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Canaccord Downgrades T2 Biosystems to Hold

NEW YORK — Investment bank Canaccord Genuity on Thursday downgraded T2 Biosystems to a Hold rating from a previous Buy and lowered its price target to $2.50 from a previous target of $12.50.

The reduction in the price target reflects an adjustment related to T2 Bio's 1-for-50 reverse stock split.

Canaccord analyst Kyle Mikson wrote in a note to investors that the firm's preliminary Q3 2022 earnings, announced Wednesday, show the company's expected quarterly revenue of $3.7 million is far below the bank's estimate of $7.6 million and the consensus of $7.2 million. He noted that the company's Q3 revenue was down about 50 percent year over year, which T2 Bio attributed to a decline in COVID-19 assay sales and lower-than-expected revenue from the US Department of Health and Human Services' Biomedical Advanced Research and Development Authority.

Mikson also cited slower-than-expected progress in T2 Bio's product development pipeline and ongoing capital and liquidity concerns.

"According to management, the shift to sepsis testing for previously COVID-focused installed instruments is taking longer than T2 anticipated," he wrote. "Consequently, the company reduced its 2022 revenue and T2Dx instrument placement guidance."

He noted that T2 Bio's record sales of sepsis assays tempered the decline in revenue. T2 Bio had reported that its revenue from sepsis assays and related non-COVID-19 products had increased 24 percent year-over-year.

Mikson said T2 Bio is seeking funding options to mitigate its decline in cash. The bank remains optimistic about the company's long-term growth potential but is taking a hold position until it shows positive momentum and a better capital position.

"In our view, if the company can correct its recent issues, we think the stock could offer an attractive risk-reward profile," he wrote.