Accelerate Diagnostics, Inc. (NASDAQ:AXDX) Q1 2016 Earnings Conference Call

Accelerate Diagnostics, Inc. (NASDAQ:AXDX)

Q1 2016 Earnings Conference Call

May 12, 2016 4:00 PM ET

Laura Pierson - Investor Relations

Lawrence Mehren - President and Chief

Steve Reichling - Chief Financial Officer

Brian Weinstein - William Blair &

Steve Reiman - JP Morgan

Bill Quirk - Piper Jaffray

Good day and welcome to the Accelerate

Diagnostics Incorporated 2016 Q1 Results Conference Call. All participants will be in listen-only mode. After today's presentation,

there will be a question-and-answer session. Please note this event is being recorded.

I would now like to turn the conference

over to Laura Pierson of Investor Relations. Please go ahead.

Good afternoon and thank you all very

much for joining us today. Before we begin, I would like to advise you that any information presented during this conference call

may contain forward-looking statements within the meaning of the Safe Harbor provisions of the securities laws. Forward-looking

statements include statements about our future and statements that are not historical facts and may contain expectations regarding

revenues, earnings, operations, and other results, and may include statements of future performance, plans and objectives.

Forward-looking statements also include

statements pertaining to our strategies for future development of our business and products, including statements based on assumptions

that we will retain key management personnel, we will be successful in the development of the Accelerate Pheno System, we will

obtain sufficient capital to complete the development, required clinical trials and commercialization of the Accelerate Pheno System,

and we will be able to protect its intellectual property.

These statements represent only our

belief regarding future events, many of which are inherently uncertain, information regarding important factors, including our

risk factors that could cause actual results to differ perhaps materially from those in our forward-looking statements is contained

in reports we filed with the SEC. You should read and interpret any forward-looking statements together with reports we filed with

I will now turn the conference call

over to Mr. Lawrence Mehren, President and CEO of Accelerate. Larry?

Thank you, Laura, good afternoon everyone

I appreciate you joining us for our Q1 2016 conference call. Over the last quarter, I believe, we've made solid progress

on a number of fronts, including our clinical trial, commercial readiness, and research and development. I will cover these topics

in order and then turn the call over to Steve Reichling, our CFO to review the quarter's financials. We will then open it

So let's begin with our clinical

trial progress. We are pleased that our trial is proceeding according to the aggressive plan we laid out last year. We have now

completed the enrollment of fresh samples and are running the last spiked samples necessary to achieve the required number of resistant

and low prevalence bacteria.

We anticipate this will conclude shortly

with FDA submission expected as early as late June. Now FDA timelines are variable but our team has done a considerable amount

of work with the agency, with the aim of ensuring the most efficient review process possible, including the development of a mock

submission, which we sent to FDA for comment earlier in the quarter.

This document is representative of

our proposed submission and the agency's review of this document may help us avoid potential delays. Accordingly, we remain

hopeful to have a decision as early as Q3 2016.

Most of you will recall that we are

conducting a significant trial and we expect to enroll a minimum of 1,500 fresh and spiked samples across 12 sites, including enriching

this trial with rare, highly resistant bacteria to challenge our system's capabilities.

During the trial, each ID and AST result

from the Accelerate Pheno System is compared to the sites standard of care and the gold standard, which is run at an independent

reference lab. Both methods are important in assessing the system's performance, with the gold standard for registration

purposes and the standard of care for marketing purposes.

We are in the process of completing

the clinical trial and some positive conclusions can be drawn. First, we believe it is clear that the Pheno platform and its underlying

technology works for both ID and AST. For ID, overall sensitivity and specificity for the Pheno test positive blood culture kit

was 95.3% and 99.3%, respectively, across approximately 951 samples, while in AST overall EA and CA was 94.9% and 94.8%.

The data suggests that the system's

ability to examine single cells for morphokinetic signatures in a highly multiplexed way appears to be an excellent technology

for the rapid diagnosis of serious infections. This is great news, providing us a platform on which we can launch multiple syndromic

panels, each which we expect to provide scores of clinically relevant to assays.

As we have mentioned previously, we

chose to trial all 152 assays for the Pheno blood culture kit concurrently, which normally is done in a phased approach over a

much longer period. Based on the data, I previously referenced, we believe that this strategy is likely to deliver between a 115

and 140 of the most prevalent and clinically important assays in the first FDA submission. Not only does this make our initial

approval more attractive to potential customers, it decreases the size, complexity, and potentially the time to clearance of our

Also with our ability to view our trial

results in real-time, many of the assays that could fall below our acceptance threshold have already been adjusted and are ready

for re-trialing and follow-on submission. Accordingly, we anticipate having the second process complete and submitted to FDA in

Now moving on to commercial readiness.

In the U.S., we believe we are making solid progress building a world-class sales organization made up of highly motivated and

accomplished diagnostic sales professionals. This group of presently 20 individuals is working on filling our funnel in advance

of the anticipated launch. This is going well with customer interest in line with expectations.

As part of this process, the team has

established a number of early access sites, who are exercising the system and our support infrastructure to help prepare us for

a smooth ramp. The data from the first study completed at one of these early access sites was positive with ID and AST scores similar

and in some cases higher than what we've seen in the clinical trial.

Further, on time to result, a very

critical measure at the heart of our value proposition, we saved 40 hours over this site's current standard of care method.

This is a significant improvement, nearly 40% better than our goal of saving 29 hours, and one that we believe should improve patient

care, while decreasing cost.

In addition, we are receiving valuable

commercial feedback from our early access sites. For example, we need to simplify our current QC method, something that we are

already working on with a goal of launching an easier to use QC concurrent with the U.S. launch.

Commercial progress in the EU is also

proceeding as anticipated. We now have a small, but highly experienced team covering Germany, UK, France, Italy, Spain, Benelux,

and the Nordics. This team executed well at the recent EU launch of the Pheno instrument at the European Congress of Clinical Microbiology

and Infectious Disease. Interest in the system was high with a number of valuation contracts currently in negotiation.

We are very excited about the EU market,

and believe that the long-term test potential could equal or exceed that of the U.S. due to higher incidence rates of serious infections.

However, due to the tender process and extended sales cycles, we expect a relatively slow ramp.

Finally, on research and development

progress, we are excited about the Pheno platform and believe we are just beginning to exploit the full potential of the technology.

At the heart of the system is a process called Morphokinetic Cellular Analysis or MCA for short, enabled by high-speed optics and

supercomputing, MCA simultaneously analyzes thousands of single cells for multiple features.

At present, we are using this unique

technology to provide rapid ID and AST from positive blood culture. We expect our next Pheno test, which is for serious respiratory

infections to launch in late 2017. Further, we expect this will be followed by Pheno tests for skin and soft tissue infections

and serious urinary tract infections.

As importantly, a number of key opinion

leaders have expressed excitement about the possible unique clinical value of the Pheno system. For example, two major institutions