Good day, everyone. And welcome to the T2 Biosystems Preliminary Fourth Quarter and Full Year 2023 Results Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now pleasure to turn the floor over to your host, Trip Taylor, Investor Relations. Sir, the floor is yours..

Thank you, operator. I'd 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 on March 31, 2023, 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 would like to turn the call over to Chairman and CEO, John Sperzel.

John?.

sepsis, bioterrorism and Lyme disease, which all share a critical need for rapid pathogen detection and targeted antimicrobial treatment. We've made significant advancements across our new product pipeline, which is focused on expanding the test menu on the FDA-cleared T2Dx instrument.

During 2023, we filed 3 FDA submissions, and we have already received 2 FDA 510(k) clearances. First, we submitted a 510(k) premarket notification to the FDA for the T2Biothreat Panel. And we announced receipt of FDA 510(k) clearance in September 2023.

As a reminder, the T2Biothreat Panel is a direct from blood, molecular diagnostic test that runs on the FDA-cleared T2Dx instrument and simultaneously detect 6 biothreat pathogens, including organisms that cause anthrax, tularemia, glanders, melioidosis, plague and typhus.

These pathogens have been identified as threats by the CDC and if not treated promptly can have mortality rates of 40% to 90%.

Our clinical evaluation of the T2Biothreat Panel demonstrated positive percent agreement or sensitivity of 100% for all targets, except Francisella tularensis, which was 94.3% and demonstrated negative percent agreement or specificity for all 6 targets of 100%.

Second, we submitted a 510(k) premarket notification to the FDA for the expanded T2Bacteria Panel to include detection of Acinetobacter baumannii. And we announced receipt of FDA 510(k) clearance earlier this week.

As a reminder, the T2Bacteria Panel is the only FDA-cleared diagnostic test able to detect sepsis-causing bacterial pathogens directly from blood in just 3 to 5 hours without the need to wait days for a positive blood culture.

The expanded T2Bacteria Panel now covers approximately 75% of all sepsis-causing bacterial pathogens commonly found in blood stream infections, including [indiscernible] pneumonia, Acinetobacter baumannii, Pseudomonas aeruginosa, E.coli.

In a large study of nosocomial bloodstream infections, Acinetobacter baumannii was the 10th most common pathogen and has accrued ICU mortality rate of 34% to 43%.

Due to the emergence of pan-antibiotic-resistant Acinetobacter baumannii, the World Health Organization has identified - Acinetobacter baumannii as the most critically important bacteria that requires improved prevention and therapeutic approaches.

Acinetobacter resistance to many antibiotics, including carbapenems, highlights the importance of rapid detection and targeted antimicrobial treatment. Third, in December 2023, we submitted a 510(k) premarket notification to the FDA to expand the use of the FDA-cleared T2Candida Panel to include pediatric testing.

As a reminder, the T2Candida Panel is the only FDA-cleared diagnostic test able to detect sepsis causing candidate pathogens directly from blood in just 3 to 5 hours, again, without the need to wait days for a positive blood culture. According to the U.S.

Centers for Disease Control and Prevention, or CDC, up to 95% of all invasive candida infections in the U.S. are caused by the 5 candida species detected by the T2Candida Panel, including Candida albicans, Candida tropicalis, Candida parapsilosis, Candida krusei and Candida glabrata.

Candida species are a major contributor to morbidity and mortality in hospitalized children and present a significant burden to the U.S. health care system with a mean increased hospital length of stay of 21 days and an estimated $92,000 in excess hospital costs for children with invasive candidiasis.

A 2022 Journal of Clinical Mycology study conducted at Bambino Gesù Hospital in Rome, Italy found that pediatric patients suspected of fungal bloodstream infections that were tested with the T2Candida Panel received species identification results 121.8 hours faster than compared to blood culture.

Looking forward to 2024, we expect continued advances in our pipeline. Following my comments on pediatric testing, as part of our commitment to expand the clinical utility of our sepsis test panels, we expect to receive FDA 510(k) clearance to expand the use of the T2Candida Panel to include pediatric testing.

We also plan to submit a 510(k) premarket notification to the FDA to expand the use of the FDA-cleared T2Bacteria Panel to include pediatric testing. In addition, we have three new tests in our pipeline, including the U.S. T2Resistance Panel, the T2Lyme Panel and the Candida Auris test.

Each of these new test panels or test is designed to run on our FDA-cleared T2Dx instrument, and each of these three previously received FDA breakthrough device designation, which will provide for a prioritized FDA review upon submission.

The T2Resistance Panel is a direct from blood molecular diagnostic test designed to simultaneously detect 13 antibiotic resistance genes known to cause antibiotic-resistant infections in just 3 to 5 hours without the need to wait days for a positive blood culture.

We believe the T2Resistance Panel will be a very important addition to our expanding test menu as we expect it to be the first direct from blood or culture independent antimicrobial resistance test, and that can drive increased adoption of our platform. We have completed all external testing in the T2Resistance Panel U.S.

clinical trial and we are now focused on internal stability and shelf life testing, and we expect to submit a 510(k) premarket notification to the FDA in the third quarter of 2024. The T2Lyme Panel is a direct from blood molecular diagnostic test designed to detect Borrelia burgdorferi, the bacteria that's the major cause of Lyme disease in the U.S.

There's a critical need for new Lyme disease diagnostics. With an estimated 476,000 cases annually, Lyme disease is by far the leading vector-borne disease in America.

The current diagnostic process, a 2-tiered antibody test algorithm originally developed in 1994 for disease surveillance - as a stand-alone diagnostic test relies on the presence of antibodies and can only be used accurately 4 to 6 weeks after infection. Early diagnosis of Lyme disease is critical.

If left untreated, debilitating disease can spread throughout the body and become much harder to eradicate. As we announced earlier this month, we've been selected as a Phase II winner in the LymeX Diagnostics Prize, and will receive $265,000 to help accelerate the development of our T2Lyme Panel for the early detection of Lyme disease.

We appreciate the support from the Lyme Innovation Accelerator or LymeX from the U.S. Department of Health and Human Services and the Steven & Alexandra Cohen Foundation. As I mentioned earlier, we're advancing the T2Lyme Panel toward commercialization and planned the initial U.S. launch as a laboratory developed test or LDT.

We're in discussion with potential laboratory partners, and we're exploring the potential to obtain non-dilutive grant-based funding to advance the T2Lyme Panel.

The Candida Auris test is a direct from blood molecular diagnostic test designed to detect Candida Auris species in just 3 to 5 hours without the need to wait days for a positive blood culture. We believe the addition of the Candida Auris test will strengthen our value proposition and lead to increased adoption of our platform.

Candida Auris is a multidrug-resistant fungal pathogen that has a mortality rate up to 60% and is recognized as a serious global health threat by the CDC and World Health Organization. CDC estimates the costs associated with U.S.

fungal diseases are as high as $48 billion annually and is called on public health professionals to help lower the burden of fungal disease by continuing to raise awareness of the life-saving benefits of early detection and proper treatment.

With that, I'll now turn the call over to John Sprague to provide a detailed update of our fourth quarter financial results and our financial outlook for 2024..

Thank you, John. Fourth quarter 2023 revenues were $1.7 million, all from product sales, a 69% decrease compared to the prior year period, driven by lower international T2Dx instrument sales and lower sepsis test sales due to production back orders. We resolved the production back orders in January 2024.

Cash and cash equivalents were $15.7 million as of December 31, 2023. In the fourth quarter of 2023, we raised $800,000 in net proceeds from ATM sales. In October 2023, CRG extended the term loan agreement interest-only period and maturity date to December 2025 and reduced the minimum cash covenant from $5 million to $500,000.

We expect total sepsis and related product revenues to grow between 49% and 64% to $10 million to $11 million in 2024 over 2023, and this target excludes any potential sales marked T2Biothreat or T2Lyme Panels. Thank you, and back to John Sperzel for closing remarks..

We made considerable progress across the business during 2023, increasing our global installed base of T2Dx Instruments, generating record sales of our T2Bacteria Panel, strengthening our supply chain and manufacturing operations, advancing multiple new product development initiatives and strengthening our balance sheet.

We're very excited by the progress on our new product pipeline, which includes recent FDA 510(k) clearances for the expanded T2Bacteria Panel to include the detection of Acinetobacter baumannii, the T2Biothreat Panel and the pending FDA clearance to expand the T2Candida Panel to include pediatric testing.

Additionally, 3 of our products in our pipeline have received FDA breakthrough device designation, including the U.S. T2Resistance Panel, the T2Lyme Panel and the Candida Auris test. We believe we are very well positioned heading into 2024, and we remain focused on accelerating our sales, enhancing our operations and advancing our pipeline.

With that, I'd like to turn the call back to the operator to open the line for questions.

Operator?.

Certainly. Everyone at this time will be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from Ben Haynor from Alliance Global. Your line is live..

Good afternoon, gentlemen. Thanks for taking the questions.

Can you hear me okay?.

We can, Ben. All clear..

Excellent. All right. First off, just on the backlog, it sounds like most of it was clear by the end of the year, but the T2Resistance didn't clear until January.

How much was the backlog at the end of the year? And kind of how much - how many months would that have represented in T2Resistance?.

About $70,000 was the backlog on T2Resistance at the end of the year. As we mentioned, the backlog on T2Candida and T2Bacteria was zero, and it remains that. We have product on the shelf for all three of those test panels..

Okay. So....

Don't expect any backlog issues in the - at least in the near term..

We've put mitigations in place to protect that from happening, including people, resources and processes..

Okay. Great. And then on T2Biothreat, that's been clear for a little while now. What kind of needs to tip before one of the organizations or entities that you mentioned you might see sort of the first order? And once you sort of get the first order to do a lot of folks follow suit or a lot of entities follow suit.

What's the right way to think about that?.

Well, first thing I would say is just to remind everyone what I said on the scripted remarks, and that is that, we have a really unique product here. We have unique targets on the panel, three of which appear on no one else's panel. And we believe we have a unique performance. The specificity is 100%.

That means zero false positive across our clinical evaluation and the sensitivity was 100% on 5 of the 6 targets. So we have unique targets, and we believe we have unparalleled performance. So we believe that makes us very well suited to supply this product to U.S. and other governments, state and local labs.

As far as how long it takes to sell the product, Ben, we're in the process of that right now, and we look forward to reporting sales results on the T2Biothreat Panel in the future..

And how soon might that future be?.

We're working on it as we speak..

Okay. Had to try. Okay. Got it. And then just on the international distribution, you mentioned a handful of countries in the press release this afternoon and kind of how many number of sepsis cases each has on an annual basis.

Is there kind of a back of the envelope calculation on if there's x number of sepsis cases in a given geography in a year that should necessitate y systems - these distributors think about when signing up?.

Sure, Ben. So I think as we've discussed in the past, sepsis doesn't discriminate. Big hospitals, small hospital, well-developed country, less developed country, it can impact patients in every single corner of the world and it can impact hospitals in every corner of the world as well.

So we continue to believe that every hospital in the world should have one of our instruments and should be using our test panels. That remains our goal. From a distribution standpoint, our go-to-market strategy in the U.S. is to sell directly. We are exploring the potential to accelerate our commercialization through partnerships.

And our go-to-market strategy internationally is to partner with generally a single exclusive distributor in a country or in multiple countries. We have some distributors that cover more than one country. And our goal is to continue to support them.

Generally speaking, our international distributors sell many more products, many of them sell complementary products or adjacent products in the sepsis space. So they know where to go. They've already established key opinion leaders. They have key reference accounts. So they don't start from a standing start.

They start from a jog, if you will, and we train them on our products and we support them from a medical affairs and a service perspective. So we're excited about the four countries that we have just announced expansion into, and we look forward to many more throughout 2024 and beyond..

Okay. Got it. And then on Acinetobacter baumannii, congrats on getting that FDA clearance, what is the right way to think about it from a hospital standpoint on what that could do to utilization or adoption.

Do you have potential accounts out there that kind of just waiting on this addition to the panel? Or how big a deal is it being that it's probably only a handful of percent of the bloodstream infections subs cases [ph] that are out there?.

The important aspect of Acinetobacter baumannii is one of the escape pathogens. It's the A and escape. And the escape pathogens are the ones that typically do not respond to broad spectrum empiric therapy.

So if a patient is on broad spectrum antimicrobials and they have one of the test or one of the targets that's on our T2Bacteria Panel, we're generally not going to respond. And that's why we focused on those. Acinetobacter baumannii itself adds about 5% more coverage on our test panel.

So with 6 targets now, we're covering 75% of the bacterial organisms that are typically found in a bloodstream infection. And we think that, that's sufficient for now. The additional 25% they're well covered by broad-spectrum antibiotics and the blood culture companies can have those, we'll take the other 6..

Okay. That's helpful. And then lastly for me, just kind of a housekeeping question. For shares outstanding post the CRG conversion of the existing share, preferred shares that they had.

Where does the share count stand today or post conversion?.

John Sprague, do you want to take that?.

Yes. So Ben, we ended the year - well, go back to Q3 because that's what we've disclosed and the share count hasn't changed much since then. But we had at - the Q3, suffer with me for a second..

Sure..

It should be about $4.5 million..

Okay. So basically, just the small amount of ATM sales and the conversion is the way to think about it..

Yes, correct..

Okay. Great. Well, that's all I had for now, gentlemen. Thanks for taking the questions..

Thank you, Ben..

Thank you..

Thank you. There are no further questions in the queue. I will now hand the conference back to John Sperzel, Chairman and CEO, for closing remarks. Please go ahead..

I'd like to thank you all for joining our Q4 2023 and full year 2023 earnings call. We look forward to updating you as we progress through 2024. Thank you, and have a good night..

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation..