TTOO - Earnings call transcript Q3 2019

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Operator

Greetings. Welcome to the T2 Biosystems' 2019 Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

to WXO conference Group. like Kubow to now the of would turn over the Zack I

You begin. may

Zack Kubow

Thank you, XXXX Operator, joining call. us and good morning the Biosystems' everyone. TX third quarter financial conference for results Thanks for

the Sprague. the ended CEO, for John On operational and Chief Chairman XXXX, quarter to results September discuss and call Financial highlights are McDonough; XX, and the Officer, John

a will prepared Tom also Chief Scientific by team joined remarks executive some with by Lowery, period. open are call We The the question-and-answer followed Officer.

I include would for everyone plans and remind to that comments and answers financial made today and like to Those developing related by and to forward-looking statements future results management questions include marketing Biosystems' will new TX operating statements. products.

assumptions on to Form actual are uncertainties The company the the publicly the including today these law. except and TX Forward-looking time-to-time. from the from as differ of Annual as and forward-looking risks SEC by and uncertainties the cause SEC any company statements expressed no makes subject are results may to those statements, required Biosystems' risks obligation filings revise that materially XXXX and on XXth, implied XX-K and in update undertakes to based other or Report statements described March with on with or by estimates filed

John? John that, With to over I'd like to McDonough. call and CEO, turn Chairman the

John McDonough

discuss the and Zack. and XXXX. joining results, everyone, thank as morning, progress, Thank we Good following for quarter you, the you outlook of third us

support Technology receive Biosystems' or and These major the TXBacteria the vitro only in external Add-On increasing economic that and two-thirds from Panel. potential. of quarter, third validation, TX milestones diagnostic being milestones series we near-term of CMS that of company momentum the announced a to by provide growth price were approximately of covers and During a Payment, the long-term the first drivers NTAP, headlined for New

time. payers this up reimbursement by be in will codes picked also new expect We private

CMS technologies, because mortality also bacterial extra over from of summary existing thus inappropriate place, by a and decision patients reduces stating strong as is reducing length TXBacteria statement substantial improvement the rates with endorsement represents stay included number on The in a patients reimbursement of Panel put this being well because for therapy, as of sepsis-causing other it infection. reducing interventions, the clinical

be milestone-based An an government multiyear milestone initial equally million. awarded value $X significant new will of we that contract announcement with a milestone were

network Premier, of In addition, Panel, we and with announced TX market and version distribution the breakthrough a launched research-use-only further Resistance contract technology opportunities. international our the expanded

our the to XXXX, burn improved need eased We cash CRG a capital million up reduction towards possibility our us by of at $XX of per access position, by financial in also for capital our in that put with $X million term XX% quarter the made to quarter and restructuring loan, and agreements the the provide levels. financing market two of progress place fourth to

provide We related on the progress of and items on these will update today's call. each an operational

$X.X million, an States, QX achieved the based for fulfillment States, associated of the team sales third our approach changes placements five reported for with This line with the our made company's as the five was contracts in secured outside new initiated government quarter on our and third in we expectations the But commercial which September. results overview call. in quarter. and first, United to product the instruments, during We provide I'll seven contracts third of TXDx of the our changes of XX quarter revenue U.S.-based and included financial that to on United

the we encouraged we in commercial have testing to TXBacteria track new factors. We patient. and remained growth on are are our made strategy, TXCandida customers changes Importantly, more right live believe steady, with and by went several

progress focused and health good is large accounts organizations their on making infectious which complimented is Securing our contracts stewardship integrated organizations disease is This of systems. pharmacy hospitals national with the team to potential improved these on by provides group with Our access specialists sales Premier. as customers. delivery committees engaging force in such purchasing networks and

Our interactions IBMs future. the hopeful will team to and we additional able that GPOs, continues and to we Premier positive have in be similar announce to near with partnerships

international Outside well. of quarter, performing the new the the United entered United is business outside we XX third during States. States, And of markets our

countries, we XX in and sales to strong TXBacteria. this that expanding in Overall, now in market dynamic long-term continue are funnel the the TXCandida to interest gives panels year. be there plans TXBacteria have both and and a continues confidence opportunity We in market, have the us for

TXBacteria beginning demonstrate October to only for approval first NTAP patients. went that Xst, and addition, NTAP receive effect. clinical for the is which test substantial the in to granted into the technologies vitro TXBacteria for diagnostic new outcomes is In

tests cost sepsis result, the States around or to Panel treating the based NTAP to reimbursement approximately per addition of through for compared and are eligible reimbursement. a for This the are now by reimbursement. only in this Group TXBacteria for are United to receive Panel is DRG these eligible This Related all $XX effectively of cost from of $XX.XX patients, product, the covers the to not the lowers with code Diagnostic TXBacteria test. of As culture DRG-based hospitals incremental two-thirds Medicare inpatients NTAP and up in which the to blood covered $XXX the

patients. coverage that payers precedents, In private the most in of expanding addition, further aligned we same will time, beyond the benefits historical with the provide anticipate NTAP Medicare

economic August of the is into product existing and feedback has this between versus culture with adoption, since, driver and towards gone both early positive, and results. believe potential clearly September, demonstrates customers. be our has a the We The potential promotion major blood economic difference product NTAP substantial on to clinical the been value positive that based any of and the affect and has in our from

with are TXBiosystems government beyond At in U.S. the CARB-X. funding our of contract the government to Washington, transition D.C., a product current We're work that highlighted add this of in savings our recent from under contract on development potentially us infections. of portfolio outcomes, of patients result allow significant extended to options. program We the head emerging resistant that in in unnecessary the program. other Wright, cost for extended the the company the activity conference through the decline antibiotics we that timelines. can to a Rick and that as are agency further and better very hospital, suspected this we are our government will to the in bloodstream excited the Turning from CARB-X early to that to of track improvement Dr. treatment initiated have potentially sepsis September, drive government this prescribing management announced superbugs of first clinical and agreement, to and excited awarded graduate This

up. commencing improved in activity picks as QX expect research We revenue

will I turn the Lowery, to and our for now update. Officer, Tom Tom? call Chief Scientific pipeline over technology a

Tom Lowery

on Thank start pipeline a quick update you, I'll initiatives. our John. with

Panel is available use-only TXResistance TXBacteria from both is TXResistance to detect antibiotic test. the now a which direct-from-whole-blood First, The Panel. gram-negative Panel, designed research gram-positive pathogens XX the complement and is will as resistance genes

demonstrated to TXResistance result. Panel designation Due presentations for ability, FDA, breakthrough least year. this time As recent positive a reminder, methods got the this industry compared Panel by blood February that a to unique two-day conventional from a the has a provides that advantage our data of a TXResistance the require at culture in

Europe, from early to it are feedback Middle September, of first We Africa. our additional encouraged a pleased customer within The and panel States, and United also studies use-only South others the the shortly will and orders, the research United received multiple have are United at by in sites The available start in underway, States, East, is and States, are interested launched we as October. at product the the outside end customers. the

during approval have to for a for year-end. States fourth outside planned, of we and of clinical as of enable We XXXX, by it which CE United submitted would launch quarter TXResistance the product expect the Mark use receive

Comprehensive the all XX Panel, pan and This positive reported all comparable identify by is species, of products Second, Disease which than is cover results. gram-negative these sample. infections gram-positive Control addition pan news or all panel of results blood of expected greater that is greater market the and to the pathogens cultures, infections from than blood-borne the in Prevention, blood-borne XXX antibiotic bacterial the XX% includes Centers to patient to for threats by resistance detects but This in panel for the CDC. directly from identified

run being will potential on test believe this We a post In further while species resistance this when cost we've building development a adapt our to on goods began for completely providing we pathogen next-generation new available, culture day. therapy susceptibility layman's instrument on that lower per able industry, This to from reliance this results. the identification panel. the and on for blood, the will work to number to change blood our a technology and platform high we disposable product detection the and deliver reducing cultures, create directly of performed improving has prior testing panel panel time-defective of pan the testing terms, results believe panels,

our needs its government bio of sensitivity panel large new of it's bio platform to direct-from-blood how ultra threat sepsis, multiple addresses and is We ever toxigens. address be a under the a panel market first developing threat addressed this of a we're contract. bio per example platforms. other kind This that cannot by detection Outside be first and pathogens high can believe threat panel expected market another opportunity

the TXLyme protocols with for EM with potentially to development work and other is a the our market. panel to which TXLyme indication to expanded brought panel our diagnostic this patients continue we With to population, expanded associated trial rash studies bullseye on clinical may programs, a study patient broader have ongoing use target Lyme. pivotal Turning much rash and our

testing revenue potentially of referenced disease the of This Lyme dynamics but ongoing developed provides Based labs, panels for reference the the believe discussions and the disease lab out for market, Lyme will panel, offering to partner Lyme near-term cleared for continued laboratories tick-borne Lyme including for on the development doesn't have TXLyme most our FDA single commercialization path a several other of carried preclude expeditious more we Majority we of by from of currently additional and work feedback that as and the the test the commercializing and with test. pursuing the a is pathogens. be FDA testing to had an partner opportunity.

goal not date a expect the we tick ready Although Northeast. our for when in for partner's TXLyme partnership agreement, into and launch to validated time at in this enter we season are lab the is our potentially have providing next year's in

elimination and TXCandida be Candida the help with the panel continues dealing interest there hospitals are They in world. addressing welcome auris to containment can emergency the in the the around of panel, Lastly, for hospitals auris, superbug. these

received orders and this have panel and panel. TXCandida We auris global in in addition Africa European the Europe underscoring customers East the to Middle South by awareness for the in growing interest

third, facility, TXCandida the prevalent. an reserve the auris and some customers Middle separate East; in use are South in difficulty testing outbreak. just rate is in test patients given to where very using for prevalence cases; and of three in Africa outbreak use of affected case to where locations Candida panel a and the auris with the first, maintain validate the in from high high healthcare some an Candida These addressing patients panel such And in Australia associated countries test auris for in mortality as panel of is second, customers Europe routine event

will of Outside based National are and from or and rates. Healthcare January development central non-culture TXCandida. use by non-culture methodologies the programs, to the bloodstream Network, testing this like Safety infection of associated with pleased TXBacteria to guidance, CDC's like for NHSN, will increase guidance we the test line the highlighting effect. I see new Effective TXCandida culture go our not to based testing TXBacteria And CDC's support into X, based XXXX, hospital's want CLABSI close non-blood that

and on-culture sensitively it a to encourage is patients like endorsement non-culture culture-based based affected unique and ours to hospitals believe We in tests. use this more Ultimately, will test. possible this identifying tests based positive rapidly characteristics of

are the from Let a catch catch Infection one give Lead don't resolutely, hospital [indiscernible]. within to that of missed want infections personal very that me a example TX I infections cultures, test single said by explaining single blood Control set you can missing. After of

sound it. may certainly when bizarre. that Now heard It I did

having its surveillance CLABSI to of hospital's rate reimbursement percentage old a the peer a be under significant CMS as due However, group. hospital annual could CLABSI rule, high reduced compared

amount and one of CLABSI for annual a rates As recently to this unintended thereby [indiscernible] testing published, in increase in limit hospitals perverse avoid an incentive such created reimbursement. jeopardizing large order for

Fortunately, change and CDC CDC accommodate due new of this customers, to the advocacy of the to insight this consequence. of avoid kind the technology ability our made and

to be of expect use by our this important We test boosted change.

Financial financial over I turn for John call Officer, And results. update the will Chief an our to Sprague, on our

John Sprague

Thank you, Tom.

in time is a cyber for ransom due noted company's As our additional quarter needed determined finalize XX-Q press attack information the release, the third that system, Form we technology recent our on XXXX. have to

filing be next soon which as be expect basis as XX-Q could five in a will will finalized, diluted the days. We we the on be it

We operations. will the the today expense results the the caused of an by appropriate file company's form earnings to are materially Interruption affect secure Accordingly, preliminary. SEC did with reporting attacks we not and are extension.

was data external Importantly, experienced a the determined company did with in an not firm attacks, ransom also who company's and cyber that exfiltrated. worked pay

quarter $X.X to third for instruments revenues million government product our $X.X including were million; associated by revenues new third new the financial XXXX to XX% contract five a placed quarter government were $X.X and million related in TXBacteria revenues data. higher and delivered new quarter contract $XXX,XXX third Third of year's quarter compared TXDx million. third of revenues Panel, instrument We XX Product XXXX year's of Panel total last XXXX places sales. last TXCandida than including for systems, growing contracts quarter and driven with XX-year were $X.X results,

$XX.X We of revenues, associated $X.X last not constant new with third third of related product TXDx contract with contribution of revenue which compared and Research excluding in system mentors instrument the $XXX,XXX, year's $X.X $XXX,XXX contribution to or $XX.X compared to including million, cyber-attack last does year's research costs government quarter. the million respiration and million cost million to placements include from quarter. anticipate

last per Total depreciation year's interest performance-based compared to and a of quarter. and loss last loss decrease last quarter in in include to of $XX.X expense loss net to margin $XX.X in quarter cost third quarter, a third a share. of primarily to last million other year's million anticipate $XX.X to $X.X $X.X year's We $X.XX net $X.XX $XX.X year's third $X.X compensation vesting million to million total the billion. A quarter. income anticipate anticipate We and third stock estimated compared million net million operating expenses $X.XX RSUs. compared non-cash share of million, to million, We $X.X due of to an of loss third $X.X the of per million $XX.X

based Weighted last of outlook, was expect full-year million $X.X XXXX and $X.X in $X.X expect to uncertainty average $X.X and compared shares revenues $XX.X million subject million. forward-looking range we of outstanding XXXX, $XX.X following November reflect to a million the in XXXX as million information million estimates year's of revenues to third XX, statements product on are quarter.

million. a we and We $X.X $X expect product for range the grant contribution research to million expect and full-year revenues of

fourth product expect million. We to $X.X quarter of $X.X revenues million

XX to in TXDx XXXX. We and XXXX expect XX fourth contracts quarter of instrument in XX placement to XX the

in the calls. outlined prior guidelines product following growth, on you keep you consider As please mind revenue

to average you instruments months testing. three Historically, get in live new six to and go begin to have patient

time for John as many is averaging nine months close months. customers today As outlined to TXBacteria, beyond this six for

of this instrument, the which XX% customers period revenue hospital United of receive During because for States time. typically and purchases the must normal

of price $XXX,XXX at purchased list International per distributors XX% the off instruments a discount typically instrument.

continuation about single is future we a of bacteria that per per of panels, capable XX% per Panel. sales International distributors of estimate of a average of discount receive TXDx X,XXX $XXX expect $XXX We TXCandida instrument the Therefore, expect average we average and typically a running instrument test an test year of TXDx after generate X,XXX, year, testing and range testing. tests $XXX,XXX utilization to the up. of X,XXX panel per each of from TXCandida expect ramps revenue per tests annual about in but TXBacteria combination panel,

We with to will reduce allow year, have quarter burn which collaboration expenses, fourth research million the the excluding $X to this revenue million us be $XX.X $XX.X on actions growth expectations. to our while revenue the to to under taken fourth our line excluding of in rate executing updated of in strategy per quarter be XXXX. in expenses our continue quarter cash product Operating million, reducing cost will

compensation non-cash include based of stock affect vesting depreciation non-cash approximately and $X.X cost expense. Total timing performance RSU quarter. million The stock of expenses may per compensation

from Our shares zero in equity $XX.X the the without cash cash at equity $X.X We the proceeds the XXXX, we sold to credit first-half million were third ATM any credit us equivalents which million lines. take our and that line. and will to expect, of capital end quarter the additional XXXX accessing under and shares $X.X September million will ATM of

with compliant line And will outstanding facility. option debt we in million. compliant credit expect currently average are and the share of and weighted ATM exercises sold equity We shares Stock CRG affect our continue may periods. terms under the we future $XX.X

Thank you, and remarks. back for closing McDonough to John

John McDonough

results. quarter John, benefit the you, and our Tom. commercial the U.S. CMS, ramp potential XXXX and was has by recognized Government, milestones, significant and exposure our to a economics Thank The filled company. for with the technology that and providing been watershed each Premier, the conclusion, have customers the technology CDC, In of third adopted tracked FDA, the the of

to We sales drive adoption more make as these growing of of shorten evidence as are patients and body cycles, economic endorsements soon in our TXBacteria, to possible. leveraging clinical and tests the available

their for for your efforts to our closely will of pursuing our hospitals the and belief commitment to patients. to support. We on and are and that and are accounts also mission, external excited the with Thanks national to focused customers our care. endorsements having our are become team both standard programs, impact Biosystems in their and we and leave internal us our ultimately highlight impact on working expanding products The product convinced seeing in TX investors be and the need tireless

that, call With now open will for we questions. Operator? the

Operator

Please you. Thank Puneet question with is Partners. [Operator from Our Souda Leerink first Instructions] SVB proceed.

Puneet Souda

question reiterated remind a which you drivers, did couple you back here? and other the you duration call dates us how any hear two sale held months my of John, quarter the it impact hi. new then you cyber far have if on would it of and first Yes, the BARDA a of contracts could about these and is, -- long and sort how so technology add-on today, highlighting fourth when attacks attacks back, the and payment what's

John McDonough

Yes.

So, an QX. to have QX, has and It We're All on tirelessly didn't The all inconvenience and challenge of massive team on affected the the getting no, weeks. happen. impact team that took massive, filing how the impact it timing are and XX-Q, back which worked attacks the of running. customers, it cyber won't an have didn't into completed. systems back biggest just make back. virtually been affect it ERP system, several has just was the a that And concerns data the the now

which for days, anyone's attacks to concern. the next but and we've of just the we five not the Now, need should got why on review the off sign cyber be auditors is extension the numbers,

Puneet Souda

assume would has timing any the Government from no they security impact that for And projects and by on then that or BARDA for that's impact stringent that Okay. -- I well, U.S. the contract delay research the that given have? medical requirement delay would BARDA as of

John McDonough

so Yes, great question.

with project hear these hasn't really helped exactly ransomware And we had one own review is your bigger they from it a started Unfortunately attacks, massive taken already. have so you experts were we've -- like bigger of do many, of BARDA. was I lock and based impact than not, on in nothing everyone's times. would, thought absolutely and That system, the companies brought now, on company this we many what who impacted. So, when they us and it no hit has gambling, importantly business is out

system, things, no that inconvenience. place absolutely your records in you removed that ERP like was that, there or like massive out anything so put just certain codes that were So of lock but were

back backup online, The start then back effort just go all in backups, with put date your the data and ERP to means system again. your backup, [indiscernible] your restore you bring you to you and

at So around of impact taken on should -- at the the time. TX the about from has this but clock massive, team BARDA, who customers, ever, no in TX it inconvenience impact the point nobody working frankly, massive company, assets been on of it seen I've were no be didn't incredibly in no one again, efforts the most and on has worried impressive this

Puneet Souda

helping remind whether many in on us, Okay, that. the the and you is in the sort expect force, customers that in any assume much in are sales the or benefit how And XX government on thanks the that force update you that sort the in you better, could ones of that I ER, the us benefit weren't term placed are given if seeing of should out you on fourth systems the of is now sales about those ER, from those economics you the we talking could placement And immediate on quarter? were of testing any quarter, to the contracts, more the and NTAP, remind that us that? of and from can

Tom Lowery

hospital historically, don't these in in you're Yes, being going XX% believe government case used course this third a know of and are was the tested being the is they're I lab, population About in the the the XX% sure. but And quarter, units of right; ER. ER. so all patient about into for traditionally placements, but I

those up In have after once as started terms them and a or as everybody them of were And impact, able received week it. educate yes, we NTAP. NTAP, go to our there start discussions talking we has we talking about sales to and about been soon force about received

And it'll especially because of fourth the lower of TXBacteria of we is secondly that big with improves price the two we'll believe a technology broader in to improves the point make the further do -- the quarter, patients those significantly from this. on going placements, being see We -- And set tested believe an system as we and because it's seeing overall on drive adoption are well. place. a areas the impact will it instrument return think it investment the in we're have difference, bringing

So will of an will we year next go have we and have QX, a sure, about talking all you goals, it cycle real if But quarter between a you impact turns talking it sales because tin some into think for we're expected. it tight will will. have be in but growing is it -- into the Call fourth when big and start first-half business. when it impact now, things these the impact as actually

Puneet Souda

And works my the role, the that's us last Could on stand CEO? the you you transition one is your transition do search currently in where and the it. update right Appreciate Chairman Thank does now. you. in stand to for where

John McDonough

I'm that the the out. in forward soon right place, definitely of that exciting candidates when move are couple But we're ready forward as in a can't There I to the and We're to all transition. candidate have will predict in Yes. pipeline. we the looking right itself middle close of search. as

of So, this happen end difficult this those to but year, it's before hopefully will things. the all predict

Puneet Souda

All great, thanks. right,

John McDonough

You bet.

Operator

Our is with Mark from next question proceed. Canaccord Please Genuity. Massaro

Mark Massaro

unrelated to BARDA? BARDA going to for guess all is Can sense your associated funnel placements of give I also my one believe thanks the first Hey, you I related contract. a then forward talk us with can just the in those placements And question. were John, five you of BARDA? your about U.S., the sort on expectations for the

John McDonough

Yes.

it'll to be we as expect our don't to U.S., is in a very remain would the that the they target, we terms XX So that some and not believe. BARDA, related be more in can placements placements where number we significant quarter XX instrument our placements are but hit continue in fourth confident per there of be if for And may to well. expectations to we quarter in

Mark Massaro

how over that an time. just recognized good. periods it's in we upfront, $X additional million comprehensive. us cadence around When been over It's $XX and more of obviously upfront, $XX additional has maybe Very five years. contract, funding for give million you recognizing seven sense granularity million BARDA a over Can any think much about that potentially the option

John McDonough

Yes, answer so I'll let this. Sprague John

it the I I $XXX,XXX correct, to recognized about $XXX,XXX BARDA? think with John, in am quarter was third

John Sprague

in $XXX,XXX in Yes, we September. took

John McDonough

John, maybe, expectations and And talk our Yes. in you QX? to QX could

John Sprague

research And XXXX guide May of the for beginning is million runs award we through guided revenue primarily $X all but XXXX. haven't BARDA. yet, this QX, initial of

John McDonough

you've to going these got what seven it's be sequential. to all and options, we'd Now, not is Mark, expect have happened,

So likely goes the first when you now option And we picked same is going two, be option up could in think so revenue some time time, on as another it's about in projects quarter the up. that the you at will it think picked have up.

all all assuming So, $X.X these if options between several going were million somewhere for put the be million to quarter probably averaging options are years, in we're $X exercised. place, and a

Mark Massaro

XXXX, timing the from looks new do see we comment, research depending initiatives? revenue that's that think potentially has in you variable, levels. you To that extent the the of announcing do fair Yes, makes revenue it like line sense. you XXXX XXXX, the for And then as increasing think about or our can consensus that research model on

John McDonough

other trigger of these up research should BARDA will, maybe of options the timing out piece are are the alone revenue the numbers me then I the is the If of exercise but could some options. it has think two initiatives new we BARDA their I exercising to impact way that it all their think in points, think I picked in them they but that's were BARDA and options even right, manner. a the timely assuming backs to double are have definitely in potential there on ramp-up, XXXX, all front of don't has of

Mark Massaro

strong points that GPO the through that the think you comment you their have extent Premier funnel can hospitals, can significant any and your forces give contract breakthrough signed you might with for then contract? you Okay, thanks. access with to had on a sense sales in And a you us traction the U.S. early Premier, just with really that

John McDonough

that Yes, has part are we're in hospitals accounts putting having accelerated accounts. we're are together. and great of discussions hospital access points programs those that many some a so of that There help already them Premier, that identifying

and it's So positive a very start. also favorable

Mark Massaro

I queue. will the hop back Great, in

John McDonough

Mark. Thanks,

Operator

next with is Paul Please proceed. Our Montgomery. Knight from Janney question

Paul Knight

talk deduct cash could of Hi, the that withdraw stand as could do about should outline you Lincoln well? include, you with rather And to when achieve lastly, John, you you we then BARDA? potential flow million breakeven, upfront needed million your kind where equity from payment and does $XX $X

John McDonough

want other our rebounding the be is Yes, of we way. because good on would $X if it be about to million. on I of $X so place but Obviously, we share to the the are about sure, the we'll plan not million. monitor it But it, we where we those top $XX based opportunistic price. million saw using carefully very vehicles capital price, crazy the company don't hand, utilize will we for and value And $XX to think company. still over think continue to relative of some raise to potentially a about we're terms use dilute it Lincoln it is there a Park, the of the reasonable. in the not ATM that on Think not and as would have in terms million on an that part share

Paul Knight

are went the confident a or what you test, it line summer LDT, would spring then expect you how And pricing on line the launch? on if and

John McDonough

know expect a launch test could we're I happen we all don't would say least we're be talking it I think of season. could north would think to spring, we I by confident be, would is to the we at and during Yes, make $XXX see to that tech potentially, pricing a motivated that the what that And everybody likely but happen. it

about overly could of it's too a to it to that, tech confidence, of early confident so the but be be some lot beginning do. have the season, work we So still at

Paul Knight

on mentioned be comments based, next-gen the Panel earlier is And that expansion based in Bacteria you call the that sequencing you would your next-gen mean? did

John McDonough

we No, of generation next own TXDX mean instruments. our

Paul Knight

Okay, thank you.

John McDonough

You Paul. bet. Thanks,

Operator

question Steve Please Securities. is with from next WBB Our Brozak proceed.

Steve Brozak

CDC, back come BARDA one thanks CMS, now, and questions. auris that that morning lot you've and John been taking like that, talked you terms with Hey, provide the for part, answered, auris know to been and can a you thing any but I that or I'd to Candida has get an on to got details please? flush a of just the give CMS Since about, asked that's developed a while, reminder the that into and any been you obviously, details Candida exceptional and I relationship in specifically, ongoing good have relationship I'll had out and for like can with because with go

John McDonough

you Tom, you Yes, to take want that do bet. one?

Tom Lowery

Sure.

takes from Candida we to hours a request published they to did sample, where So, at and swab culture within [indiscernible] weeks. they sample Candida of developed test for and Candida were it's a patient's auris our swab as validation use identification which a get three auris three skin auris of to positive, CDC, from waiting the able opposed

the have the of provide result, to coming that validation see surveillance with interest within patient the time on movement be patient, the entire use should CDC demonstrated to Candida data the results and is work equivalent running from than they and to test. So, of the a sort was it better done is of to tests culture, a a that's terms to that's hours for real this to where value able clinical out it. there few add inform time auris And great or only in the real of the demonstrated published sensitivities

Steve Brozak

far - how or country please? you lab, comparison but what's top average that, the that, not identifying the and details don't they the the how work, you, labs the might can and Tom, follow regular talking but how as about auris as in past? to plug Candida culturing the And in been one in pathology give just isolating the any if I us compared you world, to of effective and mean answer on terms labs up have on in I'm

Tom Lowery

then these it's Ineffective, right looking swab by completely bit it, right getting see to within ineffective, a able patients and off standard that starting spreading the U.S. it but test terms long be on even going institutions. the hospitals, now. why proactive, that's this back institutions they method acute samples outside not of denial unfortunately, facilities, weeks a homes. in and moved already that. to help are not problem. need of within they realize and And be those care And across it's state there to around our serious of nursing U.S. CDC, is or the ahead to is spreading, a a to are good they send country hospitals to it's results just excited hoping and now doing there's the later, Currently, lab And term into is get the the we're

Steve Brozak

I'll back in question, Great. And the last Thank you. queue. hop my

the there that that TX as that wanted out and was availability as it's the or CMS I'm of enable, it's greater get but the well And access there? how the are side use very used And use other not those TX what's TX explanation queue. into of lot recognize that TX, obviously, play does your part or of that I'll are TX, the not kind detail cases, using a I curious in can being back antibiotics hop hospital several processes, thoughts the because there expensive decision-making because the drugs and the new to what drugs? again, of are on to there's a of possible, just are On thanks

John McDonough

take that one, You John.

John Sprague

Sure. on think they what are a antibiotics prescribing with. is Today based infected physicians patient

cheap strong because and time therapies. don't of the very actually laboratory, until they're know from antibiotic infected culture takes that on they days because and patients a have You a therapies later, get it relying results to if bias to impure of the very the positive

to expensive tough And know critical so, locked will actually teach use away. the because the you antibiotics so more the justifying kept like they are patients. In then those of are specialized antibiotics,

with precious use resistance, Resistance the and resistance justification to disease. Panel, expensive And TX is know more of live patient one provide antibiotics the infected that in these a progression particularly marker, we more and for the fact, will In the confident of who been justification implement pathogen they're the hospital because they're with actually they're and these for them, -- costs just drugs antibiotics not infected on were just patients the challenges because using they're enough big not to the incurring is there that's guessing.

problem the we the we so, directly with face essential based provide result the test, resolving from system, can are that hours within think for antibiotics. And solution the it's in Congress part a antimicrobial. Washington, And because just patient Resistance where few new we TX non-culture to was I is DC, of World just that at a our Anti-Microbial week this important of last piece discussion, was and

Steve Brozak

Great. Thanks again.

Operator

Ram H.C. [Operator proceed. next with question Instructions] Our Wainwright. from Selvaraju Please is

Unidentified Analyst

on Ram All is right. [indiscernible] Selvaraju. This for

you the has cash of of progress any Just in expenses impacted in on operating to comments how if to see back negatively penetration products? wanted whether company's come to back, has reduction this terms the [indiscernible] I had market

John McDonough

made been a Yes. We enable sales company believe reduce of that the the the of the size of held little the another we reductions side we most part on would cost, not bit. the have It's business. the although to way substantial have commercial area force the for back

very feel commercial the And further drive further comfortable, we side see can more we are in the and more believe So we for moment. extend we really people but are prepared growth we business. to once right-sized progress where

Unidentified Analyst

the with term the revenue importantly whether loan And company could meet XQ minimum thank synergy? requirement in Okay, the then your you. agreement revenue

John McDonough

will meet Yes, requirement. revenue that minimal we believe we

thank Okay, you.

Unidentified Analyst

more in And been how color the last you potential provide include the can addition, forward? partnership? with the your one to Do one any validation for you hospital on timelines going system? discussions expect And timelines from have me,

John McDonough

Yes.

timeline the nine call partnering expect the run, talked expect decline dialog. live range. things patients. go but not strong that and around over do short Probably have some into partnership side, hopeful And as So of partner testing active six-month Lyme but in tests. front to is we have the an we that will closed after have has then I to pullback to been the the together, are account on pipeline we months typical opportunities about, of even to see time. averaging that closer a we opportunities. lot And a would it yes, always on we And come We

to other and come would diagnostic together. will more so, affect when good that in We sepsis coming are news they we hopeful to partnering we opportunities pipeline. some well, report have Difficult But products as of have that if things months. like will the strong our predict

Unidentified Analyst

on back will from I Okay, me. it thank hop queue. you. the That's

John McDonough

there are Operator, any Great. other questions?

Operator

Yes.

Please next question Alliance proceed. from Our Ben is Global Haynor with Partners.

Ben Haynor

morning gentlemen. taking Thanks for questions. Good the

Just a for about test, that LDT the that of the the goes testing on patient Lyme of Lyme things to other you on pricing, give are traditionally us cost the and sense thinking and kind now done? can serology

John McDonough

to PCR tests run And approach. the up, you almost serology as the as of trying these of tests tests triage And that tests. $XXX it PCR, a of used. some tests, in to usually to of all will these know, that even very, difficult the order you It's Yes. is combination of in run. a we serology hope battery infection are are, get charge very Multiple labs detecting it all would because of add think detect. when Multiple

being $XXX least novel do that, pricing certainly or our may a own replace than of well what's we So, fit be those today, warranted. time, existing but believe may we be a more lot obviously all tests would sensitive that those higher north be than at would tests in of of of over we be with that we really Whether fit used than part determined and paradigm. approach higher be approach battery a in that would as there and

Ben Haynor

with or how of tests Okay, -- I kind about much of course that's way then as what's of helpful. want part as evolving on And the think kind you to it, standalone is are am of is still just are that be good definitely be whether quite it, will it it I to standalone possible about not that sure you offered think that it of or the as the trying or pricing. mean at a profitability get battery maximize volume something mix -– you to drive or done? test being a

John Sprague

Yes.

we more be of would there standard lower drive a combination to but sure to try to there, get for the run we share such prices in go still of profitability. profit days really of goods short range And the volume objectives out and and are trying in to to think drive can but of market drive a care. cost margin, our go like also I that in to early the reasonable $XXX to would drive

Ben Haynor

growth in these you kind a rate? I us give Where Can kind that remarks teens, then TXCandida Okay, that's is means that growth remaining single And does the steady. is about days? fall helpful. of of mentioned prepared it it you ballpark of digits?

John Sprague

We X% have Ben, been generally to XX% quarter-over-quarter. growing,

Ben Haynor

from Okay, me And systems sold kind guess then any quarter? were I just a question, lastly great. the a housekeeping during of --

John McDonough

almost units all sold were through international Yes. The distributors.

Ben Haynor

in not the Okay, U.S. though?

John McDonough

Not U.S. the in

Ben Haynor

All you. a right. lot, gentlemen. Got Thanks

John McDonough

you. Thank

Operator

session. end of would the We question-and-answer have remarks. for closing the to I reached management call like over turn back to

John McDonough

all thank dialing Well, morning. for this you in

in forward in very third excited was growth Thank that many made fronts to on continued the excited next progress you. back so and in look the seeing to -- growth are to the forward you business reporting quarter accelerated business, about We the and quarter. look and

Operator

today's conference. Thank concludes This you.

your may this thank You disconnect lines and your time for you participation. at

T2 Biosystems (TTOO) 12 Nov 192019 Q3 Earnings call transcript