Greetings, and welcome to the T2 Biosystems Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr.

Philip Taylor, Investor Relations. Please go ahead, sir..

Thank you, operator. Thank you for joining us for the T2 Biosystems second quarter 2020 financial results conference call. I would like to remind everyone that comments made by management today and answers to questions 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 these statements, including the risks and uncertainties described in T2 Biosystems' annual report on Form 10-K filed with the SEC, March 16, 2020, and other filings the company makes with the SEC from time to time.

The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. With that, I'd like to turn the call over to President and CEO, John Sperzel.

John?.

one, accelerating our sales; two, improving our operations; and three, advancing our pipeline. We remain laser-focused on our mission and fully committed to our corporate priorities. This pandemic provides us with an opportunity to dramatically increase our U.S. installed base of T2Dx Instruments and supply U.S.

hospital systems with high quality COVID-19 molecular diagnostic tests that deliver results in less than two hours. Our plan is to subsequently leverage a much larger installed base of instruments to advance our sepsis business going forward. Sepsis represents nearly $41 billion in annual U.S.

health care costs and causes the death of nearly 270,000 people in the United States each year, and $11 million globally. We deliver life-saving innovations to achieve faster targeted therapy, reduced unnecessary use of broad spectrum antibiotics and help to prevent and combat growth in antimicrobial resistance.

We continue to supply our T2Dx Instruments and our T2Bacteria, T2Candida and T2Resistance Panels to hospitals around the globe to aiding clinicians in the rapid detection of sepsis pathogens.

T2 Biosystems offers the only FDA cleared products to identify sepsis causing pathogens directly from whole blood in three to five hours without the need to wait days for a positive blood culture. Time matters, when it comes to sepsis, as each hour of delayed targeted treatment can increase mortality by up to 8%.

Data has shown that COVID-19 patients are susceptible to co-infections and secondary infections that can cause sepsis. Our hospital customers understand this connection, and have been using our sepsis diagnostic panels to help manage patients more effectively.

As such, expanding our test menu to include a molecular diagnostic test to allow the detection of SARS-CoV-2, the virus responsible for causing primary COVID-19 infections, is a great strategic fit.

With greater clarity around the impact of COVID-19 on demand for our products and our initial experience in the launch of the T2SARS-CoV-2 Panel in the United States, we are reissuing guidance for the full year 2020 as follows.

We expect full year 2020 total revenues of $18 million to $20 million, including product revenues of $13 million to $14 million and research and contribution revenues of $5 million to $6 million. We expect 60 U.S. T2Dx Instrument sales contracts in 2020.

We'll now shift gears to discuss the three corporate priorities we established at the beginning of this year to drive long-term success for the company, accelerating our sales, improving our operations, and advancing our pipeline.

Let's start by addressing our first priority, accelerating our sales by prioritizing adoption and increased test utilization. Product sales during the second quarter decreased compared to the prior year period, primarily due to fewer international sales of T2Dx Instrument.

Consistent with the first quarter, hospital customers continue to focus on COVID-19 patient management and delayed the evaluations of technologies to address non-COVID illnesses. As such, our second quarter product revenue was driven primarily by sales of T2Candida and T2Bacteria Panels. We were very pleased that U.S.

test utilization per instrument increased by 51% during the second quarter compared to the prior quarter, due in large part to increased testing of COVID-19 patients that were at risk for developing co-infections and secondary infections that can lead to sepsis.

I would now like to provide an update on the COVID-19 molecular diagnostic test, the T2SARS-CoV-2 Panel, which we've launched commercially in the United States on June 30, 2020, the last day of the second quarter.

We believe this new test will have a significant positive impact on our business by providing a new growth vehicle and driving increased sales of T2Dx Instruments in the United States, which are being pretty positioned for future adoption of our existing sepsis products.

The T2SARS-CoV-2 Panel uses a nasopharyngeal swab sample and runs our FDA-cleared T2Dx instrument, which can perform seven tests simultaneously and provides results in less than two hours.

Based upon testing in a clinical setting using known positive and negative patient samples, the T2SARS-CoV-2 panel demonstrated sensitivity of 95% and specificity of 100%.

To understand, how we plan to succeed in a growing COVID-19 diagnostic testing market, it's important to understand the types of tests currently available, as well as the locations where COVID-19 testing is being performed.

The FDA issued a document in July 2020 titled, Coronavirus Testing Basics, describing two types of tests, diagnostic tests and antibody tests.

According to the FDA, diagnostic tests can show if you have an active infection and include molecular tests that detect the virus is genetic material, such as the T2SARS-CoV-2 Panel and antigen tests that detect specific proteins on the surface of the virus.

Antibody or serology tests look for antibodies that are made by your immune system in response to a threat, such as a specific virus, not the actual virus. Antibodies can take several days or weeks to develop after an infection and may stay in your blood for several weeks or more after recovery.

According to the FDA, molecular tests can be used to diagnose an active-COVID infection.

While antigen tests may also be used to diagnose active COVID-19 infections, the FDA cautions that antigen tests are more likely to miss an active infection compared to a molecular test therefore, should not be used to definitively rule out an active COVID-19 infection.

Finally, according to the FDA, antibody test cannot be used to diagnose active COVID-19 infections. Today, COVID-19 tests are performed in numerous locations, including large, high-volume reference laboratories, hospital laboratories, long-term care facilities, urgent care centers, doctor offices, clinics and drive-through testing sites.

We're also seeing new testing scenarios to serve professional sports teams, universities, schools and employers. In almost all locations, the need for diagnostic tests and the need for rapid results is outpacing industry capabilities.

While it's true that our T2SARS-CoV-2 panel could be used to detect and help diagnose active COVID-19 infections in any of the aforementioned testing locations, especially given its 2-hour time to resolve. We plan to stay true to our mission and our target customer, which is U.S. hospital systems.

It's important to remember that these are the same target customers for our sepsis panels, T2Candida and T2Bacteria. Our objective is to significantly increase the installed base of T2Dx Instruments in the U.S.

market during the COVID-19 pandemic, and delivering a high-quality COVID-19 molecular test and leverage a much larger installed base to revolutionize the sepsis market going forward. We are experiencing high demand from U.S. hospital systems for our T2SARS-CoV-2 Panel and T2Dx Instrument, following the recent commercial launch.

Hospital systems are also experiencing high demand for molecular diagnostic test. And because diagnostic test manufacturers are unable to supply sufficient quantities of tests, many hospitals have acquired multiple testing platforms in an effort to meet COVID-19 testing demand.

We believe our ability to guarantee customers the supply and delivery of specific quantities of our T2SARS-CoV-2 Panel is a significant competitive advantage. This new demand has allowed us to shift our U.S.

commercial model from the previous practice of leasing or placing key T2Dx Instruments to selling instruments, selling service contracts, obtaining large upfront purchase orders and facing customers on standing orders for T2SARS-CoV-2 Panels. We are also actively working to convert existing reagent rental customers over to capital purchases.

At the same time, we're rebuilding our U.S. sales team with experienced diagnostic sales professionals who have already made a positive impact on our business. Moving to our second priority. Improving our -- by prioritizing cost of goods and expense reduction.

Over the past six months, we made significant progress in changing the cost structure of the organization. We've taken several steps to eliminate costs that do not support our corporate priorities, including headcount reduction, facility consolidation and driving efficiencies in manufacturing and logistics.

We've reduced our real estate footprint by approximately 22% during the second quarter, following the exit of one of our leased facilities. At the beginning of the second quarter, we implemented a number of initiatives to reduce the manufacturing cost of our products.

We're beginning to see the benefit of these improvements in our second quarter financials in the form of reduced cost of product revenue and reduced selling, general and administrative expenses, which is also driving a reduction in cash burn.

We believe the increased volume associated with T2SARS-CoV-2 will improve overhead absorption, and allow us to leverage our supply chain and implement additional improvements. Combined with other initiatives and volume benefits over time, we believe the cost of product sales as a percentage of revenue should continue to improve.

Related to our COVID-19 operational initiatives, we are significantly scaling with our T2Dx Instruments and T2SARS-CoV-2 Panel manufacturing to meet the current and anticipated demand.

We're taking measures to secure our supply chain in the form of increased inventory, and we are hiring personnel in instrument manufacturing, test manufacturing and quality assurance.

Our goal is to be in a position to deliver up to 60 T2Dx Instruments in the United States during the second half of 2020, which represents a sevenfold increase over last year. As a reminder, each T2Dx Instrument has the capacity to consume up to 60 T2SARS-CoV-2 Panels per day, depending on workflow.

That coupled with our standing order process, which we're implementing with customers, enables us to accurately calculate and forecast test demand based on our installed base of instruments. Moving to our third priority, advancing our pipeline.

By prioritizing our programs under the $69 million milestone-based product development contract awarded by the U.S. government in September 2019, I'm pleased to report that we are on schedule to create a next-generation instrument, expanded panel and biothreat panel.

We believe the next-generation instrument, an expanded panel under development, have the potential to revolutionize the blood diagnostics space and could potentially replace most cultures performed for species identification and susceptibility results.

As a reminder, our expanded panel is being designed to potentially cover up to or greater than 99% of all blood-borne infections and detect more than 250 species, in addition to all bloodborne antibiotic-resistant threats identified by the Centers for Disease Control and Prevention.

The government contract also includes a biothreat panel that we believe will be the first high sensitivity whole blood test for the detection of multiple biothreat patents and toxin genes. Based on our progress to-date, we are optimistic that the U.S. government will decide to fund the next phase of the contract.

In May 2020, we set ambitious goal to develop, validate and commercialize a COVID-19 molecular diagnostic test as early as the end of June. We're very pleased with the efforts of our team to develop a new class of tests on our platform during the pandemic.

On June 30, we completed the validation of our T2SARS-CoV-2 Panel to meet requirements for an Emergency Use Authorization or EUA, request to the Food Drug Administration. We submit our EUA request to the FDA on July 1, 2020. Given the significant number of EUA submissions, we're pleased to have recently been assigned an FDA reviewer.

We are actively engaged with the FDA in interactive review of the submission. We look forward to completing the process. As a reminder, consistent with FDA guidelines, we are actively selling, marketing and shipping the T2SARS-CoV-2 Panel for clinical use by our customers.

I want to inform you of an organizational change that will occur later this month. On August 21, 2020, Dr. Thomas Lowery, step down, Chief Scientific Officer to build a new cell therapy company. Tom's leadership has been instrumental in developing our technology and building our strong scientific team.

The timing of [Technical Difficulty] follows the completion of a number of important milestones, including obtaining a multiyear government contract to advance our technology, developing and commercially launching a SARS-CoV-2 test and strengthening our balance sheet to continue our commercial advancements.

I want to publicly thank Tom for his leadership and commitment for mission and wish him the best in his next venture. Moving forward, Dr. Roger Smith, who most recently led the development of our T2SARS-CoV-2 Panel has been promoted to Vice President and will lead our scientific team.

Roger has been with T2 Biosystems for 6 years and has worked in a leadership capacity on our scientific team on T2Bacteria, T2Lyme, T2Resistance and our government-funded biothreat and comprehensive panels. Now I'll turn the call over to John Sprague to provide the details on our second quarter financial results..

Thank you, John. Total revenue for the second quarter of 2020 was $2.6 million, an increase of 41% compared to the prior year period. Product revenue for the second quarter of 2020 was $1 million, an increase of 18% compared to the prior year period, driven by lower international instrument sales.

Research and contribution revenue for the second quarter of 2020 was $1.5 million, an increase of 185% compared to the prior year period, driven by increased funding under our U.S. government contract.

Cost and operating expenses for the second quarter of 2020 were $11.4 million, a decrease of $4.2 million compared to the prior year period, driven by lower cost of product revenue and lower selling, general and administrative expenses on lower international instrument sales.

Net loss for the second quarter of 2020 was $10.7 million, $0.09 per share compared to a net loss of $15.6 million, $0.35 per share in the prior year period. We completed the ATM offering in July 2020, and there is no remaining availability. Cash, cash equivalents and marketable securities as of July 31, 2020, were $69.1 million.

We remain compliant with the terms of our CRG debt facility. Thank you, and back to John Sperzel for closing remarks..

While the COVID-19 pandemic remains a significant global challenge, diagnostic testing continues to be center stage. We have an incredible opportunity created by the flexibility of our patented technology platform.

Our ability to provide clinicians with critical diagnostic information in hours rather than days is unique and can help to save lives and improve outcomes for COVID-19 patients and those under intensive care, who are susceptible to bacterial or fungal infections that may lead to sepsis.

We're excited to continue to drive the adoption of our technology while providing a powerful solution to clinicians in their efforts to combat this pandemic. With significant progress across all three of our corporate priorities, we have improved the position of the company, both financially and in the market.

We believe customer demand created through the recent U.S. commercial launch of our T2SARS-CoV-2 Panel will have a significant positive impact on our business moving forward. We have a strong balance sheet, an improved cost structure, a potentially disruptive product pipeline and an experienced management team and Board of Directors.

We look forward to providing updates on our progress toward these priorities throughout the year. We'll now open it up for questions.

Operator?.

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] The first question is from Puneet Souda, SVB Leerink. Please go ahead, sir..

Yes, thanks. And thanks, John and congrats on the strong results here. First question on trying to understand what does the pickup in sepsis means as a result of COVID? How sustainable is that trend? And correct me if I'm wrong, that this is a rule out test for sepsis.

Can you elaborate the growth that you're seeing there? It appears to be coming from that during the quarter.

How sustainable is that trend longer term? And what sort of contribution do you expect from that, specifically, not necessarily COVID testing? What do you expect from that sepsis in COVID patients in the second half because you have a significant ramp-up here in the sales in the second half?.

The uptick that we've seen in test utilization for sepsis panels is largely driven by customers who have fully implemented the test into their sepsis protocols. And we saw that, in particular, in some of the hot spots in Florida and New York City.

And in discussions with those customers, they're simply testing the COVID patients or those that are in critical care more frequently because of the risk of coinfections and secondary infections. So that part of it, we believe, is sustainable so long as the COVID pandemic is in front of us.

In terms of the ramp in the second half of the year, the instrument sales that we have planned in the back half of the year, which is approximately 60 instruments, are largely both driven placements and they will be fully utilized by the T2SARS-CoV-2 Panel.

The transition, obviously, is as the impact of COVID winds down some point in the future, we plan to transition those instruments that were installed during the COVID pandemic to our sepsis panels.

And as I mentioned in the prepared remarks, we are pre-positioning that with every single customer that's adopting our T2Dx Instrument with the T2SARS-CoV-2 test..

Okay. That's very helpful. And on the COVID assay, could you elaborate -- I think you gave a number of 60 tests per day. Is that a metric that can potentially increase? And how are you thinking about the next instrument? Is that a -- could you accelerate higher volume testing on that instrument, if you can provide any details on there.

The next instrument is designed for greater throughput. I think it's important to say that we are focused on the products that we have today for the moment. And so, when we look at the T2Dx instrument, it has a theoretical throughput of just north of 80 tests per day, assuming that we can deliver a test in a little under two hours.

However, when we look at practical throughput running three shifts, and some of our customers are running three shifts today, the practical throughput is about 60 tests per day. Now in terms of thinking about a model, we modeled that with customers running two shifts per day.

So you could call that a little bit conservative, but that's the way we've done it..

Okay. That's great. And then on the sales team, can you elaborate where do you stand currently? And what are the additions? What are expectations for additions into the second half? And overall, this is maybe a question for John Sprague, if you can provide your estimate on cash burn into the second half? Thank you..

So I'll take the sales piece. John can handle the up piece. I think it's important just to remember where we came from. In -- at the very end of Q1, we decided to eliminate the sales team that was in place.

And in the midst of the COVID pandemic, I think we talked about this before, there was a period of time where hospital systems simply would not allow a sales rep to enter the building. And in many cases, that's -- that still occurs.

So a lot of our selling efforts had been using other vehicles, remote vehicles, and we've been very, very successful with that. I can tell you that the inbound demand for our COVID test is significant. And we only need a few outsized sales reps in order to execute on that, which is what we have rehired.

We've rehired three regional account managers so far, and we'll continue to scale that as the pandemic winds down and as appropriate. John, if you want to handle the cash question that would be great..

Sure. So our cash burn was about $8.9 million in the second quarter. We see that as extending for the rest of the year, although we are adding manufacturing capacity as well as two commercial sales team. But it won't be a dramatic increase in burn.

We are investing in inventory levels, as John mentioned, and that will utilize cash, but we see that starting to turn as we exit the year..

Okay, great. Thank you..

Next question is from Max Masucci, Canaccord Genuity. Please go ahead, sir..

Hi. Thanks for taking the question. So, it's nice to see the reinstated guidance for the year. Can you just speak to some of the key embedded assumptions and then the potential swing factors? The guidance calls for 60 instrument contracts for the year.

What does the guidance assume for mix of capital sales versus reagent rental?.

100% capital mix, that's one of the great things that have occurred in the shift, is we were able to sell instruments. We're able to put customers on standing orders. With the sale of an instrument comes the sale of a service contract. So, commercial model has been on 180 from reagent rentals to capital equipment.

Now, I will say that we are making it attractive for customers to adopt our instrument technology, because there is both a short-term effort, which is to drive T2SARS-CoV-2 tests as well as to meet significant demand in the market. And there's a long-term play, which is to really revolutionize the sepsis market as COVID pans down..

Great.

And then just any initiatives to reduce the time line to get the instruments up and running once they are placed? Just would be helpful to understand, what sort of assumptions are baked in there?.

It's about three weeks, right now. So, it's been massively....

Three weeks. Great.

And then what sort of runway do you have to expand your manufacturing capacity organically? Are you still exploring manufacturing partners to help you extend the capacity? And then does your 2020 guidance assume -- what does the 2020 guidance assume for manufacturing capacity? Is it a constraining factor? Or is there any sort of dependency there?.

So, we plan to sell key instruments into U.S. customers in the second half of 2020, which I mentioned in the prepared remarks, is a sevenfold increase compared to last year. So, we're ramping our instrument manufacturing to stay ahead of that anticipated demand. We have littered a lot of materials.

John sort of highlighted that, that's going to show up in increased inventory in the second half of the year. We're ramping our test manufacturing as well to meet what we believe is significant customer demand.

The beauty about having the installed base that we have, knowing exactly where it is and what we plan to place in terms of COVID-driven placements is we can very accurately forecast the number of tests that our installed base actually can consume. So, the maximum number of that installed base it can consume.

Now, some customers are going to want to order more than that because they're experiencing allocations, delayed shipments or back orders with other manufacturers.

So, while we're making promises to customers on delivery because we know that we can stay ahead of our installed base in terms of the scalability of our test, some customers don't believe that and they're going to order more than what the instrument can actually consume on a day, a week or a monthly basis.

So, we feel very good about our ability to scale manufacturing of instruments. We feel very good about our ability to scale manufacturing on the test. And our model is a go-at-a-loan model. We are still pursuing opportunities for government funding, scale up procurement that we hope would be non-dilutive.

Of course, we can't make any guarantees that, that will occur..

Great. That's it for me and congrats on the new opportunity ahead..

Thanks Max..

We have a question from Ben Haynor, Alliance Global. Please go ahead sir..

Good afternoon gentlemen. Thanks for taking the questions and congrats on being able to offer guidance when a lot of firms have pulled back and have not been able to reinstate it.

So just thinking about the 60-system number, are those kind of -- what's kind of the mix in terms of new accounts, existing accounts that might need additional systems? And then how that incoming demand -- how many orders or indications do you have in hand at the moment?.

I would say that it's about 80% new customers, 20% existing so far. We're still six weeks into the launch. So, that's an early number. And we're confident enough in that 60 instrument number to give guidance. I think you started with that as a comment, Dan.

So, thanks for acknowledging that and we're pretty confident in these figures enough to give that guidance..

And maybe -- and then maybe you're not seeing this being that you've got incoming interest, but do you get a sense of what other solutions on the COVID testing front that these hospitals might be evaluating?.

Well, obviously, there are a lot of players in the COVID diagnostics space. As I mentioned in some of my prepared remarks that supply -- molecular tests that supply antigen test, antibody tests -- there are lots of different testing locations, that frankly, leads to a lot of confusion and misunderstanding.

So, I want to be very clear about where we're going to compete and how we're going to win. We're going to compete in the hospital market. We're going to be focused on supplying them with a number of tests that meets their expectations about our platform, and we're going to make commitments to that.

What we're seeing from other -- from many of our customers is that they buy a system from a competitive company and within one week, they're on allocation. And so the discussions that are taking place about turnaround time on instrument. Somebody might say, well, two hours. There are out there that can give results in less time than that.

That's great if you can get those tests. I mean what we're hearing if you watch the news every day is turnaround time is measured in days, not hours. We're going to stay very focused on the hospital market. I think we've all heard the adage that what you say no to is often as important as what we say yes to. That rule applies for us.

We're not going to chase other market segments that are outside of our long-term objective to revolutionize the sepsis place. This is a catalyst for us to go out and significantly increase our installed base, generate revenue, product gross margin and then to lift that down the road to building a really strong sepsis business..

Okay. That's very helpful. Thanks for the color there.

And then maybe following up a little bit on my first question, on the 60 units, do you expect a lot of these accounts just given the throughput to need multiple units or is it kind of 1.2, 1.5 systems per account on average?.

We are in discussions with many customers that want multiple systems, and that's great..

Okay. Thanks a lot gentlemen. That’s all I had..

Thank you, Ben..

We have a question from Steve Brozak, WBB Securities. Please go ahead, sir..

Hey, thank you for taking question. I've just got one follow-up. I know it’s too early for you to tell us in terms of what you're seeing with the COVID testing.

But can you tell us anything anecdotally about what your -- what the different hospitals, the different clinicians are giving you as far as feedback? Any light you can do would be terrific?.

I think one thing that I'd like to point to, Steve, is the fact that we already have a handful of customers that are using our Sepsis Panels as well as our T2SARS-CoV-2 Panel. Those are customers that already existed.

They were ones that asked us early once we announced that we were going to develop a COVID-19 test to be early adopter for that because they saw the connection clinically between critically-ill COVID patients and the risk of sepsis. So that was a thesis that we had when we licensed this technology from Hackensack Meridian Health.

And it's really exciting to see it play out that way, that we're meeting customer needs and we're helping patients have better outcomes..

Actually, thank you John -- that actually leads me to the next question in terms of the COVID sepsis correlation because that's something that, obviously, we're reading about in the newspapers all the time.

Can you give us any insight as to what you're seeing as far as how clinicians are practicing and how they understand this? And anything you can give us on that front, that would be terrific, and I'll hop back in the queue? Thank you..

So I might ask Tom Lowery to just comment about the clinical application between the sepsis panels and the COVID test.

Tom, do you mind responding to that?.

Sure, happy to. So we've seen data and more data are emerging about the presence of super infections and co-infections and a lot of our customers where utilization is up are customers that have been in epicenters of the outbreak, such as New York City and other places.

And so, we're seeing that as these patients who are suffering from COVID or in the ICU, they really discrete them rapidly and quickly for the presence of bloodstream infections and persistent fungal infections and they turn to our panels T2Candida and T2Bacteria to do that..

Great. Well, thank you again John and Tom. And congrats on, obviously, on this progress..

Thank you, Steve..

[Operator Instructions] We have a question from Mark Massaro, BTIG. Please go ahead, sir..

Hey guys, congrats on a good quarter. Thanks for taking my questions. I guess, before I start, for Tom Lowery, I just want to congratulate you for your long tenure of the company and all the successful development milestones you had to take T2 to this level..

Thank you, appreciate it..

And okay, so my first question, guys, if you could just help me with the guidance. So obviously, 60 placements in the back half of the year is something that I don't think anyone on this line was expecting. John Sperzel, you talked about receiving some orders in the quarter.

Just doing the math relative to the initial guide that you provided earlier in the year, that would assume an incremental step-up of, I think, its $4.5 million of product revenue relative to the initial guide.

So can you just give us a sense for -- have you received somewhere near 20 or 30 orders for the T2Dx system? Just some sense on the traction you have on the order side?.

Sure, Mark. First of all, it's an even bigger step-up than that, because by this time, in our initial guidance, we would have expected to be further along in product sales than we were through the end of Q2, because of the headwinds related to COVID, mostly in the international market and mostly moving from evaluations to closes.

So we expect a significant step-up from the first half of the year to Q3 and then an even bigger step-up to Q4. Now what drives that is instrument placements. The number of instruments that we have installed at the end of a given quarter, it's really what's going to drive revenue in the following quarter.

So if you look at the 60 units, we already have a significant pipeline of customers in our sales funnel that are in the contracting process. And we already have a number of customers that have gone live with our T2SARS-CoV-2 test, and new customers as well as existing customers. So we didn't plan to get into the specific number on this call.

But just in terms of the way we think about Q3 and Q4, we expect Q4 to be 2x above Q3, in terms of the way we think about that guidance for the full year..

That's super helpful. And then, on the successful increase in annuity per system, I think you said 51% sequentially.

How sustainable do you think that is? And can you give us any commentary about what July look like?.

Sure. So I don't have July in front of me, quite frankly. But where we were in Q2 versus Q1, just important to go back. At the beginning of the year, we said that the utilization in terms of number of tests per year measured in dollars was approximately $50,000. That's about what it was at the end of Q1.

I think it had inched north of $51,000, $52,000, and its north of $70,000 in the second quarter. So we obviously saw an uptick. And as I mentioned before, we saw it in hotspots. We saw it in New York. We saw in Florida. We saw it with some of our international customers, in Italy as well, although we don't count that in our utilization for the U.S.

So we think that, that part is sustainable. We set a target to get to $100,000 by the end of this year in utilization. Now, that's pre-COVID, but I think our prospects just got substantially better to even outdo that number, because we're now adding a COVID test to our platform..

Got it. Yes. No, that's remarkable.

And then your two large GPOs, Premier and Vizient, can you talk about the traction you've had within their large networks? Presumably, some of the COVID contracts or orders you've received likely might be stemming from those GPOs?.

We have not added the T2SARS-CoV-2 Panel to the Vizient or Premier contracts yet. That's something that we're going to look at in the back half of the year. Quite frankly, we have so much inbound demand right now. I don't think that, that's something that we need to address at the moment for a number of reasons.

And in terms of our sepsis business, obviously, COVID impacted the implementation with Vizient and Premier to start the year, but we expect that to be strong as we go forward..

Okay. And you said you now have a reviewer at the FDA on the COVID test.

Do you think this is four, eight, 12 weeks away? I mean, do you have a sense on roughly when we can expect to see an EUA approval?.

It's really hard to predict that, Mark. I can tell you that we are in an interactive review process, where exchange goes back and forth. What we can do is control our response time, and I'd tell you that we are going to be very prompt..

Yes. And I think....

That said, it's not slowing down our commercialization of the test. I mean, we are still able to market, sell, ship for commercial use, and we are..

Yes. Understood. Your -- you now have, I think you guys said $69 million of cash at the end of July. It's the highest cash balance you've had in a long time. How does that change how you think about -- John, you haven't been at the company for that long. You announced restructuring.

I know not all of your sales people have been in place in their seats a long time. But you do have a lot of tailwinds, you have a lot of new products, I think you have a relatively small sales force.

Is there any chance we could get you to quantify how many reps you have now? And then how many you think you might have a year from now?.

So having a strong balance sheet, obviously, is a blessing. We thank our shareholders for supporting that. It doesn't change the fact that we have to be good stewards of capital and we intend to be. On the other hand, we did that for a reason so that we could lean into commercial opportunities.

And we have a great one standing in front of us for sepsis as well as for COVID and we intend to do that. We have rehired three new regional account managers. These are expert people from very successful diagnostic companies. And I don't have a number yet for end of the year, Mark, we'll scale that as it makes sense.

Quite frankly, if we had 50 salespeople today, they'd be sitting at home and that's not the best use of our capital. So we're going to be slow in rebuilding that, but we won't let it get ahead of us..

Got it. On the T2Resistance Panel, I think you have CE-Mark. It's commercial as an RUO in the U.S. Can you give us a sense of timing with the FDA understanding -- I believe you have breakthrough device designation.

Just where are you in conversations with the agents?.

Tom, you comment on that?.

Yes. So the agency, they have these weekly town hall meetings and they communicated that everything not COVID-related is on the back burner. So unfortunately, that affects a lot of private programs. So we really aren't in a position to be able to say sort of ETA as to our discussions with them and the kick-off of our pivotal study..

Yes. That makes sense. Understood. And then sorry, for all the questions. Last one for me. You guys have a lot on your plate. My suspicion is that maybe the Lyme disease test might be on hold, given focusing on the task at hand with COVID and everything else going on.

Is that right or do you continue to pursue maybe an LDT launch with the lab part?.

So the LDT launch with the lab partner is still our strategy. And you're absolutely right in characterizing that as we're keeping that in our back pot given the other opportunities that we have in front of us at the moment. So it's a little bit on a backburner, if you will..

Great. Thanks, guys..

Thank you, Mark..

The next question is from Louis Samra [ph]. Please go ahead, sir. I’m sorry, he’s unregistered. Gentlemen, that begins that -- we've reached the end of the question-and-answer session. I'd like to turn the call back over to John Sperzel, CEO. Please go ahead, sir..

Thank you very much for your participation in today's call and your support of T2. Look forward to updating you next quarter. Have a great day, everyone..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..