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Talis Biomedical Discusses Point-of-Care Thesis in First Earnings Call as a Public Company

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NEW YORK – After the close of the market on Tuesday, Talis Biomedical held its first-ever call to discuss quarterly financial results with analysts and investors. Executives used the occasion to describe the firm's commercial plans after going public, reiterate its point-of-care thesis and menu pipeline, and offer insights into its recent grant-based revenues.

The Menlo Park, California firm reported a sharp spike in total revenues as a newly public company, due almost entirely to proceeds from grant funding. Talis is one of approximately 40 firms to have been chosen for pandemic-related support from the Rapid Acceleration of Diagnostics, or RADx, program of the National Institutes of Health and achieved $7 million in milestone payments in the quarter.

On Tuesday's call, Roger Moody, Talis' chief financial officer, noted that these payments are now tapering off, however.

"We don't expect to recognize [grant] revenue in the second quarter, but we hope to do so in the third quarter," Moody said, adding that the total possible RADx support was $25 million, but the firm had "already recognized a large portion of that."

Talis is now ramping up manufacturing and building a sales force as it drives to launch its first commercial product — its Talis One instrument and a US Food and Drug Administration Emergency Use Authorized SARS-CoV-2 test — which, pending EUA, is reportedly on track to launch in the second quarter as previously reported.

On the call, Talis CEO Brian Coe said that although pandemic-related testing is declining and competition is increasing, there is an overall shift toward point-of-care testing that will likely open new market opportunities. Coe further emphasized the Talis One system's "favorable economics with scale and low-cost manufacturing."

On this front, Talis expects to be "among the industry leaders in terms of margins," Moody said, with margins driven by cartridge consumable revenues. The firm specified in its S-1 form filed with the US Securities and Exchange Commission as part of its initial public offering that it will offer its instrument on a reagent rental program.

Talis invested approximately $60 million in the quarter to prepare for commercialization of the Talis One.

Moody specified on the call that $28.6 million was spent on manufacturing scale-up that included installing an automated test cartridge assembly line, while $14 million was spent on "pre-commercial production" of instruments, $5.9 million on tests, and $3.3 million in personnel expansion.

The new automated assembly line now enables Talis to produce 1 million tests per month, Coe noted on the call, and Talis is already making products to ship "in a timely manner" after EUA.

The firm expects to invest a total of $100 million in manufacturing scale-up by the end of the third quarter, Moody also said. It has also invested scaling up its in-house sales force. While declining to provide exact numbers, Moody said on the call that Talis will have "a sizable commercial team" led by the company's chief commercial officer, Rob Kelley, a veteran of Illumina, Trovagene, and Genalyte.

Talis' go-to-market strategy is to pursue opportunities in the hospital segment first, followed by urgent care centers and then specialty and primary care centers like sexually transmitted infections clinics, Coe said.

Regarding SARS-CoV-2, Coe suggested that the virus is likely to become endemic, and that the firm will gauge the needs for a mix of stand-alone and syndromic testing with the combo flu test going forward. The firm expects to submit its combined test in time for the next flu season, he added.

Talis also has designs on the diagnostics market outside of the US, which Coe called "an area of real interest," noting that the firm is continuing to look into opportunities.

Competitive landscape

Meanwhile, competition in the point-of-care molecular diagnostics space continues to grow.

For its part, RADx ramped up its activities early in the COVID-19 pandemic in the hopes of accelerating point-of-care and at-home diagnostic testing, in particular. The Talis One system fit the point-of-care bill due to its portability, "lab quality" results, and 25-minute time to results directly from raw samples.

Early development of the Talis system and assays was also supported by a $5.6 million NIH award to develop a direct-from-blood sepsis assay, and $4.4 million from the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator, or CARB-X, to support the CT/NG assay development with the possibility of an additional $4.2 million in milestone-based support. Talis also raised approximately $254 million through its IPO.

The Talis One uses an isothermal amplification chemistry and tests can be multiplexed.

In previous descriptions of the technology during development, the firm said it included a method called SlipChip and a "digital" loop-mediated isothermal amplification, or LAMP, approach deploying many tiny reaction wells. Reverse transcriptase LAMP, or RT-LAMP, which is typically licensed from Eiken Chemical, has gained popularity during the pandemic, with some firms enhancing the chemistry using specialized proteins. Talis' S-1 states that the core amplification technology is an isothermal method, but it does not specify the chemistry.

The system can potentially multiplex up to 14 targets, although the firm is configuring it for commercial launch with small panels of up to five targets. Its first multiplex panel will include influenza A and B targets in addition to COVID-19. On the call, Coe also reiterated plans for a combined chlamydia and gonorrhea test, followed by tests for other STIs, vaginosis, urinary tract infections, and herpes simplex virus.

Competition could come from other rapid, point-of-care, molecular diagnostic instruments that currently have EUA assays for COVID-19 testing, for example systems from Cepheid, Lucira Health, Abbott, Roche, Cue Health, Visby Medical, and Thermo Fisher Scientific subsidiary Mesa Biotech. Cepheid and Roche also have combined SARS-Cov-2 and flu point-of-care assays, as well. Meanwhile, other rapid point-of-care and near-patient systems that run multiplex panels of five or more targets include systems from Meridian Bioscience, BioFire Diagnostics, and Qiagen.

Another competitor might be Quidel, which expects to launch its Savanna rapid molecular system with an EUA SARS-CoV-2 test and has small panel tests in the pipeline. Quidel said in its recent earnings call that is it is investing $200 million to ramp up Savanna cartridge manufacturing and has already developed six multiplex cartridges including one for sexually transmitted infections.

In terms of the CT/NG test, the flagship system in the rapid molecular point-of-care CT/NG testing space is the CLIA-waived Binx io. Novel Microdevices is also developing a system and CT/NG test called Novel Dx and recently obtained support from CARB-X worth up to $13.8 million. Outside the US, there are point-of-care CT/NG assays available on the Bosch Vivalytic, Hibergene HG Swift, and MolBio TrueLab, for example. Australia-based SpeeDx was awarded $3.7 million from CARB-X this week to port its CT/NG test with gonorrhea antimicrobial susceptibility detection to the QuantuMDx Q-POC rapid molecular system. There are also CT/NG tests in development from Prominex and Antelope Dx, among others.

When queried by analysts about competition in the rapid point-of-care molecular diagnostics space, Coe suggested that there will be plenty of opportunities to go around. "We have never had an expectation that we will be alone in serving these enormous markets," he commented.

And, despite the competition, Coe outlined reasons the firm believes it has a unique offering, such as rapid turnaround time, ease of use, and the potential to expand its menu due to multiplex capabilities and ability to test multiple types of specimens directly from a patient sample.

Coe also noted that the Talis One's high sensitivity can set it apart. For example, in its S-1, Talis specifies that the "lab quality" results for its SARS-CoV-2 test involve limits of detection as low as 500 viral particles per milliliter. This is generally in the same range as an assay from Lucira that was recently described as having an LoD of 1,000 copies per mL and also uses isothermal chemistries. Talis also noted that its positive and negative agreements of 60 nasal specimens was 100 percent compared to reference lab results, which the firm attributed to the low LoD. And the Talis One platform also boasts LoD of 1 infectious unit per mL for bacteria from assorted unpurified patient sample types.

Investment analysts weigh in

After the first-ever earnings call, analysts from investment banks that recently initiated coverage of Talis generally held their previous positions with respect to Talis stock.

At BTIG, Mark Massaro reiterated a Buy rating and lowered the price target for Talis to $16 from $18.

Massaro said in a note that the COVID-19 pandemic has "served as a major catalyst to drive adoption of new diagnostic instrument platforms, particularly those with high accuracy," and that the investment bank expects "near-patient, point-of-care technologies to materially benefit going forward as a result," including in indications beyond SARS-CoV-2 and influenza. This, in turn, can serve "as a significant tailwind for the Talis One platform," which Massaro also wrote has "a huge potential for scalability" and "fulfills a large unmet need for dependable and reproducible POC testing."

Likewise, at Piper Sandler Steven Mah lowered the price target to $13 from $17 but rated the stock as Overweight due in part to a likely EUA submission for the Talis COVID-19 test late in the second quarter in a context of "sharply declining" US infections.

"We believe increasing global access to healthcare plus the shift toward easy-to-use, rapid POC testing with central lab quality will help drive adoption of Talis instruments and tests," Mah wrote.

At JP Morgan, Tycho Peterson and colleagues maintained both a $17 price target and an Overweight rating for Talis Biomedical after the call. "We view outsized near-term growth potential relative to peers given COVID momentum driving placements, with conservative estimates leaving runway for upward revisions upon execution," Peterson wrote in a note.

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