T2 Biosystems(TTOO) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements Unaudited Q3 2022 financial statements show decreased revenue, increased net loss, and a weakened balance sheet, raising going concern doubts Condensed Consolidated Balance Sheets Balance Sheet Highlights (In thousands) | Balance Sheet Highlights (In thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $20,366 | $22,245 | | Total current assets | $28,876 | $44,394 | | Total assets | $43,952 | $60,539 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $10,943 | $11,688 | | Notes payable | $49,188 | $47,790 | | Total liabilities | $75,281 | $73,442 | | Total stockholders' deficit | ($31,669) | ($12,903) | - The company's financial position weakened, with total assets decreasing from $60.5 million to $44.0 million and stockholders' deficit increasing from $12.9 million to $31.7 million between December 31, 2021, and September 30, 2022[10] Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations (In thousands) | Statement of Operations (In thousands) | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $3,677 | $7,428 | $16,822 | $21,078 | | Cost of product revenue | $6,085 | $4,720 | $17,371 | $15,341 | | Loss from operations | ($15,800) | ($12,212) | ($45,676) | ($32,694) | | Net loss | ($17,375) | ($13,962) | ($51,904) | ($37,097) | | Net loss per share — basic and diluted | ($2.95) | ($4.21) | ($12.08) | ($11.86) | - Total revenue for Q3 2022 decreased by 50.5% YoY to $3.7 million, while net loss widened to $17.4 million from $14.0 million in Q3 2021. For the nine-month period, revenue fell 20.2% YoY, and net loss increased by 40% to $51.9 million[12] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (In thousands) | Cash Flow Summary (In thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($40,300) | ($29,032) | | Net cash provided by investing activities | $9,695 | $14,990 | | Net cash provided by financing activities | $28,306 | $20,296 | | Net change in cash, cash equivalents and restricted cash | ($2,299) | $6,254 | - Cash used in operating activities increased to $40.3 million for the first nine months of 2022, up from $29.0 million in the prior year period, indicating a higher cash burn rate. Financing activities provided $28.3 million, primarily from public stock offerings[21][250] Notes to Condensed Consolidated Financial Statements - The company has substantial doubt about its ability to continue as a going concern, as its cash of $21.5 million at September 30, 2022, is not sufficient to fund operations for at least one year. Additional financing will be required in Q1 2023[31][39] - On October 12, 2022, the company effected a 1-for-50 reverse stock split to regain compliance with Nasdaq's minimum bid price rule. All share and per-share data in the report have been retroactively adjusted[36][41][166] - The company has a milestone-based contract with BARDA potentially worth up to $69.0 million. In September 2022, BARDA exercised Option 3, providing an additional $3.7 million in funding for clinical trials and FDA submissions[151][154] - In August 2022, the company issued 3,000 shares of Series A Redeemable Convertible Preferred Stock and a warrant in a private placement for $0.3 million. All preferred shares were subsequently redeemed in October 2022[115][167] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses significant revenue decline, increased net loss, and critical liquidity issues, raising going concern doubts Results of Operations Revenue Breakdown (In thousands) | Revenue Breakdown (In thousands) | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Product revenue | $2,641 | $4,306 | ($1,665) | | Contribution revenue (BARDA) | $1,036 | $3,122 | ($2,086) | | Total revenue | $3,677 | $7,428 | ($3,751) | - Q3 2022 product revenue decreased by $1.7 million YoY, driven by a $2.0 million decline in consumables sales, primarily from the T2SARS-CoV-2 panel, which was partially offset by a $0.3 million increase in T2Dx instrument sales[211] - Cost of product revenue for Q3 2022 increased by $1.4 million YoY to $6.1 million, despite lower sales, due to higher costs from a change in build plan, manufacturing inefficiencies, and costs related to higher instrument sales[213] - For the nine months ended September 30, 2022, R&D expenses increased by $4.6 million to $21.0 million, driven by clinical trial costs for the T2Resistance and T2Biothreat panels, and higher payroll expenses[227] Liquidity and Capital Resources - The company has substantial doubt about its ability to continue as a going concern. Cash and equivalents of $21.5 million as of September 30, 2022, are insufficient to fund operations for at least one year, with additional financing needed in Q1 2023[242][247] - The company raised net proceeds of $28.1 million in the first nine months of 2022 through its "at the market" Equity Distribution Agreement with Canaccord[237] - The Term Loan Agreement with CRG requires a minimum cash balance of $5.0 million. The agreement's maturity was extended to December 30, 2024, in November 2022[243][264] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, T2 Biosystems is not required to provide this information - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[271] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2022, and concluded they were effective - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[273] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[274] PART II OTHER INFORMATION Legal Proceedings The company is not currently subject to any claims or legal actions that would have a material adverse effect on its financial condition or results of operations - As of the filing date, there are no material legal proceedings against the company[276] Risk Factors Key risks include substantial doubt about going concern, potential Nasdaq delisting, supply chain disruptions, and challenges in obtaining regulatory approvals - A primary risk is the substantial doubt about the company's ability to continue as a going concern, with cash reserves at September 30, 2022, being insufficient to fund operations for at least another year[278][280] - The company faces the risk of delisting from Nasdaq if it fails to maintain compliance with continued listing requirements, such as the minimum bid price, despite recently regaining compliance via a reverse stock split[281][285][287] - The business is exposed to supply chain risks, including fluctuations in demand and prices for raw materials, which could be exacerbated by global political tensions and may impact manufacturing and profitability[288][289] - Obtaining and maintaining regulatory approvals (e.g., FDA 510(k) clearance, EU IVDR compliance) is a costly, time-consuming, and uncertain process that is critical for commercial success[292][293][299] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended September 30, 2022, the company had no unregistered sales of equity securities other than the issuance of Series A redeemable convertible preferred stock and related warrants, which were previously reported - No unregistered sales of equity securities occurred in Q3 2022, other than the previously disclosed private placement of Series A preferred stock and warrants[312]