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Summary

  • TTOO, an in vitro diagnostics firm with principal offices in Lexington, Massachusetts, plans to raise $64 million in its upcoming IPO.
  • TTOO appears to be nearing FDA approval for its T2Candida, but there is little guarantee that the firm will be able to successfully commercialize its products, especially given strong competitors.
  • We are positive on this IPO (as T2Candida could represent a life-saving advance in Candida diagnostics) and suggest aggressive investors consider this Polaris backed IPO.

T2 Biosystems, Inc. (Pending:TTOO), an in vitro diagnostics firm with principal offices in Lexington, Massachusetts, plans to raise a modest $64 million in its upcoming IPO.

The firm will offer a small slice of 4.0 million shares at an expected price range of $15-17 per share. If the IPO prices at the midpoint of that range at $16 per share, TTOO will command a market value of $321 million.

Very Strong Underwriting For A Tiny Deal

TTOO filed on July 2, 2014.

Lead Underwriters: The all star firms of Goldman Sachs and Morgan Stanley

Underwriters: Janney Montgomery Scott LLC; Leerink Partners LLC

Summary: In Vitro Diagnostics

TTOO is an in vitro diagnostics firm seeking to develop new diagnostic methods through its T2 Magnetic Resonance platform (T2MR). T2MR is able to quickly detect abnormalities various patient sample types and can detect cellular targets in extremely small quantities, as low as a single colony forming unit per milliliter. TTOO is focusing its efforts on the development of diagnostics to target hemostasis and sepsis.

TTOO has competed its pivotal clinical trial of its T2Dx instrument and T2Candida panel for the detection of Candida fungal pathogens, which cause sepsis.

The firm states in its S-1 filing that communications with the FDA lead it to believe that it will receive approval to market the products; TTOO submitted a de novo petition for marketing authorization in late May and plans a commercial launch for the products in early 2015. T2Candida could allow physicians to deliver care to sepsis patients far more quickly than current blood culture diagnostics, potentially improving patient outcomes by a significant margin.

The firm is also developing T2Bacteria and T2HemoStat, which are designed to detect bacterial sepsis infections and hemostasis. Neither is yet in clinical trials; TTOO plans to initiate trials for T2Bacteria in the second half of 2015 and for T2HemoStat in the first half of 2016.

Valuation

TTOO offers the following figures in its S-1 for the three months ended March 31, 2014:

Revenue: $0.00

Net Loss: ($6,920,000.00)

TTOO's current lack of revenue is common for pre-commercial biotech firms, and should not be taken as an indicator of the firm's potential for future success. TTOO will not be able to generate significant revenues until it has commercialized one or more of its products.

Potential Competitors

If TTOO's products receive approval, they will likely compete with other diagnostic products, particularly traditional blood culture-based diagnostics, some of which are offered by firms with access to far greater financial and marketing resources than TTOO.

Potential competitors include Becton Dickinson & Co. (NYSE:BDX), bioMerieux, Inc. (BIM), Siemens AG, Cepheid (NASDAQ:CPHD), and Bruker Corporation (NASDAQ:BRKR).

Management Highlights

President and CEO John McDonough has served in his current positions and as a director of TTOO since November 2007. He previously served in various positions at Cytyc Corporation, including President of Cytyc Development Corporation.

He was paid $729,000.00 in 2013 which we believe is excessive for a company losing millions for its shareholders.

Mr. McDonough holds a B.S./B.A. from the little known basketball powerhouse Stonehill College in Massachusetts.

Conclusion: Consider This Puppy As It May Blast Off This Week

We are positive on this IPO in the proposed range. The interest in this story seems to be positive and we expect the IPO to shape up nicely for pricing on Wednesday night.

According to the detailed S-1, the stellar board of directors includes the thirty nine year old youngster Tom Carela from the well known Goldman Sachs megabank who served as a board member of the "KAR" auction company and the mature and Harvard educated sixty eight year old Alan Crane from the hugely successful venture capital firm of Polaris Partners. These two firms currently own 35% of T2.

We believe this small IPO will be priced properly by the Goldman bankers given their ownership stake and should fly out of the gate for their institutional and wealthy clients who get decent allocations from Goldman Sachs and Morgan Stanley. We also believe the inside shareholders will not be bailing out over the near term and will provide modest stability to this offering.

TTOO does appear to be nearing FDA approval for its T2Candida, but there is little guarantee that the firm will be able to successfully commercialize its products, especially given the substantial competition that TTOO faces.

The firm's other products are still far from receiving approval.

That said, T2Candida could represent a life-saving advance in Candida diagnostics, particularly since the effectiveness of treatment of Candida is largely dependent on how advanced infection is when treatment begins. As such, the diagnostic could prove to be a potential huge cash cow for shareholders.

Given the excitement over TTOO's future, and TTOO being one of the exciting IPOs scheduled for a crowded Hamptons and Martha's Vineyard vacation week for senior bankers, we suggest growth investors consider taking a small position in this flyer.

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Source: T2 Biosystems IPO With Goldman Sachs Underwriting And Goldman Sachs Ownership May Pop