Q2 2024 Accelerate Diagnostics Inc Earnings Call
Speaker Change: [music].
Operator: Good day, and welcome to the Accelerate Diagnostics Incorporated second quarter 2024 results conference call. All participants will be in a listen-only mode. After today's presentation, there will be a question and answer session with covering analysts. Please note this event is being recorded. I would now like to turn the conference over to Ms. Laura Pierson of Accelerate Diagnostics. Please go ahead.
Good day and welcome to the accelerate diagnostics incorporated second quarter 2024 results conference call. All participants will be in a listen only mode. After today's presentation. There will be a question and answer session with covering analysts. Please note. This event is being recorded I would now like to turn the conference over to MS. Laura peer thing.
Laura Peerthing: Accelerate diagnostics. Please go ahead.
Laura Pierson: Before we begin, it is important to share that information presented during this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E 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 risk, uncertainties, and other factors that could cause our actual results to differ materially.
Speaker Change: 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 at the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934.
Speaker Change: We're lucky statements include projections statements about our future and those that are not historical facts are 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.
Laura Pierson: These are discussed in greater detail in our annual report on Form 10-K for the year ended December 31, 2023, and other reports we file with the SEC. It is my pleasure to now introduce the company's president and CEO, Jack Phillips.
Speaker Change: For the year ended December 31st 2023, and the other reports we filed with the SEC.
Speaker Change: It is my pleasure to counter it is the company's president and CEO Jack Phillips.
Jack Phillips: Thank you, Laura. Good afternoon.
Jack Phillips: Thank you Laura.
Jack Phillips: Good afternoon today, I would like to provide exciting updates on our wave program, including the preclinical trial results commercial readiness progress and meaningful incremental funding to further deliver strategic milestones I will then pass the call to David patients our CFO to summarize our.
Jack Phillips: Today, I would like to provide exciting updates on our WAVE program, including the preclinical trial results, commercial readiness progress, and meaningful incremental funding to further deliver strategic milestones. I will then pass the call to David Patience, our CFO, to summarize our financial results for the quarter before opening up the call to take questions from our analysts. As a reminder, Accelerate is uniquely positioned to disrupt the microbiology susceptibility testing market with our second-generation antimicrobial susceptibility system, WAVE. WAVE addresses the entire AST market, including both positive blood culture and traditional isolated colony testing. The combined global AST market is estimated to be $2 billion.
Speaker Change: <unk> financial results for the quarter before opening up the call to take questions from our analyst.
Speaker Change: As a reminder, accelerate is uniquely positioned to disrupt the microbiology susceptibility testing market with our second generation anti microbial susceptibility system wave wave addresses the entire E. S T market, including both positive blood culture and traditional isolated colony.
Jack Phillips: Testing.
Jack Phillips: The combined global a S. T market is estimated at $2 billion by processing all I S. T testing on the same instrument with a cost structure competitive to the market leaders in traditional automated isolated colony testing customers will have the opportunity to can.
Jack Phillips: By processing all AST testing on the same instrument with a cost structure competitive with the market leaders in traditional automated isolated colony testing, customers will have the opportunity to consolidate all testing on a single AST platform. Further, WAVES product differentiators include same-shift results in four-and-a-half hours on average, a lab-friendly workflow that does not require sample preparation instruments, and a scalable platform to meet the testing needs of all lab segments while delivering a significantly improved cost structure to return higher platform margins and incremental cash flow generation.
Jack Phillips: Solidago all testing on a single a S T platform.
Jack Phillips: Further waves product Differentiators include same shift results in four and a half hours on average a lab friendly workflow, which does not require sample preparation instruments, a scalable platform to meet the testing needs of all lab segments, while delivering a significantly improved.
Jack Phillips: Cost structure to return higher platform margins and incremental cash flow generation.
Jack Phillips: Moving to our preclinical trial, we are pleased to announce our preclinical trial was a success, measured by several meaningful endpoints. First and foremost is the clinical performance, which included a data set of 1,570 unique bug-drug combinations tested on the WAVE platform compared to the reference method broth microdilution. Our overall performance is measured by essential agreement and categorical agreement, both of which were approximately 95% across 20 antibiotics.
Jack Phillips: Moving to our preclinical trial, we are pleased to announce our preclinical trial was a success measure by several meaningful endpoints first and foremost is the clinical performance, which included a dataset of 1570 unique bug drug combinations tested on the wave platform.
Speaker Change: Compared to the reference method brought micro dilution.
Jack Phillips: Our overall performance as measured by a central agreement and categorical agreement both of which were approximately 95% across 20 antibiotics.
Jack Phillips: It's important to note the study included an equal number of fresh and contrived samples, resulting in excellent concordance between prospective patient samples and site-selected challenge stock samples. Our strong performance was achieved with an unprecedented time-to-result of four and a half hours on average, delivering true same-shift susceptibility results to clinicians, which is not achieved by any emerging AST platform today. Beyond strong data readout and time-to-result performance, the trial measured assay reportability, system reliability, ease of use, and laboratory workflow. A remarkable 99% of wave runs reported a minimum inhibitory concentration result. There were no major hardware failures that required a service engineer to visit the labs, and assay reliability was excellent.
Speaker Change: It's important to note. The study included an equal number of fresh and contrived samples, resulting in excellent concordance between prospective patient samples and site selected challenged stock samples.
Speaker Change: Our strong performance was achieved with an unprecedented time to result, a four and a half hours on average delivering true same shift susceptibility results to clinicians, which is not achieved by any emerging a S. T platforms today.
Speaker Change: Beyond the strong data read out in time to result performance. The trial measured assay report ability system reliability ease of use and laboratory workflow.
Speaker Change: A remarkable 99% of wave runs reported a minimum inhibitory concentration result.
Speaker Change: There were no major hardware failures that required a service engineer to visit the labs and assay reliability was excellent.
Jack Phillips: After a few hours of operator training, lab technicians ran all specimen testing during the preclinical trial. Operators were pleased with the simple pre-analytical workflow, the ease of use, the intuitive interface, and random access capabilities. In conclusion, the preclinical trial was a great success, which gives us confidence we have both the right product design to take to a clinical trial and, in turn, commercialize. We are now ready to start the clinical trial, which includes four external sites. WAVE systems have been installed at all sites, and all necessary gram-negative test kits have been manufactured. The start of the clinical trial is imminent.
Speaker Change: After a few hours of operator training lab technicians ran all specimen testing during the preclinical trial operators were pleased with the simple pre analytical workflow the ease of use intuitive interface and random access capabilities.
Speaker Change: In conclusion, the preclinical trial was a great success, which gives us confidence we are both the right product design to take to a clinical trial and in turn commercialize.
Speaker Change: We are now ready to start the clinical trial, which includes four external sites wave systems have been installed in all sites and all necessary Gram negative test kits have been manufactured.
Speaker Change: The start of the clinical trial is imminent.
Jack Phillips: As previously outlined in prior earnings calls, our three-step strategic roadmap to maximize WAVE's commercial impact includes initially leveraging our position in the PBC market with existing customers in the U.S. and EMEA, followed by expanding into the isolate susceptibility testing market by offering new assays to increase customer engagement and wallet share, and thirdly by applying our holographic imaging technology to other areas of diagnostic testing. First, launching WAVE with the appropriate regulatory clearances and converting our existing customers already implementing rapid susceptibility testing provides a commercial platform for strong initial uptick while also reducing overall cash needs of the business and sets the company on a path to cash flow positivity.
Speaker Change: As previously outlined in prior earnings calls, our three step strategic roadmap to maximize waves commercial impact includes initially leveraging our position in the PBC market with existing customers in the U S and EMEA.
Speaker Change: Followed by expanding into the isolate susceptibility testing market by offering new assays to increase customer engagement and wallet share and thirdly by applying our whole graphic imaging technology to other areas of diagnostic testing.
Speaker Change: First by launching wave with the appropriate regulatory clearances and converting our existing customers already implementing rapid susceptibility testing provides a commercial platform for strong initial uptick while also reducing overall cash needs of the business.
Speaker Change: And sets the company on a path to cash flow positivity.
Jack Phillips: We now have approximately 75% of our U.S. customer base signed to longer-term contracts ahead of the wave commercial launch. Secondly, by launching an incremental menu for gram-positive PBC, as well as subsequent isolate assays, we provide microbiology labs with a comprehensive diagnostic solution for all susceptibility tests.
Speaker Change: We now have approximately 75% of our U S customer base signed to longer term contracts ahead of the wave commercial launch.
Speaker Change: Secondly by launching an incremental menu for Gram positive PBC as well as subsequent isolate assays, we provide microbiology labs with a comprehensive diagnostic solution for all susceptibility testing.
Jack Phillips: We estimate by expanding into isolate testing, we can grow our existing customer annuities by three to four times by offering comprehensive PBC and isolate assays on the same wave platform. This growth in revenue is coupled with a very attractive margin contribution given WAVE's low cost structure compared to emerging PBC and traditional isolate competitors. We continue to concurrently develop our gram-positive PBC assay as well as have demonstrated our ability to perform susceptibility testing on isolate samples.
Speaker Change: We estimate by expanding into the isolate testing, we can grow our existing customer annuities by three to four times by offering comprehensive P. B C and isolate assays on the same wave platform.
Speaker Change: This growth in revenue was coupled with a very attractive margin contribution given waves low cost structure compared to emerging PBC and traditional isolate competitors.
Speaker Change: We continue to concurrently develop our gram positive PBC assay as well as have demonstrated our ability to produce susceptibility testing on isolate samples.
Jack Phillips: Finally, we also see WAVE capable of completing other microbiology assays, such as yeast and anaerobes, along with antibiotic development opportunities with pharma, which could expand WAVE's addressable market even further. We continue to focus on delivering WAVE's strategic roadmap to ensure we maximize the benefits of WAVE's holographic imaging technology to improve patient outcomes, grow market share while expanding customer wallet share, and finally, further expand our To this end, and now with our strong preclinical trial results, we have decided to focus on achieving further critical wave operational and development milestones.
Speaker Change: Finally, we also see wave capable of completing other microbiology assays, such as east and anaerobes, along with antibiotic development opportunities with pharma, which could expand waves addressable market. Even further we continue to focus on delivering wave strategic road map to ensure we maximize the.
Speaker Change: Fits of waves holographic imaging technology to improve patient outcomes grow market share, while expanding customer wallet share and finally further expand our addressable market.
Speaker Change: To this end and now with our strong preclinical trial results, we have decided to focus on achieving further critical wave operational and development milestones. We believe this focus will drive more value for all accelerate stakeholders ahead of signing a strategic partner.
Jack Phillips: We believe this focus will drive more value for all Accelerate stakeholders ahead of signing a strategic partnership. We are excited to announce we have worked with our existing lenders to bring in additional capital to fund the company through 2025. The financing also allows us to focus on delivering an FDA-cleared WAVE system and gram-negative PBC menu, along with developing incremental assays to further demonstrate WAVE's capability. We feel this strategy will now ensure we have the cash runway to deliver these important value-inflecting program milestones and, in turn, further demonstrate and increase value for our wave system with strategic partners. I will now turn the call over to David to discuss the Q2 2024 financial results. David. Thank you, Jack.
Speaker Change: We are excited to announce we worked with our existing lenders to bring in additional capital to fund the company through 2025.
Speaker Change: The financing also allows us to focus on delivering an F. D. A clear wave system and Gram negative PBC menu, along with developing incremental assays to further demonstrate waves capabilities.
Speaker Change: We feel this strategy will now ensure we have the cash runway to deliver these important value inflection program milestones and in turn further demonstrate and increase value for our wave system with strategic partners.
Speaker Change: I will now turn the call over to David to discuss the Q2 2024 financial results David.
David Patience: Thank you, Jack, and good afternoon, everyone. Net sales were approximately $3 million for the quarter, which compares to approximately $2.9 million for the same period in the prior year. This increase was driven by a low double-digit growth in reoccurring consumable net sales. Growth margin was approximately 23% for the quarter, which compares to approximately 27% for the same period in the prior year. The overall decline in gross margin was driven by product.
David Patients: Jack and good afternoon, everyone net sales were approximately $3 million for the quarter, which compares to approximately $2 9 million from the same period in the prior year.
David Patience: Selling, general, and administrative expenses were approximately $5.4 million for the quarter, which compares to $7.6 million for the same period in the prior year. SG&A expenses for the quarter include approximately $800,000 in non-cash, stock-based compensation. The overall decline in SG&A expenses is a result of lower employee-related expenses. Research and development expenses were $3.9 million for the quarter, which compares to $5.8 million for the same period in the prior year. R&D expenses for the quarter include approximately $200,000 in non-cash, stock-based compensation.
David Patients: This increase was driven by a low double digit growth in reoccurring consumable and that sales.
Speaker Change: Gross margin was approximately 23% for the quarter, which compares to approximately 27% for the same period in the prior year.
Speaker Change: Overall the decline in gross margin was driven by product mix.
David Patients: Selling general and administrative expenses were approximately $5 4 million for the quarter, which compares to $7 6 million in the same period in the prior year SG&A expenses for the quarter include approximately 800000 and noncash stock based compensation overall.
Speaker Change: And SG&A expenses as a result of lower employee related expenses.
Speaker Change: Research and development expenses were $3 9 million for the quarter, which compares to $5 8 million for the same period in the prior year R&D expenses for the quarter include approximately 200000 and noncash stock based compensation.
David Patience: The overall decline in R&D expenses is a result of lower third-party development expenses for our WAVE program. Our net loss for the quarter was approximately $11.6 million, resulting in a net loss per share of $0.50. Cash used for the quarter was approximately $8.7 million net of finances. Our cash use for the quarter includes notable one-time and non-recurring payments of approximately $1.5 million for both the repayment of our outstanding 2.5% convertible notes, as well as a payment to a key wave development partner.
Speaker Change: The overall decline in R&D expenses as a result of lower third party development expenses for our wave program.
Speaker Change: Our net loss for the quarter was approximately $11 6 million, resulting in a net loss per share of <unk> 50.
Speaker Change: Cash used for the quarter was approximately $8 7 million net of financing.
Speaker Change: Our cash used for the quarter includes notable onetime and nonrecurring payments of approximately $1 5 million for both the repayment of our outstanding 2.5% convertible notes as well as a payment to a key wave development partner.
David Patience: As discussed on previous calls, we are focused on driving significant reductions in operating expenses and cash burn in the coming quarters. In summary, continuing to drive these significant reductions in cash burn, coupled with the new funds raised, provides us the runway to continue delivering these critical wave program milestones through the end of 2025. At this time, we are happy to open the call and take questions from our covering analysts.
Speaker Change: As discussed on previous calls we are focused on driving significant reductions in operating expenses and cash burn in the coming quarters in summary by continuing to drive the significant reductions in cash burn coupled with the new funds raised provides us the runway to continue delivering these critical wave program milestones.
Speaker Change: Through the end of 2025.
Speaker Change: At this time, we are happy to open the call and take questions from our covering analysts.
Operator: We will now begin the question and answer session, and the first question will come from Mr. Andrew Brackmann with William Blear. Please go ahead.
Speaker Change: We will now begin the question and answer session and our first question will come from Mr. Andrew Brachman with William Blair. Please go ahead.
Andrew Brackmann: Hi guys, good afternoon.
Andrew Brachman: Hi, guys. Good afternoon, thanks for taking the question.
Andrew Brackmann: Thanks for taking the questions. Maybe just on the preclinical trial results, certainly look exciting, but Jack, as you sort of think about pioneering and advancing the rapid AST field, what levels of essential agreement and categorical agreement do you think are likely needed to drive the inflection and sort of uptake? I guess, in other words, as we move to the full clinical trial here, what results should we be looking for as you define them?
Andrew Brachman: Maybe just on the preclinical trial results certainly look exciting, but Jack as you sort of think about pioneering in advancing the rapid de S. T fields, what levels of Central agreement and categorical agreement do you think are likely needed to drive the inflection and sort of uptake I guess in other words as we move to the four.
Jack Phillips: Trial here what results should we be looking for as you define success.
Jack Phillips: Hi Andrew. Again, thanks for the question. So yeah, as I mentioned in my prepared comments, first of all, the preclinical trial was a really big success for the company. It was a big milestone, and it's paving the way for us to start an effective clinical trial here in the next coming week. And so, specific to your question around clinical performance, I mean that in really most any diagnostic platform, that's really table stakes.
Jack Phillips: Hi, Andrew again, thanks for the question so yeah.
Jack Phillips: Yeah as I mentioned in my prepared comments first of all the preclinical trial was a.
Speaker Change: A really big success for the company. It was a big milestone in its paving the way for us to start an effective clinical trial here in the next coming weeks.
Speaker Change: And so specific to your question around clinical performance I mean that in.
Speaker Change: And really most any diagnostic platform.
Jack Phillips: That's that's really table stakes and so in microbiology and rapid E. S T testing.
Jack Phillips: And so, in microbiology and rapid AST testing, there are really two key parameters that you mentioned, EA and CA. These are the two key factors that will be, you know, data that's submitted to the FDA. The FDA requires performance above 89.9% for approval. And so, where we're at right now, as we stated in our press release, we just released a press release on the preclinical trial, and we shared some of the data of the 1,570 bug-drug combinations that we produced in fresh samples and contrived samples.
Speaker Change: There's really two key parameters that you mentioned E. A N C a.
Speaker Change: Are the two key factors that that will be.
Speaker Change: Data that submitted to the FDA the FDA requires performance above 89, 9% for for approval.
Speaker Change: And so where we're at right now as we stated in our we just released a press release on the preclinical trial. When we we shared some of the data of the 1570 bug drug combinations that we that we produced on fresh samples and contrived samples and.
Jack Phillips: And the performance is very solid. In the mid-90s, and that's really where we need to be, and again, this has given us great confidence to complete a successful clinical trial as a result of that.
Speaker Change: The performance is.
Speaker Change: Very solid in the mid nineties.
Speaker Change: And that is that's really where we need to be and again. This has given us great confidence to complete.
Speaker Change: Complete a successful clinical trial as a result of that.
Jack Phillips: And then if I could just switch gears here, the comments on sort of now focusing on achieving the milestones before working with the strategic partner. I guess can you maybe just give a little bit more color around what led to that decision, and I guess as you sort of think about these preclinical trial results, how might that further any conversations with these partners moving forward?
Speaker Change: Perfect and then if I could just switch gears here the comments on sort of now focusing on achieving the milestones before.
Speaker Change: Working with our strategic partner I guess can you, maybe just give a little bit more color around what led to that decision and I guess as you sort of think about these preclinical trial results how might that further any conversations with these partners moving forward. Thanks.
Jack Phillips: Yeah, so we've obviously had a lot of interest from strategic partners for what we're doing with WAVE because it's unique, it's in a class all by itself. We've been able to demonstrate workflow, system reliability, and time to result is really unmatched at four and a half hours on average.
Speaker Change: Yes, So you know we.
Speaker Change: Obviously have a lot of interest from strategic partners.
Speaker Change: For what we're doing with wave because it's unique it's in a class all by itself.
Speaker Change: We've been able to demonstrate.
Speaker Change: Workflow system reliability time to result is.
Speaker Change: Really unmatched at four and a half hours on average and and now with the you know building up to this now we just completed the preclinical study, which delivered the results that I spoke about and so as we're going through our strategic planning.
Jack Phillips: And now, building up to this, we've just completed the preclinical study which delivered the results that I spoke about. And so as we went through our strategic planning, it became very clear to us that time was on our side if we were able to secure funding, which we were able to do. That funding, David may speak to it, but it will get us through 25. It will set us up to comfortably conduct the clinical trial.
Speaker Change: It became very clear to us that.
Speaker Change: Time is on our side, if we're able to secure funding which.
Speaker Change: Which we were able to do that funding David may speak to it but it will get us through 25 it.
Speaker Change: It will set us up to.
David Patients: Comfortably conduct the clinical trial.
Jack Phillips: To submit to the FDA and then ultimately get FDA clearance for WAVE and PBC gram negative panels. And so, as we went through the process and thought about our options, this we believe is absolutely the best path forward for us right now because of the confidence that we have in the platform, the solution, and the data that we're seeing from preclinical. And in the end, we ultimately believe it's absolutely the best way to maximize value for all stakeholders.
David Patients: To submit to the FDA.
Speaker Change: And then ultimately get FDA clearance for wave and PBC Gram negative panel and so as we went through the process and thinking about our options.
David Patients: This we believe is absolutely the best path forward for Us right now.
Speaker Change: Because of the confidence that we have in the platform the solution and the data that we're seeing off the preclinical and in the end ultimately we believe it's absolutely the best way to maximize value for all stakeholders.
Jack Phillips: And so, moving forward, we will continue to work with strategic partners to meet with strategic partners. I had meetings at ADLM last week. We have meetings coming up with those partners that are interested in following the story. We also have, you know, we continue to share the data that we generate, and we'll be doing that with strategic partners as well.
Speaker Change: So moving forward.
Speaker Change: We will continue to work with strategic partners.
Speaker Change: To meet with strategic partners I had meetings at ADL Lamb last week.
Speaker Change: We have meetings coming up to those partners that are interested in following the story.
Speaker Change: We also have.
Speaker Change: You know we continue to to share the data that we generate and and we'll be doing that with the strategic partners as well.
Andrew Brackmann: Perfect. And then, David, maybe one for you, just on the cash balance in lieu of this raid. My pro forma math gets you somewhere in the low to mid $20 million range for your cash balance. Can you maybe just sort of help bridge us and get comfortable with your target of funding through 2025?
Speaker Change: Perfect and then David maybe one for you just on the cash balance and more of this rate my pro forma math gets you somewhere in that low to mid $20 million range for your cash balance can you, maybe just sort of help bridge us and get comfortable up to your target of funding through 2025.
David Patience: Perfect, yeah, no, thank you for the question Andrew. So, yeah, it's on a net proceeds basis, and it's in the mid-25 million on a pro forma basis, but we're really excited to prove out in our recent quarters that we've driven significant cost-cutting initiatives while also delivering key strategic milestones for the WAVE program and continuing to preserve our customer base. You know, starting with the second quarter, if you look at our cash burn, after adjusting net of financing and excluding, you know, the repayment of our two and a half percent notes and, you know, a non-recurring payment with the Wave Development Partner, we burned about $7 million.
David Patients: Perfect Yeah. Thank you for the question Andrew So yeah. It's.
Speaker Change: Net proceeds basis and it's in the mid $25 million on a pro forma.
Speaker Change: But we're really excited to prove out our recent quarters that we've driven significant cost cutting initiatives. While also delivering key strategic milestones for the way program and continuing to reserve or <unk>.
Speaker Change: Customer base.
Speaker Change: Starting with the second quarter, if you look at our cash burn after adjusting net of financing and excluding the repayment of our two 5% notes and nonrecurring payment with a wave development partner, we burned about $7 million and then quarter over quarter looking at our second quarter R&D cash.
David Patience: And then, quarter over quarter, looking at our second quarter R&D cash expenses, we were down 20%, you know, while delivering a very key program milestone with the preclinical. We've also, you know, are ready to go with the clinical trial, as Jack discussed, pre-purchased all of our clinical trial materials, which is included in the second quarter number.
Speaker Change: We were down 20%, while delivering a very key.
Speaker Change: Program milestone with the preclinical we've also are ready to go with the clinical trial as Jack discussed pre purchased all of our clinical trial materials, which is included in the second quarter number.
David Patience: So, you know, really excited that we are delivering milestones within the R&D team with Wave, but also able to bring down the cost, you know, 20% quarter over quarter. Within SG&A, we were able to bring that down quarter over quarter by about 5% on a cash basis, but we also implemented further significant cost-cutting measures during the second quarter, which is going to further reduce our SG&A expenses moving forward. Our overall goal is to get to a target operating cash burn of about $5 million, and we're on our way to getting there.
Speaker Change: Really excited that we are delivering milestones within the R&D.
Keane: Keane with wave, but also able to bring down the cost 20% quarter over quarter.
Speaker Change: Within SG&A, we were able to bring that down quarter over quarter by about 5% on a cash basis, but we also implemented further significant cost cutting measures during the second quarter, which is going to further reduce our SG&A expenses moving forward. Our overall goal is to get to a target of operating cash burn of about five.
Speaker Change: $5 million and we're on our way to get there. We're really excited about that as we've looked at strategic cost cutting initiatives with a focus priority on wave milestones.
David Patience: We're really excited about that as we've looked at strategic cost-cutting initiatives with a focused priority on the wave milestones. Additionally, to bridge into the 2025 timeframe and through 2025, we do have contractual obligations from other folks for cash inflows through our on-market product portfolio partnership.
Speaker Change: Additionally to bridge into the.
Speaker Change: 2025 time frame and through 2025, we do have contractual obligations from other folks for our cash inflows with our on market product portfolio partnership.
Operator: Perfect. Thanks, guys. This concludes our question and answer session. I would like to turn the conference back over to Mr. Jack Phillips for any closing remarks. Please go ahead, sir.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: Okay. Thank you Andrew This concludes our question and answer session I would like to turn the conference back over to Mr. Jack Phillips for any closing remarks. Please go ahead Sir.
Jack Phillips: Thank you, and thanks for everybody joining in on the call today. As I close out, just a reminder, we're on a very, very exciting journey here at Accelerate with the WAVE platform and the Next Generation Solution for Rapid Susceptibility to get patients on optimal antibiotic therapy quickly. Sepsis continues to impact 49 million people globally each year, and estimated deaths are about 11 million. 1.3 million are attributed to bacterial antimicrobial resistance.
Jack Phillips: Thank you and thanks for everybody joining into the call today.
Jack Phillips: I close out just a reminder, I mean, we're on a very very exciting journey here at accelerate.
Speaker Change: The wave platform in the next generation solution for rapid susceptibility.
Speaker Change: To get patients on optimal antibiotic therapy quickly.
Speaker Change: Sepsis continues to impact 49 people 49 million people globally each year.
Speaker Change: Estimated deaths or about $11 million.
Speaker Change: One 3 million are attributed to bacterial anti microbial resistance.
Operator: So this is a real-world health care issue that still has not been addressed. And with WAVE, with rapid susceptibility testing, we have an opportunity to do just that. I want to thank our employees. We've been working day and night to continue to hit our milestones and advance WAVE forward. We're very appreciative and thankful that we're able to move forward with new funding that will fund us through 25. The preclinical trial success was a tremendous milestone for the company that gives us great confidence to start the clinical trial.
Speaker Change: So this is a real world health care issue that still has not been addressed.
Speaker Change: And with wave with rapid susceptibility testing, we have an opportunity to do that just that I want to thank.
Speaker Change: Our employees, we've been working day and night to continue to hit our milestones in advance.
Speaker Change: Way forward.
Speaker Change: We're very appreciative and thankful that we're able to move forward with new funding that will fund us through 'twenty five.
Operator: Andrew Brackmann, Dustin Scaringe, David Patience, Albert Hu, Accelerate Diagnostics Inc Andrew Brackmann, Dustin Scaringe, David Patience, Albert Hu, Accelerate Diagnostics Inc Andrew Brackmann, Dustin Scaringe, David Patience, Albert Hu, Accelerate Diagnostics Inc To begin, it is important to share that information presented during this call may contain forward-looking statements within the meeting of Section 27-A of the Security's Act of 1933 and Section 21-E of the Security's Exchange Act of 1934 Forward-looking statements include projection, 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.
Speaker Change: The preclinical trial success was a tremendous milestone for the company that gives us great confidence to to start the clinical trial and then finally with all of this we're we're excited to identify future strategic partner for wave and ultimately <unk>.
Operator: And then finally, with all of this, we're excited to identify a future strategic partner for WAVE and ultimately maximize value for AXDX stakeholders across the board. So with that, thank you very much and have a wonderful day.
Speaker Change: Maximize value for <unk> stakeholders across the board.
Speaker Change: So with that thank you very much and have a wonderful day.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: [music]
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Operator: These are discussing greater detail in our annual report on Form 10K for the year-end of December 31st, 2023, and other reports we file with the SEC.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Jack Phillips: It is my pleasure to introduce the company's president and CEO, Jack Phillips. Thank you, Laura. Good afternoon. Today I would like to provide exciting updates on our WAVE program, including the preclinical trial results, commercial readiness progress, and meaningful incremental funding to further deliver strategic milestones.
Speaker Change: Yeah.
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Speaker Change: [music].
Jack Phillips: I will then pass the call to David Patience, our CFO, to summarize our financial results for the quarter before opening up the call to take questions from our analyst.
Jack Phillips: As a reminder, Accelerate is uniquely positioned to disrupt the microbiology susceptibility testing market with our second-generation anti-microbial susceptibility system WAVE. WAVE addresses the entire AST market, including both positive blood culture and traditional isolated colony testing. The combined global AST market is estimated at $2 billion. By processing all AST testing on the same instrument with a cost structure competitive to the market leaders in traditional automated, isolated colony testing, customers will have the opportunity to consolidate all testing on a single AST platform.
Speaker Change: Yes.
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Jack Phillips: Further, WAVE's product differentiators include same-shift results in 4.5 hours on average, a lab-friendly workflow which does not require sample preparation instruments, a scalable platform to meet the testing needs of all lab segments while delivering a significantly improved cost structure to return higher platform margins and incremental cash flow generation.
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Jack Phillips: Moving to our pre-clinical trial, we are pleased to announce our pre-clinical trial was a success, measured by several meaningful endpoints. First and foremost is the clinical performance, which included a data set of 1,570 unique bug drug combinations tested on the WAVE platform compared to the reference method brought micro delusion. Our overall performance is measured by a central agreement and categorical agreement, both of which were approximately 95% across 20 antibiotics. It's important to note the study included an equal number of fresh and contrived samples resulting in excellent concordance between prospective patient samples and site selected challenge stock samples.
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Jack Phillips: Our strong performance was achieved with an unprecedented time to result of 4.5 hours on average delivering true, same-shift susceptibility results to clinicians, which is not achieved by any emerging AST platforms today. Beyond a strong data readout and time to result performance, the trial measured assay reportability, system reliability, ease of use, and laboratory workflow. A remarkable 99% of WAVE runs reported a minimum inhibitory concentration result. There were no major hardware failures that required a service engineer to visit the labs, and as their reliability was excellent. After a few hours of operator training, lab technicians ran all specimen testing during the preclinical trial. Operators were pleased with the simple pre-analytical workflow, the ease of use, intuitive interface, and random access capabilities.
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Jack Phillips: In conclusion, the preclinical trial was a great success which gives us confidence we have both the right product design to take to a clinical trial and in turn commercialize. We are now ready to start the clinical trial, which includes four external sites. WAVE systems have been installed in all sites and all necessary Graham negative test kits have been manufactured. The start of the clinical trial is imminent.
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Jack Phillips: As previously outlined in prior earnings calls, our three-step strategic roadmap to maximize WAVE's commercial impact includes initially leveraging our position in the PBC market, with existing customers in the U.S, and Amia, followed by expanding into the isolate susceptibility testing market by offering new assays to increase customer engagement and wallet share, and thirdly by applying our holographic imaging technology to other areas of diagnostic testing. First by launching WAVE with the appropriate regulatory clearances and converting our existing customers already implementing rapid susceptibility testing provides a commercial platform for strong initial uptick while also reducing overall cash needs of the business and sets the company on a path to cash flow positivity.
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Jack Phillips: Technology. We now have approximately 75% of our U.S, customer base signed to longer term contracts ahead of the Wave commercial launch. Secondly, by launching an incremental menu for grand positive PBC, as well as subsequent isolate assays, we provide microbiology labs with a comprehensive diagnostic solution for all susceptibility testing. We estimate by expanding into the isolate testing, we can grow our existing customer annuities by three to four times by offering comprehensive PBC and isolate assays on the same wave platform.
Jack Phillips: This growth in revenue is coupled with a very attractive margin contribution given waves low cost structure compared to emerging PBC and traditional isolate competitors. We continue to concurrently develop our grand positive PBC essay, as well as have demonstrated our ability to produce susceptibility testing on isolate samples. Finally, we also see Wave capable of completing other microbiology assays, such as yeast and anaerobes, along with antibiotic development opportunities with pharma, which could expand waves' addressable market even further.
Jack Phillips: We continue to focus on delivering Wave strategic roadmap to ensure we maximize the benefits of Wave's holographic imaging technology to improve patient outcomes, grow market share while expanding customer wallet share, and finally further expand our addressable market.
Jack Phillips: To this end, and now with our strong pre-clinical trial results, we have decided to focus on achieving further critical wave operational and development milestones. We believe this focus will drive more value for all Accelerate stakeholders ahead of signing a strategic partner.
Jack Phillips: We are excited to announce we worked with our existing lenders to bring in additional capital to fund the company through 2025. The financing also allows us to focus on delivering an FDA-cleared wave system and Graham negative PBC menu, along with developing incremental assays to further demonstrate wave's capabilities. We feel this strategy will now ensure we have the cash runway to deliver these important value-inflecting program milestones, and in turn, further demonstrate and increase value for our wave system with strategic partners.
David Patience: I will now turn the call over to David to discuss the Q2-2024 financial results. David, thank you, Jack, and good afternoon, everyone. Net sales were approximately 3 million for the quarter, which compares to approximately 2.9 million for the same period in the prior year. This increase was driven by a low double-digit growth in reoccurring consumable net sales. Growth margin was approximately 23% for the quarter, which compares to approximately 27% for the same period in the prior year.
David Patience: The overall decline in growth margin was driven by product mix. Selling, general, and administrative expenses were approximately 5.4 million for the quarter, which compares to 7.6 million in the same period in the prior year. SGNA expenses for the quarter include approximately 800,000 in non-cash stock-based compensation. The overall decline in SGNA expenses is a result of lower employee-related expenses. Research and development expenses were 3.9 million for the quarter, which compares to 5.8 million for the same period in the prior year.
David Patience: R&D expenses for the quarter include approximately 200,000 in non-cash stock-based compensation. The overall decline in R&D expenses is a result of lower third-party development expenses for our WAVE program. Our net loss for the quarter was approximately 11.6 million resulting in a net loss per share of 50 cents. Cash used for the quarter was approximately 8.7 million net of financing. Our cash used for the quarter includes notable one-time and non-recurring payments of approximately 1.5 million for both the repayment of our outstanding 2.5% convertible notes, as well as a payment to a key WAVE development partner. As discussed on previous calls, we are focused on driving significant reductions in operating expenses and cash porn in the coming quarters.
David Patience: In summary, by continuing to drive the significant reductions in cash coupled with the new funds raised provides us the runway to continue delivering these critical WAVE program milestones through the end of 2025.
Operator: At this time, we are happy to open the call and take questions from our covering analysts.
Andrew Brackmann: We will now begin the question and answer session and the first question will come from Mr. Andrew Brackman with William Blair. Please just on the free clinical trial results, certainly looking exciting, but Jack, as you sort of think about pioneering and advancing the rapid ASD field, what levels of essential agreement and categorical agreement do you think are likely needed to drive the inflection and sort of uptake? I guess in other words, as we move to the full clinical trial here, what results should we be looking for as you define success?
Jack Phillips: Thanks. Hi, Andrew. Again, thanks for the question. So, as I mentioned in my prepared comments, first of all, the preclinical trial was a really big success for the company. It was a big milestone and it's paving the way for us to start an effective clinical trial here in the next coming weeks. And so specific to your question around clinical performance, I mean, that in really most any diagnostic platform, that's really table stakes.
Jack Phillips: And so in microbiology and rapid ASD testing, there's really two key parameters that you mentioned, EA and CA, are the two key factors that will be data that's submitted to the FDA. The FDA requires performance above 89.9% for approval. And so where we're at right now, as we stated in our, we just released a press release on the preclinical trial and we shared some of the data of the 1,570 bug drug combinations that we produced on fresh samples and contrives samples.
Jack Phillips: And the performance is very solid in the mid-90s. And that is that's really where we need to be. And again, this has given us great confidence to complete a successful clinical trial as a result of Perfect. And then if I could just switch gears here, the comments on sort of now focusing on achieving the milestones before working with the strategic partner. I guess you maybe just give a little bit more color around what led to that decision and I guess as you sort of think about these pre-finical trial results, how might that further any conversations with these partners moving forward?
Jack Phillips: Thanks. Yeah, so we've obviously have a lot of interest from strategic partners for what we're doing with WAVE because it's unique, it's in a class all by itself. We've been able to demonstrate workflow, system reliability, time to result is really unmatched at 4.5 hours on average. And now with the, you know, building up to this, now we just completed the pre-clinical study which delivered the results that I spoke about. And so as we're going through our strategic planning, you know, it became very clear to us that, you know, time is on our side if we're able to scare funding, which we were able to do.
Jack Phillips: That funding, David, may speak to it, but it will get us through 25. It will set us up to comfortably conduct the clinical trial to submit to the FDA and then ultimately get FDA clearance for WAVE and PBC Gram-Negative Panel. And so as we went through the process and thinking about our options, you know, this we believe is absolutely the best path for us right now because of the confidence that we have in the platform, the solution and the data that we're seeing off the pre-clinical.
Jack Phillips: And in the end, ultimately, we believe it's absolutely the best way to maximize value for all stakeholders. And so moving forward, we will continue to work with strategic partners to meet with strategic partners. I had meetings at ADLM last week. We have meetings coming up to those partners that are interested in following the story. We also have, you know, we continue to share the data that we generate and we'll be doing that with the strategic partners as well.
Jack Phillips: Perfect. And then David, maybe one for you just on the cash balance in Mill of this raise, my pro forma mask gets you somewhere on that low to mid-20 million dollar range for your cash balance. You maybe just sort of help bridge us and get comfortable to your target of funding through 2025. Thanks. Perfect. Yeah. No, thank you for the question Andrew. So, yeah, it's, you know, on a net proceeds basis and it's in the mid-25 million on a pro forma.
Jack Phillips: But, you know, we're really excited to prove out, you know, in our recent quarters that we've driven significant cost-cutting initiatives. We're also delivering, you know, key strategic milestones for the wave program and continuing to reserve our, you know, customer base. You know, starting with the second quarter, if you look at our cash burn, you know, after adjusting net of financing and excluding, you know, the repayment of our two and a half percent notes and, you know, a non-recurring payment with the wave development partner, we burned about $7 million.
Jack Phillips: And then quarter over quarter, looking at our second quarter R&D cash expenses, we were down 20 percent, you know, while delivering a very key, you know, program milestone with pre-clinical. We've also, you know, already to go with the clinical trial is Jack discussed, pre-purchased all of our clinical trial materials, which is included in the second quarter number. So, you know, really excited that we were delivering milestones within the R&D, you know, team with wave, but also able to bring down the cost, you know, 20 percent quarter over quarter.
Jack Phillips: With NSGNA, we were able to bring that down quarter over quarter by about 5% on a cash basis. But we also implemented further significant cost-cutting measures during the second quarter, which is going to further reduce our NSGNA expenses moving forward. Our overall goal is to get to a target of operating cash earn of about 5 million, and we're on our way to get there. We're really excited about that as we've looked at strategic cost-cutting initiatives with a focused priority on the WAVE milestones. Additionally, to bridge into the 2025 time frame, and through 2025, we do have contractual obligations from other folks for cash inflows with our on-market product portfolio partnership. Perfect. Thanks, guys.
Andrew Brackmann: Okay, thank you, Andrew.
Operator: This concludes our question and answer session.
Jack Phillips: I would like to turn the conference back over to Mr. Jack Phillips for any closing remarks. Please go ahead, sir. Thank you, and thanks for everybody joining in to the call today. As I close out, just a reminder, we're on a very, very exciting journey here to accelerate with the WAVE platform and the next generation solution for rapid susceptibility to get patients on optimal antibiotic therapy quickly. Substance continues to impact 49 people, 49 million people globally each year, estimated deaths are about 11 million, 1.3 million are attributed to bacterial antimicrobial resistance. So this is a real-world healthcare issue that still has not been addressed, and with WAVE, with rapid susceptibility testing, we have an opportunity to do that just that.
Jack Phillips: I want to thank our employees. We've been working day and night to continue to hit our milestones in advance, WAVE forward. We're very appreciative and thankful that we're able to move forward with new funding that will fund us through 25. The preclinical trial success was a tremendous milestone for the company that gives us great confidence to start the clinical trial. And then finally, with all of this, we're excited to identify a future strategic partner for WAVE and ultimately maximize value for AXDX stakeholders across the board.
Jack Phillips: So with that, thank you very much, and have a wonderful day.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.
Operator: Andrew Brackmann, Dustin Scaringe, Jack Phillips, Laura Pierson, David Patience Andrew Brackmann, Dustin Scaringe, Jack Phillips, Laura Pierson, David Patience, David Patience, David Patience, David Patience, David Patience, David Patience, David Patience David Patience, David Patience David Patience, David Patience Andrew Brackmann, Dustin Scaringe, Jack Phillips, Laura Pierson, David Patience[inaudible]