Q3 2022 T2 Biosystems Inc Earnings Call
Ladies and gentlemen, and welcome to the T. Two bio systems incorporated third quarter 2022 earnings conference call your host for today exactly.
Up Hello, Mo you may now begin.
Should we just look at can they call them. 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, including the risks and uncertainties described in <unk> Biosystems annual report on Form 10-K filed with the SEC on March 23, 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 first of all John .
Thank you all for joining our third quarter 2022 earnings call.
Today I will review the company's performance during the third quarter.
Highlighting a number of recent accomplishments and discuss the progress we are making across our three corporate priorities.
He will then turn the call over to John Sprague, Our Chief Financial Officer.
We'll review our third quarter financial results before I provide some closing remarks, and we open the call for questions and answers.
During the third quarter, the <unk> Biosystems team achieved total revenue of $3 $7 million, including product revenue of $2 6 million and R&D revenue of $1 $1 million.
Importantly, our product sales included $2 4 million of sepsis and related product revenue, which excludes COVID-19 product sales.
Representing a 24% increase compared to the prior year period.
We entered into contracts for 11, <unk> Dx instruments during the third quarter.
Including three in the United States and internationally.
Our year to date totals through the first nine months of 2022 to 20 instruments in the U S and 18 internationally.
Our team has realized a number of important accomplishments in recent months.
During the third quarter, we achieved the highest quarterly sales of our sepsis and related products in company history.
And we've continued to increase our installed base of <unk> Dx instruments.
We've continued to expand our international commercial strategy.
And we have entered into a territory exclusive distribution agreement in the Baltic region.
We have advanced our near term product pipeline by meeting milestones and the ongoing U S clinical trials for the teacher resistance panel and the <unk> bio threat panel.
We also obtained multiple milestones related to the tier two Lyme panel <unk>.
Including the receipt of breakthrough device designation from the FDA.
And receipt of the Lime X award from the U S Department of health and human services.
And the Cowen Foundation.
Finally, we recently regained compliance with the NASDAQ minimum bid price listing requirement.
These accomplishments support our mission.
Fundamentally change the way medicine is practiced through transformative culture independent diagnostics to improve the lives of patients around the world.
Given the recent developments with our tier two Lyme panel, we are now expanding our target markets to include Lyme disease, along with sepsis.
Both of which represent significant opportunities within the infectious disease field, where.
Where the current standard of care is leading to poor patient outcomes.
Substance presents one of the greatest challenges to healthcare systems worldwide.
Claims approximately 11 million lives each year.
In the United States, such as the number one cost of hospitalization.
Costing our health care system, approximately $62 billion annually.
The number one cause of death and hospitals, claiming approximately 270000 American lives annually.
And the number one cause of 30 day Hospital Readmissions.
Wiring nearly 20% of substance survivors to be readmitted within 30 days.
Nearly 40% to be readmitted 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 and approximately one half of cases and can contribute to the growing problem of antimicrobial resistance.
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.
Rapid detection of sepsis, causing pathogens and antibiotic resistance genes is critical for treatment decisions and improving patient outcomes as each hour of delayed targeted antimicrobial treatment can lead to increased mortality risk of up to 8%.
Lyme disease is a bacterial infection caused by the bacteria borrelia.
And is considered the most common vector borne illness in the United States.
Roy of Bergdorf right is transmitted to humans through the bite of infected checks.
My Dear checks in the northeastern mid Atlantic and North central regions of the U S.
And by the Western Black legged checks on the Pacific Coast.
According to the U S centers for disease control and prevention or CDC <unk>.
Approximately 476000 Americans may get Lyme disease, each year in the United States.
Typical symptoms include fever, headache, fatigue and skin rash.
And if left untreated infection can spread to joints, the heart and the nervous system.
The current CDC recommended serological testing for Lyme disease relies on the presence of antibodies.
And can only be used accurately four to six weeks after infection.
We believe there is a significant unmet need for a sensitive diagnostic test to detect early lyme disease and.
And the initial performance data on our T. Two line panel is very encouraging.
We believe the T. Two line panel will allow clinicians to detect active infections and ensure patients receive appropriate therapy faster.
And prevent the negative impact of a delay in delivery of treatment.
And the overuse of antibiotics.
Yeah.
To advance our mission and create value for our stakeholders.
We're focused on three corporate priorities.
One accelerating our sales.
Two enhancing our operations and.
And three advancing our pipeline.
I will now provide an update on our recent progress as it relates to each of these corporate priorities.
Starting with our first priority accelerating our sales.
Our commercial strategy is focused on driving adoption of our <unk> technology by expanding our instrument installed base globally.
And the increasing utilization of our Subsys touch panels.
As I mentioned earlier third quarter sepsis and related revenue was $2 $4 million.
Representing a record number for a single quarter and an increase of 24% compared to the prior year period.
We entered into contracts for 11, Q2, Dx instruments for Subsys testing, increasing our installed base of instruments to 170.
Including 101 in the United States, and 69 internationally, including clinical trial instruments.
We generated sepsis test panel revenue of $1 $5 million.
Representing growth of 25% from the prior year period.
From an instrument pull through perspective in the United States, we achieved annualized sepsis test utilization of $104000 per legacy instruments.
We continue to believe that annualized U S sepsis test utilization will reach $200000 per instrument.
And we have a number of customers that have already surpassed that target.
The record quarterly subsystem related revenue was driven by our growing installed base of <unk> instruments, and our ability to bring new accounts online faster than we have in the past.
As a reminder, it has historically taken four to six months from contract close to go live testing at hospital labs.
Through improvements integrating our sales and field operations teams and streamlining our processes were seeing improvements and we are targeting three months from contract close to go live testing.
This should translate to new customers consuming tests earlier.
And contributing to our sepsis test revenue faster.
The second driver of Subsys revenue in the quarter with growth in sales of the T. Two bacteria panel in the U S and internationally.
It's encouraging to see customers realize the value of the teacher bacteria panel and to increase their utilization.
Typically seen customers adopt the T. Two candida panel first followed by the adoption of the teacher bacteria panel.
We are beginning to see some customers start with teacher bacteria because of its unique ability to detect the most critical sepsis, causing pathogens.
We believe we are benefiting from our work to increase awareness of the benefits of this panel.
Following the field force realignment, our medical affairs personnel are making progress improving customer engagement and leveraging the increasing library of peer reviewed clinical data that demonstrates the value of the teacher bacterial panel.
The core market opportunity for our sepsis products targets Hospital, Microbiology labs, which we believe represents a market opportunity exceeding $2 billion.
We're in the early innings of commercialization and we.
We're encouraged by the potential that lies ahead.
Our ability to play.
These instruments across all types of hospitals, ranging from large academic hospitals two critical access hospitals gives us confidence we can continue to expand our installed base of instruments and accelerate growth of our sepsis test panels.
We recently sold a second tier two dx instrument to one of the leading U S Laboratory service providers to be deployed for sepsis testing in one of that providers managed hospital laboratories.
We believe there is potential to further expand our business in the laboratory service providers in their quest to expand their managed hospital laboratory business.
We now have multiple end user customers that have added a second <unk> dx instrument to expand their testing capacity or to add an additional testing site within their system.
Outside of the U S. There was also a significant market opportunity for our products.
Our international go to market strategy includes a network of exclusive distributors that sell and support our products in specific countries or regions.
And we're focused on continuing to expand our international presence.
We recently executed a territory exclusive distribution agreement covering the Baltic region, including Lithuania, Latvia, and Estonia, where we believe our products offer a solution to drive meaningful improvement in the management of sepsis patients.
In fact studies have shown that the Baltic region has a higher average incidence of sepsis per population than western Europe .
And guidelines have been issued in the region to improve sepsis management.
We expect further international expansion in 2022 and 2023.
As we have discussed we have taken steps to expand and realign our commercial team.
We are confident the sales medical affairs service and support teams are aligned to execute our strategy.
Including spending appropriate time pursuing new instrument sales and working with existing customers to increase sepsis test utilization.
At the beginning of 2022, we communicated our belief that sales of our COVID-19, molecular diagnostic test for <unk>.
Sars Covid two panel with decreased during the year and provide an opportunity to convert COVID-19 driven instruments to sepsis testing.
While the conversion process has taken longer than we anticipated. We continue to believe this represents a potentially meaningful growth opportunity to increase sepsis test utilization.
Moving to our second priority enhancing our operations and.
In the current macroeconomic environment, we recognize that operating efficiently as a critical success factor.
As such we've prioritized improving our product gross margins and reducing our operating expenses and we have taken steps to address both priorities.
The product gross margin improvement initiatives includes the T. Two bacteria and teach you can do the panels and has resulted in a reduction in the manufacturing cost of those two products.
In June we made changes to improve our overall cost structure.
<unk>, reducing our workforce and operating expenses by approximately 20%.
We expect both improvements to be more apparent in the coming quarters as we continue to increase volume and fully absorb our overhead and onetime costs related to organizational changes.
Finally, our operations team has worked to ensure that there is an uninterrupted supply of products to our customers.
And we are effectively managing longer lead times and inflationary pressures.
While supply chain challenges continue exist across the industry.
Our team remains confident in our ability to continue supplying our customers without interruption.
Moving to our third priority advancing our pipeline.
We are advancing the development of multiple new products that leverage both our technology platform and our scientific expertise.
Our product pipeline is supported in part by a milestone based product development contract awarded by BARDA.
The U S. Biomedical advanced research development authority, which is valued at up to 69 $62 million. If all options are exercised.
We recently completed option to be of the contract.
Following our team's successful completion of all milestones for advancing the U S clinical trials for the teacher resistance panel.
And the teacher biotech panel.
And advancing the development of the next generation instrument and comprehensive Subsys panel.
We were awarded option three valued at $3 $7 million to finalize U S clinical trials and complete FDA submission for the <unk> panel and the T. Two resistance panel.
Several products are being developed with the goal of expanding the test menu on our FDA cleared <unk> Dx instruments, Inc.
<unk> for products that I'll highlight on todays call.
<unk> bio threat panel teacher resistance panel T. Two Lyme panel and T. Two bacteria panel enhancements.
We believe these new products could potentially be commercially launched in 2023 subject to regulatory approvals.
Each of these new products represents a differentiated solution to rapidly identify harmful pathogens and potentially allow clinicians to achieve faster targeted therapy.
The <unk> panel is a direct from blood test panel designed to run on the <unk> instrument and simultaneously detect six bio threat pathogens identified as threats by the U S government and just three to five hours. This.
This program is funded under our BARDA contract and we believe the target customer for this panel would be the U S government.
We initiated a clinical evaluation for the <unk> panel in December 2021, which is very near completion and we remain on track to file an FDA submission in 2022.
The teacher resistance panel is a direct from blood test panel designed to run on the <unk> instrument and simultaneously detect 13 antibiotic resistance genes known to cause antibiotic resistant infections in just three to five hours.
This program is funded under our BARDA contract.
As a reminder, we are currently marketing and selling the teacher resistance panel in Europe under a CE Mark.
And we are on a pathway to apply for FDA clearance prior to U S commercialization.
We initiated a U S clinical trial for the <unk> resistance panel in December 2021.
We are currently enrolling patients at eight hospitals, and we are adding two additional hospitals to increase patient enrollment.
We anticipate completion of the trial in early 2023 and plan to subsequently filed with the FDA.
As a reminder, the teacher resistance panel was previously granted breakthrough device designation from the FDA, which provides for a prioritized FDA review process.
The Q2 line panel is a direct from blood test panel designed to run on the <unk> instrument and detect active borrelia infections.
Bacteria that causes Lyme disease in just three to five hours.
We expect it to be used to aid in the diagnosis of early Lyme disease.
Earlier this week, we announced that the tissue line panel was selected as a winner in the line innovation accelerator or in line X a partnership between the U S Department of health and human service.
And Steven and Alexandra Cowen Foundation.
Largest public private partnership for Lyme disease.
While we plan to potentially commence marketing and sales of the T. Two line panel as a lab developed test in 2023.
We also plan to initiate discussions with the FDA with the purpose of pursuing FDA clearance.
The teacher line panel was also granted breakthrough device designation from the FDA, which again provides for a prioritized review process.
Finally, we have initiated studies to expand the number of pathogens detected on our FDA cleared <unk> bacteria panel.
To include the detection of Acinetobacter <unk>.
Acinetobacter is a cause of bloodstream infections, especially in critically ill patients, which can range from benign transient bacteremia, two septic shock and.
It has been reported to have accrued ICU mortality rate of 34% to 43%.
Acinetobacter can be resistant to many antibiotics, including Cobre Panama's high.
Highlighting the importance of rapid detection and targeted antimicrobial treatment.
<unk> infections rarely occur outside of health care settings in the United States and can disproportionately impact those with weakened immune systems chronic lung disease or diabetes.
Adding acinetobacter detection to the T. Two bacteria panel will provide clinicians with a rapid direct from blood diagnostic that will provide actionable data for the appropriate antimicrobial treatment for patients with.
We plan to submit for FDA clearance in early 2023.
With that I'll now turn the call over to John Sprague to provide a detailed update of our third quarter 2022 financial results and our financial outlook for the remainder of the year John .
Thank you John .
Total revenue for the third quarter of 2022 was $3 $7 million, a decrease of 50% compared to the prior year period.
Product revenue was $2 $6 million, a decrease of 39% compared to the prior year period.
Given by 88% decline in sales of COVID-19 tests from $2 $4 million offset by increased sepsis test sales Reese.
Research contribution revenue was $1 million, a decrease of 67% compared to the prior year period, driven by the timing of enrollments in the T. Two resistance trial.
Product costs for the third quarter of 2022 were $6 $1 million, an increase of $1 $4 million compared to the prior year period, driven by increased supply chain cost inefficiencies Reese.
Research and development expenses were $6 $4 million flat compared to the prior year period.
Selling general and administrative expenses were $7 million, a decrease of $1 5 million compared to the prior year period, driven by decreased medical affairs spending.
Net loss for the third quarter of 2022 was $17 4 million $2 95 per share compared to a net loss of $14 million $4 21 per share for the prior year period.
Cash marketable securities and restricted cash were $21 $5 million as of September 32022.
<unk> sales were $22 9 million for the third quarter and we raised approximately $700000 since September 32022.
We redeem the series a preferred stock in October 2022, and there are no longer any preferred shares outstanding.
We remain in compliance with the CRD loan agreement covenants and today, we announced <unk>.
Then meant to the agreement extending the interest only period and the maturity date to December 32024.
For guidance, we now expect full year 2022, total revenue of $22 million to $23 million, including product revenue of 11 $5 million to $12 million and research contribution revenue off of.
10, 5% to $11 million and we expect to close 50 to 55 teacher Dx instrument contracts in 2022.
Thank you and back to John <unk> for closing remarks.
Thank you John during the third quarter, the <unk> biosystems team generated a quarterly record of sepsis and related product revenue.
And we remain on track to achieve record substance driven <unk> Dx instruments in 2022.
We're excited by the progress.
With our near term product pipeline, including the <unk> bio threat T. Two resistance T. Two line and tissue bacteria panel expansion.
To close the year, we will remain focused on our three corporate priorities accelerating our sales enhancing our operations and advancing our pipeline to support long term growth and sustained value creation.
I'd like to turn the call over to the operator to open the line for questions operator.
If you have a question at this time, please press star one and you have a.
Question at this time, please press star one on your telephone keypad.
Our first question comes from Kyle <unk> with Canaccord.
Hey, guys. Thanks for taking the questions I.
I guess, starting with the quarter, so gross margin pretty deeply negative territory this quarter.
Revenue went down Cogs went up I thought the best trend I guess.
Just what caused that and what gross margin maybe elevated earlier when COVID-19 test sales were kind of stronger and then how you rightsize the gross margin.
Gross margin here and do you have any visibility on kind of overall confidence that the margin will flip to the positive side and kind of remain there sustainably.
John spread would you like to take that.
Yes, so Kyle it was driven by supply chain issues. So think of it as we typically buy probes and primers for a reagent tests.
That are under GMP manufactured.
And we were forced due to supply chain constraints to source.
Search grade materials, which come in smaller batches.
And they have a much.
A much longer our QA process that we have decided get them too.
So that coupled with we did ultimately get the GMP materials in.
Left us a bit long on those materials.
The other contributing factor was a was a modest amount of.
Excess COVID-19 inventories given the falloff in Covid sales. So we view this as an aberration in the supply chain and overall, we're happy with our our cost structure and source of supply and where the margins going forward.
Now is there going to be any headwind John from.
FX things like that going forward as well.
Not that we foresee at this time, it's something that we monitor and manage.
Okay, Alright sounds good and then just going back to maybe the current state of the business. So maybe just talk a bit about the.
The instrument backlog into the sales funnel at this point just based on the way that those two factors are kind of progressing maybe just speak to the.
I like your optimism on our expectations for placements over the next few quarters and in your opinion guys is 23 more around instruments or kind of a consumables pull through at this point.
Well I'd take that kind of on a year to date basis through the first nine months as I mentioned, we've sold or placed 38, <unk> Dx instruments 20 in the U S 18 internationally.
We expected a 50 50 split when we started the year and that's pretty much in line with what we're seeing.
And we've guided for the full year of 50 to 55 instruments. Those are all substance driven instruments that will represent a record year.
When it comes to allocation of time amongst our commercial team.
Splitting that roughly equally between pursuing new instrument sales and driving subsys growth. If I go back to your first question about product gross margins one of the things that we can control is driving greater consumable sales, which helps to absorb our overhead faster.
<unk> has a direct impact on our product gross margins and our overhead consumption. So we're really trying to strike a balance between the two and that's the way we think about it going into 2023 as well.
Yeah.
Okay, Okay, and then what about the kind of like the funnel in terms of backlog of instruments like do you see a lot of demand is there.
Could there be any placements in the fourth quarter that are pulled forward from first quarter things like that or may be delayed into the first quarter, just kind of curious like what the kind of the dynamics are that you're seeing and then kind of environment.
I'll start with that and Brett Gibson is on the call. He can certainly add to it.
As a general rule, we don't pull product forward from a subsequent quarter into the current quarter. It is not a good practice and at some point you pay the price for doing that so that's not something that we engage in.
And we have sold 38 instruments through the first nine months, we've guided to 50 to 55. So you can pick the midpoint of that which means.
We expect a fair instrument quarter for Q4.
And we believe that'll be a record for the year. So we feel pretty good about our overall instrument performance and we know that that's going to be a driver of such as consumables going forward.
Hey, do you want to add.
I mean, I think that's exactly right John .
The real good about what we've got in front of us here.
Okay.
Yeah. Okay. Thanks, guys. So it sounds like the jumping off point for 'twenty there is.
Construction is positive it's good.
Maybe just thinking about the pull through John so multiple customers above that 200, K target that you have.
Maybe just could you talk about the types of customers those are and how long it takes to get to $200000 per.
Per box for those customers and in general maybe.
I'm just wondering if you could speak to like how utilization differs among various cohorts of customers buy by vintage or by the type the type of customer too.
Well I'll start again, and again feel free to jump in we are seeing customers move from contract close to go live faster.
We are also seeing <unk>.
Some of our newer customers become some of our better customers faster and I think that those two things are a direct result of.
Of our commercial teams working together and doing a better job on the sales process before we even get to contract close and as we've discussed in the past the call points that we have commercially.
Or really in disorder.
The head of the Microbiology lab in.
Infectious disease doctors.
And pharmacy.
And.
Historically the company had focused on that number one target, which is the head of the microbiology lab and effectively got an instrument into into an account and then the hard work came behind it with infectious disease doctors and pharmacy.
When it came to patient selection criteria and antibiotic stewardship, we're doing a lot of that work upfront and I think that's why we're seeing the time from contract close to go live accelerating and we believe that's going to continue to accelerate Brian you might want to talk about the differences between some of our larger accounts and some of our smaller accounts.
Yes, so I think everything everything John said, there I think that one of the things as John mentioned, it's been an important driver of that is in fact, what we're seeing we're seeing much more rapid adoption of bacteria that traditionally saw and I think particularly I think some of the legacy larger accounts. The typical pathway was.
Obviously, Canada would be the initial and then move to bacteria and I think what we're seeing.
Talk about sort of types of accounts as we.
Begun to bring on more and more of the critical access hospitals more and more medium sized brands. It's been much more aware bacteria has been a much bigger part of that right up front and as John mentioned I think from a just from a sales and a messaging perspective.
Definitely leaned in very significantly and.
I think having much more sort of traction with having a lot of those discussions across a wide swath.
Key contact points on Friday, so which sometimes.
That can make the navigation process in the beginning sometimes.
Take a bit longer at the same time, we're certainly having success with that.
Yes.
Okay that was great guys I guess I'll just ask a final question just thinking about the international expansion because it's good to hear you want to keep doing that next year or two.
But the question is kind of like how do you balance the spending and the cash burn and expanding internationally have you kind of balance all these things and how important is penetrating and expanding internationally in the near term to your kind of long term growth strategy.
It's very important the market opportunity outside the U S is as large if not larger than it is in the U S. Oftentimes path to adoption internationally is faster than talk to adoption in the U S. I think the other thing to keep in mind is X.
Outside of the U S. We sell the instruments to distributors and then they generally are.
Putting those into customer accounts.
Sure.
They're absorbing the capital costs theyre, putting it in some kind of a reagent rental replacement plan. So our distribution partners are making investments and generally they have been selling to customers for a very long time. So they have relationships with these accounts. They know the key opinion leaders the relationships that they have are broad.
Rod within hospital accounts, so their path to adoption can be faster in the U S where in many cases.
<unk> has not historically been known like they've been known to their customers and we're starting upfront with relationship building, whereas they may have years of that under their belt. So it's a really important part of our growth strategy. We expect to continue doing it and we're doing that with separate teams small team managing our international partners.
A team of 20 territories of which 14 are filled in the U S. Today.
Great perfect. Thanks, so much Shawn thanks, guys.
Thank you. Thank you.
Our next question comes from Mark Massaro with <unk>.
Thank you Franco.
Thanks for taking the question.
Some of them come in.
I'll take that.
For any recording clinical trial work.
And I think you also made some headcount reductions earlier this year. So just how you're thinking about prioritizing investment in our pipeline.
Thank you Vivian so in terms of the Nexgen instrument, we completed all of the milestones under contract option with BARDA to be both for the instrument and for the comprehensive Subsys panel. Likewise, we completed all the milestones for the two products in clinical trial.
Q2 resistance and tissue bio threat.
In terms of option three contracts that we're working under right now.
Entirely focused on the two products that are closest to FDA submission. That's the T. Two resistance panel and the <unk> panel and that is that BARDA has request so any future funding for <unk> next generation instrument and the comprehension substance panel would potentially come.
In future contract options.
Outside of that no update on the product timeline.
As far as prioritizing our pipeline one of the shifts that you may have noticed in the prepared remarks.
Is around our priorities of menu expansion on our current <unk> Dx instruments.
And I think it's probably important to reinforce a little bit about why we're doing that.
And because we think we have a number of quality shots on goal related to new product pipeline, particularly ones that we think can be commercialized in the U S. In 2023, and those are not only catalyst, but also important revenue drivers potentially <unk>.
I described those four products earlier.
They would potentially go on our U S installed base.
Perhaps with the exception of the <unk> panel, but certainly pizza resistance to lime.
And the teacher bacteria panel expansion.
Yeah.
Okay.
Yes sure.
Okay. Thanks, so much.
Okay final one for me could you also just provide an update on that conversion.
Okay.
I think in the past you've talked about ADP. Thank conversion.
Christine a cleaner ball.
You also alluded to discussions with two large health systems on that front.
Conversations that guide thanks.
Sure Vivien would you or would you like to take that please.
Certainly so yes, I mean, we're still clearly our target is the 80% conversion of that uncertainty.
Kevin I Havent backed off of that at the same time I think that in terms of the conversion process as we mentioned I think.
It's been slower admittedly than we would've liked.
Uh huh.
Factors to that I think we.
With some of the as I mentioned some of the earlier this year and reorganization of effort. We did by shifting more of our sales focus versus a medical affairs focus we had I think as well.
We certainly we certainly got full effort on that and I think that those are going to that's going to continue along as I said I think we're still we're still comfortable with looking at it from an 80% conversion as it is.
The target for it.
It's just taken a little bit longer than we would have liked at this point, but it's an important part of our targeting and it's something that as I mentioned from the John .
John mentioned earlier from a sales perspective in the U S.
The team is focused on that.
Much more additionally than they were say earlier in the year when we're focused a little more on sort of new account wins.
That effort.
The last part of your question I believe was.
But I think what was the last part of your question.
And I'll tell you, we're just talking about discussions they had with it.
Oh, yes, yes, yes, yes, yes, we still yes of course, yes.
We're in active discussions.
We've certainly moving that along those two those two groups do represent a significant portion of.
Of the accounts that are in that that total bucket. So I think that we've we're.
We're working those discussions at the corporate level and certainly progress is continuing on it I mean, certainly we're working through that now and I've gotten to the point where now at least.
Being able to bring in much more of a medical affairs type of approach to it in addition to the sales discussions.
Basically continuing.
Thanks for taking the question.
Thank you Vivian.
Yeah.
Yeah.
Our next question comes from.
Steve Brozak with Ww W. BD.
Yes.
Hey, good afternoon, thanks for taking the questions just one that.
Pretty much asked and answered everything else, but just one.
On your ability to go out there and meet any kind of.
Demand or excess demand, let's just say.
In terms of manufacturing and throughput.
How would you see your position for the ability to go out there and ramp up.
Given excess demand for devices.
Of course.
In terms of.
Being able to turnaround and meet any any demand into the future and hop back in the queue. Thank you.
Thank you, Steve we feel really good about our ability to flex to respond to increased demand for Covid, obviously presented a lot of challenges for the supply chain across the industry for us.
<unk> scaled our test capacity sevenfold at the peak of Covid.
And similarly scaled our instrument production output.
The company was built to produce a lot more test that we're producing today, that's part of the overhead absorption that we talked about earlier, so we feel really good about the potential to.
Flex and increase production, both on instruments and on consumables.
Got it great. Thank you.
Thanks, Steve.
Yeah.
Thank you have a question at this time, please press star one.
If you have a question at this time place press Star one.
Okay.
There are no callers in the queue at this time.
I would like to thank you all for joining our third quarter 2022 earnings call. We look forward to updating you on our future progress. Thank you very much.
Ladies and gentlemen that concludes your call you may disconnect at this time.