NEW YORK – Point-of-care testing firm Talis Biomedical said Tuesday that it had to delay an application to the US Food and Drug Administration for Emergency Use Authorization for its Talis One COVID-19 molecular assay, and until further notice, it would extend timelines for the launch of additional tests in its product portfolio.
The firm said that the near-term delays will not disrupt its long-term objective to enter the respiratory, sexual health, and women’s health point-of-care testing markets. However, at least three Wall Street investment banks reacted by trimming expectations for the firm's current-year revenues.
JP Morgan also downgraded the company's stock to Neutral from Overweight and reduced the share price target to $10 from $17. Similarly, Piper Sandler downgraded the stock to Neutral from Overweight and reduced its price target to $9 from $13.
On its second earnings call Tuesday, the Menlo Park, California-based company declined to provide an estimate of when its COVID-19 test's authorization might occur, stating that the timing is in the hands of the FDA.
Nonetheless, the company, which went public in February, expects to see the "first meaningful revenue ramp in 2022" from the marketing of its Talis One COVID-19 assay running on its sample-to-answer, point-of-care instrument, its CFO Roger Moody said on the earnings call. That is contingent on the test receiving EUA, however.
The company reported after the close of the market on Tuesday that its second quarter revenues fell 86 percent year over year due to a reduction in grant revenue. In the recently completed quarter, Talis didn't recognize revenue for a National Institutes of Health Rapid Acceleration of Diagnostics contract to support the development of its COVID 19 test.
"We are scaling production of our COVID-19 assay to meet demand and prioritizing a thoughtfully planned, phased strategy to drive adoption and long-term success," the firm's CEO Brian Coe said on the conference call. "While we are very enthusiastic about our EUA submission, we cannot predict the FDA's timing for authorization, and we still need to finalize validation of our automation lines. Furthermore, variability in COVID testing demand makes it difficult to project the precise ramp of our commercial launch."
Coe said the firm's EUA application was delayed by about three weeks because during its test's validation, "the prevalence rate of COVID in the population was lower, and it just took us longer to enroll the population we needed for our study."
Talis also had plans this year to seek EUA for a test that detects SARS-CoV-2 and influenza and initiate clinical trials for a test that detects Chlamydia trachomatis and Neisseria gonorrhoeae. However, according to Coe, the company has had to extend its development timelines due to delays in the launch and the manufacturing scale-up of its COVID-19 test.
The company previously estimated that its combo SARS-CoV-2-flu respiratory assay would be available in the fourth quarter of this year. Meanwhile, the firm's CT/NG assay also will not be ready for FDA submission by the first half of 2022 as previously expected. The company didn't provide updated estimates for the timing of launch of its new products but said it would provide that information on future earnings calls.
Despite reassurances from Talis' management, analysts on the earnings call expressed concern about whether there would be a market for the Talis One COVID-19 assay by the time it is launched, as the diagnostics industry may be moving toward multiplex testing.
The US Centers for Disease Control and Prevention said recently that it is withdrawing the EUA for its test for the detection of SARS-CoV-2 while recommending that clinical labs that had been using its test transition to a test that can differentiate the coronavirus from influenza viruses.
Meantime, diagnostic companies are developing multiplex respiratory panels for laboratory and point-of-care testing, and several, such as Cepheid and Roche, have already launched combined SARS-Cov-2 and flu point-of-care assays.
Still, Talis sees COVID-19 as being endemic for "perhaps a very long period of time," during which "testing will increasingly move from centralized to decentralized locations because you're getting a result in a more timely manner," Coe said, adding that "there will also be a movement toward quality molecular tests away from other testing."
Further, COVID-19 testing is just a first step for the firm, given the broader menu of tests in its product portfolio, he said.
Coe added that the data it recently submitted to obtain FDA EUA for its standalone COVID-19 test "is very positive, and the results on clinical specimens exceed FDA guidance for 95 percent concordance with the comparator test results, including both the positive and negative percent agreement."
The company is also monitoring new COVID variants of concern and conducting in silico analysis, as well as in vitro testing, to determine the extent to which mutations may impact its test's performance.
At the time of validation testing for its system and assay in June, Talis was unable to include the Delta variant in its study. However, a subsequent, small internal study showed correct identification of the Delta variant in clinical specimens, and Talis included the findings in its EUA submission, Coe said.
Coe said he believes the company is well positioned to take share from less sensitive antigen tests and longer turnaround PCR lab tests for SARS-CoV-2, pending authorization of its COVID-19 assay and isothermal nucleic acid amplification technology platform, which can deliver test results in about 25 minutes.
"Success in serving [point-of-care testing] and other large markets in the future will require the combination of accuracy, speed, ease of use, menu accessibility, and low cost," Coe said. "With Talis One’s unique confluence of these five critical capabilities, the team we have in place, and the manufacturing capabilities we are building, we are confident in our ability to meet the needs of the multibillion-dollar respiratory, sexual health, and women’s health point-of-care testing markets that we plan to serve."
BTIG analyst Mark Massaro said in a note on Tuesday that "the COVID-19 pandemic has pulled forward by years the obvious need for highly accurate, low-cost detection of various diseases at the point-of-care, closer to the patient, delivered accurately, more conveniently, and quickly. We believe the Talis One molecular platform from Talis Biomedical is well positioned to be a winner over the coming years."
Rapid turnaround molecular tests for testing indications such as COVID-19, flu, sexually-transmitted diseases, and women's health address a total market opportunity of about $12 billion, or $5.5 billion excluding COVID-19 testing, Massaro added.
Nonetheless, BTIG revised its COVID-19 estimates, and Massaro reduced the investment bank's 2021 revenues estimate for Talis to $11 million from $51 million, and its 2022 revenues estimate to $90 million from $102 million.
The adjustments to Talis' timelines for product launch have added "significant uncertainty to the revenue ramp, especially given the initial strategy of building an installed base through COVID placements," JP Morgan analyst Tycho Peterson wrote in a research note on Wednesday.
JP Morgan reduced its 2021 revenues estimates for Talis to $7 million from $80 million, and its 2022 estimates to $75 million from $116 million.
At the end of trading on the Nasdaq Wednesday, Talis Biomedical's shares were down more than 6 percent at $8.39.