacteria that cause lyme disease directly from whole blood.
We expect it to be used to aid in the diagnosis of early Lyme disease.
In June the U S patent and trademark office issued a patent covering the tier two lyme panel vote NMM.
NMM methods and symptoms and systems for the rapid detection of tick borne pathogens and quote.
In July the FDA granted breakthrough device designation for our teacher line panel.
Which is intended to expedite development assessment and review of a potential submission for market clearance.
In August we submitted for additional funding through the Wimax initiatives and we're also pursuing other sources of non dilutive funding for the tier two Lyme panel.
As we announced last week, we're exploring the potential to develop a rapid molecular diagnostic test for the detection of the monkey pox virus, including technical and commercial feasibility.
Monkey pox as a rare disease caused by infection with the monkey pox virus that.
That is part of the or the pox virus family of viruses.
Which also contains smallpox.
The main symptoms of Monkey pox is a rash, but individuals' may also present with flu like symptoms.
Rapid and accurate diagnosis of Monkey pox is accentual to expedite treatment and to limit exposure and spread of the disease.
We believe it is possible to develop a molecular diagnostic tests on our platform and we also believe non dilutive funding may be available to assist in such development efforts.
Finally, we formed a scientific advisory board during the second quarter of 2022.
Apprised of leading clinicians and researchers in the area of infectious disease Laboratory medicine and pharmacy.
Scientific Advisory Board is chaired by Roger Smith, Senior Vice President of Science Research and development at <unk> Biosystems.
And we'll provide insights on clinical utilization product pipeline preclinical development clinical research clinical data generation and strategic guidance to advance the company's mission.
With that I'll now turn the call over to John Sprague will provide a detailed update of our second quarter 2022 financial results.
And our financial outlook for the remainder of the year.
Thank you John .
Total revenue for the second quarter of 2022 was $5 $9 million, a decrease of 12% compared to the prior year period, driven by decreased COVID-19 test panel sales offset by increased T to Dx instrument sales and BARDA contract activities.
Product revenue was $2.6 million, a decrease of 30% compared to the prior year period research contribution revenues were $3 $4 million, an increase of 11% compared to the prior year period.
Product costs for the second quarter of 2022 were $5 $1 million, an increase of $300000 compared to the prior year period, driven by increased teacher Dx instrument sales and offset by decreased COVID-19 test panel sales.
Research and development expenses were $8 million, an increase of $2.6 million driven by increased BARDA contract activities.
General and administrative expenses were $7 $8 million, an increase of $600000 driven by increased commercial head count.
Net loss for the second quarter of 2022 was $18 million 10 per share compared to a net loss of $12 $5 million.08 per share for the prior year period.
Cash cash equivalents and restricted cash of $14 $3 million as of June 32022.
This includes net proceeds of $4 $5 million from the sale of 21 6 billion shares through the ATM facility during the second quarter as John mentioned earlier, we also raised $22 $9 million through the ATM facility. After the end of the second quarter, we remain in compliance with the C or G loan covenants are.
Our guidance for the full year 2022 remains unchanged.
We expect total revenue of $28 million to $31 million, including product revenue of $16 billion to $17 billion and research contribution revenues up $12 million to $14 million. We continue to expect to close 60 to 70 T to Dx instrument contracts in 2022, and COVID-19 revenue decreased from $9 five to three five.
Millions of dollars.
Thank you and back to John's Perusal for closing remarks.
Thank you John .
I'd like to provide an update on the compliance status with NASDAQ listing requirements.
During the quarter, we presented a plan to NASDAQ to regain compliance which included operating plans to organically drive our share price the compliance as well as plans to implement a reverse stock split as may be required.
In June we announced that NASDAQ hearing panel granted our request for an extension until November one 2022 to regain compliance with nasdaq's minimum bid price requirement.
Today, we filed our preliminary proxy statement for our annual stockholder meeting.
One of the items to be voted on at the annual stockholder meeting is a request for stockholder approval to authorize a reverse stock split in the event we need this by November one 2022 to achieve the minimum bid price required by NASDAQ.
We urge our stockholders to review the proxy statement and vote their shares of common stock for the reverse stock split proposal.
We believe it is in the best interest of <unk> Biosystems, and our stockholders to maintain our NASDAQ listing.
There are three main reasons listing on NASDAQ is important one it provides share liquidity at an efficient market price to it enables more flexibility to finance the business and three it is a valuable source for attracting and retaining the most skilled talent.
Thank you for your consideration and efforts ensuring to do biosystems maintains its NASDAQ listing.
In light of the importance of this proposal to our stockholders and the fact that our shares are largely held by retail holders that traditionally do not vote large numbers as well as by brokers.
That has eliminated discretionary voting, we've taken certain steps to improve the chances of having this proposal approved these.
These steps include one.
Ending our bylaws to reduce the quorum requirement.
Or the number of shares that need to be present at a meeting.
The transaction of business and to issuing shares of preferred stock with limited special voting rights.
These preferred shares are only permitted to vote on the proposals related to the reverse stock split and we cannot vote against the interests of the common stockholders.
The purpose of the preferred shares is to amplify the vote of the common holders by submitting votes in the same exact proportion as the votes submitted by the common stockholders in order to achieve the vote threshold required by Delaware law.
The reverse split proposal will only be approved if more common stockholders approved the reverse split then don't approve the split.
In summary, we're pleased with the continued execution across our three corporate priorities, which we believe are key to advancing the standard of care for patients at risk of sepsis.
We've worked diligently to reduce expenses and enable a sustainable business model.
Our commercial team continued to expand the installed base of tea to Dx instruments globally.
Which is important to increase sepsis test sales.
Our operations team implemented important changes to increase product gross margins.
Our R&D team continues to meet key milestones to advance our new product pipeline under our BARDA contract.
Our accomplishments during the second quarter reinforce our excitement about the future for TG biosystems and commitment to our leadership position for rapid detection of sepsis, causing pathogens and antibiotic resistance genes.
I'd like to turn the call back over to the operator to open the line for questions operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your touch on the phone.
They start using a speakerphone please pick up your handset before pressing the keys you got any time. Your question has been addressed and even like to withdraw. Your question. Please press Star then two at.
At this time, a little pause momentarily to assemble our roster.
Yeah.
Our first question comes from Stephen Brozak with double your BBB Securities.
Hey, good afternoon, gentlemen, and thanks for taking our questions.
Right off the bat on the financial side I, obviously, the you'd been using the a T M to make sure that you've got enough cash, but can you tell us are you still using it.
Hi, Steve we are not currently using the ATM facility.
Okay. Okay away from the financial can you tell us in as much detail as possible on the one of the things obviously as we're still in this pandemic what is the linkage that you've seen between Covid and sepsis and as much detail as you can give us would be greatly appreciated not I've got one full.
Go up after that please.
Well really on in the pandemic, we saw data coming from China, which which we subsequently saw it in Europe , and then and then in the United States showing that about 30% of the critically ill hospital.
Hospitalized COVID-19 patients were at risk and in fact developed a bloodstream infection and sepsis.
And that's been a consistent number we've had key opinion leaders talk about one out of every three of their critically ill hospitalized COVID-19 patients, having sepsis and and we've seen that data throughout so there's nothing that we've seen that has changed.
A 30% link between critically ill hospitalized COVID-19 patients in sepsis.
Okay and.
Given you know your understanding of obviously disease in terms of the on the virus sudden how quickly you were able to go out there and.
And put into effect a dog a rapid diagnostic on Oh for Covid.
What are the technological areas that we should be looking at when given your skills with monkey pox and what what what detail can you give us on that and I'll hop back in the queue. Thank you.
Thank you, Steve well last week or earlier this week, we announced that we were exploring a potential to develop a molecular diagnostic test for the monkey pox virus.
And if you go back to early 2020, when we were contemplating the development of a molecular diagnostic test for Sars Cov two.
Once we made the decision to do that our scientific team.
Developed that test within just 90 days and we launched that test in fact on the 90 day under the FDA emergency use authorization criteria. So.
I would say that was a demonstration of the scientific expertise of our team as well as the versatility of the platform. We've always said that the platform was agnostic to sample type, we certainly have the only FDA cleared.
Able to detect sepsis, causing pathogens directly from whole blood, we demonstrated the ability to develop a COVID-19, molecular diagnostic tests using our upper respiratory Schwab TD.
Today, all of the Monkey Pox test in fact, the one license from CDC to many companies requires a swab of a lesion, which we understand is very painful and the lesions often don't show up for weeks at a time and we think that there is the potential to develop a direct from blood.
Test for Monkey pox virus, and that's something that we're exploring got.
Got it okay, well, thanks very much for taking the time to answer these questions I'll hop back into the queue. Thanks again.
Thank you Steve.
Once again, if you wish to ask a question. Please press Star then one.
Okay.
Yeah.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. John first of all for any closing remarks.
Thank you very much for joining our second quarter 2022 earnings call. We appreciate your support and look forward to updating you next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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