Accelerate Diagnostics, Inc. (NASDAQ:AXDX)

Fascinating medical device company. Accelerate sells a device to hospitals that tests for bacteria and fungus infections. The status quo is to run a test on a patient, send it off to a lab, and get the response back in 2-3 days. With this machine the doctors can get a response back in a matter of hours. And that makes a big difference in treatment.

Sepsis is the body's response to a bacterial or fungus infection. 270,000 people die from sepsis every year in the U.S. Also sepsis costs hospitals an estimated $27 billion dollars each year. It's the #1 cause of hospitalizations in the U.S. Most of these sepsis deaths are preventable if the doctors know what the infection is.

Globally sepsis kills 8 million people every year, including 3 million children.

Status quo is to run the test, send it off to the lab, get it back several days later. Often too late to help the patient. Accelerate Diagnostics wants to speed up this process. Cut the wait time by 75%. 40+ hours faster.

Company has the only cleared FDA solution for doing this test at the hospital.

Reminds me of Intuitive Surgical because the company has a razor-and-blades business model. You sell the device, a one time purchase, but most of your money is recurring revenue from the use of the device. Thus it's very important to have a large installed base of customers. Once they have the machine, hospital is locked in. They don't say this but it's probably a good idea to sell the machine at cost, or even below cost, so you have the hospitals in your network.

Right now they are at the stage of their business where they go from selling to the top hospitals (influencers) to selling to all hospitals. This year they are projecting 300-400 instruments sold. Consumables (the recurring revenues from the use of the device) is growing by 150%.

They just made a CEO change. Previous CEO was the guy who got this device approved. More of a scientist-type guy I think. Now they're switching to a sales guy. They hired the guy who was the CEO of Roche Diagnostics. Roche is a huge company ($275 billion market cap) so to have the CEO of their diagnostic division step down to become COO of this tiny company is a huge signal to me. He really thinks he can drive this business forward. They hired him as COO in September so he can spend a few months learning the business before he becomes CEO next month. He wants to put this device in every hospital in the U.S. There are 5564 hospitals. Right now they've only got 200 or so so huge runway of growth.

A guy on the board just bought $136,000 worth of shares at $14 a share.