BTIG downgrades T2 Biosystems to sell

BTIG Research downgraded T2 Biosystems (NASDAQ:TTOO) to “sell” from “buy” and slashed its price target to $4 from $12. The stock closed at $7.61 on Thursday.

“While our prior buy rating was predicated on our view that T2’s T2MR technology is worth more than the company’s market cap (potential for M&A) and our optimism around the market opportunity for T2Bacteria, 

recent developments, including another quarter of poor T2Dx placements, cartridge manufacturing issues, an extended timeline for the completion of the T2Bacteria trial, and what we considered mixed commentary at the annual meeting of the American Society for Microbiology, now lead us to a sell rating,” writes analyst Karen Koski. 

She said that despite a number of concerns last year, she upgraded the stock to “buy” around a belief that T2’s platform addresses an important unmet need, optimism for T2Bacteria, and the potential for M&A. 

“We did not foresee cartridge manufacturing issues, a multi-quarter delay in the T2Bacteria launch, or multiple catalysts skewed to the downside,” she added. 

Ms. Koski said that over the next year, she expects to see additional potential negative catalysts, including further possible manufacturing issues, another delay in the timeline of the completion of the T2Bacteria trial, a lowering of 2016 commitments/contracts guidance, and a need to raise additional capital. 

“While we still think a takeout is possible, we’d expect potential acquirers to await a more favorable opportunity,” she added.