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Accelerate Diagnostics Anticipates Waning Pandemic, New Product Launches Will Boost Revenue Growth


NEW YORK – Despite a miss on analyst expectations for third quarter revenues Tuesday, Accelerate Diagnostics believes it may be poised for accelerated revenue growth on the back of new product launches and fewer patients needing testing for COVID-19.

In the near term, its business outlook depends heavily on whether the COVID-19 pandemic quickly abates, Accelerate Dx CEO Jack Phillips said on a conference call Tuesday to discuss the firm's financial results. That would give the firm better access to the customers it needs to target.

"We are committed to establishing rapid susceptibility testing as a standard of care, and the case for change has never been more urgent," Philips said. "In 2021, we are advancing this commitment through increasing our integrated ID-AST solution customer base, launching new products to better target specific market segments, and continuing to expand our available market through the development of our next-generation platform, Pheno 2.0."

In Q3, as the pandemic worsened, it negatively impacted customer access. "First, as Delta variant hospitalizations surged in specific regions and cities, non-COVID projects were put on hold to focus on COVID patient testing and management," Phillips said. "Second, a significant wave of healthcare and lab staff resignations left prospective customers struggling to keep up with routine lab testing, thereby delaying discussions on purchasing" its current products.

That resulted in few new contracts signed and delays to laboratory implementations of contracted systems in the quarter, when it brought live 11 of its current Pheno ID/AST instruments and added three contracted instruments in the US.

William Blair analyst Brian Weinstein said in a research note on Wednesday the investment bank does "not view the lighter-than-expected third-quarter results as indicative of any fundamental issues with the business or a commentary on the company’s Pheno or AST only products."

The investment bank remains "comfortable that Accelerate is firmly in the lead with its installed base, commercial infrastructure, and accomplished management team, but the lack of uptake on Pheno 1.0 relative to the market opportunity is frustrating to us and we know to management and investors as well," Weinstein added.

For the past few years, the firm has been offering the US Food and Drug Administration-cleared Pheno ID-AST instrument and kit to hospital laboratories seeking to cut down on the time to results for pathogen identification and antimicrobial susceptibility testing of samples for patients with bloodstream infections.

Since early 2020, with the onset of the pandemic, Accelerate Dx has encountered challenges with varying levels of difficulty in getting access to hospital laboratories focused on COVID-19 testing.

"Throughout the pandemic, the correlation between the level of COVID hospitalizations and our rate of new customer acquisitions and go-lives is evident," Phillips said.

With COVID hospitalization rates falling, its commercial teams are making progress with prospective customers through a combination of indirect marketing and virtual sales calls, he said, adding, "Nearly half of the new funnel additions in recent months are for our new Pheno AST kit, a strong early indication that this new product will be an important part of our near-term product mix."

Its launch of the Pheno AST kit in June was designed to increase traction with laboratories that already had pathogen identification technology in place. The test kit delivers rapid AST results on the current Pheno platform and also incorporates an identification result from a rapid ID system already purchased by a laboratory.

Overall, Phillips said, the company's 2021 priorities include growing adoption of its current Pheno platform through new contracts and initiating testing with customers under contract; launching a workflow automation tool, called Arc, to enable rapid infectious disease pathogen identification with MALDI-TOF systems; and advancing development of its next-generation ID-AST platform, Pheno 2.0.

The firm is conducting studies with three US sites to build clinical evidence for Arc, which it anticipates will be completed by the end of this year enabling its launch around March next year. Used in combination with a reagent kit, Arc has the potential "to transform how MALDI delivers rapid identification of organisms in the microbiology lab," Phillips said.

MALDI, which can be used for the identification of bacterial, yeast, and fungal species, is used by more than half of the 2,400 microbiology labs in the US, and with the introduction of benchtop MALDI systems, that number continues to grow, Phillips said, adding that almost all large laboratories in Europe, the Middle East, and Africa use MALDI as their principal method for identification.

The firm is also seeking to expand its total addressable market with the launch of Pheno 2.0, a multi-sample next-generation ID-AST system, at the end of 2023 or early in 2024.

"Based on continuing prototype testing and ongoing R&D progress, we are increasingly confident that the system will deliver fast and accurate results at a fraction of the size and cost of the current system," Phillips said, adding, "This will allow us to launch Pheno 2.0 in multiple configurations across different-sized hospitals and across various high-volume sample types."

Looking ahead, Accelerate Dx continues to see "escalating inflation and other pandemic-related disruptions to the supply chain," the firm's CFO Steve Reichling said on the conference call.

Some of the items impacting its business most are raw materials such as resins and plastics for its consumables as well as the supply of labor. A number of its suppliers are triggering "force majeure clauses in their contracts to increase pricing," he added.

However, the firm is "cautiously optimistic about Q4 and beyond relative to our ability to get into more hospitals and deliver the solutions that so many hospitals need," Phillips said.