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Edited Transcript of TTOO earnings conference call or presentation 5-May-20 8:30pm GMT

Q1 2020 T2 Biosystems Inc Earnings Call

Lexington May 17, 2020 (Thomson StreetEvents) -- Edited Transcript of T2 Biosystems Inc earnings conference call or presentation Tuesday, May 5, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anthony Pare

T2 Biosystems, Inc. - Chief Commercial Officer

* John J. Sperzel

T2 Biosystems, Inc. - President, CEO & Director

* John M. Sprague

T2 Biosystems, Inc. - CFO & Senior VP

* Thomas J. Lowery

T2 Biosystems, Inc. - Chief Scientific Officer

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Conference Call Participants

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* Benjamin Charles Haynor

Alliance Global Partners, Research Division - Analyst

* Patrick O'Donnell

Canaccord Genuity Corp., Research Division - Equity Research Associate

* Scott Alexander Mafale

SVB Leerink LLC, Research Division - Associate

* Stephen Gilbertpaul Brozak

WBB Securities, LLC, Research Division - Senior Equity Analyst

* Philip Taylor

Gilmartin Group LLC - Associate

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Presentation

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Operator [1]

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Good day, everyone. Welcome to today's T2 Biosystems First Quarter 2020 Earnings Conference Call. Today's call is being recorded.

At this time, I'd like to turn things over to Mr. Philip Taylor, Investor Relations. Please go ahead, sir.

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Philip Taylor, Gilmartin Group LLC - Associate [2]

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Thank you, operator. Thank you for joining us for the T2 Biosystems First Quarter 2020 Financial Results Conference Call. I would like to remind everyone that comments made by management today and answers 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 the 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?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [3]

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Thank you, Philip, and thank you all for joining us today. I'll start by recognizing the challenges and hardships we're all facing as a result of the ongoing COVID-19 pandemic. Thank you to all of the healthcare workers and first responders across the globe for your service and sacrifice. Thank you to my colleagues at T2 Biosystems for your unwavering commitment to advance our mission despite the difficulties created by the greatest public health challenge of our lifetime.

On today's call, I'll start with a review of our performance in the quarter, including the impact of COVID-19, and then discuss the progress made for each of our 3 corporate priorities. One, accelerating our sales by prioritizing increased test utilization. Two, improving our operations by prioritizing significant cost reductions. And three, advancing our pipeline by prioritizing our programs under the $69 million milestone-based product development contract awarded by the U.S. government in September of 2019.

John Sprague will provide the detailed first quarter financial results. I will make some closing remarks and then we'll open the call for questions and answers.

As we announced, the T2 Biosystems team generated total revenue of $2.5 million in the first quarter of 2020, an increase of 43% compared to the prior year period. We continue to supply our T2Dx Instruments, and our T2Bacteria, T2Candida, and T2Resistance panels to hospitals around the globe to aid clinicians in the rapid detection of sepsis causing pathogens.

We are fully committed to our 2020 priorities, which now include the development of a COVID-19 molecular diagnostic test, branded as the T2SARS-COV-2 panel. We have taken important steps to strengthen our balance sheet during the quarter, which we believe provides more than one year of cash and to significantly reduce our operating expenses going forward.

Given the disruption and uncertainty related to the ongoing pandemic, on March 24, we suspended financial and operational guidance for 2020. As hospitals have undergone extreme changes to focus their resources on the identification, treatment, and management of patients with COVID-19, they currently have limited bandwidth to advance evaluations of new technologies.

Our hospital-based customers include critical care and infectious disease doctors and pharmacists and laboratory directors who are on the front lines caring for patients. Hospitals have also restricted access for non-essential personnel, including our sales and medical affairs teams, and limited access for our service team.

While these conditions have created commercial headwinds, we're using technology to remain engaged with our customers as much as possible. At the same time, the value of our platform has proven to be an essential element for our customers. We're pleased to note that most of our customers are continuing to place orders and in some cases, larger or more frequent orders given the patient population in their intensive care units.

Data has demonstrated that COVID-19 patients are susceptible to co-infections and secondary infections that can cause sepsis. Our customers understand this connection and have been using our tests to help manage patients more effectively. We're seeing increased rates of testing at accounts and geographies that are heavily impacted by COVID-19 cases like New York City, Italy, Spain, and Greece.

The severity and cost of sepsis are staggering. A recent study found that sepsis contributes to 1 in 5 hospital deaths globally and that approximately 11 million people worldwide die from sepsis each year. That's more deaths than all forms of cancer combined. In the United States, sepsis represents nearly $41 billion in healthcare costs and is the most common cause of in-hospital deaths, killing nearly 270,000 people in the United States each year.

For those who are new to T2 Biosystems, our technology includes the only FDA cleared products to identify sepsis causing pathogens directly from blood in 3 to 5 hours without the need to wait days for a positive blood culture. Saving time means saving lives when managing patients suspected of sepsis, as each hour of delayed, targeted treatment increases mortality risk by up to 8%.

Rapid pathogen identification can enable quicker administration of targeted antibiotic therapy, reduce unnecessary use of broad spectrum antibiotics, and help to prevent and combat growth in antimicrobial resistance.

Regarding COVID-19 impacts on our business, predicting the duration, possible resurgences, or further institutional changes is not possible. But based on current information, we've created a set of assumptions under which we are running our business. This is a fluid and dynamic situation and we will adjust our game plan, as new information is available.

We remain hopeful that social distancing and other precautionary measures to flatten the curve of infection rates continues to prove effective. We believe our current products will continue to be crucial tools to identify co-infections and secondary infections related to COVID-19 and that the T2SARS-COV-2 panel currently in development could potentially log the detection of primary COVID-19 infections.

We'll now shift gears to discuss the 3 corporate priorities we established 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.

During my first quarter as CEO, we challenged all assumptions related to our commercial strategy. As a result, we've shifted our strategy to focus on increasing the utilization of our tests among our install base of instruments and driving adoption of our T2Dx Instruments. We believe these are the right metrics to demonstrate commercial traction rather than the historical focus on the number of instruments placed in a given quarter.

We are prioritizing the U.S. market and focusing our direct commercial efforts on our current customers to gain access to more affiliated hospitals and new stakeholders within those accounts. They're also targeting hospitals that are members of group purchasing organizations where we have contracts.

During the first quarter, we were awarded a multiyear, innovative technology contract from Vizient, Inc., the largest group purchasing organization in the United States market. Vizient serves more than 50% of the nation's acute care hospitals, 95% of all academic medical centers, and 20% of the country's ambulatory market. The Vizient contract includes the T2Dx Instrument and the T2Bacteria and T2Candida panels, and was based on a recommendation by clinical experts on Vizient's member council that our products offer incremental benefits compared to other products.

We believe entering into pricing contracts with prestigious organizations like Vizient and Premier, who awarded us a breakthrough technology contract in September 2019 validate our technology, increase our visibility with hospitals, and facilitate sales activities. We're further focusing our U.S. commercial strategy to target clinicians in high-risk departments where our products are typically used, such as the intensive care, oncology, and transplant units.

To better address this group of clinicians, we've refined our messaging to target these providers and expand our relationships in these departments. We understand it is essential for us to address multiple stakeholders within the hospital due to the complexity of sepsis management protocols, which are created with input from clinicians, lab directors, and hospital administrators.

Our medical science liaisons are playing a key role here in demonstrating and expanding body of clinical evidence and use cases that are resonating with the stakeholders within the hospital. To align our U.S. sales team with these objectives, we made changes to the compensation plans by heavily weighting incentive-based sales compensation on test utilization.

We're pleased to see early traction with active accounts integrating our tests into their sepsis management protocols and placing orders on a routine basis. At the end of the first quarter, the active install base of T2Dx Instruments was flat and we saw a slight sequential increase in the annual test utilization run rate per active instrument compared to the prior quarter.

We were also encouraged to see Instruments that were under evaluation convert to contracts under both capital and reagent rental agreements, despite the ongoing challenges associated with COVID-19. This progress was offset by instruments that are still in an evaluation period that has been delayed due to COVID-19. We view these as strong signals that our platform fills an unmet need, while delivering value to hospitals in spite of the current market conditions.

Internationally, the healthcare diagnostic market in Europe experienced similar disruption from COVID-19. Interest in evaluating T2Dx Instruments slowed, as did the progress with evaluations already underway. We did, however, see strong test utilization from customers in areas that were hardest hit with COVID-19 infections, as I mentioned before, like Italy, Spain, and Greece.

Following the recent CE Mark approval for our T2Resistance panel, I'm pleased to inform you that we're gaining early commercial traction in Europe and we now have our first hospital customer, which implemented the T2Resistance panel into routine clinical use.

Finally, we continue to pursue opportunities to strengthen our international business, like partnering with large, strategic commercial distributors. And we remain optimistic that the first such agreement may be completed during the second quarter of 2020.

Moving to our second priority, improving our operations. I noted on the last call that based on my initial observations, the company's expense profile would need to undergo significant changes to affect the current size and scope of the business and to sustain a position of financial strength.

In conjunction with our strategic shifts and as a result of current market conditions, we restructured our workforce, resulting in a headcount reduction of 22%. And we plan to consolidate our facilities, resulting in a real estate space reduction.

We also conducted a deep dive examination across all departments and eliminated expenses that did not support our new strategy. Second quarter expenses will reflect these new changes and we aim to continue to build upon these cost savings throughout the year.

We will also focus on improving the cost of product revenues moving forward. As we did with our operational expenses, we conducted a thorough evaluation of our current products and supply chain, including our processes for ordering raw materials, manufacturing, packaging, and shipping.

At the beginning of the second quarter of 2020, we implemented numerous initiatives designed to reduce our cost of goods. We anticipate many of these initiatives will be completed during 2020 and will have a positive impact on our product gross margins going forward.

Moving to our third priority, advancing our pipeline. Our team of scientific experts are continually working to expand our offering, powered by T2's proprietary technology platform. Last year, the company was awarded a milestone-based $69 million product development contract by the U.S. government to create a next-generation instrument, expanded panel, and biothreat panel.

We believe the comprehensive panel we are developing has the potential to revolutionize the blood diagnostic space and could potentially replace most blood cultures performed for species identification and susceptibility results. It's being designed to potentially cover greater than 99% of all blood born bacterial infections and detect more than 250 species, in addition to all blood born antibody resistant threats identified by the Centers for Disease Control and Prevention.

The last component of the government contract is a biothreat panel that we believe will be the first high-sensitivity, whole blood test for the detection of multiple biothreat pathogens and toxin genes. Given the versatility of our technology platform and our scientific expertise, we explored possible means to further assist with the effort against COVID-19. We determined that the most efficient path to develop and launch a COVID-19 diagnostic test was to license certain proprietary information from the Center for Discovery and Innovation at Hackensack Meridian Health.

The proprietary information we licensed from Hackensack is accelerating our development of a SARS-COV-2 molecular diagnostic test that we believe will detect the presence of the virus's genetic material. We're excited about the progress we're making on the development of the T2SARS-COV-2 panel, which is designed to use a nasal-pharyngeal swab sample and we look forward to launching a molecular diagnostic test that we believe will provide the quality customers have come to expect from T2 Biosystems.

Once the T2SARS-COV-2 panel development is completed and evaluated, we plan to make it available to customers under the FDA emergency use authorization guidelines and pursue the formal FDA EUA. At this time, we anticipate making our T2SARS-COV-2 panel available to U.S. customers as early as the end of this quarter.

The market potential for a COVID-19 diagnostic test continues to evolve as the industry responds to the pandemic. As we've seen with many other diagnostic tests, we believe multiple COVID-19 tests will succeed in the market, including molecular diagnostic tests to identify acute cases and the antibody tests to identify active or past treated infections.

We also believe COVID-19 tests will be performed in multiple locations, including reference laboratories, hospitals, and point of care sites, like doctor offices and clinics. Given the susceptibility of critically ill COVID-19 patients to develop co-infections and secondary infections that can lead to sepsis, we believe our T2SARS-COV-2 molecular test has the potential to be used to identify acute infections at targeted patients under intensive care who may also benefit from early identification of bacterial or fungal infections with our T2Bacteria and T2Candida panels. Providing rapid results in this setting can enable faster targeted therapy, which can lead to reduced length of stay in the intensive care unit and free up beds for incoming patients.

Now I'll turn the call over to John Sprague, our CFO, to provide details on our first quarter financial results. John?

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John M. Sprague, T2 Biosystems, Inc. - CFO & Senior VP [4]

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Thank you, John. Total revenues for the first quarter of 2020 were $2.5 million, an increase of 43% compared to the prior year period. Product revenues for the first quarter of 2020 were $1 million, a decrease of 20% compared to the prior year period. Growth in test panel sales offset declines in instrument sales. The install base of T2Dx Instruments entered the quarter flat compared to the prior quarter. We believe COVID-19 negatively impacted our U.S. and international sales.

Research and grant contribution revenues for the first quarter of 2020 were $1.5 million, an increase of 218% compared to the prior year period. Cost of expenses during the first quarter of 2020 were $16.1 million, an increase of $800,000 compared to the prior year period. Cost of product revenues were $4.7 million compared to $4.4 million in last year's first quarter, an increase due to the write-down of inventories in T2-owned instruments of $1.2 million, impaired from the impact of COVID-19 on our business, offset by lower overhead spending.

Research and development expenses were $4.9 million compared to $3.9 million in last year's first quarter and include expenses incurred under the government contract of $2.1 million in the first quarter of 2020. Selling, general administrative expenses were $6.5 million compared to $7.1 million in last year's first quarter. First quarter 2020 cost expenses include severance cost from our cost reduction program of approximately $400,000, which represent ongoing annual cost reductions of more than $3.7 million.

Net loss was $15 million, $0.22 per share, compared to a net loss in last year's first quarter of $15.1 million, $0.34 per share. Weighted average shares outstanding were $67.9 million compared to $44.3 million in last year's first quarter. Total cash and cash equivalents were $36.5 million at March 31, 2020. We sold 68.2 million shares for $40.1 million in net proceeds to our ATM and equity credit line facilities in the first quarter.

In April 2020, we expanded the ATM facility to $95 million and we canceled the equity credit line. We are compliant with the terms of our CRG debt facility. Stock option exercises and shares sold under the ATM may affect weighted average shares outstanding. Guidance for the full year 2020 has been suspended due to the uncertain impact COVID-19 may have on our business. Thank you.

And back to John Sperzel for closing remarks. John?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [5]

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Thank you, John. I'm proud of how our team has responded during the early days of the COVID-19 pandemic and continues to adapt, while quickly implementing policies to ensure the health and wellbeing of our employees and our customers. While the COVID-19 pandemic has created challenges around the world, diagnostic testing is center stage and its value has never been more apparent.

During the first quarter, we implemented important changes across the organization and made meaningful progress advancing on our new corporate priorities, accelerating our sales, improving our operations, and advancing our pipeline. We look forward to providing updates on our progress toward these priorities throughout the year.

We'll now open it up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll hear first from Puneet Souda with SVB Leerink.

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Scott Alexander Mafale, SVB Leerink LLC, Research Division - Associate [2]

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This is Scott Mafale on for Puneet. First of all, congrats on the licensing deal with Hackensack for the COVID-19 assay. I was wondering if you could walk us through what is left to be done from a validation and development standpoint to begin using the assay on the T2Dx Instrument. And then once it is improved, what is your manufacturing capacity look like at that time?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [3]

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Scott, I have Tom Lowery, our Chief Science Officer on the call as well. And so I'm going to ask him to address the scientific question about what's left to be done on the test. In terms of manufacturing capacity, I will say that on the operations side of our business, our SARS-COV-2 test uses many of the same materials that our Bacteria, Candida, or Resistance panel uses. So from a supply chain standpoint, we're in very good shape and we have sufficient manufacturing capacity such that we don't need to add additional resources to enter this test into our operations.

In terms of actual output numbers, it's a little bit early. We plan to make the test first available at the end of this quarter and we'll update on what the specific output will be at that time. So Tom, can you address the scientific question?

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Thomas J. Lowery, T2 Biosystems, Inc. - Chief Scientific Officer [4]

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You bet. So we've got the tests and tested it right in-house from Hackensack, and we have been clearly developing that and optimizing. We really care about avoiding some of the quality issues that some of these earlier tests have suffered from and we know that we're well known for high sensitivity tests. We're ensuring that we can get the performance that our customers would expect on the automated system. So we're currently doing optimization and marching toward that timeline that John shared.

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Scott Alexander Mafale, SVB Leerink LLC, Research Division - Associate [5]

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And then if I could on the COVID assay, again, so could you guys provide any more color on the pricing or the throughput characteristics of the assay at this time? And then how do you expect the assay to kind of stack up against the current PCR standard in terms of the margins to the provider lab?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [6]

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This is John again. Let me just -- I'll give you some thoughts on where we're going to target customers, some general remarks around pricing because I think that will satisfy some of what you asked for. Keep in mind, we have not launched the test yet so I don't want to get too far ahead of our skis on it. But the customers that we plan on targeting include hospital intensive care units as well as oncology and transplant units.

So we're targeting the same departments with the launch of the T2SARS-COV-2 panel that we sell to today. So this is about expanding our menu with the addition of a T2SARS-COV-2 panel. It fits our strategy of increasing test utilization among our install base as well as increasing adoption of our T2Dx technology.

We recognize that some hospital labs will have a need for increased tests given the demand and the supply challenges and we believe we can satisfy some of that as well. With respect to pricing, Scott, we also know there's a wide range of COVID-19 tests available as well as being developed, including molecular, and antibody tests as well as tests based on laboratory of point of care technologies.

We anticipate launching a high quality molecular diagnostic test that's used in the hospital market and we anticipate that our pricing will be competitive in that segment.

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Scott Alexander Mafale, SVB Leerink LLC, Research Division - Associate [7]

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Last one if I could. I appreciate the comments you made regarding instrument purchases and the capital purchasing environment for hospitals right now. With that being said, do you have any views on the second half and if there could be a rebound and what a rebound would look like in the second half of the year?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [8]

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Sure. So I would say that our strategy is to drive test utilization. And so success with that strategy is not dependent on instrument placements in 2020. Obviously, as we look out to 2021, 2022, we want to make sure that we start to drive a larger install base so that we can further execute that strategy. But as far as 2020 is concerned, the headwinds that we're experiencing with COVID-19, when it comes to instrument placements or instrument sales, is not impeding our strategy to drive test utilization.

So we do believe that as things start to lighten up, as hospitals start to increase bandwidth to look at advancing new technologies that they were considering that that world provide additional opportunities for us to increase our install base. And we're hopeful that that begins in the second half of the year.

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Operator [9]

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We'll hear next today from Max Masucci with Canaccord Genuity.

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Patrick O'Donnell, Canaccord Genuity Corp., Research Division - Equity Research Associate [10]

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This is Patrick O'Donnell on for Max. First question here. Given the proximity of COVID-19 and the related co-infection and secondary infections, your test target, how could we think about any long-term potential for elevated utilization for your commercially launched and pipeline tests as this pandemic unfolds?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [11]

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I think it fits perfectly within our strategy. The strategy, as I was just mentioning, around driving test utilization is also a strategy quite common in diagnostics, which is to continue to broaden your test menu. And we see this as a natural extension of our test menu for critically ill patients.

One, because of the connection with sepsis causing pathogens and the link to COVID-19. There continues to be more and more data that's coming out that link the 2. Our customers are seeing that and many customers among our install base are asking us how quickly our tests can be available. So we see demand for it and we see that demand being sticky.

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Patrick O'Donnell, Canaccord Genuity Corp., Research Division - Equity Research Associate [12]

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And one more, looking here at the commercial organization. How are you working now to keep the sales team continually engaged during the pandemic? And have there been things that have surprised you regarding your commercial team or commercial effort throughout the past couple months?

I'm going to ask Tony Pare, our Chief Commercial Officer, to address that as he's closer to it. Tony?

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Anthony Pare, T2 Biosystems, Inc. - Chief Commercial Officer [13]

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Thanks, John. So it's been somewhat of a challenge to reach many of our customers including infectious disease clinicians and pharmacists. But it hasn't been impossible. So we are using technology to help us. As a matter of fact, we just set up a webinar to talk about these co-infections and how T2 can help and diagnose in the co-infections that are very common with COVID.

But we're also setting up remote training sessions where some of these accounts where the evaluation has completed but they haven't been brought to routine usage yet. And then lastly, we are reaching out and connecting where we're can. And we're using our medical science liaisons for this task. Since it is a clinician-to-clinician discussion, especially when we talk about these secondary infections.

The great thing is for those customers that have implemented our test and utilized it on a routine fashion, as John alluded to, we have seen quite an uptick in the orders for those particular accounts. The accounts that are impacted in terms of COVID in ordering tests are those where the evaluations were not completed and those evaluations have been suspended, for the most part, although we have seen some continuing this at a lower rate.

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Operator [14]

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We'll hear now from Ben Haynor of Alliance Global Partners.

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Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [15]

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Just first for me on the cost of goods sold. You mentioned the $1.2 million write off in the quarter. If I heard you correctly, was that all COVID related?

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John M. Sprague, T2 Biosystems, Inc. - CFO & Senior VP [16]

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Yes, it was driven by COVID, 2 parts. We've got the reagent rental instruments and we took a look at the cash flows related to those. And with the uncertainty due to COVID, took a charge there. And then similarly, as you know, we took down our -- we have not guided for 2020 but we did rework our plans for 2020 as we communicated at our last conference call and that impaired some of the inventory for T2Dx Instruments as well.

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Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [17]

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That makes sense. And then just on the cost reductions going forward, it sounds like it will take a little bit of time to kind of work off. I mean is that function of some of the raw material inventory that you have maybe at highest costs or work in progress inventory? What's a good way to think about when the improvements that you guys are in the process of making will start to show up in the reported results?

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John M. Sprague, T2 Biosystems, Inc. - CFO & Senior VP [18]

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Sure. So it's a series of changes in the manufacturing process to get efficiencies of scale, efficiencies in process in the reagent manufacturing process. And they'll take place between now and the end of the year. But as they're completed, they can have rather dramatic improvements to yield and reductions in scrap rates.

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Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [19]

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Just a couple on the COVID tests. Is there any type of quantitative measurement on the panel or any way of getting a viral load on that?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [20]

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Tom, would you like to take that?

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Thomas J. Lowery, T2 Biosystems, Inc. - Chief Scientific Officer [21]

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Sorry, I was on mute. So currently, under FDA EUA, the SARS-COV-2 tests are qualitative and so that's the pathway that we're taking this test down. I think what's really important is getting robust performance, particularly in the appropriate sample matrices.

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Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [22]

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That makes sense. And then just lastly from me, it seems like in the data that's come out, very high percentage of the patients that are passing way from COVID have sepsis or has a lot fewer of those recovering have sepsis. Do you guys have any data or anything to point to that can tell us maybe how quickly some of those COVID patients were diagnosed and whether that had any impact into whether they survived or not?

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Thomas J. Lowery, T2 Biosystems, Inc. - Chief Scientific Officer [23]

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Yes, so we don't have data from our own customers right now but we do have customers that are using our tests in COVID-19 patient populations. So we're excited to be able to get our hands on that as they're able to actually collate that data and share it.

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Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [24]

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So stay tuned there.

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Thomas J. Lowery, T2 Biosystems, Inc. - Chief Scientific Officer [25]

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Yes.

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Operator [26]

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(Operator Instructions) We'll hear next from Stephen Brozak with WBB.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [27]

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John, this question goes straight out to you. Given your configuration right now and the steps that you've taken, can you answer how you've reconfigured based on what I'm looking at as an observer is making larger sales to a larger group versus going out there and doing it in 1s, 2s, and 3s. And how do you perceive that approach as taking place and shifting? And then I've got a follow-up question after that please. Thank you.

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [28]

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Sure. It's a good observation, Steve. We're certainly focusing our organization on trying to make sales at a higher level, including the use of our management team, many of which have commercial experience. You see that evident in the Premier contract that the company was awarded. That was a deliberate attempt of the company to go out and go out and get a major group purchasing organization under contract.

We followed that up with a contract with Vizient. So that opens up substantial opportunities. We still have to go out and convert those customers. And we're also targeting large integrated delivery networks. So we are absolutely taking a top down approach and a very focused approach to our commercial strategy.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [29]

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And in keeping along those lines, you had alluded to it earlier in the call. But obviously, when you're looking at that kind of a growth, there's a lot of different entities that are complaining about access to product -- any kind of components and such. What steps have you taken on that front and on the manufacturing front to ensure that for that type of approach that you're taking that you can satisfy it when it does present itself?

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [30]

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I think it's fair to say that no diagnostic company that I'm aware of has unlimited manufacturing capacity. So many companies are working through the process of scaling production. And one benefit that we have is that this company was built to produce more volume that it has historically produced. And that's why I said in the prepared remarks that we don't really have to add additional capacity to launch our SARS-COV-2 test. It doesn't mean that we have unlimited capacity but we absolutely have capacity right now once we're able to launch.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [31]

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Okay. And I'll cheat. One for you. How about one for Tom and I'll get back in the queue please. Tom, in terms of -- and by the way, congratulations and quick thinking on the COVID side, obviously. Can you give us any background in terms of -- because this is the first innovative test that you've gone out and developed. You also went out there and did Candida auris a couple years back in conjunction with CDC. What did that teach you in terms of the ability to go out there and turn shoe on a new test? Anything you want to give? I'd be very curious to know and understand that and I'll hop back in the queue.

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Thomas J. Lowery, T2 Biosystems, Inc. - Chief Scientific Officer [32]

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I think our Candida auris experience taught us that the platform was easily configured for different type of sample matrices because it's T2 magnetic resonance based. It's agnostic to the sample matrix. And so as we've been seeing, whether we're testing in universal transport media or other type of matrices that the platform works very robustly.

And so that's enabled us to be able to more quickly reconfigure how our reagents and then how our processes, the test cartridge, to be able to go after new sample types. So that's one of the things that we're excited about with this test is it's not as complex as doing it direct from whole blood. It doesn't require anywhere near the high sensitivity of our direct from whole blood sepsis pathogen detection test. So that reduces the turnaround time, and reduces some manufacturing complexity. And so it's a nice situation to be in.

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Operator [33]

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(Operator Instructions) And gentlemen, at this time, I'd like to turn things back to you all for closing remarks.

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John J. Sperzel, T2 Biosystems, Inc. - President, CEO & Director [34]

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Thank you for joining us on today's call and for supporting T2 Biosystems. I look forward to updating you next quarter. Have a great day.

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Operator [35]

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And again, that does conclude today's conference. Thank you all for joining us.