SAN FRANCISCO (360Dx) – Accelerate Diagnostics expects to begin clinical trials early in the third quarter of this year or before then in preparation for a submission for clearance to the US Food and Drug Administration for the second test in its pipeline, Lawrence Mehren, the firm's president and CEO, said during a presentation at the 36th annual JP Morgan Healthcare Conference on Wednesday.
The firm had just announced that the test, which runs on Accelerate's Pheno system and targets severe pneumonia or lower respiratory infections, has received CE-IVD marking. According to the firm, researchers found that results for its severe pneumonia assay were available about 57 hours faster than through use of standard-of-care methods.
Accelerate also said on Wednesday that it expects to report fourth quarter revenues of $2.1 million, which would fall short of the consensus Wall Street estimate of $3.0 million.
For full-year 2017, the firm expects revenue of around $4.2 million compared to full-year revenue of $39,000 in 2016.
Mehren said that the revenue shortfall relative to analyst expectations has nothing to do with a lack of commitment by customers that have said they want to purchase Accelerate's Pheno system and kits for infectious disease identification and antimicrobial susceptibility testing, which received FDA clearance in February 2017. It was due to the sales cycle being longer than anticipated, which is both "challenging" and "frustrating," for the company, he said, adding, "Our urgency was not our customers' urgency."
Nonetheless, the firm is taking steps that should reduce the sales cycle from 12 to 14 months to between 6 and 9 months, and to reduce uncertainty in that cycle, he said.
In the quarter ended Dec. 31, Accelerate placed 42 Pheno systems under evaluation contracts, bringing the total number of instruments under contract — including revenue generating placements and instruments under evaluation — to 337. It added 22 revenue-generating placements in Q4, which brings the total number of Pheno placements so far to 78.
All of the deals that were expected to close and generate revenue in 2017 but didn't will close in 2018, Mehren said. The average unit price per kit was more than $220 in 2017, he also noted.
Piper Jaffray analyst William Quirk said in a research note on Wednesday that although Accelerate's results came in below expectations, there's "early evidence that revenue is beginning to ramp, and [it] does not take away from the product's long-term potential." He said "most important" in the investment bank's estimation is the CE mark on the lower respiratory assay. He said that he does "not believe Accelerate would introduce an assay that does not meet FDA's high sensitivity/specificity threshold and thus this important step removes a layer of risk around the pipeline."
Accelerate reported at the JPM conference that for its severe pneumonia assay, it is seeing 97.3 percent sensitivity and 99 percent specificity for pathogen identification against eight targets. It noted that the system provides a susceptibility analysis for 15 drugs in this application with an essential agreement of 93.8 percent and a categorical agreement of 96.9 percent.
Mehren said that in a move that could improve the company's ability to close business quicker, it is tracking the capability of the Pheno system and kit to reduce mortality rates in patients with sepsis, an important application of the firm's infectious disease assay. The ability to quickly provide an identification and antimicrobial susceptibility result for sepsis patients is crucial in helping a clinician to decide on giving the correct antibiotic or de-escalating therapy.
Based on studies done with installed infectious disease ID and AST instruments, clinicians are getting results with Accelerate's system between 36 and 54 hours sooner than with any competitive system available today, Mehren said. Those hours saved "are crucial to the health of the patient," he said, adding, "Sepsis is imminently treatable if you get the patient on the right antibiotic in the right amount of time."
He noted that some of the most significant results from the launch and implementation of the firm's infectious disease system were revealed by use of the test during a study at the University Hospital in Augusta, Georgia. "Over the course of six months, death rates from sepsis fell from about 12 to 4 percent," he said. He said later during a breakout session that the firm is accumulating these and similar results and intends to publish them in peer-reviewed journals.
Accelerate said that it expects that for 2018 revenues will grow to between five and seven times its 2017 revenues.
JP Morgan analyst Tycho Peterson said in a conference report Wednesday that with a market of 2.8 million tests per year, severe pneumonia assays are "expected to become a significant revenue contributor in 2019" and beyond to Accelerate's business. He noted that besides respiratory, Accelerate has plans to develop tests for acute urinary tract infections, with a total market of about 6.5 million tests per year, and intra-abdominal infections, with a market of about 1.7 million tests per year.