Q3 2020 OpGen Inc Earnings Call
Welcome to the object incorporated Q.
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At this time all parts of the <unk>.
A question expenses actually will follow the formal presentation.
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Operator assistance during the conference. Please press star there on your telephone keypad.
Please note this conference is being required.
I will now turn the conference over to your host Megan Paul Investor Relations you may begin.
Welcome to the object third quarter 2020 earnings call and business update at this time all participants are in.
Listen only mode.
Following management's prepared remarks, there will be a Q and a session. As a reminder, this conference call is being recorded today November 11, 2020 before we begin I would like to caution you that comments made during this conference call by management may contain forward looking statements regarding the operations and future.
As a result of objects, including its subsidiary curative scenarios genetics.
I encourage you to review options filings with the Securities and Exchange Commission, including without limitation. The company's most recent form 10-K and form 10-Q for the third quarter of 2020 that will be filed with the FCC.
Which identify specific factors that may cause actual results or events to differ materially from those described in the forward looking statements.
Factors that may affect the Companys results include but are not limited to our ability to successfully achieve the expected synergies from the company's completed business combination with karidis.
And to implement the combined company strategy.
The impact of the continuing global COVID-19 pandemic on our business and operations our use of proceeds from the aftermarket offering that we commenced in February 2020, as well as the proceeds from recent warrant exercises.
Pursuit of Sta clearance.
They acuitas m., our gene panels for use with bacterial isolates and for other products and services.
The rate of adoption of our products and services by hospitals and other health care providers in general as well as in the current COVID-19 pandemic situation in particular.
Success of our commercialization efforts and partnering sales.
It's for GE, the effects of our business of existing and new regulatory requirements and other economic and competitive factors. The content for this conference call contains time sensitive information that is accurate only as of the date of this live call November 11, 2020, the company undertakes no obligation.
Got it to revise or update any statements to reflect events or circumstances. After the date of this conference call, except as required by law.
Joining the call today, it will be Oliver shocked president and CEO and Tim Dec CFO of option I would now like to turn the call over to Oliver shocked for introductory remarks.
Thank you Megan and thank you everyone for joining us this afternoon.
I'd like to start this call by recognizing the hard work and dedication put forth by the committed teams at auction here in the United States as well as our often group subsidiaries greatest in Germany, and ours genetics in Vienna, Austria during the tumultuous time.
During the third quarter.
2020, our business grew year over year, and we're excited to announce that we have almost entirely completed the successful integration of our businesses, including.
Including R&D efforts operations and global commercial as well as DNA teams integration.
As a combined business, we have a very exciting portfolio products, which we believe will help us achieve.
Strong growth towards becoming one of the industry leaders and the anti microbial resistance and bio informatics space.
On today's call, we will be providing more details on options recently announced corporate strategy and reprioritization efforts, including further color on the product portfolio and platform pipeline changes.
We will.
Also address developments relating to the coat 19 pandemic and the next wave, causing an uptake in cases around the world last.
Lastly, we will review financial highlights from the third quarter, and then share with you an update on our strategic initiatives and pipeline opportunities.
First and foremost we're excited to provide further details regarding this.
Dziedzic reprioritization of our product portfolio and platform pipeline going forward.
This reprioritization was based on feedback from extensive market research performed by renowned third party market research and consulting firm.
Conducted a voice of customer survey of 150 stakeholders in the decision, making on new diagnostic platforms.
And a significant number of key opinion leader interviews.
Over the past two quarters.
Following a review of insights in conclusion is derived from this research option on its board have decided to focus the company's product portfolio and our proprietary universal platform and unique bio informatics capabilities.
I'd like to walk you.
You through some of the key impacts of this reprioritization, starting with our product portfolio, which will be centered around rapid molecular diagnostic platform offerings with an increased focus on bioinformatic solutions, including our genetics next generation sequencing based and artificial intelligence powered antimicrobial resistance or more and susceptibility.
ASP prediction capabilities.
In addition to focusing on our state exam, our prediction capabilities. Following the successful completion of all three phases of the partnered R&D program as announced in our Q2 earnings call.
Our genetics has recently received formal notification from its undisclosed global leading Ivan.
Corp. partner that they have exercised their option to exclusively negotiate with forest genetics, the scope and terms of a potential worldwide exclusive license or other arrangement to our genetics technology in the field of human clinical diagnostics in the coming months.
It is also important to note that during this third quarter.
After our genetic successfully completed a technology feasibility study for yet another major global IB corporate partner, we have since been duly informed of the 90 day exclusive negotiation with the other partner following the exercise of their option as mentioned before.
Furthermore, our genetics has delivered first next gen sequencing and.
Our informatics analysis of several samples for Austrian.
Agency for health and food safety, who have since followed up with a request for proposals for future commercial services that ours could offer in the NGL space using a proprietary AI powered by informatics and prediction models for Amazon Astec.
The re.
Barterization also includes a platform consolidation to realize significant operational synergies and cost savings overtime.
We look to expand the universal platform and product portfolio to include complicated urinary tract infections and invasive joint infections in the United States with clinical trials for future FDA submission and clear.
Anticipated to start next year in 2021.
We will aim to hold so called pre submission meetings with the FDA on each of the two products during the first half of 2021.
Similar products in both clinical indications using identical sample types have already been successfully developed and CE marked and our commercially.
And similarly in Europe and other markets.
Additionally in October we submitted our formal response to the FDA is January 2020 request for additional information for the Acuitas AMR gene panel priceless I.
I will discuss the anticipated timing of the FDA final review a little later.
Cleared by the FDA option anticipate.
Events with commercial launch in the us in the following months.
As part of the Reprioritization, we will be discontinuing the legacy fish products business, including Quickfish and PNM fish by mid 2021 in Europe, the us and the rest of the world with last production lots to be manufactured in early 2021.
We have informed all customers and distributors accordingly, and have requested last binding purchase orders to be placed during this fourth quarter of 2020.
We have also decided to discontinue the Acuitas AMR gene panel urine clinical trial and have informed all clinical trial sites accordingly.
This will help us shift our focus towards the unit.
Another platform for the complicated UTI and ipi indications as well as potentially additional future applications.
We're extremely encouraged by this new business strategy and believe the shift towards fewer platforms and more menu will create meaningful long term shareholder value for our investors as well as stakeholder value to.
Our partners healthcare providers and patients alike, as we continue to strive towards establishing ourselves as one of the industry's leaders in the molecular diagnostics and bio informatics space and antimicrobial resistance.
Switching gears to the persisting global COVID-19 pandemic.
While recovery efforts and sue it is important to.
To review, how the pandemic has continued to affect options business and operations.
The hospital environment continues to be very challenging however, elective surgeries are being scheduled regularly and various noncovered related clinical studies are beginning to reenroll patient samples in specific regions and hospitals.
Corresponding with.
Through our care professionals has also improved although the focus remains managing the COVID-19 pandemic and most communications remains purely virtual.
The continued very high number of new infections and hospitalizations here in the United States as well as renewed partial lockdowns in key European markets, such as Germany, France, and many others.
Is likely going to pose continuing challenges to the commercial distribution of our products across many key markets.
Accordingly, we have started to take decisive action and Reprioritizing, our R&D efforts to ensure the long term durability of our business.
We continue to adjust our operations and business practices to capitalize on opportunities to help.
Hi, just in the fight against the virus.
With that being said, we're excited to continue working with Menarini silicon Biosystems here in the us to marketing co promote menarini portfolio of COVID-19 related products.
If FDA emergency use authorization is granted in the U.S. This portfolio may eventually include additional relevant COVID-19 related.
Office products.
Option via its greatest subsidiary announced last quarter. The successful completion of the development of our own proprietary PCR based koby to test kit.
We're excited to announce that this rapid one hour test that includes our proprietary PCR compatible universal license buffer called pulp.
Obtained CE, marking in the European Union for the detection of Sars Koby two in August of 2020 with.
With the launch of our CE Mark Koby Toolkit, we also announced the termination of distribution of the BG kits as we have a significantly greater pricing flexibility and much improved margin profile on our own proprietary tests, which again takes only.
Good one hour to result, compared to the almost three hours for the BTI test.
As we continue to work with Menarini in the U.S No decision has been made yet as to whether or if so when we might seek an FDA uday for this source koby to test ourselves as the market in the US already comprises a large number of PCR test kits.
In the first half of 2020, we had announced an investigator initiated collaboration with the carlin's constitute in Sweden to identify bacterial co infections in patients admitted to the intensive care unit for cold 19, pneumonia, using the universal HP end or hospitalized pneumonia panel.
Options Universal HTM panel for pneumonia.
About identifies life threatening bacterial co infections and cold 19 patients in just five hours.
And universal L.R.T. and at our TBL panels, our FDA cleared here in the U.S for the rapid detection of lower respiratory tract infections, such as pneumonia.
It is our pleasure to report that this study has been successfully completed and data.
On the Universal HTM panel was presented by the Carlin's got investigators at exit 2020.
The study demonstrated reliable performance and potentially high clinical utility off begin aveiro, aged 10 panel as a rapid rule out diagnostic tool based on its high negative predictive value of 99.8% of.
Observed in this study.
The average turnaround time for final culture result was 68 hours during which patients continue to receive empiric antibiotics, while universal HP and panel reduce turnaround times from days to less than $5.
We believe such rapid and accurate detection is essential to ask.
Data to assess bacterial pneumonia co infections and critically ill COVID-19 patients.
The study investigators concluded quote that the Universal HCM panel is a useful diagnostic tool to help with the early detection of lower respiratory tract infections, and anti microbial stewardship and inpatient suspected with a omar.
The panel can be beneficial for escalation or de escalation of antibiotics.
Additionally, option announced the publication of two notable peer reviewed studies the first being a publication that demonstrated the clinical utility of the universal L.R.T. panel and its potential impact on antibiotic use in hospitalized patients.
With suspected pneumonia compared to treatment directed based on microbiological culture results only.
Additionally, option subsidiary Ares genetics in collaboration with researchers from the Johns Hopkins University School of Medicine also announced the publishing of a peer reviewed study on modifiable risk factors for the emergence of sales told.
Designed taser back some resistance or by its trade name also known as their backs in Pseudomonas aeruginosa in.
In the journal of clinical infectious diseases.
Along with peer reviewed studies came awards option subsidiary our genetics, one the Austrian National Digitization Award and was also nominated for the 40th fostering Innovation award for its our.
Vishal intelligence powered next generation sequencing based molecular antibiotic susceptibility test marketed under the brand name, our CPGA Universal path of genome assay.
In addition to pipeline updates and awards option was awarded two grants during the third quarter, which will contribute to Nondilutive German government funding to.
Some of our R&D programs.
With our Universal 30 platform, we recently announced the award of a German federal government grants to our subsidiary curators and collaborators carpeting Monster in Germany, and the clinic for small animal internal medicine of the Lubich Maximillian University in Munich, Germany.
The project will focus on travel related.
Towards that end tehrik diseases, and small animals, which is an area of growing concern with increasing incidence rates.
Several of these diseases are caused by potential Zola knotek pathogens that could also be past documents.
While looking at veterinary applications, one might also help prevent human diseases in the future.
Option also issued a press release regarding.
For the award of a German federal government grant to its subsidiary greatest and collaborators at the research campus effective nostix the.
The project is coordinated by University hospital, and designed to use artificial intelligence based assay development for Carbapenem resistance based on porn Lawson efflux pump over expression and Gram negative bacteria.
I will now turn the call over to our Chief Financial Officer, Tim Dec Review financial results for the third quarter 2020, and recent financial developments for the business.
Yeah.
Thank you Oliver.
On today's call I will touch briefly on the highlights of the third quarter 2020 financial results. Please keep in mind that the business combination closed on April onest.
2020, Therefore Q3 results include a full quarter as a combined company.
The nine month numbers only include six months as a combined company and all references to 2019 pertained to option only numbers all pro forma reference will be noted separately.
Revenue for the third.
2020 was $1.1 million up from $600000 for the prior year period. This increase is largely due to the strong collaboration revenue from Aries genetics as well as international sales from curious offset in part by lower collaboration revenue related to our New York State project and lower finished product revenue.
[music].
Total revenue for the nine months ended September Thirtyth, 2020 was 2.9 million compared with $2.7 million for the nine months ended September Thirtyth 2019.
Again, the increase was primarily due to strong collaboration revenue from Aries genetics offset in part by lower collaboration revenue related to our New York State.
Correct and lower finished product revenue.
Operating expenses for option as a combined company for the third quarter of 2000 ton or $7.2 million compared with $4.1 million in the third quarter of 2019.
Operating expenses for the nine months ended September Thirtyth, 2020, or 19.6 million.
When compared with $12.4 million for the nine months ended September Thirtyth 2019.
I'd like to provide some granularity in terms of our operating expenses since the business combination.
Research and development was $2.4 million in Q3, 2020 down from $3 million in Q.
Turning to 2020 this was primarily due to the timing of our year on clinical trials.
Gionee was essentially flat at $2.4 million in Q3, 2020, as compared to $2.5 million in Q2.
And sales and marketing was likewise flat at 900000 in Q3 of this year as.
Compared to $1 million in Q2.
Net loss for the third quarter of 2020 was 7.7 million or 40 cents per share compared with $3.5 million or $3.95 per share in the third quarter of 2019.
The net loss for the nine months ended September Thirtyth 20 Twond.
Tony was $19.1 million or one dollar and 36 cents per share.
Compared with a net loss of $9.9 million or $13.32 per share for the nine months ended September Thirtyth 2019.
As profit 19 pandemic continues through the next wave globally.
And consequential consequences remain uncertain, we will not be providing any guidance for the company at this time.
I would like to conclude my prepared marks prepared remarks by updating everyone on our cash position.
Option maintain a strong working capital position the third quarter of 2022 to say.
Sales of approximately 1.5 million shares of common stock under the Companys ATM program and the exercise of 270000 warrants from the October 2019 financing for combined gross proceeds of $4.3 million during the quarter.
During the nine months ended September Thirtyth 2020.
The company sold approximately 7.1 million shares of common stock under the Companys ATM program and issued approximately 4.3 million shares of common stock under.
Under the exercise of warrants from the October 2019, or combined gross proceeds of $24.4 million.
Total current shares outstanding as of today are approximate approximately 20.1 million shares.
As of September Thirtyth, 2020, we reported 10.5 million in cash.
With that I'll turn the call back to Oliver to discuss additional key milestones.
Thank you Tim.
I would now like to highlight some of Fox.
His key upcoming milestones and our development programs and commercial activities.
First and foremost let me comment on the FDA clearance process for our Acuitas AMR gene panel product prices.
As stated on previous calls we have submitted the Acuitas AMR gene panel isolates five 10-K to the FDA in the second quarter of 2019.
And had subsequently received two formal AI requests so called additional information requests from the agency.
The first in July of 2019, and the second in early 2020.
While a 180 day response deadline is normally imposed for these requests the option response was delayed in June of 2020 as a consequence of the.
Okay, and teen pandemic when all pre market submissions on hold as of March 2020 were issued a 90 day extension to the previously established response deadlines.
During recent weeks or months option has been working with the FDA review team on an interactive basis to address any and all outstanding information requests and has received.
Numerous inputs some feedback that have all been built into a formal response, which we submitted October 13th of 2020.
Despite the impact of the COVID-19 pandemic and after a review of open submissions as experienced this calendar year option has maintained an open dialogue has remained an open dialogue with the FDA regarding.
The status of the Acuitas AMR gene panel for islands' five 10-K submission.
More recently EPS. The agency remains actively engaged in responding to the condemning the company has received notice that for at least the remainder of the year. The FDA plans to continue prioritizing emergency use authorization or EUA requests for in vitro died.
Diagnostics intended to address the COVID-19 pandemic over the review of open submissions.
During this time the FDA plans to provide monthly updates regarding the ongoing impact of such prioritization of Airways on the option Acuitas AMR gene panel prices submission since our October 13th formal response to the FDA say island.
Layers.
To date, we believe that option has addressed all of the FDA requests for additional information and given the timelines under the statutory review period for a five 10-K, we anticipate a clearance decision at the FDA review teams earliest opportunity once FDA resource allocation and staffing surges due to covance.
19 related you waste permits.
However, it remains clear that COVID-19, we'll continue to have an impact throughout the remainder of 2020 on statutory review periods and so we simply need to be patient and continue to let the FDA work through their process as they strive to address the critical industry needs raised by the ongoing pandemic.
Okay.
Based on strong validating data published by our Synnex and several of its clinical partners, such as Mayo clinic, and Johns Hopkins as well as the excellent progress made in the execution on the partnered R&D programs. We've continued to work very closely with our first undisclosed global leading IB corporate partner into.
In defining potential next areas of collaboration, especially now that they have exercised their option for a 90 day period of exclusive negotiations with our us about the scope and direction of a potential future collaboration and possible licensing of our STB in the field of human clinical diagnostics.
We've also seen some.
Significant progress with the Chinese and MP a regulatory body.
And the regulatory process together with our partners at Beijing clear bio having submitted a comprehensive response package to the NPV for the Universal system and have received additional data for the universal HP and pneumonia cartridge we've.
We view this as a potential 2021 regulatory.
Story approval milestone and subsequent commercial launch in China.
Just to remind everyone in the eight years following an MPV approval, our distribution partner Beijing clear bio has committed to minimum volumes of products to be purchased from options create a subsidiary to the tune of about 60 million euros. During the first five years and another 90.
80 million euros in the out years, six seven and eight.
Hence the Chinese regulatory approval and commercial launch are expected to be key milestones towards future growth trajectory of our international Universal business.
Furthermore, we have significantly progressed the development of our units are a 30 platform with exciting clinical proof of concept data.
From sample to answer now available.
We've demonstrated the capabilities of this platform in multiple datasets, including antimicrobial resistant markers native respiratory samples as well as a combined Sars Colby to flu a flu and RSV assay.
Based on such data we've continued the dialogue with several potential.
Partners for such a platform and we'll provide updates as these discussions progress and come to fruition, which we believe could be a 2021 partnering milestone for option.
Earlier in the year, we had announced the completion of the final milestone during the first year of our partnership with the New York State Department of Health and I'd see we.
We had also.
As announced in the second quarter that this partnership has been extended into a second year to detect track and manage and microbial resistant infections at healthcare institution statewide in.
In response to the COVID-19 pandemic in New York State testing of the program was put on hold by the Wadsworth Center and participating hospitals during the second quarter, but in Q3 sites.
It began running increasing numbers of test again, a trend we expect to continue into the fourth quarter and into Q1 of 2021, there's a tremendous amount of excitement around the ability to not only look at so called Crts carbapenem resistant intro cockeyed, but also a broader array of hospital Super Bugs with a focus of Gram negative MDR roles.
Multi drug resistant organisms.
We will continue to update shareholders regarding the expected ramp up of this program with more information is available.
In closing, we're very pleased with our results for the third quarter of 2020 and head into the fourth quarter with a strong balance sheet access to significant additional capital Reprioritized.
Strategic outlook for our product portfolio and pipeline.
Although uncertainty remains surrounding the COVID-19 pandemic and market volatility. We believe option is in a strong position to pursue value, creating opportunities to meet our growth and profitability targets for 2020 and beyond.
Opt ins combined proprietary product portfolio and pipeline.
ER includes many exciting prospects such as the pending FDA clearance decision.
And Swift subsequent commercial launch of the Acuitas a margin panel price lifts in the U.S.
Along with additional clinical trials of Universal Yutai, and III and their future Usfifty, a regulatory milestones such as submissions and eventual clearances.
As always thank you for your unwavering support and for participating in this afternoons call I would now like to turn the call back to the operator for questions.
Operator, thank you.
Thank you we will now begin the question and answer session. If you do have a question.
Please press star one on careful keypad now to be placed in the queue.
Also if you'd like to remove your question from the queue you May press star two.
Our first question.
Is from Maxim Jacobs with Edison Group. Please proceed with your question.
Hi, guys.
Question, Ed Thanks for taking my question.
I was wondering.
What could it and Eric genetics license with the Global IBT Corporation, you potentially look like.
Sure well, thanks, Max and for for the question I think.
In general terms, we might consider all the typical.
Elements of such a strategic collaboration and licensing deal so potentially that might be an upfront license or technology access fee.
Quite possibly some ongoing R&D funding to ours genetics for continued R&D work, possibly.
Possibly milestone payments, some often upon hitting certain developmental regulatory.
Larry and or commercial milestones.
And if a license gets taken ongoing royalties on our partners' future product sales.
The amounts of all of these are of course highly variable and will depend on factors such as the geographic scope was it really going to be global versus regional degree of exclusivity.
Scope of.
For potential license is this going to be for specific defined products or specific clinical indication area or is it truly going to be as broad as all of human clinical diagnostics et cetera. So.
So as the deal comes together once its being negotiated.
With get implemented we will of course provide updates and guidance on how this.
If I might be looked at but you'd expect all the typical elements of a sort of strategic collaboration on that front.
Okay Wonderful and then just with regards to the.
To the gene panel year in trial discontinuation.
I was just wondering.
Is that a sign that you're kind of moving away from the Acuitas gene panel platform in general.
No first of all I mean, we are obviously committed to the acute iOS platform, which fell from memory that is based on the thermo Fisher Quantstudio five for the AMR gene panel.
All right so let's.
[music].
But generally we believe in the value of adding multiple indications and multiple panels on a single platform one that we actually own and control in the universal platform. So thats what were going to primarily focus on in terms of menu in content.
But we're not.
Total discontinuing the Acuitas platform as we're getting ready to basically get FDA clearance and.
And then launch commercially the platform for the islands' Pam.
And that does the Icelleight I mean is it islip panel by itself.
I remember kind of the whole idea of it was the bacterial islip.
It's kind of like a good first step, but then once you get the year end clearance.
Then the.
The time to result would be significantly faster.
So I'm just wondering like it is the the isolates how viable is the islands' product by itself.
Well so first of all the time to result on the Acuitas AMR gene panel platform is basically the same whether it's an isolated or youre in so it's about three hours time to result.
On unit barrel that depending on the panel and sample types between four and five hours one of the key learnings I would say on feedbacks from the market research was indeed that.
From a customer perspective.
Whether it's three hours four hours of five hours is neither here nor there, but they are really interested in is getting eight the most comprehensive panel with the broadest pathogen and antimicrobial resistance market coverage and number two having a platform that is as easy to use with minimal hands on time fully integrate.
Its sample to answer so clear preference for a cartridge based sample to answer platform over and above a more open PCR plate based platform.
Okay, Great and that was very helpful. And then just one last question so for the unit.
Great Aro trials and likely.
For Cdti and Ipi.
When when do you think that might start and what do you think they might look like.
But in terms of sample size et cetera, sure sure well also designed wise and size wise. This is driven by basically the FDA guidance on multiple.
Of like saw infectious disease PCR panels, so there's going to be a minimum of three clinical trial sites typically and you've seen this with both the previous greatest trials as well as the option trials, probably a number between call. It five and 10 trial sites is more likely.
It's going to have a minimum of 1500 prospectively collected spent.
Supplement for specificity as.
As well as a significant number of and per pathogen or per analytes that you put on your panel.
So.
Typically these trials will it will ultimately when all is said and done on the prospective side retrospectively collected specimen contrived specimens plus.
Plus all of the analytical and clinical.
Testing be several thousand tests run.
When do we expect that to get underway as said, we really want to get in front of the FDA with precept meeting.
For first the Yutai and then the Ipi ideally both in Q1 and Q2 next year.
They are not a requirement. So we could move ahead without those but it's always a good idea to to get an early read on what the FDA is looking for but clearly we have a fully established infrastructure of clinical trial sites. While we did discontinue the year end trial, we've had a very close some multi year collaboration with these sites we've.
We've reached out to all of them. We've made it very clear that while of course, we could understand their disappointment for terminating and ongoing clinical trial will be more than excited to have them join the universal Yutai trial, and we've gotten very positive feedback from multiple of these trials sites. So the infrastructure is there the team is there.
We have instrument systems.
Here in the United States, we Havent Yutai cartridge basically readily readily developed and available. So I see no reason why these trials shouldn't be getting underway. It's call. It middle of next year, and then again with you tie in the relatively high incident rates you'd expect a fairly swift enrollment on the prospective side. So we're certainly going to be pushing.
In these trials to completion as rapidly as possible.
But then you're probably going to look at a submission to the FDA.
In 2022.
Great. That's all extremely helpful. Thank you so much.
Okay.
And our next question is from.
Consistent with HC Wainwright. Please proceed with your question.
Thank you for taking my questions. First question is in view of the Cobi 19, Resurge in Europe, and new Locums in Germany, and France, and the UK as well think could you comment on.
The outlook for those sales of your own Sars Koby to PCR kits and could you also comment on sales of the.
Men Iranian covenant contested products in the us as well thanks.
Yes, each has always we're obviously not providing any specific guidance on test.
Numbers are expected revenue, but I'll say this I mean.
Within within just.
A week or two of us launching our own Sars Koby toolkit in Europe.
And remember we don't have any direct sales or marketing efforts in Europe, we rely on our network of distributors.
We've seen a nice early.
Buffer of testing purchases most of the countries.
Frankly, a lot of the countries in Europe do go through a tender system, so kind of hard to predict as we know that some of our distribution partners have ongoing tender applications in a number of countries and these can be bulky.
Yeah.
Good.
On a per tender bases b.
Several several thousand or even several tens of thousands of tests.
Per country per tender for a certain period of time.
So again I mean, you look at average selling prices across the industry and you look at it.
Our base test kits right now they're probably.
Randy anywhere from the high single digit euros to the very low teens from a from an end customer selling price.
When you look at typical distributor margins in them sort of expectation of ideally.
30% or more.
Yes. The good news here is we control our own cost to goods, we manufacture this product and so we have a.
A lot of margin room to play with.
Again.
The way we view this as we are in infectious disease Diagnostics company, it's our contribution in certain segments of the market, we're not changing our strategy to becoming a primarily a covert driven story here, we fundamentally believe that the pandemic underlying covert.
19 is antimicrobial resistance, so that remains our primary focus.
It has helped in Q2 as well as Q3 on the top line.
So while other purchasing decisions have been pushed off by hospitals we've.
Basically kept kept things some.
Pretty steady there compared to last year with making up.
For good chunk with Covance revenue here in the US the deal with Menarini Silicon bio just to remind folks is a bit different we're not actually selling the product directly to end customers. So youre not going to see option recognized end customer sales revenue from any us product under the Menarini portfolio. The way the deal works, it's a co promotion we.
Go out if we refer a customer potential customer over to Menarini. They will do the order fulfillment. They will invoice they'll recognize the topline revenue we have paid a commission, which.
Clearly from a from a topline revenue is only a small part of the overall, but to us its pure profit there is no.
We don't have any inventory, we don't have any material cost of goods or anything we really basically leverage our our funnel of accounts and our knowledge and infectious disease.
Working with with memory.
To be fair, if you look at their the portfolio they have in the United States predominantly with the antibody test.
The Mark.
Market in recent months has clearly shifted from antibody test over to NT. Gen tests. So one of the things that were clearly waiting on is the FDA emergency use authorization on one of the pipe.
Pipeline products, they have which is a diagnostic antigen test, which once an FDA airway authorization is granite.
And once added to the to the collaboration would obviously.
Potentially drive some additional revenue and and profitability for us here in the near term.
But obviously hard to predict how the FDA is going to work through their their funnel I think by last count they they've gone through something like 560, he weighs over the past couple of months.
Got it got it.
Sure good question ones.
The FDA clears the acute us marching panel five satellites and upfront launched a product do you think the launch will face the challenge of the COVID-19 pandemic.
In a similar way do you think placing.
A universal instruments in laboratories was we also faced a similar same challenge.
Oh, that's certainly not completely out of the realm of possibilities now again I would if you look at some of the strategy and launch planning obviously you start.
From a network of existing sites we.
We obviously have a number of hospitals and labs in New York State. We're already in the process of expanding that that universe of hospitals that are providing samples into the New York State project.
Remember in New York State under the Department of Health. They are using the research use only version of that product now as you think about adding.
Adding new hospitals, and we're obviously then be the benefit of having an FDA cleared.
Cleared version of the product.
With obviously the ability to make.
Diagnostic label claims that you can only make once you have an FDA clearance.
[music].
The need for microbial resistance detection hasnt.
For gone away I mean, if you talk to.
Clinicians antibiotic stewardship folks.
Farm pharmacist infectious disease.
We're seeing just as many bad cases of AMR as before and so.
It's likely not going to help in the very short term, but we are seeing clear.
They are clear and clear demand and clear need I think having something thats, an FDA clear, where you have a clear manner.
Mandate from a instructions for use and intended use statement, we'll just make it.
Significantly easier to to really go out and actively promote and market the product.
Got it and last question regarding.
Iris genetics, so its artificial intelligence powered am Orient is is t. prediction capabilities is there any way complementary to.
The a is typically the TLC acute as platform in the future do you think.
These platforms can be combining to a single platform brings to services to customers.
Yeah, very good but so it's not actually not just acuitas is actually universal as well. So you basically our genetics fundamentally the database is based on next generation sequencing.
Molecular data.
Basically anti microbial resistance markers and you are building prediction models, whether you feed your prediction models with data that comes out of Ngs or you feed your prediction algorithms.
With data coming out of any PCR platform.
Is in principle, neither here, nor there I think the power of.
Am are pretty.
Action has been proven by PCR platforms with data from acute as data from Univ Arrow data from other platforms to be pretty accurate when you have sort of multiplex sizes.
30, 40, plus analytes on your panel now to predict accurately antibiotic susceptibility.
Some of the data that for example, Mayo clinic and Johns Hopkins have published together with ours genetics would suggest that you are going to be better off or at least your prediction accuracy is going to be significantly higher if you have the benefit of a much broader panel using ngs, but from a technology standpoint, you're absolutely spot on I mean, combining the AI by.
Our informatics piece and prediction capabilities, our technology agnostic, whether you feed them ngs data or PCR data, whether from our platform or frankly somebody else's platform.
Whether we run specimen and our labs or customer labs or.
Customers have their own ngs capabilities on site and just upload data.
Data into the cloud all of that works and all of that is already available from our genetics today.
But we're going to be clearly strengthening the bio informatics capabilities.
And we do what we have also done us as part of the business integration. We have successfully combined the acuitas lighthouse data with the arch genetics into the Rsvb.
So we have the full capability here by now in excess of 55000 bacterial Iceland that have been deep sequencing and phenotype typically tested against over a 100 antibiotics. So that is the combined power of Acuitas lighthouse with Rsvb.
Okay. Thank you.
And again, there's a reminder, if you have a question you May press star one on your telephone keypad.
Our next question is from Randy You know with Alliance Global Partners. Please proceed with your question.
Good afternoon, gentlemen, thanks for taking my questions.
First off for me, just what the Rx generics option being ex.
Exercise you know I would presume that theres some urgency on the part of the potential partner you know to make a decision to go to market you know if they if they decide to to go that route.
Offer is I mean, I think that.
Would be the.
The I think that would be the way that they would go but is there also.
Decision, making process, where it is.
Requires this largest from to a lot of bureaucracy in a lot of time to make the decision and.
That goes the full 90 days.
Yeah.
I mean, a full 90 days.
Frankly from my experience of.
Almost 25 years in this industry and deal making would be a.
Pretty pretty darn fast for truly negotiating and striking a complex strategic deal.
I'm not going to speculate.
On their sense of urgency now the facts are simple, there's a 90 day period, which started on October 12, which is when they exercise the option. So runs through the middle of January 2021.
During which they have the exclusive right to negotiate with ours genetics.
I think we have a good sense and a half.
Very very closely for over a year now with the team.
So I think theres a good common the mutual understanding what's what's required to design and develop the types of products that they are thinking about.
On what it would take in terms of number of number of specimen you need to test.
The R&D effort, both bio informatics wise as well as lab wise.
We will seek when I'll be experienced the one data point I can give you is when we negotiated the original acquisition of the the intellectual property and all of the rights from Siemens arguably also a global huge.
Corporate.
From the very first.
Encountered we had in the very first sort of non binding bids that we put out there which was in I believe it was late May early June of 2016 to closing the deal on September seven five believe it was in 2016 was about three months. So it is possible.
But again a lot of things need to come together here now what happens if.
That 90 day period from today's perspective lapses now of course as as mentioned our genetics has already successfully completed very similar feasibility work with another large global corporates.
And both parties while.
Neither of them knows the identity of the other I mean, they're all small enough universe. They can all speculate they all know that there is other interest. So we officially have to put the second party on hold because we're obviously you negotiating exclusively with party number one.
But it's always good to know that there is additional parties who are interested.
Right I was just thinking about it from the second parties standpoint at all if it makes the first party more.
Have a great urgency.
But like you said, it's it's good to have.
Multiple potential partners out there.
Great. So you mentioned in the prepared remarks that you are almost entire.
Really integrated the you've almost entirely integrated the two businesses is there anything big.
Big left to do or is that down to the short strokes or any color there would be helpful.
Yes, no I think I mean from from a strategic and organizational standpoint, I think we're pretty much done now what obviously remains here.
Part of the strategy decisions, we took as were.
Winding down the fish business, obviously, we will continue that.
Through June Thirtyth of 2021.
As I said earlier will be manufacturing the last batch of fish products here early in 2021.
Which also means that from an infrastructure standpoint.
Manufacturing.
Certain aspects of just addition.
Additional quality and regulatory oversight.
We're probably going to look at the organization and then really adjusted to the going forward needs, which is really going to be unit vero, driven yutai and III.
But.
Point through the middle of next year, we're going to continue executing again I think part of the.
The interesting dynamic here that we are witnessing in the fourth quarter as we put out the notice to all customers and distributors. There is a heightened sense of urgency by anybody who wants to stock up. So we might also be looking at some nice.
I guess stocking orders and chunky bite sizes, so we'll need to meet the team to execute on that.
But for all intensive purposes beyond that really the integration is complete.
With.
Hit things in stride, the team's working extremely well together across.
Across all.
So the Mark Gene panel isolates truly was a herculean effort in very short order, putting together a response that in the end was north of 800 pages that involved obviously, the core R&D team and quality and regulatory leadership here at option. It involves some of the.
Commercial leadership.
And scientific Affairs leadership.
Older Curators, you asked as well as the R&D leadership over in Europe, given the experience we have with.
A couple of Univ Arrow FDA clearances, so that was a true team effort and.
Testament to just how well the integration has worked so I think it's a team that works well together and.
Yes.
[music].
I think has worked as smooth as I've ever seen sort of a business integration work in that short of a period of time.
Okay, well thanks for all the color there congrats on the progress with everything and I'll take the rest of my questions offline. Thanks, a lot guys.
Thanks Ben.
And that is all the time, we have today I will now turn the call back to Mr. shot.
Shot for closing remarks.
Well, thanks, everyone for joining us today, we look forward to updating you as we continue to progress the business.
For more information please visit the investors section of our website or our SEC filings.
And feel free to give Tim or myself a call. Thank you very much and have a great day.
And this concludes today's conference call you may disconnect. Your lines. Thank you and good day.