OpGen, Inc. (NASDAQ:OPGN) Q1 2023 Earnings Call Transcript May 15, 2023

OpGen, Inc. beats earnings expectations. Reported EPS is $3, expectations were $-1.2.

Operator: Welcome to the OpGen First Quarter 2023 Earnings Call and Business Update. Before we turn the call over to OpGen’s management, please note that any forward-looking statements made during this call are based on management’s current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. OpGen does not undertake any obligations to update publicly any forward-looking statements to reflect events or changed circumstances after this call. For a discussion of factors that could cause results to differ, please see the company’s filings with the Securities and Exchange Commission, including without limitation, the company’s annual report on Form 10-K for the year ended December 31, 2022, and its reports on Form 10-Q and Form 8-K.

Joining the call today are Oliver Schacht, OpGen’s President and CEO; and Albert Weber, its CFO. Now I would like to turn the call over to Oliver for introductory remarks.

Oliver Schacht: Thank you, operator. And thank you all for taking the time to join today’s call. We are pleased to have this opportunity to provide a business and financial update and will follow with a Q&A Session. On our last call, we discussed reaching key milestones, upcoming near-term catalysts, as well as continued commercialization initiatives. Business advancements have carried on from late 2022 into the first quarter of 2023 and year-to-date. And we believe OpGen is in a good position to increase revenues. We started off the year by announcing that our subsidiary, Curetis met several key milestones in the collaboration project with a Foundation for Innovative New Diagnostics or FIND. This achievement triggered an undisclosed milestone payment per the terms of the agreement.

We’re excited about our FIND collaboration accomplishments and recently announced that we successfully achieved all remaining key milestones and completed the deliverables as planned. In addition, our Austrian subsidiary, Ares Genetics, announced that they were granted a key patent in China. The patent covers the identification and diagnostic use of genomic variants for the diagnosis of antibiotic resistant bacteria. We welcome the decision by the Chinese patent office as we believe it accentuates the strategic value of our intellectual property portfolio. We also announced that Ares Genetics moved to a new Vienna location. The move is one of several milestones that will help support our further growth plans for the product and next-generation sequencing or NGS service business.

With recent growth in our RSDB database asset from 102,000 data sets to over 130,000 data sets in Q1 of this year alone, we believe we are well positioned to continue executing on our plans to expand and improve our menu of accurate AI models to predict antibiotic susceptibility from genomic. I will now turn the call over to Albert Weber, OpGen’s Chief Financial Officer. He will review financial results for the first quarter of 2023 and recent financial developments, Albert?

Albert Weber: Thank you, Oliver. And welcome to everyone on the call. I will discuss the first quarter highlights and financial results and our thoughts and guidance for the remainder of 2023. OpGen’s first quarter revenue for 2023 was approximately $913,000, an increase of approximately 94% over the company’s revenue of $470,000 in the first quarter of 2022. Compared to the fourth quarter 2022 revenue of $722,000, we achieved a 26% increase in the first quarter of 2023. This increase was primarily due to revenue generated from the FIND collaboration project, Unyvero product sales, revenue we received under our Acuitas AMR Gene Panel commercial contracts, as well as Ares related service revenues. For the upcoming quarters in 2023 we will continue to work on generating revenue from existing commercial agreements as well as from new collaborations and customers.

Looking at our operating expenses, our total operating expenses decreased in the first quarter of 2023 to $6 million compared to $6.3 million for the same quarter in 2022. Our first quarter 2023 research and development or R&D expense was $1.8 million compared to $2.3 million for the corresponding period over the pre of the previous year, i.e. a 22% reduction. Our first quarter 2023 general and administrative or G&A expense was $2.4 million compared to $2.6 million for the corresponding period of the previous year or an 8% reduction. Our sales and marketing expenses stayed fairly consistent at approximately $1 million in the first quarter of 2023 compared to $1.1 million in the first quarter of 2022. Now turning to our cash position. We end at 2022 with approximately $7.4 million cash and as of the end of first quarter 2023, we had a cash position of approximately $7 million.

The company continues to closely monitor its cash consumption rate while also evaluating potentials future financing opportunities. In January, we announced the closing of a public offering with $7.5 million of gross proceeds, and recently on May 4, 2023, we announced the closing of another public offering with $3.5 million of gross proceeds. We have been and continue to be using proceeds from these offerings for the following: Support continued commercialization of the FDA-cleared Acuitas AMR Gene Panel test in the U.S., commercialize our products with a focus on the Unyvero platform and diagnostic tests, support further development and commercialization of the Ares Genetics database and related service offerings, support direct sales and marketing efforts to the customers and collaborators for our products and services, invest in manufacturing and operations infrastructure to support sales of our products, continue to invest in R&D for the Unyvero A50 and A30 platforms and products, and the repay certain outstanding indebtedness of the company and its subsidiaries.

As mentioned on previous earnings calls, we have met our debt repayment obligations from the first tranche of our EIB debt pool by April this year. There are now only two additional tranches of €3 million, and €5 million in principle plus accumulated and deferred interest that become due in June, 2023 and June, 2024 respectively. We continue to be in an active dialogue with the EIB about potential opportunities to restructure the upcoming repayments. At this time, we reiterate our guidance that we provided in our full year earnings call at the end of March for an expected net cash consumption of around $4.5 million to $5 million per quarter from our operations in 2023 and an expected full year 2023 revenue range of $4 million to $5 million.

We continue to see revenue growth opportunities for our Unyvero products and our genetic services globally, and especially here in the U.S. after having closed the distribution partnership for our Unyvero products with Fisher Healthcare as recently enough. Oliver will share some further details of this distribution partnership with you later on this call. We expect to see traction and momentum building for our Unyvero universal sales in the U.S. under this distribution partnership in the coming quarters and beyond. We have also recently signed new contracts with customers for further Unyvero Systems placements here in the U.S. and are making good progress in the commercial rollout of both the Unyvero and Acuitas products. We have also seen Ares Sequencing Services now being offered in the U.S. market as well with repeat customer orders coming in consistently on a weekly basis during the first and into the second quarter of this year.

Sample processing has quickly become routine for our local team. Taken together our commercial funnel has proposals to customers with substantial dollar value annually clearly indicating significant revenue growth potential for OpGen. After we had recognized approximately $300,000 in revenue from the FIND collaboration in 2022, we recognized more than $400,000 in revenue from this project in the first quarter of 2023. With the expansion of the first phase of this product and – of the first phase, we anticipate recognizing another approximately $180,000 for the additional work packages in the second quarter. The teams at FIND and Curetis has already initiated discussions on a potential follow-on project and a new contract looking at full product development of an antimicrobial resistance or AMR test for blood culture samples in low- and middle- income countries or LMICs. This would include clinical trials, regulatory submissions and seeking market approvals as needed for the specific LMICs and preparing for commercial launch down the road in these countries.

Also, during the first quarter of 2023, we have seen initial revenue generation from Unyvero System placements, and pneumonia cartridge sales under our BioVersys collaboration for their BV100 clinical trial. We expect further systems to be added as more trial sites come online and expect revenue recognition under that collaboration to continue and grow during 2023 and 2024 as their clinical trial progresses. Non-dilutive financing opportunities remain a strategic priority for option with multiple opportunities around Unyvero A30 and Ares already submitted and in a various – hello? I continue, sorry. Non-dilutive financing opportunities remain strategic priorities for OpGen…

Oliver Schacht: Operator, can you check if his line has dropped?

Albert Weber: Hello? Can you hear me? Hello?

Operator: We can hear you, Albert.

Albert Weber: Okay. Then I’ll continue. Oliver? Non-diluted financing opportunities remain a strategic priority for OpGen with multiple opportunities around Unyvero A30 and Ares already submitted in various stages of review and further submissions for additional non-dilutive funding opportunities in preparation. We look to complement these opportunities with equity funding’s that will extend our collaboration potential and allow us to partner with organizations like FIND, BARDA, European Union and other funding bodies. It is key to understand that none of these non-dilutive funding opportunities provide for full 100% funding of the respective projects. Typically, funding quotas range from somewhere in the 14% to maybe 70% or 80% ranges. It is therefore vital to ensure that OpGen’s balance sheet can provide such co-funding’s as otherwise non-dilutive funding would not likely materialize. This concludes the financial update. I will now turn the call back to Oliver.

Oliver Schacht: Thanks Albert. Before we turn to the Q&A, I would like to highlight our progress so far in the second quarter of 2023. OpGen recently completed two interim milestones as part of Curetis collaboration project with InfectoGnostics under the PREPLEX brand. During this project, novel markers were identified two of which are pathogens of concern on the World Health Organization’s list. These markers were also confirmed and validated using our proprietary RSDB database. This success could allow for additional collaborative work being conducted under the PREPLEX project, which could provide additional funding of a few hundred thousand dollars in the coming years. We signed a short-term expansion of our R&D collaboration with FIND, which originally started in the fall of 2022.

Work already completed under the collaboration will be expanded by three work packages, increasing total project volume to up to about $913,000 in revenue. In April, we submitted a De Novo classification request to the FDA, seeking marketing authorization for our Unyvero UTI panel following the successful completion of our clinical trial. This marks a major milestones and we’re looking forward to working closely with the FDA during the interactive review for the Unyvero UTI panel, which we hope will become the first high multiplex molecular diagnostic test for urine samples granted by the FDA. The FDA has recently sent confirmation already that the submission is complete and that they have initiated their substantive review. We were pleased to learn that the lead reviewer on the Unyvero UTI submission will be the same lead reviewer who had worked closely with OpGen on the Acuitas AMR Gene Panel submission and eventual FDA clearance.

Also in April, we announced that OpGen has entered into a non-exclusive distribution agreement with Fisher Healthcare, a part of Thermo Fisher Scientific. The agreement is for the distribution of OpGen’s Unyvero A50 platform and in vitro diagnostic tests for bacterial pneumonia as well as its currently research use-only test for urinary tract infection, which we expect to become FDA-cleared in the future. We’re very excited about the strategic distribution partnership with Fisher as we believe it will increase our Unyvero A50 platform, commercial presence and footprint across the U.S. due to Fisher’s strong position in the relevant markets. We view this expansion in our commercial channel strategy as the next step towards driving commercial adoption of Unyvero in the U.S. and achieving our revenue growth objectives in the coming years.

Since Fisher Healthcare has existing contracts with many of the relevant target accounts already, we believe that there is a potential for the sales cycle to be shortened and the hospital onboarding process to be streamlined. Our momentum during the first quarter has carried over to the second quarter of this year. In April alone, we’ve announced several key achievements for the business. A few other milestones to look out for include, but we teamed up with a strategic advisory firm to support a Unyvero A30 specific corporate business development campaign in China, where we believe there is an attractive opportunity to partner with and possibly license or otherwise monetize the A30 platform. After completion of their due diligence on our platform, they are now launching the strategic outreach to a target list of identified Chinese corporate partners that might be interested in a strategic deal around the Unyvero A30 platform for China.

We continue our weekly contact with our existing Chinese partners for the A50 platform, including upcoming in-person meetings in both Germany and in China during the month of May, and they are prepared to move forward with their clinical studies and work towards a final submission for review by the National Medical Products Administration or NMPA. We expect the overall process to obtain clearance from the NMPA to take somewhere around 24 to 30 months per guidance from Chinese regulatory advisers to our partner. We believe OpGen’s near-term catalysts and milestones, along with the continued commercialization of our existing approved product, sets OpGen on a path to increase revenues. We look forward to updating everyone on our developments. Thank you for your continued support and for participating in this afternoon’s call.

I would now like to turn the call back to the operator for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes Pooya Hemami with Edison Group. Please proceed with your question.

Operator: Thank you. Our next question comes from Yi Chen with H.C. Wainwright. Please proceed with your question.

Operator: Thank you. That is all the time we have today. I will now turn the call back to Oliver for closing remarks.

Oliver Schacht: Well, thank you, everyone, for joining us today. Please visit the Investors section of our website or our SEC filings for updates on the company. Thank you very much.

Operator: Thank you. And with that, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.