Speed up Diagnostics, Inc. (AXDX) Q2 2024 Earnings Name Transcript

Speed up Diagnostics, Inc. (NASDAQ:AXDX) Q2 2024 Earnings Convention Name August 8, 2024 4:30 PM ET

Firm Members

Laura Pierson – Investor Relations Officer
Jack Phillips – President and CEO
David Endurance – Chief Monetary Officer

Convention Name Members

Andrew Brackmann – William Blair

Operator

Good day. And welcome to the Speed up Diagnostics Integrated Second Quarter 2024 Outcomes Convention Name. All contributors will probably be in a listen-only mode. After as we speak’s presentation, there will probably be a question-and-answer session with overlaying analysts. Please observe this occasion is being recorded.

I might now like to show the convention over to Ms. Laura Pierson of Speed up Diagnostics. Please go forward.

Laura Pierson

Earlier than we start, IT is essential to share that Information introduced throughout this name might comprise forward-looking statements inside the that means of Part 27A of the Securities Act of 1933 and Part 21E of the Securities Change Act of 1934.

Ahead-looking statements embody projections, statements about our future, and people that aren’t historic information. All forward-looking statements which are made throughout this convention name are topic to dangers, uncertainties and different components that might trigger our precise outcomes to vary materially. These are mentioned in higher element in our annual report on Type 10-Okay for the 12 months ended December 31, 2023, and different reviews we file with the SEC.

IT is my pleasure to now introduce the corporate’s President and CEO, Jack Phillips.

Jack Phillips

Thanks, Laura. Good afternoon. Right now, I want to present thrilling updates on our Wave program, together with the preclinical trial outcomes, business readiness progress, and significant incremental funding to additional ship strategic milestones. I’ll then move the decision to David Endurance, our CFO, to summarize our monetary outcomes for the quarter earlier than opening up the decision to take questions from our analysts.

As a reminder, Speed up is uniquely positioned to disrupt the microbiology susceptibility testing market with our second-generation antimicrobial susceptibility system, Wave. Wave addresses the complete AST market, together with each optimistic blood tradition and conventional remoted colony testing.

The mixed world AST market is estimated at $2 billion. By processing all AST testing on the identical instrument, with a price construction aggressive to the market leaders in conventional automated remoted colony testing, prospects could have the chance to consolidate all testing on a single AST platform.

Additional, Wave’s product differentiators embody same-shift ends in 4.5 hours on common, a lab-friendly workflow which doesn’t require pattern preparation devices, a scalable platform to fulfill the testing wants of all lab segments, whereas delivering a considerably improved price construction to return increased platform margins and incremental money move era.

Shifting to our preclinical trial, we’re happy to announce our preclinical trial was successful, measured by a number of significant endpoints. At the start is the scientific efficiency, which included a dataset of 1,570 distinctive bug-drug mixtures examined on the Wave platform in comparison with the reference technique, broad microdilution.

Our general efficiency is measured by important settlement and categorical settlement, each of which had been roughly 95% throughout 20 antibiotics. IT’s essential to notice the research included an equal variety of contemporary and contrived samples, leading to glorious concordance between potential affected person samples and site-selected problem inventory samples.

Our robust efficiency was achieved with an unprecedented time to results of 4.5 hours on common, delivering true same-shift susceptibility outcomes to clinicians, which isn’t achieved by any rising AST platforms as we speak.

Past a robust information readout and time to end result efficiency, the trial measured assay reportability, system reliability, ease-of-use and laboratory workflow. A exceptional 99% of Wave runs reported a minimal inhibitory focus end result. There have been no main {hardware} failures that required a service engineer to go to the labs and assay reliability was glorious.

After just a few hours of operator coaching, lab technicians ran all specimen testing throughout the preclinical trial. Operators had been happy with the easy preanalytical workflow, the ease-of-use, intuitive interface and random entry capabilities.

In conclusion, the preclinical trial was an ideal success, which supplies us confidence we have now each the proper product design to take to a scientific trial, and in flip, commercialize. We at the moment are prepared to start out the scientific trial, which incorporates 4 exterior websites. Wave techniques have been put in in all websites and all obligatory Gram-Destructive take a look at kits have been manufactured. The beginning of the scientific trial is imminent.

As beforehand outlined in prior earnings calls, our three-step strategic roadmap to maximise Wave’s business affect consists of initially leveraging our place within the PBC market with current prospects within the U.S. and EMEA, adopted by increasing into the isolate susceptibility testing market by providing new assays to extend buyer engagement and pockets share. And thirdly, by making use of our holographic imaging Technology to different areas of diagnostic testing.

First, by launching Wave with the suitable regulatory clearances and changing our current prospects already implementing fast susceptibility testing offers a business platform for robust preliminary uptick whereas additionally lowering general money wants of the enterprise and units the corporate on a path to money move positivity. We now have roughly 75% of our U.S. buyer base signed to longer-term contracts forward of the Wave business launch.

Secondly, by launching an incremental menu for Gram-Optimistic PBC, in addition to subsequent isolate assays, we offer microbiology labs with a complete diagnostic resolution for all susceptibility testing. We estimate by increasing into the isolate testing, we will develop our current buyer annuities by 3 occasions to 4 occasions by providing complete PBC and isolate assays on the identical Wave platform. This development in income is coupled with a really engaging margin contribution given Wave’s low-cost construction in comparison with rising PBC and conventional isolate rivals. We proceed to concurrently develop our Gram-Optimistic PBC assay, in addition to have demonstrated our potential to supply susceptibility testing on isolate samples.

Lastly, we additionally see Wave able to finishing different microbiology assays, akin to yeast and anaerobes, together with antibiotic growth alternatives with pharma, which may increase Wave’s addressable market even additional. We proceed to give attention to delivering Wave’s strategic roadmap to make sure we maximize the advantages of Wave’s holographic imaging Technology to enhance affected person outcomes, develop market share whereas increasing buyer pockets share, and eventually, additional increase our addressable market.

To this finish, and now with our robust preclinical trial outcomes, we have now determined to give attention to reaching additional important Wave operational and growth milestones. We imagine this focus will drive extra worth for all Speed up stakeholders forward of signing a strategic accomplice.

We’re excited to announce we labored with our current lenders to herald extra capital to fund the corporate by means of 2025. The financing additionally permits us to give attention to delivering an FDA-cleared Wave system and Gram-Destructive PBC menu, together with creating incremental assays to additional show Wave’s capabilities.

We really feel this technique will now guarantee we have now the money runway to ship these essential value-inflecting program milestones, and in flip, additional show and improve worth for our Wave system with strategic companions.

I’ll now flip the decision over to David to debate the Q2 2024 monetary outcomes. David?

David Endurance

Thanks, Jack, and good afternoon, everybody. Internet gross sales had been roughly $3 million for the quarter, which compares to roughly $2.9 million for a similar interval within the prior 12 months. This improve was pushed by a low double-digit development in reoccurring consumable internet gross sales.

Gross margin was roughly 23% for the quarter, which compares to roughly 27% for a similar interval within the prior 12 months. The general decline in gross margin was pushed by product combine.

Promoting, basic and administrative bills had been roughly $5.4 million for the quarter, which compares to $7.6 million in the identical interval within the prior 12 months. SG&A bills for the quarter embody roughly $800,000 in non-cash stock-based compensation. The general decline in SG&A bills is a results of decrease employee-related bills.

Analysis and growth bills had been $3.9 million for the quarter, which compares to $5.8 million for a similar interval within the prior 12 months. R&D bills for the quarter embody roughly $200,000 in non-cash stock-based compensation. The general decline in R&D bills is a results of decrease third-party growth bills for our Wave program.

Our internet loss for the quarter was roughly $11.6 million, leading to a internet loss per share of $0.50. Money use for the quarter was roughly $8.7 million internet of financing. Our money use for the quarter consists of notable one-time and non-recurring funds of roughly $1.5 million for each the reimbursement of our excellent 2.5% convertible notes, in addition to a cost to a key Wave growth accomplice.

As mentioned on earlier calls, we’re centered on driving important reductions in working bills and money burn within the coming quarters. In abstract, by persevering with to drive the numerous reductions in money burn, coupled with the brand new funds raised, offers us the runway to proceed delivering these important Wave program milestones by means of the tip of 2025.

Right now, we’re pleased to open the decision and take questions from our overlaying analysts.

Query-and-Reply Session

Operator

[Operator Instructions] And the primary query will come from Mr. Andrew Brackmann with William Blair. Please go forward.

Andrew Brackmann

Hello, guys. Good afternoon. Thanks for taking the query. Possibly simply on the preclinical trial outcomes, they definitely look thrilling. However, Jack, as you type of take into consideration pioneering and advancing the fast AST discipline, what ranges of important settlement and categorical settlement do you suppose are possible wanted to drive the inflection and type of uptake? I suppose, in different phrases, as we transfer to the total scientific trial right here, what outcomes ought to we be in search of as you outline success? Thanks.

Jack Phillips

Hello, Andrew. Once more, thanks for the query. So, yeah, as I discussed in my ready feedback, initially, the preclinical trial was a extremely huge success for the corporate. IT was an enormous milestone and IT’s paving the best way for us to start out an efficient scientific trial right here within the subsequent coming weeks.

And so, particular to your query round scientific efficiency, I imply, that in actually most any diagnostic platform, that’s actually desk stakes. And so, in microbiology and fast AST testing, there’s actually two key parameters that you just talked about, EA and CA, are the 2 key components that will probably be information that’s submitted to the FDA.

The FDA requires efficiency above 89.9% for approval. And so, the place we’re at proper now, as we acknowledged, we simply launched a press launch on the preclinical trial and we shared among the information of the 1,570 bug-drug mixtures that we produced on contemporary samples and contrived samples. And the efficiency could be very stable. Within the mid-90s, and that’s — that’s actually the place we must be, and once more, this has given us nice confidence to finish a profitable scientific trial on account of that.

Andrew Brackmann

Good. After which if I may simply swap gears right here, the feedback on type of now specializing in reaching the milestones earlier than working with the strategic accomplice. I suppose, are you able to possibly simply give slightly bit extra shade round what led to that call, and I suppose, as you type of take into consideration these preclinical trial outcomes, how would possibly that additional any conversations with these companions transferring ahead? Thanks.

Jack Phillips

Yeah. So, we’ve clearly have a variety of curiosity from strategic companions for what we’re doing with Wave as a result of IT’s distinctive. IT’s in a category all by itself. We’ve been in a position to show workflow, system reliability, time to result’s actually unmatched at 4 and a half hours on common. And now with the, constructing as much as this, now we simply accomplished the preclinical research, which delivered the outcomes that I spoke about.

And so, as we’re going by means of our strategic planning, IT grew to become very clear to us that, time is on our facet if we’re in a position to safe funding, which we had been in a position to do. That funding, David might converse to IT, however IT will get us by means of 2025. IT will set us as much as comfortably conduct the scientific trial to undergo the FDA after which finally get FDA clearance for Wave and PBC Gram Destructive panel.

And so, as we went by means of the method and fascinated by our choices, this we imagine is totally the very best path ahead for us proper now, due to the boldness that we have now within the platform, the answer and the info that we’re seeing off the preclinical. And in the long run, finally, we imagine IT’s completely the easiest way to maximise worth for all stakeholders.

And so, transferring ahead, we are going to proceed to work with strategic companions to fulfill with strategic companions. I had conferences at ADLM final week. We’ve got conferences coming as much as these companions which are excited by following the story. We even have — we proceed to share the info that we generate and we’ll be doing that with the strategic companions as nicely.

Andrew Brackmann

Good. After which, David, possibly one for you simply on the money stability in lieu of this elevate. My professional forma math will get you someplace on that low to mid $20 million vary to your money stability. Are you able to possibly simply type of assist bridge us and get snug to your goal of funding by means of 2025? Thanks.

David Endurance

Good. Yeah. No. Thanks for the query, Andrew. So, yeah, IT’s — on a internet proceeds foundation, and IT’s within the mid $25 million on a professional forma. However we’re actually excited to show out in our current quarters that we’ve pushed important cost-cutting initiatives whereas additionally delivering key strategic milestones for the Wave program and persevering with to protect our buyer base.

Beginning with the second quarter, for those who take a look at our money burn, after adjusting internet of financing and excluding the reimbursement of our 2.5% notes and a non-recurring cost with the Wave growth accomplice, we burned about $7 million.

After which quarter-over-quarter, taking a look at our second quarter R&D money bills, we had been down 20%, whereas delivering a really key program milestone with the preclinical. We’ve are also able to go together with the scientific trial, as Jack mentioned, pre-purchased all of our scientific trial supplies, which is included within the second quarter quantity. Actually excited that we’re delivering milestones inside the R&D, you realize, group with Wave, but in addition in a position to deliver down the fee 20% quarter-over-quarter.

Inside SG&A, we had been in a position to deliver that down quarter-over-quarter by about 5% on a money foundation. However we additionally applied additional important cost-cutting measures throughout the second quarter, which goes to additional cut back our SG&A bills transferring ahead.

Our general objective is to get to a goal of working money burn of about $5 million and we’re on our strategy to get there. We’re actually enthusiastic about that, as we’ve checked out strategic cost-cutting initiatives with a centered precedence on the Wave milestones.

Moreover, you realize, to bridge into the 2025 timeframe and thru 2025, we do have contractual obligations from people for money inflows with our on-market product portfolio partnership.

Andrew Brackmann

Good. Thanks, guys.

Jack Phillips

Okay. Thanks, Andrew.

Operator

This concludes our question-and-answer session. I want to flip the convention again over to Mr. Jack Phillips for any closing remarks. Please go forward, sir.

Jack Phillips

Thanks and thanks for everyone becoming a member of in to the decision as we speak. As I shut out, only a reminder, I imply, we’re on a really, very thrilling journey right here at Speed up with the Wave platform and the subsequent era resolution for fast susceptibility. To get sufferers on optimum antibiotic remedy rapidly.

Sepsis continues to affect 49 folks, 49 million folks globally annually. Estimated deaths are about 11 million. 1.3 million are attributed to bacterial antimicrobial resistance. So, it is a real-world healthcare situation that also has not been addressed. And with Wave, with fast susceptibility testing, we have now a chance to just do that.

I wish to thank our staff. We’ve been working day and night time to proceed to hit our milestones and advance Wave ahead. We’re very appreciative and grateful that we’re in a position to transfer ahead with new funding that may fund us by means of 2025. The preclinical trial success was an incredible milestone for the corporate that offers us nice confidence to start out the scientific trial.

After which lastly, with all of this, we’re excited to determine a future strategic accomplice for Wave and finally maximize worth for AXDX stakeholders throughout the Board. So, with that, thanks very a lot and have an exquisite day.

Operator

The convention is now concluded. Thanks for attending as we speak’s presentation. You could now disconnect.