T2 Biosystems Reports Second Quarter 2019 Financial Results and Provides Corporate Update
Announces Two Financing Agreements to Potentially Provide up to
Updates 2019 Financial Guidance
Announced Management Update
Financing Agreement Highlights:
- The Company entered into two financing agreements that enables the potential access to up to
$60 millionof additional capital, potentially strengthening its financial position.
- Entered into an At-the-Market (ATM) equity offering agreement with Canaccord Genuity LLC pursuant to which Canaccord will, at the Company’s option, use reasonable best efforts to sell up to
$30 millionof our common stock at our direction.
- Entered into common stock purchase and registration rights agreements with Lincoln Park Capital Fund, LLC (LPC), a Chicago-based institutional investor, under which we will have the right and the sole discretion to sell to LPC up to $30 million worth of shares over a 36-month period at market rates based on closing prices in the past 10 days from when a sales of shares may occur, subject to certain limitations under the agreement as further described below under the section titled "Financing Agreement Details".
“We plan to be opportunistic in accessing the capital markets, including through these agreements, and we may not sell the full amount under either agreement. We will remain open to other potential sources of additional capital, both from a traditional financing perspective and through business development opportunities. Combined with our plan to reduce our cash burn by 30% by the fourth quarter and our projected capital requirements, we believe we have a means to efficiently use resources now available to us to achieve our goals,” said
Second Quarter and Recent Business and Financial Performance Highlights:
- Reported second quarter total revenue of
- Reported second quarter product revenue of
$1.3 million, up 8% year-over-year, from an increase in T2Bacteria Paneltesting revenue by over 80% from the first quarter.
- Secured 12 new contracts for T2Dx® Instruments in the second quarter, compared to 9 new contracts in the second quarter of 2018.
- Highlighted products and technology at several medical meetings during the second quarter, including early, positive T2Bacteria® Panel clinical data and experience from commercial customers and data supporting new panel opportunities.
- Published results from T2Bacteria® Panel pivotal clinical study in the Annals of Internal Medicine® journal; additional cost-effectiveness data published in peer-reviewed journals.
- Expanded international business by entering exclusive distribution agreements covering five new markets representing approximately 1,170 hospitals that could benefit from T2’s products.
Mr. McDonough added, “During the second quarter T2Bacteria revenue grew over 80% from the first quarter and we continued to secure new customer contracts for T2Bacteria, while also assisting hospitals through the validation and evaluation process so that they can begin testing patients. All of the new hospitals that have completed this process in the U.S. and international markets in 2019 are tracking at or above our expectations in terms of utilization, demonstrating the clinical need for our direct-from-blood rapid diagnostic tests. In some cases, the sales cycle and validation process have taken longer than anticipated, and we are adjusting our product revenue expectations for the year as a result. We have made changes to our commercial team, strategy and tactics in the field to accelerate these timelines and remain confident in the long-term outlook for T2Bacteria growth.”
“We remain excited about potential business development opportunities that are expected to result in both research and commercial revenues. Anticipated research revenue associated with one such opportunity has been impacted by a delay in the timing of the agreement by about three months. We now expect the contract to be finalized in the second half of the year and still expect to realize the full value of the contract into next year.”
Additional Financial Results:
- Research and grant contribution revenues were
$0.5 millionin the second quarter, compared to $2.7 millionin last year’s second quarter.
- Costs and expenses in the second quarter, excluding cost of product revenue, were
$10.8 million, compared to last year’s second quarter costs and expenses of $11.4 million. Total costs and expenses include depreciation and non-cash stock compensation of $2.0 millioncompared to $4.5 millionin last year’s second quarter, a decrease primarily due to last year’s vesting of performance-based restricted stock units.
- Operating margin in the second quarter was a loss of
$13.8 million, compared to last year’s second quarter operating loss of $10.9 million.
Weighted average shares outstanding were 44.4 million for the second quarter, compared to 38.3 million in the same period last year.
The Company is updating its full year 2019 financial guidance as follows:
- Total revenue is expected to be
$8.7 million to $9.6 million, including product revenue of $5.7 million to $6.1 millionand research and grant contribution revenue of $3.0 million to $3.5 million.
- The Company expects to secure contracts of 43 to 53 T2Dx® Instruments in 2019.
- A combination of cost control efforts and growth in revenue is expected to reduce quarterly cash burn to below
$8 millionby the fourth quarter of 2019. Operating expenses, excluding cost of product revenue and contingent on closing a research collaboration, are expected to be $10.5 million to $11.5 millionin the third and fourth quarters of 2019 and $7.0 to $8.0 millionabsent the research collaboration in the fourth quarter. Total costs and expenses will include non-cash depreciation and stock-based compensation expenses of approximately $1.5 millionper quarter. We will provide a further update on expected fourth quarter operating expenses at the time of our next earnings release.
- The Company believes that an additional
$40 millionof capital is required to get to cash flow breakeven.
Financing Agreement Details
T2 entered into an At-the-Market (ATM) equity distribution agreement with Canaccord Genuity LLC. Pursuant to the ATM, Canaccord has agreed to act as our sales agent and at the Company’s option, use reasonable best efforts to sell up to an aggregate of
T2 entered into a common stock purchase agreement and registration rights agreement (together, the “Agreements”) with Lincoln Park Capital Fund, LLC (“LPC”), a Chicago-based institutional investor, for up to $30 million, subject to limitations. Under the terms of the Agreements and subject to the limitations thereunder, T2 will have the right and the sole discretion to sell to LPC up to $30 million worth of shares over a 36-month period. T2 will control the timing and amount of any future investment and LPC will be obligated to make purchases in accordance with the Agreements and at the lower of the current market price or the purchase price looking back at the closing price over the past 10 days and averaging the 3 lowest prices. There are no upper limits to the price at which the shares may be sold to LPC. There are limitations under the agreement as to the number of shares that can be sold on any day, the price at which they are sold and the total number of shares that may be sold under the agreement. In particular, T2 cannot sell more than 20% of its outstanding shares, or 8,902,661 shares as of today, at a price lower than
LPC has agreed not to cause or engage in any manner whatsoever, in any direct or indirect short selling or hedging of shares of the Company’s common stock. No warrants, derivatives, financial or business covenants are associated with the Agreements. As consideration for the commitment of to purchase share, T2 has issued 413,349 shares to LPC as a commitment fee. The Agreements may be terminated by the Company at any time, at its sole discretion, without any cost or penalty.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities in these offerings, nor will there be any sale of these securities in any jurisdiction in which such offer solicitation or sale are unlawful prior to registration or qualification under securities laws of any such jurisdiction.
Management Update – Executive Succession Plan
The Company also announced that founding CEO
Mr. McDonough commented, “It is personally the right time for me and I believe, the right time for T2 to begin the process of finding a successor for the CEO role. I have been honored to have worked diligently at the helm for 12 years and I look forward to working with our Board of Directors in the search process and fostering a smooth transition to my successor while moving to the non-executive Chairman role.”
Management will host a conference call today with the investment community at
About T2 Biosystems:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding additional patients, timing of testing patients, anticipated product benefits, strategic priorities, product expansion or opportunities, growth expectations or targets, timing of FDA filings or clearances and anticipated operating expenses, as well as statements that include the words “expect,” “intend,” “plan”, “believe”, “project”, “forecast”, “estimate,” “may,” “should,” “anticipate,” and similar statements of a future or forward looking nature. These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, (i) any inability to (a) realize anticipated benefits from commitments, contracts or products; (b) successfully execute strategic priorities; (c) bring products to market; (d) expand product usage or adoption; (e) obtain customer testimonials; (f) accurately predict growth assumptions; (g) realize anticipated revenues; (h) incur expected levels of operating expenses; or (i) increase the number of high-risk patients at customer facilities; (ii) failure of early data to predict eventual outcomes; (iii) failure to make or obtain anticipated FDA filings or clearances within expected time frames or at all; or (iv) the factors discussed under Item 1A. "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission, or SEC, on March 14, 2019, and other filings the company makes with the SEC from time to time. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management's estimates as of the date of this press release. While the company may elect to update such forward-looking statements at some point in the future, unless required by law, it disclaims any obligation to do so, even if subsequent events cause its views to change. Thus, no one should assume that the Company’s silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing the company's views as of any date subsequent to the date of this press release.
Gina Kent, Vault Communications
Zack Kubow, W2O Group
T2 BIOSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
|Cash and cash equivalents||$||28,422||$||50,805|
|Prepaid expenses and other current assets||713||1,340|
|Total current assets||33,414||56,608|
|Property and equipment, net||7,262||7,315|
|Operating lease right-of-use assets||4,108||—|
|Liabilities and stockholders’ equity|
|Accrued expenses and other current liabilities||8,823||6,073|
|Current portion of lease incentives||—||268|
|Total current liabilities||57,799||52,297|
|Lease incentives, net of current portion||—||492|
|Operating lease liabilities, net of current portion||2,893||—|
|Deferred revenue, net of current portion||98||133|
|Commitments and contingencies|
|Stockholders’ (deficit) equity:|
|Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and
outstanding at June 30, 2019 and December 31, 2018
|Common stock, $0.001 par value; 200,000,000 shares authorized; 44,535,572 and
44,175,441 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
|Additional paid-in capital||332,301||328,514|
|Total stockholders’ (deficit) equity||(15,620||)||11,387|
|Total liabilities and stockholders’ equity||$||45,170||$||64,309|
T2 BIOSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
|Three Months Ended
|Six Months Ended
|Costs and expenses:|
|Cost of product revenue||4,820||3,458||9,208||6,731|
|Research and development||4,048||3,749||7,949||8,467|
|Selling, general and administrative||6,722||7,611||13,776||13,366|
|Total costs and expenses||15,590||14,818||30,933||28,564|
|Loss from operations||(13,786||)||(10,887||)||(27,344||)||(22,322||)|
|Interest expense, net||(2,000||)||(1,506||)||(3,782||)||(3,074||)|
|Other income, net||139||69||332||159|
|Net loss and comprehensive loss||$||(15,647||)||$||(12,324||)||$||(30,794||)||$||(25,237||)|
|Net loss per share — basic and diluted||$||(0.35||)||$||(0.32||)||$||(0.69||)||$||(0.68||)|
|Weighted-average number of common shares used in computing
net loss per share — basic and diluted
Source: T2 Biosystems, Inc.