T2 reels in $40M Series E for Candida assay trial and launch

John McDonough, CEO of T2 Biosystems

T2 Biosystems pulled in a whopping $40 million Series E funding round to support clinical testing and a commercial launch of the company's Candida infection rapid diagnostic assay.

CEO John McDonough told us in January 2013 that T2 had planned to raise $20 million, and the final tally obviously doubled that. Goldman Sachs also led the round, an unusual move for an investment bank that typically targets much larger companies for its portfolio. Quite an accomplishment for the 2012 Fierce 15 company, and a validation of its core technology developed by MIT's Robert Langer, Harvard University and Massachusetts General Hospital.

McDonough explained to FierceMedicalDevices that investor support encouraged T2 to aim much higher than originally planned for its Series E round.

"There was just so much support for the company we made the decision to essentially raise enough capital to take us all the way through commercialization, and are of the belief that this would be our final private round of financing," McDonough told us in a telephone interview. "There was just a lot of excitement, a lot of investors that wanted to participate that, unfortunately, we didn't have room for."

McDonough said Goldman Sachs' decision to lead the funding round is a "thrill and honor" because "it is not the type of investment they typically do. They were very excited about what we are doing and the difference, hopefully, we can have with patients with our product."

Goldman Sachs' tremendous size and resources open the door for T2 in a number of ways. McDonough said the bank could help T2 in its efforts to find global partnering and has the resources to assist companies such as T2 if and when they decide to go public. So is going public part of T2's game plan here?

"We can build a multibillion-dollar business around this detection technology. We are clearly a platform technology, so going public is absolutely a [possible] path," McDonough said. "The markets have to line up. And you never know what opportunities may present themselves between now and then, but it is absolutely something we see as a potential [option] for the company."

In January, McDonough said the company had hoped to begin enrollment in February of an eventual 1,500 patients at 5 different hospitals for its T2Candida test clinical trial. T2Candida uses magnetic resonance technology to help detect the possible presence of Candida in a basic blood or urine sample within a few hours versus up to 5 days with current methods. McDonough wouldn't comment on the clinical trial details during our March 28 conversation, but said "our plan has been to start the trial and file [for 510(k) clearance] with the FDA in the second half of the year, and we're right on track with that."

Before the latest round Lexington, MA-based T2 had pulled in $53 million in four previous rounds since its 2006 launch. Other than Goldman Sachs, the latest round included existing investors Flagship Ventures, Polaris, Aisling Capital, Flybridge Capital Partners, Physic Ventures, Arcus Ventures, Partners Healthcare, Camros Capital and WS Investments.

- read the release

Special Report: T2 Biosystems – 2012 Fierce 15