Q1 2024 T2 Biosystems Inc Earnings Call & Business Update
Operator: Greetings. Welcome to the T2 Biosystems, Inc. First Quarter 2024 Earnings Conference. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Philip Taylor. You may begin.
Greetings and welcome to the <unk> Biosystems, Inc. First quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Now I'll turn the conference over to your host Philip Taylor you may begin.
Philip 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. Such 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 April 1, 2024, 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 Sperzel. John?
Philip 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 <unk> biosystems future financial and operating results and plans for developing and marketing new products.
Philip Taylor: 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 April one 2020.
Philip Taylor: Four and other filings the company makes with the SEC from time to time.
Philip Taylor: The company undertakes no obligation to publicly update or revise any forward looking statements, except as required by law with that I would like to turn the call over to chairman and CEO John <unk> John.
John J. Sperzel: Thank you for joining our first quarter 2024 results call. I will start with an update on our NASDAQ compliance plan and our capital plan and then discuss our first quarter progress across our three corporate priorities before turning the call over to John Sprague, our Chief Financial Officer, who will review our financial results and outlook for 2024. I will then provide closing remarks and open the call for questions and answers on March 12th, 2024.
John: Thank you for joining our first quarter 2024 results call.
John: I will start with an update on our NASDAQ compliance plan and our capital plans and then discuss our first quarter progress across our three corporate priorities before turning the call over to John Sprague, Our Chief Financial Officer.
John M. Sprague: We'll review our financial results and outlook for 2024.
John M. Sprague: I will then provide closing remarks and open the call for questions and answers.
John M. Sprague: On March 12 2024.
John J. Sperzel: We announced that the NASDAQ hearings panel had granted our request for continued listing on the NASDAQ stock market, subject to the company demonstrating compliance with NASDAQ's market value of listed securities or market value requirements, as set forth in NASDAQ Listing Rule 5550B2, the rule, on or before May 20th, 2024. The rule requires that a company maintain a closing market value of at least $35 million for a minimum of 10 consecutive business days.
John M. Sprague: We announced that the NASDAQ hearings panel and granted our request for continued listing on the NASDAQ stock market.
John M. Sprague: Subject to the company demonstrating compliance with nasdaq's market value of listed securities our market value requirement is.
John M. Sprague: As set forth in NASDAQ listing rule $55 50, b to the rule.
John M. Sprague: On or before May 22024.
John M. Sprague: The rule requires that the company maintain a closing market value of at least $35 million for a minimum of 10 consecutive business days.
John J. Sperzel: As I outlined in our recent investor update call, an important part of our NASDAQ compliance plan included the conversion of debt to equity. In April 2024, the company converted $15 million of its term loan with entities affiliated with CRG Servicing LLC, or CRG, our lender, into T2 Biosystems equity. Today, the company announced the conversion of an additional $15 million of its term loan with CRG for a total debt-to-equity conversion of $30 million in the past 30 days, which we believe significantly improves the probability of meeting the NASDAQ listing requirement. In the past 12 months, we have reduced our debt and associated quarterly interest payments by approximately 80%.
John M. Sprague: As I outlined in our recent Investor update call an important part of our NASDAQ compliance plan included the conversion of debt to equity.
John M. Sprague: In April 2024, the company converted $15 million of its term loan with entities affiliated with CRD servicing LLC or CRB, our lender <unk> biosystems equity.
John M. Sprague: Today, the company announced the conversion of an additional $15 million of its term loan with Georgi for a total debt to equity conversion of $30 million in the past 30 days.
Which we believe significantly improves the probability of meeting the NASDAQ listing requirements.
John M. Sprague: In the past 12 months, we have reduced our debt.
John M. Sprague: And associated quarterly interest payments by approximately 80%.
John J. Sperzel: Earlier today, we filed an S-1 registration statement that included our plan to raise up to $10 million in capital through the issuance of new security. We believe the company is at an inflection point, transforming from an internally focused research and development company to an externally focused commercial company. This capital is necessary for general working capital and to help us achieve our goals, including increasing our sepsis product sales, launching the T2 Lime Panel, and advancing the T2 Resistance Panel. Simultaneously, we intend to reduce operating costs, reduce inventory, and increase production volume.
John M. Sprague: Earlier today, we filed an S. One registration statement that included our plan to raise up to $10 million in capital through the issuance of new securities.
John M. Sprague: We believe the company is at an inflection point.
John M. Sprague: <unk>, forming from an internally focused research and development company to an externally focused commercial company.
And this capital is necessary for general working capital.
John M. Sprague: And to help us achieve our goals.
John M. Sprague: Increasing our subsys product sales.
John M. Sprague: Launching the tier two Lyme panel and advancing the teacher resistance panel.
John M. Sprague: Simultaneously, we intend to reduce operating costs reduce inventory and increased production volumes.
John J. Sperzel: Today, we are applying our technology to sepsis, Lyme disease, and bioterrorism. These three areas share the need for rapid pathogen detection and faster targeted antimicrobial treatment. Our core opportunity, sepsis, continues to impose an enormous human and economic toll. Sepsis is the leading cause of death in U.S. hospitals, claiming the lives of 270,000 Americans annually, with an additional 80,000 who die in hospice each year. Tepsis also represents the leading expense of U.S. hospitalization, costing our health care system an estimated $62 billion.
John M. Sprague: Today, we are applying our technology to sepsis line disease and bioterrorism.
John M. Sprague: These three areas share the need for rapid pathogen detection and faster targeted anti microbial treatments.
John M. Sprague: Our core opportunity sepsis continues to impose an enormous human and economic tool.
John M. Sprague: Jeff just as the leading cause of death in U S Hospital.
John M. Sprague: Aiming the lives of 270000 Americans annually.
John M. Sprague: With an additional 80000, who die in hospice each year.
John M. Sprague: Texas also represents the leading expense of U S hospitalization.
Our health care system, and estimated $62 billion annually.
John J. Sperzel: Lastly, sepsis is the leading cause of 30-day U.S. hospital readmission, with 19% of sepsis survivors re-hospitalized within 30 days and 40% within 90 days. Rapid detection of sepsis-causing pathogens is crucial, as mortality risk increases by up to 8% for each hour of delayed targeted antimicrobial treatment. As we've discussed, T2 Biosystems has developed and commercialized the only FDA cleared products able to detect sepsis-causing pathogens directly from blood in just three to five hours without the need to wait days for a positive blood sample. Competitive products, like those marketed by BioMérieux, BD, and Accelerate, first require a positive blood sample, which can take days.
John M. Sprague: Lastly step this is the leading cause of 30 day U S Hospital readmission.
John M. Sprague: With 19% upsets the survivors re hospitalized within 30 days and 40% within 90 days.
John J. Sperzel: So when those competitors claim that they can produce species identification or antibiotic susceptibility, or AST, results in one to three hours, it is after they wait one to five days for a positive blood culture, and when blood culture produces false negative results due to lack of sensitivity or inhibition due to prior antimicrobial treatment, those culture-dependent technologies provide little to no value. A meta-analysis of 14 controlled studies published in a peer-reviewed medical journal compared T2 Biosystems' sepsis test to blood culture-based diagnosis and showed that T2 Biosystems products provided faster time to detection, for example, species identification 77 hours faster.
John M. Sprague: Rapid detection of sepsis, causing pathogens is crucial.
John M. Sprague: As mortality risk increases by up to 8% for each hour of delayed targeted anti microbial treatment.
John M. Sprague: As we've discussed <unk> biosystems has developed and commercialized the only FDA cleared products able to detect sepsis, causing pathogens directly from blood in just three to five hours without the need to wait days for a positive blood culture.
John M. Sprague: Competitive products like those marketed by BMS U B D and accelerate further.
John M. Sprague: First require a positive blood culture, which can take days.
John M. Sprague: So when those competitors claim that they can produce species identification or antibiotics susceptibility or S. T results in one to three hours.
John M. Sprague: It is after they wait one to five days for a positive blood culture.
John M. Sprague: And when blood culture produces false negative results.
Due to lack of sensitivity or inhibition due to prior antimicrobial treatment those culture dependent technologies provide little to no value.
John M. Sprague: A meta analysis of 14 controlled studies published in a peer reviewed medical journal compared teach you biosystems sepsis test to blood culture based diagnostics.
John M. Sprague: And showed that you do biosystems products provided faster time to detection for.
John M. Sprague: For example species identification 77 hours faster.
John J. Sperzel: Faster Targeted Therapy. For example, patients testing positive with T2 Biosystems receive targeted antimicrobial therapy 42 hours faster. And finally, shorter length of stay. For example, five fewer days in the ICU and 4.8 fewer days in the hospital.
John M. Sprague: Faster targeted therapy.
John M. Sprague: For example, patients testing positive with <unk> biosystems, receiving targeted anti microbial therapy 42 hours faster.
John M. Sprague: And finally reduce length of stay for example, five fewer days in the ICU and 4.8 fewer days in the hospital.
John J. Sperzel: Thanks to the strong efforts of our team during the first quarter of 2024, we made considerable progress across our three corporate priorities, accelerating our sales, enhancing our operations, and advancing our pipeline. Starting with our first corporate priority, accelerating our sales, in the first quarter of 2024, our team achieved sepsis product revenue of $2.1 million, representing growth of 25% compared to the prior year period. Our team also achieved sequential quarterly growth of 23% compared to the fourth quarter of 2023.
John M. Sprague: Thanks to strong efforts of our team during the first quarter of 'twenty 'twenty four we made considerable progress across our three corporate priorities accelerating our sales enhancing our operations and advancing our pipeline.
John M. Sprague: Starting with our first corporate priority accelerating our sales.
In the first quarter of 'twenty 'twenty four our team achieved sepsis product revenue of $2 $1 million Rep.
John M. Sprague: Representing growth of 25% compared to the prior year period.
John M. Sprague: Our team also achieved sequential quarterly growth of 23% compared to the fourth quarter of 2023.
John J. Sperzel: The growth in the first quarter was led by sales of our T2 Candida panel globally and sales of our T2 Resistance panel internationally. We added eight T2DX instrument contracts, continuing to grow our installed base with five sold in international markets and three in the US market. We're seeing strong momentum in the U.S. market, including four hospital go lives during the first quarter from prior account closings.
John M. Sprague: The growth in the first quarter was led by sales of our T to Candida panel globally and sales of our teacher resistance panel internationally.
We added eight key to Dx instrument contracts continuing to grow our installed base with five sold in international markets and three in the U S market.
John M. Sprague: We're seeing strong momentum in the U S market, including four hospital go lives during the first quarter from prior account closes.
John J. Sperzel: We're focused on growing revenue in our current U.S. hospital account through improved focus and coordination between medical affairs, scales, and field applications. The strong global performance of T2 bacteria panel during the quarter is also encouraged. As we gained FDA clearance in February this year to expand the T2 Bacteria panel to include the detection of Acinetobacter baumannii, we expect even further utilization of the T2 Bacteria panel moving forward. During the quarter, we further expanded our international distribution network in the Middle East by signing a new distribution agreement in Qatar, which includes the T2DX instrument, the T2 Bacteria panel, the T2 Candida panel, and the T Qatar's National Sepsis Program is a collaboration between the Ministry of Public Health and leading medical centers that guides the national sepsis prevention efforts in Medina.
We're focused on growing revenue in our current U S Hospital accounts through improved focus and coordination between medical affairs sales and field applications.
John M. Sprague: The strong global performance of T. Two bacteria panel during the quarter is also encouraging.
John M. Sprague: As we gained FDA clearance in February of.
John M. Sprague: This year to expand teacher bacteria panel to include the detection of Acinetobacter Bahmani eye.
John M. Sprague: We expect even further utilization of the teacher bacterial panel moving forward.
John J. Sperzel: Qatar's strong focus on sepsis care is demonstrated by sepsis mortality rates among the best in the world and a regular National Sepsis Symposium. The introduction of the T2DX instrument and sepsis test panels into Qatar will allow rapid detection of sepsis-causing pathogens and antibiotic resistance genes in hours instead of days, enabling clinicians to achieve faster targeted therapy. We expect to continue to expand into new geographies and broaden our international distribution network throughout 2024. We have also extended our existing multi-year capital equipment supplier agreement with Vizion, the largest group purchasing organization in the United States, until March 31, 2025.
John M. Sprague: During the quarter, we further expanded our international distribution network in the middle East by signing a new distribution agreement in Qatar.
John M. Sprague: Which includes the teacher Dx instrument the teacher bacteria panel that teach you Candida panel and the teacher resistance panel.
John M. Sprague: Guitarist National Sepsis program is a collaboration between the Ministry of public health and leading medical centers that guides the national Subsys prevention efforts.
John M. Sprague: Qatar is a strong focus on subsys care as demonstrated by sepsis mortality rates among the best in the world.
John M. Sprague: And a regular national sepsis symposium.
John M. Sprague: The introduction of the teacher Dx instrument and sepsis test panels into Qatar will allow rapid detection of sepsis, causing pathogens and antibiotic resistance genes in hours instead of days.
Enabling clinicians to achieve faster targeted therapy.
John M. Sprague: We expect to continue to expand into new geographies and broaden our international distribution network throughout 2024.
John M. Sprague: We also extended our existing multiyear capital equipment supplier agreement with Vizio.
John M. Sprague: The largest group purchasing organization in the United States.
John M. Sprague: Till March 31 2025.
John J. Sperzel: This extension ensures that members continue to have access to the benefit from contracted pricing for our T2DX instrument, T2 Bacteria panel, and T2 Candida panel. This move emphasizes the demand among hospitals for more efficient, rapid diagnostics that enable faster targeted therapy. It also highlights the significant value proposition our products offer to patients suspected of sepsis. Generating compelling clinical data that demonstrates the value of our technology is a core part of our strategy.
John M. Sprague: This extension ensures that members continue to have access to the benefit from contracted pricing for our T. G. Dx instrument teaching bacteria panel and to do Candida panel.
John M. Sprague: This move emphasizes the demand among hospitals for more efficient rapid diagnostics that enable faster targeted therapy.
John M. Sprague: It also highlights the significant value proposition our products offer to patients suspected of sepsis.
John M. Sprague: Generating compelling clinical data that demonstrates the value of our technology as a core part of our strategy.
John J. Sperzel: During the first quarter of 2024, we announced the publication of the strongest evidence to date in support of the T2 Resistance Panel in a real-world hospital setting. Published in the Journal of Clinical Microbiology, the study highlights high accuracy for the T2 Resistance Panel, faster detection time, and the impact of faster test results on clinical innovations based on T2 sepsis test results. This compelling data not only strengthens our position in CE mark adopting countries where the T2 resistance panel is already available but also sets the stage for our entry into the U.S. market.
John M. Sprague: During the first quarter of 2024, we announced the publication of the strongest evidence to date in support of the teacher resistance panel in a real World Hospital setting.
John M. Sprague: Published in the journal of clinical Microbiology study highlights high accuracy for the teacher resistance panel faster detection times.
John M. Sprague: And the impact of faster test results on clinical innovations based on T to sepsis test results.
John M. Sprague: This compelling data not only strengthens our position in CE, Mark adopting countries, where the teacher resistance panel is already available.
John M. Sprague: But also sets the stage for our entry into the U S market.
John J. Sperzel: New data was also presented at ECMID 2024 showing improved patient outcomes with the T2 Canada panel compared to blood culture-based diagnosis, and the ability of the T2 Bacteria Panel to detect persistent Staph aureus infections better than blood clots. Finally, to advance our commercial opportunities for the T2 Biothreat Panel, we've entered into an agreement with Dr. Robin Robinson to serve as a strategic advisor. Dr. Robinson has significant experience and expertise leading U.S. government entities in the areas of medical countermeasures and biodefense, including serving as Director of the Biomedical Advanced Research and Development Authority, or BARDA, and Deputy Assistant Secretary in the Office of the Assistant Secretary of Preparedness and Response, or ASPR, within the U.S. Department of Health and Human Services.
John M. Sprague: New data was also presented at mid 2024, showing improved patient outcomes with the two do Candida panel compared to blood culture based diagnostics.
John M. Sprague: And the ability for the T. Two bacteria panel to detect persistent staph aureus infections better than blood culture.
John J. Sperzel: We believe Dr. Robinson's vast network across multiple U.S. government agencies, including CDC, ASPR, BARDA, Department of Defense, and National Institutes of Health, coupled with his expertise in medical countermeasures and biodefense will be invaluable as we pursue government contracts to procure the T2 Biothreat Panel and protect our nation from the consequences of deliberate or accidental exposure to biothreats. It's important to note that T2 Biothreat Panel sails are not in our current 2024 revenue guidance. So potential sales during 2024 represent an upside to that guide. Moving to our second corporate priority, enhancing our operation.
Finally to advance our commercial opportunities for the teacher bio threat panel, we've entered into an agreement with Dr. Robin Robinson to serve as a strategic advisor.
Speaker Change: Dr. Robinson has significant experience and expertise leading U S government entities in the areas of medical countermeasures and Biodefense.
Speaker Change: Including serving as director of the Biomedical advanced research and development authority or BARDA.
Speaker Change: And the Deputy Assistant Secretary and the office of the assistant Secretary of preparedness and response or asper within the U S Department of health and human services.
Speaker Change: We believe Doctor Robinsons vast network across multiple U S government agencies, including CDC Asper BARDA Department of defense and National Institutes of health.
Speaker Change: Coupled with his expertise in medical countermeasures and Biodefense will be invaluable as we pursue government contracts to procure the teacher bio threat panel and protect our nation from the consequences of deliberate or accidental exposure to bio threats.
Speaker Change: Important to note that <unk> panel sales are not in our current 2020 for revenue guidance. So potential sales during 2024 represent upside to that guidance.
Speaker Change: Moving to our second corporate priority enhancing our operations were.
John J. Sperzel: We're committed to improving the profitability of the business. This requires continued product sales growth, reduced operating costs, and improved costs, Product Revenue, all of which we are a priority. We're pleased to have eliminated product backorders, and we've been working to reduce inventory levels as an operational priority. We're driving improvements in manufacturing efficiency as we scale production, and we're working to improve product gross margin. From an operating expense perspective, we will continue to balance investing appropriately in commercial and development resources to support future growth while being prudent with expenses to preserve capital.
We're committed to improving the profitability of the business. This requires continued product sales growth.
Speaker Change: <unk> operating costs and improved cost to product revenue all of which we are prioritizing.
Speaker Change: We're pleased to have eliminated the product back order and.
Speaker Change: We've been working to reduce inventory levels as an operational priority.
Speaker Change: We're driving improvements in manufacturing efficiency as we scale production and we're working to improve product gross margins.
Speaker Change: From an operating expense perspective, we will continue to balance investing appropriately in commercial and development resources to support future growth, while being prudent with expenses to preserve cash.
John J. Sperzel: Moving to our third priority, advancing our pipeline, we have three tests in our pipeline, including the U.S. T2 Resistance Panel, the T2 Lime Panel, and the Candida Auris, each of which has received breakthrough device designation from the U.S. Food and Drug Administration. These three tests, or test panels, share a critical requirement for rapid pathogen detection and targeted antimicrobial treatment. The T2 Resistance Panel is a direct-from-blood molecular diagnostic test that runs on the FDA-cleared T2DX instrument and simultaneously detects 13 antibiotic-resistant genes in just three to five hours, without the need to wait days for positive blood samples. We believe the T2 Resistance Panel will be a significant catalyst to drive broader adoption of our T2DX instrument and our T2 Bacteria Panel.
Speaker Change: Moving to our third priority advancing our pipeline.
Speaker Change: We have three tests in our pipeline, including the U S. T. Two resistance panel the tier two Lyme panel and the Candida Auris test.
Speaker Change: Each of which has received breakthrough device designation from the U S food and drug administration.
Speaker Change: These three tests, where test panels share a critical requirement for rapid pathogen detection and targeted antimicrobial treatment.
Speaker Change: The teacher resistance panel is a direct from blood and molecular diagnostic tests that runs on the FDA cleared teacher Dx instrument.
Speaker Change: Simultaneously detects 13 antibiotic resistance genes in just three to five hours without the need to wait days for a positive blood culture.
Speaker Change: We believe the teacher resistance panel will be a significant catalyst to drive broader adoption of our teaching Dx instrument.
Speaker Change: And our Q2 bacteria panel.
John J. Sperzel: As I mentioned earlier, in March, we issued a press release to announce the results of a new study that was published in the Journal of Clinical Microbiology, highlighting the performance and clinical benefits of the T2 resistance band. The prospective study included 59 patients at two sites and intended to determine the clinical sensitivity, time to detection, and clinical impact of the teaching resistance panel compared to blood culture and conventional microbiology methods. Highlights included high accuracy.
Speaker Change: As I mentioned earlier in March we issued a press release to announce the results of a new study that was published in the journal of clinical microbiology, highlighting the performance and clinical benefits of the teacher resistance panel.
John J. Sperzel: The teacher resistance panel demonstrated clinical sensitivity of 94.7% and specificity adjudicated of 97.4%. This is consistent with the clinical performance of our two FDA-cleared sepsis test panels, the T2 Bacteria Panel and the T2 Candida Panel, which have rapid turnaround. The TG resistance panel results were available on average in 4.4 hours, compared to 58.3 hours with blood culture-based methods. The T2 resistance panel provided a 92% improvement in time to result compared to blood culture-based diagnosis. That is 4.4 hours versus 2.2 days, and finally, clinical impact. There were 49 clinical interventions in 24 of the 59 patients, resulting in 17 antibiotic escalation and 32 discontinuations of unnecessary antibiotics.
Speaker Change: The prospective study included 59 patients at two sites and.
John J. Sperzel: The use of the T2 resistance panel led to a change in antibiotic therapy for 41% of the patients in this study, as those patients were on the wrong or unnecessary antibiotic. These results demonstrated the strongest clinical impact of the T2 resistance panel to date in a real world hospital setting. We believe this performance data demonstrates the enormous potential of this unique and highly differentiated product to reduce cost, improve patient outcomes, and reduce the threat of antibiotic resistance. We expect this to be a catalyst for greater adoption of the teacher resistance panels in countries where we currently market them under the CE mark.
Speaker Change: And intended to determine the clinical sensitivity time to detection and clinical impact of the teacher resistance panel compared to blood culture and conventional microbiology methods hi.
Speaker Change: Highlights included high accuracy.
The teacher resistance panel demonstrated clinical sensitivity of 94, 7%.
Speaker Change: Specificity adjudicated of 97, 4%.
Speaker Change: This is consistent with the clinical performance of our two FDA cleared sepsis test panels, the teacher bacterial panel and the teacher Candida panel.
Speaker Change: Rapid turnaround time.
Speaker Change: Teachey resistance panel results were available on average and 4.4 hours compared to $58 three hours with blood culture based methods.
Speaker Change: The teacher resistance panel provided a 92% improvement in time to result, compared to blood culture based diagnostics that is 4.4 hours versus 2.2 days.
Speaker Change: And finally clinical impact.
Speaker Change: We're 49 clinical interventions in 24 of the 59 patients, resulting in 17 antibiotic escalations and 30 to discontinuation of unnecessary antibiotics.
The use of the teacher resistance panel led to a change in antibiotic therapy for <unk>.
Speaker Change: 41% of the patients in this study as those patients were on the wrong or unnecessary antibiotics.
Speaker Change: These results demonstrated the strongest clinical impact of the teacher resistance panel to date in a real World Hospital setting.
Speaker Change: We believe this performance data demonstrates the enormous potential of this unique and highly differentiated product to reduce cost.
Speaker Change: Improved patient outcomes and reduce the threat of antibiotic resistance.
We expect this to be a catalyst for greater adoption of the teacher resistance panels in countries, where we currently market under CE Mark.
John J. Sperzel: We also believe the international experience with direct blood detection of antibiotic resistance genes is an important precursor to our launch in the U.S. market. As a reminder, we plan to submit a 510k pre-market notification to the U.S. Food and Drug Administration, or FDA, during the third quarter of 2024, and we've previously received breakthrough device designation from the FDA, which will provide for a prioritized FDA review upon submission. The T2 Lyme Panel is a direct-from-blood molecular diagnostic test designed for the early detection of Borrelia burgdorferi, the bacterium that causes Lyme disease in the United States.
Speaker Change: We also believe the international experience with direct from blood detection of antibiotic resistance genes is an important precursor to our launch in the U S market.
Speaker Change: As a reminder, we plan to submit a 500 10-K premarket notification to the U S food and drug administration or FDA during the third quarter of 2024, and we previously received breakthrough device designation from the FDA, which will provide.
Speaker Change: Provide for a prioritized FDA review upon submission.
Speaker Change: The T. Two line panel is a direct from blood and molecular diagnostic test designed for the early detection of Brallier Bergdorf Ray the bacterium that causes Lyme disease in the United States.
John J. Sperzel: Lyme disease is a leading vector-borne disease in America, with an estimated 3.4 million tests performed each year. The current diagnostic process is a two-tiered antibody test algorithm that relies on the presence of antibodies and can only be used accurately four to eight weeks after infection. If left untreated, the bacteria may spread throughout the body to become much harder to eradicate and treat effectively. Although early symptoms of Lyme disease are similar to the flu, Borrelia burgdorferi infections can lead to chronic debilitating diseases.
Speaker Change: Lyme disease is a leading vector borne disease in America with an estimated $3 4 million tests performed each year.
Current diagnostic process is a two tiered antibody test algorithm that relies on the presence of antibodies and can only be used accurately four to eight weeks after infection.
Speaker Change: If left untreated the bacteria may spread throughout the body become much harder to eradicate and treat effectively.
Speaker Change: Although early symptoms of Lyme disease are similar to the flu.
Speaker Change: Elliot Bergdorf infections can lead to chronic debilitating disease.
John J. Sperzel: To address this critical unmet need, we have developed an extremely sensitive diagnostic test for the detection of early Lyme disease, with an analytical sensitivity that is in line with our FDA-cleared sepsis test. We believe our test will detect Lyme disease within the first 30 days of infection, compared to antibody tests that can take 30 to 60 days after infection. As I've mentioned previously, we plan to launch our T2 line panel as a Laboratory Developed Test, or LDT, during the third quarter of 2024.
Speaker Change: To address this critical unmet need we have developed an extremely sensitive diagnostic test for the detection of early Lyme disease with an analytical sensitivity that is in line with our FDA cleared subsys deaths.
Speaker Change: We believe our test will detect lyme disease within the first 30 days of infection.
Speaker Change: Compared to antibody tests that can take 30 to 60 days after infection.
Speaker Change: As I've mentioned previously we plan to launch our teacher line panel as a laboratory developed test or L. D. T. During the third quarter of 2024.
John J. Sperzel: And we believe there are numerous potential advantages of launching this panel in this format, including faster time to market, higher test throughput, and a stronger product contribution margin. Importantly, in an LDT format, we can run the test without the T2DX instrument, which can provide the potential to process hundreds of Lyme tests per day. This is because the individual components of our underlying technology can be leveraged to process a higher volume of samples. Additionally, given the LDT format does not require the T2DX instrument or the costs associated with a cartridge, we expect to realize strong product contribution margins.
Speaker Change: And we believe there are numerous potential advantages of launching this panel in this format, including faster time to market.
Speaker Change: Higher test throughput and stronger product contribution margins.
Speaker Change: Importantly, and in L. D. T format, we can run the test without the T. Two dx instrument, which can provide the potential to process hundreds of Lyme tests per day.
Speaker Change: This is because the individual components of our underlying technology can be leveraged to process a higher volume of samples.
Speaker Change: Given the L. D. T format does not require the T. T. Dx instrument what are the costs associated with a cartridge.
Speaker Change: We expect to realize strong product contribution margins.
John J. Sperzel: Our market research confirms that reference laboratories often charge greater than $250 for two-tiered antibody Lyme tests and greater than $250 for PCR Lyme. Our ultimate objective is to provide early Lyme disease results to major U.S. reference laboratories. We believe we can utilize their strong retail networks to collect patient samples, which would allow us to provide testing to Lyme patients across the country. These samples would then be sent to our LDD partner to perform the T2 Lyme panel in their lab. As I mentioned with T2 BioThreat, it is important to note that T2 line panel sales are also not in our current 2024 revenue guidance, so any potential sales during 2024 represent upside to that guidance.
Speaker Change: Our market research confirms that reference laboratories, often charged greater than $250 for two tiered antibody Lyme tests and greater than $250 for PCR Lyme tests.
Speaker Change: Our ultimate objective is to provide early Lyme disease results, Jim Major U S. Reference laboratories, we believe we can utilize their strong retail networks to collect patient samples, which would allow us to provide testing to line patients across the country.
These samples would then be sent to our LDP partner to perform the tier two Lyme panel in their lab.
Speaker Change: As I mentioned with T. Two bio threat. It is important to note that tier two Lyme panel sales are also not in our current 2020 for revenue guidance. So any potential sales during 2024 represent upside to that guidance.
John J. Sperzel: Our candidate ORAS test is a direct from blood molecular diagnostic test designed to detect Canadaura species in just three to five hours without the need to wait days for a positive blood count. We believe the addition of a Candida auris test will strengthen the value proposition of our T2 Candida panel and lead to increased adoption. Candida auris is a multi-drug-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 the World Health Organization.
Speaker Change: Our Candida Auris test is a direct from blood molecular diagnostic test.
Speaker Change: Signed to detect Canada or a species in just three to five hours without the need to wait days for a positive blood culture.
Speaker Change: We believe the addition of a candidate Auris test will strengthen the value proposition of our teach you Candida panel and lead to increased adoption.
Candida Auris 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 the World Health organization.
John J. Sperzel: The 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. Candida 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.
Speaker Change: The CDC estimates the costs associated with U S. Fungal diseases are as high as $48 billion annually.
Speaker Change: And is called on public health professionals to help lower the burden of fungal disease by continuing to raise awareness of the life saving benefits of early detection and proper treatment.
Speaker Change: Candida species are a major contributor to morbidity and mortality in hospitalized children.
Speaker Change: And present, a significant burden to the U S health care system.
Speaker Change: With a mean increased hospital length of stay of 21 days and an estimated $92000 in excess hospital costs for children with invasive candidiasis.
John J. Sperzel: A 2022 Journal of Clinical Microbiology 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 compared to blood culture-based diagnosis. Finally, we're also pursuing claims for our FDA-cleared T2 Candida Panel and T2 Bacteria Panel to include pediatric testing. In December 2023, we submitted a 510k pre-market notification to the FDA to expand the use of the T2 Candida panel to include pediatric testing.
Speaker Change: A 2022 journal of clinical Microbiology study conducted at <unk> Xu Hospital in Rome, Italy.
That pediatric patients suspected of a bungled bloodstream infections that were tested with the T. Two candida panel.
Speaker Change: Received species identification results 121.8 hours faster.
Speaker Change: Compared to blood culture based diagnostics.
Speaker Change: Finally, we're also pursuing claims of our FDA cleared T to Candida panel and to do bacteria panel to include pediatric testing.
In December 2023, we submitted a five 10-K premarket notification to the FDA to expand the use of the T. Two candida panel to include pediatric testing.
John J. Sperzel: And we expect to submit a 510k pre-market notification to the FDA to expand the use of the T2 bacteria panel to include pediatric testing during 2020. With that, I'll now turn the call over to John Sprague to provide a detailed update on our first quarter financial results. John.
Speaker Change: And we expect to submit a five 10-K premarket notification to the FDA to expand the use of the T. Two bacteria panel to include pediatric testing during 2024.
John M. Sprague: First quarter 2024 revenues were $2.1 million, all from Sepsis product sales, a 25% increase compared to the prior year period and sequential growth of 23% compared to the fourth quarter of 2023 led by T2 Canada and T2 Resistance sales. First quarter 2024 cost of product revenue was $4.2 million, a 5% increase compared to the prior year period driven by sales volume. Research and development expenses were $3.7 million, a 17 percent decrease compared to the prior year period driven by decreased BARDA contract activities.
With that I'll now turn the call over to John Sprague to provide a detailed update on our first quarter financial results John.
John M. Sprague: Thank you John.
John M. Sprague: Selling, general, and administrative expenses were $6.7 million, an 8% decrease compared to the prior year period driven by decreased headcount. The first quarter 2024 net loss was $13.5 million, $2.66 per share, compared to a first quarter 2023 net loss of $18 million, $131.77 per share. Cash and cash equivalents were $6.2 million as of the end of the first quarter of 2024, and we raised $2.2 million in net proceeds from ATM sales across the border.
John M. Sprague: First quarter 2024 revenues were $2 $1 million all from sepsis product sales, a 25% increase compared to the prior year period and sequential growth of 23% compared to the fourth quarter of 2023 led by T to Canada and T. Two resistance sales.
John M. Sprague: First quarter 2020 for cost of product revenue was $4 $2 million, a 5% increase compared to the prior year period, driven by sales volume research and development expenses were $3 $7 million, a 17% decrease compared to the prior year period, driven by decreased BARDA contract activities.
John M. Sprague: Selling general and administrative expenses were $6 $7 million, an 8% decrease compared to the prior year period, driven by decreased head count.
John M. Sprague: The first quarter 2024, net loss was $13 $5 million $2 66 per share compared to a first quarter 2023, net loss of $18 million $131 77 per share.
John M. Sprague: Cash and cash equivalents were $6 $2 million as of the end of the first quarter 2024, and we raised $2 $2 million in net proceeds from ATM sales in the door.
John M. Sprague: The CRG debt conversion has reduced our debt and interest expense by almost 80% compared to a year ago. We continue to expect total sepsis product revenues to grow between 49 and 64% to $10 to $11 million in 2024 from $20 million in 2023. And this target excludes any potential sales from T2 BioThreat or T2 Lyme tests. Thank you, and back to John Sperzel for closing remarks.
John M. Sprague: The C or D bird.
John M. Sprague: European debt conversion has reduced our debt and interest expense by almost 80% compared to a year ago.
John M. Sprague: We continue to expect total sepsis 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 T. Two bio threat or tier two Lyme tests. Thank you and back to John's group closing remarks.
John J. Sperzel: It's an extremely exciting time for the company, as we've been taking measures to significantly reduce our debt, strengthen our balance sheet, and position the company for sustained growth. We're nearing four catalysts that we expect to be growth drivers. One, the T2 Line Panel, which we may launch sooner than anticipated via a partnership, and the T2 Biothreat Panel, which we are pursuing initial sales to government agencies and have engaged a U.S. government expert.
John M. Sprague: It's an extremely exciting time for the company as we've been taking measures to significantly reduce our debt.
John M. Sprague: Strengthen our balance sheet and position the company for sustained growth.
John M. Sprague: We're nearing four catalysts that we expect to be growth drivers one the TQ line panel.
John M. Sprague: Which we may launch sooner than anticipated via a partnership.
To the teacher bio dry panel, which we are pursuing initial sales to government agencies and have engaged a.
U S government expert.
John M. Sprague: Three the T. Two candida panel to include pediatric testing, which is pending FDA five 10-K clearance.
John M. Sprague: And for the U S teacher resistance panel, which we expect to submit for FDA five 10-K clearance during the third quarter of 2024.
John J. Sperzel: 3, the T2 Candidate Panel to Include Pediatric Tests, which is pending FDA 510K clearance, and four, the U.S. Teacher Resistance Panel, which we expect to submit for FDA 510K clearance during the third quarter of 2024. With that, I'd like to turn the call back to the operator to open the line for questions. Operator?
With that I'd like to turn the call back to the operator to open the line for questions operator.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your line from the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Kyle Mikson with Canaccord. Please proceed.
Speaker Change: Thank you 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, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your line from the question queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions. Once again, please press star one if you have a question or comment. The first question comes from Kyle mixing with Canaccord. Please proceed.
Kyle Alexander Mikson: Hey guys, thanks for the questions. Congratulations on a good quarter. So the TG Bidari was strong, you said. I think it benefited from the FDA expansion in February of this year. Can you, John, can you just talk a little bit more about the quantitative impact of that expansion, that test, the panel this quarter and then what exit rates might look like in March maybe and what we could and how we should think about the contribution, you know, going forward? saw S.
Kyle: Yeah, Hey, guys. Thanks for the question.
Kyle: Congrats on a good quarter.
Kyle: Did you buy there is strongly you said I think that benefited from the FDA expansion in February of this year.
Kyle: Can you John can you just talk a little bit more about and they like the quantitative impact from that expansion that that test. This the panel. This this quarter and then what what exit rates look like in March maybe and what we can how we should think about the contribution going forward.
Kyle: Yeah.
John J. Sperzel: So, I'll ask John Sprague to talk about the second part, but I'll certainly take the first part, Kyle. We're excited to get FDA clearance to add Acinetobacter to our T2 bacteria panel. That adds a sixth target, and those six targets now take our coverage to approximately 75% of what is typically seen in a bacterial bloodstream infection. So, while sometimes we get blowback about only detecting six targets, those six targets comprise the overwhelming majority of bacterial bloodstream infections.
Speaker Change: So I'll ask John Sprague to talk about the second part, but I'll certainly take the first part Kyle we're excited to get the FDA clearance to add acinetobacter to our teacher bacteria panel.
John M. Sprague: That adds a fixed target those six targets now take our our coverage to approximately 75% of what is typically seen in a bacterial bloodstream infection. So while sometimes we get blowback about we only detect six targets those six targets comprised the overwhelming majority.
John M. Sprague: Bacterial bloodstream infections, and adding that sixth targeted added approximately 5% additional coverage and it's the 10th most common.
John J. Sperzel: And adding that sixth target added approximately 5% additional coverage, and it's the 10th most common bacterial pathogen seen in the ICU. It has a mortality rate between 35 and 45 percent, so it's an important one to add, and it is certainly drawing on demand, and we expect to continue to do so.
Bacterial pathogens scene in the ICU. It has a mortality rate between 35% and 45%. So it's an important one to add and it is certainly drawn on demand and we expect to continue to.
John J. Sperzel: Okay, was there anything else that you guys wanted to add to that, or is that...
Speaker Change: Okay and was there anything else you guys want to add to that or is that.
Speaker Change: The bulk of the answer.
Speaker Change: John.
Thank God.
I would say that covers it.
It sounds good the maybe maybe guys. The cost reduction measures that you were talking about that I guess have been started recently are.
Speaker Change: They kind of seem like they're ongoing when does that when does that become more tangible like I have to tell them, it's hard to kind of understand given the the revenue base is.
Speaker Change: Did you know year over year and things like that to the burns over that you know it can be misleading, but when does when.
Speaker Change: When does that kind of flow through into the P&L and when could that.
Speaker Change: I think a visit from the gross margin you know for that to flip positive would be interesting to know how are you thinking about that kind of near term.
Speaker Change: I think you'll see improvements on a sequential quarterly basis. Our guide is between 10 and $11 million as John and I. Both mentioned that does not include any sales of two two bio threat or teacher lime and it ramps up from Q1 to Q2 to Q3 to Q4, So we will get better overhead absorption.
Speaker Change: And that will drive improved cost as well as the measures that we're taking internally to control cost reduce inventory improved product gross margins.
Speaker Change: Gotcha, and maybe just expand on that note does it fan on the C V. The the kind of the the asphalt to be Lyme panel being now just like an ODT fit for the time being that higher margin given it doesn't have to use the T. G. Dx instrument, so does that kind of that.
Speaker Change: And that act as a benefit kind of going forward or is it that they're not too material, but it's hard to say you know childhood understand like how real that really better than that but if it really could be on margins.
Speaker Change: Well, we think the lime opportunity is a substantial opportunity today, there are $3 4 million Lyme tests performed.
Speaker Change: Our understanding from our market research is that.
PCR type test, which by the way the ones that are out there in the market are not very sensitive at all.
Speaker Change: Continue to grow and so we think the opportunity for a high quality molecular diagnostic test that can detect line in the first 30 days could have significant market appeal command a premium price. The reason we're launching it initially as a lab developed test and we're certainly not ruling out a future.
Speaker Change: FDA five 10-K submission.
He is because we can get to market faster. We can address what we believe will be important throughput requirements by testing off instrument and we don't need the cost associated with the cartridge. So we think we can get higher throughput.
Speaker Change: And we can command a better product contribution margin.
Speaker Change: And as I said in the prepared remarks, there's a good chance. We launched ahead of schedule through an L. D T Park.
Speaker Change: Gotcha, and then did you discuss the FTA approval pathway for that the Lyme panel I guess like has that changed since the business update I think it was like in March.
Speaker Change: It hasn't changed from our perspective, certainly the FDA came out with their ruling on L. D teas, which we don't think has any near term impact related to our strategy to launch initially as an L. D. T. We have a perfect track record with the FDA every time, we've made an FDA five 10-K submission we have received clearance.
Speaker Change: We're not going to jeopardize that we already have FDA breakthrough device designation for the teacher Lyme panel, we think launching as an ODT is going to help us collect data and at the time, we decide to pursue FDA five 10-K clearance we'll be ready.
Let me ask another one before I hop off the I'm. Just you know BARDA is hasnt been the model for for a couple of quarters would be is there any like global research opportunities or programs that you that are in the pipeline are in the works that you're aware of is there any interest among various countries and governments to sort of be it's more <unk>.
Speaker Change: And if that was just not good benefit T to possibly but could that be a M. A tailwind over time.
Speaker Change: Yeah, absolutely. So we've talked publicly about candida auris and Oh.
Speaker Change: Every time, we talk to a customer almost without exception about our T to Candida panel.
Speaker Change: We're asked about the addition of Candida Auris.
Speaker Change: <unk> at the <unk> conference in our booth regularly over the last week or so and so we think we're on the right track in adding Candida auris to Archie to Canada panel. The test itself has FDA breakthrough device designation.
Speaker Change: And that's an area, where we think there will be funding to help us get that over the goal line sort of non dilutive grant based type funding. There may also be that type of funding for adding additional targets on a tick borne panel that's something we're also explore.
Speaker Change: In the early stages.
Speaker Change: Gotcha, Okay that make sense.
Speaker Change: Over there thanks, guys I appreciate it.
Speaker Change: Thank you Scott.
Speaker Change: Thanks Al.
Speaker Change: We have no further questions in queue I will now turn the call over to John's, Brazil for closing remarks.
John J. Sperzel: [inaudible]
John M. Sprague: So thank you very much for joining our Q1 earnings call. We appreciate your support and we look forward to updating you next quarter.
Kyle Alexander Mikson: Sounds good. Maybe, guys, the cost-reduction measures that you were talking about that, I guess, have been started recently or, you know, they kind of seem like they're ongoing. When does that become more tangible, I guess? It's a little bit hard to kind of understand, given the revenue base has shifted, you know, year over year and things like that, so the burn's a little bit, you know, it could be misleading. But when does that kind of flow through into the P&L and when could, I think, specifically gross margin, you know, for that to flip positive would be interesting too? How are you thinking about that kind of near term?
John J. Sperzel: I think you'll see improvements on a sequential quarterly basis. Our guide is between 10 and 11 million. As John and I both mentioned, that does not include any sales of T2 BioThread or T2 Lyme. And it ramps up from Q1 to Q2 to Q3 to Q4. So we'll get better overhead absorption, and that will drive improved costs, as well as the measures that we're taking internally to control costs, reduce inventory, and improve product gross margin.
Kyle Alexander Mikson: Gotcha, and maybe just expand on that note, just expand on the kind of the aspect of the LIME panel being now just like an LDT for the time being, that higher margin given it doesn't have to use the T2DX instrument, so does that kind of act as like a benefit kind of going forward too, or is it not super material? It's hard to, you know, challenging to understand like how real that benefit really is. That benefit really could be on the margins.
John J. Sperzel: Well, we think the Lyme opportunity is a substantial opportunity. Today, there are 3.4 million Lyme tests performed. Our understanding from our market research is that PCR-type tests, which, by the way, the ones that are out there on the market are not very sensitive at all, continue to grow. And so we think the opportunity for a high-quality molecular diagnostic test that can detect Lyme in the first 30 days could have significant market appeal and command a premium price.
John J. Sperzel: The reason we're launching it initially as a lab-developed test, and we're certainly not ruling out a future FDA 510k submission, is that we can get to market faster, we can address what we believe will be important throughput requirements by testing off the instrument, and we don't need the cost associated with a cartridge. So we think we can get higher throughput, and we can command a better product contribution margin. And, as I said in the prepared remarks, there's a good chance we can launch ahead of schedule through an LDT partner.
Kyle Alexander Mikson: Gotcha, and then did you discuss the FDA approval pathway for that with the LIME panel? I guess, has that changed since the business update, I think it was like in March?
John J. Sperzel: It hasn't changed from our perspective. Certainly, the FDA came out with their ruling on LDTs, which we don't think has any near-term impact related to our strategy to launch initially as an LDT. We have a perfect track record with the FDA. Every time we've made an FDA 510k submission, we have received clearance. We're not going to jeopardize that. We already have FDA breakthrough device designation for the T2 Lyme panel. We think launching as an LDT is going to help us collect data, and at the time we decide to pursue FDA 510k clearance, we'll be ready.
Kyle Alexander Mikson: Okay, let me ask another one before I hop off. BARDA hasn't been in the model for a couple quarters.
John M. Sprague: Have a great afternoon.
Kyle Alexander Mikson: Are there any global research opportunities or programs that are in the pipeline or in the works that you're aware of? Is there any interest among various countries and governments to do some more research in subsystems that could benefit T2 possibly? Could that be a tailwind over time?
John J. Sperzel: Absolutely. So we've talked publicly about Candida auris. And every time we talk to a customer, almost without exception about our T2 Candida panel, we are asked about the addition of Candida auris, including at the ECMID conference at our booth regularly over the last week or so. And so we think we're on the right track in adding Candida auris to our T2 Candida panel. The test itself has FDA breakthrough device designation, and that's an area where we think there will be funding to help us get that over the goal line, sort of non-diluted grant-based funding. There may also be that type of funding for adding additional targets on a tick-borne panel. That's something we're also exploring in the early stages.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Kyle Alexander Mikson: That makes sense. All of it is there. Thanks, guys. I appreciate it.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Operator: We have no further questions in queue. I will now turn the call over to John Sperzel for a closing remarks. Thank you very much.
John J. Sperzel: Thank you very much for joining our Q1 earnings call. We appreciate your support, and we look forward to updating you next quarter.