Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- T2 Biosystems Inc (TTOO, Financial) achieved a 25% year-over-year growth in sepsis product revenue, totaling $2.1 million in the first quarter of 2024.
- The company successfully reduced its debt by approximately 80% through a strategic conversion of $30 million of debt to equity, significantly improving its financial stability.
- T2 Biosystems Inc (TTOO) expanded its international distribution network, including a new agreement in Qatar, enhancing its global market presence.
- The company received FDA clearance for additional targets in its T2Bacteria Panel, increasing its coverage of bacterial bloodstream infections and enhancing its product competitiveness.
- T2 Biosystems Inc (TTOO) has several promising products in the pipeline, including the T2 Lyme panel and the T2 Resistance Panel, both of which have received Breakthrough Device designation from the FDA.
Negative Points
- Despite revenue growth, T2 Biosystems Inc (TTOO) reported a substantial net loss of $13.5 million in the first quarter of 2024.
- The company's cost of product revenue increased by 5% year-over-year, indicating rising costs associated with higher sales volume.
- T2 Biosystems Inc (TTOO) faces ongoing challenges with manufacturing efficiency and product gross margins, which are critical for achieving profitability.
- The company's cash and cash equivalents stood at $6.2 million at the end of the first quarter of 2024, which raises concerns about its liquidity and ongoing capital needs.
- While T2 Biosystems Inc (TTOO) has innovative products, the reliance on future FDA approvals and market adoption for new panels adds uncertainty to its growth trajectory.
Q & A Highlights
Q: Hey, guys, thanks for the questions and congrats on a good quarter. So the MTV. by the area was strong. You said, I think that benefited from the FDA expansion in February of this year. Can you or Jon, can you just talk a little bit more about like the quantitative impact from that expansion that test the some panel there, some this quarter and what exit rates look like in March, maybe in what we could, how we should think about the contribution going forward.
A: 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 as needed factor to our T2Bacteria panel that adds six 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 comprise the overwhelming majority of bacterial bloodstream infections and adding that six target, it 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%. So it's an important one to add and it is certainly drawn on demand and we expect to continue to again.
Q: Was there anything else that you guys want to add to that? Or is that bulk of the answer.
A: Kyle, I think that covers it.
Q: Sounds good. Guys, the cost reduction measures that you were talking about that I guess have been started recently or the other kind of seeing what their ongoing ones, the ones that become more tangible. I guess it's a little bit hard to kind of understand, given the revenue base is it has shifted year over year and things like that. So the burns all that, yes, it can be misleading. But when there's some ones that kind of flow through into the P&L and when could and I think physical gross margin for that to flip positive would be interesting to hear anything about that kind of near term.
A: I think you'll see improvements on a sequential quarterly basis. Our guide is between $10 million and $11 million. As John and I both mentioned, that does not include any sales of T2 biothreat or T. two 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 were taken internally to control costs, reduce inventory, improve product gross margin.
Q: Got you. And maybe just expand on that note, just expand on the CIV. on the kind of the the aspect of the Lyme panel being now just like an LDT for the time being that's a higher margin, given it doesn't have to use the T. two Dx Instrument So does that kind of it does look a benefit kind of going forward, tourism that is not super material. Just hard. Just challenging to understand like how real that really benefit that benefit really could be on margins.
A: What we think the long-term 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 in 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, 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 FDA five, 10 K submission. It's because we can get to market faster. We can address what we believe will be important throughput requirements by testing of instruments, and we don't need the cost associated with the 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 launch ahead of schedule through an LDT partner.
Q: And then did you discuss the FDA approval pathway for that for the Lyme panel, I guess, has that changed since the business update like it was like in March?
A: 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 five 10 K submission. We have received clearance. We're not going to jeopardize that. We already have FDA breakthrough device designation for the T. two Lyme panel and we think launching as an LDT is going to help us collect data. And at the time we decide to pursue FDA 5-10K clearance, we'll be ready.
Q: Let me ask another one for have off. The on. Barda is hasn't been in the model for for a couple of quarters be. Is there any like global research coverage opportunities programs that you are in the pipeline and are in the works that you're aware of? Is there any interest among various countries and governments to sort of it's more research and services that could benefit to possibly, but could that be a tailwind over time?
A: Absolutely. And so we've talked publicly about Candida auris. And so every time we talk to a customer almost without exception about our T2Candida Panel. We are asked about the addition of Candida auris, including at the Actimid 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 our T2Candida Panel on 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 of sort of non-dilutive grant base type funding. There may also be that type of funding for adding additional targets on tick-borne panel. That's something we're also exploring in the early stages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
