Nanosphere announced this month that its former vice president of sales and marketing, Michael McGarrity, has taken over as CEO of the company, replacing Bill Moffitt. With the change in leadership, the company said that it is entering a new phase, focused less on technical and scientific development and more on commercial growth and cultivation of its customer base.
"I have spent virtually all of my time building that focus with our sales representatives, our customers, our market in and around our competition, and I think that it's probably a normal progression of a company like ours, we spend a lot of time working on the technology and then take a 180-degree focus turn," McGarrity said during the company's 2012 fourth-quarter earnings call Feb 13.
In the call, Nanosphere reported record growth, though slightly below its earlier projections, for the fourth quarter of 2012 — 56 customer placements and $1.6 million in revenue, an 87 percent increase over placements in the final four months of 2011.
Nanosphere placed 166 instruments overall in 2012, a 163 percent improvement over the previous year, bringing its total installed base to 272. The company's total revenue for 2012 was $5.1 million, an increase of 100 percent over 2011.
The company received US Food and Drug Administration 510(k) clearances for its C. difficile and 2C19 tests during the final quarter of 2012. It also received FDA clearance for its blood culture gram positive test in June of 2012, and is planning to submit its gram negative blood culture and enteric pathogen assays by the middle of this year.
McGarrity and Nanosphere's chief financial officer Roger Moody said in the call that growth in placements and revenues over 2012 as a whole was driven predominantly by US-based microbiology laboratories adopting Nanosphere’s platform and growing menu of infectious disease tests.
Sales of systems and consumables used in testing for gram positive blood stream and respiratory infections specifically drove the firm's fourth-quarter revenue growth.
McGarrity said that validation of Nanosphere's blood culture and respiratory virus assays at customer labs is "progressing well," adding that about a third of the firm's 150 US microbiology customers have gone through the validation process for the gram-positive assay, and a subset are using the company's respiratory virus test as well.
According to McGarrity, Nanosphere's customers fall into different categories and require different validation strategies and subsequent timelines for test introduction.
"These three categories [of customer] lead to a normal distribution of time utilization and revenue. And while [some take longer than others] they generate compelling data to be shared with future adopters of our tests," McGarrity said. "This data illustrates benefits ranging from antibiotics stewardship guided by our unique resistance markers preserving efficacy of critical last line therapies, earlier rule-out of non-life-threatening contaminants, and mobility and mortality benefits for multiple disease states independent of coexisting conditions," he said.
"We have a number of abstracts and publications pending from these validations that will provide a stream of additional data, to drive adoption of our test," McGarrity added.
Last year, Moody told BioArray News that Nanosphere expected the $26.9 million that it raised in its July 2012 public offering to secure the company's future, seeing it through the regulatory approval of its infectious disease test pipeline and funding commercialization that would bring the firm to the break-even point (BAN 7/31/2012).
In this month's earnings call, Moody said that Nanosphere saw a net loss of $32.9 million in 2012, ending the year with $33.1 million in cash — enough to see the company through the next 12 months. He also said that Nanosphere was now evaluating some "debt financing structures" to allow it to operate through the achievement of positive cash flow.
According to McGarrity, Nanosphere's customers are "clearly positive about the results they are seeing in real-world application" of the company's platform and expanding test menu.
"We have had multiple customers who have documented cases where critical clinically actionable information from our test had a direct, measurable effect on patient outcomes," he said.
"All of this speaks for the standard changing aspect of what we are delivering to our customers. While it is an overused term, we are clearly changing the paradigm of diagnosing and treating bloodstream infections. It should also be noted that the sensitivity and specificity of our gram-positive blood culture test has been exceptional compared to gold standard method comparisons," he added.
While the company reported record growth for the fourth quarter of 2012, the numbers reflected a shortfall from Nanosphere's guidance for the quarter.
McGarrity and Moody said that this discrepancy was due to "softness" in the European market.
While placements outside the US at one time made up around 50 percent of the company's customer growth, that contribution has now retracted to about 15 percent, Moody said in the call.
Recognizing that shift, Moody said the company has tightened its guidance for 2013 from earlier projections, reflecting a narrower focus on US microbiology customers. He said Nanosphere expects to make between 200 and 250 placements in 2013 overall, between $13 million and $15 million in revenue, and between 45 and 50 placements in first quarter.
"Initiating progress in the EU is clearly taking longer than we anticipated, but we believe we will see progress in 2013," Moody said.