NEW YORK – Accelerate Diagnostics has been sharpening its sales and marketing strategies in recent years to build a business for its Pheno ID-AST rapid bacterial identification and antimicrobial susceptibility testing system, but challenges presented by the global COVID-19 pandemic have resulted in a pivot for the firm with the hope of creating a new revenue stream.
Accelerate recently entered into a collaboration agreement with San Francisco-based BioCheck and its affiliate, Beijing, China-based Sophonix, to distribute SARS-COV-2 IgG and IgM antibody tests and the BioCheck MS-FAST fully automated chemiluminescence immunoassay analyzer in the US, Europe, the Middle East, and Africa.
This approach to capitalizing on US regulatory experience is somewhat reminiscent of a strategy employed recently by Hardy Diagnostics, a maker of culture media that recently helped bring a lateral flow assay for carbapenem-resistant bacteria from Guipry, France-based NG Biotech through the US Food and Drug Administration, and has also partnered with Zhengzou, China-based AutoBio Diagnostics to bring its COVID-19 antibody test through the US Emergency Use Authorization process.
In a call with investors to recap Accelerate's first quarter 2020 earnings last week, CEO Jack Phillips, who slotted into that position less than six months ago, said the firm's near-term efforts have evolved to maximize its commercial relevance in the current COVID-19-focused healthcare environment.
"In my 30 years in diagnostics, I have never experienced a period of such profound disruption," said Phillips, who previously served as president and CEO of Roche Diagnostics North America. However, he added, "With this disruption comes the creation of new opportunities."
Through February, Accelerate was in line with its anticipated instrument sales and installations, adding 17 net new instruments in Q1 and bringing 33 instruments live, he said. But, "Our progress in March was essentially halted as customers turned their focus to COVID-19."
The firm ended the quarter with 197 revenue-generating instruments, although it had 239 essentially halted in the process of being implemented at customer sites. The latter instruments do not generate revenue, as the firm has converted to a reagent-rental model for instrument installation and only gets revenues once a site is utilizing its Pheno ID-AST sepsis test, initially cleared by the FDA three years ago.
Phillips cited lower hospital admission and occupancy rates for elective surgeries as the reason why customers also began placing fewer orders — down about 5 percent from normal levels — for Accelerate sepsis tests in April.
The firm has recently seen some indications that things are returning to normal, but Phillips said Accelerate expects the headwinds to continue over the near term. As a result, "We have quickly adapted to the current environment, maximizing our productivity and potential for near-term commercial relevance," Phillips said.
For example, the firm recently filed for EUA for its Pheno Respiratory Test Kit, which has been in development, to potentially benefit COVID-19 patients on ventilators. Phillips said that authorization could be used to "obtain useful analytical and clinical data on this new test, and help some affected patients."
Yet, the highlight of Accelerate's adaptation to the pandemic might be the BioCheck collaboration. Accelerate is essentially using its expertise with the FDA submission process to guide the test through EUA and then distribute it.
"This partnership has the potential to provide both an avenue to re-engage prospective customers on Pheno as well as a near-term revenue uplift," Phillips said.
The performance data for the BioCheck test is "best in class" with sensitivity and specificity estimated to exceed 95 percent for both assays, he said, based on more than 100 samples tested from Wuhan, China.
The FDA has updated its guidance for antibody tests, but Phillips said that the new guidance has not impacted the firm's EUA submission for the IgG and IgM combo test, which he said already meets the agency's accuracy requirements.
Accelerate plans to also submit an EUA application for the IgG and IgM as individual tests this week. It is also submitting a 510(k) marketing application for the MS-FAST instrument, Phillips added, and is currently working on that with a consultant.
"Accelerate is the authorized legal agent for BioCheck, so we're basically spearheading all of the dialog" with FDA, he said.
Since announcing the partnership on April 15, the firm has received several indications of interest across the global business, Phillips said, adding that the firm is continuing to work on the EUA and has already taken initial orders in Europe, the Middle East, and Asia, though he also noted that it is too early to estimate the revenue potential of the opportunity.
Phillips said governments globally have been investing in COVID-19 diagnostics, and he believes investment will soon broaden to other infectious disease testing.
"Pheno and MS-FAST are positioned incredibly well to take advantage of both immediate and intermediate tailwinds," he said.
Romney Humphries, CSO of Accelerate, said in an email that the firm was attracted by the fact that fully automated technology and chemiluminescence chemistry are associated with a better specificity and sensitivity than traditional ELISA colorimetric methods.
"In addition, the target for the test is an S1 antigen, which has the lowest homology across coronaviruses, including HKU1, OC43, 229E and NL63," Humphries said, which could potentially improve specificity.
The Sophonix MS-FAST instrument also provides the ability to do lower-throughput, rapid testing, she said, although chemiluminescence technology is typically only found on larger, more expensive analyzers. "Our hope is this will allow high-fidelity testing at lower-throughput settings," she said.
Humphries noted that it is still somewhat unknown how serology results can be best used, but "having more tests in the market will help us as a field learn about antibody response to the virus and answer important questions like whether antibodies are protective."
Humphries joined Accelerate three years ago from a clinical microbiology lab position at University of California, Los Angeles. She will now be leaving the firm and taking a position running the clinical microbiology department at Vanderbilt University.
On the call to recap the quarterly earnings, investment analyst Brian Weinstein of William Blair queried Phillips about what the BioCheck/Sophonix collaboration might signal for the long-term strategies of the business. Phillips said Accelerate already has its eyes on other menu for the MS-FAST, such as tests for procalcitonin, C-reactive protein, Interleukin-6, and other cytokine markers of inflammatory response. Some of these infectious disease-related assays are already on the MS-FAST system outside the US, he added.
"This is something that could very much complement our core business. It is no way, shape, or form an indication that we're moving away for one second from our primary focus, which is rapid ID-AST," Phillips said.
In a subsequent research note, Weinstein called the collaboration "a bit of an odd marriage," but added that, "even small amounts of revenue here are meaningful and represent offsets to cash burn," especially since the incremental costs are "essentially zero."
Phillips also said during the call that the partnership is an opportunity to maximize the utility of the firm's sales and support organization as well, and more broadly help the healthcare community and patients during the pandemic. "And obviously from a short- and mid-term standpoint, it does present revenue opportunities that we'll also take advantage of," he said.
Alex Nowak, a senior research analyst at Craig-Hallum, said in his view this partnership doesn't change the firm's mission at all. "Pheno has the potential to be a revolutionary device for microbiology labs, and I do not believe [Accelerate] is taking their eye off the ball," he said.
Rather, he views this strategy as more opportunistic, because "there is significant demand for antibody tests, and while there are many suppliers that have emerged, it still seems that demand is outstripping supply."
Furthermore, the lockdown of hospitals has reduced the activity of the Accelerate's sales force, but "this product keeps the sales team engaged until hospitals begin to re-open."
Nowak cautioned that the performance of MS-FAST COVID antibody tests is still unknown. Although he questioned the ultimate potential of mass antibody testing, based on current understanding of the disease, prevalence, and real-world use, he also noted the expedience.
"The company is in a difficult position given the sole focus of labs is COVID-19 testing," Nowak said.