NEW YORK (360Dx) – Accelerate Diagnostics said after the close of the market on Tuesday that its third quarter revenues grew 63 percent year over year.
For the three months ended Sept. 30, the Tucson, Arizona-based firm posted revenues of $1.35 million, up from $828,000 in the prior-year, but well short of the consensus Wall Street estimate of $2.95 million. In early morning trading on the Nasdaq on Wednesday, Accelerate Dx's shares tumbled 17 percent to $13.54.
On a conference call following the release of the company's financial results, Accelerate Dx President and CEO Lawrence Mehren said that while there has been robust interest in the company's Pheno technology, translating it into commercial purchases has been the challenge. Specifically, the firm has identified three obstacles, including budget cycles and limited capital availability; an extended sales cycle and time to clinical adoption; and access to group purchasing organizations, entities that help healthcare providers, such as hospitals, aggregate purchasing volumes.
In Q3, Mehren said, Accelerate saw material progress in clearing all three hurdles. As a result, the firm has increased its installed base of commercial instruments in the US to 92 instruments in Q3, while the number of instruments under evaluation contracts remained consistent during the quarter at 193, bringing the total US installed base to 285 instruments.
In Europe, the company has 55 commercial and 118 evaluation instruments under contract, bringing the global total to 458 instruments under commercial or evaluation contracts, Mehren said.
Commercialization of Accelerate Dx's technology "has been harder and taken longer than we anticipated. While we have executed with tremendous intensity, the challenges we've faced have impeded our commercial success," Mehren said. "However, based on what we are seeing, we believe we have cracked the code," he added, noting a reorganized sales team, as well as emerging clinical data that supports the use of the Pheno technology.
In Q3, the University of Arkansas for Medical Sciences presented data that demonstrated a three-day reduction in the length of hospital stays for patients with bacteremia after implementing the Pheno system, the company said.
Accelerate Dx also said that it has begun engaging with the US Food and Drug Administration on a new test for severe bacterial pneumonia. New preclinical data has shown a lack of reproducibility with quantitative culture methods currently used in clinical laboratories, and the test under development would provide a solution to the issue.
Accelerate Dx anticipates it will begin a clinical trial for the test in Q1 2019.
"Needless to say this is an important new test," Mehren said on the call. "It will increase our current [total addressable market] for North America and the EU from approximately 4 million tests, or $900 million, to over 6 million tests, or over $1.35 billion, at an average test price of $225."
In Q3 2018, Accelerate increased its R&D spending 23 percent year over year to $7.9 million from $6.4 million a year ago, and bumped up its SG&A costs 5 percent to $12.2 million from $11.6 million.
The company had a net loss of $22.1 million, or $.41 per share, for the recently completed quarter compared to a net loss of $17.1 million, or $.31 per share, a year ago, matching the consensus Wall Street estimate of a loss per share of $.41.
Accelerate Dx finished the quarter with $61.6 million in cash and cash equivalents.
On Wednesday JP Morgan downgraded the company's shares to Neutral as analyst Tycho Peterson noted that uptake of the Pheno platform and revenue ramp have been "much weaker than originally anticipated. ... [W]ith yet another unexpected pipeline delay, we are re-evaluating our investment thesis." He also lowered his December 2019 price target on Accelerate's shares to $16.