OpGen, Inc. (NASDAQ:OPGN) Second Quarter 2022 Earnings Conference Call August 11, 2022 4:30 p. m. Eastern Time
Participating companies
Alyssa Factor – Investor Relations Associate, Edison Group
Oliver Schacht – President and Chief Executive Officer
Albert Weber – Chief Financial Officer
Conference Call Participants
then Romanoff – Edison Group
Operator
Ladies and gentlemen, welcome to OpGen’s 2022 quarter announcements and earnings call update. Today, OpGen’s control will provide an update on the company’s existing activities and long-term prospects. After the comments prepared through OpGen, there will be a live Q&A session. A reminder, this convention call is recorded today, August 11, 2022, and all participants are in listen-only mode.
At this point, we will pass the call to Alyssa Factor, OpGen’s IR representative, to provide the opening statement. Please go ahead.
Factor Alyssa
Hello and thank you Operator for the presentation.
Before we begin, I would like to emphasize that any comments made through the control of this convention call may involve forward-looking statements relating to OpGen’s operations and long-term effects, adding its subsidiaries, Curetis and Ares Genetics. I urge you to review OpGen’s filings with the Securities and Exchange Commission, adding, without limitation, the Company’s most recent Forms 10-K and 10-Q for the current quarter and the first part of 2022 to be filed with the SEC, which will identify express points that may also only cause actual effects or occasions to differ materially from those described in the forward-looking statements.
Factors that may affect the effects of the Company include, but are not limited to, the good fortune of the Company’s marketing efforts and partnership strategies; your ability to develop, seek and download regulatory clearance and to accurately, timely and profitably advertise your product and service offerings; the ability of the Company to fortunately continue to achieve the synergies expected from the business mix carried out through the Company with Curetis and to implement its advertising strategy; the effect of the ongoing global COVID-19 pandemic on the Company’s business and operations, as well as on the capital markets and general economic conditions; the Company’s use of recent financing proceeds, as well as its ability to access more financing in the future; the Company’s ability to repay its debt under its loan to the European Investment Bank; the rate of adoption of its products and facilities by hospitals and other health care providers in general, as well as during the geopolitical situation and the ongoing COVID-19 pandemic, in particular; the effect of military action in Russia and Ukraine on its distributors, affiliates and service providers; the effect on the Company’s business of existing and new regulatory requirements; and other economic and competitive factors.
The content of this convention calls for time-sensitive data that is not accurate until the date of this live convention on August 11, 2022. The Company assumes no legal responsibility to revise or update the statements to reflect occasions or cases after the date of this call for agreements, except as required by law.
Today, Oliver Schacht, president and CEO of OpGen, and Albert Weber, its chief financial officer, signed up to the call.
I will now call Oliver Schacht for his introductory remarks.
Olivier Schacht
Thank you Alyssa. Thank you all for being with us this afternoon. Albert and I are excited to be here together in Rockville, at OpGen’s world headquarters, and we look forward to sharing our progress. We are very happy with our strong functionality. the moment quarter and advances in the first part of 2022.
Over the past year, we have focused on commercialization and our efforts have materialized through new and existing partnerships. We look to the future to update everyone on Options’ milestones and achievements in this call to highlight our continued growth.
Today, I’ll start with a summary of past highlights revealed in the first part of 2022, followed by recent updates on our products and R pipe.
We need to start by noting that OpGen has entered into two advertising contracts for our Acuitas AMR gene panel in the United States with two primary hospitals. Our first advertising agreement was reached in June with a large company of more than 1000 beds and of great reputation. training hospital in the northeast. And the agreement so far signed in July with a primary children’s hospital with more than 400 beds in the Midwest.
As a reminder, the FDA-approved Acuitas AMR gene panel is a complete panel of 28 AMR genetic markers that will be tested on remote bacterial colonies of 26 other pathogens in just 2. 5 hours. This is an exciting step for OpGen, as they set the level for More Advertising Contracts to come, and there are several active proposals for advertising contracts versus the accounts we plan to deliver here at the time of part of 2022.
Last quarter saw the healthiest line of partnerships and collaborations in the lifecycle of our Austrian subsidiary Ares Genetics. One such collaboration includes extending our Ares collaboration agreement with Sandoz, the world’s leading provider of generic antibiotics until January 31, 2025. In the initial phase of the collaboration, Ares developed a virtual anti-infective platform, which combines an established practical microbiology laboratory with complex bioinformatics and synthetic intelligence strategies to help identify effective antimicrobial compounds or combinations of compounds to combat critical pathogens.
Sandoz uses it to make trading and portfolio decisions. In the next phase, either party plans to leverage next-generation RS sequencing, or NGS, and bioinformatics technologies to focus more on antibiotic control by enabling genomic surveillance of resistant pathogens. AMR is guilty of approximately 1. 3 million deaths worldwide each year, and this collaboration is a major step toward reducing that number by providing the data needed to prescribe antibiotics as it should be.
The third major milestone for Ares Genetics was the publicity launch of a number of new genome sequencing facilities on a global scale. To help minimize the spread of AMR pathogens, Ares announced the expansion of its announcement that provides research and sequencing facilities for microbiologists, healthcare, infection prevention and specialists. Services come with ARESid and ARESiss Express. ARESid is a sequencing service for the accurate and deep detection of commensal pathogens or environmental microbes directly from local patient samples or environmental samples.
ARESiss leverages the clinically validated Ares platform from whole genome sequencing of bacterial isolates and reduces response times by more than 80%. as it should be and efficiently. The first orders for ARESiss Express and ARESid have been received. This quarter we have made significant progress in our clinical trial of the Unyvero urinary tract infection panel.
At the beginning of the current quarter, we announced the effects of an interim investigation on the first 150 samples from U. S. patients at the 3 control sites for the ICU panel. Interim investigation showed that there is no significant variation in effects between control sites and that blind sampling and data collection at all sites were performed as planned. The positive effects allowed us to continue recruiting for our goal of examining 1500 prospective samples which is expected by the third quarter of 2022.
In June, we announced our 1000th pattern of patients enrolled in the clinical trial for the Unyvero Urinary Tract Infection Panel or UTI. We also added a fourth trial to optimize recruitment and speed up trial completion. We are satisfied with the dynamics of enrollment towards the purpose. of 1500 prospective patterns, as required by applicable FDA guidelines. And to date, we have already recruited more than 1300 patient patterns.
We plan to complete the ICU trial and have the last reading of the data in the current part of this year. This is an exciting step, as we anticipate an upcoming submission to the FDA, as there is an immediate and complete unmet medical need. tests for urinary tract infections. We’re already seeing evidence of this in the developing traction of our UTI research, which only uses product sales in the United States.
Earlier this quarter, we announced some compelling news for our German subsidiary Curetis. In June, Curetis entered into a distribution agreement with Leader Life Sciences, its trading company Leader Medical Supplies Trading LLC, a component of Leader Healthcare Group, for the distribution of Unyvero systems. in the United Arab Emirates or the United Arab Emirates and Qatar. The agreement has an initial duration of 3 years and can be extended in increments of one year.
Leader Life Sciences has committed to a minimal acquisition of Unyvero application tools and cartridges for a total price of approximately $1 million in profits for OpGen over the initial three-year period. This is exciting for OpGen as Leader Healthcare Group is one of the leading providers in the Middle East region and has a presence in the region. There are a significant number of hospitalized patients suffering from nosocomial infections in the Middle East. Therefore, the immediate and complete detection of pathogens and their markers of antibiotic resistance with Unyvero will be particularly patient. results.
This marriage aligns with OpGens’ purpose of expanding our advertising presence as industry leaders in molecular diagnostics and bioinformatics. We are expanding our global footprint and plan to continue working hard with Leader Life Sciences to explore possible expansion to other countries in the region in the future. Recently, we also added Keis Group as a distribution partner in Kosovo, following its successful bid in a World Bank-funded tender for Unyvero.
We already plan to deliver the first formula and cartridges in the third quarter of 2022 and have signed an exclusive three-year distribution agreement with Keis. Another appointment we have continued is with Menarini Diagnostics, our pan-European distribution partner. Last quarter, we announced the progression of our existing partnership with an extension of our 5-year strategic distribution agreement with Menarini.
We previously announced a primary build-up in minimum acquisition commitments for the next 12 months of more than 50% compared to the last 12 months and over a 2-year period of an overall minimum income source of more than 80% higher compared to the last 12 months.
During the current quarter, we also signed an advertising agreement with Menarini for approximately 70 Unyvero systems installed in nine other European countries. We sent the invoice for more than $360,000 in additional earnings in 2022, which were identified in the current quarter of 2022.
OpGen appeared in several peer-reviewed journal publications during the last quarter of 2022 that we would like to highlight. the authors of the publication evaluated the clinical application and effect of the Unyvero panel in hospitalized adult patients, with suspected pneumonia, clinical indication of bronchoscopy and threat of infection by gram-negative bacteria, the end point being the duration of antibiotic therapy.
The trial obviously demonstrates that the use of the Unyvero PNH panel in hospitalized patients with pneumonia for bronchoalveolar lavage or BAL examination in combination with antibiotic control reduces the duration of additional antibiotic treatment in hospitalized patients with pneumonia at risk of gram-negative. bacteria and supports the suppression of antibiotics. escalation in 66% of patients.
Other primary effects include additional antibiotic treatment relief by 45% and a reduction in overall antibiotic treatment by 22. 5% in the Unyvero organization. Overall, patients treated in the Unyvero organization were 3 times more likely to get proper treatment antibiotic treatment. This study shows the significant and usable effect of the Unyvero Hospitalized Pneumonia panel on the adaptation time of antibiotic treatment in patients.
In July, we announced the publication of a new publication in a peer-reviewed journal about a study conducted at Karolinska University Hospital in Solna, Stockholm, Sweden. This publication demonstrates the ability of Unyvero’s Hospitalized Pneumonia (NHP) panel to stumble upon potential pneumonia pathogens before culture or at the first symptoms of infection.
The Unyvero Hospitalized Pneumonia panel detected bacterial pathogens from lower respiratory tract samples from critically ill COVID-19 patients with increased diagnostic yield and bacterial culture. This is a vital step as it allows for reliable and timely diagnosis of pathogens in just five hours for hospitalized patients with COVID-19 Pneumonia.
Overall, we have made wonderful progress with our products this quarter and since the beginning of the year and continue with marketing. We are excited about the profits generated through product sales that continue to grow.
I will now call albert Weber’s chief financial officer OpGen. He will review the monetary effects for the current quarter and the first part of 2022 and recent monetary developments. Albert?
Albert Weber
Thank you, Oliver, and welcome everyone to the call. I will speak briefly about the highlights of the current quarter and the first part of 2022, our position on the balance sheet, and the company’s underlying expansion drivers, and conclude with a mind on the forecast. We are excited to announce our earnings of approximately $1 million for the time of the 2022 quarter. We closed the time of the quarter with approximately $967,000 in earnings, a 19% increase from the same was last year, while earnings for the first part of 2022 totaled $1. 4 million compared to $1. 6 million in the six months. 2021. La accumulation of profits in the current quarter is basically due to a significant accumulation in product sales.
Compared to the current quarter of 2021, our product sales increased by approximately $582,000 or a 189% year-over-year increase. before, as well as an increase in Unyvero’s sales in the United States.
To be clear, second-quarter earnings have yet to come with sales of Acuitas AMR Gene panel products in the U. S. The first advertising contract for this product was signed at the end of June. Later in the call, Oliver will talk about our pipeline expansion to increase sales in the U. S. U. S. and internationally.
In addition to expanding our revenue, we also reduced our operating expenses for the 3 months ended June 30, 2022, by nearly 10% to $6. 2 million, to nearly $7 million in the current quarter of 2021. For the first part of 2022, we saw a reduction of more than 10% in its operating expenses, from $14 million in the six months of 2021 to $12. 6 million in the same period this year.
Our expenses R
General and administrative expenses for the current quarter of 2022 were $2. 1 million, approximately 22% less than the general and administrative expenses for the current quarter of 2021 of $2. 7 million. In the first part of 2022, general and administrative expenses amounted to $4. 8 million, a low of about 11% to $5. 4 million in the first part of last year. The exploitation of synergies after the final touch of the integration of our business has allowed us to reduce general and administrative costs.
Sales and marketing expenses for the current quarter and the first part of 2022 were $1. 2 million and $2. 2 million respectively, compared to $800,000 in the current quarter of 2021 and $1. 7 million in the first part of 2021. We continue to expand our sales and business progression team, as they are to expand our partnerships and generate overall revenue. We’ve also noticed the return of in-person meetings and exhibitions around the world, as well as here in the U. S. This has also contributed to higher marketing spend in return to greatly improve visitor access and interaction.
Let’s move on to our net loss. In particular, we reduced our loss in the current quarter of 2022 compared to the same period last year. Our net loss was not unusually consistent with shareholders in the current quarter of 2022 $5. 8 million or $0. 13 consistent with percentage, which is well less than $7. 1 million or $0. 19 consistent with the percentage in the current quarter of 2021. The half-yearly net loss of $12. 6 million or $0. 27 consistent with the percentage consistent in the existing year and $21. 9 million or $0. 65 consistent with the percentage consistent in 2021.
Increased revenues, improved gross margins and, in particular, reduced operating expenses in the R&D and G aspect
As discussed in our last earnings call, our subsidiary Curetis and the European Investment Bank, the EIB agreed to repay the tranche of debt that matures first in April 2022 over the next 12 months. We paid €5 million in April 2022 and in May the monthly bills for the remainder of the debt tranche of approximately €8. 4 million began during the 12-month era to April 2023.
There are two tranches of more than 3 million euros and 5 million euros, principal plus accrued and deferred interest, maturing in June 2023 and June 2024 respectively. At this stage, these tranches are not changed through the agreement with the EIB.
In addition, in June, the company entered into a new ATM contract with H. C. Wainwright, allowing it to sell up to approximately $10. 7 million in non-unusual stock. The company will continue to explore other strategic and tactical equity and debt financing opportunities throughout the year to further strengthen its balance sheet.
As discussed in our previous earnings conference call, our ongoing expenses remain in line with our expectations and are very much in line with our annual net money income forecast. We expect to build on this momentum this year with expected net money income of approximately $5 million to $6 million consistent with the quarter of our consistent dispositions.
Following the recently announced restructuring of our debt to the EIB, we expect a further outflow from the budget of around $700,000 consistent with the month. We continue to see an expansion, especially with product sales here in the U. S. The U. S. Department of Homeland Security and with the collaboration of Ares genetics has a solid funnel of business progression and collaboration opportunities, in which we remain optimistic, with several prospective partnership agreements each giving a contribution to the profit expansion expected in the current part of 2022 and beyond.
Our overseas distribution business, which focuses on the Unyvero product line outside the U. S. In the U. S. , it generated positive earnings growth in the current quarter. The new IVDR went into effect in May 2022 and given the multi-year pricing era for one of our products With the previous IVD CE mark to continue to be sold, we expect this to continue over the next year.
Our pan-European distribution partner, Menarini, has particularly higher minimum commitments for the next two years of contract, starting in April 2022 up to 50% for the next 12 months and generally until the end of the fifth year up to more than 80%, for last contract. minimum years. In addition, our distribution agreement with Leader Life Sciences in the UAE and Qatar has an overall starting price of $1 million in earnings over a three-year period. This deal has the option of being extinguished in one-year increments for a period of not -stopping the flow of profits.
With the recent addition of a distribution partnership with Keis Group in Kosovo, we have added another advertising deal that is expected to contribute to earnings expansion from the third quarter of 2022.
Due to our progress in the current quarter of 2022 and since the beginning of the year, we expect continued expansion in the advertising launch of the Unyvero product and the acute AMR gene panel. the AMR Gene panel with several ongoing discussions with hospitals and directly with customers. This year, we already signed the first two industry deals in June and July and we expect that number to increase over the course of the year.
As a reminder, the typical diversity for those acuity accounts once fully implemented in the clinical regimen will be between $50,000 and $150,000 consistent with the year on the recurring consumable earnings screen. We look forward to updating our clinical trials and regulatory filings for Unyvero UTI and invasive joint infections, or IJI products.
As discussed above, the ICU clinical trial has progressed this year and we expect a next reading of the data in the current part of 2022 for submission to the FDA. We are also moving toward launching a prospective multicenter clinical trial in the U. S. on the Unyvero A30 platform for IJI.
Our long-term goals include expanding Ares Genetics’ strategic collaborations and partnerships. We have several ongoing consultations with leading organizations in the fields of NGS, diagnostics, and the pharmaceutical industry. We look forward to opening our NGS service lab for the U. S. We are here in Rockville, Maryland in the coming weeks to help us with the upcoming release of announcements and responses in 2022 and beyond.
We expect the expansion of earnings from our products and globally by 2022 to be around 25% compared to last year. We plan to particularly increase direct sales in the United States and increase profits similarly to Ares Genetics through more software solutions and collaboration.
In addition, we would like to mention the at-the-market ATM sales facility for a maximum of approximately $10. 7 million than in June 2022. We have the opportunity to sell from time to time at an At The Market providing non-unusual stock. Our point of business has remained modest with approximately 150,000 shares for nearly $80,000 sold in July and approximately 1. 7 million shares sold for approximately $1 million in net profit in August to date.
With that, I’ll be calling Oliver back to talk about the company’s accomplishments and next steps. Olive tree?
Olivier Schacht
Thank you, Albert. Je will now talk about the next steps and plans for the coming quarters. to achieve our goal of studying 1500 samples from potential patients and we are on track to complete trial enrollment by the end of the quarter, followed by the final reading of the data in the latter part of 2022 for submission to the FDA.
We will be offering ICU control as a product for study use only in the United States prior to FDA submission and approval. We have noticed an increase in monthly order volumes that continue to increase compared to the last quarter. We are also lately making smart progress with our Unyvero A30 platform on an IJI panel from synovial liquids. Lately, IJI verification is in progress and the progression of our cartridges is also on track.
Our purpose is to launch a prospective multicenter clinical trial in the U. S. The U. S. Food and Drug Administration on the Unyvero A30 platform is awaiting ongoing strategic discussions followed by an upcoming submission to the FDA. As we move forward on the A30 for clinical trials and the upcoming filing, approval and commercialization, we have continued to deepen our conversations about licensing and strategic partnerships. These talks are others that span the United States, Europe and Asia.
On the Ares Genetics front, we are well on our way to opening Ares Genetics’ own service laboratory at OpGen’s headquarters in Rockwell, Maryland. This is a major milestone as we will continue to expand our features in our own backyard. Lately we are in the final phase of validation of the procedure and we have effectively completed the move of the generation from Vienna to Rockville and we look forward to launching our own direct to consumers here, in the third quarter of 2022, as scheduled.
Last month we shared exciting news from our subsidiary Ares Genetics. In July, Ares Genetics signed a collaboration agreement with the Belgian National Reference Centre for Invasive Streptococcal Pneumonia at UZ Leuven. This agreement aims to expand and compare computational equipment developed through Ares Genetics for the identity and characterization of streptococcal pneumonia for diagnostic purposes.
Estimated annual deaths that could have been prevented with effective antimicrobial treatment have risen to 1. 7 million deaths in the same year and Ares and UZ Leuven aim to reduce this number by advancing predictive antibiotic susceptibility testing.
As described above, Ares has the healthiest portfolio for partnership and collaboration since the company’s inception. We are seeing a significant expansion in their funnel of collaboration opportunities. Currently, we have many partners running NDAs and are discussing the scope with several leading corporations in this field.
Our update with China’s National Medical Products Administration or NMPA lately is still waiting for COVID-related lockdown restrictions in major cities. Once those restrictions are lifted, we plan to generate knowledge in China for approximately six hundred additional clinical samples.
We anticipate the shipment and possible approval of a cartridge for pneumonia and the upcoming advertising release. We continue in very normal communication with Beijing Clear Bio and its CRO, as well as its regulatory advisors. But right now, we just don’t have visibility into the schedule of clinical trials that can be introduced and run in China.
In addition, on August 8, 2022, we submitted our application to NASDAQ for an additional 180-day period during which we would possibly repair compliance with the $1 minimum offer value rule. We met all the criteria for such an extension and anticipated the NASDAQ reaction and resolution we anticipated by the end of the month.
In conclusion, we are satisfied with our positive effects for the current quarter of 2022 and from the beginning of the year. We continue to see growth, in the U. S. U. S. with direct product sales and Ares with strong business progression and an expanding funnel of collaboration opportunities. .
We expect competitive momentum in the current part of the year, either locally and with our foreign partners.
We have noticed more advertising proposals in recent weeks than had been noticed before in several quarters. And we look to the future to advance those agreements and continue to generate developing revenue.
As always, we will continue to provide updates on our strategic partnership discussions and the progress of our 2022 go-to-market efforts. Thank you for your continued help and participation in this afternoon’s call.
Now I would like to call back the operator, for questions.
Q&A session
Operator
Thank you. We will now begin the response session. [Operator Instructions] The first comes from the So Romanoff lineage of the Edison group. Continue.
Soo Romanoff
Hello, congratulations, Oliver, Albert. There is a lot to cover here, so let me intervene with a few questions. Acuitas AMR’s two wins were excellent to see a vital organization. Can you give me a concept of the sales cycle and give me Do you update us on the 60 entities you are targeting?Do you see development opportunities for cross-selling?
The moment is that there is a lot of foreign traction. Could you give us a little more color about the main geographical points and about the products?
And the last one is more cleanliness. It’s great to see 23% expansion in the quarter. But may it give us some context on the apples-to-apples comparison for the decline in the first part with the net contribution: the net contribution is the contribution in the first quarter of 2021?Thank you.
Olivier Schach
Yes, of course. Now when it comes to the sales cycles of Acuitas, I would like to repeat what we have said and what we have said for the sales cycle quarter after quarter, a sales cycle of six to 12 months is anticipated.
When you look at the two agreements we signed in terms of the agreement period, they range from more than six months between a first draft and the end to less than 60 days between the first draft of the agreement and the end.
So, over time, I would expect there to be a stable chord rhythm. And again, we have a big funnel of those opportunities versus a series of accounts where we obviously have to paint over those opportunities for several months.
Therefore, I do not expect there to be a steady flow of more Acuitas deals. And endorsing the six- to 12-month guidance, however, given that we carried out the extensive launch and implementation crusade in October 2021, it’s fair to say that many of those conversations have also progressed quite well over the past few months.
In terms of foreign trade, it’s really, obviously, a big part of Menarini’s partnership and then it depends on the country that Asian markets are still seen of, places like Singapore suffering from expired stages of COVID restrictions. But adding more foreign distribution partnerships is going to be a recurring theme.
And so, that’s what we’re going to focus on, working with Menarini to drive expansion into existing key European markets and adding overseas distribution, whether it’s in Asia-Pacific, the Middle East, Latin America, which will continue to be the goal.
And just to remember, I mean, we have, for example, the collaboration with Annar Dx in Colombia. They worked very diligently on the launch the first part of the year. The first Unyvero systems are already there, they have been installed in the laboratories of customers’ hospitals. .
And again, we have team members who will be on the floor with the Annar team in Colombia later this quarter, supporting the various launch initiatives. Again, there are opportunities for several additional systems and an apparent expansion in the early stages of this increase.
In terms of numbers, I mean the first half. Surely you’re right. If you look at the decline, it’s actually, on the one hand, the expansion in product sales. And then you have to eliminate the FISH business, which cost about $170,000 in the first quarter of last year before you finish that. And then the New York State Collaborative Project, which is a collaboration of studies that ended and concluded at the end of the third quarter of 2021.
So, basically, he had six months with several hundred thousand dollars. As a result, sales of Unyvero’s underlying products worldwide and in the U. S. are all over the world. U. S. sales increased, but the net effect of FISH business interruption and non-recurring collaboration necessarily led to net decline.
Operator
Ms. Romanoff, do you have any questions for management?
Soo Romanoff
No, that’s great. Thank you.
Operator
Ladies and gentlemen, that’s all the time we had for today. I will now give the floor to Dr. Schacht for his concluding remarks.
Olivier Schacht
I need to thank everyone for joining us today and please visit the Investors segment of our online page or our security files for updates on the company. Thanks a lot. Have a wonderful day.
Operator
Thank you, gentlemen, that concludes today’s conference. Thank you for your participation. Now you can disconnect your line.