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AXDX Accelerate Diagnostics

Participants
Laura Pierson IR
Lawrence Mehren CEO, President and Director
Steve Reichling CFO, CAO and Secretary
Bill Quirk Piper Jaffray
Brian Weinstein William Blair
Tycho Peterson JP Morgan
Call transcript
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Operator

Good day and welcome to the Accelerate Diagnostics, Inc. 2017 Q4 Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will a question-and-answer session. Please note this event is being recorded. to Diagnostics. conference like Pierson to now Accelerate of would turn over the Laura I ahead. go Please

Laura Pierson

Before we contain would the of during the begin, the I of Securities this information you meaning Act and conference presented Act that Securities of call Section XXA Exchange may Section forward-looking XXXX within like statements of to XXE advise XXXX. of

other These revenues, statements statements statements performance, that historical and facts. and earnings, include about regarding are expectations future statements and our include contain of statements plans Forward-looking may may and results operations not future objectives.

Accelerate that capability our our respect future regarding generally; and statements estimates among and expectation and well future positive research sales and technology are performance system demand our meet expansion. as product us for strategy, of statements product expectations and of BC PhenoTest including Forward-looking and pertaining statements XXXX These accelerated and launch Pheno on results; PhenoTest growth placements, commercial of many Accelerate as things, our expanded development our blood and will cultures; our our development only of demand; include which and Accelerate to the system to Pheno Accelerate susceptibility allow including to, results XXXX the the kit, time other the kit potential the identification and to belief potential represent with BC manufacturing reduction events, plans belief for of inherently benefits profitability; uncertain.

results materially those differ, forward-looking reports regarding of risk guarantees results including those future that file are could cause in with Information the performance forward-looking SEC. contained that statements such to not differ statements factors and specific we any factors. involve from actual uncertainty, that cautioned risk materially factors, and our in from of the in actual are because important forward-looking perhaps are various statements projected and You may

we CEO President any file I forward-looking the the over Mehren, statement Larry? now with Accelerate. turn call read together reports conference and SEC. will of with Lawrence and You interpret should the Mr. to

Lawrence Mehren

Laura, XXXX our you, start conference glad I'm XXXX everyone. of on performance goals. could our We'll QX for with Thank afternoon join the our and key us review good call. you

and Next, will wrap XXXX out then preliminary QX goals review for and with I full and financial year Q&A. Steve lay results. expectations up our XXXX will

Our threefold. focus XXXX in was

of the positive launch great blood instrument a PhenoTest First, culture and Pheno kit.

system for Second, CE product kit. current and in expand achieve of our maintain And our the markings superiority third, attractiveness our respiratory kit.

Let's review our order. performance of in each

a both by and and translated and instruments saying launch U.S. hand At and This agreements and that contracts XXX these most the been And launch, of into solid this want system many Pheno the interest is we U.S. and signed accounts I XXX EU. funnel, qualified saw becoming Europe these the top our institution. in we Pricing prospects. across measures system active success. has raising for into the increasing their qualified was the were turning replacements. of In since XXXX, our across strong in we First customers. of XX evaluation interest my and instruments for Accelerate reagents. Further, of tangible prospects hundreds saw

day, to of with all average pull-through This kit was our an year closed strong while also was per per the for also For EU, remained mix remains U.S. instrument at around reagent in deals instrument to of three results. this than in pricing all customer customer Annuity approximately instruments Globally, confident increase exceeded favorable driven one by capital. per expectations. customers. number per and reagent more our example the on for model, $XXX both clinical XX% above for our

began In four time-consuming. we from and months in phases months of analyzing good streamlining. anticipated. and have say, are new diagnostic our to critical QX disappointing around intern we our mentioned a nine mitigations, as a an the results to our for sales different found our had processes. seeing from This increase the unexpected acquisition call XX In of challenge, sales these However, immediately extremely the to examination has of efforts. right revenue. complicated we process deployed cycle already each resulted now this Needless news, we areas, for originally six This was sales excellent in we become in mix device cycle delayed significant the and

time a the simply language in an example of streamlining evaluation by quarter, evaluation the decreasing to contract our months. For fourth number a positive impact of had contracts

just addition In could approved. large XXXX I contract. customers any that with portion not was or into FDA of enter overhang in significant a a budget qualified to mentioned not sales cycle Low device issues that

be. to an Analytical CA performance are XXXX, of at they in experience". with overall we EA and performance three and combined measures the in budget better FDA data hours discretely faster saying, "satisfying feedback maintaining excellent while specificity by Instrument of best-in-class. us that with been Product repair reliability Pheno, instrument in with second high-XXs cost papers and an of kit XX%. our lowering consistently new the and believe the added average up of above dollars sold a acquisition EU, improvement with class hours, XX%. As documenting ourselves. our while ASP year, customers result in our the of the performance excellent was This device for to XX time the to is enter and generate than the has we sensitivity of over consistently launch per drugs of studies newly in XX you’re goods millions measure one year was by approximately to unqualified of results ability and this excellent with standard-of-care, approximately These performance. numerous were confirm year-end certainly puts a Customer a with We excellent visit call the surveys starting panel superiority, approval hand of with success. place the

now the sepsis. customer that study a ability are impact actual interventions results on having these of numerous to hospitals dramatic challenge confirming the are and importantly, More rapid manage

XXXX the of exciting was most of out first coming of our development perhaps University data Augusta. example, For Hospital customer, the

at us Pheno savings of Using been extremely Pheno. $XX,XXX impact tallied money, The this alone of XX% as since part director from lives savings antibiotic sepsis told to XX% detailed also equates implementing that less a reduction. month As And institutions Pheno, saving each what to not is saved clinical have the lab and only it's three to the X%, encouraging. lives their implementation, keeping since implementation. they depths the recently found the of records from they their they have overall Pheno, were reduce able approximately than

these In savings, we from savings ROI. C. decrease sepsis a addition, expected launched. seen morbidity already sides, many we that and most other fewer suggest, diff Pheno lower ever while And customer the readmission could are deliver high across to what very intervention we to yielding believe eager duplicate powerful have infections data rates, are the this times be

be site believe in a to working results we and XXXX. the journal with We publish high will in these will impact see these

We on similar launching The sepsis results is our to solid our by overall severe time changer It which our also season third We we foundation delivered time tests performance this flu often a of pneumonia possible this results. XXXX. customer for will sample will these our great test, help. hours, begin patients. collect believe flu, are to with registry which over our demonstrated kit devastating we across the solution, a and in bacterial steadily solution our market pneumonia all critically Interestingly, of is of will result with increase our pneumonia base. viral the reduces some launch. a to also kit a by who high be Severe with initiative believe significant we Needless as large global and direct mortality importance over approximately also game contract is disease healthcare from We say, X.X XX with for is million believe outcome eager key costs. XX%.

hours of our parameters, Accelerate. respectively. move and to customer. quite XX and resolve key diligently and our we a evaluation EA XX.X% drugs our This standard-of-care, translate into across faster the multisite was of met the number we prospects, strong solid demonstrated of steady most For were year, Sensitivity in with including global kit, for summary, than tests will the have XX.X% mark performance or year importantly, a and value. respectively, clinical towards contracts, our CA at XXXX worked the expectations annuity was also launch. per AST pricing mix development In XX modules, number and Throughout XX.X% qualified Most on a in progress XX% reasons, CE XXXX made culminating to this these study. team specificity capital Commercially, all of we and study was believe exceeded good, which performance time significant device. a while for the on

of which the have we sales now underestimated we the length something However, we cycle, mitigated. believe

product new Our improved goal and performance consistent was achieved reliability. drugs, superiority with

goal, out solid all build base this financial third turn with Steve? good rounding the to I to performance over excellent great the as a year, respiratory it performance. And our review kit I that, a XXXX. achieved our CE of with performance will was marking also Finally, on Steve said, our in-all to and preliminary which

Steve Reichling

same and the and were XXXX costs goods development gross the fourth This due respectively. prior-year. $XX.X margins $XXX,XXX Accelerate for $XXX,XXX in This XXXX, margins increases Europe fourth cost in sold the $XX.X and in and year-over-year the and Larry, recorded for $XX.X Europe. the resulting were to and development to for was were million $XX,XXX year same decrease and Middle system East. year. the $X.X million prior-year. with Selling the $XX.X million the in are of These trial PhenoTest that compared for and the were across $X was the and fourth kit in research year that to were XXXX. and million driven quarter repeat Pheno few play the and with general Revenue and related for million quarter and not quarter sold quarter of Research driven the past for of incurred million sales costs year. These BC in for increases instrument year-over-year period the clinical quarters million million for current in expenses you, period inventory by the the were $XX for million the inventory in for These Cost good million prelaunch gross Thank did and XX% compared U.S. $X.X for $XX.X to by period evaluation and due $X.X and the the million and afternoon. previously compared and to personnel administrative $X.X same higher Accelerate U.S. XX% expense.

The Net hand year. back and and cash X.X million respectively. year cash We of used $XX.X on resulting million million $XX.X $XXX.X net $XX.X Our was goals million company on and net $X.XX outlook. loss filing review a was Larry investments XXth. of for and the a the $XX.X quarter stock-based shares per for year outstanding ended compensation now million for These net of year our million. basic the losses million the the contained average XX share XXXX $XX.X the loss will and for in and to anticipate the to million non-cash the fourth quarter million in call for XX-K February XX.X and I $X.XX expense. with weighted

Lawrence Mehren

Steve. you, Thank

initiatives be performance laser we be, XXXX, can XXXX. now onto for where with Now two wanted instrument focus on to we

first will for achievements The our of of guidance XXXX. revenue these be

Specifically, between very $XX steep ramp with first of million to and light $XX and generate into year, and half for million QX QX. revenue very the a expect we a

gross remain of strong will supporting $XXX above price expect margins. kid We

our Our we sales confidence XXXX to fired the process, also learnings addition top was have recently high. BioMerieux sales representatives contributing. sales rolled The at The Beckman from our sales meeting our new of BioFire, Cepheid, up resulting team. which and improvements out is with from our national

with late trials thereafter. Our submission second early focus completion QX shortly will in be initiate U.S. to we QX, on and expect respiratory where

that FDA's it and is sample specimen Our others. this, follow to to from an we up Further, can be outcomes unique. associated approval the the advance while completion FDA. will Accordingly, start when trial, type demonstrating clinical predict direct and ultimate difficult arm and our conclude will and we we timing require the requirements trial will device, among something also us for we to size, with with expect is believe test, discussions predict groundbreaking on using

first an pre-submission to quarter in have conference significant occur that update and Given FDA, a that the the this our on this we to next we provide already milestone, sent package expect conversation anticipate call. XX our days over will

partnerships In we a to China and additional up of and generation addition efforts. Pheno research keep complementary the with it with pharma XXXX, expansion to these principal This more we next are be types, that, combined objectives definitely could other open instrumentation. on to instruments continuing these us and for results sample I will development see busy, And excited will questions. and

Operator

Thank you.

question-and-answer go We Quirk first ahead. the will comes begin Please from our session. And [Operator now Bill Jaffray. with Piper question Instructions]

William Quirk

I the CE Thanks much test. very for mark guess on first question Larry. respiratory to the data

As memory the the serves, that would be approval, I replicated us could believe the U.S. be threshold they correct? all in of assuming sufficient data for

Lawrence Mehren

and That’s I question, I before Bill, hey, mention thing. just your correct one to get wanted

say, customers customer that rating our that but glad ahead satisfied I’m this listening. with are the surveys not with experience, understand newly consistently device satisfied, just the the very launched the from of and customer possible. know service is highest feedback are and So to employees they I of

want I I for our sure make service to that in get folks. So, customer

answer and And So data correct. on excuse me, approval, Bill, FDA we now answer yes, question. absolutely, the that’s that receive is, your I'll would based

Bill Quirk

are of service that excellent to you’re the your customers support. possible That’s terms hear certainly and highest rating and very category news in in glad that

have And the being this your we customer? the we've just presumably help specifically speed in, secondly, some to lower asked heard trial some in a I'm to no question of include by outcomes there, done. eventual Additional one, work that designed clinical Certainly about is measure doubt assuming being of thinking product design bit little to respiratory clinical surveys the adoption? and is

Lawrence Mehren

proffered think part kind Yes, the Bill, If sure. right of sepsis results that to more be for the that sepsis, have of we look for heartening, seeing from are quite out I say we I seen have had trial. we of we tailwind and the the that could gate, would of hindsight are would product in reduction that have of in a clinical would type

that sure that in make trial. this to want we So, we do

I there we so a think to impact of and and a actually decided take build on to clinical a potential is the in greater arm pneumonia trial. that show to bit severe a time even

we Now, but unusual to that are typically it's something in diagnostic done going that quite this a see is could trial, confident spectacular. are be we

Bill Quirk

cash One usage Steve, let in Steve I'll then question for else somebody XXXX? here. and jump on expected

Steve Reichling

call were we $XX of Yes, in with per coming out it quarter. consistent range million $XX our XXXX, expectations of pretty the million to

a team We respiratory bit bit, ramping little expect to ramp we as clinical into get our a nothing this trial and for up sales dramatic. the but

still we'll to XX I think basis in the on range of quarter. per million million XX be net the

Operator

comes ahead. The next Blair. Brian with Weinstein from go William question Please

Brian Weinstein

evaluation stage more these a the little the Can little early of XXX are the of they about bit you in I Or stage have you are of as you towards think a said about they that stage that process? more evaluation processes in, later where of a that? weighted more are bit evaluations? in talk XX/XX. just the talk bit little Can of you what's kind

Lawrence Mehren

across that stages I are say they board. the would various

will more were should through using complete towards beginning acquisition. We have we allow process" experienced. just in evals moving at some those of quickly is process beginning good that that sales the move are than news those process. the past and have evaluation the faster the they And and The are some the so what we that our some that have go "accelerated the are of very of have to new that at cycle those very than are

like QX. said think will have in in past what the see of based general with and as conversions QX QX seen I QX lots we on in have we we

Brian Weinstein

about evals. mean the you talked you’ve contract, progress in into frontend I on made changing then the by language And the the the

IT One in going. of the past you the up mentioned other were issues that the kind have guys getting and of systems

and So shaping of some evaluation the and can using process well? also on guys IT during to an the that's incentives update you as software you months the give contracting us that on work were if of

Lawrence Mehren

In been had not exercise we've a able that. situations or many that to where we’ve situation case, yet

other of lot a things. doing are We

all now we have contractual relationships providers. example, the significant LIS For with of

I have instruments and happen. the the by finished being over to some that the next incentivized think part just are finish see between also Accordingly, those the who sites two quarters, pre-built of interfaces we'll course to interfaces we’ll soon all this or we LISs. accelerates for our concurrently those and of start see to sure of do going

a but on we kicking a off doing the that As think, matter reviewed is doing I now. actually Monday, evaluation, just fact, the of before that's right LIS site they're

be, overall what Brian. So I will tell the savings yet you can't

Brian Weinstein

are little then accounts away molecular Or any you accounts a products? you’re seeing update can kind more from kind Are winning or of bit winning describe old winning? what are And the or ID of you share you resistance were something typically with accounts and that that and guys kit on considering Just taking of culture school price there? just going you're of an head-to-head else?

Lawrence Mehren

those we're question we We a Yes. against product X,XXX mostly Brian. molecular number see a Thanks, their and and Great I as line, in Nanosphere heads that batting Luminex out we’re often, with to there. as there, winning head know, we head-to-heads of far are products. different excited are companies

to molecular, see really really, folks of looks early year that the are are closes takeaways you're now. good it So some in and that right running going from direct the

Operator

And JP Morgan. [Operator comes go from question our with Peterson Instructions] Please next ahead. Tycho

Unidentified Analyst

for for Tycho. the Thanks taking This actually Julia question. is

the Could XX just and as the today. Europe? breakout between U.S. instrument started is, one you the First been of that specifics you’ve

Lawrence Mehren

U.S., The split. revenue that’s XX% about Europe. split right Europe is now, revenue XX% excuse U.S., It's XX% about Actually XX% roughly. me, the

were XX%. While commercial XX%, roughly contracts

Unidentified Analyst

strong is is you the sales and the the between capital mentioned mix U.S. Europe? there. And… very specific about XX% it. What Got breakout then currently Okay. next And

Steve Reichling

Sure, closed the out for a saw is roughly of very so typical European rate nearly that of XX% for we contracts of were we XX% capital. for we And contracts in that which North market. all capital, rentals model XXXX saw and coming Europe were America in the closed were

Our the expectations are with capital. a majority that for we global still overall XXXX contracts close in will see of

Unidentified Analyst

you conversion you a of measures to number order taking are the situation. include And talked know terms in of that I then the about

the your like them of capital any system pricing contracts? how system do involved are changing in placement pricing? Just those And looks

Steve Reichling

generally mean for been an convinced this binary there. a Once that what need seen pretty I we somewhat issue, and Yes, have is hospital. we not them we move is that quickly, is pricing it's then have right they an through so issue not solution a

kit we our anticipate having nor So don’t heading our either, dramatically change instrument into pricing 'XX. pricing to

instrument target for is two an taking and there the customer initial system on of customers On course instruments for average acquisition. $XXX,XXX about side, module we discounts generally call it additional at

Unidentified Analyst

do scale And you require at lastly longer And what long then are revenue operating of plus reach kind term of target kind scale? me think is margin your you you what just from XX% for of margin? targeting to term growth

Steve Reichling

the a and of have consumables, the fundamentally instruments X,XXXs capacity kit. for lot I and of implemented operating good X,XXXs for right margin margin front. a gross decrease is and manufacturing the think over to cost is of XXs foundation of to XXXs built in strong year a Well, getting the I that changes We've think past the certainly into track of year the we

to us a run think achieve through up sets targets that we we just volume in well So the XXs. for built now very to system have those I the scale,

Unidentified Analyst

more year? that this of about you've year just latest clarify so is low for because your previously margin like, to expectation talked still about Olay growth XXs, next expectations

Steve Reichling

upcoming I year think is there guided pretty the we and margins complex. gross particularly picture this don’t for

lot play. is somewhere that be around but at there will we think mark, I of factors a

Operator

our And Lawrence turn Mr. this to back remarks. any would Mehren question-and-answer session. for the like closing concludes conference I to over

Lawrence Mehren

All right, thanks.

through of customers So investors, the our thank XXXX. in closing, and all great I want to for our quarter employees, our

and our have and to Thank great company technology position We you you our to I'll and speak soon. Bye-bye. has banner work enthusiastic. belief couldn’t in be in all XXXX. put strong hard us a more You a

Operator

gentlemen and thank Ladies concluded. attending today's presentation. for now is you conference The

now You disconnect may