NEW YORK – T2 Biosystems said on Tuesday that its third quarter revenues fell 36 percent year over year, driven by a reduction in research revenues.
For the three months ended Sept. 30, the company reported revenues of $1.6 million compared to $2.5 million in the prior-year period, short of analysts' consensus estimate of $2.0 million.
Q3 product revenues rose 17 percent year over year to $1.4 million from $1.2 million, and research revenues dropped 83 percent to $200,000 from $1.2 million in Q3 2018.
The firm said that due to a ransom cyberattack, it needs additional time to record expense and other information in its enterprise resource planning system and is on track to file its Form 10-Q for the third quarter 2019 by Nov. 18.
T2 Bio's Chairman and CEO John McDonough said in a statement that the firm continues "to see solid quarter-to-quarter growth in T2Bacteria testing revenue, and we are on track to receive a CE mark approval for the T2Resistance Panel before the end of the calendar year."
In the near term, the firm expects to benefit from a strong sales pipeline and several recent external validations of its technology, including a New Technology Add-on Payment (NTAP) for its T2Bacteria sepsis panel from the US Centers for Medicare & Medicaid Services, a new government contract with the Biomedical Advanced Research and Development Authority (BARDA), and a breakthrough technology contract with group purchasing organization Premier. "We also continue to expand our market opportunity with the launch of the T2Resistance Panel [for research use only (RUO)], and the addition of new international distribution partners," McDonough said.
The firm said that in Q3, it expanded its international business by entering exclusive distribution agreements covering 10 new markets, representing approximately 2,384 hospitals that could benefit from T2’s products.
The company restructured a term loan agreement with CRG Servicing, extending an interest-only payment period through Dec. 2021 and reducing minimum revenue targets.
T2 Bio also said it secured contracts for 12 T2Dx instruments in the third quarter, including five in the US and seven outside the US, compared to a total of 11 new contracts in Q3 2018. The total number of T2Dx instrument contracts for Q3 2019 included five instruments associated with the government contract that commenced in September, the firm said.
McDonough said on a conference call to discuss the financial results that the number of contracts for instrument placements in the quarter was in line with the firm's expectations, based on the changes it made during the third quarter to its US-based commercial approach and sales team.
T2Candida test growth remained steady and in Q3 additional new "T2Bacteria customers went live in testing patients," he said.
Beginning Oct. 1, the NTAP for T2Bacteria went into effect and US hospitals treating Medicare inpatients with sepsis are eligible to receive "incremental reimbursement" of up to $97.50 for the T2Bacteria panel in addition to the diagnostic-related group, or DRG-based, reimbursement, McDonough said. "[The NTAP reimbursement] covers approximately two-thirds of the cost of the test for these patients and effectively lowers the cost of the bacteria panel from $150 to around $50 per test."
Overall, he said, the firm believes that "NTAP will drive further adoption of the technology because it significantly improves the return on the investment for [putting] the system in place. We believe we will see a broader set of patients being tested with T2Bacteria because of the lower price point, as well."
T2 Bio's CFO John Sprague noted on the call that international distributors typically purchase instruments at a 30 percent discount off a list price of $100,000 per instrument. The firm expects the average sales prices of $150 per test for the T2Bacteria panel and $200 per test for the T2Candida panel to continue, he said. "We estimate that a single T2Dx instrument is capable of running about 3,000 tests per year, but we expect average utilization per instrument to be between 1,000 and 2,000 tests per year after testing ramps up."
The firm's Q3 costs and expenses, excluding cost of product revenue, are expected to be $10.5 million to $11.5 million, compared to $8.6 million in last year’s third quarter. Total costs and expenses include depreciation and non-cash stock compensation, estimated at $1.8 million compared to $2.9 million in last year’s third quarter, a decrease primarily due to last year’s vesting of performance-based restricted stock units.
T2 Bio's CFO John Sprague said on a conference call to discuss the financial results that it anticipates posting a Q3 net loss of between $15.4 million and $16.4 million, or $.33 to $.36 per share, compared to a net loss of $10.8 million, or $.25 cents per share, in Q3 2018. Analysts on average expected a net loss of $.31 cents per share in Q3.
In the third quarter of 2019, the company sold 1.7 million shares, obtaining $2.1 million in net proceeds.
Sprague said that T2 Bio finished Q3 with $16.2 million in cash and cash equivalents.
The company reiterated its full-year 2019 financial guidance, saying it expects total revenue between $8.7 million and $9.6 million, including product revenue of $5.7 million to $6.1 million and research and grant contribution revenue of $3.0 million to $3.5 million. Before the release of the financial results, analysts on average had expected $9.3 million for 2019.
Sprague said that the firm expects Q4 product revenues of between $1.7 million and $2.0 million.
The company expects to secure contracts for 45 to 50 T2Dx instruments in 2019 and, according to Sprague, between 10 and 15 contracts in Q4 of 2019.
The company noted in reference to the cyberattack that it did not pay a ransom and worked with an external firm that determined there was no evidence that customer or company data had been stolen.
McDonough said during the conference call that the cyberattack is not expected to impact Q4 revenues.
In morning trading on the Nasdaq, T2 Bio shares were down more than 17 percent at $2.22.