Q3 2020 Accelerate Diagnostics Inc Earnings Call

Good afternoon, and welcome to the accelerate diagnostics third quarter 2020 earnings conference call.

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I'd now like to turn the conference over to more Pierson of accelerate diagnostics. Please go ahead.

Before we begin it is important to share the information presented during this call may contain forward looking statements within the meaning of section 27 eight of the Securities Act of 1933 and section 21 E. Other Securities Exchange Act of 19, three four but.

Forward looking statements include projections statements about our future and those that are not historical facts.

All forward looking statements that are made during this conference call are subject to risks uncertainties and other factors that could cause our actual results to differ materially. These are discussed in greater detail in our annual report on form 10-K for the year ended December 31st 2019, and other reports we file with the FCC.

It is my pleasure to introduce the company's president and CEO Jack Philip.

Thank you Laura good afternoon, everyone and welcome to our third quarter 2020 earnings call on today's call. We will review our third quarter financial results discuss the ongoing impacts of the pandemic on the business and highlight the progress we are making on key commercial and development priorities. Despite these disruptions.

Before we begin I wanted to convey that our global accelerate teams are safe and remaining productive I'm continuously impressed by the hard work and enduring spirit of our team during this challenging time.

Salt or improved internal efficiencies and lower external study spend.

Our net loss was $18 $6 million for the third quarter and $59 $2 million year to date, resulting in net losses per share of 33.

And a dollar six respectively.

Net losses for the third quarter and year to date after excluding the impact of non-cash stock based compensation expense, where $14 $1 million and $47 million respectively.

Net cash used was $11.2 million for the quarter.

And $31 million a year to date.

The company ended the quarter with cash and investments of $77.5 million.

Our ongoing efforts to mitigate expenses and reduce our cash burn continue to yield results in the quarter.

And we are confident we will end the year materially favorable to our original net cash burn expectations of $49 million.

I will now hand, it back to Jack to further review, our third quarter results in greater detail Jack.

Thanks, Steve I will begin by reviewing use commercial results followed by updates on our international business and we will finished by reviewing progress on our new product strategy, including an update on our COVID-19, serology testing opportunity.

Turning first to our use commercial results.

After some testing declines in April and May the third quarter was marked by robust and predictable consumable sales to our existing customer base that we are in line with our expectations for annuity per installed unit, while parts of the U S. Solve the highest levels of new Covid cases during the quarter positive blood culture.

Testing remained stable.

And speaking with customers. This sustained testing volume is due to the establishment of protocols, which allows most U S hospitals to manage their covid patient population, while remaining open for other patients with various needs and conditions.

This leaves us cautiously optimistic that our existing customer base will remain resilient to any future waves of covid incidents.

We brought 22 instruments live during the quarter and ended the quarter with 223 revenue generating instruments you may recall that in March nearly all contracted customers placed implementation activity on hold as they began onboarding covid testing with Covid testing protocols now.

And place the majority of contracted customers have resumed their go live efforts. However, a significant number of our customers are still facing pandemic related challenges, which are preventing them from proceeding through the go live process at a normalized pace. We continue to work closely with these customers to accommodate their.

A rapidly evolving situations.

That said I am pleased with the improvements we've made in our implementation process as part of this improved process. We have increased the level of collaboration with customers, which in turn has allowed us to improve our forecasting accuracy. We began the fourth quarter with 192 instruments.

In the process of being implemented at customer sites and not yet generating revenue.

Despite delays at some sites we have many customers actively engaged in the go life process and therefore expect a fourth quarter will be solid for new customer go lives.

We contracted to new customers for five instruments and signed a number of committed contract extensions with existing customers during the quarter, while contracting new customers continues to be challenging. This activity represents our highest levels of customer engagement since the pandemic began in March.

Existing customers remain incredibly enthusiastic on the results generated by Fino for example, during the quarter, we signed a five year extension of an expiring contract among a nine hospital network in the northeast this contract not only extended the term reaffirming the networks Committee.

Defino, but includes a minimum committed revenue exceeding $1 million per year.

With regard to new instrument placements are funnel prospective customers continues to grow as we begin pre selling our extended product offering. However, our conversations with many hospital decision makers continue to indicate that delays and progressing new contracts are likely to persist in the near term.

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Lastly in the quarter, we were pleased to receive CPT final determination coverage from CMS for our fino.

Blood test the.

The reimbursement is above our list price and we will cover the cost of our customers when treating patients in the outpatient setting equally important the newly established reimbursement provides independent validation through CMS of our value in pricing for economic justification with prospective customers.

We also received word that our application for and tap reimbursement was denied while fino met all of the requirements related to clinical benefit an economic return on value. Our application was denied because it did not meet the required newness criteria, which requires that the product be within three years of the commercial launch.

Date to be eligible for and tap reimbursement.

In summary, a strong Facebook of business improving go lie momentum and even this quarter's limited increasing contracting activity has delivered 93% year over year growth and 74% year to date growth in the U S.

Access in this market is our focus and we are pleased to be realizing meaningful progress despite the challenging conditions.

Moving now to our international business in the third quarter, we moved into a new phase of our efforts to restructure EMEA operations to focus on Geography's with the highest potential in the initial phase, we redistributed lower producing instruments to customers in southern Europe, and the middle East where the.

Challenge of antibiotic resistance is the greatest.

This geographical focus enabled us to reduce the size of our EMEA operations and our EMEA cost structure by half in the third quarter, which significantly reduces R X U S cache burn expectations for 2021, finally, we will be launching fino Asti in these new.

New focus geography's by year end, which will further improve our prospects in EMEA.

Turning now to China as we've discussed in the past China is a promising market with a significant substance challenge a large population and a government that is focused on healthcare investment. We continue to progress are clinical trial and regulatory activities during.

Have a 21.

We continue to invest in our leading asce technology to ensure that are competitive differentiation remains significant.

Second we will be launching additional products to enable various ivy workflow solutions to be used in conjunction with our existing fino instrument platform delivering rapid test results in new ways. These.

These include Fino S T a new Asti test kit, which runs on the current fino platform Defino accepts electronically or manually and identification test result from an existing system loads the appropriate antibiotic panel and delivers rapid asti results in about seven hours.

We know prep, a new instrument, which automates the front end steps to deliver a multi identification result, delivering substantial time to result in work flow benefits and lastly are exclusive collaboration agreement with the San diagnostics too commercialized a bench top multi platform of our own to be you.

Used in conjunction with Fino prep.

We recently concluded an extensive marketing study, indicating broad levels of interest in these new offerings. This study reaffirmed what we had heard during our conversations with customers in the field that microbiology labs have a diverse set of work flow requirements. When it comes to meeting their I D and ask T needs.

The research also reconfirmed the significant market interest in growing need for integrated fino.

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The development trial and regulatory activities for these products additions are progressing according to schedule and expect launches of Fino, Asti and fino prep in the first half of 21.

We believe that these new products will allow us to accelerate our rate of market penetration by delivering tangible clinical and economic benefits to a broader cross section of the microbiology market.

The third prong of this strategy is fine Oh 2.0.

This lower costs and higher throughput system will considerably expand our market penetration through the addition of higher volume lower acuity samples like isolates and urine.

Key hardware advances were made during the quarter, which enables simultaneous and random access testing to accommodate more sample types broader organisms and an improved array of antibiotics.

We believe that this strategy maximises, our near term opportunity to penetrate with fino today, while establishing fertile territory in which to launch Fino 2.0 to address this growing 4 billion dollar marketplace.

Lastly, I will provide an update on our collaboration to commercialize the EMS fast fully automated chemiluminescence immunoassay analyzer, and Sars Kobe to test for the detection of ITG and IGN. We have now received emergency you saw at the relation for our Covid Agg IGN and.

Combined assays, we are actively building our funnel for this platform the role of antibody testing continues to be studied by the medical community and with our EUA in hand in the supply chain poised, we're ready if and when the clinical use cases established and.

In closing the current pandemic related business disruption continues to be profound but is slowly improving blood culture testing has returned to pre covid levels go lie of activity is increasing in perspective customer engagement globally is slowly but steadily growing.

Meanwhile, we are using this time to aggressively expand our product portfolio and streamline global operations.

I believe we are at the beginning of a fundamental shift in healthcare diagnostics in the immediate term hospitals are hurting financially and singularly focused on surviving this once in 100 year pandemic event.

Based on my discussions with other industry leaders this challenging environment will likely be met with further investment in infectious disease solutions with a focus on readiness and improving patient care further we believe that prior trends towards lab centralization will slow as forces drive.

Healthcare to become more and more local.

These secular trends position accelerate well for the future and will Stablish rapid asti as the standard of care, because said simply getting patients on the right antibiotics sooner saves lives and money period.

I would now be happy to answer questions from our analyst should others on the call have questions not addressed we would welcome you to send these questions or requests for a follow up meeting to investors at <unk> Dot com.

Thank you.

We will now begin our question and answer session.

The first question comes from Brian Weinstein of William Blair. Please go ahead.

Hey, guys. Good afternoon. This is Chris in on for Brian.

Jack just click on here you successfully worked with.

Some other companies as far as partners to bring really unique products to market can you give us an update on the likelihood of additional collaborations that would either add unique content or distribution get abilities to what you have today.

Maybe a little bit more specifically, what do you look for when you're thinking about those kind of collaborations.

Yes, hi, thanks for the question. So I guess first off I'd mentioned that the the new product portfolio that we've talked about that we've now launched in the marketplace is going very well and.

Speaks to a few of those collaborations within that overall strategy ascend diagnostics for one as we as we embark into the multi area for it.

That's going well the other one is Ms fast and we spoke about that as well in the serology areas. So we've got a couple examples already where we've we've successfully.

Going to be successful in these type of collaborations that you're speaking about and then beyond that.

There's nothing specific that I want to speak to today that we're working on but just rest assured that we are continuing to look at collaborations that would.

Broaden our footprint within infectious disease, but most importantly, strengthen our overall value proposition for rapid idea.

Meetings that we had we we also the other thing I would mention on access as in speaking to the commercial teams within the U S were granted gaining a much more access due to our new product launches that we're now talking about specifically fine O S T and fino prep.

Or generating a lot of new interest out there is creating access for those customers that are interested in those new products and that's been that's been helpful. As well and then lastly, I would just say it's encouraging to see the access improve we still have a ways to go to get back to pre covid.

Times, but it is trending in the right right way and.

We're very positive about about how it's going and how it's evolving.

Great. Thanks for taking the question guys.

Thank you.

This concludes our question and answer session.

And the accelerate diagnostics third quarter conference call for today.

Thank you for attending today's presentation you may now disconnect.

Okay.

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