Nanosphere, Inc. (NSPH)

Q2 2012 Earnings Call

August 7, 2012 10:00 AM ET


Bill Moffitt – President and CEO

Mike McGarrity – Vice President, Sales and Marketing and CCO

Roger Moody – Vice President, Finance & Administration and CFO


Brandon Couillard – Jefferies

Bill Quirk – Piper Jaffray

Scott Gleason – Stephens

Matt Dillon – Roth Capital



Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Nanosphere Earnings Call.

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Nanosphere would like to state that certain statements made during this conference call, which are not based on historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results, events or developments to differ materially from those impressed or implied by these forward-looking statements.

Such factors include those described from time to time in Nanosphere's filings with the United States Securities and Exchange Commission. Please note that Nanosphere undertakes no duties to update this information.

I would now like turn the presentation over to your host for today, Mr. Bill Moffitt, Chief Executive Officer. Please proceed.

Bill Moffitt

Thank you Clarissa. Good morning everyone and thanks for joining us for Nanosphere's Investor Conference Call covering the second quarter of 2012. In a few moments I'll turn the call over to Mike McGarrity, Chief Commercial Officer and Roger Moody, Chief Financial Officer. But first I'll give you my perspective on our progress.

There is one primary point today. With the clearance to market our bloodstream infection Gram-Positive Assay our business has achieved an inflection point that will enable us to fulfill the promise of this technology and our company.

In a few moments Mike McGarrity will review the significance of this assay and its impact not only on our business but also on patient care. We stand alone in the market with a test that addresses the clinical requirements for early diagnosis of sepsis, the number one driver of hospital costs and death.

The value proposition for this assay is clearly understood by the market and we expect it to fuel an increase in Verigene system placements over the coming quarters. Moreover our customers are excited about this assay and the pipeline of products that we have coming to the market over the next quarters that will continue to address critical issues in patient care.

Before providing you an update on our progress with that pipeline let me turn the call over to Mike to update you on our progress in the market, our plans for expansion of our commercial organization and the significance of the recently cleared bloodstream infection Gram-Positive Assay. Mike?

Mike McGarrity

Thanks Bill. We had 25 new customer placements in the second quarter bringing our installed customer base to 166 worldwide. The FDA clearance of our Gram-Positive blood culture test at the end of Q2 is serving as the placement catalyst we anticipated in the U.S. In addition, our recent exhibition at the American Association of Clinical Chemistry and the associated excitement by this audience served to confirm that we will continue to build our pipeline in the coming quarters.

We are focused on building this customer base and moving them through the validation process to drive increased utilization. The profile of our customer base and pipeline is represented by the full spectrum of hospital microbiology labs, from community based to academic teaching centers. The considerable awareness and demand for this assay is driven by the fact that sepsis is the leading cost of inpatient stay in the U.S. at over $15 billion annually, carrying a mortality rate of one in six patients.

We are the only assay on the market that can provide broad identification of bacteria and drug resistance and a sample to result on-demand test. Recently cited publications demonstrated the benefit of reduced mortality in the intensive care unit from one in two patients to one in 10 as well as a 6.2 day reduction in length of stay saving over $21,000 per patient.

Clearly the value proposition of our blood culture test can save lives, money as well as efficacy of critical last line therapies reducing the risk of resistance. As we update you today we are upgrading our current VerigeneSP customers with new software to run the blood culture assay and are providing the validation support to them as well as new customers coming online. The significant and comprehensive data generated during the FDA clinical trials serves as validation to the sensitivity and specificity of our assay.

Customers are required to conduct their own confirmatory validations and we will begin to get visibility to the timing from installation, training and validation to provide guidance on time to utilization in the U.S. for our new customers. On average we would expect this to mirror similar adoption profiles of 90 days in the U.S. and 120 days in our international markets. These efforts underway in Q3 will serve as the basis for the corresponding revenue ramp beginning in Q4 as customers go live.

As a result of initial market response and the significant opportunity this presents we are in the process of expanding our direct U.S. sales force as well as the technical and clinical resources to support our customer base. The size of this sales and customer organization will double over the next few quarters.

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