T2 Biosystems Announces Agreement with CRG for the Conversion of $15 Million of CRG Term Loan into Equity

Rhea-AI Summary

T2 Biosystems, Inc. announces a definitive agreement to convert $15 million of its term loan into equity, strengthening its balance sheet. The company is working on important business catalysts like international distribution expansion and FDA clearances.

Insights

Financial Analyst

The conversion of a portion of T2 Biosystems' term loan into equity is a strategic financial maneuver that immediately impacts the company's balance sheet by reducing its debt burden. This transaction not only alleviates short-term liquidity pressure but also signals to the market a vote of confidence from the lender, CRG, in the company's future prospects. The waiver of prepayment premiums and back-end fees by CRG further underscores this support.

From a financial perspective, the debt-to-equity swap is beneficial for T2 Biosystems as it reduces interest expenses, thus potentially improving net income and earnings per share in the future. However, current shareholders may experience dilution of their ownership, as new shares are issued to CRG. The exact impact on the stock price will depend on the market's perception of the company's improved financial health versus the dilutive effect of additional shares.

Market Research Analyst

Looking at the broader implications, T2 Biosystems' focus on expanding international distribution and the recent FDA 510(k) clearances are pivotal for its growth trajectory. The anticipated double-digit product revenue growth could strengthen the company's market position in the medical diagnostics sector, especially in the critical area of sepsis detection.

The company's strategic initiatives and regulatory achievements are likely to be viewed positively by investors, as they indicate progress and potential for increased market share. It is also important to monitor how the conversion affects the company's Nasdaq listing compliance, as maintaining this status is crucial for investor confidence and the ability to raise capital in the future.

Medical Research Analyst

The importance of T2 Biosystems' technology in the rapid detection of sepsis-causing pathogens cannot be overstated, given the high mortality rates associated with sepsis and the increasing threat of antibiotic resistance. The FDA 510(k) clearances serve as a testament to the efficacy and reliability of their products, potentially leading to greater adoption in healthcare settings.

Investors should be aware of the significant market opportunity in the sepsis diagnostics space, as well as the competitive landscape. The company's success in obtaining regulatory clearances and its focus on expanding its product offerings could provide a competitive edge and drive long-term growth, which is a critical factor for investment considerations.

LEXINGTON, Mass., Feb. 15, 2024 (GLOBE NEWSWIRE) -- T2 Biosystems, Inc. (NASDAQ:TTOO), a leader in the rapid detection of sepsis-causing pathogens and antibiotic resistance genes, today announced the entrance into a definitive agreement to convert $15 million of its term loan with entities affiliated with CRG Servicing LLC (“CRG”) into T2 Biosystems equity upon stockholder approval.

On February 15, 2024, T2 Biosystems entered into a Securities Purchase Agreement with CRG to facilitate the debt conversion. Pursuant to the terms of the Securities Purchase Agreement, within 10 business days of receiving stockholder approval of the transaction, CRG will cancel $15 million of loans outstanding under the CRG Term Loan Agreement in exchange for the issuance of an aggregate of $15 million of shares of common stock at a price per share of the lower of (i) the average closing price of our common stock on Nasdaq for the five consecutive trading days immediately preceding the date of issuance and (ii) the closing price of our common stock on Nasdaq on the trading day immediately preceding the date of issuance; provided that in the event this would result in CRG beneficially owning more than 49.99% of the Company’s outstanding shares of common stock (or in the case of one of the CRG entities, 9.99%, calculated without considering convertible securities held by CRG), the Company will issue shares of the newly designated Convertible Preferred Stock representing the excess above 49.99% or 9.99%, as applicable. CRG agreed to waive prepayment premiums and back-end fees associated with such principal amounts of loans exchanged for equity.

“We appreciate CRG’s continued support of the Company as we work to advance the business and regain compliance with the Nasdaq listing requirements,” said John Sperzel, Chairman and CEO at T2 Biosystems. “Equitizing another portion of the term loan strengthens our balance sheet at a time when the company has a number of important business catalysts ahead, including international distribution expansion, two recent FDA 510(k) clearances and one pending FDA 510(k) submission, and the expectation for double-digit product revenue growth.”

This latest debt to equity conversion follows two recent amendments to the CRG Term Loan Agreement. In July 2023, CRG canceled $10.0 million of the Term Loan’s principal in exchange for 483,457 shares of common stock and 93,297 shares of Series B Convertible Preferred Stock (with each share of Series B convertible into 10 shares of common stock). In October 2023, the CRG Term Loan Agreement was amended to extend the interest-only period and maturity date from December 30, 2024 to December 31, 2025 and to permanently reduce the minimum liquidity covenant from $5 million to $500,000.

About T2 Biosystems
T2 Biosystems, a leader in the rapid detection of sepsis-causing pathogens and antibiotic resistance genes, is dedicated to improving patient care and reducing the cost of care by helping clinicians effectively treat patients faster than ever before. T2 Biosystems’ products include the T2Dx® Instrument, the T2Bacteria® Panel, the T2Candida® Panel, the T2Resistance® Panel, and the T2SARS-CoV-2™ Panel and are powered by the proprietary T2 Magnetic Resonance (T2MR®) technology. T2 Biosystems has an active pipeline of future products, including the T2Biothreat™ Panel, the T2Cauris™ Panel, and T2Lyme™ Panel, as well as next-generation products for the detection of bacterial and fungal pathogens and associated antimicrobial resistance markers. For more information, please visit www.t2biosystems.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding stockholder approval of the conversion of debt into shares of common stock, the potential benefit of international distribution expansion, recent FDA 510(k) clearances and the pending FDA 510(k) submission, as well as the expectation for double-digit product revenue growth, as well as statements that include the words “expect,” “may,” “should,” “anticipate,” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, (i) any inability to (a) realize anticipated benefits from commitments, contracts or products; (b) successfully execute strategic priorities; (c) bring products to market; (d) expand product usage or adoption; (e) obtain customer testimonials; (f) accurately predict growth assumptions; (g) realize anticipated revenues; (h) incur expected levels of operating expenses; or (i) increase the number of high-risk patients at customer facilities; (ii) failure of early data to predict eventual outcomes; (iii) failure to make or obtain anticipated FDA filings or clearances within expected time frames or at all; or (iv) the factors discussed under Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission, or SEC, on March 31, 2023, and other filings the Company makes with the SEC from time to time, including our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While the Company may elect to update such forward-looking statements at some point in the future, unless required by law, it disclaims any obligation to do so, even if subsequent events cause its views to change. Thus, no one should assume that the Company’s silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this press release.

Investor Contact:
Philip Trip Taylor, Gilmartin Group
ir@T2Biosystems.com
415-937-5406

FAQ

What did T2 Biosystems announce regarding its term loan?

T2 Biosystems announced a definitive agreement to convert $15 million of its term loan into equity.

Who did T2 Biosystems enter into a Securities Purchase Agreement with?

T2 Biosystems entered into a Securities Purchase Agreement with CRG to facilitate the debt conversion.

What will CRG do upon receiving stockholder approval of the transaction?

CRG will cancel $15 million of loans outstanding under the CRG Term Loan Agreement in exchange for the issuance of $15 million of shares of common stock.

What important business catalysts does T2 Biosystems have ahead?

T2 Biosystems has important business catalysts ahead, including international distribution expansion, recent FDA clearances, and the expectation for double-digit product revenue growth.