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T2 Biosystems Q4 Revenues Rise 6 Percent; Shares Tumble on Revenues and EPS Miss

NEW YORK (360Dx) – T2 Biosystems reported after the market closed on Thursday that its fourth quarter revenues rose 6 percent year over year, but the results fell short of analysts' expectations, triggering a sell-off of the firm's stock.

In Friday morning trading on the Nasdaq, T2 Bio's shares were down more than 19 percent at $2.52.

For the three months ended Dec. 31, 2018, the company posted revenues of $1.8 million, compared to $1.7 million in Q4 2017, and lower than analysts' average estimate of $2.7 million.

Product revenues were flat year over year at $1.3 million, and its research revenues were $500,000, up 67 percent from $300,000 in Q4 2017.

The firm said it secured a record 14 new contracts of T2Dx instruments in the fourth quarter, which was at the high end of its guidance for the second half of 2018.

T2 Bio CEO John McDonough said in a statement that the contracts secured by the firm in the fourth quarter contributed to 25 contracts secured in the second half of 2018.

"We expect [the] steady increase of T2Bacteria Panel activity to drive greater recurring revenue through 2019, and along with growing system contracts, will contribute to achieving our revenue growth guidance for 2019 and a doubling of revenue again in 2020," he added.

On a conference call Thursday to discuss the firm's financial performance, McDonough said that T2 Bio had placed 89 instruments by the end of 2018 with nearly all the associated recurring revenue coming from its T2Candida Panel utilization.

"As we enter 2019, we expect the new contracts from the second half of 2018 to complete the three- to six-month validation and the startup phase and begin testing patients, which will begin to layer on meaningful T2Bacteria Panel sales," he said.

In the first half of this year, the firm expects the results of a pivotal US Food and Drug Administration clinical trial on the T2Bacteria Panel to be published in a peer-reviewed medical journal. "For many physicians and healthcare providers, the publication of this data in a peer-reviewed journal is an important validator of our technology," McDonough said. 

T2 also expects to further expand its market opportunity this year with its T2Resistance Panel, which it expects to launch as a research-use-only product in the US and for which it anticipates receiving a CE mark for commercial launch in Europe by the end of 2019.

In February, shares of T2 Biosystems soared on news that the US Food and Drug Administration granted Breakthrough Device Designation for its T2Resistance Panel, but its stock price dropped significantly in recent days following negative comments related to the potential of its business on the Seeking Alpha website. The post was written by an investor who had taken a short position on the company's stock.

On the conference call, T2 Bio contested the assumptions underpinning the short seller's report. "It certainly is curious timing that that report would come out shortly after some pretty darn good news on the T2Bacteria Panel — the breakthrough status that had caused a runup in the share price, which probably isn't good for people in a short position," McDonough said, adding that it is difficult to witness someone "trying to make money … in a way that basically is impeding a product that can save patients' lives.

The firm said that its costs and expenses in the fourth quarter, excluding cost of product revenue, were $9.8 million, up slightly year over year from $9.7 million.

T2 Bio said that its Q4 net loss narrowed to $15.1 million, or $.34 per share, from a net loss of $18.2 million, or $.51 per share, in Q4 2017, and missed the consensus Wall Street estimate for a net loss of $0.29 per share. The number of weighted average shares outstanding was 44.1 million in Q4 2018 compared to 35.7 million in Q4 2017.

For the full year 2018, T2 Bio said total revenues were $10.5 million, up 123 percent from $4.7 million in 2017, and lower than analysts' average estimate for 2018 revenues of $11.4 million. Product revenues rose 41 percent year over year to $4.8 million from $3.4 million in the prior-year quarter.

The firm said that for full year 2018, its net loss narrowed to $51.2 million, or $1.26 per share, from $62.4 million, or $1.94 per share, in 2018. Analysts, on average, had estimated a net loss per share of $1.21 for 2018.

T2 Bio reported that its 2018 R&D expenses fell 39 percent to $14.5 million from $23.7 million in 2017, and its SG&A expenses rose 13 percent year over year to $25.7 million from $22.8 million.

The firm noted that in full year 2018, it secured 39 new contracts of T2Dx instruments.

During 2018, the firm also closed a round of equity financing, raising $52.6 million in gross proceeds to support commercialization its product portfolio, including the ongoing launch of the T2Bacteria Panel.

T2 Bio had cash and cash equivalents of $50.8 million at the end of December.

The firm said that it expects total revenues to double in 2019. First quarter 2019 revenue is expected to be in the range of $1.3 million to $1.5 million, reflecting continuing adoption of T2Bacteria and T2Candida Panel test sales and expanding T2Dx instruments reagent rentals and sales in the US and internationally, the firm said.

The company expects to secure contracts for 70 to 80 T2Dx instruments in 2019, including 8 to 10 contracts in the first quarter of 2019.

Canaccord Genuity analyst Mark Massaro wrote in a research note on Friday that the investment bank is lowering its 2019 revenue estimate for T2 Bio to $18 million from $21.5 million, and lowering its 2020 forecast to $30 million from $43.5 million.

Massaro noted that his concern is the "ongoing limited pull-through in [Candida panel] utilization, and that the firm doesn't expect to see much lift in consumable pull-through in Q1 2019.

Nonetheless, the financial report "wasn't all bad," he said. The firm delivered a strong number of placements and proposals, shortened its selling cycle to less than 3 months from less than 12 months, and reiterated its "view to double revenue in 2019."