Q4 2023 Accelerate Diagnostics Inc Earnings Call
Hello, and welcome to the accelerate diagnostics fourth quarter and full year 2023 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Today's presentation will be followed by a question and answer session with covering analysts as well.
Reminder, this conference is being recorded.
I would now like to hand, the call to Laura Pierson with accelerate diagnostics Laura. Please go ahead.
Before we begin it is important to share that information presented during this call may contain forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934.
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 and our anti.
Our report on Form 10-K for the year ended December 31st 2023, and other reports we file with the S E C.
It is my pleasure to now introduce the company's president and CEO Jack Phillips.
Thank you Laura good afternoon, everyone today, I would like to discuss the exciting innovation with wave I will cover both near term program milestones and how wave will revolutionize automated susceptibility testing. Additionally, I will provide updates on our strategic partnership process and.
Our our FDA submission first I'll pass it over to David patients, our CFO to summarize our financial results.
Thank you Jack and good afternoon, everyone.
Net sales were approximately $3 million for the quarter and approximately $12 1 million year to date. This compares to approximately 3 million and $12 8 million for the same periods in the prior year. The decrease in net sales was driven by lower onetime instrument sales in the current peer.
Got it.
This was partially offset by an increase in reoccurring consumable net sales.
Gross margin was approximately 21% for the quarter and year to date. This compares to approximately 28% and 26% for the same period in the prior year.
Overall decline in gross margin, primarily resulted from a $1 2 million dollar inventory write down of excess inventory during the third quarter of 2023.
Selling general and administrative expenses were $5 8 million for the quarter and $31 2 million year to date. This compares to $8 8 million and $39 2 million for the same periods in the prior year.
The overall decline in SG&A expenses resulted primarily due to lower employee related expenses.
Research and development expenses were $5 6 million for the quarter and $25 4 million year to date. This compares to $6 million and $26 9 million for the same period in the prior year.
The overall decline in R&D expenses resulted primarily due to both lower third party <unk>.
Development expenses for our wave program as well as lower employee related expenses.
Our net loss for the quarter was approximately $13 million and $61 6 million for the year, resulting in a net loss per share of 89 cents for the quarter and $4.94 for the year.
Cash used for the quarter was $7 9 million and $46 3 million for the year, we meaningfully reduced our quarterly cash burn in the second half of 2023.
We are focused on continuing to drive further significant reductions in cash burn moving forward.
Now back to you Jack to discuss our exciting innovations with wave.
Thanks, David as we exit the development phase we are focused on delivering several key milestones over the next 12 months. These include a preclinical trial and clinical trial, followed by an FDA submission and clearance for the wave system and a full gram negative positive blood culture menu over the.
Several months, we have made significant progress in formally exited development with a very impressive data set leveraging our deep experience in the E. S. T market our approach in developing wave was extremely thorough this included running more than 5000 unique organisms 10000 consumable cards were.
Ron and 100 million images were taken on approximately 25 wave platforms. These results were compared to more than 30000 brought micro dilutions, which is the reference method for comparison.
Along with strong data. The average time to result is less than four and a half hours waves unique holographic imaging technology is what makes it possible to deliver an unprecedented time to resolve for extensive bug drug combinations for E. Coli, the most prevalent gram negative organism wave can.
Definitive calls in under three and a half hours for many drugs on our panel by leveraging growth in morphology data.
While there are many other highlights let me highlight one, particularly challenging type of bacteria from microbiologist Pseudomonas aeruginosa, which is a major threat to hospitalized patients and is very difficult to treat because it's highly resistant pseudomonas is a slow growing bacteria.
Each presents many challenges for both traditional and rapid susceptibility platforms, often this bacteria must grow over eight hours to make an accurate call.
Wave is able to capture changes in morphology within two hours and make definitive calls in under four and a half hours for an important carbo Pan am drug mayor of Panama.
This has the potential to make significant clinical impact by ensuring patients are put on optimal therapy in the same shift.
With wave development successfully completed on the most challenging bug drug combinations, we are confidently ready to begin our preclinical trial. Our preclinical trial will include two sites enrolling both fresh perspective, as well as contrived challenge isolate our.
Our objective is to demonstrate a S T performance compared to the reference method and verify our time to results.
Additionally, the preclinical trial demonstrates our ability to successfully ship install train and run wave systems and cards within a clinical microbiology lab setting.
Our first system has been installed in a clinical microbiology lab and is running samples will be installing a second site in the coming weeks, we anticipate wrapping up our preclinical trial by the end of April, giving us confidence in running patient specimens and starting the clinical trial.
The clinical trial will start in the second quarter aligned with our previously communicated schedule. The clinical trial will include a total of four external sites. The two preclinical sites plus two additional sites already identified.
We anticipate the trial to last for about three months, followed by the FDA submission. Shortly thereafter by the end of the third quarter.
With submission in quarter, three we anticipate our five 10-K should be approved by mid 2025.
In summary, we remain on track to deliver our key milestones over the next 12 to 15 months through FDA clearance of the system and first assay.
Turning now to the commercial strategy for wave accelerate is uniquely positioned to disrupt the microbiology susceptibility testing market.
Surpassing emerging positive blood culture, and traditional traditional isolated colony systems. The global PPC market is estimated at around $800 million with the isolate market at approximately $1 billion.
Wade brings a consolidated platform that can process, both PBC and isolate specimens on the same instrument.
Providing industry, leading time to results scalability high throughput workflow and profitable cost structures.
Our loyal customer base currently using rapid susceptibility testing will be an important factor in early wave success, our strategy for commercializing wave starts with leveraging our position in the PBC market with existing and new customers in the U S and EMEA.
Secondly, we will expand into the isolate susceptibility testing market by offering new assays to increase customer engagement and market research.
Finally, we will enter new regions beyond the U S and EMEA and apply our holographic imaging technology to other areas of diagnostic testing.
The first step in our strategy to extend leadership in PBC with increased market penetration is well underway. We continue to secure our existing customers to long term rapid susceptibility testing contracts and grow our funnel of 500 plus accounts any.
Interested in adopting rapid susceptibility testing.
Our next step is to further increase market access with a global commercial partner with a strategic partner, we will build on our existing clinical and economic outcomes data and begin developing early wave champions.
Launching wave and converting our existing installed base provides a commercial platform for quick wins, but also reduces our overall cash burn and sets us on a path to cash flow positivity.
The second step of our commercialization strategy is to expand customer wallet share by launching an isolate menu on the same instrument already in the lab producing PBC susceptibility results.
Today legacy platforms report isolate results in most cases in greater than eight hours and up to 24 hours missing a critical window for clinicians to either adjust therapy, where discharge patients.
By bringing customers true same shift results with the comparable cost structure to legacy isolate platforms. We can begin replacing antiquated systems and finally by expanding our geographic footprint into markets beyond the U S and EMEA affords another growth trajectory for wave to improve patient outcomes.
<unk> microbiology testing.
Now for a quick update on important work to secure a strategic commercial partner for wave as mentioned an important part of our strategy is to sign a global strategic partnership to commercialize wave.
Over the past several months, we've engaged in multiple discussions with several potential partners.
There is strong interest and we remain confident we will be able to sign a strategic partnership by mid year wave can accept an IDE result from any source, making it highly complementary to numerous microbiology diagnostic portfolios wave will be the pivotal building block for our.
<unk> partners microbiology diagnostic solution.
Now moving on to arc, we have recently completed and submitted our five 10-K application for the Ark instrument and consumable we remain encouraged with the commercial prospects of providing microbiology labs with an automated yet cost effective rapid multi identification for PBC.
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In summary, we are very optimistic about the next 18 months, having achieved successful development exit for wave. We are set to deliver on our next major milestones in our strategic discussions continue to confirm the incredible market potential of wave.
With a complete menu of both PBC and isolate and average time to result of four and a half hours and a scalable platform meeting the needs of all laboratories wave will set a new standard in microbiology for <unk> testing.
At this time I'm happy to take any questions from our covering analysts.
Thank you very much our first question comes from Alex Nowak with Craig Hallum. Please go ahead.
Hey, good afternoon, everyone. This is connor on for Alex Thanks for taking my questions.
Could you maybe describe your thoughts on how well you think the BD partnership is going where is it going well, whereas maybe struggling and then maybe when can we start to see a potential sales inflection begin to incur.
Hi, Conor Thanks for the question this is Jack.
Yes, so of the BD partnership a couple of things first of all it's very active we continue to work with BD on on all fronts relative to sales and marketing as I mentioned previously.
In Europe first off I mean, we once we got into the Europe market.
We realized that the commercial agreement that we had with BD, we mutually agreed that.
It wasn't something that was setting us up for success.
We redid that agreement and.
Several quarters ago now.
We signed a new agreement for Europe that really puts us on a much better glide path too for the European BD team to participate in tenders, so as they as they submit tenders for the broader microbiology business of BD.
They can now include the Pheno and the Ark in Europe in those tenders so.
That's going well, but we were we were put back.
Several months as we as we went through and transition that in the U S.
Really momentum continues to build we pad.
More training and ongoing training with the BD sales team, that's been very productive and successful.
Resulting in continued funnel growth, we're getting into more and more sites.
We granted in Q4.
Placement production and new account closes was disappointing.
But many of those deals shipped into shifted into Q1, and I'm happy to say and in the quarter in the quarter. We brought those in in Q1. So so that was very positive and then the other pieces, we continue to progress opportunities in the funnel. So as we get opportunities we continue to bring them closer.
To close.
The last thing I would say is that.
As we mentioned arc has now filed with the FDA.
Happy to say that and the team is already trained and ready to go.
And ready to start positioning arc in the U S as well.
Okay.
Great and then could you maybe frame up the potential impact or could have once its launch and then maybe walk through the pacing of that as well.
Yeah. So just a reminder, I mean, mark arc fills a.
Very big need in the market. There are many thousands of moldy clinical multi platforms on the market today.
Really serve an important need in identification.
It's a it's one of the broadest it's the broadest menu, it's an easy to use platform one of the challenges with multi though it takes it takes a long time to produce and identification.
With arc in conjunction with our partner broker on this we have an agreement with broker.
To co develop and co develop both arc and the biotech or into one system that would then be 500 10-K approved in the U S.
We we really expect to capitalize on the opportunity as we move forward. We've got good traction in Europe again, as I said before we're a bit behind but we did closed several deals in quarter four in Europe for arc.
You know as we are in the FDA were very careful about.
Not doing marketing in the U S. But we are making customers aware of our plans for arc, what arc is and getting the market prepared and we are we expect big things for arc in the U S. Once we get FDA approved because theres. So many multi platforms.
In the market in customer sites already and it's a tremendous opportunity to move multi identification results from basically overnight two to a one one plus hour turnaround time.
Also and then kind of what's been the main hang up with.
You know not getting more traction in terms of system placements and then what else can be done to drive more placements there.
Yeah, I mean, we like I said mid year next year last year. We were we were starting to gain more traction we continue to gain traction with BD.
The strategic selling process remains challenging with rapid S. T. It involves many stakeholders across many many functions within the Haas healthcare system both.
Docks of pharmacy to microbiology, two two to the C suite and and so our funnel continues to build.
We've been like I said, we've been challenged with decision, making and moving opportunities through the funnel effectively.
We also as a result of our partnership with BD, we restructured our organization to cut cash burn.
And we did that we did that last year.
And.
We probably in hindsight, maybe did that a little early.
And in thinking the BD would be up to speed and trained quicker than they were and that's taken a bit more time and that's probably one of the biggest drivers of the lag and really getting the traction that we need because of the change that we went through in our organization.
Two to really cut cash burn and and really kind of getting BD in their sales and marketing team up to speed and this is a complex sale. It's one of the most complex sales and diagnostics.
For sure in microbiology.
And it just takes time to come up to speed. So we're excited about where we're headed there and we expect to see greater productivity moving forward.
Alright, that's helpful. And then one more here is there any is there any more work left to do on the final design of the wave.
No. So we've we've exited a development and so we've locked to the development design down on wave.
Our card is locked as well software is completed.
And we are just really thrilled to have wave in hospital laboratories today. We're in one site will be in another site in a week or so and that is our preclinical study things are going very well we're.
We're off to a good start we of course as we go through preclinical and we go through clinical there's always that chance to where we may need to upgrade or update software make changes like that but we do not anticipate.
Any major development initiatives on wave.
Leading up to FDA approval.
Great Congrats on the progress and thanks for the questions.
Thank you Connor.
The next question is from Andrew Brachman with William Blair. Please go ahead.
Hey, everyone. This is duston on the line for Andrew Thanks for taking our questions.
First question for US I know in the past you've talked about releasing data I think act metolazone area, you're going to plan.
We plan on submitting that but.
That's still the case what performance metrics should we expect there with wave and then how should this be different from some of the preliminary data we saw back in December.
Yeah, great. So thanks Duston, yes, we do plan on releasing data when we're able to do so through our preclinical and clinical trial.
Again, some of that will be.
Also dependent on our ability to release data that possibly will be embargoed as we lead up to FDA submission and data that we put into to an FDA submission.
That said where possible.
We intend to be fully transparent on on the data that we're seeing for wave youre.
Youre correct Akhmed as at the end of April in Barcelona, and at that at that conference. We've actually been we'll have a couple of posters on wave there.
Selected for an oral presentation for a breakthrough technology and microbiology and one of our key scientist here to accelerate we'll be actually presenting on wave.
Our.
Holographic imaging format that we used for data capture an image capture of of the system. So we're really excited about that.
And then you asked about the metrics and we'll be we'll be releasing our key metrics that are very much related to this area. The central agreement categorical agreement time to result metrics those will all be metrics that we will continue to release as appropriate and as we're able to do so.
So in alignment with our FDA submission.
Understood. Thanks for the color there another question on isolates.
You know understanding understanding the pairing narrow a positive blood culture, what would the SBA approval process look like for that after you get the Gram negative positive blood culture, and how long would that take thereafter.
Yes, so our menu strategy for wave.
<unk> is first to submit as I've mentioned, the Gram for Gram negative.
PBC panel its a full menu by the way.
It's a much more robust menu than what we have today on fino and it will surpass anything.
Thats coming or that's on the market for as it relates to menu.
And that's what we'll be going to clinical trials with an ultimate submission. The next the next menu focus will be gram positive positive blood as well, we feel like it's important to round out the full menu of PBC highest acuity samples and also as we look to <unk>.
Upgrade our existing customer base with from Fino to wave that will allow us to do so and then in parallel as we get ready to prepare that we're already working on Gram positive development by the way as we've moved off of development for Gram negative that that work has already started once we.
We get Gram positive ready for submission then we will move quickly to Gram negative isolates.
And that full menu.
And then once we go through that development will look at submission there. So and then and then lastly, it will be Gram positive isolate menu beyond there and then.
So as far as timing goes I don't want to release any dates on that right now, but again back to the Gram negative first menu we plan to.
Complete clinical trial and submit to the FDA in quarter three we expect by midyear next year to get FDA approval and then.
We expect to have clinical trials and FDA submission and.
Get approval for Gram positive.
<unk> sometime in 'twenty, five as well after Gram negative.
Beyond that is when the isolate menu will be will be launched.
Okay.
Okay I appreciate the detail there one last one for David.
Just any commentary you can give on spend this year and where we can expect for them to end up. Thank you.
Yes, Thank you Dustin and as you know cash burn has there been a significant focus for us and we have implemented many cost saving initiatives over the past 18 months.
Overall, our cash burn in 2023 does not reflect a lot of these initiatives as we referred in the first half of the year with over $8 million.
Related to our amendment and extension with legal debt restructuring fees.
But since the amendment and extension of that that you have seen meaningful quarter over quarter reductions in the third quarter as well as the fourth quarter.
We're confident that we can further reduce our burn.
For example in R&D, we've averaged approximately $6 million a quarter, excluding noncash compensation in 2024.
Moving into 2024 excuse me, we see significant reduction as our wave program.
Exits development and heads into the clinical portion of the program. So starting in the second quarter, we're going to forecast about $2 million of savings per quarter and 24.
And as well as in SG&A, we've made significant cuts over the past 18 months, but again those have been a bit muddied given.
Given the fact, we had the debt restructuring we're focused on continuing to reduce SG&A.
And think that both the fourth quarter cash burn as well as our SG&A cash spend for the fourth quarter, a good jumping off points when modeling into 2024, and then we look to further reduce as mentioned.
I appreciate that David that's all from us. Thank you.
Thank you. Thank you very much. This concludes our question and answer session I would like to turn the call back to Jack Phillips for closing remarks.
Yes, Thank you everybody for joining the.
Quarter, four and full year 2023 call today.
I appreciate your continued interest and accelerate diagnostics and the work that we're doing.
Around sepsis and EMR, such an important area in the space of health care, and becoming more and more important.
I just want to wrap up on a few important items that we talked about today first of all.
We are we're just off to a great start with our preclinical trial for wave.
We've already been running for about three days, we've run a number of samples the systems running in a clinical laboratory today.
The workflow looks very good.
The results are yet to come but we're very optimistic about the results we'll see.
And we feel like we're very much on track to start.
The clinical trial in quarter, two and then followed by FDA submission sometime thereafter likely in Q3.
As we prepare wave for the market.
As a reminder, we've done significant work in the market to ensure that this product really meets and exceeds.
The needs of microbiology and infectious disease in general.
With over 125 deep market research interviews.
We continue to confirm the value proposition is right for wave the ability to consolidate positive blood and isolate on one menu.
The ability to deliver.
Results that are not delivered today at all and microbiology around four four and a half hours.
The workflow and scalability of the platform is also a major driver in the value proposition and resonates very well with the customers that we've done market research with we continue to prepare our existing customers' fino.
Move to wave as many of them are already on extending contracts and and looking to upgrade upgrade to wave.
Another exciting announcement around arc is that we submitted arc for 500 10-K FDA approval. The BD team is already trained and ready to go and we expect to continue to see <unk>.
Increased productivity with the BD sales team in the U S and abroad.
Our strategic partnership discussions beyond Pheno in arc with wave specifically.
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Global commercial partnership discussions with multinationals.
Those continue to progress.
And they're on track and therefore, we're on track to.
Sign a partnership agreement by mid year.
David did a good job of outlining our cash burn initiatives. This is quite important for the company remains a major priority.
And we every quarter, we continue to make good progress for four long term cash burn reductions.
And then.
In closing I want to take a moment and thank our wonderful employees accelerate for the the great work that they're doing across the board. We've made tremendous progress in all the areas that I've mentioned, we've got a lot of work ahead of us the team's very excited.
To deliver on these milestones that we laid out today and and we're really excited about.
The remaining quarters in 2024.
You very much for tuning in and we'll talk to you soon.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
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