Accelerate Diagnostics, Inc. (AXDX) is an in vitro diagnostics company dedicated to providing solutions that improve patient outcomes and lower healthcare costs through the rapid diagnosis of serious infections. The company's primary focus is on developing innovative technologies that address the growing threat of antibiotic resistance, a critical healthcare challenge identified by the U.S. Centers for Disease Control and Prevention.

Product Portfolio

Accelerate's flagship product, the Accelerate Pheno® system, has been commercially available since 2017 and provides identification and antibiotic susceptibility testing results significantly faster than traditional methods. The system uses a combination of genotypic and phenotypic technologies to deliver results in approximately 8 hours, compared to the 2-3 days typically required by conventional culture-based testing. This rapid turnaround enables clinicians to make more informed treatment decisions, leading to improved patient outcomes and reduced healthcare costs.

In 2022, the company announced the launch and commercialization of the Accelerate Arc™ system, which automates the sample preparation process for positive blood culture samples, further streamlining the workflow for microbiology laboratories. The Accelerate Arc system is designed to integrate with the company's Accelerate Pheno system, as well as other platforms such as the Bruker MALDI Biotyper, providing customers with flexibility in their testing approaches.

The company's latest innovation, the Accelerate Wave™ system, is poised to disrupt the microbiology susceptibility testing market. The Wave system is designed to perform antibiotic susceptibility testing (AST) directly from positive blood culture bottles and bacterial isolate colonies, with the goal of delivering results within 4.5 hours. This represents a significant improvement over the Accelerate Pheno system and other competing solutions currently on the market.

A key differentiator of the Accelerate Wave system is its ability to process both positive blood culture (PBC) samples and isolated colonies (Isolates), expanding the addressable market beyond the PBC segment that the Accelerate Pheno system primarily serves. The Wave system's high-throughput, scalable design and lower cost-per-test are expected to make it highly competitive in the larger Isolate testing market, which represents approximately $1 billion of the global $2 billion antibiotic susceptibility testing market.

Financials

Accelerate's financial performance has been impacted by the ongoing development and commercialization of its innovative product portfolio. For the fiscal year ended December 31, 2023, the company reported annual revenue of $12,059,000, a decrease from the prior year's revenue of $13,401,000. This decline was primarily attributable to the impact of the COVID-19 pandemic on hospital spending and delayed purchasing decisions. The company's annual net loss for the year was $61,618,000, reflecting the significant investments in research and development, as well as sales and marketing efforts to support the launch and adoption of its products.

Despite the challenging financial environment, Accelerate has made significant progress in strengthening its commercial partnerships and expanding its customer base. In the first quarter of 2024, the company reported net sales of $2,921,000, a 4% increase compared to the same period in the prior year. This increase was driven by higher sales of the Accelerate PhenoTest consumables, which represent the company's primary revenue source.

Gross margin for the first quarter of 2024 was 25%, compared to 36% in the same period of the prior year. The decline in gross margin was primarily due to an increase in the cost of manufacturing consumables and a higher volume of consumables sold. The company's management team is actively implementing initiatives to improve its cash burn and extend its runway, including cost-cutting measures and strategic partnerships.

One such partnership is the company's collaboration with Becton, Dickinson and Company (BD), which was announced in 2022. Under this agreement, BD serves as the exclusive commercial agent and representative for Accelerate's products, leveraging its extensive global sales team and distribution network. This partnership is expected to enhance the company's commercial reach and reduce its sales and marketing expenses.

Accelerate's research and development expenses for the first quarter of 2024 were $5,173,000, a decrease from $6,968,000 in the same period of the prior year. This reduction was primarily due to lower third-party costs associated with the development of the Accelerate Wave system. The company's sales, general, and administrative expenses for the quarter were $5,706,000, a significant decrease from $10,105,000 in the same period of the prior year, driven by lower legal and professional fees, as well as a reduction in employee-related expenses.

Liquidity

The company's cash and cash equivalents, including investments, totaled $15,751,000 as of March 31, 2024, an increase from $13,219,000 as of December 31, 2023. This increase was primarily due to the proceeds from the sale and issuance of Units in the company's January 2024 public offering, partially offset by cash used in operations.

Accelerate's liquidity position remains a concern, as the company does not currently have adequate financial resources to fund its forecasted operating costs for at least twelve months from the filing of its latest Form 10-Q. The company is actively exploring additional funding options, including potential equity and/or debt financing arrangements, to support its ongoing operations and the development of its product pipeline.

Future Prospects

The company's future success is heavily dependent on the successful commercialization of its products, particularly the Accelerate Wave system, which is expected to be a key driver of growth. The Wave system's ability to process both PBC and Isolate samples, combined with its rapid turnaround time and competitive cost structure, positions it as a potentially disruptive force in the microbiology susceptibility testing market.

Accelerate's management team remains confident in the company's ability to secure a global partnership to commercialize the Wave system by the middle of 2024. Such a partnership would provide additional resources and expertise to support the product's launch and adoption, as well as potential geographic expansion beyond the company's current focus in the United States and Europe.

The company's geographic revenue breakdown for the first quarter of 2024 showed that 90% of net sales were generated from the domestic market, with the remaining 10% coming from international customers. This reflects the company's current commercial focus on the U.S. and European markets, where it has established a strong customer base for its Accelerate Pheno system.

In terms of revenue by product category, the company's net sales for the first quarter of 2024 were primarily driven by product sales, which accounted for $2,489,000, or 85% of total revenue. Service revenue, which includes revenue from extended service agreements, contributed $432,000, or 15% of total revenue. This product-centric revenue mix is consistent with the company's "razor-and-blade" business model, where instrument sales are complemented by the recurring revenue generated from consumable product sales.

Looking ahead, Accelerate's management team has provided guidance on the company's key priorities and milestones for the remainder of 2024. The primary focus is on the successful completion of the Accelerate Wave system's preclinical trials and the initiation of clinical trials, which are targeted for the second half of the year. Additionally, the company is working to develop a Gram Positive PBC menu for the Wave system, which will further expand its testing capabilities.

The company's commercial strategy for the Wave system is a three-step approach. The first step is to extend the company's leadership in the rapid PBC AST market by securing long-term contracts with its existing customer base and presenting the Wave system to over 500 prospective accounts. The second step is to expand the addressable market by launching an Isolate testing menu on the same Wave platform, leveraging the system's high-throughput and cost-competitive capabilities. The final step is to pursue geographic and technology expansion, potentially through a global partnership, to bring the Wave system to international markets and explore additional applications of the underlying holographic imaging technology.

Overall, Accelerate Diagnostics is well-positioned to disrupt the microbiology susceptibility testing market with its innovative Wave system. The company's strong customer relationships, strategic partnerships, and focus on developing cutting-edge technologies position it for potential long-term success, despite the current liquidity challenges. Investors will closely monitor the company's progress in the development and commercialization of the Wave system, as well as its ability to secure additional funding to support its ongoing operations and growth initiatives.