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Accelerate Diagnostics Q2 Sales Miss Estimate, But Analysts Cheer COO Appointment

NEW YORK (GenomeWeb) – Accelerate Diagnostics reported after the close of the market Thursday that its second quarter revenues were up a fraction of a percent.

The firm also announced separately that it has hired Roche Diagnostics North America President and CEO Jack Phillips to be its new COO. He was senior VP and GM of Ventana Medical Systems prior to the tissue diagnostics firm being acquired by Roche in 2008.

The Tucson, Arizona-based maker of test systems for antibiotic resistance and sepsis reported total revenues of $1.8 million versus $1.7 million for the second quarter of 2018. The top-line result fell well short of analysts' average expectation for sales of $2.6 million.

"We achieved mixed results in the second quarter, as revenue and placements were both lighter than anticipated due to lower-than-expected capital sales in our EMEA region," Lawrence Mehren, president and CEO of Accelerate Diagnostics, said in a statement. "However, we were encouraged by our commercial progress during the quarter, highlighted by 30 percent sequential growth in consumable sales and by our signing of the Mayo Clinic as a key reference customer."

Accelerate said that it added 55 new commercially contracted Pheno instruments in the quarter compared to 29 in Q2 2019, and noted that revenues from consumables were up 125 percent year over year. On a conference call with analysts and investors to discuss the Q2 results, Mehren noted that the firm continues to see an annuity stream of $45,000 to $65,000 per instrument, with customers in the US at the higher end of that range and customers in Europe, the Middle East, and Africa at the lower end.

Mehren said that the firm placed 39 new Pheno instruments in the quarter, which was below the previous two quarters but in line with the firm's expectations. He said the lower number was due to two factors: a bottleneck of potential customers under two group purchasing contracts that were executed prior to the firm instating a reagent rental program, and several customers have delayed purchases until their budgets are set for the next fiscal year.

He said that the addition of the Mayo Clinic Rochester to its roster of customers is a "significant development" and "will have a positive impact on moving customers through the sales process and attracting new prospects." Mehren further noted the Accelerate has a master agreement with Mayo that he believes will speed up the sales and contracting process with additional Mayo sites.

Mayo also is a participant in a study funded by the Antibacterial Resistance Leadership Group within the National Institutes of Health assessing the accuracy of the firm's Pheno system in driving "meaningful clinical interventions," said Mehren. The results of that study are expected to be presented at the ID Week conference this fall.

"Given that Mayo, which provided the majority of the patients for the study, has run the system clinically, seen the result in outcomes, and decided to adopt Pheno as its new standard of care, we feel confident that the outcomes of this study will make a compelling case for Pheno's broad market adoption," Mehren said.

Mehren also noted that the firm is working with a key opinion leader in China to start evaluating the use of the Pheno system there. The firm has targeted the first half of 2021 to begin selling in China.

Accelerate trimmed its second quarter net loss to $20.8 million, or $.38 per share, from a loss of $23.2 million, or $.43 per share, in Q2 2018. Analysts, on average, had expected a loss of $.39 per share.

Accelerate's R&D spending was flat year over year at $6.1 million while its SG&A expenses declined to $12.8 million from $15.3 million.

The firm finished the quarter with $87.5 million in cash and cash equivalents, and $50.3 million in investments.

Just last week Accelerate announced that an updated version of its PhenoTest BC kit for antimicrobial susceptibility had received the CE-IVD mark.

Regarding Phillips' appointment, William Blair analyst Brian Weinstein said in a note to investors that it stands out as being important, "as the validation that this should signal not only to the investment community, but also to the deep relationships inside of the clinical community, about what Accelerate Diagnostics is doing should reverberate loudly."

"Everything except the actual results were positive in the quarter, and we think the Jack Phillips hire is notable as is Mayo's instrument purchase," Piper Jaffray analyst William Quirk added in a note to investors. "We believe Accelerate is entering into a critical period as their consumables should be ramping into the end of the year."

"We understand investors may look at the quarterly results and think that uptake is happening slower than expected for the year, but we do not believe that is actually the case as the funnel continues to build and should crescendo (as it did last year) with a big fourth quarter," Weinstein added.

In early Friday afternoon trade on the Nasdaq, shares of Accelerate were up nearly 1 percent at $16.78.