0000727207 false 0000727207 2020-11-05 2020-11-05 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

  

Date of report (Date of earliest event reported) November 5, 2020

 

Accelerate Diagnostics, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation)

 

001-31822   84-1072256
(Commission File Number)   (IRS Employer Identification No.)

 

3950 South Country Club Road, Suite 470, Tucson, Arizona   85714
(Address of principal executive offices)   (Zip Code)

 

(520) 365-3100

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.001 par value per share AXDX

The Nasdaq Stock Market LLC

(The Nasdaq Capital Market)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On November 5, 2020, Accelerate Diagnostics, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ending September 30, 2020 and hosted a conference call to discuss such results. A copy of the press release is attached hereto as Exhibit 99.1 and a copy of the transcript of the conference call is attached hereto as Exhibit 99.2, each of which is incorporated herein by reference in its entirety.

 

In accordance with General Instruction B.2 for Form 8-K, the information in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

  

Item 9.01    Financial Statements and Exhibits.

 

 (d)           Exhibits.  

 

Exhibit    
Number   Description
     
99.1   Press Release, dated November 5, 2020 
     
99.2  

Earnings Call Transcript, November 5, 2020

     
104   Cover Page Interactive Data File (cover page XBRL tags are embedded within the Inline XBRL document) 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  ACCELERATE DIAGNOSTICS, INC.
  (Registrant)  
     
Date: November 6, 2020 /s/ Steve Reichling  
  Steve Reichling  
  Chief Financial Officer  

 

 

 

 

 

 

 Exhibit 99.1

 

Accelerate Diagnostics Reports Third Quarter 2020 Financial Results

 

TUCSON, Ariz., November 5, 2020 -- Accelerate Diagnostics, Inc. (Nasdaq: AXDX) today announced financial results for the third quarter ended September 30, 2020.

 

“We achieved solid revenue growth in the third quarter, driven by continued steady utilization within our installed base of live Pheno instruments, an improving go-live cadence, and a large capital deal in the U.S.,” commented Jack Phillips, President and CEO of Accelerate Diagnostics, Inc. “While COVID-related delays in the go-live process have begun to moderate, our ability to contract new customers continues to be affected by the pandemic. However, we are beginning to see an improvement in customer engagement as our recent product approvals and upcoming product releases are beginning to stimulate new interest in Accelerate Diagnostics. I am very pleased with the efforts put forth by everyone on the Accelerate team during the quarter, as we have continued to make meaningful operational and financial progress in the face of an unprecedented macro-environment.”

  

Third Quarter 2020 Highlights

 

·Added 5 contracted instruments in the quarter and brought 22 instruments live in the U.S.

 

·Ended the third quarter with 223 U.S. live revenue-generating instruments, with another 192 U.S. contracted Pheno instruments not yet live.

 

·Net sales of $3.6 million, compared to $2.3 million in the third quarter of 2019, or 57% growth.

 

·Gross margin was 36% for the quarter, compared to 51% in the third quarter of 2019. This decrease was the result of pandemic-related effects on manufacturing and dilution from the large capital deal in the quarter.

 

·Selling, general, and administrative expenses for the quarter were $11.5 million, compared to $12.7 million in the third quarter of 2019. This decrease was driven by pandemic-related reductions in sales and marketing spend related to travel and trade shows.

 

·Research and development (R&D) costs for the quarter were $5.0 million, compared to $6.1 million in the third quarter of 2019. This decrease was the result of increased efficiencies and lower external study spend.

 

·Net loss was $18.8 million in the third quarter, or $0.33 per share, which included $4.7 million in non-cash stock-based compensation expense.

 

·Net cash used in the quarter was $11.2 million, and the company ended the quarter with total cash, investments, and cash equivalents of $77.5 million.

 

·Received 510k approval for a new suite of product enhancements to the Accelerate Pheno® system, which improve performance and expand Pheno’s antimicrobial susceptibility testing (AST) menu for bloodstream infections.

 

·Received FDA Emergency Use Authorization for the MS Fast fully automated chemiluminescence immunoassay analyzer and SARS-CoV-2 tests for the detection of IgG and IgM.

  

Year to Date 2020 Highlights

 

·Net sales were $8.1 million year-to-date as compared to $5.8 million from the same period in the prior year, or 40% growth.

 

·Gross margin was 41% year-to-date, compared to 50% from the same period in the prior year. This decrease was the result of pandemic related effects on supply chain and dilution from the large capital deal in the quarter.

 

·Selling, general, and administrative expenses were $35.7 million year-to-date, compared to $38.3 million from the same period in the prior year. This decrease was driven by pandemic-related reductions in sales and marketing spend related to travel and trade shows.

 

·Research and development (R&D) costs were $16.2 million year-to-date, compared to $19.1 million from the same period in the prior year. This decrease was the result of increased efficiencies and lower external study spend.

 

·Net loss was $59.3 million year-to-date, or $1.07 per share, which included $12.3 million in non-cash stock-based compensation expense.

 

·Net cash used was $31.0 million year-to-date, and the company ended the quarter with total cash, investments, and cash equivalents of $77.5 million.

 

 

 1 

 

 

Full financial results for the quarter ending September 30, 2020 will be filed on Form 10-Q through the Securities and Exchange Commission’s (SEC) website at http://www.sec.gov.

 

Audio Webcast and Conference Call

 

The company will host a conference call at 4:30PM ET today to review its third quarter results. To listen to the 2020 third quarter financial results call by phone, dial +1.877.883.0383 and enter the conference ID: 0113821.  International participants may dial +1.412.902.6506. Please dial in 10–15 minutes prior to the start of the conference. A replay of the call will be available by telephone at +1.877.344.7529 (U.S.) or +1.412.317.0088 (international) using the replay code 10148610 until November 26, 2020.

 

This conference call will also be webcast and can be accessed from the “Investors” section of the company’s website at axdx.com/investors. A replay of the audio webcast will be available until November 7, 2020.

  

About Accelerate Diagnostics, Inc.

 

Accelerate Diagnostics, Inc. is an in vitro diagnostics company dedicated to providing solutions for the global challenges of antibiotic resistance and sepsis. The Accelerate Pheno™ system and Accelerate PhenoTest™ BC kit combine several technologies aimed at reducing the time clinicians must wait to determine the most optimal antibiotic therapy for deadly infections. The FDA cleared system and kit fully automate the sample preparation steps to report phenotypic antibiotic susceptibility results in approximately 7 hours direct from positive blood cultures. Recent external studies indicate the solution offers results 1-2 days faster than existing methods, enabling clinicians to optimize antibiotic selection and dosage specific to the individual patient days earlier.

 

The “ACCELERATE DIAGNOSTICS” and “ACCELERATE PHENO” and “ACCELERATE PHENOTEST” and diamond shaped logos and marks are trademarks or registered trademarks of Accelerate Diagnostics, Inc.

 

For more information about the company, its products and technology, or recent publications, visit axdx.com.

 

Forward-Looking Statements

 

Certain of the statements made in this press release are forward looking, such as, among others, Mr. Phillips statements about COVID-related delays in the go-live process moderating, and improvement in customer engagement beginning to stimulate new interest in our company and products. Actual results or developments may differ materially from those projected or implied in these forward-looking statements. Information about the risks and uncertainties faced by Accelerate Diagnostics is contained in the section captioned "Risk Factors" in the company's most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 27, 2020, and in any other reports that the company files with the Securities and Exchange Commission. The company's forward-looking statements could be affected by general industry and market conditions. Except as required by federal securities laws, the company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties or other contingencies.

###

 

For further information: Investor Inquiries & Media Contact: Laura Pierson, Accelerate Diagnostics, +1 520 365-3100, investors@axdx.com

 

Source: Accelerate Diagnostics Inc.

 

 

 2 

 

 

ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

BALANCE SHEET

(in thousands, except share data)

 

   September 30,   December 31, 
   2020   2019 
   Unaudited     
ASSETS          
Current assets:          
Cash and cash equivalents  $27,029   $61,014 
Investments   50,463    47,437 
Trade accounts receivable   2,610    3,222 
Inventory   9,459    8,059 
Prepaid expenses   961    955 
Other current assets   1,517    1,165 
Total current assets   92,039    121,852 
Property and equipment, net   7,104    7,905 
Right of use assets   3,402    3,917 
Other non-current assets   1,674    750 
Total assets  $104,219   $134,424 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $2,372   $2,351 
Accrued liabilities   3,176    3,828 
Accrued interest   191    1,262 
Deferred revenue   338    271 
Current portion of long-term debt   511     
Current operating lease liability   482    450 
Total current liabilities   7,070    8,162 
Non-current operating lease liability   3,231    3,579 
Other non-current liabilities   259    19 
Long-term debt   5,028     
Convertible notes   138,299    130,043 
Total liabilities  $153,887   $141,803 
           
Commitments and contingencies          
           
Stockholders’ deficit:          
Preferred shares, $0.001 par value;          
5,000,000 preferred shares authorized and none outstanding as of September 30, 2020 and December 31, 2019        
Common stock, $0.001 par value;          
85,000,000 common shares authorized with 57,027,429 shares issued and outstanding on September 30, 2020 and 85,000,000 common shares authorized with 54,708,792 shares issued and outstanding on December 31, 2019   57    55 
Contributed capital   469,302    452,344 
Treasury stock   (45,067)   (45,067)
Accumulated deficit   (474,054)   (414,653)
Accumulated other comprehensive income (loss)   94    (58)
Total stockholders’ deficit   (49,668)   (7,379)
Total liabilities and stockholders’ deficit  $104,219   $134,424 

  

See accompanying notes to condensed consolidated financial statements.

 

 

 3 

 

 

 

ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Unaudited

(in thousands, except per share data)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2020   2019   2020   2019 
Net sales  $3,588   $2,271   $8,056   $5,827 
                     
Cost of sales   2,287    1,117    4,745    2,940 
Gross profit   1,301    1,154    3,311    2,887 
                     
Costs and expenses:                    
Research and development   5,001    6,064    16,191    19,145 
Sales, general and administrative   11,465    12,743    35,738    38,302 
Total costs and expenses   16,466    18,807    51,929    57,447 
                     
Loss from operations   (15,165)   (17,653)   (48,618)   (54,560)
                     
Other income (expense):                    
Interest expense   (3,955)   (3,598)   (11,540)   (10,585)
Foreign currency exchange gain (loss)   229    (89)   191    (142)
Interest income   149    676    753    2,329 
Other income (expense), net   (15)   (9)   (82)   (12)
Total other expense, net   (3,592)   (3,020)   (10,678)   (8,410)
                     
Net loss before income taxes   (18,757)   (20,673)   (59,296)   (62,970)
Provision for income taxes       239         
Net loss  $(18,757)  $(20,434)  $(59,296)  $(62,970)
                     
Basic and diluted net loss per share  $(0.33)  $(0.37)  $(1.07)  $(1.16)
Weighted average shares outstanding   56,560    54,553    55,617    54,456 
                     
Other comprehensive loss:                    
Net loss  $(18,757)  $(20,434)  $(59,296)  $(62,970)
Net unrealized gain (loss) on debt securities available-for-sale   (117)   10    62    229 
Foreign currency translation adjustment   71    (113)   90    (139)
Comprehensive loss  $(18,803)  $(20,537)  $(59,144)  $(62,880)

 

See accompanying notes to condensed consolidated financial statements.

 

 4 

 

 

ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

Unaudited(in thousands)

 

   Nine Months Ended 
   September 30,   September 30, 
   2020   2019 
Cash flows from operating activities:          
Net loss  $(59,296)  $(62,970)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   2,270    1,862 
Amortization of investment discount   43    (400)
Equity-based compensation   12,291    9,409 
Amortization of debt discount and issuance costs   8,256    7,370 
Realized loss on sale of investments   3     
Loss on disposal of property and equipment   546    577 
Contributions to deferred compensation plan   (248)    
(Increase) decrease in assets:          
Accounts receivable   532    (782)
Inventory and instruments in property and equipment   (1,734)   (3,286)
Prepaid expense and other   (1,267)   (319)
Increase (decrease) in liabilities:          
Accounts payable   76    788 
Accrued liabilities, and other   (759)   (2,115)
Accrued interest   (1,071)   (1,071)
Deferred revenue and income   67    33 
Deferred compensation   240    (25)
Net cash used in operating activities   (40,051)   (50,929)
           
Cash flows from investing activities:          
Purchases of equipment   (1,364)   (148)
Purchase of marketable securities   (44,589)   (20,710)
Proceeds from sales of marketable securities       13,400 
Maturities of marketable securities   41,707    78,922 
Net cash (used in) provided by investing activities   (4,246)   71,464 
           
Cash flows from financing activities:          
Proceeds from issuance of common stock   296    1,363 
Proceeds from exercise of options   4,458    4,879 
Proceeds from debt   5,552     
Payment of debt   (13)    
Net cash provided by financing activities   10,293    6,242 
           
Effect of exchange rate on cash   19    (99)
           
(Decrease) increase in cash and cash equivalents   (33,985)   26,678 
Cash and cash equivalents, beginning of period   61,014    66,260 
Cash and cash equivalents, end of period  $27,029   $92,938 

 

See accompanying notes to condensed consolidated financial statements. 

 

 5 

 

 

ACCELERATE DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (CONTINUED)

Unaudited

(in thousands)

 

   Nine Months Ended 
   September 30,   September 30, 
   2020   2019 
Non-cash investing activities:          
Net transfer of instruments from inventory to property and equipment  $1,284   $3,225 
Supplemental cash flow information:          
Interest paid  $4,288   $4,288 
Income taxes paid, net of refunds  $46   $54 

 

 See accompanying notes to condensed consolidated financial statements.

 

 6 

 

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

 

Accelerate Diagnostics, Inc.
Third Quarter 2020 Earnings Conference Call
Thursday, November 05, 2020, 4:30 PM Eastern
 

CORPORATE PARTICIPANTS

 

Jack Phillips - President, Chief Executive Officer

 

Steve Reichling - Chief Financial Officer

 

Laura Pierson - Investor Relations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

  

PRESENTATION

 

Operator

Good afternoon and welcome to the Accelerate Diagnostics Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, to withdraw your question, please press star then two. Please note, this event is being recorded.

 

I would now like to turn the conference over to Laura Pierson of 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. These are discussed in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2019 and other reports we file with the SEC.

 

It is now my pleasure to introduce the company’s President and CEO, Jack Phillips.

 

Jack Phillips

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 am continuously impressed by the hard work and enduring spirit of our team during this challenging time. In the third quarter, we recorded global revenues of $3.6 million which represents 57% growth over the previous year and 40% growth year-to-date.

 

Consumable revenue from our existing base of live Pheno instruments proved durable during the third quarter and were boosted by an improvement in our go-live cadence. Our results also benefitted from a multi-hospital U.S. capital deal that was secured by our commercial team during the quarter.

 

Limited hospital access and competing pandemic-related priorities in the microbiology lab continued to impact new contracts in the third quarter. However, recent product approvals and upcoming product releases are beginning to open new doors and are improving the level of engagement among prospective customers.

 

Recent marketing studies and customer discussions continue to validate our new product strategy, and our R&D teams are making steady progress on the development and regulatory activities required to bring these new products to market.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

2

 

Before providing additional details on our operational results for the quarter, I would like to hand it over to Steve to review our third quarter financial results. Steve?

 

Steve Reichling

Thank you Jack, and good afternoon everyone. Net sales were $3.6 million in the third quarter and $8.1 million year-to-date. This compares to $2.3 million and $5.8 million for the same periods in 2019. This represents 71% sequential growth over the second quarter and 40% growth year-over-year. This growth was driven by two factors, first, higher consumable sales driven by an increase in the number of live, revenue-generating instruments. Second, in the quarter we recorded revenue from a large U.S. capital deal with a multi-hospital integrated health network.

 

Cost of goods sold were $2.3 million in the third quarter and $4.7 million year-to-date, resulting in gross margins of 36% and 41% for the same periods in 2019. This compares to cost of goods sold of $1.1 million and $2.9 million, or gross margins of 51% and 50% respectively, during the same periods in 2019. The decline in gross margins year-over-year resulted from ongoing pandemic-related impacts to manufacturing costs, restructuring costs in EMEA, and dilution from a large capital deal booked in the quarter.

 

Selling, general and administrative expenses were $11.1 million for the third quarter and $35.3 million year-to-date. This compares to $12.7 million and $38.3 million from the same periods in 2019. This decrease was the result of cost cutting measures and natural cost reductions from pandemic-related spend such as travel and shows.

 

Research and Development costs were $5 million in the third quarter and $16.2 million year-to-date, compared to $6.1 million and $19.1 million during the same periods in 2019. This reduction was the result of 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 $0.33 and $1.06, respectively. Net losses for the third quarter and year-to-date, after excluding the impacts of non-cash stock-based compensation expense, were $14.1 million and $47 million respectively.

 

Net cash used was $11.2 million for the quarter and $31 million 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 continued 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?

 

Jack Phillips

Thanks Steve. I will begin by reviewing U.S. commercial results, followed by updates on our international business, and will finish by reviewing progress on our new product strategy including an update on our COVID19 serology testing opportunity.

 

Turning first to our U.S. 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 were in line with our expectations for annuity per installed unit. While parts of the U.S. saw the highest levels of new COVID cases during the quarter, positive blood culture testing remained stable. In 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 incidence.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

3

 

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 in 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 proceeding through the go-live process at a normalized pace. We continue to work closely with these customers to accommodate their rapidly evolving situations.

 

That said, I am pleased with the improvements we have 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 forecast accuracy. We began the fourth quarter with 192 instruments in the process of being implemented at customer site and not yet generating revenue. Despite delays at some sites, we have many customers actively engaged in the go-live process and therefore expect the fourth quarter will be solid for new customer go-lives.

 

We contracted two 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 Pheno. 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 network’s commitment to Pheno, but includes a minimum committed revenue exceeding $1 million per year.

 

With regard to new instrument placements, our funnel of 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 in progressing new contracts are likely to persist in the near term.

 

Lastly in the quarter, we were pleased to receive CPT final determination coverage from CMS for our Pheno ID/AST blood test. The reimbursement is above our list price and will cover the cost for our customers when treating patients in the outpatient setting. Equally important, the newly established reimbursement provides independent validation through CMS, of our value and pricing for economic justifications with prospective customers.

 

We also received word that our application for NTAP reimbursement was denied. While Pheno met all of the requirements related to clinical benefit and 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 NTAP reimbursement

 

In summary, a strong base book of business, improving go-live momentum, and even this quarter’s limited increase in contracting activity has delivered 93% year-over-year growth and 74% year-to-date growth in the U.S. Success in this market is our focus, and we are pleased to be realizing meaningful progress despite the challenging conditions.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

4

 

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 geographies 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 our ex-U.S. cash burn expectations for 2021. Finally, we will be launching PhenoAST into these new focused geographies by year end, which will further improve our prospects in EMEA.

 

Turning now to China. As we have discussed in the past, China is a promising market with a significant sepsis challenge, a large population, and a government that is focused on healthcare investment. We continue to progress our clinical trial and regulatory activities. During the quarter we hired a Head of Operations, who previously was the former head of microbiology in China for Becton Dickinson. We look forward to driving continued development in this important diagnostics market.  

 

Now let’s turn to an update on our expanded product strategy. This strategy begins with continuing to establish Pheno’s current integrated ID solution as not only the fastest, but the most accurate and clinically impactful solution on the market. Second, we will soon provide new ways for customers to adopt rapid susceptibility testing on Pheno regardless of existing workflow or prior investment in identification testing. And third, we will expand our addressable market through the introduction of Pheno 2.0.

 

First, we will continue to provide and enhance our fully integrated rapid ID/AST test on the Pheno system. Our current customers enjoy workflow advantages from the integrated solution and are seeing significant benefits. Examples of these benefits come to us almost daily from customer patient stories, hospital justification data, and publications. This quarter we received 510K approval for a new suite of product enhancements to Pheno that improve performance and expand Pheno’s antimicrobial susceptibility testing menu for bloodstream infections.

 

Other enhancements, including the addition of new de-escalation antibiotics, are nearing completion and submission to the FDA, and we expect these to launch to customers in the first half of 2021. We continue to invest in our leading AST technology to ensure that our competitive differentiation remains significant.

 

Second, we will be launching additional products to enable various ID workflow solutions to be used in conjunction with our existing Pheno instrument platform delivering rapid ID/AST results in new ways.

 

These include PhenoAST, a new AST test kit which runs on the current Pheno platform. The Pheno accepts electronically or manually an identification test result from an existing system loads the appropriate antibiotic panel and delivers rapid AST results in about seven hours.

 

PhenoPrep, a new instrument which automates the frontend steps to deliver a MALDI identification result delivering substantial time to result in workflow benefits.

 

And lastly, our exclusive collaboration agreement with Ascend Diagnostics to commercialize a bench top MALDI platform of our own to be used in conjunction with PhenoPrep.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

5

 

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 workflow requirements when it comes to meeting their ID and AST needs.

 

The research also reconfirmed the significant market interest in the growing need for integrated Pheno ID/AST solution. The development, trial and regulatory activities for these product additions are progressing according to schedule and expect launches of PhenoAST and PhenoPrep in the first half of 2021.

 

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 Pheno 2.0. This lower cost and higher throughput system will considerably expand our market penetration through the addition of higher volume, lower acuity samples like isolates in 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 maximizes our near-term opportunity to penetrate with Pheno today while establishing fertile territory in which to launch Pheno 2.0 to address this growing $4 billion marketplace.

 

Lastly, I will provide an update on our collaboration to commercialize the MS-Fast fully automated chemiluminescence immunoassay analyzer and SARS-CoV-2 tests for the detection of IgG and IgM. We have now received Emergency Use Authorization for our COVID IgG, IgM, 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 and the supply chain poised, we are ready if and when the clinical use case is established.

 

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-live activity is increasing, and prospective 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 and diagnostics. In the immediate term, hospitals are hurting financially and singularly-focused on surviving this, once in a 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 toward 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 establish rapid AST as the standard of care because said simply; getting patients on the right antibiotic sooner saves lives and money, period.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

6

 

I would now be happy to answer questions from our analysts. Should others on the call have questions not addressed, we would welcome you to send these questions or request for a follow-up meeting to investors@axdx.com. Thank you.

 

QUESTION AND ANSWER

 

Operator

We will now begin our question and answer session. The first question comes from Brian Weinstein of William Blair. Please go ahead.

 

Chris

Hey guys, good afternoon. This is Chris on for Brian. Jack, just a quick one here, you successfully worked with some other companies as partners to bring the unique products to market. Can you give us an update on the likelihood of additional collaborations that would either add unique content or distribution capabilities to what you have today? And maybe a little bit more specifically, what do you look for when you are thinking about those kind of collaborations?

 

Jack Phillips

Yes, hi, thanks for the question. I guess, first off I’d mentioned that 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 embark into the MALDI area for ID, that’s going well. The other one is MS-Fast and we spoke about that as well in the serology area. We’ve got a couple of examples already where we’ve successfully or we’re going to be successful in these type of collaborations that you are speaking about. And then beyond that, there’s nothing specific that I want to speak to you today that we are working on, but just rest assured that we are continuing to look at collaborations that would really broaden our footprint within Infectious Disease, but most importantly, strengthen our overall value proposition for rapid ID/AST. Areas that would, on the front end, possibly of sepsis management, really help our...help our customers and clinicians and providers better manage the overall sepsis workflow. Those are some of the things that we are working on in addition to, again, the current product portfolio that we have right now and I would just say, more to come and as things develop we’ll be sure to share those with you.

 

Chris

Great. Thank you, it’s really helpful color. And just one more, can you talk a little bit about lab access, the trends that we have been hearing is that access is improving. First, is that what we you’re seeing, and to talk a little about that and really second, even if access is improving, does that necessarily correlate your ability to sell there, labs are so focused, October ‘19.

 

Jack Phillips

Yes. Great, great question and are on our mind every day. I would say that definably over the past several months access has been improving, consistently improving. I would add a couple of other things, one is, our commercial organizing has adapted greatly to, the new normal that we are in right now. I would say that, as we gain more access, some of that access is really through, more effective Zoom meetings and phone calls and interchanges like that, which are becoming, as I said, we have adapted to this and we are becoming much effective at working in that environment. In fact, last week I had three customer calls with probably in total 25 customers on those three calls. And it was a very productive meetings that we had.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

7

 

The other thing I would mention on access is in speaking of the commercial teams within the US, we are gaining much more access due to our new product launches that we are now talking about, specifically PhenoAST and PhenoPrep are 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 way and we are very positive about how it’s going and how it’s evolving.

 

Chris

Great. Thanks for taking the question guys.

 

Jack Phillips

Thank you.

 

CONCLUSION

 

Operator

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.

 

Accelerate Diagnostics, Inc.

Thursday, November 05, 2020, 4:30 PM Eastern

 

v3.20.2
Cover
Nov. 05, 2020
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Nov. 05, 2020
Entity File Number 001-31822
Entity Registrant Name Accelerate Diagnostics, Inc.
Entity Central Index Key 0000727207
Entity Tax Identification Number 84-1072256
Entity Incorporation, State or Country Code DE
Entity Address, Address Line One 3950 South Country Club Road
Entity Address, Address Line Two Suite 470
Entity Address, City or Town Tucson
Entity Address, State or Province AZ
Entity Address, Postal Zip Code 85714
City Area Code 520
Local Phone Number 365-3100
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, $0.001 par value per share
Trading Symbol AXDX
Security Exchange Name NASDAQ
Entity Emerging Growth Company false