T2 Biosystems (TTOO) Stock Rockets On Coverage News

T2 Biosystems TTOO Stock News

T2 Biosystems Inc (NASDAQ: TTOO) is making a run for the top early on in the trading session this morning, trading on gains of more than 30%. The gains come after the company announced payor coverage news, exciting investors. Here’s what’s going on:

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TTOO Stock Rockets On Coverage

In a press release issued this morning, T2 Biosystems said that the United States Center for Medicare & Medicaid Services, also known as CMS, has granted approval for a New Technology Add-on Payment (NTAP) for its T2Bacteria Panel. The coverage will start in fiscal year 2020.

In the release, TTOO reminded investors that its T2Bacteria Panel product is the first and only FDA-cleared test that identifies sepsis-causing bacterial pathogens. This detection takes place with a blood sample and takes about 3 to 5 hours without the need to wait for blood culture.

The T2Bacteria Panel is now the first and only in-vitro diagnostic test to ever receive approval for NTAP. CMS provided the following information in its fiscal year 2020 inpatient prospective payments system final rule:

The T2Bacteria Test Panel represents a substantial clinical improvement over existing technologies because it reduces the proportion of patients on inappropriate therapy, thus reducing the rate of subsequent diagnostic or therapeutic intervention as well as length of stay and mortality rates caused by sepsis causing bacterial infections.

In a statement, John McDonough, Chairman and CEO at TTOO, had the following to offer:

By approving NTAP for the T2Bacteria Panel, CMS has confirmed that the T2Bacteria Panel represents a substantial clinical improvement over existing technologies. The introduction of the T2Bacteria Panel has altered the course of clinical treatment in a number of ways, and this new designation will ensure increased access to this groundbreaking, direct-from-blood rapid diagnostic for patients suspected of a bloodstream infection or sepsis.

Why Investors Are So Excited

The truth of the matter is that this news can lead to a significant increase in revenue. At the end of the day, Medicare and Medicaid cover a very large patient population. So, coverage of the product through CMS means that the covered patient population pool will grow significantly.

Considering the fact that patients are more likely to move forward with medical options that are covered by their insurance providers, and that medicaid and medicare are generally provided to a lower income population, this patient population would not have been likely to take advantage of the T2Bacteria Panel. Nonetheless, with coverage now added, these patients are more likely to take advantage of the product.

Moreover, coverage by CMS may open the eyes of others who provide coverage to other patient populations, setting the stage for further payor coverage ahead.

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