Matt Clawson - IR, Pure Communications John McDonough - President & Chief Executive Officer Shawn Lynch - Chief Financial Officer Rahul Dhanda - SVP, Corporate Development David Harding - Chief Commercial Officer.

Issac Ro - Goldman Sachs Steve Brozak - WBB Securities Bryan Brokmeier - Cantor Fitzgerald Mark Massaro - Canaccord Genuity.

Greetings. And welcome to the T2 Biosystems' Third Quarter 2016 Nine Months Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Clawson from Pure Communications. Please go ahead, sir..

Thank you, operator. Good afternoon, everyone. Thanks for joining us for the T2 Biosystems' 2016 third quarter and nine months results conference call.

On the call this afternoon to discuss results and operational milestones for the periods ended September 30, 2016, are President and CEO, John McDonough; Chief Financial Officer, Shawn Lynch; and Senior Vice President, Corporate Development, Rahul Dhanda; and Chief Commercial Officer, David Harding.

The executive team will lead up the call with some prepared remarks followed by a question-and-answer period. I would like to remind everyone that comments made by management and responses to questions today will include forward-looking statements.

Those include statements related to T2 Biosystems' future financial and operating results and plans for developing and marketing new products.

Forward-looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in T2 Biosystems' Annual Report on Form 10-K filed with the SEC on March 9, 2016.

The Company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. Now with that, I'd like to turn the call over to President and CEO, John McDonough, for his opening comments. Good afternoon, John..

Thanks, Matt. And good afternoon, everyone. Thank you for joining us on the call. The third quarter proved to be a solid one for T2 from a financial, strategic, and operational standpoint, and our results further demonstrated the power of the T2 Technology and the immense potential it holds for creating a new global paradigm for patient care.

During the quarter we were able to increase our revenue to $1.1 million while decreasing operating expenses to $11.1 million. We also ended the quarter with approximately $75 million of cash and cash equivalents to the balance sheet, leaving us well funded to achieve our future growth milestones.

Shawn will provide a more detailed look at the quarter later in the call. Beyond our results and more importantly, 2016 continues to prove to be a transformative year for T2 as we have recently taken a number of strategic actions to position us for a long-term sustainable growth.

Back in July, we announced a multi-year agreement will Bayer to provide our T2 Magnetic Resonance Technology Platform or T2MR for Bayer's research and development efforts in blood coagulation disorders.

In September we announced a $40 million equity investment by Canon USA, that will fund the companies continued growth through the launch of the T2Bacteria panel, and today we announced a collaboration with Allergan to develop a novel diagnostic panel to detect gram negative bacterial species and antibiotic resistance for patients with serious bacterial infections including infections that lead to sepsis.

These partnerships represented important third-party endorsements of the game changing nature of our technology in T2 strategic direction. They will be an important part of our go-forward growth strategy, and we are actively working to expand our pipeline which will keep you updated on as we move forward.

Before I turn it over to Rahul Dhanda, Senior Vice President of Corporate Development, to provide some further details around the Allergan announcement, let me say that we're extremely excited about this partnership.

Together we hope to help address the serious and urgent threat to public health that antimicrobial resistance is creating by more quickly diagnosing sepsis and enabling the rapid delivery of lifesaving medicines to the millions of patients at high risk for infection while also providing significant cost savings to hospitals.

Rahul?.

Thanks, John. And good afternoon, everybody. As stated in the release, the announced partnership with Allergan will expand T2 Biosystems sepsis pipeline and will include the first direct from blood diagnostic panel to detect anti-microbial resistance.

Anti-microbial resistance may develop when a bacteria has repeated exposure to antibiotics forcing the survival of only those strains that cannot be treated by typical anti-microbial drugs.

One of the most dangerous trends is resistance to an entire class of antibiotics known as carbapenems because these are often the therapy of last resort for serious Gram-negative infections, according to the CDC and our panel is being developed to specifically identify carbapenem resistance.

Under the terms of this agreement, Allergan will pay T2 $4 million in milestone payments related to the development of the bacterial resistance panel, and an expansion of the T2Bacteria test panel currently under development. We've retained exclusive worldwide distribution rights for all products developed through this partnership.

Allergan has the option to collaboratively market T2 Biosystems' menu of sepsis diagnostics to targeted hospitals around the world through Allergan's leading physician-facings institutional sales force. We also believe it is Allergan's intent to use the T2Bacteria panel in their development in clinical trial efforts.

We look forward to working with the Allergan team and believe that together we can make a difference for patients around the world. With that, let me turn to tack over to John..

Thanks, Rahul. Before getting into the discussion around the customer commitments received in the third quarter, I want to take a minute and walk through the announcement you all have seen in our earnings release this afternoon related to the change to our Q reporting metric.

As we discussed last quarter, as T2 continues to grow and gain more experience, we'll be reporting on what percentage of the market universe we are penetrating with our close customer accounts and how it grows over time.

We sized the T2Candida market opportunity in the United States at 6.75 million high-risk patients; and the T2Bacteria market opportunity at 8.75 million high-risk patients. We've been targeting the top 450 hospital in the United States which represents about one-third of that market.

We estimate the European market size at over 3 million high-risk patients. We now see the critical indicator of future revenue is the number of high-risk patients within our customer base, not the number of contracts.

We started reporting these figures last quarter, and as we indicated then - view this number as the more accurate measure of the growing total opportunity within the expanding T2 product portfolio, especially as we work to bring T2Bacteria to market next year.

As a result and going forward, we will be migrating your key reporting metric completely from the number of signed contracts to the number of hospitals and the estimated annual number of symptomatic high-risk patients in hospitals and hospital systems under contract.

And while we will continue to report the number of contracts we have secured in a quarter, we are less focused on that number as we have learned that sales cycles within hospital systems are unpredictable and the number of contracts on its own does not paint the full picture of the health of the business.

During the third quarter, we were able to sign commitments that will provide access to approximately 43,000 patients considered to be at high-risk for sepsis infections.

That number represents six commitments from a total of 10 hospitals and hospital systems for the adoption of the T2 Candida panel and the T2Dx instrument; five in the United States and one in Europe.

One of the closed accounts is with a hospital system that includes two affiliated hospitals and will provide access to approximately 25,000 high-risk patients per year. The European account is with a large hospital in Spain that will provide access to over 8,500 high-risk patients.

We continue to be very encouraged about our ongoing progress in Europe where we remain well ahead of our initial expectations and continue to benefit from the significant market opportunity that exists due in part to the anti-fungal drug pricing environment.

On a worldwide basis, we now have a total of 125 hospitals and hospital systems with access to the T2Dx system and the T2Candida test. Those hospitals provide access to an approximate 345,000 patients considered to be at high-risk of sepsis infections which is approximately 150% higher than the number we quoted at this time last year.

As we have often indicated, customer success stories are an important driver in securing our next phase of growth. Last week at ID week, three T2Candida customers had presentations that demonstrated the power of our technology and the impact it's having at their institution. One example I want to highlight is the Henry Ford Health System in Detroit.

Henry Ford presented data that demonstrated through the implementation of the T2Candida technology the hospital was able to save approximately $2 million over a 12-period as a result of reduced patient stays.

These savings are right in line with the hospital economic savings we have been discussing with the investment community, and this is the largest case study to date that demonstrates the economic savings associated with accurate and rapid species specific diagnostic tests for the detection of Candida alone.

In addition to the news from Henry Ford, Riverside Community Hospital in California and Huntsville Hospital in Alabama reported positive results from the implementation of the T2Candida technology.

At Riverside, they were able to discontinue anti-fungal therapy in accordance with the clinical status in all patients and provide 100% of the patients the necessary treatment within nine hours. And at Huntsville, our technology was able to reduce the average duration of anti-fungal therapy in the average time to de-escalation of anti-fungal therapy.

During the quarter we continued patient enrollment in the ongoing T2Bacteria clinical trial and remained on-track for completing the clinical trial and filing for market clearance with the FDA by mid-2017. We continue to work hard to see if we can shorten this timeline.

We are also making good progress on T2 line as we have done with T2 Candida and T2Bacteria, we'll be conducting pre-clinical studies in 2017 which is expected to lead to an FDA clinical trial in 2018. On the sales front, we're making a change to our direct sales efforts in the United States.

Ahead of the T2Bacteria launch anticipated in 2017, a change also comes as a result of both the Allergan cooperative marketing partnership and continued unpredictable sale cycles and associated high customer acquisition costs.

We'd be reducing our sales force for an interim basis by about one-third and we'll be focusing the ongoing efforts on institutions and hospital systems that have demonstrated the success monitoring.

Our primary objective will be to continue to grow the customer base at a rate consistent with what we have realized this year while working very closely with these accounts so that they become the future success stories that will drive adoption of T2Candida, T2Bacteria and our resistance panel.

We believe this reduction is the right action for the business and we will reassess the size of the sales force as we get closer to the T2Bacteria launch next year.

As we move forward, partnerships - a growing number of customer success stories and the continued expansion of our diagnostic product portfolio; we expect sales cycle so accelerate and more accounts to actively engage but the timing for acceleration is difficult to predict and may not happen until the launch of T2Bacteria.

With that, let me turn over to Shawn to take you through the quarterly results and are our outlook.

Shawn?.

Thanks, John. Total revenue for the second quarter was approximately $1.1 million which consisted of $580,000 in product revenue compared to $245,000 in the third quarter of 2015; primarily from sales of T2Candida and instruments and $504,000 in research revenue.

Total operating expenses, excluding cost to the product revenue for the quarter were $11.14 million compared to $11.4 million for the third quarter of 2015. The cost containment has been a focus area for us ahead of the T2Bacteria launch and we are pleased with these results.

The net loss applicable to common shareholders for the third quarter was $12.8 million or $0.51 loss per share compared to $11.6 million or $0.57 loss per share for the third quarter of 2015.

Our balance sheet remains strong, we ended the quarter with approximately $75 five million of cash and cash equivalents with an additional $5.4 million available under our equipment leads currently in these facility.

Looking ahead we are targeting an increase in the number of high-risk patients at healthcare facilities by 150,000 patients over the next 12-months ahead of the launch of T2Bactria.

In the fourth quarter, we are anticipating higher product revenue from the testing of more patients with T2Candida and it was realized in the first three quarters of 2016. Primarily as a result of additional hospitals going live and the increased use of the T2Candida plan at the institutions that are - are we testing patients.

Additionally total product revenue could show flat to nominal growth to the fewer instruments expected in the fourth quarter while research revenue is expected to be comparable to what we saw in the third quarter. We expect total operating expenses for the fourth quarter of 2016 to be between $11.3 million and $11.8 million.

These expenses are expected to include approximately $1.7 million to non-cash expenses which are primarily depreciation and stock compensation expense.

We anticipate the total number of common shares outstanding will be approximately $30.4 million in the fourth quarter and for the full year the forecasting weighted average shares outstanding of $26 million. With that, I would like to turn the call back over to John for some closing remarks..

We believe the future is very bright for T2 Biosystems. At our core, we are working to deliver diagnostic products but fundamentally change clinical decisions in a way that saves the lives of the patients and delivers a strong economic return to the hospital system.

There is a paradigm shift occurring within hospitals with regards to how they approach patient care, and our technology is allowing our customer hospitals to be at the forefront.

Through our technology we want to be partners in this inevitable change by helping those pioneering institutions reduce the patient spend [ph] in the intensive care unit in the hospital, reduce the patient mortality rate, increase the long-term call of life for patients and lower the re-admittance rate for patients.

Our technology can be a game changer is demonstrated by Henry Ford and numbers; and our product pipeline will help drive further adoption.

Partnerships such as the ones we've Bayer and Allergan and that investment by Canon, not only provides third-party validation but also will help accelerate the growth profile of T2 through the launch of T2Bacteria and T21.

The market opportunity is clear as well, sepsis continues to be one of the leading causes of death in the United States and the most expensive of hospital treated conditions cost the U.S. Health Care System over $23 billion per year.

We now have the right team, the right approach it and we are screwed focused on entering into the next phase of growth for T2. With that I'd like to turn the call over to the operator for questions.

Operator?.

[Operator Instructions] Our first question today is coming from Isaac Ro from Goldman Sachs. Please proceed with your question..

Good afternoon, guys. Thank you.

Given your comments regarding the reduction in the salesforce, I was hoping you could maybe spend a little bit of time talking about what the remaining assets that you have where you are your most focused? And if you could frame that in terms of driving increased penetration and utilization on existing installations or just driving a larger installed base? Just Rank ordering the key priorities they have now as you go to market with a little bit of a smaller effort..

You bet, Issac. Great question. So as we look at the priorities going forward, we believe we can continue to close accounts at a rate very consistent with what we've been closing at. Importantly, continuing to grow the number of high-risk patients customer base.

Having said that, really the number one priority would be driving successful customer implementations.

As we've been talking about for a couple of quarters, we really think that what drives the future growth of both T2Candidaand for that matter we'll prepare for the launch of T2Bacteria, is having the kind of successful customer success stories that we're now seeing enter the marketplace.

The story from Henry Ford that was released just last week, it's phenomenal.

In a six month period of time they were detecting over 50 patients, reducing length of stay in a side by side study by four days in the hospital even bigger than that seven days in the ICU, that translated to over $2 million in savings, it's almost perfectly consistent with the economic savings model the we've been talking to investors about over the course of the last two years.

So more of those stories is more important, is clearly the most important thing, number one. Two would be continue to close the customer base, and we're hopeful maybe we can do better.

What would drive that would be the impact of these customer success stories, the impact of the type of endorsement we're getting from Allergan and potentially other third-party relationships.

And then thirdly which I'd put on the left, maybe not in the next 90 days but as we get beyond that, the third element for our sales focus would be preparing for the important launch of T2Bacteria next year..

Thank you. And maybe just a follow-up. If I try to take a balanced view here, obviously the ramp in your installed base has taken a little bit longer than we would have hoped for a year ago but at the same time you pointed to some of the success stories you had, some of the feedback you've gotten from customers, that's clearly showing value here.

And then you obviously have a pretty solid balance sheet to work with.

So as you look at the next 12 months and try to help analysts think about how your go-to-market strategy is going to change, is there maybe one or two things here that you think will really be different about how you go to market to try and achieve greater or a faster pace of success..

Yes, absolutely. It's really taking - the customer's success story do two things for us, one is, obviously that really impacts adoption rates in a really significant way. I think everybody understands that.

But the second and perhaps equally important part of these customer success stories is - so what do they do to be successful? I mean what do we learn there that you can apply to the next account.

In addition to Henry Ford, we had really exciting stories coming out of Riverside, Huntsville, back at ASM; we had several as well, Lee Memorial Health System being one.

All of the learnings and in fact, when these folks talk to each other, how do you –implement, what patients do you [tab][ph], how do you ramp up patient testing volumes? All of these learnings will help really drive and hopefully accelerate the adoption of the testing of patients within our closed accounts.

We were on a very, very nice path, something we were thinking and hoping we'd be talking about now but it's still a little bit too early, we were seeing a very nice penetration of growth and testing within our accounts that have gone live.

But as we have talked about in Q1 and Q2, the number of those hospitals were just too small, we didn't have enough information to want to report but what we saw happening was a very nice double-digit quarter-to-quarter growth out of those accounts that were growing and testing patients and that was all being driven by the success that they were having.

Unfortunately, the product issue that we had - with the manufacturing issue that had us pull some product back from the field at the end of June which is completely behind us it impacted growth in Q3, we could see that.

July and August, we saw a modest - very low double digit decline in volume, good news is they are all back, in fact, in total doing it even better than that in the month of September, and appeared to be right back on-track as we enter the fourth quarter.

But we're seeing a nice steady cadence of growth, and yes, the way we approach accounts, the way we go into customer base, assist them, aid them in patient selection criteria we think will really influence not just the number of accounts closing but the number of patients being tested..

Got it. And then last question for me and I'll get out of the way is T2Bacteria, you mentioned you're on-track with the clinical trial and filing for next year.

Can you talk a little bit about what you've learned about what it will take from a commercial standpoint to drive adoption? Obviously you've got a lot of experience selling T2MR for Candida but if you look towards the bacteria opportunity, the hope had been that they would open up a much bigger market for your platform and I'm wondering as you go through the process on the regulatory front, how you're thinking about the investment in focus that you want to apply for bacteria?.

Yes, so the regulatory side, I think it's very comparable with what we're doing with Candida, and what we did with Candida. So there is a lot of learnings that are being applied, so we feel very comfortable with that process.

I think there is a number of huge advantages of getting the bacteria product into the market, not the least of which is that many people inside of hospitals, especially folks within the lab, they really understand bacterial sepsis inherently more than they understand Candida based sepsis.

Once you get them to do the work on that they understand Candida is a big problem, probably a lethal problem to bacterial sepsis but there is an education that goes on that in part [inaudible] sales cycles and maybe even some skepticism and people wanting to wait for T2Bacteria.

So I think T2Bacteria is going to break that barrier in a significant way. Second of all, it's going to provide a more complete solution to the market.

I mean the combination of T2Candida and T2Bacteria will enable 95% of subject patients to be brought on the –right drugs within the first six to twelve hours, I mean that's it, that’s the –Holy Grail, right, it's all about getting patients treated more quickly.

And then thirdly, and obviously as the bacteria product enters the market, that will mean more testing of patients but that will then help accelerate the [inaudible] of patients being tested within an institution..

Got it, thank you very much..

Thank you. Our next question today is coming from Steve Brozak from WBB. Please proceed with your question..

Good afternoon. Thanks for taking the question. I wanted to follow-up on this because you had you obviously mentioned a couple things in terms of the reception that you're getting and all the validation you're getting from partners and facilities.

What are the - what's the feedback? What's the validation that you're getting from the individual clinicians and specifically, I know it's going to be anecdotal but what are you hearing about success stories as far as the patients that were treated? You just said ID Week that just came through, what can you tell us about that and I've got one follow-up after that please..

Yes, you bet. I'm going to let David Harding take that question because there was a great presentation at ID Week last week from the Head Clinician at Henry Ford and others.

So David, you want to pick that one?.

Yes, absolutely. So what are the kinds of impacts we're seeing with patients, it's really quite striking, right.

So on the patients who are detected positive - what the evidence is showing in some of these posters indicated is that we are identifying patients who otherwise would not have been identified with a Candida infection until several days later that enabled the physicians to get the drug treatment on board more quickly and you know really get that patient treated effectively.

This is a tremendous benefit for the clinicians and obviously for the patients but that then leads to these tremendous savings in ICU time reduction. So that is a huge benefit and clearly what we're seeing on the negative side, right, when a patient is tested and comes out negative is a reduction in the use of antifungals.

And as we all know, antifungals are quite costly. We're also minimizing the impact of resistance when we don't treat people who don't need to be treated that minimizes overall resistance in the system and in that individual. So these are great impacts.

The other - more subtle things that we're seeing are sometimes blood culture will only detect a single organism, in many cases where there are multiple infections the T2 test will pick up each of those infections and allow the patient to be treated with the right combination of drugs whereas they might have been missed with the standard blood culture.

So the net-net of it is, length of stay improvement, certainly reduction in antifungal cost and a more rapid time to treatment that is ultimately leading to a better patient outcome..

And along those lines, obviously the Allergan partnership is one that - they are validating you guys but they are also looking to increase their presence on their business model.

Do you see a continuation of these types of licensing deals or these types of collaborations going into the future where other pharmaceutical or biotech companies use your technological platform to invest themselves and at the same time obviously further your success? And I'll hop back in the queue after that. Thank you..

We do. In fact I think when you look at the deal that we've done with Bayer, the deal with Allergan, it's all a part of the pipeline we've been cultivating over quite a bit of time and continue to cultivate.

And as we continue with - working with and developing that pipeline, we anticipate - we'll see more of these and now it's not something that we can predict, it's certainly something that - as we find the right opportunity for us and the right opportunity for the partner, we will pursue it and we will develop more of these opportunities..

Yes, and I want to add on top of that. Sometimes you're going to hear about them too, sometimes you won't. So for example, there is a pharmaceutical product that entered a clinical trial this year and we're baked into their FDA protocol and it has been able to use the T2Candida test to enroll patients.

And in fact that's aiding in the driver with option within certain hospital accounts because while the pharmaceutical companies, they only have to make - if they can detect patients quicker, they will get through to the enrollment of their clinical trial quicker because a lot of times - and we know this, if you wait a couple days to get the positive blood culture, I mean the patients feel sick, you can't even get them through to sep [ph].

And then secondly, most importantly, what we really enable is for drugs to be more effective. So if you can get the patients enrolled earlier, that drug is more likely to get cleared.

So it's already been happening, what we're doing with our Allergan is really, really exciting; it moves us into the whole world of susceptibility testing which is something we've been talking about as a plan for us to go down that path, resistance being intuitive and being able to go directly off of a blood sample. We see the big benefit of that.

Of course this is a bigger benefit to identify the species because we're picking up 50% of patients that get completely missed by blood culture but now adding susceptibility, we'll get another 10% but that might be delayed in getting to their right treatment, so there is a huge benefit to that - we're excited about working with Allergan and the potential to be working with the sales force in the future as well..

Great, thank you again..

Thank you. Our next question today is coming from Bryan Brokmeier from Cantor Fitzgerald. Please proceed with your question..

Hi, good afternoon.

So you mentioned the susceptibility testing; is that the changes that you're talking about to the T2Bacteria panel that the Allergan agreement is having? Or it's just about a change that is causing that expansion of the panel?.

No, there is actually two things going on here. So separately we're going to build a susceptibility panel for Gram negative resistance. And then separately we're going to expand the T2Bacteria panel which has 60 sheets on it today.

We're not expanding it at the time of the launch of T2Bacteria, so nothing we're doing here has any impact on the timeline or even when our T2Bacteria product but you will see in the future is unique.

I will almost think about it as - the T2Bacteria panel that will expand the number of species that we're detecting directly from blood sample and that will just be an enhancement to the cartridge and the reagents that we provide with Version 1 of the T2Bacteria panel..

Okay. And could you elaborate a little bit more on how the Allergan collaboration is impacting your near-term commercialization efforts you've talked about.

That is being one of the reasons that you're reducing the salesforce?.

Great question. So there is really two elements to it and I'll tell you what we're planning for and what we're working towards.

So what planning for is that - in the short run we get a very significant endorsement from Allergan and that's invaluable as the Henry Ford story and the Riverside story, and it just more supports around the strength and the power of what we're doing with all of our substance product line.

What we think is likely to happen in the future and it could happen sooner, we're going to assume it happens only a bit later, because it's just a prudent way to plan the business is that Al again we think it will likely be promoting our products at certain targeted hospitals around the world including inside of the U.S and that will just expand our presence and expand the number of opportunities that we pursue it's very much of a cooperative marketing relationship, that's something very excited about and for all the logical reasons.

It's good stewardship within hospitals and certainly one of the leading institutions for the training - for training hospitals how to treat patients, and having what we're doing and being a part of that algorithm and part of what they're educating people about, it is just got to get them and they know that and obviously our panel is identifying pathogens, where they're - where their drugs can be just extremely powerful and affected.

So when that all will happen. We'll see how it plays Self-help, hopefully sooner rather than later but our expectations is there is probably slight early on and more helpful down the road..

Well, then the high-risk operation population we talked about is attractive. How is hospitals that are enriching - using the system and how can you further drive that increase in utilization..

Yes.

So to me they're all using a little bit differently, I mean they're all starting with some sub segment of what I will call the high risk patient population, and what we're seeing as I mentioned earlier we were seeing very nice growth, we think we're back to seeing that kind of growth in their usage of the product in terms of going online, but they all go through a process of setting that initial patient collection criteria to their naturally going to pass, and then they roll it out and get a really good ones who know how to manage and monitor and see the impact in the expand for whom they educate the Cornishman et cetera.

Most of them start by tapping patients that are in the intensive care unit, that's usually a part of where they start and often they go beyond that as well, and we think we can impact that in a pretty significant way as it gets further and further demonstrated that what they - they really should be doing is screening all of their high risk patients and that's our objective.

We never assume, we never get 100% contrary of all high rotations, but they should and that's our objective and the more board data that's brought to market. You know by these accounts for testing patients are demonstrating the impact, the more we're going to move in that direction.

The data that we're seeing in the market from places like Henry Ford [ph] not to keep referring to that one but if you run the economic model they are seeing about eight times return on investment. Well, to the price they're paying per test, that's just absolutely extraordinary.

And where this is very we can rap over they don't even have to buy an instrument up from - and they are getting that return on investment for weeks after the online, maybe day.

So, that's what open a bigger drive usage, that of course the impact you can have a patient's life and helping hospitals really believe that through the success story, is what's ultimately going to drive further exhilaration of testing patients and more adoption broadly across more across the country, across the United Stated, and Europe..

Are those costumers - Presentations from like Henry Ford in Riverside are those result of that might be published at some point, or they really just presentation in case examples that I wouldn't be in any sort of per view of your journal..

We are hopeful, that's not for us, we're pretty hopeful and we'll try to get it, the peer reviewed publication in the future and so, I think you will see that at the data was released in post presentations last week and sometimes as you have seen these previous post presentation, I'm sure most of you have they don't often go into calculating dollars, but what you can see is that use calculated value self.

If you look at data for example you see that on average patient spending seventy with intensive care unit with average security in care unit of $4,000 they should be spending few more days in the hospital, they get into specifics and reductions and I think was all there in the posted format which from our stand point is more than good enough as you go from one newer opportunity to another, in terms of parking the hospital but for those on the phone that might want to see the data themselves, you just got to kind of call that date, Google search of the average costs of day and night for you and you will get the numbers real quick..

Okay, thanks..

Your next question come from Mark Massaro from Canaccord Genuity Please proceed with your question..

Thanks guys for the question. My first one is on the R&D deal and a little surprising to see - but I guess we were surprised to see your other partner as well.

My question is they're - organ is more known for aesthetics in ophthalmology, two areas in particular they are diversified, so can you maybe comment on how long you've been talking to organ, their existing capabilities in infectious disease and then related to that what their commercial channel is today that would overlap with yours..

You bet. Mark, as you know we aim to keep surprising as long it is all good. But overall want to examine. Yes.

Well, I mean so I thought the real conversation to organ have been I think they've been extensive and they've been tracking us and we've been aware of them because they do have some very effective gram negative therapies like - I think that are that are successful in the market.

And they built a very strong channel, in fact one of the largest in the anti-infective space. So they have dedicated themselves and have been very, very committed to the area and developing more therapies in there.

If you look at their pipeline and whatnot you will see that they are committed to expanding on the negative targets that they have as well as [indiscernible].

So it not as surprising as it may seem it terms of the set because they really do have a commitment not just to delivering [indiscernible] but also to delivering solutions anti-infective being a stewardship partner.

And I think what they really represent is an indication of the fact that they are - there is a need within the space for anti-infective in particularly to have better diagnostics to guide the use of therapies and that trend is bigger than just the hour gap opportunity, it extends into broad anti-infective category and so a big - it's representative of the kind of deal we can deal and it's representative of the opportunities that's ahead of us.

We hope to find and work with the right sitting companies as we have now going forward and I think the channel itself is just one of many that we can leverage if we consider fall in model forward..

And do you know roughly what the size of their sales force in the infectious disease space?.

We do but that's probably not for us to disclose, we are not sure what they have to disclose but they have a very powerful and large position facing day sales force and I will let you found that out yourself, they are important partner probably not for us but specifically about..

And then maybe for you John, as we think about the bacteria panel, you mentioned you have intentions to increase the size of that panel.

Can you just walk me through how that can be done in terms of clinical trials and submissions to the FDA, is there anything you need to do differentially relative to your original forecast with your clinical trial work and as you push through FDA clearance there?.

So just to clarify the first T2Bacteria product that's coming from [indiscernible] will not include the expanded [indiscernible] panel. We're not changing that timeline for FDA clearance so there is nothing new vis-à-vis that panel and this is not to disrupt that in any way, shape or form.

What we will be doing then probably in parallel honestly we will start building the probes to detect the additional species associated with this contract and we will then enter some kind of an FDA trial for it, it perhaps can be better on a more limited basis, perhaps there is a way to get that to market a little bit quicker but we don't have a timeline on that.

You shouldn't expect to see that in 2017 that's for sure and as we get closer to understanding what that timeline might look like we will certainly be back with that along with the negative panel that will be developing to let you know what those timelines might be but you know don't expect to hear too much in the next couple of quarters but rest assured we're often working on it and really excited about it.

It really broadens and expands the full set of solution we're bringing to market and we know customers are going to be excited about it as well and others we are not - there is more to come, it's just so much more opportunity for us beyond what we're talking about today and we look forward to talking about that in future as well..

And maybe my last question, you quote six customer commitments in the quarter and I know that you're shifting the focus of your metrics to high risk patient, is it reasonable to think now that you are kind of hovering in that mid-single digit contract that that is likely to continue until you get bacteria on to the market or how should we think about the number of possible contracts?.

Well I think what I would encourage you to think I never thought build a model - I will just tell you the way we're building it, we think we can add a 150,000 high risk patients to the customer base over the next 12 months, think about that as adding 150,000 patients hopefully more but the 150 will be the target you know honestly if we have got that in one contract I would be delighted if it became in 30.

So I have got a couple one contract, although there are opportunities where you would actually cover that number and then rest assured we keep going and beat the number.

But the number of high risk patients is far, far more important than - you're right I think expecting the same cadence than we have been at I think that's the right expectation that I have, that's what we would say.

We added just under 50,000 high risk patients here in the third quarter and you know we have been running kind of right between that 30,000 and 50,000 high risk patients per quarter and if we maintain that pace that's about a 150,000 over the next 12 months and we feel very good about the opportunities we're pursuing that we can deliver on that.

And as that number evolves or change we will come back and let you know, we will - quarter on quarter basis I think you've got the right expectation..

[Operator Instructions]. Our next question is coming from Paul Knight from Janney Montgomery Scott. Please proceed with your question..

This is actually [indiscernible]. I was wondering if you can provide more details on the data that you presented last September on the Lyme disease diagnostic including the initial levels of sensitivity and the performance of the test again existing PCRD [indiscernible]..

We're really excited about the progress we're making with the Lyme disease panel, so thank you very much for that and our objective is to enter preclinical studies next year and that should set us up to enter an FDA clinical trial probably right in [indiscernible] seasons upon us in 2018.

Through the data that we're able to present was very, very exciting we're able to detect and demonstrate for the three different species that are on the T2 line panel, a limited detection of less than 10 cells per ml, all the way down to the five cells per ml range.

We also had a 21 clinical samples where we demonstrated the T2MR was detecting eight positive versus PCR that are only picks up one so we had some really strong clinical data and kind of the bottom line is this we demonstrated that for borrelia which is the primary cause of Lyme disease here in the U.S.

the others that are on the panel are more geared towards Europe, we're showing far superior sensitivity to PTR [ph] and of course remember the issue here is that according to the PVC about 90% online these patients go completely undetected and so the fact that we were able to - small sample size and ADEX [ph] improvement of relative to PCR is very, very encouraging data and having to limit the detection below 10 cells per ml for reaching the species that's really indicative very consistent with the data that we have been to demonstrate around all of our diagnostics pathogens as well..

You've been optimistic in the past also on the prospect of securing additional agreements with distributors in Europe to increase your coverage there, what is the current situation on these?.

Yes you should expect what's going on in Europe is very, very exciting we're way ahead of where we expect to be at this point.

We close another large hospitals in Spain in the quarter, we think we can continue to see a nice perhaps even growth in number of accounts that we're closing in Europe as we enter 2017 and a part of that you should expect to see more distributors coming on board as well..

Thank you. We have the end of the question-and-answer session. I would like to turn the floor back over to Mr. McDonough for any further or closing comments..

Well we're really excited about the developments in the third quarter. The addition of the [indiscernible] partnership that we announced today and lot could be lost in a shuffle here with significant endorsement and investment from Canon U.S.

that we closed back in September that puts us in just an extraordinarily strong financial position and I just want to point out that probably the most important development in the quarter are the customer success stories. I think everyone should understand that we have a unique and novel and compelling value proposition.

We have been talking to you about it as a public company now for about two years, that's all the value proposition is not alone intact, it's playing itself out in the market and we're really excited to go forward with all of these tremendous endorsements behind us and look forward to the introduction of T2Bacteria next year where we think we can really accelerate the business.

So thank you all for taking the time to dial in and we look forward to reporting back next quarter..

Thank you. And that concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today..