Q4 2023 T2 Biosystems Inc Earnings Call
Good day, everyone and welcome to the T. Two biosystems preliminary fourth quarter and full year 2023 results conference call.
Operator: Good day, everyone, and welcome to the T2 Biosystems preliminary fourth quarter and full year 2023 results conference call. At this time, all participants have been placed in a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Tripp Taylor, and, best to relate, the floor is yours.
At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host trip Taylor Investor Relations, Sir the floor is yours.
Tripp Taylor: 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 T2 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 T2 Biosystems' annual report on Form 10-K, filed with the SEC on March 31, 2023, and other filings 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 Spurzle. John?
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 31 2010.
'twenty three and other filings the company makes with the SEC from time to time.
Company undertakes no obligation to publicly update or revise any forward looking statements, except as required by law.
With that I would like to turn the call over to chairman and CEO John <unk> John.
John Spurzle: Thank you all for joining us for our fourth quarter and full year 2023 results. I'll start by discussing our plan to comply with the NASDAQ listing requirements, including the proxy and press release that we are filing today. I will then review our 2023 progress and 2024 objectives across our three corporate before turning the call over to John Sprague, our Chief Financial Officer, who will review our financial results and provide our financial outlook for 2020. I will then provide closing remarks, and we'll open the call for questions and answers. As a reminder, we received a letter from NASDAQ informing us that we had failed to comply with the Market Value of Listed Securities, or MVLS, of at least $35 million for a period of 30 consecutive business days.
Thank you all for joining our fourth quarter and full year 2023 results call.
I'll start by discussing our plan to comply with the NASDAQ listing requirements.
<unk> the proxy and press release that we are filing today.
I will then review our 2023 progress 2024 objectives across our three corporate priorities before turning the call over to John Sprague, Our Chief Financial Officer.
We'll review our financial results and provide our financial outlook for 2024.
I will then provide closing remarks, and we'll open the call for questions and answers.
As a reminder for.
For 'twenty 2023, we received a letter from NASDAQ informing us that we had failed to comply with the market value of listed securities or M. D. O S. A at least $35 million for a period of 30 consecutive business days.
John Spurzle: Today, we participated in a meeting with the NASDAQ Listing Qualifications Hearing, and we presented a detailed plan to regain compliance with the $35 million MVLS requirement. We expect a response from NASDAQ in the coming weeks. Our NASDAQ compliance plan includes the following steps: Step one, which was previously approved by stockholders, included the conversion of 82,422 shares of Series B convertible preferred stock, held by our lender, CRG Servicing LLC, or CRG, into 824,220 shares of T2 Biosystems Commons. Step two, which is also occurring today, includes the filing of a preliminary proxy seeking approval at a special meeting of stockholders to We expect the issuance of common stock and the cancellation of this portion of the term loan to occur within 10 days of the meeting.
Today, we participated in a meeting with the NASDAQ listing qualifications hearing panel.
And we presented a detailed plan to regain compliance with the $35 million M. D O S requirement.
We expect a response from NASDAQ in the coming weeks.
Our NASDAQ compliance plan includes the following steps.
Which occurred today and which was previously approved by stockholders included the conversion of 82422 shares of series B convertible preferred stock.
By our lender Georgi servicing LLC or <unk>.
824220 shares.
To do biosystems common stock.
Step two which.
Which is also occurring today includes the filing of a preliminary proxy seeking approval at a special meeting of stockholders to be held on April 11, 2024 to allow <unk> to convert up to $15 million or nearly 37% of its term loan in <unk> biosystems common.
Stock.
We expect the issuance of common stock and the cancellation of this portion of the term loan to occur within 10 days of the meeting.
Additionally, while not part of our NASDAQ compliance plan, we have numerous business catalysts.
John Spurzle: Additionally, while not part of our NASDAQ compliance, we have numerous business catalysts that we will discuss shortly, which we believe can create value and increase the market value of our listed securities. We believe maintaining our NASDAQ listing is in the best interest of both the company and our stockholders. As it maintains liquidity for stockholders, helps attract and retain key employees, broadens our access to capital, and improves our position in the company for potential mergers and acquisitions. Another benefit of our plan is that we are reducing the company's debt burden and thus lowering future interest payment expenses.
We will discuss shortly which we believe can create value and increase the market value of our listed securities.
We believe maintaining our NASDAQ listing is in the best interest of both the company and our stockholders.
It maintains liquidity for stockholders helps.
Helps attract and retain key employees.
Broadens our access to capital.
And better position the company for potential mergers and acquisitions.
Another benefit of our plan is that we are reducing the company's debt burden and thus lowering future interest payment expenses.
Now I will shift gears to discuss our 2023 progress and our 2024 objectives across our three corporate priorities accelerating our sales enhancing our operations and advancing our pipeline.
John Spurzle: Now I'll shift gears to discuss our 2023 progress and our 2024 objectives across our three corporate parties, accelerating our sales, enhancing our operations, and advancing our pipeline, starting with our first corporate priority.
Starting with our first corporate priority accelerating our sales.
John Spurzle: Accelerating our sales. As a reminder, Sepsis continues to exact an enormous human and economic cost. Sepsis is the number one cause of death in U.S. hospitals, claiming the lives of 270,000 Americans annually, plus another 80,000 who die in hospice each year. Substance is the number one cost of U.S. hospitalization, costing our healthcare system an estimated $62 billion annually.
As a reminder.
This continues to exact an enormous human and economic toll.
Such as the number one cause of death in U S hospitals, claiming the lives of 270000 Americans annually plus.
Plus another 80000 guy in hospice each year.
Substance is the number one cost of U S hospitalization.
Our health care system, and estimated $62 billion annually.
John Spurzle: Finally, sepsis is the number one cause of 30-day U.S. hospital readmission, causing 19% of sepsis survivors to be re-hospitalized within 30 days and 40% within 90 days. Rapid detection of sepsis-causing pathogens is critical, as mortality risk increases by up to 8% for each hour of delayed targeted antimicrobial treatment. T2 Biosystems has the only FDA-cleared product able to detect sepsis-causing pathogens directly from blood in three to five hours, without the need to wait days for a positive blood test. In 2023, the T2 Biosystems team achieved full year total revenue of $7.3 million, including product revenue of $6.7 million, and we achieved record T2 bacteria panel sales in the U.S. We added 26 T2DX In the fourth quarter of 2023, we achieved sepsis and related product revenue of $1.7 million, representing sequential growth of 13% compared to the third quarter, and sales accelerated each month of the quarter. I am looking forward to 2024.
Finally substance is the number one cause of 30 day U S Hospital readmission.
19% of substance survivors can be re hospitalized within 30 days and 40% within 90 days.
Rapid detection of sepsis, causing pathogens is critical.
As mortality risk increases by up to 8% for each hour of delayed targeted anti microbial treatment.
<unk> Biosystems has the only FDA cleared products able to detect sepsis, causing pathogens directly from blood.
In three to five hours without the need to wait days for a positive blood culture.
In 2023, the <unk> Biosystems team achieved full year total revenue of $7 $3 million.
Including product revenue of $6 $7 million.
And we achieved record Q2 bacteria panel sales in the U S market.
We added 26 key to Dx instruments to our growing installed base, which is now approaching 200 instruments globally.
Including 19 in international markets and seven in the U S market.
In the fourth quarter of 2023, we achieved sepsis and related product revenue of $1.7 million.
Representing sequential growth of 13% compared to the third quarter.
And sales accelerated each month of the quarter.
Looking forward to 2024.
John Spurzle: Our objectives include continuing to expand our installed base of T2DX instruments in the U.S. and international markets and increasing test panel revenue. We plan to increase test panel revenue by selling more products to existing customers, by selling to new customers in existing geographies, and by expanding our international distribution network into new geographies. During 2024, we expect to commercialize four new tests, Tests, which run on the FDA-cleared T2DX instrument, including the expanded T2 bacteria panel, the T2 Candida panel with a pediatric indication, the T2 BioThreat Panel, and the We believe each of these products represents an opportunity to increase test utilization among existing customers and to attract new customers.
Our objectives include continuing to expand our installed base of <unk> Dx instruments.
In the U S and international markets and increasing touch panel revenue.
We plan to increase test panel revenue by selling more products to existing customers.
By selling to new customers in existing geographies and by expanding our international distribution network into new countries.
During 2024, we expect to commercialize four new test panels for tests, which run on the F. D. A clear T to Dx instruments.
Including the expanded T. Two bacteria panel the.
The teacher Candida panel with a pediatric indication.
The teacher bio threat panel.
And the tier two Lyme panel.
We believe each of these products represent an opportunity increased test utilization among existing customers and to attract new customers.
The expanded G tube bacteria panel to include the detection of Acinetobacter Bombardier was developed using direct feedback from customers on which bacteria species are most important to identify.
John Spurzle: The expanded T2 bacteria panel, to include the detection of Acinetobacter baumannii, was developed using direct feedback from customers on which bacteria species are most important to identify. We expect this latest FDA clearance to drive increased adoption of our platform, as the expanded test panel now covers nearly 75% of all sepsis-causing bacterial pathogens commonly found in bloodstream infections. Rapid detection of these pathogens is essential to getting infected patients on the appropriate antimicrobial therapy and improving clinical outcomes.
We expect this latest FDA clearance to drive increased adoption of our platform.
As the expanded test panel now covers nearly 75% of all sepsis, causing bacterial pathogens, commonly found in bloodstream infections.
Rapid detection of these pathogens is essential to getting infected patients on the appropriate antimicrobial therapy and improving clinical outcomes.
John Spurzle: We're expecting a positive outcome on our FDA submission to expand the use of the T2 Candida panel to include pediatric testing. We believe an expanded claim for our FDA-cleared T2 Candida panel to include pediatric testing will drive increased adoption of our platelet-rich, as it opens a new pediatric market segment and will allow clinicians to improve outcomes and reduce costs by achieving faster targeted antifungal treatment for their pediatric patients. Following the FDA clearance of the T2 Biothreat Panel in September 2023, which we developed in collaboration with the U.S. government, or BARDA, we shifted our focus to commercialization, given the ongoing wars in Europe and the Middle East. The global population is at an increased risk of exposure to bioterrorism.
We're expecting a positive outcome on our FDA submission to expand the use of the T. Two candida panel to include pediatric testing.
We believe an expanded claim for our FDA cleared Cheechoo Candida panel to include pediatric testing will drive increased adoption of our platform.
As it opens a new pediatric market segment and will allow clinicians to improve outcomes and reduce cost by achieving faster targeted antifungal treatment for their pediatric patients.
Following the FDA clearance of the T. Two bio threat panel in September 2023, which we developed in collaboration with the U S government for BARDA.
We shifted our focus to commercialization.
Giving the ongoing wars in Europe, and the Middle East.
The global population.
Increased risk of exposure to bioterrorism.
John Spurzle: The T2 Biothreat Panel provides unique biothreat targets, and we believe it offers unparalleled sensitivity and specificity, creating multiple opportunities for sale, including to the U.S. Laboratory Response Network, the U.S. Strategic National Stockpile, state or public health labs, other government agencies, and an International Government Ally.
The teacher bio threat panel provides unique bio threat targets.
And we believe it offers unparalleled sensitivity and specificity.
Creating multiple opportunities for sales.
Including to the U S Laboratory response network.
The U S strategic national stockpile.
Date or public health labs other government agencies.
International government allies.
Given our advances with the tier two Lyme panel, we intend to commercialize a laboratory developed test version of the tier two Lyme panel in 2024.
John Spurzle: Given our advances with the T2 Lyme panel, we intend to commercialize a laboratory-developed test version of the T2 Lyme panel in 2024. Accordingly, we're exploring potential partners to capitalize on what we believe is a significant opportunity. Internationally, we sell our products through a network of distributors.
Accordingly, we're exploring potential partners to capitalize on what we believe is a significant opportunity.
Internationally, we sell our products through a network of distributors.
During 2024, we expect continued expansion of our international distribution network.
John Spurzle: During 2024, we expect continued expansion of our international distribution network. Today, we announced that we have expanded distribution into the Netherlands, Belgium, and Vietnam, and we've re-entered the market in Switzerland through one of our existing distributors. As part of our commercial growth strategy, we've prioritized expanding our clinical evidence. We recently announced our collaboration with the NIH-funded Antibacterial Resistance Leadership Group, or ARLG, to evaluate T2 Biosystems direct from blood diagnostic technology for the detection of ventilator-assisted pneumonia. Specifically, the FDA-cleared T2 bacteria panel and the T2 resistance panel will be evaluated for the ability to detect infections in the blood currently missed by conventional methods in a prospective observational diagnostic feasibility study. This study will aid in exploring whether combined diagnostic testing can provide more targeted antimicrobial therapy. Strengthen stewardship and improve outcomes.
Today, we announced that we've expanded distribution into the Netherlands, Belgium, and Vietnam, and we re entered the market in Switzerland.
Of our existing distributors.
As part of our commercial growth strategy, we prioritize expanding our clinical evidence.
We recently announced our collaboration with the NIH funded antibacterial resistance leadership group or a R. L. G to evaluate T. Two bio systems direct from blood diagnostic technology.
But the detention of ventilator assisted pneumonia.
Specifically, the FDA cleared T. Two bacteria panel and the teacher resistance panel will be evaluated for the ability to detect infections in the blood currently missed by conventional methods in a prospective observational diagnostic feasibility study.
The study will aid in exploring whether combine diagnostic testing and provide more targeted antimicrobial therapy strengthened stewardship and improve outcomes and we look forward to providing an update once available.
John Spurzle: And we look forward to providing an update once available. At ID Week 2023 in October, our team presented new clinical data, Urging early detection data for the T2 resistance path.
At week 2023 in October our team presented new clinical data.
Urging early detection data for the teacher resistance panel.
John Spurzle: The poster included data showing rapid detection of antibiotic-resistant genes direct from whole blood samples by T2 Magnetic Resonance Technology, or T2MR. Oral and poster presentations demonstrating speed, accuracy, and clinical benefits of the T2DX instrument and T2 Biosystems sepsis panels were also presented by customers. Real-world performance of our products was highlighted as part of sepsis patient management. We continue to appreciate our customer support, aiding in increasing awareness of both the clinical and economic benefits of our technology. Moving to our second corporate priority, enhancing our operations. Throughout 2023, we made significant progress enhancing our operations. This included strengthening our operations leadership. Mitigating Raw Material Issues
The poster included data showing rapid detection of antibiotic resistance genes direct from whole blood samples by T. Two magnetic resonance technology forty-two Omar.
Oral and poster presentations, demonstrating speed accuracy and clinical benefits of the teacher Dx instrument and TCU Biosystems sepsis panels were also presented by customers.
Real World performance.
Some of our products were highlighted as part of sepsis patient management.
We continue to appreciate our customer support aiding in increasing awareness of both the clinical and economic benefits of our technology.
Moving to our second corporate priority enhancing our operations.
Throughout 2023, we made significant progress enhancing our operations.
This included strengthening our operations leadership.
Mitigating raw material issues.
John Spurzle: Improving Manufacturing Processes, and Addressing the Sepsis Test Panel Background. I'm pleased to announce that we cleared all back orders for the T2 Bacteria panel and the T2 Candida panel in December 2023, and we cleared all back orders for the teacher resistance panel in January 2020. During 2023, we made material headcount and operating expense reductions. We strengthened our balance sheet by reducing our debt by $10 million, or approximately 20%, extended the interest-only period and maturity date of our Tong Loan to December 31st, 2025, and permanently reduced the Minimum Cash Covenant from $5 million to $500,000. I am looking forward to 2024.
Improving manufacturing processes and addressing the sepsis test panel back order.
I'm pleased to announce that we cleared all back orders for the tier two bacteria panel and the teacher Candida panel in December 2023.
We cleared all back orders for the teacher resistance panel in January 2024.
During 2023, we made material head count and operating expense reductions.
We strengthened our balance sheet by reducing our debt by $10 million or approximately 20%.
Extended the interest only period and maturity date of our term loan due December 31, 2025 and.
And permanently reduced our minimum cash covenant from $5 million and $500000.
Looking forward to 2024.
Earlier.
Strengthen our balance sheet following stockholder approval.
John Spurzle: Strengthen our balance sheet following stockholder approval, version of $15 million, or nearly 37% of our term loan with CRG into T2 Biosystems equity. In addition, we expect to reduce inventory levels to positively impact our balance sheet, reduce scrap to increase efficiency and improve product gross margins, continue to improve on-time delivery of our T2DX instruments and sepsis test panels, and complete the Oracle ERP system cutaway. Moving to our third prior.
Version of $15 million or nearly 37% of our term loan with <unk> into <unk> biosystems equity.
In addition, we expect to reduce inventory levels to positively impact our balance sheet.
Reduced scrap to increase efficiency and improve product gross margins.
Continuing to improve on time delivery of our teacher Dx instruments, and sepsis test panels and complete the Oracle ERP system cutover.
Moving to our third priority.
Our pipeline.
Reminder, we are applying our proprietary direct from blood technology to three areas.
John Spurzle: We are applying our proprietary direct-from-blood technology to three areas, sepsis, bioterrorism, and Lyme disease, which all share a critical need for rapid pathogen detection and targeted antimicrobial treatment. We've made significant advances across our new product pipeline, focused on expanding the test menu on the FDA-cleared T2DX instrument. During 2023, we filed three FDA submissions, and we have already received two FDA 510K clearances. First, we submitted a 510k pre-market notification to the FDA for the T2 biothreat, and we announced receipt of FDA 510K clearance in September 2023. As a reminder, the T2 BioThreat Panel is a direct-from-blood molecular diagnostic test that runs on the FDA-cleared T2DX instrument and simultaneously detects six biothreats, including organisms that cause anthrax, tularemia, blanders, melloidosis, and Hi. These pathogens have been identified as threats by the CDC and, if not treated promptly, can have mortality rates of 40% to 90%.
Sepsis, bioterrorism and Lyme disease.
Which all share a critical need for rapid pathogen detection and targeted anti microbial treatment.
We've made significant advancements across our new product pipeline.
Which is focused on expanding the test menu on the FDA cleared <unk> Dx instrument.
During 2023, we filed three FDA submissions and we have already received two FDA five 10-K clearances.
First we submitted a five 10-K premarket notification to the FDA for the tissue bio threat panel.
And we announced receipt of F. D. A five 10-K clearance in September 2023.
As a reminder, the tissue bio threat panel is a direct from blood molecular diagnostic test that runs on the FDA cleared teacher Dx instrument and simultaneously detect six bio threat pathogens.
<unk> organisms that clause anthrax tularemia landers melioidosis.
Typhus.
These pathogens, but identified as threats by the CDC.
And if not treated promptly can have mortality rates of 40% to 90%.
John Spurzle: Our clinical evaluation of the T2 Biothreat Panel demonstrated positive percent agreement, or sensitivity, of 100% for all targets except Francisella tularensis, which was 94.3%, and demonstrated negative percent agreement or specificity of 100% for all six targets. Second, we submitted a 510k pre-market notification to the FDA for the expanded T2 bacteria, to include detection of Acinetobacter baumannii, and we announced receipt of FDA 510K clearance earlier this week. As a reminder, the T2 Bacteria Panel is the only FDA-cleared diagnostic test able to detect sepsis-causing bacterial pathogens directly from blood in just three to five hours, without the need to wait days for a positive blood test. The expanded T2 Bacteria Panel now covers approximately 75% of all sepsis-causing bacterial pathogens commonly found in bloodstream infections, including E. fae Pneumonia, Asmita Bacter Valmaniae, Pseudomonas aeruginosa, and E. coli.
Our clinical evaluation of the tissue bio threat panel demonstrated positive percent agreement or sensitivity a 100%.
All targets, except for instance, sell it to Laurentus, which was 94, 3%.
And demonstrated negative percent agreement or specificity for all six targets of 100%.
Second we submitted a 500 10-K premarket notification to the FDA for the expanded T. Two bacteria panel to.
To include detection of Acinetobacter Bahmani yet.
And we announced receipt of FDA five 10-K clearance earlier this week.
As a reminder, the T. Two bacteria panel is the only FDA cleared diagnostic test able to detect sepsis, causing bacterial pathogens directly from blood in just three to five hours without the need to wait days for a positive blood culture.
The expanded teacher bacteria panel now covers approximately 75% of all sepsis, causing bacterial pathogens, commonly found in bloodstream infections, including E basically staph aureus.
Oh pneumonia acinetobacter ball Mommy Pseudomonas aeruginosa E coli.
In a large study of nosocomial bloodstream infections Acinetobacter Bahmani. It was the 10th most common pathogen and has a crude I see your mortality rate of 34% to 43%.
John Spurzle: In a large study of nosocomial bloodstream infections, Asinidabacter baumannii was the 10th most common pathogen and had a crude ICU mortality rate of 34% to 43%. Due to the emergence of pan-antibiotic-resistant Asmitabacter baumannii, the World Health Organization has identified it as the most critically important bacteria that requires improved prevention and therapeutic approaches. Third, in December 2023, we submitted a 510k pre-market notification to the FDA to expand the use of the FDA-cleared T2 Candida panel to include pediatric patients. As a reminder, the T2 Candida panel is the only FDA-cleared diagnostic test able to detect sepsis-causing candida pathogens directly from blood in just three to five hours, again, without the need to wait days for a positive blood According to the US Centers for Disease Control and Prevention, or CDC, up to 95% of all invasive candida infections in the US are caused by the five candida species detected by the T2 test, including Candida albicans, Candida tropicalis, Candida parapsilosis, Candida cruciae, and Candida glabrata.
Due to the emergence of pan antibiotic resistant acinetobacter <unk>.
The World Health organization has identified.
So about <unk> as the most critically important bacteria that requires improved prevention and therapeutic approaches.
Acinetobacter resistance, many antibiotics, including carbo panels highlights the importance of rapid detection and targeted anti microbial treatments.
Third in December 2023, we submitted a five 10-K premarket notification to the FDA to expand the use of the FDA cleared tissue Candida panel to include pediatric testing.
As a reminder, the teacher Candida panel is the only FDA cleared diagnostic test able to detect sepsis, causing candidate pathogens directly from blood in just three to five hours again without the need to wait days for a positive blood culture.
According to the U S centers for disease control and prevention or CDC up to 95% of all invasive candida infections in the U S are caused by the five candida species detected by the teacher Candida panel, including Canada Albicans, Canada dropped the callous.
Canada, perhaps slows us down to the crew CA in Canada, what brought it.
John Spurzle: Canada's species are a major contributor to morbidity and mortality in hospitalized children, and present a significant burden to the U.S. healthcare system with a mean increased hospital length of stay of 21 days and an estimated $92,000 in excess hospital costs for children with invasive candidiasis. A 2022 Journal of Clinical Mycology study conducted at Bambino-Gesù Hospital in Rome, Italy found that pediatric patients suspected of fungal bloodstream infections that were tested with the T2 Candida panel received species identification results 121.8 hours faster than blood culture. Looking forward to 2024, we expect continued advances in our pipeline. Following my comments on pediatric testing, as part of our commitment to expand the clinical utility of our sepsis test panel, We expect to receive FDA 510K clearance to expand the use of the T2 Candida Panel to include pediatric patients. We also plan to submit a 510K pre-market notification to the FDA to expand the use of the FDA-cleared T2 bacteria panel. Pediatric Test
Candida species are a major contributor to morbidity and mortality in hospitalized children.
And present, a significant burden to the U S health care system with a mean increased hospital length of stay of 21 days and an estimated $92000 in excess hospital costs for children with invasive candidiasis.
A 2022 journal of clinical Mycology study conducted at Bambino Gay Xu Hospital in Rome, Italy found.
<unk> found that pediatric patients suspected of bundled bloodstream infections that were tested with the teacher Candida panel.
Named species identification results 121.8 hours faster than compared to blood culture.
Looking forward to 2024, we expect continued advances in our pipeline.
Following my comments on pediatric testing as part of our commitment to expand the clinical utility of our sepsis test panels. We expect to received FDA five 10-K clearance to expand the use of the TT Candida panel to include pediatric testing.
We also plan to submit a five 10-K premarket notification to the FDA to expand the use of the FDA cleared teach you bacteria panel.
Pediatric testing.
In addition, we have three new tests in our pipeline, including the U S. T. Two resistance panel.
John Spurzle: In addition, we have three new tests in our pipeline, including the U.S. T2 Resistance Panel, the T2 Lyme Panel, and the Candida Auris Test. Each of these new test panels, or tests, is designed to run on our FDA-cleared T2DX instrument, and each of these three has previously received FDA breakthrough device designations, which will provide for a prioritized FDA review upon submission. The T2 Resistance Panel is a direct-from-blood molecular diagnostic test designed to simultaneously detect 13 antibiotic-resistant genes known to cause antibiotic-resistant infections in just three to five hours without the need to wait days for a positive blood test. We believe the T2 Resistance Panel will be a very important addition to our expanding test, as we expect it to be the first direct-from-blood or culture-independent antimicrobial resistance test that can drive increased adoption of our platform.
The tier two Lyme panel and the Candida Auris test.
Each of these new test panels or test is designed to run on our FDA cleared teach you Dx instrument.
Each of these three previously received FDA breakthrough device designation.
Which will provide for a prioritized FDA review upon submission.
The teacher resistance panel as a direct from blood molecular diagnostic test designed to simultaneously detect 13 antibiotic resistance genes known to cause antibiotic resistant infections in just three to five hours without the need to wait days for a positive blood culture.
We believe the teacher resistance panel will be a very important addition to our expanding test menu as well.
We expect it to be the first direct from blood or culture independent antimicrobial resistance test.
That can drive increased adoption of our platform.
We have completed all external testing in the teacher resistance panel U S. Clinical trial, we're now focused on internal stability and shelf life testing and we accept expect to submit a 500 10-K premarket notification to the FDA in the third quarter of 2024.
John Spurzle: We have completed all external testing in the Teacher Resistance Panel U.S. Clinical Trial. We are now focused on internal stability and shelf-life testing, and we expect to submit a 510K premarket notification to the FDA in the third quarter of 2024. The T2 Lyme panel is a direct-from-blood molecular diagnostic test designed to detect Borrelia burgdorferi, a bacteria that's the major cause of Lyme disease in the U.S. There is a critical need for new Lyme disease diagnosis, with an estimated 476,000 cases annually. Lyme disease is by far the most common vector-borne disease in America. The Current Diagnostic Process, a two-tiered antibody test algorithm originally developed in 1994 for disease surveillance, is a standalone diagnostic test, relies on the presence of antibodies, and can only be used accurately four to six weeks after infection. Early diagnosis of Lyme disease is critical.
The teacher line panel is a direct from blood molecular diagnostic test designed to detect borrelia bergdorf right. The bacteria. That's the major cause of Lyme disease in the U S.
There's a critical need for new Lyme disease diagnostics with.
With an estimated 476000 cases annually.
Lyme disease is by far the leading vector borne disease in America.
The current diagnostic process, a two tiered antibody test algorithm originally developed in 1994 for disease surveillance.
As a standalone diagnostic test relies on the presence of antibodies.
Only be used to accurately four to six weeks after infection.
Early diagnosis of Lyme disease is critical.
John Spurzle: If left untreated, this debilitating disease can spread throughout the body and become much harder to eradicate. As we announced earlier this month, we've been selected as a Phase 2 winner in the LIMEx Diagnostic Prize and will receive $265,000 to help accelerate the development of our T2 LIME panel for the early detection of Lyme disease. We appreciate the support from the Lime Innovation Accelerator, or LimeX, U.S. Department of Health and Human Services, and the Stephen and Alexandra Cohen Foundation.
If left untreated.
<unk> disease can spread throughout the body and become much harder to eradicate.
As we announced earlier this month, we've been selected as a phase two winter in the Y X diagnostic price.
We've seen $265000 to help accelerate the development of our T. Two line panel for the early detection of Lyme disease.
We appreciate the support from align innovation accelerator or Linux.
From the U S Department of health and human services, and the Stephen and Alexandra Cowen Foundation.
As I mentioned earlier really dancing the T. Two line panel toward commercialization and plan. The initial U S launch as a laboratory developed test or L. D T.
John Spurzle: As I mentioned earlier, we're advancing the T2 line panel toward commercialization and plan the initial U.S. launch as a Laboratory Developed Test, or LDT. We're in discussions with potential laboratory partners, and we're exploring the potential to obtain non-diluted grant-based funding to advance the T2 Lyme. The Candida auris test is a direct-from-blood molecular diagnostic test designed to detect Candida auris species in just three to five hours without the need to wait days for a positive blood test. We believe the addition of a Candida AORUS test will strengthen our value proposition and lead to increased adoption of our platform.
We're in discussion with potential laboratory partners and we're exploring the potential to obtain non dilutive grant based funding to advance the teacher alarm panel.
The Candida Auris test is.
A direct from blood molecular diagnostic test designed to detect candida auris species in just three to five hours without the need to wait days for a positive blood culture.
We believe the addition of the Candida Auris test will strengthen our value proposition and lead to increased adoption of our platform.
John Sprague: Canadaurus is a multidrug-resistant fungal pathogen that has a mortality rate of up to 60% and is recognized as a serious global health threat by the CDC and World Health Organization. CDC estimates the costs associated with U.S. fungal diseases are as high as $48 billion annually and has called on public health professionals to help lower the burden of fungal diseases by continuing to raise awareness of the life-saving benefits of early detection and proper treatment. With that, I'll now turn the call over to John Sprague to provide a detailed update on our fourth quarter financial results and our financial outlook for 2024. Thank you, John. Fourth quarter 2023 revenues were $1.7 million, all from product sales, a 69% decrease compared to the prior year period, driven by lower international T2DX instrument sales and lower sepsis test sales due to production back orders. We resolved the production back orders in January 2024. Cash and cash equivalents were $15.7 million as of December 31, 2023.
Canada or is a multi drug resistant fungal pathogen that has a mortality rate up to 60% and is recognized as a serious global health threat by the CDC and World Health organization.
D C estimates the costs associated with U S. Fungal diseases are as high as $48 billion annually and has called on public health professionals to help lower the burden of bundled disease by continuing to raise awareness of the lifesaving benefits of early detection and proper treatment.
With that I'll now turn the call over to John Sprague to provide a detailed update of our fourth quarter financial results and our financial outlook for 2024.
Thank you John.
Fourth quarter 2023 revenues were $1 $7 million all from product sales is 69% decrease compared to the prior year period, driven by lower International T to Dx instrument sales and lower sepsis test sales due to production back orders, we resolved the production back orders in January of 2002.
94.
Cash and cash equivalents were $15 7 million as of December 31, 2023 in the fourth quarter of 2023, we raised $800000 in net proceeds from ATM sales.
John Spurzle: In the fourth quarter of 2023, we raised $800,000 in net proceeds from ATM sales. In October 2023, CRG extended the term loan agreement interest-only period and maturity date to December 2025 and reduced the minimum cash covenant from $5 million to $500,000. We expect total sepsis and related product revenues to grow between 49% and 64% to $10 to $11 million in 2024 from 2023. And this target excludes any potential sales from our T2 BioThreat or T2 Lyme panels. Thank you, and back to John Spurzel for closing remarks. We made considerable progress across the business during 2023, increasing our global installed base of P2DX instruments and generating record sales of our T2 bacteria path. Strengthening our Supply Chain and Manufacturing Operations, advancing multiple new product development initiatives, and strengthening our balance sheet.
In October 2023, C or G extended the term loan agreement interest only period and maturity date to December of 2025, and reduced the minimum cash covenant from $5 million to $500000.
We expect total sepsis and related product revenues to grow between 49% and 64% to $10 million to $11 million in 2024 over 2023, and this target excludes any potential sales from our D to bio threat or tier two lyme panels.
Thank you and back to John's Perusal for closing remarks.
We made considerable progress across the business during 2023.
Increasing our global installed base of tea to Dx instruments.
Generating record sales of our T. Two bacteria panel.
Strengthening our supply chain and manufacturing operations.
Advancing multiple new product development initiatives and strengthening our balance sheet.
John Spurzle: We're very excited by the progress on our new product pipeline, which includes recent FDA 510K clearances for the expanded T2 bacteria panel to include the detection of Acinetobacter baumannii, the T2 Biothreat Panel, and the pending FDA clearance to expand the T2 Candidate Panel to include pediatrics. Additionally, three of our products in our pipeline have received FDA breakthrough device designation, including the U.S. T2 Resistance Panel, the T2 Lyme Panel, and the Candida Oris.
We're very excited by the progress on our new product pipeline, which includes recent FDA five 10-K clearances for the expanded teacher bacteria panel to include the detection of Acinetobacter Beaumont area.
The teacher bio threat panel and the pending FDA clearance to expand the teach you Candida panel to include pediatric testing.
Additionally, three of our products and our pipeline I've received FDA breakthrough device designation, including the U S teacher resistance panel the tier two Lyme panel and the Candida Auris test.
John Spurzle: We believe we are very well positioned heading into 2024, and we remain focused on accelerating our sales, enhancing our operations, and advancing our. With that, I'd like to turn the call back to the operator to open the line for questions. Operator?
We believe we are very well positioned heading into 2024, and we remain focused on accelerating our sales enhancing our operations and advancing our pipeline.
With that I'd like to turn the call back to the operator to open the line for questions operator.
Operator: Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while asking your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality.
Certainly everyone. At this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time, we do ask them about posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Ben Hainer: Once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Ben Hainer from Alliance Global. Your line is live. Good afternoon, gentlemen. Thanks for taking the questions. Can you hear me OK?
Once again, if you have any questions or comments. Please press star one on your phone.
Your first question is coming from Ben Hayner from Alliance Global Your line is live.
Yeah.
Good afternoon, gentlemen, thanks for taking the questions can you hear me okay.
John Spurzle: You can, Ben. Loud and clear. Excellent. All right. First off, just on the backlog, you know, it sounds like most of it was cleared by the end of the year, but the T2 resistance didn't clear until January. You know, how much was the backlog at the end of the year and, you know, kind of how many months would that have represented in terms of T2 resistance? About $70,000 was the backlog on T2 resistance at the end of the year.
Canada.
Excellent.
Alright.
Just on the on the backlog and you know it sounds like most of it was cleared by the end of the year, but the teacher resistance unclear until January.
How much was the backlog at the end of the year and you don't care how much.
How many months would that have represented 720 resistance.
About $70000 was the backlog on teacher resistance at the end of the year as we mentioned the backlog on T. G Candida and TJ bacteria were zero and it remains that we have product on the shelf for all three of those test panels.
John Spurzle: As we mentioned, the backlog on T2 candida and T2 bacteria was zero, and it remains that. We have product on the shelf for all three of those tests, OK. So, don't expect any backlog issues, at least in the near term. We've put mitigations in place to protect that from happening, including people, resources, and processes. Okay, great. And then on T2 BioThreat, you know, that's been cleared for a little while now.
Okay.
Don't expect any backlog issues and at least in the near term.
We've put mitigation in place to protect that from happening, including people resources and processes.
Okay great.
And then on to do a bio threat that's been.
Been cleared for a little while now what.
John Spurzle: What kind of needs to tip before, you know, one of the organizations or entities that you mentioned might see sort of the first order? And once you sort of get the first order, do a lot of a lot of folks follow suit, or a lot of entities follow suit? What's the right way to think about that?
What kind of needs to ship before you don't want them to organizations are or it just seems like you've mentioned.
And you might see sort of the the first order and once you sort of get the first order didn't do a lot of a lot of focus follow suit for a lot of it does follow suit, what's the right way to think about that.
John Spurzle: Well, the first thing I would say is just to remind everyone what I said in the scripted remarks, and that is that we have a really unique product here. We have unique targets on the panel, three of which appear on no one else's panel, and we believe we have unique performance. The specificity is 100%.
Well first thing I would say is just to remind everyone. What I said on the scripted remarks and that is that we haven't really unique product here. We have unique targets on the panel of three of which appear on no one else's panel.
And we believe we have a unique performance the specificity is 100% I mean zero false positive across our clinical.
John Spurzle: That means zero false positives across our clinical evaluation, and the sensitivity was 100% on five of the six targets. So we have unique targets, and we believe we have unparalleled performance. So we believe that makes us very well suited to supply this product to U.S. and other governments, state, and local laboratories. As far as how long it takes to sell the product, Ben, we're in the process of that right now, and we look forward to reporting sales results on the T2 Bioprep panel in the future. And how soon might that future be?
The valuation.
The sensitivity was 100% on five of the six targets. So we have unique targets and we believe we have unparalleled performance. So we believe that makes us very well suited to supply this product to U S and other governments state and local labs as far as how long it takes to sell the product then we're in the process of that right now.
And we look forward to reporting shows results from the teacher box up to handle the future.
And how soon might that future being.
We're working on it as we speak.
John Spurzle: working on it as we speak. Okay, got it. And then, you know, just on the international distribution, you mentioned a handful of countries in the press release this afternoon and kind of how many sepsis cases each country has on an annual basis. Is there kind of a, you know, back of the envelope calculation on if there's X number of sepsis cases in a given geography in a year?
Okay.
Okay got it and then just on the international.
Yes.
Distribution.
You mentioned a handful of countries and are in the press release. This afternoon, and then kind of how many number of sepsis cases.
Each pass on an annual basis is there a kind of a.
Back of the envelope calculation on if there are X number oh.
So some cases in a given geography in a year.
John Spurzle: That should necessitate Y systems. They think about when, you know, when signing up. Sure, Ben. So I think, as we've discussed in the past, Tepsis doesn't discriminate.
And that shouldn't necessitate why systems.
The Dutch.
Distributors think about when.
You know when when signing up.
Sure Ben So I think as we've discussed in the past sepsis doesn't discriminate big hospitals small hospital.
John Spurzle: Big hospital, small hospital, well-developed country, less developed country. It can impact patients in every single corner of the world, and it can impact hospitals in every corner of the world as well. So we continue to believe that every hospital in the world should have one of our instruments and should be using our test panels. That remains our goal. From a distribution standpoint, our go-to-market strategy in the US is to sell directly. We are exploring the potential to accelerate our commercialization through partnerships, and our go-to-market strategy internationally is to partner with, generally, a single exclusive distributor in a country or in multiple countries. We have some distributors that cover more than one country.
Well developed country less developed country. It can empower patients and every single corner of the world and it can impact hospitals in every corner of the world as well. So we continue to believe that every hospital in the world should have one of our instruments and should be using our touch panels that remains our goal from a distribution standpoint are.
Go to market strategy in the U S is to sell directly we are exploring the potential to accelerate our commercialization through partnerships.
And our go to market strategy internationally is to partner with <unk>.
Generally a single exclusive distributor in a country or in multiple countries. We have some distributors that cover more than one country.
John Spurzle: And our goal is to continue to support them. Generally speaking, our international distributors sell many more products. Many of them sell complementary products or adjacent products in the sepsis space. So they know where to go.
And our goal is to continue to support them generally speaking our international distributors. So many more products many of them, so complementary products or adjacent products in the subsea space. So they know where to go they've already established key opinion leaders. They have key reference accounts. So they don't start from.
John Spurzle: They've already established key opinion leaders. They have key reference accounts. So they don't start from a standing start. They start from a jog, if you will.
A standing start.
We start from a job if you will and we train them on our products and we support them from a medical affairs and a service perspective. So we're excited about the poor countries.
John Spurzle: And we train them on our products, and we support them from a medical affairs and service perspective. So we're excited about the four countries that we have just announced expansion into, and we look forward to many more throughout 2024 and beyond.
We have just announced expansion into and we look forward to many more throughout 2024 and beyond.
John Spurzle: Okay, got it. On Acetobacter baumannii. You know, congrats on getting that FDA clearance. What is the right way to think about it from a hospital standpoint as to what that could do to utilization or adoption? You know, do you have potential accounts out there that are, you know, kind of just waiting on this addition to the panel? Or how big a deal is it being that it's probably only a handful of percent of the bloodstream infections cases that are out there?
Got it and then.
Acetobacter Bahmani.
Ah.
Congrats on getting that FDA clearance what is the right way to think about it from a hospital standpoint on what that could do to utilization or adoption of it.
You have potential accounts out there are the you know.
Kind of just waiting on this addition to the panel or how big a deal is it being that it's probably only a handful of.
Percent, though the the bloodstream infections sepsis cases, the alright.
The important aspect of Acinetobacter Beaumont is it's one of the escape pathogens. It's it's the eight and escape and the escape pathogens are the ones that typically do not respond to broad spectrum empiric therapy. So if a patient is on broad spectrum antimicrobial and they have one of the.
John Spurzle: The important aspect of acetobacter baumannii is that it's one of the escape pathogens. You know, it's the A in escape. And the escape pathogens are the ones that typically do not respond to broad-spectrum empiric therapy. So if a patient is on broad-spectrum antimicrobials and they have one of the tests that's on our T2 bacteria panel, they're generally not going to respond, and that's why we focused on those.
Tests are one of the targets that's on our teacher bacteria panel generally not going to respond and that's why we focused on those.
John Spurzle: Athmetobacter itself adds about 5% more coverage to our test panel. So with six targets now, we're covering 75% of the bacterial organisms that are typically found in a bloodstream infection. And we think that that's sufficient for now. The additional 25%, they're well covered by broad-spectrum antibiotics, and the blood culture companies can have those.
Tobacco itself adds about 5% more coverage on our touch panel so with six targets now we're covering 75% of the <unk>.
<unk> organisms that are typically found in a blood stream infection, and we think that that's sufficient for now the additional 25%. They are well covered by broad spectrum antibiotics and blood culture company is going to have those will take the other six.
John Spurzle: We'll take the other six. Okay, that's helpful. And then lastly, for me, just kind of a housekeeping question.
Okay.
That's helpful. And then lastly for me just kind of a housekeeping question.
For for shares outstanding post the conversion of the existing share preferred shares that they had where does the share count stand you know what.
John Spurzle: For shares outstanding post the CRG conversion of the existing preferred shares that they had, where does the share count stand, you know, today or post conversion? John Sprague, do you want to take that? Yeah, so then we ended the year, well, go back to Q3, because that's what we disclosed. And the share count hasn't changed much since then. But we had that Q3.
Today or for post conversion.
John Sprague do you want to take that.
Yeah. So Ben we ended the year well go back to Q3, because that's what we've disclosed in the share count.
Has it changed much since then.
But we had that the Q3.
John Sprague: Circle with me for a second. Sure. It should be about 4.85.
Circle with me for a second.
Sure.
It should be about $4 $85 million.
Okay.
John Sprague: Okay, so it's basically just a small amount of ATM sales, and the conversion is the way to go about it. Yep, correct. Okay, great. Well, that's all I have for now, gentlemen. Thanks for taking the questions. Thank you, Ben. Thank you. Thank you. There are no further questions in the queue. I'll now hand the conference back to John Spurzle, Chairman and CEO, for closing remarks. Please go ahead. I'd like to thank you all for joining our Q4 2023 and full year 2023 earnings call. We look forward to updating you as we progress through 2024. Thank you, and have a good night. Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Basically.
On the ATM sales and the conversion is the the way to think about it yes.
Yes, correct.
Okay great.
Well, that's all I have for now Jonathan Thanks for taking the questions.
Thank you Ben.
Thank you.
Thank you there are no further questions in the queue I'll now hand, the conference back to John's Perusal, Chairman and CEO for closing remarks. Please go ahead.
I'd like to thank you all for joining our Q4 2023 and full year 2023 earnings call. We look forward to updating you as we progress through 2024, Thank you and have a good night.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.