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Canon's $40M Cash Infusion Bolsters T2 Biosystems' Cash Position, Product Development Efforts


NEW YORK (GenomeWeb) – T2 Biosystems this week bolstered its cash position through an equity investment and presented data on a Lyme disease test that is seen as an important piece of its product pipeline, bringing some good news to the firm and its investors after a recently challenging period.

The $40 million investment from Canon USA, representing a 19.9 percent stake in the molecular diagnostics company, strengthens T2's finances and will support its product development efforts, John McDonough, CEO of T2 Biosystems, told GenomeWeb.

Canon and T2 have been partners since early 2015 when they struck a deal to develop a diagnostic test panel based on T2's technology for the rapid detection of Lyme disease.

"Canon is very excited about the opportunity for Lyme disease testing, and they see a tremendous opportunity for our company in terms of the T2MR technology," McDonough said this week. "Because of the opportunities they see, they wanted a closer relationship than was provided by doing a project together. For our company, the investment by Canon puts us in a very strong financial position."

At the end of the second quarter, T2 had cash and cash equivalents totaling $50.2 million, as well as an additional $5.5 million available through an equipment lease credit line.

McDonough said that his company had not been actively fundraising partly because of this cash position. "However, this new financing puts our company in a strong position to reach important milestones over the next one to two years," he said, "and it puts the company on an exciting path commercially with new products coming into the market."

T2 already sells the T2Candida test for detection of sepsis, for which it received US Food and Drug Administration clearance two years ago. The T2Candida panel, which runs on the firm's miniaturized, magnetic resonance-based technology platform, identifies the five clinically relevant species of Candida directly from whole blood -- C. albicans, C. tropicalis, C. parapsilosis, C. krusei and C. glabrata.

T2 has multiple competitors in the market for sepsis testing. A number of companies including Roche, BioMérieux, OpGen, DNAe, Sepset, and Accelerate Diagnostics are either developing or marketing advanced sepsis detection systems. As a result, physicians have available an array of technologies and products ranging from molecular tests to biomarkers.

While getting FDA clearance for the test and platform was a major milestone for the firm, there have been some bumps over the past year.

During a conference call to discuss Q2 financial results in August, McDonough said that T2 anticipated closing 45 commitments for its T2Candida test in 2016, which was down from 60 commitments forecasted earlier in the year.

And its shares had tumbled more than 20 percent on July 8 after the company disclosed that it had not only secured fewer commitments for its T2Candida sepsis test than expected, but it had also encountered problems with test results from T2Candida cartridges, and it had to delay plans to submit its upcoming T2Bacteria bacterial sepsis test to US regulators.

McDonough at the time attributed the difficulties to the challenge of achieving adoption with a novel and disruptive technology. He also noted an evolving approval process for adopting new diagnostic tests at hospitals and hospital systems, as well as tweaks the company was making to its sales process.

But, McDonough told GenomeWeb this week that he believes issues related to the technology and test adoption are now in the past.

Data and pipeline

Meanwhile, at the Diagnostic Tests for Lyme Disease Conference in Cold Spring Harbor Laboratory, New York, this week, T2's Chief Scientific Officer Tom Lowery presented limit of detection data for panels that run on the firm's platform. Lowry, reporting results for the T2Lyme panel, said it detected Borrelia — the bacteria that causes Lyme disease — from patient samples at early stages of the disease with limit of detection of less than 10 cells/mL.

Lowery also reported limit of detection data at the conference for the T2Bacteria panel of less than 5 CFU/mL. Limit of detection data of less than 5 CFU/mL had been previously reported for T2Candida.

"We've demonstrated that we were detecting 95 percent of the infections when there were only 5 cells per mL in the blood stream," McDonough said. "That's a really big deal because we should be able to pick up a very large number of infections that are being missed [with current test technologies], and our time to result is on the order of three to five hours."

Lyme disease frequently goes unnoticed for 30 days, until traditional tests detect changes in the immune response to the disease, he said. For effective treatment, patients need to receive the correct therapy as early as 21 days from infection.

A technology such as the T2MR that requires no blood culture and has rapid turnaround is essential in the case of Lyme disease and sepsis detection, McDonough said.

"In the case of Borrelia, the bacteria that causes Lyme disease, you can't culture the cells because you can't make them grow," McDonough added. "Even if the test took two to three days it would be okay because you have 21 days to get to therapy."

The T2Bacteria bacterial sepsis test is the next product in the company pipeline due for commercialization. "We're on track to complete all of the work required to submit an application for market clearance to the FDA in mid-2017," McDonough told GenomeWeb. "The investment of capital by Canon takes us way beyond the commercial launch of that product and others."

McDonough also said that he expects the company will soon have a timeline for submission to the FDA for clearance of the Lyme disease panel.

According to the US Centers for Disease Control and Prevention, Lyme disease is the most commonly reported vector-borne illness in the US. By CDC estimates, the number of people diagnosed with Lyme disease in the US, based on medical claims information from a large insurance database, is around 329,000 annually.

Recognizing the opportunity in Lyme disease testing, in June, Oxford Immunotec agreed to acquire substantially all of Imugen's assets in a transaction worth $22.2 million in cash. Imugen's PCR tests detect the presence or absence of causative organisms of not only Lyme disease, but also babesiosis, anaplasmosis, and ehrlichiosis.