Speed up Diagnostics, Inc. (NASDAQ:AXDX) Q2 2024 Earnings Convention Name August 8, 2024 4:30 PM ET
Firm Individuals
Laura Pierson – Investor Relations Officer
Jack Phillips – President and CEO
David Endurance – Chief Monetary Officer
Convention Name Individuals
Andrew Brackmann – William Blair
Operator
Good day. And welcome to the Speed up Diagnostics Included Second Quarter 2024 Outcomes Convention Name. All members shall be in a listen-only mode. After immediately’s presentation, there shall be a question-and-answer session with overlaying analysts. Please be aware this occasion is being recorded.
I’d now like to show the convention over to Ms. Laura Pierson of Speed up Diagnostics. Please go forward.
Laura Pierson
Earlier than we start, you will need to share that data 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 embrace projections, statements about our future, and people that aren’t historic details. All forward-looking statements which can be 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 larger element in our annual report on Kind 10-Ok for the yr ended December 31, 2023, and different experiences we file with the SEC.
It’s my pleasure to now introduce the corporate’s President and CEO, Jack Phillips.
Jack Phillips
Thanks, Laura. Good afternoon. Right this moment, I wish 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 all the AST market, together with each constructive blood tradition and conventional remoted colony testing.
The mixed international AST market is estimated at $2 billion. By processing all AST testing on the identical instrument, with a value construction aggressive to the market leaders in conventional automated remoted colony testing, prospects may have the chance to consolidate all testing on a single AST platform.
Additional, Wave’s product differentiators embrace same-shift leads to 4.5 hours on common, a lab-friendly workflow which doesn’t require pattern preparation devices, a scalable platform to satisfy the testing wants of all lab segments, whereas delivering a considerably improved price construction to return larger platform margins and incremental money circulation era.
Transferring to our preclinical trial, we’re happy to announce our preclinical trial was a hit, measured by a number of significant endpoints. At the start is the medical 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 have been roughly 95% throughout 20 antibiotics. It’s essential to notice the examine 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 immediately.
Past a robust information readout and time to consequence efficiency, the trial measured assay reportability, system reliability, ease-of-use and laboratory workflow. A outstanding 99% of Wave runs reported a minimal inhibitory focus consequence. There have been no main {hardware} failures that required a service engineer to go to the labs and assay reliability was glorious.
After a number of hours of operator coaching, lab technicians ran all specimen testing through the preclinical trial. Operators have been happy with the straightforward preanalytical workflow, the ease-of-use, intuitive interface and random entry capabilities.
In conclusion, the preclinical trial was an excellent success, which supplies us confidence we’ve got each the precise product design to take to a medical trial, and in flip, commercialize. We are actually prepared to start out the medical trial, which incorporates 4 exterior websites. Wave programs have been put in in all websites and all vital Gram-Detrimental check kits have been manufactured. The beginning of the medical trial is imminent.
As beforehand outlined in prior earnings calls, our three-step strategic roadmap to maximise Wave’s business influence 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 know-how to different areas of diagnostic testing.
First, by launching Wave with the suitable regulatory clearances and changing our current prospects already implementing speedy susceptibility testing gives 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 circulation 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-Constructive 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 instances to 4 instances by providing complete PBC and isolate assays on the identical Wave platform. This development in income is coupled with a really enticing margin contribution given Wave’s low-cost construction in comparison with rising PBC and conventional isolate rivals. We proceed to concurrently develop our Gram-Constructive PBC assay, in addition to have demonstrated our skill to supply susceptibility testing on isolate samples.
Lastly, we additionally see Wave able to finishing different microbiology assays, comparable to yeast and anaerobes, together with antibiotic growth alternatives with pharma, which may develop 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 know-how to enhance affected person outcomes, develop market share whereas increasing buyer pockets share, and eventually, additional develop our addressable market.
To this finish, and now with our robust preclinical trial outcomes, we’ve got determined to give attention to attaining additional crucial Wave operational and growth milestones. We imagine this focus will drive extra worth for all Speed up stakeholders forward of signing a strategic associate.
We’re excited to announce we labored with our current lenders to usher in 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-Detrimental PBC menu, together with creating incremental assays to additional display Wave’s capabilities.
We really feel this technique will now guarantee we’ve got the money runway to ship these essential value-inflecting program milestones, and in flip, additional display and enhance 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 have been roughly $3 million for the quarter, which compares to roughly $2.9 million for a similar interval within the prior yr. This enhance was pushed by a low double-digit development in reoccurring consumable web gross sales.
Gross margin was roughly 23% for the quarter, which compares to roughly 27% for a similar interval within the prior yr. The general decline in gross margin was pushed by product combine.
Promoting, common and administrative bills have been roughly $5.4 million for the quarter, which compares to $7.6 million in the identical interval within the prior yr. SG&A bills for the quarter embrace 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 have been $3.9 million for the quarter, which compares to $5.8 million for a similar interval within the prior yr. R&D bills for the quarter embrace 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 web loss for the quarter was roughly $11.6 million, leading to a web loss per share of $0.50. Money use for the quarter was roughly $8.7 million web 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 associate.
As mentioned on earlier calls, we’re centered on driving vital 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, gives us the runway to proceed delivering these crucial Wave program milestones by means of the tip of 2025.
Right now, we’re completely satisfied 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. Perhaps simply on the preclinical trial outcomes, they definitely look thrilling. However, Jack, as you type of take into consideration pioneering and advancing the speedy AST area, what ranges of important settlement and categorical settlement do you assume are seemingly wanted to drive the inflection and type of uptake? I assume, in different phrases, as we transfer to the complete medical trial right here, what outcomes ought to we be on the lookout for as you outline success? Thanks.
Jack Phillips
Hello, Andrew. Once more, thanks for the query. So, yeah, as I discussed in my ready feedback, to start with, the preclinical trial was a extremely large success for the corporate. It was a giant milestone and it’s paving the way in which for us to start out an efficient medical trial right here within the subsequent coming weeks.
And so, particular to your query round medical efficiency, I imply, that in actually most any diagnostic platform, that’s actually desk stakes. And so, in microbiology and speedy AST testing, there’s actually two key parameters that you simply talked about, EA and CA, are the 2 key components that shall 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 said, 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 strong. 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 medical trial because of that.
Andrew Brackmann
Excellent. After which if I may simply change gears right here, the feedback on type of now specializing in attaining the milestones earlier than working with the strategic associate. I assume, are you able to perhaps simply give a bit of bit extra coloration round what led to that call, and I assume, as you type of take into consideration these preclinical trial outcomes, how may that additional any conversations with these companions shifting ahead? Thanks.
Jack Phillips
Yeah. So, we’ve clearly have lots 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 capable of display 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 examine, which delivered the outcomes that I spoke about.
And so, as we’re going by means of our strategic planning, it turned very clear to us that, time is on our facet if we’re capable of safe funding, which we have been capable of do. That funding, David might converse to it, however it is going to get us by means of 2025. It’ll set us as much as comfortably conduct the medical trial to undergo the FDA after which in the end get FDA clearance for Wave and PBC Gram Detrimental panel.
And so, as we went by means of the method and occupied with our choices, this we imagine is completely one of the best path ahead for us proper now, due to the boldness that we’ve got within the platform, the answer and the info that we’re seeing off the preclinical. And ultimately, in the end, we imagine it’s completely the easiest way to maximise worth for all stakeholders.
And so, shifting ahead, we are going to proceed to work with strategic companions to satisfy with strategic companions. I had conferences at ADLM final week. We now have conferences coming as much as these companions which can be involved in 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 properly.
Andrew Brackmann
Excellent. After which, David, perhaps 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 in your money stability. Are you able to perhaps simply type of assist bridge us and get snug to your goal of funding by means of 2025? Thanks.
David Endurance
Excellent. Yeah. No. Thanks for the query, Andrew. So, yeah, it’s — on a web proceeds foundation, and it’s within the mid $25 million on a professional forma. However we’re actually excited to show out in our latest quarters that we’ve pushed vital 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, if you happen to take a look at our money burn, after adjusting web of financing and excluding the reimbursement of our 2.5% notes and a non-recurring cost with the Wave growth associate, we burned about $7 million.
After which quarter-over-quarter, our second quarter R&D money bills, we have been down 20%, whereas delivering a really key program milestone with the preclinical. We’ve are also able to go along with the medical trial, as Jack mentioned, pre-purchased all of our medical trial supplies, which is included within the second quarter quantity. Actually excited that we’re delivering milestones inside the R&D, you realize, workforce with Wave, but additionally capable of deliver down the fee 20% quarter-over-quarter.
Inside SG&A, we have been capable of deliver that down quarter-over-quarter by about 5% on a money foundation. However we additionally carried out additional vital cost-cutting measures through the second quarter, which goes to additional scale back our SG&A bills shifting ahead.
Our general purpose is to get to a goal of working money burn of about $5 million and we’re on our approach 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 other people for money inflows with our on-market product portfolio partnership.
Andrew Brackmann
Excellent. Thanks, guys.
Jack Phillips
Okay. Thanks, Andrew.
Operator
This concludes our question-and-answer session. I wish 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 immediately. 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 following era resolution for speedy susceptibility. To get sufferers on optimum antibiotic remedy rapidly.
Sepsis continues to influence 49 folks, 49 million folks globally annually. Estimated deaths are about 11 million. 1.3 million are attributed to bacterial antimicrobial resistance. So, this can be a real-world healthcare concern that also has not been addressed. And with Wave, with speedy susceptibility testing, we’ve got a possibility to do exactly that.
I need 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 capable of transfer ahead with new funding that may fund us by means of 2025. The preclinical trial success was an amazing milestone for the corporate that offers us nice confidence to start out the medical trial.
After which lastly, with all of this, we’re excited to determine a future strategic associate for Wave and in the end 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 immediately’s presentation. Chances are you’ll now disconnect.