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Accelerate Diagnostics Revenues Up 64 Percent

NEW YORK – Accelerate Diagnostics reported after the close of the market on Thursday that its third quarter revenues jumped 64 percent year over year.

It missed the consensus Wall Street estimate, however, and blamed an elongated sales cycle and the timing of commercial go-lives during the quarter for the lower-than-expected top line results.

"We continue to see positive signs that we will again have a solid fourth quarter [and] we are encouraged by our growing body of clinical evidence and by improvements to our commercial process," CEO Larry Mehran said on a call to recap the earnings.

For the three months ended Sept. 30, the Tucson, Arizona-based firm posted revenues of $2.3 million, up from $1.4 million in the prior-year, but well short of the consensus Wall Street estimate of $3.12 million.

The firm noted that its instrument revenues decreased year-over-year, reflecting the introduction of a reagent rental business model in September of 2018, while consumable revenues grew by over 175 percent as compared to the third quarter of 2018, and by approximately 15 percent over the prior quarter. It also added 37 net new commercially contracted instruments, compared to 29 in the third quarter of 2018.

Accelerate has placed 167 instruments to date and is on pace to hit the lower end of its target of 300 to 400 placements in 2019, Mehran said on the call.

Regarding placements, Mehran said that US placements in Q3 2019 were short of expectations as a result of two "nearly completed" deals comprising approximately 20 instruments that will be reflected in fourth quarter results, instead. "While capturing such lucrative, multisite, [integrated hospital network] accounts yields significant step-function growth, these deals are more difficult to predict," Mehran explained. Similarly, a deal in the Europe, the Middle East, and Africa region for more than 12 instruments also shifted to Q4.

In terms of its go-lives, or active installations requiring consumables, Mehran said the firm's average time to have its Pheno system up and running — with instruments validated, connected to the laboratory information system, and staff trained — is currently within its target range of four to nine months. Individual hospitals are quicker, but larger hospital systems take longer and push the average to the high end of the target, Mehran said.

New COO Jack Phillips acknowledged in the call that despite the enthusiasm present among the existing and potential customer base, the rate of market penetration has been below expectations. He has identified tailwinds — "robust clinical data" and enthusiastic customers advocating for the technology — the firm can use to improve the speed of its sales cycle. The firm expects to translate the clinical data into a return-on-investment tool for customers, "to further prove the economic impact of improved outcomes on their specific institutions," Phillips said, as well as to improve how it leverages customer enthusiasm.

The ROI data will also be important to establishing payment for a unique CPT code recently designated for gap fill by the Centers for Medicare and Medicaid Services, Phillips said, as well as for its recent New Technology Add-on Payment (NTAP) submission.

The firm has also begun the verification and validation of its lower respiratory infection test kit and expects to launch it in late 2020.

"Respiratory samples are recognized as the most complex and challenging within the clinical microbiology workflow. What we had to create ... was a system for standardizing highly variable samples and managing multiple bacteria in a single sample at the same time," Mehran said. "With this, we believe we now have a kit that can be used on virtually any specimen and that allows us to extend the benefits of the Pheno to many other sample types, addressing a broader portion of the microbiology market."

In Q3 2019, Accelerate decreased its R&D spending 23 percent year over year to $6.1 million from $7.9 million a year ago, and edged up its SG&A costs 4 percent to $12.7 million from $12.2 million.

The company had a net loss of $20.4 million, or $.37 per share, for the recently completed quarter compared to a net loss of $22.1 million, or $.41 per share, a year ago. It barely beat the consensus Wall Street estimate of a loss per share of $.38.

Accelerate Dx finished the quarter with $92.9 million in cash and cash equivalents.

In early Friday morning trade on the Nasdaq, shares of Accelerate were up nearly 3 percent at $15.20.