NEW YORK (360Dx) – T2 Biosystems reported after the market closed on Thursday that its first quarter revenues dropped 22 percent year over year.
For the three months ended March 31, the company posted revenues of $1.8 million compared to $2.3 million in the prior-year period, beating the analysts' average estimate of $1.4 million.
Product revenues rose to $1.3 million, up 30 percent from $1.0 million in Q1 2018, reflecting an increase in testing volume and stable capital sales as more new customers selected the firm's reagent rental model.
Research revenues of $142,000 were down 89 percent from $1.3 million in Q1 2018, however, while grant contribution revenues of $329,000 compared to none a year ago.
Lexington, Massachusetts-based T2 Bio said that it inked contracts for 11 T2Dx instruments in the first quarter, ahead of guidance of eight to 10 instruments and compared to five instruments in the first quarter of 2018.
In Q1, US customers began using the company's T2Bacteria Panel to test patients at risk of sepsis-related bloodstream infections, T2 Bio said. The firm also noted that it received breakthrough device designation for the T2Resistance panel and remains on track for its availability in Europe through CE marking and as a research-use-only product in the US in 2019.
"We delivered a strong start to 2019 with revenue and new system contracts that surpassed our guidance," John McDonough, president and CEO of T2 Bio, said in a statement. During the quarter, the firm helped several of the first T2Bacteria panel customers in the US to complete their training and validation processes and begin testing patients, he said.
On a conference call to discuss T2 Bio's financial performance, McDonough said that results in Q1 reflected growth in testing volume and utilization for its T2Candida and T2Bacteria panels "from customers that completed their three- to six-month validation and startup phase and began commercial testing late in the quarter. As more customers that entered contracts in the second half of 2018 come online during or after the second quarter, we expect T2Bacteria panel volume and recurring revenue to ramp up."
T2 Bio continues to enroll patients in a clinical trial for its Lyme disease test, and toward the end of 2019 could submit an application for clearance with the US Food and Drug Administration, McDonough said, adding, "Assuming [the clinical trial] is successful and that we can secure regulatory approval, we expect to be positioned to offer a new tool to diagnose Lyme disease in an approximately $700 million market."
The firm is broadening its bacterial pathogen detection and resistance marker panel as part of a program funded by CARB-X, which is ahead of schedule, McDonough said.
John Sprague, the firm's CFO, noted that during the three to six months to commence patient testing with new instruments the company "typically receives nominal revenue unless the instrument has been purchased by the hospital, which in the United States occurs about 15 percent of the time."
International distributors "typically purchase instruments at a 30 percent discount off the list price of $100,000 per instrument," Sprague said.
He noted that T2 Bio expects to continue charging its hospital customers an average price of $150 per test for the T2Bacteria panel and $200 per test for the T2Candida panel, and that international distributors typically receive about a 30 percent discount per test panel.
The firm expects each T2Dx instrument to generate an average of about $300,000 in annual revenue from the combination of T2Bacteria and T2Candida panel testing "when hospitals fully ramp up testing of patients," he added.
The firm reported a net loss of $15.1 million, or $.34 per share, for the quarter, compared to a net loss of $12.9 million, or $.36 per share, for Q1 2018, missing the consensus Wall Street estimate for a loss of $.30 per share.
T2 Bio's R&D costs in Q1 2018 dropped 17 percent to $3.9 million from $4.7 million, while its SG&A costs rose 22 percent to $7.1 million from $5.8 million.
The firm finished the quarter with $37.4 million in cash and cash equivalents.
For 2019, T2 Bio said total revenues are expected to double compared to $10.5 million in 2018. It expects product revenue growth of more than 100 percent.
Q2 total revenues are expected to be in the range of $1.8 million to $2.1 million, while product revenues are expected to be in the range of $1.5 million to $1.8 million, reflecting continuing adoption of T2Bacteria and T2Candida panel tests and expanding T2Dx instrument reagent rentals and sales in the US and internationally.
The company expects to secure contracts for 70 to 80 T2Dx instruments in 2019, including 12 to 14 contracts in the second quarter.
In a research note on Friday, SVB Leerink analyst Puneet Souda said that the T2Bacteria test should enable penetration for the diagnostics firm into an available bacterial-sepsis market that, according to T2Bio, is sized at $1.5 billion to $2 billion per year. The diagnostic firm has "an immediate entry point into hospital emergency departments and associated microbiology labs," he said.
In morning trading on the Nasdaq, shares of T2 Biosystems were up more than 6 percent at $2.69.