T2 Biosystems Inc (TTOO) 2016 Q4 法說會逐字稿

Greetings and welcome to T2 Biosystems fourth quarter and full year 2016 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)

I would now turn the conference over to your host, Tucker Elcock with Teneo Strategy. Thank you Mr. Elcock, you may now begin.

Thank you, Doug and good afternoon everyone. Thank you for joining us for the T2 Biosystems 2016 fourth quarter and full year results conference call.

On the call this afternoon to discuss results and operational milestones for the periods ended December 31 2016, our President and CEO John McDonough, Chief Financial Officer Shawn Lynch and Chief Scientific Officer Tom Lowery. Chief Commercial Officer David Harding will be available during the question-and-answer period of the call. The executive team will open the call with some prepared remarks followed by a question-and-answer period.

I would like to remind everyone 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 9 2016. 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?

Thank you, Tucker, and good afternoon, everyone. Thank you for joining us on the call.

2016 proved to be a transformative year for T2, operationally, strategically and financially. We made significant progress against our priorities throughout the year growing our customer base, expanding our partnership pipeline, and highlighting the power of our technology through customer success stories in real world data.

We are well on our way towards demonstrating the power of the T2 technology to improve patient health and deliver strong economic returns to healthcare institutions. We exited the year with strong momentum led by a solid performance in the fourth quarter and we expect that momentum to continue in 2017 which I will cover further in a bit. But first let me walk you through some of the operational and strategic highlights from the quarter and the year.

In the fourth quarter we secured commitments that will provide us access to an estimated 100,000 additional patients annually considered to be at high risk for sepsis and infections. This number represents 18 new hospitals in the United States and Europe, four contracts representing 14 hospitals in the US and 4 in Europe. This result also represents 67% of our target of 150,000 new high-risk patients by September 30, 2017.

As a result of this strong performance today we are increasing that target to 200,000 high-risk patients over the same period. Our performance in Europe in 2016 exceeded our expectations. Our goal was to enter four European markets and by the end of the year we expanded our European presence to eight countries via contracts with international distributors. Europe will continue to be a key focus in 2017 as we add more hospitals to our customer base and as those hospitals roll out and commence testing of patients.

At the end of 2016 the world wide install base of hospitals with access to the T2Dx instrument grew to 143 hospitals representing an estimated 445,000 symptomatic patients annually who are considered to be at high risk of sepsis infections, an approximate 95% year-over-year increase in high-risk patients. Importantly, during the fourth quarter we continued to make strong progress with the T2Bacteria program and we remain on track for completing the clinical trial and filing for market clearance with the FDA by mid-2017.

We recently completed a detailed market research survey conducted by an independent market research firm that assessed the overall market needs in sepsis diagnostics. The research included interviews and surveys of leaders and hospital labs, infectious disease and hospital administration, and in part focussed on their views of T2Candida and our product candidate T2Bacteria.

We thought it would be helpful to share with you a few highlights from the research. Number one, lab directors will be over three times more likely to recommend adopting the T2 technology with both T2Candida and T2Bacteria, validating our belief that T2Bacteria will be a game changer for our business.

Two, two-thirds of the critical clinical decisions are made in the first 24 hours of when patients are initially tested demonstrating the critical need for faster and more accurate tests as blood culture results extend beyond the 24-hour period. The ideal time to result is 12 hours and the most important test result is species identification, not susceptibility results. To our knowledge only the T2 platform can deliver results in the ideal time frame of 12 hours or less and for that matter, even within the first 24-hour time frame.

Three, infectious disease doctors are strong supporters of the T2 platform with T2Candida on a standalone basis and are even more positive when you add T2Bacteria. And, four, economic customer success stories are important in driving market adoption. The survey results are consistent with our own experiences in the market and further demonstrate the need for and power of our platform and products.

Switching to other product pipeline development, we are also making good progress with T2Lyme and remain on track to complete three clinical studies in 2017 which will lead to an FDA clinical trial in 2018. We recently received issuance of a key patent related to T2MR in field of hemostasis. This patent covers the T2MR measurement of multiple factors directly in blood. These new claims in combination with issued claims from other patents demonstrate our innovations and protect the multiple T2MR hemostasis measurements associated with assessing the risk of patients bleeding or clotting.

In 2016 we strengthened our balance sheet, informed important strategic alliances that position us for long-term sustainable growth. In July, we announced a multi-year agreement with Bayer to provide T2MR for Bayer's research and development efforts in blood coagulation disorders. In September, we announced a $40 million equity investment by Canon USA that will fund the company's continued growth through the launch of T2Bacteria panel. In November we announced collaboration with Allergan to develop a novel diagnostic panel to detect Gram-negative bacterial species in antibiotic resistance for patients with serious bacterial infections including infections that lead to sepsis.

In December we secured a new $50 million debt facility with CRG with an initial draw of $40 million that delays the payment of principal payments for at least three years further improving our capital position. We entered 2017 with the financial resources and important partnerships that not only drive new opportunities but also represent important third party endorsements of our technology and T2 strategic direction. During the quarter we continued to expand our partnership pipeline and while we will remain selective in our approach we are hopeful to expand our partnerships in 2017.

Additionally, and perhaps most importantly, during the year the value of our products were demonstrated at customer sites throughout the United States and Europe. Four of our customers presented or published data at industry conferences from their use of T2Candida that highlight the patient and economic impact of testing patients. The most notable one came from the Henry Ford Health System in Detroit which presented a statistically significant study reporting approximately $2 million in savings through the implementation of T2Candida technology. These savings were realized by significant reductions in ICU and hospital length of stay for patients along with reduction in the use of anti fungal drugs. Other customers included Riverside Hospital in California, Huntsville Hospital in Alabama and the Lee Memorial Health Systems in Florida, all of whom demonstrated outstanding economic returns for their respective hospitals.

On that note, I would now like to turn the call over briefly to Tom Lowery, Chief Scientific Officer, to provide some further color on the successes that customers have had as a result of our technology. Tom?

Thanks, John. We continue to see case studies where T2Candida is detecting tissue based infections also known as DT Candidaiasis or blood cultures missing these infections. Just to remind you, in our original pivotal study we had one case that was positive with T2Candida negative for over 12 blood cultures. In this patient 7 days after the T2Candida positive result, an inter-abdominal abscess was discovered that was subsequently sampled by surgically obtained tissue culture and confirmed to be the same Candida species that was detected seven days earlier by T2Candida. We now know this was the first of many such cases.

To date there have been dozens of clinical cases that we are aware of where blood culture was negative. T2Candida was positive and confirmed by other microbiological methods. In Europe, for example a hospital recently reported that T2Candida identified four patients that were blood culture negative and had confirmed lung infections from the same species of Candida using culture from a bronchial lavage.

Another example was from a large US hospital where multiple cancer patients suffered from invasive inter-abdominal Candida infections that were missed by blood culture but identified by T2Candida confirmed by imaging and follow on microbiology testing. Additionally, customers have shared several other patient case studies where blood culture was negative but non-blood culture specimens such as wound swabs and respiratory samples were positive and matched the T2Candida results. The inability of blood culture to detect deep seated tissue infections and the challenges associated with obtaining high quality tissue samples, swabs, and lung washes for culture are well understood by market biology directors.

It's been exciting to hear the enthusiasm from customers that experience cases like these. We expect more cases of DT Candidiasis will be defected by T2Candida further demonstrating the ability of the test to help physicians and labs to appropriately manage these patients with invasive Candidiasis who with blood culture alone are being missed.

Thank you, Tom. As you can see, our products truly are transformational. And these success stories are and will continue to be an important driver going forward in securing our next phase of growth.

There have been a lot of developments in the field of sepsis diagnostics, but to our knowledge all products in the market or coming into the market that detect species or susceptibility, require a positive blood culture first. We know the problem of a blood culture taking one to five days to go positive. The biggest problem may be the 30% to 50% of patients that are positive with infections but declared negative by blood culture. T2Candida today and we believe T2Bacteria soon, may detect patients days faster than they also detect patients that are missed by blood culture. Providing this information to clinicians can be critical and the survival and recovery of patients and the hospital costs associated with these infections.

With that, let me turn the call over to Shawn to take you through the quarterly and full year financial results in our 2017 outlook. Shawn?

Thanks, John. Total revenue for the fourth quarter was $910,000 which consisted of $579,000 of product revenue compared to $343,000 for product revenue in the fourth quarter of 2015. Results were driven by an increase in T2Candida panel sales due to increased patient testing across the installed base.

Total revenue for the full year was $4.1 million which consisted of $1.75 million of product revenue compared to $599,000 of product revenue for the full year of 2015, an increase of approximately 191%. Product revenue for the full year was primarily derived from a combination of instrument and consumable sales.

Total operating expenses increased for calendar year 2016 due to an expansion of commercial activities and continued investments in the product pipeline including T2Bacteria and T2Lyme. We continue to focus on cost control ahead of the T2Bacteria launch, however, our operating expenses will fluctuate quarter to quarter based on the level of clinical studies we are running.

We closed the year with a cash and cash equivalents balance of approximately $73.5 million. This strong position will only further be buoyed by the debt refinancing we executed at the end of the quarter. The agreement positively impacted our cash flow as we secured minimum of three years of interest only payments while extending the Company's borrowing limit to $40 million with a potential option to draw an additional $10 million and extend the interest only period further upon the T2Bacteria panel achieving FDA clearance.

As we move into 2017, as John stated earlier, we are now targeting an increase in the number of high risk patients at customer facilities of 200,000 patients, or an additional 100,000 patients to the number closed in Q4. By the end of the third quarter of 2017 ahead of the launch of T2Bacteria.

Additionally we are anticipating higher product revenue in the first quarter of 2017 compared to the fourth quarter of 2016 from an increase in T2Candida sales due to increased patient testing across the install base. Total operating expenses for the first quarter of 2017 are expected to be between $13.2 million and $13.7 million, of which approximately $1.8 million is non-cash expenses which are primarily depreciation and stock compensation expenses.

We are also forecasting weighted average shares for the first quarter to be 30.6 million and 31 million for the full year. With that, I would like to turn the call back over to John for some closing remarks.

Thanks, Shawn. Our priorities entering 2017 are clear and unchanged, and our square focus is on execution. Priority one, continue to expand and gain access to patients at large hospitals and hospital systems in the United States and Europe who are at high risk of sepsis infection. We previously stated a 12 month goal through September 30 of adding 150,000 high risk patients and we are taking that number up to 200,000 high risk patients based on our strong performance in the fourth quarter.

Two, introduce new products to expand the current suite of solutions. We are running patient samples at clinical sites and expect to complete the clinical trial for T2Bacteria and file for market clearance with the FDA by mid-2017. We also intend to communicate the results of our clinical study with you after completion. For our other products in the pipeline we intend to complete preclinical studies for T2Lyme in 2017 which will lead to an expected FDA clinical trial in 2018 while commencing preclinical studies for the Gram-negative resistance panel in 2018.

Three, expand our partnership pipeline to help accelerate our growth profile. In November, we announced a partnership with Allergan and we're working to grow our pipeline of other partnership opportunities. And finally we expect to see more customer success stories that may continue to demonstrate the power of T2's technology and the impact it is having in healthcare institutions. This will be an important driver of the future success of T2.

As I have stated before and continue to believe, at the core of T2, we are working to deliver diagnostic products that fundamentally change clinical decisions in a way that saves the lives of patients and delivers a strong economic return to the hospital system. Our technology continues to help our customers be at the forefront of the paradigm shift occurring within hospitals with regards to how they approach patient care. We remain committed to and are excited to see the impact of our products in the lives of patients and the economics of hospitals in 2017 and beyond.

With that, I'd like to turn the call over to the operator for questions. Operator?

Thank you, we will now be conducting a question and answer session.

(Operator Instructions)

Our first question is from Isaac Ro of Goldman-Sachs. Please go ahead.

Hi, this is Taylor in for Isaac. So I had just a few questions. One on T2Bacteria.

I know you guys are aiming for market clearance in mid 2017. If we can get an update of where it is now and what sort of milestones to look for in the interim before the data is actually available or the trial finishes? Excuse me.

You bet. Good afternoon, this is John so we retain right on track, we have instruments running at the clinical site, patient samples being run. We're making good progress. We're right on track to file with the FDA by the middle of the year.

You know, the next update will probably be something like this when we have our Q1 earnings call. We'll give you a good sense of where we are in that trial, really, you know, the timing of when we file relative to the middle of the year which is why we keep saying the middle of the year we'll really be primarily driven by enrollment at the clinical sites. We're off to a really good start, so we're feeling really good about that and we feel very much on track by the middle of the year.

The next major milestone probably at the time we file with the FDA or pretty close to it, would be the opportunity for us to share the data from the clinical trial itself. We did that with T2Candida and in all likelihood unless there is something preventing us from doing that and we don't know would know what that would be right now, we would expect to do the same. That would come right in the middle of the year as well.

Okay. Thanks. And just one quick follow-up.

So I saw your operation expense guidance and I'm just wondering what type of pacing should we be thinking about, with obviously there is extra expenses in the beginning of the year for the clinical trial. Any color on that would be helpful.

Yes, absolutely. This is Shawn.

What I would say we're pretty comfortable with our current resource footprint with the exception of the timing of clinical trials as you think about it. So as we wind down through the clinical trials in the first half we should get back to kind of normal resource foot print.

Okay. Thank you.

Thank you. The next question is from Steve Brozak of WBB. Please go ahead.

Hey, good afternoon and congrats on all of the stuff that took place in 2016. Let me dive right into the question.

Can you tell us how over 2016 the sales cycle, the drivers, have evolved and what you've learned from that? And I got one follow-up question after that, please.

Yes, good afternoon Steve. Great question. So we're definitely seeing some changes in the sales cycle.

As we went through 2016, I think we saw more in the first half of the year that we had closed most of what typically would be called early adopters. And as we shifted to the middle of the year, we were much more targeting and talking to what I'll call more mainstream buyers.

By that I mean those who were more interested in advantages of [new] technology and less enamored with the technology itself. As we got toward the end of the year, we really saw some strong momentum starting to build with the customer success stories entering the marketplace. That is why we have been talking about that for some time. This more mainstream buyer that represents the largest part of the market, they're a little bit less risk averse than your technology buyer, and so to the extent that you can talk to real successes like Henry Ford, Riverside and a bunch of others that really moves the needle in sometimes in extraordinary ways.

The other thing we're certainly seeing as we enter Q1 is that T2Bacteria getting closer is definitely driving interest in the platform more broadly. It is a little bit too early to try to quantify that, but we definitely are seeing that positive impact in the early part of this year and we think that's only going to grow as we go through 2017.

That actually leads me into the follow-up. Given the fact that you have gone out there and laid the ground work for all of the introductions and meetings and everything else, now that you're going to target these facilities with bacteria, you've got an edge up and how would you put that? How would you position that in terms of now having not just fungal detection but bacterial detection.

How would you present that in terms of these folks that have been waiting and also the people that are installed? What do you see that as being, you know, not just two plus two equals four, but what do you think it does and I'll hop back into the queue.

Yes, great question. I think it changes the story in a pretty substantial way. What we're moving to offering is a much more complete sepsis solution to a hospital system as opposed to being positioned as a Candida solution.

As I have been saying all along the medical community has embraced and understands the huge impact of Candida. But as we have also said all along, sometimes the lab said there is more work to be done there in terms of them understanding beyond that need for Candida infection. It just takes longer, that is where the sales cycle gets longer.

They understand bacterial infections much more so because they're more prevalent. And so they get a lot more excited about a complete solution. I think the survey that we spoke to really confirmed that in a pretty, you know, numeric data-driven way as opposed to what we're seeing and hearing we certainly saw that in the survey results.

I think this really helps in terms of getting the platform into places where it doesn't exist today. Where there has been interest and interest, and maybe just moving at a slower pace than they might when you have a complete sepsis solution. And I think it is a big game changer for the existing customer base because of course they already have installed instruments and we fully expect that they will embrace and adopt pretty rapidly after FDA clearance.

Great. Again, congrats, gents, and looking forward to 2017.

Thank you, Steve.

Thank you. The next question is from Paul Knight of Janney Montgomery Scott. Please go ahead.

Hi this is actually Carolina Ibanez-Ventoso on for Paul Knight. Thank you for taking my question. Although the product revenue for the fourth quarter was considerably higher year-over-year, it was flat sequentially and also consequently the [evidence reagent] sales was down sequentially. So I was wondering if you could provide more context to the sequential results.

Yes, absolutely. This Shawn. Let me start with the second part first. I'm not sure where you're seeing the consumable sales down sequentially. I'm not sure that is information that we've disclosed. Maybe that's something that we can capture offline.

But with respect to the first part. At the end of Q3 we talked about Q4 would be relatively flat compared to Q3 as in Q3 we kind of had a bounce-back from some of the product recall issues that we had at the end of Q2. So we had some backlog that we had to fulfill in Q3, and between that and consumables and instrument mix that really kind of led to flat results in Q4. As I talked about in the script, we believe that there will be an increase in revenue in Q1 due to increased patient testing across the portfolio.

Yes, as we talked about on the third quarter call just to kind of fill in the blank, especially internationally, there are instrument sales that are a part of the mix, and we just didn't have as many instrument sales in Q4, which we expected. Which is why you had the flat guidance from Q3 to Q4, but in fact we're very happy with the growth we saw consecutively from Q3 to Q4 in disposable sales. So if that's kind of not visible on the income statement, you should know that is in fact the case.

Okay. Thank you. That is it for me.

Thank you. The next question comes from Bryan Brokmeier of Cantor Fitzgerald. Please go ahead.

Hi, good afternoon, guys. You realized hospital adoption, you talked about that and really a bit of a pickup in the fourth quarter to 100,000 -- 100 hospitals representing 100,000 patients. Revenues still haven't quite caught up to that. We talked about this a little bit in the past and see if we could get a little more color on what you can do and what you are doing to increase physician utilization.

Yes, so there is really three answers to that question. So the first one is, of course, get the account up and live and testing patients, and we -- fourth quarter is a tough time to do that when you get towards the end of the year not many hospitals are turning on new testing. We expect to see a little bit more of that in Q1 than we would have seen in Q4, and did see a couple of accounts go from December to January/February rollout, that would be number one.

Number two, of course, is we had dedicated sales people who are promoting to physicians, educating the physicians and ordering the tests, and that would be within the accounts that are closed. And then, number three, which is a really big one. As we talked about in the past, when these accounts go live, they typically are starting with testing a segment, usually a reasonably small segment of their entire symptomatic high-risk patient population that really they should be testing. And so we are definitely seeing a move towards broader testing of patients.

We're seeing that both in terms of somewhat modest, but nice growth within the customer base. And lots of interest based on the success customers are having, testing patients based on the data from customers that have been presented at trade shows. There is a lot more movement towards testing a broader segment of the overall high-risk patient population. That is certainly something that as a commercial organization we're really focused on educating and working with an account so that they are testing the right patients. So the third piece is probably the biggest needle mover that we think we will see more and more as we go through 2017 and one we're really excited about.

Okay. And you talked a little bit about the -- about the sort of the customers that you're targeting now, whether they were more main stream hospitals from where they were. Can you talk about how your customer pipeline looks, and also you signed 100,000 -- hospitals representing 100,000 patients and prior to that I believe you averaged 50,000 high risk patients in the quarter. Your goal implied a slower rate from that.

Are -- given the improving adoption, the customer references and the data that's out there that goes along with that, given the lumpiness of signing contracts, are you being prudently conservative or is there something else we should consider for the rate of adoption over the next three quarters.

I think we're being prudently conservative. I think that is a fair way to say that. But we're doing it for all the right reasons.

As you said, it could be lumpy. You can close one big healthcare system and there are some accounts we're working on that would represent more than half of the 150,000, and then we could blow it away. But then there is a lot of accounts that have [3,000, 4,000, 5,000] high-risk patients and then you need more of them to be able to get there.

But we feel really confident with the adding another 100,000 over the next three quarters. We're really excited with the progress we saw in Q4. We're going to work really hard to try to stay at that rate or better. It is really going to come down to timing of when these contracts close, which we know is very difficult to predict the timing of all of that.

Okay. And also I didn't see your financial statements. Is that something we should be expecting today or when are you going to be releasing those?

Yes, Bryan, this is Shawn. We didn't include the financials because we closed a number of complicated transactions in Q4 including our debt funding arrangement at the end of the quarter. We're going through those details internally and with our audit team.

We think that we've released the important information as of today related to symptomatic high risk patients, revenue, cash, and shares outstanding. If you need more we can talk through it but otherwise we plan to file our K in due course.

Okay. Thank you.

You're welcome.

Thank you.

(Operator Instructions)

Our next question is from Mark Massaro of Canaccord Genuity. Please go ahead.

Hey, guys, thank you for taking the questions. I was hoping you could comment on -- anyway, in Q4 you had a really strong eight contract number which is your strongest in all of 2016. Can you speak to your pipeline in your funnel in terms of contracts?

And that being said I understand you're trying to move us to the number of high risks symptomatic patients. You have taken up that guide as well. I was wondering if you could just speak to how we should be thinking about number of hospital contracts as we prepare in advance of the bacteria launch.

Yes, and we're not going to go there, right? We moved away from contracts. So what I'm happy to talk to is the number of high risk patients within those accounts. We definitely have put the sales focus on the biggest opportunities. The biggest opportunities take longer to close and we just -- and it's worth the effort because you can close 100,000 high-risk patients in a quarter like we just did in the fourth quarter.

The pipeline is strong. Honestly, I'm glad you asked about it. It continues to advance. We -- it's a very rare case that somebody is not interested in our platform.

It's a very rare case now with T2Bacteria entering the fold, even some of those that have been waiting are now starting to come back in and moving forward in the sales cycle. So we're definitely seeing a heightened interest and excitement growing, and we think T2Bacteria is helping to stoke that. The customer success stories that we talked about are stoking that.

Honestly, what Tom Lowery just spoke to on the call, that is the biggest thing of all, right? We now have well over two dozen documented cases at customer sites where they have detected infections that probably would have gone undetected, completely undetected, and the blood culture was negative, it turns out there are lung infections, abscess infections, and we're picking them up in the blood sample. I mean, it's -- I'll be real honest we didn't think even when we launched the product and started testing patients last year, we never thought we would see the types of cases that we're picking up.

No one ever really knew. Some of our scientific advisors thought this might be possible that if you were sensitive enough maybe you would pick up these infections. Nobody knew.

Does a lung infection really present in the blood? They're picking up these positives, they're doing imaging. They're seeing an infection. Even if they had done the imaging they never would have known it was a Candida infection. We're directing them in that way. We think we are going to see the same thing with bacterial infections and the impact it's going to have.

When you think about customer success stories and the impact they can have on the pipeline and sales cycles. Don't just think about the big ones. Of course that we like to see.

These smaller cases that we see are every bit as impactful. We're typically seeing in a hospital that for every two Candidemic patients they know about we pick up a third one they didn't know about. And in all honesty, if that patient ever got treated, they probably don't survive, and the cost of treating that patient on average would be 2.7 times greater than the cost of treating a patient that you did know about and treat. The cost savings, you know, are really phenomenal as well.

We're pretty excited about the technology. We're really excited about T2Candida. We can say it is having an impact on the sales cycle and we're just so excited to be in 2017 and moving toward T2Bacteria.

Certainly, we know everybody wants to see more numbers. We're working hard at that. We're an early stage company. And sometimes you don't get to see all the good things that are coming reflected in short-term revenue and profits.

Great. Thanks.

And I know all hospital systems are a little bit different, but can you speak to the number of months it's taking from the time that you provide a demo into a hospital system to the time that the budget gets approved and you place the instrument and start recognizing revenue? And then as a follow-up to that, can you just speak to the timing of recognizing revenue upon clearance of the bacteria panel?

Yes, so let's see if I could pick these pieces apart. Typical sales cycle is six to 12 months. We see them as fast as three months.

Longest, we have some in the pipeline well over a year. So I'll let you know when they close what the longest is. The longest is yet to be determined. Typically we're averaging six to 12 months.

When a contract is closed it typically takes three to six months to go through both an installation and then a verification, every product that goes in needs to be verified. For the first time today they're verifying both an instrument along with T2Candida. It's really at the end of that process, where you'll now see revenue commencing. They're starting by testing typically a smaller number of patients. Beginning to end, if you take 12-month sales cycle and you put six months to go live, it is 18 months, if you will, from first call to first revenue.

Excellent. Yes, that is pretty stable.

And then my last question is on Lyme disease. It is a large unmet need. Assuming you do finish the three clinical studies in 2017, is it fair to think that you may be in good position to submit in early 2018 and can you speak to the regulatory pathway there?

Yes, if we complete preclinical studies in 2017 we would likely enter the clinical study for the FDA and would probably start that in early spring in 2018. We don't know exactly what that trial will look like. We're in discussions with the FDA and if possible we could get submitted before the end of 2018, but it is too early to make the call on that.

It's important to point out, though, vis-a-vis Lyme disease, that panel, because that is a panel, also includes the bacteria associated with Lyme disease in Europe. So it's not unreasonable to think that we could be CE Marked and selling products in Europe in 2018. Early, I don't know, maybe first half of 2018. That would probably be the most optimistic scenario but quite possible.

Great. Thank you very much.

Thank you. We have no more questions at this time. I would like to turn the conference back over to management for closing comments.

Well thank you all for dialing in this afternoon. We look forward to communicating back in the very near future. And we hope you all have a good day.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.