Accelerate Diagnostics Inc (AXDX) 2018 Q3 法說會逐字稿

Good day, and welcome to the Accelerate Diagnostics, Inc. 2018 Third Quarter Results Conference Call. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the conference over to Laura Pierson of Accelerate Diagnostics. Please go ahead.

Before we begin, it is important to share that information presented during this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Forward-looking statements include projections, statements about our future and those that are not historical facts. All forward-looking statements that are made during this conference call are subject to risks, uncertainties and other factors that could cause our actual results to differ materially.

These are discussed in greater detail in our annual report on Form 10-K of the year ended December 31, 2017, and other reports we filed with the SEC.

I will now turn the conference call over to Mr. Lawrence Mehren, President and CEO of Accelerate Diagnostics. Larry?

Thank you, Laura. It is great to have you all with us this afternoon. For our typical cadence, I will start with a report on our commercial progress. I will then hand it over to Steve Reichling, our CFO, to review our financial results, and I'll wrap it up with updates on product development.

So to commercial progress. As you know, we started this year with a straightforward commercial plan: bring the right team, data and marketing together and then execute. And execute, we have. In Q2, we completed the reorganization of the sales team while continuing to build what we believe will be an unprecedented body of evidence supporting the terrific results of the system. Further, we translated this evidence into effective marketing, which our sales team have used to increase awareness and build the funnel.

This work has had a positive impact as evidenced by the hundreds of customers interested in acquiring a system. And this demand continues to grow as the customers who are using the system clinically speak to their colleagues and other hospitals about these terrific results. Meanwhile, those publications and posters showing the lifesaving and cost-reducing benefits of the Pheno system are also helping drive demand. And so the top of the funnel looks great. Our challenge, as you all know, has been moving these folks through to acquisition.

In diagnosing a situation, we identified a few hurdles: one, budget cycle timing and, because of this, limited capital availability; two, an extended sales cycle and time to clinical adoption; and three, GPO access. I'm glad to say that in Q3, we saw material progress in all 3.

I will begin in reverse order discussing these with GPO access first. The great news here is that this quarter, we signed an agreement with HealthTrust, the largest compliant GPO in the U.S. This contract combined with previously announced agreements with Ascension, GSA and Vizient gives us the market access we need to fully realize the commercial potential of Pheno.

To put this in perspective, when we started the year, only 600 of our 2,500 potential accounts in North America were covered by GPOs we had agreements with. This lengthened the sales cycle and, in many cases, prevented access altogether. For example, prior to signing with HealthTrust, most of our member hospitals could not purchase from Accelerate. Even more challenging, in many of these institutions, our sales reps could not even gain physical access or call on these hospitals. We can check this off our list. We now have access to all 2,500 potential customers in the U.S., and we are already seeing progress with numerous HealthTrust and other GPO customers in the latter stages of acquisition.

The sales cycle is something we also have been managing closely. In Q3 2017, a quarter after our launch, we reported to you all what we believe was a challenge with the length of the sales cycle. We have dissected the acquisition process step-by-step and found it wanting. Our go-to-market strategy started with an evaluation where customers would run their required internal verification and get comfortable with the system's performance. And while evaluations went well with instrument reliability and analytical performance consistent with or exceeding customer expectations, the entire process was taking too long. Further, contracting and LIS connection added even more time, extending the time from first contract to revenue to a predictive 14 months.

Needless to say, we were all over this. We put in place numerous mitigations, including a dedicated LIS team, streamlined or eliminated evals and improved QC. And we began tracking progress. Early results were encouraging, showing significant improvement. They were also predictive. I can now say that we believe with our new process in place and running smoothly, we have cut the sales cycle by approximately 50% with our recent customers averaging 6 to 7 months, from first contract presentation to go live.

The last major hurdle, budget cycle, timing and capital availability has been our most recent focus. First, some context here. As you know, we launched in March 2017, which put us out of the capital budget cycle for 2017 and for many customers 2018 too. To address this, our customers along with our sales team worked hard to move capital from other parts of the hospital budget, for example, blood banking, to instead acquire the Pheno. Given the urgent nature of the problem of resistance bacteria, some also sought off-budget emergency capital. And we had some success at both of these, landing a number of sales for capital in 2017 and 2018. However, we had many more customers that wanted the Pheno but whose requests were off budget or emergency capital was denied.

Further, it became clear that our focus on securing capital to drive short-term revenue did not make sense for a company with our annuity profile. For example, our average contracted annuity per instrument is at least $60,000, with growing margins currently over 50% and a cash breakeven of less than 5 months. Accordingly, we believe a strategic focus on driving rapid penetration even at the expense of altering our short-term revenue picture is the best way to create shareholder value. Accordingly, instead of waiting until 2019 or beyond for capital approval, we changed course and began offering a reagent rental option to some of our customers at the end of Q2. And they're responding quite positively, unlocking many accounts.

This progress, along with building our sales team, increasing data, improving marketing and attacking challenges is showing up in our placement numbers. We now have more commercial contracts out in front of customers than we have ever had. Several of these have already closed in record time, increasing our commercial instrument installed base in the U.S. by 40% this quarter to 92 instruments. As was predicted, instruments under evaluation contract remain consistent this quarter at 193, bringing our U.S. installed base to 285 instruments. Europe ended the quarter with 55 commercial and 118 evaluation instruments under contract, bringing our global total to 458 instruments under either an evaluation or commercial contract.

It's important to note that not all of these commercially contracted instruments are live, although we expect with our faster go-live processes in place, the majority will be soon. And once live, our annuity has been strong. While there is a wide range of reagent revenue from a small children's hospital to large regional medical centers, annuities have been consistent with expectations and are on track to average contracted volume between $60,000 and $80,000 per instrument in the U.S. with Europe a bit lower.

Regardless, in both geographies, our experience has been that customers are seeing the clinical and financial benefits of the system as soon as it is an operation. We believe as medical doctors get accustomed to AST results days faster, they will never settle for slower results again. These factors create a durable annuity impervious to changes in reimbursement and we believe add momentum for our follow-on rapid test offerings.

So we are seeing great momentum: 40% more commercial units in one quarter and 50% reduction in the sales cycle. Great, but we still have a ways to go. So of course, we're not stopping, not by a long shot.

One of the things we have learned is that when you launch a novel, nonreimbursed premium-priced diagnostics platform, customers want proof. The early adopters wanted proof our technology could produce results as quickly and accurately as we claimed. Dozens of studies later, including a huge FDA trial, we've now established that we are 2 to 3 days faster than conventional testing methods while being highly accurate. The last mile for us is empowering the hundreds of customers who want our system with the clinical and financial evidence they need to cost justify the Pheno to their institutions' administration. Said another way, we want to produce the kind of evidence that can break through hospital administration intransigence, and we are making significant progress here.

In Q1, we shared the results of University Hospital of Augusta, who had seen a material reduction in sepsis-related deaths for patients who were bacteremic following their adoption of Pheno and stewardship protocols. This quarter at IDWeek, the University of Arkansas for Medical Sciences reported that use of the Pheno led to a 3-day shorter length of hospital stay over conventional methods. While we all expected great results, the UAMS team who studied this benefit couldn't be more enthusiastic about this and believe they are receiving an exponential return of the investment in our system.

Again, what they reported was that for every PhenoTest run, they saw an average of 3-day reduction in length of stay. For a little context, length of stay reductions are often financially impactful. Recall that most sepsis AST testing is done on patients infected in the hospital and, therefore, unreimbursed. This means the tremendous cost associated with patient care during extra hospital days for these patients bring no incremental revenue. Moreover, beds that could be used to treat the next revenue-generating patient are occupied. While the cost of a day in hospital varies widely, a very conservative estimate is around $2,000. So an average customer running 900 PhenoTests per year multiplied by the 3-day savings would realize $6,000 of cost avoided per patient or over $5 million per year, a 30x ROI. While individual sites may vary in their length of stay reduction, these savings are substantial. And this example does not even include lower readmittance penalties and improved patient outcomes.

We are increasingly confident that outcome studies like this one will continue to build market acceptance for the Pheno system's value and drive market adoption. We believe the next of these studies to report out will be multicenter, government-sponsored randomized prospective outcome study at Mayo Clinic, Rochester and UCLA. We are pleased to report that we have just received word that this study has concluded enrollment.

This study's endpoints include time to effective

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therapy, clinical improvement and cost. And while the study is being managed independently of us, the anecdotal evidence of positive outcomes is mounting. This quarter, the principal investigator of the study asked us 2 things: One, to support the inclusion of our study and their bid to solicit the NIH for continued support of the antimicrobial resistance leadership group; and to support of potential Phase II study that intends to extend the study internationally. This will not delay the conclusion or report out of the current study

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indicates optimism that the investigator is seeing compelling results to anchor a new larger proposal. This combined with continued reports of good customer experience with the system bodes well for the study's findings and the potential to add these 2 key reference accounts.

We are also leveraging our customer base. Look, our best salespeople are our growing cohort of happy, successful customers. And we could not ask for a more influential or enthusiastic set of initial advocates. In fact, coming out of this quarter, 5 of the top 10 children's hospitals in the U.S. are now Pheno commercial customers. Further, when you combine this list with the list of overall top hospitals in the U.S., nearly half of these top 30 institutions are current commercial or evaluation customers. We are finding that are early customers are passionate about doing more for sepsis patients and that Pheno is a big part of that. And they're translating their enthusiasm into symposium attendance, tweets, participation in articles, driving publications and so on.

Lastly, we expect a tailwind from the study recently published in JAMA. In brief, the MERINO study was a randomized controlled trial to evaluate the effectiveness of the leading empiric treatment strategy in the U.S. Surprisingly, the trial was halted due to patient safety concerns. In reviewing the data, the investigators came to a startling conclusion: current empiric strategies for treatment fail far more often than anticipated with greater mortality and morbidity than previously thought. This makes timed optimal antibiotic therapy exceedingly important. And I tell you, we are the best and, some would say, the only solution. Great, we're ready to help.

But let me summarize our commercial progress to date. First, there is no question that this has been harder and taken longer than we anticipated. While we have executed with tremendous intensity, the challenges we face have impeded our commercial success. However, based on what we are seeing, we believe we have "cracked the code." The reorganized sales team, emerging clinical and economic data and impactful marketing are all playing a role. Full GPO access combined with a streamlined sales process and reagent rental options are also having a major impact. Results are encouraging. A study showing a potential 30x ROI, a 40% increase in placements and a sales cycle shortened by 50%. We believe these are good leading indicators of what is to come.

And with that, I will turn it over to Steve to review our financial performance. Steve?

Thank you, Larry, and good afternoon. Revenue for the third quarter was $1.3 million and year-to-date was $3.8 million. This compares to $828,000 and $2 million, respectively, from the same period in the prior year. These increases were driven by Pheno system and PhenoTest BC kit sales in the U.S., Europe and the Middle East.

Cost of goods sold was $680,000 for the quarter and $1.9 million year-to-date, resulting in gross margins of 49.8% and 50.9%, respectively. Selling, general and administrative expenses for the quarter were $12.2 million and $41.8 million year-to-date. This compares with $11.6 million and $33.6 million, respectively, from the same periods in the prior year. These year-over-year increases were driven by higher personnel-related costs for evaluations in the U.S. and EMEA.

Research and development costs for the quarter were $7.9 million and $20.7 million year-to-date as compared to $6.5 million and $16.2 million, respectively, from the same periods in the prior year. These year-over-year increases were the result of additional investments in the preparation for our respiratory clinical trials and expanded scientific affairs activity.

Our net loss for the second quarter was $22.1 million and $66.1 million year-to-date, resulting in a net loss per share of $0.41 and $1.21 on weighted average basic shares outstanding of 54 million and 54.8 million, respectively. These net losses contain $3.5 million and $12.5 million in noncash stock-based compensation expense, respectively.

Net cash used in the quarter was $16.8 million and $50 million year-to-date. And the company ended the quarter with cash and investments of $181 million.

I will now hand it back to Larry to review our development updates for the third quarter.

Thank you, Steve. And now onto development progress. In Q3, we continued to make progress on a major focus area for 2018, the completion and trial of our bacterial pneumonia test kit. In preparation to begin the trial, we conducted a study of the reproducibility of the reference method, the "gold standard," so to speak, for identification and quantification of pathogens. The results of this study were quite surprising. The study showed that current methods for qualifying pathogens in lower respiratory samples used by clinical laboratories in the U.S. are not reproducible to themselves in all cases. Furthermore, we identified pathogens in 30% of samples that were missed by the standard of care method used by clinical laboratories. This presents both a near-term challenge and an opportunity. Given that this is the method to which we score our performance during the trial, we must again align with the FDA on a study design which will not unduly penalize us for superiority to current methods. We must do this before we start the trial, and we are engaged with the FDA now. It also presents a tremendous opportunity to structure the study in a way that generates a data set that will be reviewed by the FDA and indicts the current standard of care.

In addition, we are using this time to increase the robustness of our assay through the use of certain media types and a new supplier reagent. Given this progress, we now anticipate the start of the trial in Q1 2019.

While we finalized development and wrapped up clinical trial planning, we have also been advancing our go-to-market strategy. As discussed previously, we have planned an outcome study to demonstrate the clinical benefits of Pheno for use in severe pneumonia cases. We have the sites identified, IRBs underway and anticipate initiating this study in the quarter following the start of the registration trial.

Further, we continue to meet with pulmonologists and other stakeholders about their view of this product. One discovery in these meetings is that this is a case, unlike blood, where the supervising clinician is the one ordering the test and directing clinical action. This presents an opportunity to have an even more direct impact on customer experience and patient outcomes. Needless to say, this is an important new test. It will increase our current camp for North America and the EU from approximately 4 million tests or $900 million to over 6 million tests or over $1.35 billion at an average test price of $225. In addition, it will demonstrate the versatility and platform potential of the Pheno and its ability to replace significant portions of the current micro workflow.

And with that, I'd be happy to answer any questions.

(Operator Instructions) Today's first question will be from Tycho Peterson will JPMorgan.

This is [Eleni] on for Tycho. Maybe to start off, in terms of guidance, I realize near-term uncertainty keeps you from reiterating full year revenue. But I was wondering whether you can pin down the points of uncertainty. In relation to that, I know you mentioned that to roll out the expanded reagent rental program, you have had to sacrifice some revenues here. Can you give us a ballpark estimate of what the impact will be for the full year? And how much of the headwind is expected next quarter?

Yes. So look, it became clear to us that, as I mentioned in the call, that for a company like ours, to drive short-term revenue was not a good way to increase shareholder value. Our annuity profile is too good. And accordingly, we made this shift. At this point, I can't tell you how much of that revenue that we had projected early in the year will be impacted, period. I can tell you that while we expect the capital mix to adjust as we've said before, we do expect our long-term revenue picture to be enhanced. And at this time, we're not putting out a specific updated revenue guidance but are expecting a record number of new revenue-generating units to be added in Q4. I can say that.

Okay. Great. And then, separately, can you give more color on the progress you are seeing with the expanded reagent rental program? And as a follow-up to that, could you comment on the mix of reagent rental versus capital sales and how expect the funnel to look like next year?

Sure. So as mentioned in the call, we've already presented scores of these new contracts to customers. I think well over 100. And most of these customers have been struggling for months to secure off-budget-cycle capital. Good example is Lurie Children's, who literally just completed their evaluation with great results, and while they had capital budgeted already, these funds were utilized for another hospital priority. I don't know what that was. Given that, we presented them with the reagent rental agreement. They jumped right on that, and they are now active clinical customers. So we're really excited about that. And that is just one example of, like I said, 100 accounts out there that we're hoping to move forward in the coming quarters. I would also say that those evaluation contracts that we had been using earlier have really been supplanted by our customers' desire for reagent rental agreements. And so this new acquisition model, we're seeing people getting through our acquisition process not in 6, 9, 12 months but in 4, 5, 6 months, and then going live just a couple of months after that. So all in all, we're really excited about where we are. I think the reduction in the sales cycle is going to be impactful to us and the reagent rental program is a big part of that.

As far as the actual capital mix, I think it's too early to tell, but there certainly are scenarios, in particular, in North America where capital is going to be required. There are certain GPOs who demand capital. Certainly, a lot of government contracts are capitally reoriented. Certainly, we'll see more of reagent rentals but look for an update on the exact mix in quarters to come.

Okay, great. And one last one. Could you further talk to the product delay per the FDA comment for your new test for severe bacterial pneumonia? And also, how confident are you that the trial will start in Q1 2019?

So as mentioned during the call, we were surprised in our preclinical to discover the lack of reproducibility of the reference method. It was surprising. And on the one hand, it was a concern because, obviously, we need a consistent reference method. On the other hand, it presents a great opportunity for us. And frankly, we discovered this when we looked at some of our competitors who failed to get approval for that which we are going after. And as we looked into it deeper, we found that part of their challenge was the inconsistency of the reference method. So we now have through the good work of our Chief Scientific Officer and others, a reproducible reference method where we're doing, basically, highly quantitative plating, and we found that to be reproducible. We've presented that to the FDA, and we have high confidence that they will agree with us that this is a reasonable gold standard. At the same time, part of our launch plan now is to demonstrate to our customers in North America and Europe that the current processes that they're using are inadequate and that, in many cases, they are missing many bacteria that are consequential. And we've already shared this with some of our -- some of the biggest KOLs in the country, and they were shocked to see our study data and are excited to participate in this. In terms of our confidence of starting the trial, we're highly confident. I think this is a relatively small change, and we think that FDA will be enthusiastic about this. They're keen to improve patient care, and I think demonstrating that we do that will be a positive for them, and they'll be certainly on our side here.

Next question will be from Brian Weinstein with William Blair.

Larry, can you be a little bit more specific just about how the funnel is coming together at this point? Is there -- in the past, you've been willing to kind of talk about kind of numbers that you guys are seeing kind of throughout the funnel. Can you just give us some idea beyond kind of at the top of the funnel how it's starting to come together?

Sure. So we have approximately 750 customers at the top of the funnel in North America and many more than -- and many more -- hundreds more, I'd say, in EMEA. In North America, we believe that the combination of new outcomes data and the removal of the capital hurdle in certain cases will allow us to accelerate the pace of progress of these prospects through the funnel. In EMEA, the drivers are really country specific but generally require some sort of national reimbursement studies or guidelines, and we're making steady progress on them. So Brian, I think what we're seeing is an acceleration of customers from the top of the funnel through to acquisition. And I would expect that to really accelerate out of this quarter. Remember, this is the first quarter where we changed the way that we sell, and we already saw a significant increase from what we were seeing before. And my expectation is that the level of that increase into next quarter will be even more substantial. So I think we'll end the year quite strongly in terms of the number of customers that we bring through to acquisition. And I'd say also quite importantly, the number of customers that we have up and live in the U.S. and Europe, we want that to grow too. And we're seeing the amount of time that it takes connect -- decrease every week, frankly. We recently finished our last installation with a hospital in Florida. And I think we -- from the time that we started to the time that we got to blind, it was less than 2 months. If we continue to see that kind of thing, we'll see a lot more customers through the funnel and live and the resulting reagent revenue.

So if I'm thinking about what you've said correctly, and please correct me if I'm wrong here, so the instruments under evaluation in the U.S. or North America, as you say, I think is 193. So is it fair to say that your expectation would be that all of those instruments would be commercial kind of within the next two quarters? Am I thinking about that correct?

Well, look, Brian, I don't want to give specific guidance, but I would say that we would expect a significant number of those instruments in the next couple of quarters to convert. Now to be a little more specific, I would expect us to continue to see evaluations. So we're going to be adding to that evaluation number some. Customers are still going to require them, and we are seeing a lot of customers skip evaluation entirely. So what I would expect to see is a number of customers in Q4 convert, either those will be customers that have previously done evaluations or they will have skipped eval entirely and gone to a direct acquisition. But the kind of numbers that you're talking about are the kind of numbers that we're expecting. So I think yes.

Okay. And then, specifically, you mentioned that the UCLA and Mayo study had completed enrollment. And maybe I just missed it, but did you have time for when you expected to actually see the results from that?

So look, the way that the study works is that they completed enrollment last week. And they followed those patients for 90 days after that patient has been tested on the Pheno. And they're looking for things like economic outcomes and health outcomes and all kinds of stuff like that. So 90 days from the time that the last patient concludes the data has been completed, and then at that point, the ARLG and the PI will begin evaluating the data. And we're hopeful that what we see is a rapid release of early findings. And as we mentioned on the call, we expect those findings to be pretty darn good.

Yes. Okay. And then, did you mention -- I don't think you did anything about sample prep device you were going to start that before -- that trial before this call. Is there any update on that? Or does that kind of get pushed out a little bit here as well?

Well, the sample prep device is done, Brian, and we now have it running. I think we've manufactured like 40 of them, and they're going to be an integral part of the U.S. clinical trial as well as the international randomized controlled trial for the respiratory product.

Next question will be from Alexander Nowak from Craig-Hallum Capital Group.

This is William Fafinski on for Alex. My first one is, what sort of customer feedback are you hearing from the University of Arkansas data? The data looks impressive, but is everyone still asking for that randomized study?

So the UAMS study, the good news on the UAMS study is that it is prospective. It's our first prospective trial, and I think given that, it's quite exciting for the customers, and we expect to use it to good effect in the market. That being said, we have a big -- a large number of studies that are ongoing, not only the Mayo study but previously discussed randomized prospective trials that we have going on, the first of which will kick off, and that -- the focus of that is on urosepsis. And the second trial, it compares us to molecular methods. And both of those are kicking off very soon, and both of them are prospective and randomized.

Perfect. I guess that kind of leads into my next point. Once that Mayo, UCLA study reads out, we're going to have it first randomized prospective study. If that data as positive, assuming it is, is there anything else you could think of that the market might need before they start buying the system? Or at that point, does it really come down to budgeting?

Look, my view on this is that we already have gathered one of the most significant bodies of evidence around the diagnostic that there is. Our marketing is very strong. Our health economic outcome models are stocked full of details and demonstrate a tremendous ROI. And that ROI is not just something that we're pulling out of the air. We -- like with the UAMS data, we're demonstrating that we can save hospitals lots of money and frankly, with what we saw at University Hospital of Augusta, lots of lives too. And just this -- just yesterday, I heard that our newest customer, Tampa General, saved the life of a 9-day-old baby, which was to me extraordinarily exciting and encouraging. And we're seeing that going on across the country. And I think that the more studies that we do, the better off we'll be. But the more anecdotes that our customers are tweeting out and putting on Facebook, that's also, frankly, as valuable because a lot of customers in Florida are going to say, "Well, why the hell don't I have a Pheno? And why aren't I saving that 9-day-old baby?" And accordingly, I think, it's just about getting critical mass and getting the ball rolling, and I think we're -- if we're not there, we're certainly very close.

Absolutely. One more if I could just sneak it in. And that's -- any update on the RIHN in France? I know you mentioned on your last call that this award could go -- or it could allow for greater Pheno adoption. Is there anything you've heard there?

I don't want to insult the French government, but I got to say that [ariation] has not been announced yet. It was supposed to be announced a couple of months ago, but they're having some political difficulties over there right now. And ariation is one of the things that has not been announced. The good news is that those who did not receive it have already been notified, from what I understand. So -- and we were not notified that we didn't get it so we feel confident that we'll get it. It's just a matter of time.

(Operator Instructions) Next question will be from Bill Quirk with Piper Jaffray.

So first question, Larry, in terms of the new reference method for the lower respiratory test. I know BMRU headed TEDU sequencing. Is that the likely outcome here? And if so, does that also imply that you're going end up filing a de novo 510(k) in support of that submission?

Yes. So thanks, Bill. So 2 things: One, the current method is, in general, is that people use something called a quadrant method for analyzing respiratory samples. That's probably the most common method. Although, there's many methods used across the country and around the world. That's the method that is clearly nonreproducible. And that was a method that was used in some of the other studies that we're referencing. The method that we're going to use is also a manual method, and frankly, no matter how you read that out, whether it's with multi-Doppler with sequencing, you still need to quantitatively streak that plate and understand how much bacteria you put on and how much you're getting off and ensuring that you're collecting all the colonies that have grown, and that was really the problem. We're not -- we're just doing it in a different way and have developed a method that we know is now very reproducible and have put it to the FDA. We're likely to actually do the identification using MultiDop. It's a much more standard method and a method that's, frankly, more reliable than sequencing and already approved clinically in the U.S. Accordingly, we are not going to need to file a de novo 510(k). As a matter of fact, this will be a down-class from our prior product. So our prior product was a de novo 510(k). This will just be as straight 510(k).

Okay, Got it. Perfect. And then, with respect to the deal funnel, are there any placements or, I should say, installs that are working their way through the evaluation process that were originally teed up as capital but have transitioned to reagent rental? And if so, is there any way to quantify that? Or any -- even rough ballpark, yes.

Yes. I can -- the example that I gave earlier on the call was Lurie Children's. So that was at a hospital that never has a problem with capital. And interestingly, for the first time ever, they said, "We're not going to spend any more capital this year." And that was a surprise to everybody. And so we could have waited and seen if they opened up the capital pipeline again or offer them a reagent rental agreement. We made the choice to offer them a reagent rental agreement. We think that's the right thing to do for patient care and, frankly, for us economically. And they were excited to get it. They signed it, and we're off and running. I can't quantify how many of those have shifted. We clearly still have a number of accounts that are -- for which we're going after capital. And as Steve said, for example, all of our HealthTrust prospects can only purchase from us for capital. So many of those will be capital deals still. So we'll see what it looks like, Bill.

Bill, there's actually -- there's a handful of those that were in there for capital, and we're actually using it as a bridge to 2019. So I think we'll see that trend as well. It's certainly in our best interest to get them up and running clinically as soon as is possible. But we'll do the reagent rental for a shorter period of time, and then use that as a bridge for capital budget when their budget is released in '19.

Got it. Okay. And then just lastly from me. Historically, kind of getting integrated into LIS systems was one of the reasons that it was taking longer for people to go live. Just a real quick update there, kind of how are we doing with the major systems, any of the big majors left to go?

No, we have interfaces for all of them now. And as I mentioned, Tampa General was our last one. And I think we completed that in record time, less than 2 months. So that is a marked difference from where we were even 6 months ago where it was taking 6 months for us to go live. So it's good news, and we're seeing a real acceleration.

At this time, this will conclude today's question-and-answer session. I'd like to turn the conference back over to Mr. Lawrence Mehren for any closing remarks.

So thanks to all -- all of you who are assisting us in this effort to improve the way that people with infectious diseases are treated. First, thanks to our excited and, I would say some would say, fanatical customers. You're spreading the word and saving lives. It's an inspiration to see how hard you are fighting. Thank you.

To our fantastic team who are working their tails off to change the practice of medicine, thank you, our thoughtful board guiding us in this effort.

And finally, to our steadfast shareholders. You know I speak to you almost every day, and I know how hard it is to remain confident as we fight for the shore, but I can assure you of 2 things: One, that this team is giving it's all and will continue to do so. We are all rowing hard and rowing together. And second, that the shore in sight. We are now seeing the beginnings of that hard labor.

And so I once again reiterate that we believe this is not a story of if but of when and counsel patience. Changing the practice of medicine is hard and always slower than anyone would like. I still recall seeing an MRI at Mayo Clinic in the 80s, but it was a full 10 years until MRIs were ubiquitous. Now we can't imagine a hospital without one. I believe we are on the same path with the Pheno. We see evidence that we are rapidly becoming standard of care, and as that designation solidifies, the breadth and pace of adoption will continue to increase until a few years from now you won't find a hospital without a Pheno.

We are excited to see this unfolding and expect great things to come. Thank you.

The conference has now concluded. We want to thank you for attending today's presentation. And at this time, you may now disconnect.