T2 Biosystems' (TTOO) CEO John McDonough on Q4 2017 Results - Earnings Call Transcript
T2 Biosystems (NASDAQ:TTOO) Q4 2017 Earnings Conference Call March 6, 2018 4:30 PM ET
Executives
Chris Brinzey - IR
John McDonough - CEO
John Sprague - CFO
Tom Lowery - CSO
Analysts
Steve Brozak - WBB
Patrick Donnelly - Goldman Sachs
Mark Massaro - Canaccord Genuity
Puneet Souda - Leerink Partners
Carolina Ibanez-Ventoso - Janney Montgomery Scott
Yi Chen - H.C. Wainwright
Matthew Cross - Jones Trading
Operator
Greetings and welcome to the T2 Biosystems' 2017 fourth quarter and year-end financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Chris Brinzey. Thank you. You may begin.
Chris Brinzey
Thank you, operator and good evening, everyone. Thanks for joining us for the T2 Biosystems 2017 fourth quarter and year-end financial results conference call. On the call to discuss the results and operational highlights for the period ended December 31, 2017 are President and CEO, John McDonough; Chief Financial Officer, John Sprague; and Chief Scientific Officer, Tom Lowery. The executive team will open the call with some prepared remarks followed by a question-and-answer period.
Before we begin, I'd like to remind everyone that comments made by management 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 risks and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in T2 Biosystems' Annual Report on Form 10-K filed with the SEC on March 15, 2017. 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 McDonough, for his opening comments. John?
John McDonough
Thank you, Chris. Good evening, everyone and welcome to our fourth quarter and year ended December 31, 2017 earnings call. Before getting into our results, I want to welcome John Sprague, our new Chief Financial Officer. We're pleased to have John join the T2 team and we think John's proven capabilities in building our finance teams along with his experience leading M&A, equity and debt financing and strong accounting background will be the perfect fit for T2 during this period of growth as we evolve into becoming a multiproduct commercial company.
John Sprague
Thanks, John. I'm excited about joining the T2 team.
John McDonough
Thanks and welcome aboard. Let me begin with a brief agenda for today's call. As we've done in our past calls, I'll begin my prepared remarks with a high level summary of our financial results for the fourth quarter and year end 2017, review our key business drivers in the quarter and provide an update on recent business highlight. I'll then turn the call over to John who will discuss our financial results in detail and review our financial guidance for the first quarter of 2018. Following John's review, I'll share some closing remarks before we open the call up for questions.
We were pleased with the progress we made in the fourth quarter and in 2017 as we set the stage for what we believe will be an exciting year for T2. Starting with our financial results, during the fourth quarter, we reported total revenue of $1.7 million and product revenue of 1.3 million. Product revenue exceeded the high end of Q4 guidance by almost 18% and total revenue exceeded the high end of Q4 guidance by almost 42%. Overall, product revenue grew an impressive 76% from the third to the fourth quarter of 2017 with year-over-year growth of 125%.
The strength in the fourth quarter revenue was primarily due to an increase in sales of the T2Candida panel and an increase in sales of the T2Dx instrument. T2Dx instrument sales included revenue from instrument orders received in the third quarter that were not shipped until the fourth quarter. That being said, we're seeing a strong build in our new customer sales pipeline, which we believe is being driven by the anticipated FDA clearance of the T2Bacteria panel and growing acceptance of the T2Dx platform, driven by customer success stories and publications of data.
The building of the sales pipeline is demonstrated on the growth in the number of proposals delivered to potential customers. In the fourth quarter, a total of 24 proposals were delivered, including 14 proposals to new customers. The 24 proposals compares to 8 proposals delivered in Q3. We continue to measure our progress using metrics that was highlighted on past calls, including the growth in the number of high risk patients at customer facilities under contract. We consider this metric to be important as it represent the number of patients that could be tested with T2Candida and T2Bacteria if all high risk patients were tested at the time patients present with symptoms of infections.
During the fourth quarter, we increased the number of high risk patients at hospitals under contract by approximately 45,000, ahead of the 30,000 high risk patient target we had set on our last earnings call. The estimated 45,000 high risk patients are a result of closing seven new hospital contracts, including two additional contracts for the use of the T2Bacteria, research use only or RUO products in the United States and one T2Bacteria contract in the EU. Additionally, two contract with existing customers were amended in the fourth quarter to include T2Bacteria once FDA cleared.
As of December 31, we have 10 T2Bacteria RUO customers, four of the T2Bacteria RUO placements of the existing T2Candida customers and six are with new customers. One of the placements is with an almost 1000 bed teaching hospital that operates six academic and community hospitals. Another placement is with an almost 900 bed acute care facility that operates seven academic and community hospitals and more than 100 total locations throughout the region. It is our intent to provide 2018 financial guidance after receiving FDA market clearance for the T2Bacteria panel.
At that time, we will also provide guidance on the number of hospital accounts expected to be closed and will provide a new metric on the number of instruments expected to be placed at hospital sites this year. As of December 31, 2017, we have 67 instruments placed or contracted to be placed, covering 157 hospitals in the United States and Europe. We estimate that each instrument is capable of running over 3,000 T2Candida and/or T2Bacteria tests per year. Additionally, as of December 31, those contracts and instrument placements provide access to an estimated 495,000 high risk patients that could be tested with T2Candida and T2Bacteria which both run on the T2Dx instrument.
Moving on to an update on the status of the T2Bacteria panel. As most of you on the call know, last September, we submitted our 510(k) application to the FDA requesting market clearance of the T2Bacteria panel. We had hope to have received a decision from the FDA as early as by the end of 2017, but we appear to be on a more typical timeline of six to nine months as the approval process within the FDA appears a bit different than what we experienced with the Candida submission. This timeline would have us on a path to FDA clearance in Q2.
Our discussions with the FDA continue to be productive and cooperative and based on the strong data from a clinical trial and the benefit of the T2Bacteria panel for patients, we believe that FDA clearance can be achieved within this typical time frame. As part of the review, we have removed the factor [ph] or AB species from the T2Bacteria panel due to a combination of factors in part because there were no patients shown by blood culture to be infected with AB in the pivotal study. This is consistent with the US statistic and AB represents about 1% of all sepsis cases, which translates to an incident rate of about 0.1% of our patients tested. We anticipate future studies to demonstrate performance for AB in the US population.
We do not expect this to impact the commercial adoption of the T2Bacteria panel in the United States. AB will remain a part of the T2Bacteria panel that is CE-marked and offered in Europe and other countries that have accepted the CE-Mark. AB has a higher incidence rate infection in Europe, representing an estimated 3.6% of healthcare associated infections. As a reminder, the T2Bacteria panel submission includes the filing with compelling data that demonstrates overall sensitivity of 95.8% and overall specificity of 98.1%. This compares favorably to the reported 50% to 65% sensitivity of blood culture and therefore the sensitivity of any diagnostic products that is dependent on a positive blood culture.
Most importantly, the pivotal study of over 1400 prospective patients run at 11 different institutions across the United States identified 102 patients with confirmed infection. Of those, T2Bacteria detected 98 of the infections, while the blood culture which was drawn concurrently with the T2Bacteria blood draw detected only 39 patients. The average time to result for the T2Bacteria panel is 5.4 hours compared to 71.7 hours for blood culture based species identification. We're enthusiastic about the commercial interest in the T2Bacteria panel as evidenced by the now 10 hospitals under contract to use the T2Bacteria as an RUO panel.
As we prepare for the commercial launch, we recently completed a market study with an independent market research firm. The study included inputs from over 300 hospitals, including lab directors, clinicians, hospital administrators and others. Here are some of the highlights from the study. Sepsis is viewed as a high priority for over 96% of the hospitals in the survey. The addition of T2Bacteria has the potential to significantly drive adoption of the T2Dx platform. 94% surveyed so they would use T2Bacteria to test patients at the time of first blood draw for suspected sepsis or bacteremia patients.
The clinical performance of the T2Bacteria panel in the FDA clinical trials was rated highly. 90% believed the T2Bacteria panel will reduce patient mortality and morbidity, enabled 90% of patients to be on the right therapy within six hours and enable to therapy to be adjusted or de-escalated rapidly. Lower pricing would have little impact on T2Candida adoption or testing volumes. Lower pricing for T2Bacteria as compared to T2Candida in the range of $150 per test is important however because of the expected significantly higher testing volume as compared to T2Candida.
This data supports our belief that once T2Bacteria is FDA cleared, we will see a significant uptick in hospital adoption of the T2Dx platform being driven by the unmet needs addressed by T2Bacteria. At the same time, we believe that most hospitals that adapt will utilize both T2Bacteria and T2Candida, although the testing volumes for T2Bacteria are likely to be in the order of 10 times greater than T2Candida or even more because patients will be tested closer to the time they're suspected of a sepsis infection. We believe that from the patients and healthcare perspective, the combination of T2Bacteria and T2Candida together offers the health system the potential for positively impact patients' lives by allowing a faster and a more targeted therapeutic approach to treating patients while potentially saving institutions millions of dollars each year.
Now, I'll turn the call over to our Chief Scientific Officer, Tom Lowery, to discuss some of the recent data and customer success stories. Tom?
Tom Lowery
Thanks, John. As we prepare for the launch of T2Bacteria, the key focus of ours remains utilizing the increasing number of customer success stories to broaden and enhance the awareness of the T2 sepsis solution. Overall, in 2017, hospitals presented 19 posters for presentation at the industry conferences, highlighting the attributes, benefits and potential use of the T2Dx instrument and the T2Candida and the T2Bacteria panels. Most recently, in November, we presented data on the T2Sepsis solution at the Association for Molecular Pathology Conference in the Salt Lake City, Utah.
The presentation by [indiscernible] School of Medicine highlighted the potential clinical value that may be achieved using the T2Bacteria panel by comparing diagnostic results to blood culture results. The study of 61 patient samples demonstrate the T2Bacteria correctly as we identified bacterial infections 72% of the time, which exceeded any individual tested in the study and compared favorably to blood culture which identified only 40% of the cases. Additionally, T2Bacteria was able to confirm nine infections in this blood culture. This reported performance of T2Bacteria detecting confirmed infections faster and more sensitively than other methods is consistent with other studies using T2Candida, underscoring the clinical value of the T2 based approach for detection of blood stream in invasive infections.
In February, a study called DIRECT2 was published in the Journal of Clinical Infectious Diseases, and a study called STAMP was published in the Journal of Clinical Microbiology. In the DIRECT2 study, the T2Candida panel detected almost twice as many confirmed infections this blood culture in patients receiving antifungal therapy. Lead author, Dr. Cornelius J. Clancy, associate professor of medicine in the University of Pittsburgh's Division of Infectious Diseases concluded that T2Candida is an important event in the diagnosis of candidemia and may usher in a new era in which rapid molecular testing for invasive candidemia would serve as an adjunct to microbiologic cultures.
In the STAMP study, blood culture diagnostic results were compared to the T2Candida panel for modeling the clearance of an infection when the patient is being treated with antifungal drugs. The study demonstrates that the T2Candida panel can detect the ongoing presence of Candida infection. While blood culture often yields false negative test results because the administration of antifungals can impede the growth of cells that blood culture requires to get that infection. The authors of the study concluded that the T2Candida panel can be an effective tool for reliably identifying patients with infection, which can reduce the unnecessary and expensive use of antifungal therapy.
Lastly, we're pleased to announce earlier today that T2 has been awarded the CARB-X grand. CARB-X is jointly led by BARDA, the government agency of US health and human services and the welcome trust, a global charitable foundation based in the UK. The CARB-X mission is to drive antibacterial innovation in combat the growing threat in antimicrobial resistance. The award is for the development of new test that expand of the Dx instrument product line by detecting over 25 bacterial species and resistance targets with a focus on blood borne pathogens on the CDC antibiotic resistance list. The award including options totals $2 million.
In the future, we look forward to telling you more about our plans and progress in the development of this expanded panel. We're honored to be one of the first diagnostic companies bonded through the CARB-X initiative and we believe this is further validation of our T2 technology, which is protected with over 60 issued patents and more to come and our company's ability to create products that impact patient care. CARB-X was also excited about the potential of our technology to accelerate clinical trials and to help bring new antibiotics to the market, representing significant synergies for all of their portfolio pharmaceutical development company.
With that, I'll turn it back to you, John.
John McDonough
Before turning the call over to John Sprague for a complete review of our quarterly financial performance, I'd also like to provide a brief update on our pipeline and development efforts. I'm happy to report that we successfully concluded our preclinical study for our T2 line diagnostic panel that are on track to commence the FDA clinical trial this spring. We expect this clinical trial to roll into 2019 and our hopeful to have a submission to the FDA sometime next year. The T2Grand negative resistant diagnostic panel being developed through a partnership with Allergan also remains on track and we plan to deliver initial product to Allergan by the end of this calendar year.
Our partnership with the Centers for Disease Control and Prevention regarding a new effort that will use the T2Dx instrument and an investigational use only T2Candida panel as a means of rapidly detecting the superbug Candida and hospitals around the country is progressing well. Existing laboratory data suggests that the Candida orders, including culture suffer from prolonged detection times 17 days of the CDC and while accuracy, which exacerbates the challenge in the fight to contain the superbug. The T2Candida diagnostic panel has an average time to resolve of approximately four hours. Instruments are installed at the CDC and we believe the validation work taking place at the CDC is going well.
With that, let me turn the call over to John who will review our fourth quarter and full year 2017 results in greater detail. John?
John Sprague
Thank you, John. Fourth quarter 2017 financial results. Revenues were $1.7 million, a 55% increase over last quarter's revenues of $1.1 million and an 87% increase over last year's fourth quarter revenues of $910,000 and 42% over the high range of guidance. Product revenues, primarily T2Candida panel and T2Dx instrument sales, were $1.3 million, a 76% increase over last quarter's product revenues of $739,000 and a 125% increase over last year's fourth quarter product revenues of $579,000. Research revenues were $325,000 compared to $369,000 last quarter and $331,000 in last year's fourth quarter.
Costs and expenses, excluding cost of product revenue, were $9.8 million, a decrease of 14% over last quarter's costs and expenses of $11.4 million and a 16% decrease over last year's fourth quarter costs and expenses of $11.7 million. Costs and expenses were 14% less than the low range of guidance. We are reducing our research and development spending as we are increasing our commercial sales activities.
Operating margins were a loss of $14.5 million, a 17% increase over last quarter's $12.4 million operating margin loss and a 12% increase over last year's fourth quarter operating margin loss of $12.9 million. We adjusted the carrying value of T2 owned T2Dx Instruments and incurred a non-cash charge of $2.4 million. Weighted average shares outstanding were 35.9 million this quarter compared to 31.4 million last quarter and 30.5 million in last year's fourth quarter.
Full year 2017 financial results. Revenues were $4.7 million, a 15% increase over last year's revenues of $4.1 million. Product revenues, primarily T2Candida panel and T2Dx instruments sales were $3.4 million, a 100% increase over last year's product revenues of $1.7 million. Research revenues were $1.2 million compared to $2.3 million last year and is less due to the timing of milestone payments received from partners. Cost and expenses excluding cost of product revenue were $46.8 million, a 3% decrease over last year's cost and expenses of $48.1 million. Operating margins were a loss of $54 million compared to last year's operating margin loss of $50.9 million. Weighted average shares outstanding were 32.1 million this year compared to 26 million last year. Our cash and equivalents were 41.8 million at the end of 2017. We believe we have sufficient cash and financing sources for the next 12 months of operations.
2018 outlook. The following forward-looking statements reflect estimates based on information as of March 6, 2018 and are subject to uncertainty. Additional information is available under the heading forward-looking statements. As John mentioned earlier, we'll provide guidance for the year 2018 upon FDA T2Bacteria approval.
For the first quarter of 2018, we expect total revenue to be $1.3 million to $1.6 million and product revenue to be $900,000 to $1.1 million and research revenue to be $400,000 to $500,000. We expect to close at least six new contracts in the first quarter, which include at least 6 new placements on T2Dx Instruments that provide access to a minimum of 35,000 high risk patients. We also expect first quarter 2018 operating expenses including cost of product revenue to be $10.7 million to $11.2 million, including non-cash stock-based compensation and depreciation expenses of $1.8 million.
Going forward, with the T2Bacteria clinical trial completed and as we continue our focus on commercial revenue growth, we expect operating expenses in Q2 and for the remainder of the year to be in the range of $9 million to $10 million, a reduction of approximately 20%. The reduction in expenses will not impact our investment in sales and support of revenue growth, and allows us to fully fund our product development pipeline, including the work associated with the brand Tom mentioned earlier. Our weighted average shares outstanding of 32.1 million may be impacted by stock option exercises.
Thank you. And back to John for closing remarks.
John McDonough
Thank you, John. In summary, we are pleased with our operational progress over the course of 2017 and the progress in the fourth quarter. I'd like to thank everyone on the T2 Biosystems' team for their hard work and their focus on our mission of improving the lives of patients around the world. Together, we believe we achieved many significant milestones over the course of the last year.
We're squarely focused on driving the commercial adoption of our product and driving revenue growth through adoption of our platform and testing of patients with our game changing products, which includes T2Candida today and T2Bacteria available in Europe now for clinical use and being reviewed by the FDA for market clearance in the US. We believe the market clearance of T2Bacteria will accelerate the adoption of our instrument platform and drive a substantial increase in the number of tests being run at hospitals. We believe this in turn will drive instrument placement which lead to substantial revenue growth. We're excited about the prospects of what we believe will be a very productive and exciting 2018.
Thank you for your participation in today's call and for you continued interest in T2 Biosystems. That concludes our prepared remarks for this evening. Operator, we will now open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is from Steve Brozak from WBB.
Steve Brozak
Well obviously congratulations are in order with all this good news and congratulations to you John for joining the company. That's very exciting, but let me dive right in here because one of the points in the CID study that was talked about was that you were comparing to standard of care and in looking at the notes in the standard of care, companies like Thermo Fisher, Becton Dickinson were listed as “standard of care”. Can you just quickly describe what the differences with standard of care and why T2 is unique in terms of differentiating itself or disrupting itself from the standard of care? And then I've got two more questions to follow up please.
John McDonough
Steve, thanks very much for the question. I'm going to let Dr. Tom Lowery to take that one.
Tom Lowery
Yes, Steve. So it's a great question. The biggest difference here is that standard of care, all relies on culture and blood culture has a variety of issues that were evident in the CID study as well as in other studies versus low clinical sensitivity. Second is that with patients on therapy, even if the infection hasn't cleared, you can get false negative results. It also takes a long time to get the negative result to know if your patient is cleared. So all those really came to the forefront in the CID study showing how with our test, because it's direct from blood, doesn't rely on culture and has higher clinical sensitivity that these patients can be diagnosed much faster and more sensitively.
Steve Brozak
And along with that appreciation, in remembering, I guess there was the Cidera agreement that you had. And you're now talking again about the Allergan collaboration and now we've got CARB-X. Is this kind of model we can start to think about in terms of going out there and adding to your bottom line and also adding to the power of the business franchise in terms of these collaborations.
John McDonough
That's a great question. We're definitely seeing an uptick in interest from the therapeutic companies that are using our products in clinical trial and clinical studies. And we do expect that that level of interest will increase with T2Bacteria being added to the mix. There are more antibiotics in development and antifungals. And so the number of opportunities accelerates with the clearance of that product. So I think it will be an important part of our model. It certainly drives studies. It drives revenue, but also it drives instruments being placed at hospitals that run those studies.
Steve Brozak
And my last question and I'll hop back in the queue. You've got these two journals that have come out. You've got a lot of other publications that are adjusting to the strength. What are you now starting to hear from the infectious disease docs, from the general medical community because obviously you've had a situation where you've got all this experience in the fungal side? They are obviously testing it for research purposes on the bacterial side, but what are the clinicians saying and also how does it compare with what the administrators in these hospital systems are saying now too?
Tom Lowery
Sure. I'll talk about the clinicians and what they're saying. I'll let John talk about the administrators. So what we're hearing now with as each one of these studies come out, they are just building evidence of the clinical utility and it helps answers answer really the question that we had a year and a year and a half ago of people asking how do I use a test like T2Candida, how will I use a test like T2Bacteria most effectively. So these studies are proving out the hypothesis we had years ago of how direct from blood test can really help in treatment patients. We're also hearing enthusiasm, as John mentioned in the call, about the breadth of menu of the T2 Bacteria and how many patients that will help address and detect more rapidly to put them on appropriate therapy much earlier.
John McDonough
Yeah. And from the administrator side, Steve, there are a couple of factors in play. One would be that as Tom mentioned these studies, while some of these studies are T2Candida specific, the administrators and for that matter even some in infectious disease, they were able to understand that T2Bacteria offers the same advantages. So these studies, even if they're T2Candida or they are T2Bacteria, there is a positive effect in terms of an understanding and appreciation of the product, in that case, T2Bacteria.
The other thing we're seeing from administrators for sure and it's really demonstrated in the number of proposals that we saw in the fourth quarter is that the addition of T2Bacteria enables us to offer a much more complete sepsis solution for hospitals, enabling over 90% of patients to potentially being put on the right targeted therapy in as fast as six hours and that broader appreciation of a more complete sepsis solution is definitely pushing a long sales cycle and expanding the number of hospitals that are in the pipeline in total.
Operator
Our next question is from Patrick Donnelly from Goldman Sachs.
Patrick Donnelly
So in the past, you've talked about adding to the sales force in anticipation of the FDA approval for bacteria. With this slight timeline push out, can you just give me an update on your commercial strategy, how you see the size of the sales force progressing, where you guys are now?
John McDonough
Yeah. We like the size of the sales force where it is. It won't grow too much. I mean, we're expecting T2Bacteria equipment there relatively soon Q2 and we're almost in to Q2. So as we look between now and the end of the year, I wouldn't expect it to grow by much more than about another half a dozen people. And for perhaps more that to be post FDA clearance and before.
Patrick Donnelly
And then just maybe on the push out from 3Q into 4Q. Can you just help us think about what the magnitude there was and also when we're thinking about guidance with the step down in product revenues, is that largely just from the delayed 3Q revenue making 4Q optically look a little higher.
John McDonough
No. You're looking at roughly between $250,000, $300,000 dollars of instrument sales that came in Q3 and in Q4 and that's going to happen from time to time of those instrument sales, the orders will come in, but to book the revenue, you got to have instruments in, you got to get the instruments shipped, and so sometimes will be, if you will, a backlog going from one quarter to the next. John?
John Sprague
Yeah. We will get some lift from new revenue recognition rules, which are in place for the first quarter already in that we'll be able to recognize instrument sales on a shipment and only have to defer a small portion, representing the actual inflation itself as a separate deliverable.
Patrick Donnelly
Maybe just one last quick one, from the Cidera partnership, maybe an update there, what the impact was in the quarter and then just any updates on conversations around securing additional similar partnerships in future would be helpful.
John McDonough
Yeah. There really wasn't much of an uplift in Q1, not measurable or reportable in terms of the Cidera partnership in Q1 nor do we expect it rather in Q4, nor do we expect it. There is a very active pipeline though of opportunities with Cidera and in fact we now with the team at JP Morgan and I think everybody is excited about the potential impact that it could have. In terms of the pipeline, there is a good pipeline of opportunities, new opportunities, some on the Candida side, but more on the bacteria side, but like we are closing those partnerships, we'll come close at the FDA clearance. We obviously want to see a product in the market before they are going to go to the FDA and ask for that to be part of the study.
Operator
Our next question is from Mark Massaro from Canaccord Genuity.
Mark Massaro
I hopped on a little bit late here, but I just want to reiterate John, the push out on Bacteria now for Q2 of '18. Based on your prepared remarks, it seems like the bulk of the push out is a result of taking one of the targets out of the panel. Can you just confirm that and then speak to whether or not there are any other aspects, material aspects that the FDA is pushing back as they contemplate approval of the bacteria.
John McDonough
Yeah. Honestly Mark, I would not say that being in this more 6 to 9 month timeline is because of one species being off the panel. I would just say that the back and forth with the FDA is more delayed than what we experienced the last time. In some cases, they're asking for some more data that will take a week or two to get back to them with. There hasn't been anything unreasonably requested or anything we're not able to respond to. We think we're pretty close to the end of that process, although we can't totally predict that, but we do appear to be pretty close to the end of that process.
And I think it's just more questions and a little bit more delay between when we get back to a response and we get a response back from the FDA. And it's more traditional. Last time, it was really rapid. We had answered a question on a Thursday at 5 o clock and when they will respond at Friday at 5 o clock and it hasn't been that way this time. And it's probably unreasonable to think that anyone would do that fast, but they did do that fast last time.
Mark Massaro
Great. And I know there is certainly a lot of clinical value, maybe this is a question for Tom, a lot of clinical value in ultra-rapid ID of Candida and Bacteria. But for those on the line that maybe question the clinical utility of rapid ID, without AST, can you just speak to what you're hearing hospitals who are expecting to adopt bacteria just a clinical value of identification alone and maybe related to that, can you speak to whether or not developing AST capability is perhaps something that might be available out of T2 in the next couple of years or so.
Tom Lowery
Happy to. I think the best example and evidence for the benefit of the test without AST and I will come back to your question about what we can do in the resistance, the best example is the trial data that we have about 1500 patients in our trial and we've gone back and analyzed those patients to evaluate how many patients were on antimicrobials after a time the blood drawn, the blood drawn on the trials, T2 blood draw is taking and the blood culture blood draw was taking. And over 60%, 65% of patients were actually on antibiotics at the time without blood draw.
What's really mind blowing is that the patients who are confirmed true infections in the trial, two thirds of those patients were not on effective antibiotics. So despite in over 800 patients being on antibiotics in this trial, the patients who are actually treated effective, they went - probably two thirds of them were on appropriate antibiotics.
That represents, despite a huge use of empiric antimicrobials and antimicrobials trying to get patients more in therapy, represent the real value of being able to have a rapid ID, because those patients get on effective therapy right as soon as they get the T2 results, which has already been showed in the studies to be delivered 40 times faster than blood culture. So I think that's the real significant value because the antimicrobials stewardship committee, they already know what therapy they're going to use when they have species ID. We're just accelerating that timeframe dramatically and helping really improve the quality of care much earlier in the time period of care when typically patients are only on empiric therapy.
John McDonough
Right. And so just to add on to what Tom was saying to summarize that, so there were over 800 patients on antibiotics, four departments on the T2Bacteria panel, over 800 patients and yet there were 102 confirmed infections. That means 700 patients didn't need those drugs. What that really means is that the treatment of patients Mark is not driven by ASP. The treatment of patients today is driven by empiric therapy. It's not driven by blood culture. Takes too long. These positions are being made without any ASP result, without any blood culture result even for ID.
Because it takes too long. So the real cause of resistance is the fact that 800 patients are on antibiotics and only 100 needed, but as much as empiric therapy is the best everyone has had before T2, it's not very good either, because even though there were 800 on antibiotics for the targets on our panel, it covered like 33 out of the 100 infections that really existed. So even, the guessing game is not that good. So 60% that were on the drug only covered a third of the infection.
So, the value of T2 would be to reduce the use of these antibiotics for sure, but more importantly, it's the 65 to 70 patients who were not on targeted therapy would have been without any ASP result based on the T2 results. Now, in total of these 102 infections specifically, maybe 10 of them, you would have changed the result based on an ASP result, maybe 10. And in the case of T2, we would have changed the result for 65 to 70. So the value of ID continues to be proven to be more than five times greater than the value of ASP, of course, all of it together would be the best solution in a while and we're working on that too.
Tom Lowery
And that's the second part of your question too, probably with CARB-X grand we have over a dozen targets that will be resistant targets. So, your classic CARB-X resistant change, the other resistant change, that will be a direct from blood identification of knowing that the patients infected with the pathogen, it has resistance capabilities like that and so forth. And so that will definitely then round out the capability of being able to know very early right on the off, the patient has not only an infection of the given species, but also that our species is resistant.
Mark Massaro
And I guess my final question, you might have said this already, but of the seven new hospital contracts in Q4, how many were US versus Europe? And then maybe related to that, post FDA approval of bacteria, is it fair to think that we should expect a significantly larger degree of placements coming from the US than in Europe.
John McDonough
Yes. So it was four US, three Europe of the 7. And yes, we do believe that we will see more placements in the US going forward than in Europe although I will say we have a pretty exciting pipeline in Europe as well and when we find it even proposal numbers, those were all US only numbers, not international. So it will be an interesting rate. I will say our head of international wants to beat the US and I love the spirit of the competition.
Mark Massaro
And if I can ask a follow-up to that, do you expect US utilization per box to trend above EU utilization per box?
John McDonough
No. We don't. But the revenue will, Mark, because obviously, there is a distributor involved and usually there is like a 30% discount. So if you look at revenue utilization, yes. If you look at it in terms of per test utilization, we would expect them to be comparable.
Operator
Our next question is from Puneet Souda from Leerink Partners.
Puneet Souda
So first one related to the push out of approval, has that provided you any sense here that the rest of the targets be on AB are safe? And could there be any questions on those targets as well?
John McDonough
We don't have any reason to believe there would be any questions on the other targets. They never tell you. If they if they told them, they were approved and we would be able to pay they're approved. So you never get quite that kind of a straight answer, but we're pretty confident - as confident as can be that there won't be any other changes, we think we will have that discussion already.
Puneet Souda
And could you provide a timeline of the 2 million distribution with the CARB-X grand. What's your sense there? How that could flow through in to revenue through the year and what's your thinking on the timeline on that?
John McDonough
It is likely going to be about a year for 1 million and for the first million and then another year for the second million. So if you took the 2 million and just spread it out equally, that would be pretty close. It's based on hours of work. So it might be slightly different than that, but that would be a good safe place to build a model.
Puneet Souda
Okay. And the last one on the sales process, has anything changed in terms of the sales process itself or the six new T2Bacteria accounts that you mentioned or in the ER setting, is the sales cycle shortening here? What's your sense? Do you have any other strategy in mind in terms of the sales approach differently than the T2Candida approach that you had taken in past?
John McDonough
Yeah. Absolutely and thanks for asking that question because we probably haven't emphasized it enough. There has been lots of talk about. Yeah. Boy, the pipelines really seem to be accelerating to me. It really appears to be being driven by T2Bacteria. I also - we have changed some of the approaches to market. We're talking about the T2Bacteria RUO product. We're talking about T2Bacteria in the emergency department. We're getting a super strong reception to rapid adoption in the emergency department and the value proposition there and again we had 24 proposals be allowed in Q4. We have been averaging for the last two years seven to eight proposals a quarter and that's just a tremendous fleet. Our target is definitely, we have a terrific sales force that's been further trained in develop and enhance under the leadership of Steve Hagan over the last 12 months but the T2Bacteria is really making a big difference in terms of interest in the platform and we really think we're going to see a big accelerator here post FDA clearance.
Operator
Our next question is from Paul Knight from Janney Montgomery Scott.
Carolina Ibanez-Ventoso
This is Carolina Ibanez-Ventoso. Thank you for taking the questions. One clarification on the grand award you got from CARB-X, can it be used towards the panel you are developing with Allergan or is it an independent project because both programs seem to be focused on the same identification of grand negative bacterial species and anti-system markers.
John McDonough
Yeah. That's a great question, Carolina. There is some overlap, right. The CARB-X panel is significantly bigger. It's a 20 plus number of panel that's being developed through one of the T2 platform and the Allergan is a smaller panel in that. Tom?
Tom Lowery
Yeah. So the Allergan work is just a small subset and then there is much broader at some of the umbrella of CARB-X.
Carolina Ibanez-Ventoso
And then my second question, on the development of the T2Lyme panel, you reiterated the start of the clinical trial this spring. Does this mean that you already met with the FDA and the protocol for the study is already designed? And if this is the case, when could you - are you planning to reveal more details on the clinical trial design?
Tom Lowery
Yes. So we have had several discussions, multiple discussions with the FDA, communications about the trial design and got a lot of great input there. We do have protocols for the trial that we're starting. We're currently - we have to get back to you on when we're going to reveal sort of the design of the trial. So it's pretty intricate design in order to get good reference methods for the Lyme disease that you can probably imagine.
Operator
Our next question is from Yi Chen from H.C. Wainwright.
Yi Chen
My first question is just to clarify, have you already submitted all the additional documents data required by the FDA for the T2Bacteria panel?
John McDonough
Yeah. We had a complete provision to the FDA. They continue to ask questions. So if the questions come in, there is more data being submitted to them. So I can't say they have everything at the moment, but we think we're getting pretty close to them having everything they're requesting.
Yi Chen
I mean, at this point, can you provide additional cut over there. It could be kind of early second quarter or late second quarter approval?
John McDonough
I'm going to refrain from that one. We're certainly hopeful for earlier rather than later, but we don't control the FDA and I think we're on a six to nine month timeline and we'll just stick with that and we feel really good about T2.
Yi Chen
And so far do you have a target for store base of the instruments by the end of 2018 or do you - will you have that after the approval of the T2Bacteria panel?
John McDonough
Yeah. We will definitely have that as a part of our 2018 guidance which we'll deliver once we have T2Bacteria FDA clearance. We just want to know that because obviously the timing of clearance we think will impact the adoption.
Operator
Our next question is from Matthew Cross from Jones Trading.
Matthew Cross
You've mentioned a couple of location that already opted in to receive the T2Bacteria setup following clearance by the FDA and I was wondering if this was something that was offered broadly to your current T2Candida customers or this was done kind of more on a case by case basis? And then also if the number of these options was in line with your own expectations prior to clearance?
John McDonough
Yeah. Great question. So it hasn't been offered broadly, but it's in the process of being offered broadly. So we didn't do a mass mailing, we're doing it through our sales force and we started that process late in the quarter. We're excited. That was quick than we would have expected. We weren't sure in a lot of these institution they want to see FDA clearance. I think they're going to add products to a contract. And we think we'll see some more of these this quarter and in Q1 that is and prior to the FDA clearance. So we feel very good that it's off to a stronger start than we would have expected.
Matthew Cross
And then I was also curious if you could update us on what next that might look like for negative panel with Allergan. I know you've mentioned delivering products to them, but what does T2 involvement look like next for that program or what's the next I guess key event that we should be paying attention to?
John McDonough
Yeah. The next key event to pay attention to would be delivering the product to Allergan. That we think we'll do before the end of the year and then the step after that would be what are our plans to take that panel through an FDA pivotal study and we haven't laid out that plan yet. It's a little bit too early to do that, but would be the next key event following the delivery of the product to Allergan.
Operator
Thank you. This concludes today's question-and-answer session as well as the teleconference. Thank you for your participation. You may disconnect your lines at this time.
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