Here's Why T2 Biosystems Rose as Much as 16% Today
What happened
Shares of T2 Biosystems (NASDAQ: TTOO) jumped as much as 16% today after the integrated clinical diagnostics company released performance data for its next potential growth product. The T2Lyme Panel was developed to detect Lyme disease in just three to five hours. While time is an increasingly important consideration for diagnostic blood tests, accuracy remains king. The recent study hints that the T2Lyme Panel is the best in both metrics.
The blood test demonstrated 78% positive percentage agreement (correctly detecting the presence of disease in patients who have it) and 100% negative percentage agreement (correctly detecting the absence of disease in patients who don't have it). That was significantly better than the next-best diagnostic method, which reported 56% positive agreement and 92% negative agreement.
There are currently no FDA-cleared diagnostic panels for directly detecting Lyme disease. As of 3:55 p.m. EDT, the stock had settled to a 9.2% gain.
Image source: Getty Images.
So what
T2 Biosystems has been quietly building a novel diagnostic platform that includes various blood diagnostic tests for fast and accurate detection of infections and a fully automated machine, called the T2Dx, for reading them. After years of development, recent regulatory clearances are speeding up the company's transition to commercial-stage operations.
The T2Dx machine -- the foundation for the entire technology platform -- was cleared by the FDA in 2014. While a diagnostic panel was also cleared that year, it wasn't a big seller. However, there are much higher hopes for the broad spectrum T2Bacteria Panel that received regulatory clearance in May 2018. That helped to boost first-half 2018 revenue -- from research contracts and instrument sales to new hospital systems -- 229% compared to the year-ago period.
Should the T2Lyme Panel gain regulatory clearance, that would be a strong indication that T2 Biosystems is onto something with its technology approach. Today, investors are taking notice.
Now what
Today's news is exciting for investors who have been patiently waiting for the company to deliver on the potential of its technology platform. However, it's worth acknowledging that this remains a high-risk investment at the moment. The unfortunate reality is that owning best-in-class technology doesn't guarantee that a business will become sustainably profitable. While signs of a quick start from new product launches could provide a clearer outlook for T2 Biosystems once operating results are released for the second half of 2018, there's a long way to go before the business can erase the $22 million operating loss posted in the first six months of the year.
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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
