Yahoo Finance Accelerate Diagnostics, Inc. (NASDAQ:AXDX) Q4 2023 Earnings Call Transcript
Accelerate Diagnostics, Inc. (NASDAQ:AXDX) Q4 2023 Earnings Call Transcript March 28, 2024
Accelerate Diagnostics, Inc. misses on earnings expectations. Reported EPS is $-0.89 EPS, expectations were $-0.62. Accelerate Diagnostics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the Accelerate Diagnostics Fourth Quarter and Full Year 2023 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] Today's presentation will be followed by a question-and-answer session with covering analysts. As a reminder, this conference is being recorded. I would now like to hand the call to Laura Pierson with Accelerate Diagnostics. Laura, please go ahead.
Laura Pierson: Before we begin, it is important to share that information presented during this call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include projections, statements about our future and those that are not historical facts. All forward-looking statements that are made during this conference call are subject to risks uncertainties and other factors that could cause our actual results to differ materially. These are discussed in greater detail in our annual report on Form 10-K for the year ended December 31, 2023 and other reports we file with the SEC. It is my pleasure to now introduce the company's President and CEO, Jack Phillips.
Jack Phillips: Thank you, Laura. Good afternoon, everyone. Today, I would like to discuss the exciting innovation with Wave. I will cover both near-term program milestones and how Wave will revolutionize automated susceptibility testing. Additionally, I will provide updates on our strategic partnership process and our Arc FDA submission. First, I will pass it over to David Patience, our CFO, to summarize our financial results.
David Patience: Thank you, Jack, and good afternoon, everyone. Net sales were approximately $3 million for the quarter and approximately $12.1 million year-to-date. This compares to approximately $3 million and $12.8 million for the same period in the prior year. The decrease in net sales was driven by lower onetime instrument sales in the current period. This was partially offset by an increase in recurring consumable net sales. Gross margin was approximately 21% for the quarter and year-to-date. This compares to approximately 28% and 26% for the same period in the prior year. The overall decline in gross margin primarily resulted from a $1.2 million inventory write-down of excess inventory during the third quarter of 2023.
Selling, general and administrative expenses were $5.8 million for the quarter and $31.2 million year-to-date. This compares to $8.8 million and $39.2 million for the same period in the prior year. The overall decline in SG&A expenses resulted primarily due to lower employee-related expenses. Research and development expenses were $5.6 million for the quarter and $25.4 million year-to-date. This compares to $6 million and $26.9 million for the same period in the prior year. The overall decline in R&D expenses resulted primarily due to both lower third-party development expenses for our Wave program as well as lower employee-related expenses. Our net loss for the quarter was approximately $13 million and $61.6 million for the year, resulting in a net loss per share of $0.89 for the quarter and $4.94 for the year.
Cash used for the quarter was $7.9 million and $46.3 million for the year. We meaningfully reduced our quarterly cash burn in the second half of 2023. We are focused on continuing to drive further significant reductions in cash burn moving forward. Now back to you, Jack, to discuss our exciting innovations with Wave.
Jack Phillips: Thanks, David. As we exit the development phase, we are focused on delivering several key milestones over the next 12 months. These include a preclinical trial and clinical trial followed by an FDA submission and clearance for the Wave system and a full gram-negative positive blood culture menu. Over the past several months, we have made significant progress and formally exited development with a very impressive data set. Leveraging our deep experience in the AST market, our approach in developing Wave was extremely thorough. This included running more than 5,000 unique organisms, 10,000 consumable cards were run and 100 million images were taken on approximately 25 Wave platforms. These results were compared to more than 30,000 broth microdilutions, which is the reference method for comparison.
Along with strong data, the average time to result is less than 4.5 hours. Wave's unique holographic imaging technology is what makes it possible to deliver an unprecedented time to resolve for extensive bug-drug combinations. For E. coli, the most prevalent gram-negative organism, Wave can make definitive calls in under 3.5 hours for many drugs on our panel by leveraging growth and morphology data. While there are many other highlights, let me highlight one particularly challenging type of bacteria for microbiologists, Pseudomonas aeruginosa which is a major threat to hospitalized patients and is very difficult to treat because it's highly resistant. Pseudomonas is a slow-growing bacteria, which presents many challenges for both traditional and rapid susceptibility platforms.
Often this bacteria must grow over 8 hours to make an accurate call. Wave is able to capture changes in morphology within 2 hours and make definitive calls in under 4.5 hours for an important carbapenem drug meropenem. This has the potential to make significant clinical impact by ensuring patients are put on optimal therapy in the same shift. With Wave development successfully completed on the most challenging bug-drug combinations, we are confidently ready to begin our preclinical trial. Our preclinical trial will include 2 sites, enrolling both fresh perspective as well as contrived challenge isolates. Our objective is to demonstrate AST performance compared to the reference method and verify our time to results. Additionally, the preclinical trial demonstrates our ability to successfully ship, install, train and run Wave systems and cards within a clinical microbiology lab setting.
Our first system has been installed in a clinical microbiology lab and is running samples. We will be installing a second site in the coming weeks. We anticipate wrapping up our preclinical trial by the end of April, giving us confidence in running patient specimens and starting the clinical trial. The clinical trial will start in the second quarter aligned with our previously communicated schedule. The clinical trial will include a total of 4 external sites, the 2 preclinical sites plus 2 additional sites already identified. We anticipate the trial to last for about 3 months, followed by the FDA submission shortly thereafter by the end of the third quarter. With submission in quarter 3, we anticipate our 510(k) should be approved by mid-2025.
In summary, we remain on track to deliver our key milestones over the next 12 to 15 months through FDA clearance of the system and first assay. Turning now to the commercial strategy for Wave. Accelerate is uniquely positioned to disrupt the microbiology susceptibility testing market, surpassing emerging positive blood culture and traditional isolated colony systems. The global PBC market is estimated at around $800 million with the isolate market at approximately $1 billion. Wave brings a consolidated platform that can process both PBC and isolate specimens on the same instrument, providing industry-leading time to results, scalability, high throughput workflow and profitable cost structures. Our loyal customer base currently using rapid susceptibility testing will be an important factor in early Wave success.
Our strategy for commercializing Wave starts with leveraging our position in the PBC market with existing and new customers in the U.S. and EMEA. Secondly, we will expand into the isolate susceptibility testing market by offering new assays to increase customer engagement and market research. Finally, we will enter new regions beyond the U.S. and EMEA and apply our holographic imaging technology to other areas of diagnostic testing. The first step in our strategy to extend leadership in PBC with increased market penetration is well underway. We continue to secure our existing customers to long-term rapid susceptibility testing contracts and grow our funnel of 500-plus accounts interested in adopting rapid susceptibility testing. Our next step is to further increase market access with a global commercial partner.
With a strategic partner, we will build on our existing clinical and economic outcomes data and begin developing early Wave champions. Launching Wave and converting our existing installed base provides a commercial platform for quick wins but also reduces our overall cash burn and sets us on a path to cash flow positivity. The second step of our commercialization strategy is to expand customer wallet share by launching an isolate menu on the same instrument already in the lab producing PBC susceptibility results. Today, legacy platforms report isolate results in most cases, in greater than 8 hours and up to 24 hours missing a critical window for clinicians to either adjust therapy or discharge patients. By bringing customers true same shift results with a comparable cost structure to legacy isolate platforms, we can begin replacing antiquated systems.
And finally, by expanding our geographic footprint into markets beyond the U.S. and EMEA affords another growth trajectory for Wave to improve patient outcomes. Additionally, we see Wave capable of completing other microbiology assays such as yeast and anarobes along with antibiotic development opportunities with pharma. Also, while still early, we see Wave's holographic imaging technology with the potential to expand applications beyond microbiology testing. Now for a quick update on important work to secure a strategic commercial partner for Wave. As mentioned, an important part of our strategy is to sign a global, strategic partnership to commercialize Wave. Over the past several months, we have engaged in multiple discussions with several potential partners.
There is strong interest and we remain confident we will be able to sign a strategic partnership by midyear. Wave can accept an ID result from any source, making it highly complementary to numerous microbiology diagnostic portfolios. Wave will be the pivotal building block for our strategic partners microbiology diagnostic solution. Now moving on to Arc. We have recently completed and submitted our 510(k) application for the Arc instrument and consumable. We remain encouraged with the commercial prospects of providing microbiology labs with an automated yet cost-effective rapid MALDI identification for PBC samples. In summary, we are very optimistic about the next 18 months. Having achieved successful development exit for Wave, we are set to deliver on our next major milestones and our strategic discussions continue to confirm the incredible market potential of Wave.
With a complete menu of both PBC and isolates, an average time to result of 4.5 hours and a scalable platform, meeting the needs of all laboratories, Wave will set a new standard in microbiology for AST testing. At this time, I'm happy to take any questions from our covering analysts.
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