T2 Biosystems Inc. Q1 2023 Earnings Call
Hum.
[music].
The full presentation.
Yes.
If anyone should require operator assistance during.
Two biases.
<unk>.
Does this incorporate.
On your telephone keypad.
<unk> three <unk>.
Note. This conference is being recorded.
Earnings time or.
And the conference over to your host trip Taylor.
[noise] participant and answer session will follow the formal presentation.
Thank you operator.
Acquire.
To remind everyone that comments made by management today and answers to questions will include forward looking statements.
Of note this conference.
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.
Currencies made by man.
But today and answers to question.
<unk> actual results to differ materially.
Those include statements related to <unk> biosystems, future financial and operating results and plans for developing and marketing new.
<unk> report on Form 10-K.
<unk> estimates and assumptions as of today.
2023.
Risks and uncertainties that may cause actual results to differ materially.
The company undertakes no obligation to publicly update.
Okay.
Date or revise any forward looking.
Described in <unk> Biosystems annual report on Form 10-K.
<unk> over to chairman and CEO .
<unk> 2023.
Oh.
<unk> and other filings the company makes with the SEC from time to time.
23 earnings and business update call.
Quickly.
Hey, I will start by addressing two press releases.
<unk> kept as required by law.
This thing.
What was that.
Discuss our performance during the first quarter.
And CEO .
<unk>, we have made across our three corporate priorities as outlined in our first quarter earnings.
Quarter, 2023 earnings and business update call.
Our Chief Financial Officer.
Paul start by addressing two press releases.
Two results.
Earlier this.
For 2023.
Morning, our performance during the first quarter.
Great.
<unk>, including the progress we have made across our three corporate priorities as outlined in our first quarter earnings press.
Mark's announcing.
Release will then turn the call over to Jon Springer.
Jim for the tier two bio threat.
Gregg who will review our first quarter financial result.
Panel operation with the U S Department of health and human services.
Before I provide closing remarks.
His strategic preparedness and response.
<unk>.
<unk> Biomedical advanced research and development authority.
Press release announcing.
The FDA submission marks an important milestone.
<unk> bio threat.
Stone to protect America.
Panel developed in collaboration with the U S Department of health and human services.
<unk> a bio threat pathogens.
As for strategic preparedness and response.
First clinical.
<unk> research.
<unk> stated very high sensitivity and specificity.
The FDA submission marks an important milestone.
If he can drive positive samples.
Stone Americans.
And over 470, <unk> negative blood samples.
<unk> spring outbreak.
Okay.
<unk> spread pathogen.
These subjects.
And follows the recently completed U S clinical evaluation.
Yes.
<unk> demonstrated very high sensitivity and specificity.
D a clear <unk> instrument.
<unk> 350 can drive positive <unk>.
Bio threat pathogens.
170 negative blood samples.
The U S centers.
<unk>.
These control and prevention.
<unk>.
Or CDC.
The <unk> panel.
Okay.
Is it automated.
Hum.
Two blood test.
That's fair.
Tests designed to run on the FDA cleared <unk> Dx instrument and simultaneously.
Infections with these bio threat pathogens.
<unk> identified as threats.
What are your rates.
The centers for disease control and prevention or Cds.
But keep your bio threat panel is able to detect these bio threat pathogens.
Z <unk>.
Glanders.
Or I believe from blood.
<unk> and type.
Provide clinicians.
If not treated promptly.
<unk> infections with these bio threat pathogens.
Yeah.
<unk> can result in mortality rates.
The teacher bio threat.
Rates, 2%.
Panel very high sensitivity.
<unk> a threat panel is able to detect these biotech path.
He target bio threat thoughts.
So roughly from blood.
Sorry.
Blood provide clinicians.
U S only.
<unk>.
To appropriately treat infected.
Temperature and the discussions with the U S government.
Patient a threat panel.
Pink procurement of the TQ bio threat.
Panel and specificity for a direct from blood multi target bio threat.
Panel one thing the exploration.
Product or any such.
<unk> strategic alternatives.
U S owned company.
It is amazing.
Companies, we think we will have an important factor.
The restructuring program.
After the U S government.
Graham after careful.
Q2 bio threat.
<unk> engaged an advisory firm to explore all potential strategic alternatives.
Panel announcing the exploration of a range of strategic alternatives.
Merger.
Maximizing value.
Sure.
And the implementation.
<unk> a restructuring program.
That's licensed.
Graeme took careful consideration.
King transaction.
<unk> company has engaged an advisory firm.
Actions are expected to be provided during the evaluation period.
To maximize value.
The board of directors has concluded that disclosure is appropriate or required.
Sure other business combination.
Wire strategic restructuring program is being implemented to preserve capital.
Asian <expletive> transaction.
Little pushing the company to explore all strategic.
I needed to be provided during the evaluation period.
<unk> and lessen and Joe and the board of Directors has concluded that disclosure is appropriate.
Yes.
Preet are required.
The restructuring program is designed to reduce operating costs.
We implemented to preserve capital.
Got it.
Little and better position the company to explore all strategic alternatives.
30%.
<unk> continuing to support its customers.
<unk>.
<unk> pursue new commercial opportunity.
Strategic changes in the context of our three corporate.
<unk> restructuring program is designed to reduce annual operating cost.
<unk> the <unk> system.
Costs.
<unk> has recently achieved a number of key milestones.
<unk>.
<unk> positioned the company for success.
<unk>, which was completed last.
Yes.
London mentally change the way medicine is Brad.
Weak in the context of our three corporate <unk>.
This diagnostics that improves the lives.
<unk> recent business progress the <unk> biosystems team.
<unk>.
<unk> has recently achieved a number of key.
Accelerating our sales.
Loans for success.
Our operations.
Our mission.
<unk>, Inc, or <unk>.
<unk> really change the way medicine is practiced.
Pipeline, starting with our first priority.
This culture independent diagnostics that improves the lives of patients around the.
Increasingly adoption of our products.
A world.
Support our three corporate prior.
<unk> sales.
Alrighty accelerating our sales.
Let's just touch panels.
<unk> operations.
<unk> expanding the installed base.
<unk>.
<unk> for FDA cleared <unk> Dx instrument.
Our first priority.
Instrument as we stated during our March 2023 earnings.
<unk> is focused on increasing the adoption of our products.
Paul you're seeing the use of our subsidiary <unk>.
Product sales.
Hospital.
<unk> cleared sepsis test.
Customers are increasing.
And even the installed base.
<unk>.
Base of our FDA cleared <unk> Dx install.
To our sales strategy.
Instrument as we stated during our March 2023 earnings.
Sales targets to include larger hospitals.
Call will be increasing the use of our substance test panel.
<unk>.
<unk> with existing hospital.
Sepsis test panel utilization target.
Customer.
200000.
We made two important changes to our sales strategy.
Increased use of our Q2 bacteria.
<unk> exists of expanding our sales.
Given their increased patient volumes.
<unk> and those that have.
Patients that require.
<unk>.
Achieving our annualized sepsis test panel utilization.
Hospitals have larger sales.
<unk>.
Larger hospitals have shown greater potential for increased use of our tissue bacteria and candida.
<unk> targets are smaller and critical access hospitals.
<unk>.
<unk> provides a greater opportunity.
Acquire complex treatment.
<unk> sustained growth.
Treatment at the same time, we acknowledged that larger hospitals have larger sales.
Sales incentive compensation plan.
Cycled through our sales funnel.
Land on sepsis test.
Bunnell Hospital target.
Rather the instrument.
To supplement our current targets of smaller and critical access hospitals.
<unk>.
<unk> provides a greater opportunity.
You can see account.
<unk> from.
Well as to accelerate the time from when an instrument contracts.
CIS of shifting.
Practice in a hospital goes along.
<unk> compensation plan to weigh more heavily on sepsis test.
<unk> and support teams.
Revenue.
Closely integrated.
And certainly this is intended to align with our strategy.
The training and education required.
Key accounts.
Higher.
Counts to accelerate the time from when an instrument contract is signed.
<unk>.
When the hospital goes live with patient.
The quarter, we achieved surplus.
Testing medical affairs and support teams.
<unk> million.
<unk> our integrated.
Compared to $2 million.
Customers.
Sure.
<unk> training and education required.
Thank.
Higher ramp their utilization.
We also ended the first quarter.
<unk> <unk> benefit.
With a scaled back order of $230000.
<unk> during the first quarter, we achieved.
That's panel revenue of $1 2 million.
<unk> 7 million.
<unk> came in at 11%.
In the prior year peer.
Pretty good.
Driven by lower <unk>.
With a $230000 backwards.
Instrument for the first quarter with a <unk>.
Clear the back order as of March 31.
<unk> system.
First sepsis test panel increase.
Got rated sepsis test panel revenue of $1 2 million.
Greece.
Representing an 11% increase.
Sales of teacher bacteria panel by 55.
<unk> in the quarter with a $230000 backwards.
5% increase in the U S.
<unk> the back order as of March 31, the sepsis test panel increase.
Mark Thanks for five T to Dx instruments during the first.
Kris period.
All of which were sold outside of the United.
Sales of teacher bacteria panel.
Panel.
This change in our commercial strategy.
9% increase in the U S.
<unk> panel utilization and legacy accounts and larger hospitals.
Mark <unk> Dx instruments during the first quarter.
It is a strong validation of our new commercial strategy.
Mark.
Is that our U S T two bacteria panel revenues.
Market sensitive of the change in our commercial strategy.
Okay great.
<unk> focus more on increasing sepsis test panel utilization and legacy accounts.
Great.
Four new hospitals.
<unk>.
During the teacher bacteria panel for the first time.
A strong validation of our new commercial strategy.
Instrument closures online.
<unk> three a panel revenues more than <unk>.
Doubled in the first quarter of 2023.
I'm pleased with the adoption rates of the teacher bacteria panel as more hospitals are realizing the value of it.
Three full accounts.
As evidenced by the increased demand in our legacy accounts.
Counts, bringing our fourth quarter 2022 instrument closes.
In U S Hospital laboratories.
Line.
<unk> initially sold for COVID-19 testing.
Online with the adoption rates of the teacher bacteria panel as more hospitals are realizing the value of the <unk>.
Inform you that another instrument was converted to our sepsis test panel during the first quarter of 2023.
We have approximately 40 <unk> Dx instruments.
Covid, 19%.
<unk>.
The coming.
<unk> sold for COVID-19 Tech.
We're excited that we recently entered into a multiyear pricing agreements with two large U S health.
<unk> was converted to our sepsis test panels during the first quarter of 2023.
The key hospitals.
These two health system.
COVID-19 to <unk>.
Yes.
In the coming.
Biosystems sepsis test.
Months separately, we're excited that we recently entered into multiyear pricing.
Panels into the sepsis management protocols.
Agreements.
And they are experiencing.
69 U S.
And positive economic benefit.
Hospital in each of these two health systems are multiyear used.
Benefits hospitals.
<unk> Biosystems sepsis test.
<unk> do bacteria panel.
Panel in those hospitals, our sepsis panels.
<unk> initial three year peer.
<unk> for sepsis management protocols.
Yes.
Calls and they are experiencing.
Improved clinical benefit.
Certainly excited about the opportunity to expand the use of our subsys product.
<unk> payments provide these 69 U S hospitals with contracted pricing for the bacteria panel.
<unk>.
Panel and the TV candidate panel.
Cool.
Panel for an initial three year period.
Health systems.
Those options to procure <unk> Dx instrument.
Items and represent top U S commercial prior.
Instrument opportunity to expand the use of our <unk> products.
There continues to be a significant commercial opportunity for our <unk> instruments and sensors touch.
Kevin.
<unk> within existing.
By continued sales of.
<unk> health system.
No.
<unk> core tenants of our growth strategy.
Yes.
<unk> and represent top U S commercial prior.
Europe and the Middle East.
Internationally.
East continue to expand distribution.
And the commercial opportunity for our <unk> instruments and sepsis test panel.
Our efforts to increase awareness.
Continued sales of instruments.
Got.
<unk> just test panel.
The activities of our commercial team.
<unk>.
In medical Affairs team.
Our Q to see strong demand in Europe and the middle.
Jim.
East and expect to continue to expand distribution.
For full data at the European Society of clinical microbiology and infectious disease.
<unk> efforts to increase awareness of the benefits of our sepsis test.
These like finish.
<unk> some of the activities of our commercial team.
<unk> experience.
<unk> fares team.
<unk> speed.
And leaders.
<unk>.
<unk> scientific Advisory Board.
<unk> delivered by our <unk>.
<unk> clinical data.
Okay.
Ada European Society of clinical microbiology and infectious disease.
Panel technology combined with our optimized commercial gameplan.
These by clinician.
<unk>.
<unk> second quarter.
<unk> speed accuracy.
Moving to our second priority.
<unk> delivered by our <unk> instrument and sepsis test.
Pretty inefficient operation.
Panel driving awareness of the benefits of the <unk> technology.
<unk> to drive greater efficiency.
<unk> commercial game.
The measures to reduce expenses.
Plan, our ability to accelerate sales.
Did you Biosystems is now operating as a leaner organization.
<unk>.
Asian, with 110 employees compared to 204 employees.
Alrighty.
<unk> may of 2022.
<unk> success.
We expect the net result of our workforce reduction and cost control measures.
Expenses across the.
<unk>, who is our quarterly cash burn throughout.
The company is now operating as a leaner organization.
Increased leverage.
<unk> 10 employee.
Average for our organization.
<unk> 104 employees.
She has significant gross margin expansion.
As our customers continue to increase sepsis test panel utilization.
<unk> measures to significantly reduce our quarterly cash burn throughout 2023.
Increased test unit volumes.
Increased leverage.
<unk> allocated across greater volume.
Average.
It can lead to improved product gross.
<unk> gross margin expansion.
<unk> growing demand for our sepsis test.
<unk> be sepsis test panel utilization.
During teams are hard at work.
Those carry a higher contribution margin.
Work generally improving our manufacturing process.
Margin.
First drive greater efficiency.
The allocated across greater.
Yeah.
<unk>, which can lead to improved product gross margins.
So by hiring a new vice president of operations.
And for our sepsis test panels.
<unk> new manufacturing.
Panels and manufacturing teams are hard at work managing the supply chain.
<unk> 23 call, we discussed a raw material issue we identified.
Jane Greater.
<unk> internal quality inspection.
<unk>, we have strengthened our operations team.
Sure.
Team hiring a new vice president of operation.
So.
<unk> and subsequently hired new manufacturing.
Considering we identified this issue during our in process.
<unk> 2023 call, we discussed a raw material issue that we identified during our routine internal quality inspection.
Section $230000 back order.
<unk> factors.
<unk> Candida panel and teacher bacteria panel referenced earlier.
September demand.
Since the end of the first quarter.
Demand identified this issue during our in process.
<unk> <unk> products.
Product that was shipped to customers or distributors.
Products was issue for the teacher resistance panel.
<unk>. We are pleased to report that we have cleared the $230000 back order for the <unk> Candida panel and teacher bacteria panel referenced earlier.
Between $12 million proceeds.
And we are returning to more normalized shipment patterns for these.
Workforce reduction that we implemented last week.
Products issue for the future resistance panel.
Weak, but our operating expenses.
Panel before the end of the second.
This leverage and extend our cash run.
Quarter, mainly in the first quarter, we strengthened our balance sheet by raising $12 million in gross proceeds.
In the coming.
Although technology.
<unk> force reduction that we implemented last.
<unk> positioned the company to expand our addressable market in the future.
Week to increase our operating leverage.
Focused on two goals, one developing new tests to expand the test menu on the <unk> Dx instrument.
And <unk> Biosystems novel Technology platform.
Instrument.
<unk> scientific expertise.
German.
<unk> positioned the company to expand our addressable markets in the future.
Yes to expand the test menu.
Future pipeline is focused on <unk>.
U S.
<unk>.
Including.
One new tests.
<unk> panel.
To expand on the <unk> instrument.
Anil the tissue Lyme panel.
So I'm, hoping a next generation instrument.
It'll acinetobacter <unk>.
<unk>.
Each new test panel.
Pumping five new products to expand the test menu.
Panel solution.
And you see a clear <unk>.
Including.
<unk> potentially allow clinicians to achieve faster.
<unk>.
Sure.
Panel tier two Lyme panel.
Sir you are expanding the testing menu.
Annul Acinetobacter <unk>.
New instrument adopt.
Each new test panel.
<unk>.
Panel or test represents a differentiated solution.
During the call.
<unk> quickly identify harmful pathogens.
Paul will remaining menu expansion.
<unk> to achieve faster targeted therapy.
Program resistance.
We believe expanding the testing menu.
Panel molecular diagnostic.
Instrument adoption.
Test simultaneously detect 13 antibiotic resistance genes.
Option bio threat panel earlier in the call.
This infections.
<unk> comments.
<unk> three to five.
On the menu expansion.
We need to wait days.
Program.
As blood.
First due to resistance panel.
Culture, the teacher resistance panel, which is marketed and sold in Europe .
Panel designed to simultaneously detect 13 antibiotic resistance genes.
Mark anti microbial.
And as far as antibiotic resistant infection.
The sell.
<unk> three to five hours without the need to wait days.
One trial.
As with blood.
Nearly 90% of patient enrolled.
<unk> upon completion.
Mark as genes that may confer resistance to common anti microbial.
<unk> panel.
We'll start with Panama.
Panel the breakthrough device designation by the FDA.
We have advanced the U S clinical trial.
While completed nearly 90% of patient.
And it has received funding.
Moment submission to the FDA upon completion of the study.
Study.
But molecular diagnostic.
Since panel.
That's pretax.
Panel granted breakthrough device designation by the <unk>.
That is a major cause of Lyme disease in the United States.
Upon.
Panel is intended to test individuals' with signs and symptoms of Lyme disease.
Second the tissue line panel.
These just.
Panel from blood molecular diagnostic.
It will provide a significant event.
Test.
Over the currently recommended serological test.
<unk> disease in the United States.
<unk> antibodies.
States. So TCU Lyme panel is intended to test individuals' with signs and symptoms of Lyme disease.
2022 are two line panel was named a winner.
Xie Xie.
And the line innovation accelerator or Lyme X.
<unk> advantage.
<unk> a partnership between the U S Department of health and human services.
<unk> requires the presence of antibodies.
As Colin.
<unk> take the body four to six weeks to create.
<unk> chip for Lyme disease, the plans to award.
Two our tier two Lyme panel was named a winner.
Third future award.
<unk>, an accelerator or Lyme.
<unk> also received a patent from the U S patent and trademark office covering the tier two Lyme panel.
Xander Cowen Foundation.
FDA granted break.
Asian private partnership for Lyme disease.
Break in 2022.
Yes.
Are you, allowing for a prioritized review process.
Future Award.
The FDA.
Winners we previously.
Completing the early assay development for the acute Lyme panel.
It's covering.
Panel Stablish, a preliminary level of them.
The FDA granted breakthrough device designation for the teacher Lyme panel in 2022.
The commercialization of the <unk> line.
Laboratory developed test and subsequently commenced the U S clinical trial to support submission for FDA clearance.
Third we plan to add Candida auris to our T to Candida panel a direct from blood molecular diagnostic test that detects over 90% of Candida bloodstream infections.
Candida Auris is a multi drug resistant pathogen recognized by the CDC as a serious global health threat with a mentality right up to 60%.
According to CDC Candida Auris is difficult to identify with standard laboratory methods, which can lead to inappropriate treatment and some strange are resistant to all three available classes of Antifungals.
The CDC estimates the costs associated with U S fungal diseases in general are as high as $48 billion annually.
And is called on public health professionals to lower the burden of the disease by continuing to raise awareness of the lifesaving benefits or early detection and proper treatment.
We believe adding candida auris to our existing T to Candida panel will provide a significant time advantage compared to other blood culture based methods and strengthen the value proposition of the test panel, making it even more attractive to our hospital customers.
We've recently completed feasibility and early development of a diagnostic test to detect the candida auris pathogen and I am pleased to report that we also recently applied for FDA breakthrough device designation for this test.
Finally, we plan to add acinetobacter bahmani eight to the teacher bacteria panel a direct from blood molecular diagnostic test to expand the number of pathogens detected on their test panel.
Acinetobacter bahmani it can cause bloodstream infections, especially in critically ill patients, which can range from benign trends in bacteremia. The septic shock and is reported to have it crude ICU mortality rate of 34% to 43%.
Acinetobacter 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.
Acinetobacter can be resistant to many antibiotics, including car dependents, highlighting the importance of rapid detection and targeted antimicrobial treatment.
Looking ahead at longer term projects, we're focused on developing next generation sepsis products, including a new instrument and a comprehensive sepsis test panel.
The next generation instrument is designed to increase the number of Detections for a single whole blood sample.
The comprehensive sepsis test panel as a direct from blood test designed to detect greater than 95% of all bloodstream infections caused by bacterial and candida species and antibiotic resistance genes identified as threats by the CDC and our single test with a time to result of approximately three hours the <unk>.
X generation instrument and comprehensive sepsis test panel have been funded under our contract with BARDA.
We have been operating in option three of the BARDA contract. After successfully meeting all development milestones under the base phase option, one option to a an option to be.
We have filed a no cost extension with BARDA under option three to allow additional time to complete the U S clinical trial for the teacher resistance panel.
Further funding from BARDA may resume following the completion of option three and BARDA as potential exercise of option for of the contract.
Considering timing is still.
And funding are uncertain, we are not providing guidance on BARDA revenue at this time.
With that I'll now turn the call over to John Sprague to provide detailed update on our first quarter financial results and our financial outlook for 2023 John .
Thank you John .
Total revenue for the first quarter of 2023 was $2 $1 million, a 71% decrease compared to the prior year period, driven by a decline in COVID-19 test sales and reduced BARDA revenues.
Product revenue was $1 $7 million, a decrease of 57% compared to the prior year period, driven by a 98% decline in COVID-19 test sales, partially offset by increased sepsis test sales.
Research and contribution revenues were $400000 88 per cent decrease compared to the prior year period, driven by decreased BARDA contract activities.
Cost of product revenue for the first quarter of 2023 was $4 million, a 35% decrease compared to the prior year period, driven by decreased COVID-19 test sales.
Research and development expenses were $4 $5 million, a 33% decrease compared to the prior year period, driven by decreased BARDA contract activities.
Selling general and administrative expenses were $7 $3 million, a 21% decrease compared to the prior year period, driven by decreased medical affairs spending.
Net loss for the first quarter of 2023 was $18 million $1 32 per share compared to a net loss of $16 $5 million $4 86 per share in the prior year period.
Cash and cash equivalents were $10 $1 million at March 31, 2023.
In the first quarter of 2023, we raised $1 billion from ATM sales and $11 million from a public offering.
The 30% workforce reduction will decrease our burn we.
We remain in compliance with our loan covenants.
Reiterate guidance and expect 2023, total sepsis and related product revenue of $11 billion to $13 billion. Thank you and back to John's personal for closing remarks.
Thank you John before I conclude I'd like to address our NASDAQ listing compliance.
On November 22022, we received a letter from NASDAQ, indicating that for the last 30 consecutive business days the market value of listed securities had been below the $35 million minimum requirement for continued listing on the NASDAQ capital market under NASDAQ listing rule 5550 be too.
We provided an initial period of 180 calendar days or until May 22023 to regain compliance.
We expect to receive a letter from NASDAQ informing us that our shares have failed to comply with the mpls required for continued listing on the NASDAQ capital market and as a result, our shares are subject to delisting.
We will file an appeal and hearing rest with NASDAQ, which NASDAQ must grant.
Which will stay the de listing of our common stock from the NASDAQ capital market pending a NASDAQ listing qualifications hearing panels decision.
There can be no assurance that the panel will grant our request for continued listing.
However.
We intend to present, a plan to regain compliance to the panel that includes a discussion of the events that we believe will enable us to regain compliance in this timeframe.
As a reminder, this presents one of the greatest challenges to healthcare systems worldwide, claiming 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 in hospitals.
Claiming the lives of approximately 270000 Americans annually and another 80000 deaths in hospital and hospice each year.
And finally, the number one cause of 30 day hospital readmissions, requiring nearly 20% of sepsis survivors to be readmitted within 30 days and nearly 40% to be readmitted within 90 days.
We are making progress to enhance the current standard of care for patients at risk of sepsis with our advanced diagnostic technology, and we continue to be uniquely positioned as the only company with FDA cleared diagnostics to detect sepsis, causing pathogens directly from whole blood samples.
Our sepsis related product revenue continues to grow.
Including sepsis test panels and instruments, and we expect full year growth of 2023, 31% to 55%.
The demand for our products is strong and our sales funnel continues to grow domestically and internationally.
In an effort to maximize value.
We also have taken important steps to reduce our operating expenses, including the restructuring program that was implemented last week.
And we have engaged an advisory firm to explore all potential strategic alternatives.
Finally were making excellent progress advancing our product pipeline, including several near term programs focused on expanding test menu on the FDA cleared <unk> Dx instrument.
And then have the potential to add revenue as early as 2023.
I'd like to turn the call back over to the operator to open the line for questions operator.
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Information tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Your first question for today is coming from Kyle mixing at Canaccord.
Yeah, Hey, guys. Thanks for taking the questions good to talk to you.
I wanted to just kind of level set John on the timelines and priority is kind of going forward I'm, just I guess I'm curious how long, it's going to take to kind of grow into.
And to your kind of relatively refreshed commercial strategy, while you complete these.
I guess internal efforts to advance our pipeline assets right now so when you have the BARDA partnership as well and how much time does the idea that.
They do want to allocate towards these buckets and how do you think about you know priority is says you kind of try to limit cash burn as well. Thanks.
Thanks, Kyle so the way we've set the three corporate priorities. One obviously is focused on commercialization that team is in place. It's led by Brett given we have already evolved the sales team and the targets to focus on the.
The targets that we have been prioritizing which are sort of mid to.
Two critical access hospitals and supplemented that are enhanced it with a handful of large target accounts. So thats underway. The comp plan has already been revised and that's under specific leadership, the internal operating initiatives around manufacturing and cost controls and those obviously are led primarily on the cost side by John .
On spreads, but on the operating side by our new Vice President of operations that Steve Miller and the pipeline is led by Roger Smith. So we have different leadership, that's focused on driving these initiatives and on balance we can do that we're doing it with a much leaner organization. So there are certainly some things that we we have decided.
Not to do or where we've decided to slow down a bit to make sure that we.
Can extend our cash runway appropriately.
Okay. That's helpful. John and maybe I'm, just thinking about the 11% year over year growth in the core product revenue. It sounded you know that's not.
Overly impressive at first glance, but obviously you have this $230000 back order that came through in the second quarter, but that would've been in the first if that wasn't the first it sounds like it sounds like topline growth could have been 34%. So that's which are solid.
I guess going forward I mean does that kind.
Kind of 30 30 plus percent type growth for the next several quarters.
A good way to think about you guys, especially performance or I mean, I'd, just kind of that that was a kind.
Kind of an odd one off that back order situations. So how should we think about that variable kind of coming up on them and in the future.
Sure well when we set the guidance, we guided to sepsis and related product revenue of $11 billion to $13 billion.
We expected revenue to be weighted 40% first half.
60% second half and then if you split those hubs. We also believed that the first half would be 40% Q1 at 60% Q2 and same with the second half, 40% Q3, and 60% Q4, so at the midpoint of $12 million, we expected 16.
Were sent in Q1, 24% in Q2, and Q3 and 36% in Q4. So if you look at that 16% that we expected in Q1 of the 12 million mid point. It would have been 192 million. We finished at one seven we had 230 on back order. So we're exactly where we expected to be.
Okay, and then I guess I have a couple of questions off the kind of the guidance I guess two I mean, it's just first with like kind of a simple one.
On the placements of the five placements here definitely less than what we were modeling, but I mean, that's not it's not all bad if the installed base is increasing at a relatively muted rate. Because then you're saying maybe installed utilization kind of increasing faster, possibly so I mean, maybe just talk about what youre seeing what do you have the utilization trends as some of these customers.
Sure what their current platform or.
The transition to <unk> kind of days it takes place and customers get more comfortable using those write offs.
Sure. So first thing I would say the five instruments that were went to the international markets. Those are all sold so so that's good news because in the United States. We typically place those instruments. They go on our balance sheet. So they have a certain cost associated with them and it's in line with our strategy to drive sepsis test utilization so.
If you look at our installed base and our sales team. Our sales team has a certain amount of hours that they can be selling and customer accounts and we've shifted that strategically to make sure that their focus on driving increased utilization versus hunting for new accounts, obviously hunting for new accounts takes more time versus.
Cultivating and growing the business in our existing accounts. In addition, we have those 40 instruments that were initially sold for Covid testing that we have been working to convert to sepsis testing, it's been a slower process than we anticipated and carving out some of that sales force time, so they can focus on driving.
Those conversions are really important and quite frankly, it's a lot more efficient use of the sales time will get a much better return converting those 40 instruments that are already there then we would putting 40 new instruments into the market at this point in time.
Okay. That's helpful and I guess that it's actually not clear to me, there's $230000 back or was that mainly instrument or is that consumables because that could be a few instrument, possibly two I got stretch on nutrition.
It was all consumables and it was predominantly Q2, candida panels and a little bit to two bacteria.
Gotcha, Okay Hum recipe imaginations replacement for the rest of 233, the five and in <unk> I mean, I appreciate that the dynamics of that.
Buying in that order of selling replacement and things like that and then yeah.
It is quite the difference I guess, when Youre doing O U S versus U S. But anyway. The five is the lowest since the state of epidemic I think like early 'twenty one.
Well the rest of the 23 performance like what's in the guidance right here from <unk> is that going to be driven by instrument revenue of a panel revenue in your guys view and how does that split between U S. And then international look like and then maybe if you could just comment on the pipeline product revenue sounded like you said you would include some of that.
You know youre, assuming maybe some this year is that in this guidance to them because that's obviously it could be upside.
Thanks.
So there is not I will just take those in different order there is not new product revenue in the guidance. So for example.
Your line or to the extent you do bio threat gets through FDA and is commercialized. This year that is not in our guide. That's the first thing I would say as far as instruments are concerned the five instruments in the quarter. It's obviously less than we anticipated we didn't guide on instruments because of the emphasis and the focus on tests and test utilization.
Asian, but we anticipate instruments on a quarterly basis throughout the balance of the year being higher than five per quarter.
Gotcha, Okay, and then just if I.
I can just ask a final one I don't want to go too much time, but the maybe this 30% reduction I think that so that's incremental to the one that you did not too long ago, I think several quarters ago.
Which departments were affected by this more recent reduction last week.
All of them.
Yeah, Okay, all right sounds good thanks, Sean.
At the time.
I appreciate it.
Your next question is coming from Mark Massaro at Beech.
T I D.
Hey, guys. Thank you for taking the questions maybe just a follow up on that last one if all the departments were impacted.
Maybe could you comment John our bread on you know what the commercial organization looks like I know you are down to maybe three reps or so just what does that look like in terms of sales support medical science liaisons and others that can help drive the top line.
Sure Brett would you like to take that one.
Yeah sure can you hear me okay.
Yes, okay.
Okay, Great Hey, Mark Thanks for the question. So yeah, I mean as John mentioned, we there were some impacts in the recent moves that we've made I would say that across the board. If you look at it I think they were they were I'd say more minimized on the commercial side of things. If you just looked across the whole.
Organizationally and along with that you know Mark as I had talked about in prior.
You know periods, we've obviously endeavor to strengthen our medical affairs organization. We've done the same thing with marketing with a change in leadership those two organizations were not affected in this latest.
We did actually have a couple few positions here and there across sales and service, but I. You know look we we feel very strongly about the team we have in place and certainly we were very judicious about where those moves things from an already pointed out we feel very comfortable in being able to cover the accounts.
Space with the right amount of focus so I think we're we're oh.
These things are always are they they have impacts, but I sort of feel like on the commercial side of it and what we're doing that Oh, we largely minimize that.
Okay.
On the Ah congrats on the multiyear pricing agreements with two large health systems.
I'm curious if these are pricing agreements only or were there any purchases or any orders that went with these.
They are priced they are smart.
Go ahead Brett.
No I was just going to stay there their pricing agreements mark with.
With the with.
With the I'll call it sort of the strong a strong emphasis on tie in with the sort of key anchor institutions. If you will to help drive those in across the other organs across the other institutions that are part of those networks, but yeah, they're principally pricing right.
Right.
Yeah. Okay is it fair to say that you would expect a purchasing behavior or purchasing off of these pricing agreements Ah as the year progresses or the quarter.
Very much so that these are.
For licenses to hunt so to speak of I think much more not that we couldn't have in the past, but I think it was much stronger.
I'd call it sort of tie in connection with the mothership so to speak so I think yes, we.
We're very bullish about part D. Those within those those those set up.
Okay great.
So I guess you know you.
You guys have had a relatively low cash balance in the last couple of quarters you know.
I'm, a little bit surprised modestly surprised to see the the news on the strategic alternative pursued.
Maybe can you guys comment I think theres a statement in your Q that.
That you believe that you may not have enough cash.
Let me.
May not have enough cash to get through June 30th or July yet.
Yet to fund its operating plan through June 30th So I'm trying to figure out.
You know it has the cash burn spiked a little bit were there any one timers and then how much of how much of the decision to pursue strategic alternatives is around the uncertainty on the no cost extension from BARDA.
Guess, what I'm trying to figure out is if BARDA does extend you how do you expect that might impact.
You know you're funding situation in the next.
Several months.
So I'll, let John take the cash question, but I would just address the one about.
Pursuing potential strategic alternatives is completely unrelated to BARDA.
Yes.
Yeah.
Yeah, and just excuse me just to add to the cash burn.
Byrne has come down consistently mark as we've leveraged operations as well as its going to be.
Benefited by the reduction in force we.
We do have some seasonality in terms of our procurement purchases for pricing in our supply chain, you'll see that typically in Q1, and then it levels off during the rest of the year.
But overall going forward, we expect our burn to be significantly decreased as a result of all these efforts.
Okay.
Add to that Mark I'll, just add to that I mean, the going concern language in our 10-Q that we filed yesterday that's not the first time that we've had going concern language because as you noted our cash balance has been relatively lean on a quarterly quarterly basis over the last 12 months.
Yeah.
Okay, I guess I think you've touched on this but maybe I'll just make sure. We're all on the same page.
You know, saying youre not going to have enough cash to get through June and then reiterating the full year of sepsis guidance range of 11 to 13 after doing a.
Nearly 30% reduction in force I guess, what gives you confidence that you can still hit those numbers this year.
Well I think what that language says is that we're going to need to raise capital.
Yep understood.
Which is also clear.
Alright, well congrats on the the growth in the T. Two bacteria, especially in the U S. I guess, maybe my last question. John I guess can you explain what drove the triple digit year over year revenue growth in tea to bacteria.
These predominantly the four new hospitals that that came on or maybe can you just give us a sense for where that strength came from and what your.
Near term pipeline looks like to turn on the T. Two bacteria.
Sure I'll start and then Brett might want to add to it. It certainly was a factor that we had four accounts come online.
It's also a result of renewed or modified sales strategy to focus on driving broader adoption within these hospital accounts and the fact that keep in mind the TCU bacteria launch happened.
Shortly before the Covid pandemic. So I don't think that hospital accounts have had the full benefit of our sales and marketing team and our scientific Advisory Board members championing the value of T. Two bacteria and we're starting to see the impact of that so Bret do you want to add anything to that yeah, I think that's correct.
Probably you might recall two we we've been we've been seeing are a really solid lift in bacteria go in you know going back into last year. I mean, you know the second half of last year and I think we've we've continued to accelerate that and I'll add obviously, you know, adding though our medical affairs resources that we now have in place of having that integrated.
Along as I mentioned with the marketing group and with sales all working together I think it's Oh and it's it's it's really borne a lot of fruit and it's you know it's it's a combination we've certainly seen good solid lift within the legacy accounts both in the U S as well as internationally in the end and again as John mentioned, adding to that the new accounts.
That we brought on our wish list.
Certainly seeing and experiencing the impact of that so that's been it's been a great picture and I think that's certainly one we're bullish on going forward too.
Excellent thanks for the time guys.
Thank you Mark.
Your next question is coming from Ben Hayner at Alliance Global.
Good morning, gentlemen, thanks for taking the questions.
First off for me.
Congrats on completing the assay development for the tier two Lyme.
What's left to do there before launch and you know this is something that you're going to launch yourself or look to a partner and the present balance sheet situation make you lean more towards a partner if theres some upfront money potentially available just any help there would be helpful.
So thanks, Ben for the question, we have to do a little bit of work on the instrument side.
Make sure that we marry that with the assay development work that's gone on I think the really important point to underscore on the limit of detection that I described that preliminary L. O D to C. A few per ml, that's really critical because our focus from a marketing perspective is on early Lyme disease in that.
First 30 days because the alternative tests that are in the market are relying on antibodies that take time to develop. So this is in line with our strategy, where rapid detection is important for targeted treatment from a commercial perspective.
You covered both areas, which is are we going to do this ourselves or are we going to do it through a partner, we're exploring both opportunities and we haven't decided at this point.
Okay and are you having.
I presume, there's some discussions going on and you know certainly internally, but are you also discussing with potential partners in that.
Well it kind of engagements there.
Yes, we are.
Okay got it.
Stay tuned there and then on the 30% reduction in force.
Hmm.
What's the right way to think about that in terms of expenses I mean is that kind of a 30% reduction.
Our opex as well and then.
Will there be any sort of charge in the current quarter and what does that look like.
But theres no charge in the current quarter, John Sprague would you take the.
Forward looking opex, they've been some insight on that.
Yeah, I think it's fair to model somewhere between 20 and 30% Ben.
Is it is skewed based on the mix of employees that are that were impacted.
I think that that's a good way to view, our our burn improvement going forward.
Okay got it.
Lastly for me and I'll take the rest offline but.
The teacher assistance trial getting down to the short strokes here what.
It does.
That completing trigger any payment for BARDA or does that require a picking up options for to have.
I have some more cash come in the door.
So I'd say first thing we're super excited about both T. Two bio threat and teacher resistance remember we came into this year anticipating getting two products over the goal line submitted to the FDA that could potentially be revenue contributors this year.
And we have submitted T. Two bio threat to the FDA. So that 90 day clock is now ticking the FDA will respond to us sometime in mid August if not sooner and we're excited about that we're also excited about two two resistance. We're close to the goal line on completing the clinical trial work.
We're 90% at this point.
We are under a no cost extension so from a BARDA perspective, we don't anticipate additional funding for teacher resistance. Once we complete option three as I mentioned in my earlier prepared remarks that it would be a point, where BARDA may potentially trigger payment under option for and then there is also a contemplated option.
<unk> an option six those again, assuming BARDA funds them would be for the nexgen instrument and comprehensive sepsis panel.
Okay got it I appreciate the clarification there that's it for me gentlemen, thanks for thanks for taking the questions.
Thank you Dan appreciate it.
We have reached the end of our question and answer session and I will now turn the call over to John spares, though for closing remarks.
Thank you very much for joining our first quarter 2023 earnings call Hope you all have a great day.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.