T2 Biosystems - Q4 2021
February 17, 2022
Transcript
Operator (participant)
Hello, and welcome to the T2 Biosystems fourth quarter and full year 2021 earnings call and webcast. At this time, all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Philip Taylor, Investor Relations. Please go ahead.
Philip Taylor (Head of Investor Relatons)
Thank you, operator. I'd like to remind everyone that comments made by management today and answers to questions 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 these statements, including the risks and uncertainties described in T2 Biosystems' annual report on Form 10-K, filed with the SEC on March 31, 2021, 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 would like to turn the call over to Chairman and CEO, John Sperzel. John?
John Sperzel (Chairman and CEO)
Thank you for joining our fourth quarter and full year 2021 earnings conference call. Today, I will highlight the company's strong performance in 2021, provide details on the progress across our three corporate priorities, and share our 2022 priorities. I will then turn the call over to John Sprague, our Chief Financial Officer, who will review our fourth quarter and full year 2021 financial results and share our 2022 financial guidance before I make some closing remarks, and we open the call to questions and answers. In 2021, the T2 Biosystems team generated total revenue of $28.1 million, including product revenue of $16.6 million, representing growth of 55% and 43% respectively compared to the prior year.
We entered into contracts for 32 T2Dx instruments in 2021, including contracts for 17 instruments during the fourth quarter, which exceeded the expectations we set at the beginning of the year. We have made considerable progress across our three corporate priorities, accelerating our sales, enhancing our operations, and advancing our pipeline. We strengthened our leadership, sales, marketing, clinical and medical affairs teams, expanded commercial distribution in Asia-Pacific, Latin America and Europe, increased manufacturing capacity and improved product gross margins, finalized a lease that will significantly reduce future rent expenses, initiated U.S. clinical trials for the T2Resistance and T2Biothreat panels ahead of schedule, and advanced our next-generation product pipeline. We also made meaningful progress toward our mission to fundamentally change the way medicine is practiced through transformative culture-independent diagnostics that improve the lives of patients around the world. We have our sights set on sepsis.
The current standard of care for patients at risk of sepsis relies on broad empiric protocols to administer antimicrobial therapy, despite the fact that such protocols are only optimal in approximately one-half of cases. To further complicate matters, the current standard of care continues to rely on a positive blood culture to identify the presence of a bloodstream infection and target therapy for patients suspected of sepsis. Due to their poor sensitivity, blood cultures often require multiple samples of blood from critically ill patients and take anywhere from one-five days to achieve the growth necessary for pathogen identification. Additional testing, such as traditional microbiology or post-culture molecular diagnostic tests, may then be required for determination of species identification and susceptibility. In the United States, sepsis is the number one cause of hospitalization, costing our healthcare system nearly $62 billion annually.
The number one cause of death in hospitals, claiming nearly 270,000 lives each year, and the number one cause of 30-day hospital readmissions, requiring nearly 20% of survivors to be re-hospitalized in 30 days. By these measures, it would be reasonable to conclude that the current sepsis standard of care for diagnosing and treating patients is failing patients, payers, and providers. At T2 Biosystems, we are commercializing the first and only FDA-cleared products able to detect sepsis-causing pathogens directly in whole blood in just three-five hours without the need to wait days for a positive blood culture. The rapid detection of sepsis-causing pathogens is critical as each hour of delayed targeted treatment increases mortality risk by up to 8%.
Our value proposition is based on our ability to rapidly identify sepsis-causing pathogens and antibiotic resistance genes within hours with high sensitivity and specificity, enabling clinicians to achieve targeted antimicrobial therapy faster. The T2Bacteria panel is designed for the detection of most of the ESKAPE pathogens as innovative products must first address the top clinical need, and ESKAPE pathogens are a major healthcare burden. ESKAPE pathogens are responsible for the majority of nosocomial infections and are capable of escaping the biocidal action of antimicrobial agents. Also, a systematic review of the clinical and economic impact of the antibiotic resistance levels that ESKAPE pathogens are associated with the highest risk of mortality, thereby resulting in increased healthcare costs.
Our current positioning is that our sepsis panels are used in conjunction with blood culture, and detecting the ESKAPE pathogens directly from whole blood in three-five hours enables targeted therapy to these organisms, which are resistant to common empiric therapies. Detecting these commonly resistant organisms in three-five hours pre-culture is more critical than rapidly detecting those organisms which are typically responsive to common empiric therapies. We believe our product pipeline, the Comprehensive Sepsis Panel, will replace most blood cultures for patients at risk of sepsis. When we launch that product, our positioning will likely shift from being an adjunct test to a primary test to detect sepsis-causing pathogens and antibiotic resistance genes. To advance our mission and create value across our stakeholders, we are focused on three corporate priorities, accelerating our sales, enhancing our operations, and advancing our pipeline.
I'll now discuss our recent progress and our 2022 plans as it pertains to each of these corporate priorities. Starting with our first priority, accelerating our sales. Our sales strategy consists of two primary objectives. One, significantly expanding our T2Dx instrument installed base by selling or placing new instruments. Two, doubling our sepsis test panel revenue by driving broad utilization among new and existing customers. We ended the year with strong momentum on both fronts, driving strong instrument adoption and increased sepsis test panel utilization by our hospital customers. In 2021, we entered into contracts for 32 T2Dx instruments, including 17 instruments during the fourth quarter. Our installed base of T2Dx instruments includes 89 instruments in the United States and 55 instruments internationally. We generated sepsis test panel revenue of $5.1 million, representing an increase of 46% compared to the prior year.
In the United States, we achieved annualized sepsis test utilization of $118,000 per legacy T2Dx instrument, an increase of 37% compared to the prior year. We continue to believe that over time, annualized sepsis test utilization will reach $200,000 per instrument in the United States, and we are pleased that utilization is trending in that direction. To further penetrate the market, we have materially expanded our commercial team. In the U.S., we have 20 sales territories providing geographic hospital coverage, increased from just two sales territories in 2020. We recently hired Brett Giffin as Chief Commercial Officer, and he leads our commercial growth initiatives and is directly responsible for global sales, marketing, service, and customer support.
We're excited to have Brett leading the team, and we feel great about the size and structure of the commercial team and the quality of the regional account managers we have hired. At the beginning of 2021, we hired Dr. Aparna Ahuja as Chief Medical Officer. She has led a total rebuild of our medical, clinical, and regulatory teams. In the past, our team was limited to PharmDs, and today we have a highly diverse and talented team of infectious disease doctors, laboratory professionals, and PharmDs. Our clinical and medical affairs teams are raising awareness by amplifying clinical value messaging for our products. The team is actively engaged with key opinion leaders to generate and share real-world data via scientific journal publications, at medical conferences, and at industry trade shows. During 2021, T2 Biosystems products were mentioned in over 50 publications, posters, and presentations.
As recently announced, we continue to expand our international distribution network, which allows our products to be marketed and sold in more countries. Hospitals around the world face similar challenges when caring for patients suspected of sepsis, and we're leaning into this opportunity. In the second half of 2021, we initiated commercialization in Singapore, South Korea, Taiwan, and Mexico by entering into distributor agreements in each of these countries. Shipments to our distribution partners were initiated in the second half of 2021, with 2 T2Dx instruments shipped to Singapore during the third quarter and 4 T2Dx instruments shipped to South Korea during the fourth quarter. Early in 2022, we've continued to expand our distribution networks with agreements in Norway, Finland, and Turkey.
While sepsis remains the core competency and the top commercial priority for T2 Biosystems, the introduction of our T2SARS-CoV-2 panel in 2020 has allowed us to significantly increase our installed base of T2Dx instruments and gain access to U.S. hospitals that were previously unfamiliar with our products and services. The expanded installed base of 45 T2Dx instruments being used for COVID-19 testing will eventually play a meaningful role in increasing sepsis test panel sales because each of these customers has committed to evaluating our sepsis tests. We're optimistic that many of these hospitals will have the capacity to evaluate our sepsis products this year, and we fully expect that these customers will convert to our sepsis panels over time. Despite the broad use of at-home COVID-19 antigen tests, hospitals continue to rely on molecular or PCR tests, including the T2SARS-CoV-2 panel, to identify acute COVID-19 infections.
The early 2021 surge in COVID-19 infection rates has translated to strong demand for our T2SARS-CoV-2 panel from U.S. hospitals during the first quarter of 2021. While we believe there will be continued demand for our T2SARS-CoV-2 panel, we expect a decrease in sales of our COVID-19 test compared to 2021. Taking into account our current installed base of instruments, our expanded sales and medical affairs team, and growing international distributor network, we expect to double our core sepsis business in 2022 as compared to 2021, including doubling our T2Dx instruments from 32 to between 60 and 70, and doubling our sepsis test revenue from $5.1 million to $10.2 million.
Encouragingly, in the first quarter, we are seeing customers with an increased ability to evaluate new technology and several of our new U.S. hospital customers that we closed during the first quarter will implement our sepsis test panels immediately. Moving to our second corporate priority, enhancing our operations. To sustain growth and drive adoption and utilization of our products over the long term, we continue to implement changes to our operations that enable a more efficient business model. Throughout 2021, we have focused on scaling our manufacturing capabilities and strengthening our supply chain. Over the past year, we have scaled our manufacturing from being able to produce 2,000 tests per week to over 7,000 tests per day. To achieve this level of production, we've reviewed business and manufacturing processes, as well as our business tools.
We assessed multiple tools and determined one of the best ways to improve our efficiency was by implementing a new Oracle ERP system, which we implemented during the third quarter of 2021. As a result of these initiatives, we are seeing significant improvement in our product gross margins. In the third quarter of 2021, we signed a lease that will consolidate our existing operations into a single 70,000 sq ft state-of-the-art life science facility in Billerica, Massachusetts, to accommodate current and future growth. This new facility will serve as our corporate headquarters and main manufacturing hub. It will also house all of our R&D labs that will aid in the advancement of our future products.
This move, which we expect will commence in the second half of 2022, will produce a significant reduction in rent expense, accommodate our manufacturing expansion, and reduce costs through efficiencies gained in working in a maintaining one facility. During 2022, we also plan to make strategic investments in tooling, automation, and efficiency projects to further scale our manufacturing capabilities and continue to improve cost of goods. Moving to our third priority, advancing our pipeline. We made significant progress advancing our product pipeline throughout 2021. We're continuing to prioritize the programs under our milestone-based product development contract awarded by the U.S. Biomedical Advanced Research and Development Authority, or BARDA, which is valued at up to $69 million. The four products that we are advancing under the BARDA contract are the T2Resistance Panel, the T2Biothreat Panel, the Comprehensive Sepsis Panel, and the next-generation instrument.
As a reminder, during the third quarter, our scientific team successfully completed the milestones described under option one of the BARDA contract. BARDA subsequently chose to exercise option two A of the contract, which is planned for the period between October 2021 and March 2022 and is valued at $6.4 million. Upon the successful completion of option two A, we are optimistic that BARDA will choose to exercise option two B. In December 2021, we initiated the U.S. clinical trials for the T2Resistance Panel and the T2Biothreat Panel, both ahead of our previously announced schedule. The clinical trials are designed to evaluate the performance of the T2Resistance Panel and the T2Biothreat Panel and support submissions to the U.S. Food and Drug Administration.
The T2Resistance Panel, which runs on our T2Dx instrument, is a direct from blood test panel that detects 13 antibiotic resistance genes from both gram-positive and gram-negative bacterial pathogens, which are known to cause antibiotic-resistant infections that may lead to sepsis. It provides accurate results in 3-5 hours without the need to wait days for a positive blood culture. The T2Resistance Panel, which is currently marketed and sold in Europe under a CE mark, was granted Breakthrough Device designation from the Food and Drug Administration, which provides for a prioritized FDA review process. The clinical trial, which will include up to 1,500 patients across 10 U.S. hospitals, is estimated to cost T2 Biosystems $25 million and is expected to be completed in 2022, enabling filing of an FDA submission potentially during 2022.
The T2Biothreat Panel, which also runs on our T2Dx instrument, is a direct from blood test panel that provides results in three-five hours and simultaneously detects 6 biothreat pathogens identified as threats by the U.S. government. The clinical trial, which includes positive samples being prepared and analyzed at a high containment biosafety level three laboratory and negative samples being analyzed at a single site, is estimated to cost T2 Biosystems $450,000 and is expected to be completed in 2022, enabling filing of an FDA submission potentially during 2022. The Comprehensive Sepsis Panel is a direct from blood test panel that will run on our next-generation instrument.
The new test panel is designed to detect greater than 95% of all bloodstream infections caused by bacterial and candida species and antibiotic resistant markers identified as threats by the CDC in a single test with a time to result of approximately three hours. We believe this test panel can be positioned as a primary test for patients at risk of sepsis and substantially change the blood culture-based laboratory workflow. The next-generation instrument, which is being developed in conjunction with our Comprehensive Sepsis Panel, is designed to be fully automated on demand and random access. This is similar to our current T2Dx instrument, but incorporates faster turnaround times and is designed to detect an increased number of pathogens and resistance genes from a single whole blood sample.
The design is approaching completion and based on the currently outlined schedule, we expect to have a fully functioning beta unit in the first half of 2022. Once the build out is complete, we will merge prototypes with assay and begin full scale system wet testing. We're planning to provide additional information on our new product pipeline during an investor and analyst day in the second quarter of 2022, where we'll take a deeper dive into each of these product development initiatives as well as our commercial and medical affairs plans and initiatives. With that, I'll now turn the call over to John Sprague to go over the details of our fourth quarter and full year 2021 financial results and our financial outlook for 2022.
John Sprague (CFO)
Thank you, John. Total revenue for the fourth quarter of 2021 was $7 million, a decrease of 10% compared to the prior year period, driven by increased sepsis panel test sales and BARDA contract activities, offset by decreased COVID-19 test panel sales. Product revenue was $4 million, a decrease of 31% compared to the prior year period. Research and contribution revenues were $3 million, an increase of 52% compared to the prior year period. Product costs for the fourth quarter of 2021 were $5.4 million, a decrease of $2.1 million compared to the prior year period, driven by decreased COVID-19 test panel sales and manufacturing cost efficiency initiatives. Research and development expenses were $5.4 million, an increase of $1.6 million, driven by increased BARDA contract activity.
Selling, general and administrative expenses were $6.5 million, an increase of $1.7 million, driven by increased commercial and medical affairs headcount. Net loss for the fourth quarter of 2021 was $12.1 million, $0.07 per share, compared to a net loss of $9.9 million, $0.07 per share for the prior year period. Cash, marketable securities and restricted cash were $33.8 million as of December 31, 2021. We did not use the ATM facility in the third or fourth quarter of 2021, and we have used it minimally in 2022. CRG has extended the interest-only period and loan maturity to December 31, 2023, and we are in compliance with the remaining covenants of the loan agreement.
Total revenue for 2021 was $28.1 million, an increase of 55% compared to the prior year, driven by increased sepsis test panel sales and BARDA contract activities, offset by decreased COVID-19 test panel sales. Product revenue was $16.6 million, an increase of 43% compared to the prior year. Research and contribution revenue was $11.4 million, an increase of 77% compared to the prior year. Product costs for 2021 were $20.7 million, a decrease of $600,000 compared to the prior year, driven by decreased COVID-19 test panel sales and manufacturing cost efficiency initiatives. Research and development expenses were $21.8 million, an increase of $5.7 million, driven by increased BARDA contract activity.
Selling, general and administrative expenses were $28.5 million, an increase of $6.4 million, driven by increased commercial and medical affairs headcount. Net loss for 2021 was $49.2 million, $0.31 per share, compared to a net loss of $46.8 million, $0.39 per share for the prior year. As we previously disclosed, we are not in compliance with Nasdaq's $1 listing requirement. We plan to regain compliance by executing on our operating plans and organically drive our share price to compliance. We currently have no plans for a reverse stock split. We expect full year 2022 total revenue of $28million-$31 million, including product revenue of $16million-$17 million and research and contribution revenues of $12million-$14 million.
We expect to close 60-70 T2Dx instrument contracts in 2022 and COVID-19 revenue to decrease from $9.5 million to $3.5 million. Thank you. Back to John Sperzel for closing remarks.
John Sperzel (Chairman and CEO)
Thank you, John. We made meaningful progress across the business during 2021. As expressed in our financial outlook, we're confident in our ability to build on this momentum. As we look ahead in 2022, we believe there are numerous catalysts to create value for stakeholders, including plans to double our T2Dx instrument placements and sepsis test revenue compared to last year, expand our international distribution network, build a world-class scientific advisory board, and increase awareness of our sepsis products through key opinion leader engagement, generate additional evidence to support the clinical and economic value of our products, complete the U.S. clinical trials for the T2Resistance Panel and T2Biothreat Panel, and file submissions with the FDA, and advance the next-generation instrument and Comprehensive Sepsis Panel under the BARDA contract.
We're off to a great start in 2022 with strong demand for our T2Dx instrument and test panels. We've entered into eight instrument contracts in the U.S. in the first six weeks of the year, and our team has a strong sales funnel. We're extremely excited about the future for T2 Biosystems and confident in our ability to change the standard of care for patients at risk of sepsis. Now let's open it up to questions. Operator?
Operator (participant)
Thank you. We're now conducting our question and answer session. If you'd like to be placed in the question queue, please press star one at this time. One moment please while we poll for questions. Our first question today is coming from Kyle Mikson from Canaccord Genuity. Your line is now live.
Kyle Mikson (Managing Director and Senior Equity Research Analyst)
Thanks. Hey, guys. Thanks for taking the questions. Congrats on the quarter and the year and the guidance. I want to just focus on the guidance first. The 60-70 placements, I think that would be the highest in the company's history, I believe. Basically accept it implies you're gonna, you know, see this fourth quarter level to persist throughout 2022. Just wondering what gives you the confidence that those placements will be more than double 2021 levels? And if you could tell us, like, the pacing of the instrument placements that are kind of baked into the guidance and then the rough mix of, like, U.S. versus OUS, that'd be good. Thank you.
John Sperzel (Chairman and CEO)
Sure. I'll start that, Kyle, and Brett Giffin, our Chief Commercial Officer, is on the call. He may wanna weigh in on this as well. We expect the pacing to be about 48% front half, 52% back half, and similarly distributed within each half quarter by quarter. Kind of 48% of the 48% Q1, 52% of the 48% Q2, and so on and so forth. Our confidence level was driven by a number of things. First, it is a substantially larger sales team than we had in the past, and that's something I'm sure Brett will wanna comment on, as well as the rigor we're putting around the sales process, the forecasting process, and funnel management process, as well as the fact that we have significantly expanded internationally, and we expect to continue to do that.
On top of that, we see COVID being more under control both outside the U.S. and within the U.S. during 2022, and that creates more opportunity for our sales team to get into more accounts. Brett, would you like to add anything to that?
Brett Giffin (Chief Commercial Officer)
Yeah, sure, John. Thank you. As John mentioned, the sales funnel is quite strong, both in the U.S. as well as internationally. I think in the U.S. specifically, as was mentioned, you know, we embarked on an aggressive headcount addition sort of in the latter part of 2021, which now has carried us early into 2022. I think in the hiring of that, we've been very diligent about the types of people we're bringing in, folks that have you know a significant amount of experience being able to work multiple departments in addition to the laboratory. We've doubled down on that quite a bit, as John mentioned, through some very extensive and very in-depth sales process.
We've engaged in a program called Force Management that we've trained the team down to a serious amount of rigor around qualifying accounts, developing champions in accounts, forecasting accuracy, all of that. On top of that, we've been very aggressive in the targeting effort, again, in the U.S., where a lot of our team is targeting. We're certainly continuing to work a lot of the larger institutions, but we've added to that, a significant amount of focus on medium and even some smaller.
Operator (participant)
Ladies and gentlemen, please stand by. We're expecting some technical difficulty. Please carry on.
John Sperzel (Chairman and CEO)
Brett?
Operator (participant)
Hello, speakers. Do you hear me? I believe we're having some technical difficulty with Mr. Giffin's line, so I just have him muted on my end.
John Sperzel (Chairman and CEO)
Okay.
Operator (participant)
To stop that noise.
John Sperzel (Chairman and CEO)
Sure. Kyle, would you like a follow-up question?
Operator (participant)
Our next question is actually coming from Mark Massaro from BTIG. Your line is now live.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Hey, guys. Thanks for the questions. John, can you hear me okay?
John Sperzel (Chairman and CEO)
Sure can. Hi, Mark.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Hey. Yeah, I wanted to ask if you guys could maybe help me parse out how much I totally saw your COVID guidance for the year, down $6 million to $3.5 million. You did a nice job of laying things out. I guess my question is, what are you assuming for sepsis product revenue for 2022? I'm coming up with something around $8 million-$10 million or so, which is like growth of 60%-80%. I guess it all depends on the ASPs of your instruments. That kind of piggybacks on Kyle's question about mix of systems, OUS, US. Anyway, is my $8 million-$10 million in the right ballpark?
What do you think it'll take to help drive that utilization, which really marks an acceleration compared to 2021?
John Sperzel (Chairman and CEO)
We think that our sepsis test revenue, just the test revenue, will grow from $5.1 million, which is where we ended 2021, to $10.2 million in 2022. That's where we talk about doubling our sepsis test revenue. You may not have been able to hear some of Brett's comments, but in terms of the mix of the instruments in our guide, we expect them to be even in terms of within the United States and outside the United States.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Okay. Understood. Yeah, thank you for that clarification. Then, what are you guys seeing with respect to hospital access? You know, I've recently, in the last two weeks or so, have heard some positive things from some other players in the space. But I would love to hear like what the hospital lab access looks like now here in mid-February compared to like the end of December.
John Sperzel (Chairman and CEO)
We think it's very good. In fact, it was even good for our team in December. We have had pretty good access since the second half of 2021. We thought last year that we'd start to see access opening up around July, and it was a couple of months later than that, but we've had good access through the back half of 2021, and we've had excellent access through the early part of 2022. That's also part of what gives us confidence that greater access means greater sales opportunities. With the rigor that Brett has put into the sales team, that gives us confidence overall in the instrument number. As I said earlier in the prepared remarks, we're off to a good start.
We already have eight contracts signed in the U.S. in the first six weeks and expect a lot more before the end of the quarter.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Great. Can you confirm-
Brett Giffin (Chief Commercial Officer)
This is Brett, by the way. I'm sorry.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Okay.
Brett Giffin (Chief Commercial Officer)
I think I'm back. Apologies for my volume problem there before. Yeah. Thanks, John. Yeah.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
No worries, Brett. Yeah, my third question is on the sales territories. I think you said 20 up from 2.
John Sperzel (Chairman and CEO)
Mm-hmm.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Are all those sales territories filled? Have these folks been trained? Like, what is your expectation on sometimes it takes one or two quarters for people to ramp? How should we think about the new reps contributing to the top line?
Brett Giffin (Chief Commercial Officer)
Sure. John, I'm happy to take that one if you'd like me to. Yeah.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
Good.
Brett Giffin (Chief Commercial Officer)
Actually, it's been a very positive picture. To answer specifically, we have the 20 territories. We currently have 17 that are filled as of the 17th this week, and we have aggressive recruiting activities, which we expect to get the other three in place here, you know, relatively quickly. To your question about the training, we do a combination of things. Clearly, we obviously spend, you know, significant time with folks right in the beginning and from a product and technology training perspective. But then what we did additionally, as I was mentioning earlier, again, apologies, hopefully you could hear me talking about it. But we invested in a program called Force Management.
That's very much a sales qualification, very metric driven, very detailed program that gives us a common language that we speak all through the management ranks and the sales team in terms of qualifying opportunities, their stage, likelihood of closes, all of that. So we've trained the team on that. To your last part of it, I think, yeah, I mean, I think the general expectation is that it takes some amount of time for a salesperson in a territory to impact.
However, what I'm really pleased to report, we've seen, and I think part of this has been through some of this enhanced targeting we've done with a wider array of hospitals, but we've had some really fantastic closes early in the year, and they've been done by people who started as late as sort of in the August, September, even into October timeframe. We're finding that we're having success with people that normally where you would assume a couple of quarters are having success really quickly, like within a quarter, which is very encouraging.
Mark Massaro (Managing Director and Senior Equity Research Analyst)
That's terrific. I will hop back in the queue. Thanks, guys.
Brett Giffin (Chief Commercial Officer)
Thank you.
John Sperzel (Chairman and CEO)
Thank you, Mark.
Operator (participant)
Thank you. Our next question is coming from Ben Haynor from Alliance Global Partners. Your line is now live.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Good afternoon, gentlemen. Thanks for taking the questions, and congrats on the progress. Just first off for me, you know, on the regulatory front, you know, you've got the two trials kicked off and you say that you're on track to file with the FDA this year. You know, particularly with the T2Biothreat. You know, that seems like something that could go relatively quickly and be filed, you know, relatively soon. Am I, you know, kinda correct in that thinking, or is there any more color that you can provide in terms of when, you know, these might be before the agency?
John Sperzel (Chairman and CEO)
Ben, you're absolutely right to think about it that way. Fortunately, these pathogens don't exist out in the open generally. We're dealing with contrived samples that are being prepared and tested in a BSL-3 lab. That part of it goes pretty quickly, and the negative samples are being done in one site. That also can go quickly. I think it's fair to think about it happening faster, obviously, than T2Resistance and a pretty straightforward clinical trial.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
I mean, is that something that we should expect in maybe the first half or, I mean, well, any more color that you can provide there?
John Sperzel (Chairman and CEO)
I think it's generally risky to start putting timeline when we've just started the clinical trial, Ben, but what we could absolutely plan to do is provide an update at the appropriate time. I will say that is a product that is not going to go into the hands of our sales team. That product obviously is limited to the U.S. government, and it would likely be sold to one or more government entities directly. We're gonna keep our sales team focused on our sepsis products, keeping focused on the hospital market, both in the U.S. and international.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Yeah. Okay. That kind of flows into my next question. It seems like obviously that would be something that could be in the U.S.' Strategic National Stockpile. You know, I think your shelf life is around 12 months. So I presume that would be recurring orders every year or even more often, should you guys get that across the finish line successfully. Are there... Am I correct in that? Then are there maybe examples of other sorts of products or tests that you can point to and say this could look similar to test XYZ out there?
John Sperzel (Chairman and CEO)
I'm aware that there are single tests for anthrax, for example, that are part of the Strategic National Stockpile. This would be the first-ever multi-target direct from blood biothreat pathogen system. It would certainly be a goal to have it be part of the Strategic National Stockpile, but it's a little bit early. Can't have those negotiations until we have a completed product.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
Okay. Fair enough. Lastly for me, and maybe I missed this with the technical difficulties, but on the distribution contracts, you know, do any of those have, you know, minimums associated with them, and, you know, is there, you know, presumably that those also give you some of the confidence in the 60-70 instrument number?
John Sperzel (Chairman and CEO)
Yes. Brett, would you like to take that?
Brett Giffin (Chief Commercial Officer)
Yeah, certainly. When we enter into an agreement with a distributor in one of the international markets, it's those. First of all, they buy the instruments, so there's an investment on their part up front. A part of that, we agree to minimum performance requirements that are contained in each of the agreements. As a matter of fact, we just concluded a program here where some of those had somewhat not been maybe as quite as closely policed during the height of the COVID period. We've gone back and pretty much brought all of those back up to level and in some cases negotiated a few of them.
Yeah, the simple answer is yes, we have that in all of our agreements, minimum performance requirements as well as I said, they buy the instruments and they certainly don't buy them to have them just sort of sit in their warehouse. They're tied directly to either a tender or an anticipated, you know, say, you know, an account that they have in mind.
Ben Haynor (Managing Director and Medical Technology Research Analyst)
That makes sense. It's very helpful. Great. Well, that's all I had. You know, thanks, gentlemen, and looking forward to the Analyst Day.
Brett Giffin (Chief Commercial Officer)
Absolutely.
John Sperzel (Chairman and CEO)
Thank you, Ben.
Operator (participant)
Thank you. Next question today is coming from Steve Brozak from WBB. Your line is now live.
Steve Brozak (Managing Partner and President)
Hey, thank you, gentlemen, for the granularity and congratulations on the progress in the quarter and the year, of course. I just have one question. The last two years, you've obviously had a focus on COVID, which is now transitioning to sepsis. Can you tell us what the clinicians, the facilities are saying as far as what has made it easier for you or not, maybe, in terms of understanding the T2 system is using it for COVID and how much advantage do you have now in switching it over to sepsis? Also, not that long ago, there were some presentations that were done showing a significant linkage between COVID and unfortunately, ultimately folks that wind up in the ICU having sepsis.
Whatever you can tell us on that would be greatly appreciated. Thank you.
John Sperzel (Chairman and CEO)
Sure. Thanks, Steve. Brett, I'll start. Feel free to add some commentary to it.
Brett Giffin (Chief Commercial Officer)
Sure. Sure.
John Sperzel (Chairman and CEO)
I think if we start at a high level, Steve, we saw data early on when the pandemic first hit, linking from a clinical perspective, critically ill hospitalized COVID patients with sepsis, somewhere to the degree of 30%, between 20% and 30%. I recently had a conversation with a key opinion leader, and he said that one-third, one out of every three of the patients admitted to his ICU with COVID ended up becoming septic. That statistic has been true for the last two years. We see more and more stories where a relatively healthy patient comes down with COVID, becomes critical, ends up in the hospital, and becomes septic. There's a clear link. It's been there. Clinicians understand it.
It's been part of the reason that we've been successful selling or placing instruments into U.S. microbiology labs because they're the same ones that are doing the testing, whether it's for COVID or for sepsis. I would say that while we benefited from COVID, the biggest benefit that we've received is that we've been able to place a significantly larger number of instruments that we might not have been able to place into accounts where we had no prior relationship. They didn't know T2, they didn't know our salespeople, they didn't know anything about our products or services. It's been a real door opener for the company. As those accounts get better control in their communities of COVID, and we see COVID cases going down, we believe that those accounts are gonna have more bandwidth to address their sepsis protocols and implement our sepsis test panels.
Brett may wanna add something to it, but at a high level, that's what we're seeing.
Brett Giffin (Chief Commercial Officer)
Yeah. I think John pretty well said it right. I think it's actually it has created an opportunity for us, and it's I think as part of our you know as John mentioned earlier we've really had experienced I think quite excellent by comparison access to hospitals. I think that has been a part of it you know obviously with the increased feet on the street and the extra push of doing that. I think I believe our team has gotten more access from that. As John said I think that you know the hospitals understand that linkage and it's the really encouraging element and we certainly we're well-drilled with our team.
Every conversation we have with them in our entire approach, even if we're in the discussions of COVID because a hospital is, say, stressed because they've had a primary supplier that's maybe put them on allocation and aren't getting it, we're able to fill that need. It's created that door opener. What it's also done is every one of these opportunities that you heard us mention, every one of them is earmarked for, even if COVID's involved, they're all earmarked for, and the accounts have all, you know, sort of agreed or bought into, you know, an ultimate move to sepsis. We're very much doing that on the front end with earmarking these towards sepsis.
Very encouragingly, about a third of the instruments we've already put in so far, and we have several more in the pipeline that have a stated interest of implementing sepsis really right out of the gates, just at the same time with COVID. That's been a very positive. We sort of feel like we've curried perhaps some goodwill too, where we've been able to help some institutions that were, you know, really have kinda struggled with getting the need for the COVID testing. We've been able to step in and fill that. As John mentioned, we got, you know, fresh instrumentation in there and some footprint.
It's been a positive development, and I think it bodes really well for us going forward with the sepsis business.
Steve Brozak (Managing Partner and President)
Well, again, thank you for that, quote, unquote, "granularity," and obviously the good news in 2021 and the details for 2022. I'll hop back in the queue. Thanks again.
Brett Giffin (Chief Commercial Officer)
Mm-hmm.
John Sperzel (Chairman and CEO)
Thank you, Steve.
Operator (participant)
Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.
John Sperzel (Chairman and CEO)
Thank you for joining our fourth quarter of 2021 and full year earnings call. We look forward to updating you in the future. Have a great day.
Operator (participant)
Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.