SAN FRANCISCO (GenomeWeb) – Following a difficult 2018, in which the firm came up far short of revenue expectations, Accelerate Diagnostics is aiming to jumpstart its growth through a revitalized sales force and a recent change in selling strategy.
Speaking to investors at the 37th annual JP Morgan Healthcare Conference held here, CEO Laurence Mehren said that initiatives taken on by the firm in the back half of 2018 were paying off, reflected in higher sales of its Pheno system late in the year. It anticipates building on that momentum as it makes its sales pitch, with an emphasis on outcomes data, to a broad range of hospitals, particularly in the US.
The Pheno system uses genotypic technology to identify infectious pathogens and phenotypic technology to conduct antibiotic susceptibility testing, which determines whether live bacterial or fungal cells are resistant or susceptible to an antibiotic. The system was cleared for marketing by the US Food and Drug Administration nearly a year ago along with its PhenoTest BC Kit, which can identify bacteria or yeast from a positive blood culture in about 1.5 hours.
Sepsis testing, a multi-billion dollar market opportunity, is the company's first target market. Mehren noted that sepsis costs the US healthcare system some $27 billion a year and it kills more than 8 million people globally on an annual basis. It's a massive revenue opportunity that has many diagnostic companies jumping in with new tests aimed at grabbing a piece of market.
The primary advantage for Accelerate and its Pheno system in the market, he said, is that it can do both pathogen identification and antibiotic-susceptibility testing at once. "ID alone is not good enough," he said, noting that the Pheno is the only system that can provide clinicians with both.
According to Mehren, Pheno saves 40 hours per patient and is 75 percent faster than standard testing technologies. He cited a University of Arkansas study, which demonstrated a 3-day reduction in average hospital stay using the Pheno system. This resulted in savings of $6,000 per patient, or 30x return on investment per test — metrics that have drawn great interest from hospitals, he said.
Mehren noted during his presentation that the firm is now selling the system and the BC Kit to a broad range of hospitals, including regional, cancer, and children's hospitals. This diverse customer base bodes well, he said, and the firm is targeting 8,000 to 12,000 placements of its Pheno system in the US alone.
Further, its sales team has been trained to highlight customer outcomes data, including reductions in hospital length of stay for patients, rather than focusing solely on benefits to laboratories.
Accelerate currently has 30 sales people, but Mehren said it would likely hire another 20 at the end of the year as it aims to accelerate revenue growth.
Such growth would come on the heels of a difficult 2018 for Accelerate, the result of lower instrument sales, longer than expected sales cycles, and a switch to a reagent-rental model, which the firm believes will pay off in the long run as recurring consumables sales are expected to push revenue upward.
Mehren said that the firm expects to report total 2018 revenues of around $5.7 million, well below the $21 million to $30 million range it had anticipated before the year began.
Accelerate noted in a release of preliminary Q4 results on Monday that the number of instruments it placed under commercial contract in the US in Q4 increased 27 percent. Instrument placements increased by 117 and effectively doubled the US base, as the firm gained access to additional GPOs and a revamped sales team helped drive an increase in commercial contracts. It now has cumulative US placements of 209 Pheno systems, Mehren said at the conference.
The firm added 16 instrument placements in the Europe, Middle East, and Africa region during Q4 as well, and now has a cumulative 71 commercial placements in that region.
"Our 2018 results serve as a strong jumping off point to what we hope to see in 2019 and to building a vision for what we expect over the next five years," Steve Reichling, the company's CFO, said in an interview this week on the sidelines of the conference.
The commercial launch of the Pheno system "was challenging for us, but we learned a lot and made a lot of corrections in 2018," Reichling said. "We are much more cautious having learned the hard way this past year, and we are taking a very workman-like approach in the new year and focusing mainly on execution in North America," because Europe, though promising, is a tougher market to develop.
One pathway the firm is exploring for helping to drive sales of its sepsis test is seeking New Technology Add-On Payments from the Centers for Medicare and Medicaid Services. It hopes to submit for that reimbursement in the second half of this year with the goal of gaining that reimbursement beginning in the back half of 2020.
The firm also has plans to enter the Chinese market, Mehren said, noting that Accelerate would seek marketing approval in China with the goal of launching sales of its system there in the first half of 2021. It expects to begin clinical trials there in the second half of this year. According to Mehren, there are approximately 2.3 million blood-stream infection tests currently conducted on an annual basis in China, representing a potential $725 million market opportunity.
Accelerate also anticipates starting clinical trials in the first half of 2019 for its next test, which would perform identification and antimicrobial susceptibility testing for lower respiratory tract infections, enabling clinicians to discern the types of pneumonia a patient might have. The trials for that assay were delayed because a study of the reproducibility of the reference method found high variability between the standard culture methods used at various labs.
Mehren said at the conference that the respiratory test would target a $475 market opportunity for the firm in the US and EMEA region.
Overall, the firm's goal is to achieve $500 million in annual sales by 2023, he said.