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Talis Biomedical Phasing Rollout of SARS-CoV-2 Test, Platform to Reduce Business Risk

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NEW YORK – Point-of-care testing firm Talis Biomedical said Monday that to decrease risk associated with launching a first product it will use a multiphase approach for its Talis One COVID-19 molecular assay, for which it obtained Emergency Use Authorization last week from the US Food and Drug Administration.

The company said before it seeks broader traction, it will seek feedback from users getting early access to its first assay on the market.

Further, until it has a clear view of the potential demand for its products, the Menlo Park, California-based company is holding off installing two additional manufacturing lines that would enable it to reach a production capacity of 1 million test cartridges per month.

With the FDA greenlighting the COVID assay, "our customers can gain experience with the instrument as we move to clinical testing," Kim Popovits, the firm's interim CEO, said on a conference call to discuss its financial results after a third quarter in which its revenues plummeted year over year on dwindling grant revenue.

"Our approach will be measured to ensure we deliver an experience that will drive long-term system adoption," she said. Popovits will rejoin the company's board of directors after a stint as interim CEO that began in August following the departure of previous CEO Brian Coe. On Dec. 1, Brian Blaser, a former Abbott Laboratories executive, will become the firm's new director, president, and CEO.

Blaser will lead the launch of the firm's sample-to-answer molecular diagnostic system, which provides results in less than 30 minutes and was developed with funding under a $25 million grant awarded under a National Institutes of Health's Rapid Acceleration of Diagnostics contract.

The Talis One COVID-19 Test System uses primers that target sequences of the ORF1ab gene and N gene. The instrument automates and integrates sample metering, nucleic acid purification, nucleic acid amplification, and detection of the target sequences on nasal mid-turbinate swab samples using reverse transcriptase isothermal amplification technology on the test cartridge. The sample, liquids, and reagents remain isolated in the cartridge, and the instrument contains thermal, mechanical, pneumatic, and optical sub-systems that actuate the cartridge.

The company said it expects to book the final $2 million in revenues from the RADx contract in January 2022, a year in which it also anticipates reporting its first product revenues. But for the recently completed quarter, the firm reported RADx grant revenues of $218,000, well short of analysts' average revenues estimate.

Investors reacted negatively to Talis' Q3 financial results, sending its share price down more than 16 percent to $4.83 in Tuesday afternoon trading on the Nasdaq.

Q3 brought more uncertainty for Talis "as the excitement of the EUA was more than offset by the measured, phased approach to the rollout" of its COVID-19 molecular assay, JP Morgan analyst Tycho Peterson wrote in a research note Monday.

Peterson further noted that multiple push-outs of Talis' entire portfolio due to delays in the COVID test launch create further uncertainty around the MDx system's revenue ramp. The launch of the platform with the COVID test was expected to result in instrument placements for future women's health assays, he said, but these assays are now expected in the second half of 2023 "at a time when competition has intensified in the POC setting."

Over the long term, however, the company believes its measured approach will facilitate its entry into the markets for respiratory, sexual health, and women's health point-of-care testing.

Rob Kelley, chief commercial officer at Talis, noted that the approach to rolling out its first test and instrument involves leveraging premarketing studies with prospective customers in market segments it intends to target through the end of this year.

"We're launching both an instrument and an assay [under] EUA at the same time," he noted. "There's a likelihood that if you go to market with a product too quickly, you can do some damage to reputation, and we just don't want to do that."

Specifically, Talis is using the premarketing studies to gather information on the match between its product and the needs of market segments it intends to target.

The company has hired eight salespeople to target hospitals, health systems, group purchasing organizations, integrated delivery networks, and congregate settings such as schools and workplaces, and 32 salespeople to target urgent care facilities, smaller hospitals, and physician offices.

Feedback from early users will help it better plan the first phase of its launch in the first quarter of next year, the firm said.

For that first phase, Talis plans to offer its products for evaluation to five healthcare sites and in a second, broader phase to approximately 35 sites. The firm will then seek to convert early users to paying customers.

Douglas Liu, Talis' chief operating officer, said its manufacturing plans are designed to support the findings of the premarketing studies during the initial phase of the product launch.

Though Talis has decided to hold off installing second and third manufacturing lines, it has the production equipment on hand to build them if needed. "We'll install the second and third lines after gaining more experience through the commercial ramp-up, and assuming that market demand is strong," Liu said.

The current manufacturing line, which automates multiple steps to producing cartridges, will undergo an evaluation for performance and quality over the coming weeks, he said, adding that Talis has also invested in raw materials to support the manufacturing of 5,000 instruments.

"As with cartridges, we are continuing to optimize assembly and testing to maximize efficiency and quality, and we'll be increasing output as we ramp our commercialization efforts," Liu said. The investments in instrument and cartridge production position Talis to meet high long-term demand and support the broad menu of infectious disease tests it plans to offer, he added.

During the recently completed quarter Talis continued the development of a chlamydia and gonorrhea assay for which it expects to begin external validation studies in 2022, with the aim of a 2023 launch following 510(k) clearance. The company said it expects to obtain FDA EUA for the COVID-flu test in time for the 2022/2023 COVID-flu season and to seek 510(k) clearance for the assay at a later time.

Talis held back on providing revenue estimates for next year, saying it wants to see how the rollout of its COVID test and instrument is going.

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