NEW YORK ─ Accelerate Diagnostics expects to launch two new products this year and is developing a third with the aim of achieving better penetration of the market for pathogen identification and antimicrobial susceptibility testing, or ID/AST, according to its CEO.
In a conference call following its first quarter financial results last week, Jack Phillips, CEO of the Tucson, Arizona-based diagnostics company, said it further expects better traction in hospital laboratories for its current Pheno ID/AST system as the COVID-19 pandemic subsides.
As coronavirus cases escalated, Accelerate had restricted access to its hospital laboratory customers in January and February, resulting in Q1 2021 revenues of $2.5 million, up 10 percent year over year, but short of the Wall Street analysts' average estimates on the top and bottom lines. Overall, in the recently completed quarter, the firm inked contracts for two Pheno instruments, and its US customers began using an additional 12 instruments already under contract.
2021 began much the same way as 2020 for the company as a "significant degree of hospitals' focus remained on COVID patient testing and treatment," Phillips said. Because of constrained physical access to key hospital stakeholders, the firm's ability to "progress prospective customers through the sales process" was impacted, and only a few new contracts for its Pheno instrument were signed in Q1.
"Additionally, certain customers who had already signed contracts delayed or discontinued progress on implementing the system," Phillips added.
One bright spot: While overall use of the Pheno system was low in January and February, the firm recorded the highest consumable sales month in its history in March.
Also, in March, the company secured access to more customers "as vaccination rates increased and hospitalizations declined in most of the US and parts of Europe," Phillips said. The result is that the firm has seen "a steady increase in customer engagement with increased go-live activity and notable increase in securing important customer meetings both virtually and face-to-face, which is an important precursor to winning new business."
However, to significantly expand its installed base, hospitals will need to grant greater access to the company and shift its spending priorities beyond COVID-19, he said.
"We are cautiously optimistic that the market conditions will continue to improve globally through 2021, and healthcare spend will increase for non-COVID infectious disease diagnostics," Phillips said, adding that he believes antimicrobial resistance and sepsis testing, which are the most important diagnostic applications for its Pheno ID/AST system, will be among the areas seeing an increase in spending.
Pandemic restrictions aside, the rate of penetration of its current product "has been insufficient," Phillips said, adding that as a remedy, the firm's new products will target customers with specific ID/AST requirements. In 2021, the firm plans to deploy two new testing platforms, PhenoAST and PhenoPrep, and late in 2023 it will begin marketing Pheno 2.0, a next-generation ID/AST system that includes not only blood but also isolates, urine, and other specimens as a basis for testing patients with infectious diseases.
PhenoAST, which the company expects to launch around the middle of this year, is an antimicrobial susceptibility test that can be used along with laboratories' current molecular identification systems. PhenoPrep, with a target launch at the end of this year, is a kit designed to work alongside MALDI-TOF identification systems. "The sales force is already out positioning those products that are very important to certain segments of the market," Phillips said.
Accelerate's current bloodstream pathogen identification and antimicrobial susceptibility Pheno system was launched in 2017 after it received clearance from the US Food and Drug Administration to identify bacteria and yeast from a positive blood culture and provide measurements of antimicrobial susceptibility within eight hours. Unlike PhenoAST and PhenoPrep, it operates as a standalone system from pathogen identification through antimicrobial susceptibility testing. It does not operate with molecular or MALDI-TOF systems from other manufacturers that are used in ID/AST testing.
Based on continuing prototype testing of Pheno 2.0, the firm expects that its next-generation system will deliver fast and accurate results at a fraction of the size and cost of its current Pheno system, and allow it to launch the new system in multiple configurations across different-size hospitals and across various higher-volume sample types.
The clearance of the PhenoTest BC Kit and Pheno System was a major milestone for the firm. However, convincing laboratory directors of the merits of investing in more rapid turnaround ID/AST systems and tests has proven problematic for Accelerate. Since the release of the Pheno system and tests, Accelerate has often missed analysts' estimates, including in Q2 2019 when it announced the hiring of Phillips, former Roche Diagnostics North America president and CEO, to be its COO.
One of Phillips' main objectives has been to reduce the time it takes for a customer to begin using an instrument from the time a sales contract is inked. The firm began implementing a more robust process that involves ongoing discussions with contracted customers during the go-live process to help remove uncertainty associated with implementing new technology. In Q4 2020, he said that the firm's focus on getting customers up and running led to a 63 percent increase in its installed base during the year.
William Blair analyst Brian Weinstein said in a research note on Thursday that the most telling indicators in the recently completed quarter were Accelerate's Pheno consumables revenues growth of 16 percent, the increased number of installed placements in the US, and the number of instruments waiting to go live, which stands at 111. "Overall, despite all of the issues that the team has had to overcome, we remain optimistic on the outlook at Accelerate and believe the team is making strides to fuel growth in 2022 and beyond, aided by this expanding product menu," Weinstein said.
However, in a research note on Friday, Craig-Hallum analyst Alexander Nowak characterized the most recent quarter for Accelerate as forgettable. "There is no real change in our thought process with [Accelerate] — good technology that can revolutionize the microbiology lab, with a restructured company waiting for the pandemic to abate to begin selling again."