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T2 Biosystems Shares Plummet as Q2 Revenues Fall 54 Percent

NEW YORK (360Dx) – T2 Biosystems reported after the close of the market on Tuesday that its second quarter revenues fell 54 percent year over year, leading to a nosedive in the company's stock today.

In early morning trading on the Nasdaq T2 Bio's shares were down 51 percent to $.70.

For the three months ended June 30, the company posted revenues of $1.8 million compared to $3.9 million in Q2 2018, and missed the analysts' average estimate of $2.0 million partly due to longer than expected sales cycle and validation processes.

On a conference call to discuss the company's financial results, T2 Bio's CEO John McDonough announced that he is moving into the executive chairman role at the firm and will step down as CEO. He said the firm has begun searching for a new CEO.

The firm reported product revenue of $1.3 million, up 8 percent year over year from $1.2 million. Grant contribution revenues tallied $459,000 compared to none a year ago, but research revenues fell to $71,000 from $2.7 million a year ago.  

During the recently completed quarter, the company secured 12 new contracts for its T2Dx instruments compared to 9 new contracts in Q2 2018, T2 Bio said.

McDonough said in a statement that during the second quarter its T2Bacteria revenues grew more than 80 percent from the first quarter and "we continued to secure new customer contracts for T2Bacteria, while also assisting hospitals through the validation and evaluation process so that they can begin testing patients."

All the new hospitals that have completed this process in the US and international markets in 2019 are tracking at or above the firm's "expectations in terms of utilization, demonstrating the clinical need for our direct-from-blood rapid diagnostic tests," McDonough said.

McDonough said during the conference call that the validation and evaluation process for new product placements has taken between six and nine months on average, rather than three to six months on average as had been anticipated. "In addition, due to a delay in the closing of an anticipated contract, we now anticipate that a portion of the research revenue expected this year will shift from 2019 into 2020," he said.

McDonough added that the firm continues to see interest in its products and has "a dynamic sales funnel" that gives it confidence that "the long-term opportunity for T2 bacteria remains strong and is growing."

The firm's net loss widened to $15.6 million, or $.35 per share, in Q2 2019 compared to a net loss of $12.3 million, or $.32 per share, in Q2 2018, missing the consensus Wall Street estimate for a loss of $.32 per share.

Lexington, Massachusetts-based T2 Bio said its Q2 R&D costs were $4.0 million, up 8 percent from $3.7 million in the prior-year quarter, and its SG&A expenses were $6.7 million, down 12 percent from $7.6 million in Q2 2018.

T2 Bio finished the quarter with $28.4 million in cash and cash equivalents.

For full-year 2019, T2 Bio updated its revenue guidance to a new range of between $8.7 million and $9.6 million. Full-year product revenues are anticipated to be between $5.7 million and $6.1 million, and research grant contribution revenues are expected to be between $3.0 million and $3.5 million. The company previously guided to $21 million in revenues for 2019 and had anticipated securing contracts for 70 to 80 T2Dx instruments this year.

On Tuesday, T2 Bio lowered its estimate for the number of contracts it expects to secure in 2019 to between 43 and 53.

Cannacord Genuity analyst Mark Massaro said in an investment note today that T2Bio's 2019 revenue guidance is well below the investment bank's estimate of $17 million, and added that he is "disappointed by the magnitude of the guide down" but reiterated the bank's Buy rating and lowered its price target to $2.50

Prior to T2 Bio's release of earnings, the average estimate by Wall Street analysts for its 2019 revenues was $19.4 million.

Separately, T2 Bio announced on Tuesday that it has entered into two financing agreements that would enable it to potentially access to up to $60 million of additional capital and strengthen its financial position. It entered into an at-the-market equity offering agreement with Canaccord Genuity by which the investment bank will "use reasonable best efforts" to sell up to $30 million of T2 Bio's common stock.

The firm also entered into common stock purchase and registration rights agreements with Lincoln Park Capital Fund under which T2 Bio will have the right to sell to LPC up to $30 million worth of shares over a 36-month period.