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Summary

  • In vitro diagnostics company that has developed an innovative and proprietary technology platform that offers a rapid, sensitive and simple alternative to existing diagnostic methodologies.
  • Worth watching, especially if product launch happens in the first half of '15.
  • Insiders plan to purchase 26.7%.

Based in Lexington, MA, T2 Biosystems (Pending:TTOO) scheduled a $64 million IPO on the Nasdaq with a market capitalization of $288 million at a price range midpoint of $16 for Thursday, August 7, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Co-Managers: Goldman Sachs, Morgan Stanley

Joint Managers: Leerink Partners, Janney Montgomery Scott

End of lockup (180 days): Tuesday, February 3, 2015

End of 25-day quiet period: Monday, September 2, 2014

Summary

TTOO an in vitro diagnostics company that has developed an innovative and proprietary technology platform that offers a rapid, sensitive and simple alternative to existing diagnostic methodologies.

Valuation

Glossary

Valuation Ratios

Mrkt Cap ($mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

annualizing Q1 '14

T2 Biosystems

$288

n/a

-10.4

3.8

3.9

22%

Conclusion
Worth watching, especially if product launch happens in the first half of '15.

Insiders plan to purchase 26.7%.

The rating is positive.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

TTOO an in vitro diagnostics company that has developed an innovative and proprietary technology platform that offers a rapid, sensitive and simple alternative to existing diagnostic methodologies.

T2MR platform

TTOO is using its T2 Magnetic Resonance platform, or T2MR, to develop a broad set of applications aimed at lowering mortality rates, improving patient outcomes and reducing the cost of healthcare by helping medical professionals make targeted treatment decisions earlier.

T2MR enables rapid detection of pathogens, biomarkers and other abnormalities in a variety of unpurified patient sample types, including whole blood, and can detect cellular targets at limits of detection as low as one colony forming unit per milliliter, or CFU/mL.

TTOO's initial development efforts utilizing T2MR target sepsis and hemostasis, which are areas of significant unmet medical need in which existing therapies could be more effective with improved diagnostics.

Clinical trial

TTOO has completed a pivotal clinical trial for its T2Dx diagnostic instrument, or T2Dx, and T2Candida panel, or T2Candida, which have the ability to rapidly identify the five clinically relevant species of Candida, a fungal pathogen known to cause sepsis. Based on its non-binding communications with the FDA, TTOO believes that the sensitivity and specificity achieved in the clinical trial meet or exceed the requirements for product clearance. Sensitivity is the percent concordance, or the percentage of sample results that agree with a reference, or comparative, method for positive results. Specificity is the percent concordance to a reference method for negative results.

Product launch intended for first half of '15

On May 27, 2014, TTOO submitted a de novo petition to the FDA, requesting an order authorizing TTOO to market T2Dx and T2Candida in the United States.

Upon receipt of marketing authorization from the FDA, TTOO intends to commercialize T2Dx and T2Candida and its goal is to launch these product candidates commercially in the United States in the first half of 2015.

TTOO's next two diagnostic applications are called T2Bacteria and T2HemoStat, which are focused on bacterial sepsis infections and hemostasis, respectively.

TTOO plans to initiate clinical trials in the second half of 2015 for T2Bacteria and in the first half of 2016 for T2HemoStat.

TTOO expects that existing reimbursement codes will support its sepsis and hemostasis product candidates, that TTOO will has no need to seek new reimbursement codes, and that the anticipated economic savings associated with its sepsis products will be realized directly by hospitals.

Sepsis product candidates

TTOO believes its sepsis product candidates will redefine the standard of care in sepsis management while lowering healthcare costs by improving both the precision and the speed of pathogen detection.

According to a study published in the Journal of Clinical Microbiology in 2010, targeted therapy for patients with bloodstream infections can be delayed up to 72 hours due to the wait time for blood culture results, leading to the conclusion that "more-rapid identification of the causative organism would be highly desirable to facilitate targeted treatment in the critical phase of septic illness."

TTOO's pivotal clinical trial demonstrated that T2Candida can deliver actionable results as fast as three hours, with an average time to result during the trial of 4.2 hours, rather than the two to five days typically required for blood-culture-based diagnostics, which TTOO believes will enable physicians to make treatment decisions and administer targeted treatment to patients on an accelerated basis.

Dividend Policy

No dividends are planned.

Intellectual Property

TTOO owns 23 patent families, including 16 issued United States patents, 20 issued patents outside of the U.S., 28 pending U.S. patent applications, five pending Patent Cooperation Treaty, or PCT applications, and 32 pending patent applications outside of the U.S. TTOO also holds an exclusive license to three patent families from MGH, including three issued U.S. patents, five issued patents outside of the U.S., three pending U.S. patent applications, and one pending application outside the U.S., which cover various aspects of its T2MR, T2Candida and T2Bacteria products.

Competition

Companies that currently provide traditional blood culture-based diagnostics include Becton Dickinson & Co. and bioMerieux, Inc.

In addition, companies offering post-culture species identification using both molecular and non-molecular methods include bioMerieux, Inc., Bruker Corporation, Cepheid and Siemens AG.

These post-culture competitors rely on a positive result from blood culture in order to perform their tests, significantly prolonging their results when compared to T2MR.

Some of the products offered by TTOO's competitors require hours of extensive hands-on labor by an operator, while some rely on high concentrations of pathogens present in a positive blood culture, which can require a final concentration of at least 1,000,000 CFU/mL. In addition, there may be a number of new market entrants in the process of developing competing technologies.

5% stockholders

Entities affiliated with Broad Street Principal Investments, LLC 18.1%

Entities affiliated with Polaris Partners 16.9%

Entities affiliated with Flagship Ventures Fund 16.9%

Aisling Capital III, L.P. 14.7%

Entities affiliated with Flybridge Capital Partners 9.9%

Physic Ventures, L.P. 6.6

David B. Aronoff 9.9%

Joshua Bilenker, M.D. 14.7%

Thomas J. Carella 18.1%

Alan Crane 16.9%

Stacy A. Feld 6.6%

Harry W. Wilcox 16.9%

Use of proceeds

TTOO intends to use the $57 million in proceeds from its IPO as follows:

$29 million to fund its research and development programs, which broaden its instrument and diagnostic applications utilizing T2MR technology;

$22 million to obtain marketing authorization from the FDA for, and support the commercialization of, its T2Dx and T2Candida product candidates, including the hiring of additional sales, marketing and manufacturing personnel and related support costs associated with sales, marketing and manufacturing activities; and

the balance for other general corporate purposes, including general and administrative expenses, working capital, capital expenditures to add equipment for laboratory and manufacturing-related purposes and to support expansion of facilities, and the repayment of indebtedness.

Disclaimer: This TTOO IPO report is based on a reading and analysis of TTOO's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Report: T2 Biosystems