Q4 2020 OpGen Inc Earnings Call
[music].
The speakers your lines of life.
Welcome to the op Gen and fourth quarter, and full year, 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&A session. As a reminder of this conference call is being recorded today March 'twenty.
The 2021.
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 up and future results of <unk>, Inc.
Including its subsidiary Securitas and of Ares genetics, and Curt I encourage you to review options filings with the Securities and Exchange Commission, including without limitation.
The company's most recent form 10-K for 2020 that will be filed with the SEC.
And you'll 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 company's results include but are not limited to our ability to successfully achieve the expected synergies from the company's completed business combination with curative and to implement the combined company's strategy.
Impact of the continuing global COVID-19, pandemic on our business and operations our use of proceeds from the at the market offering. The we commenced in February of 2020 as well as the proceeds from recent warrant exercises and financing such as of November 2020 pipe and February 2020 one registered direct.
The pursuit of FDA clearance of the Kyoto and Laurent gene panel for use of bacterial isolates and for our other products and services.
The rate of adoption for our products and services by hospitals and the other health care providers in general as well as and the current COVID-19 pandemic situation in particular.
The success of our commercialization efforts and partnering strategy the effects on our business of existing and new and 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 state of the live call March 'twenty and 2021 the company undertakes no.
<unk> obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call, except as required by law.
The call today will be Oliver shocks, president and CEO and Tim Dec CFO of Op Jen I would now like to turn the call over to Oliver shock for introductory remarks.
Thank you for everyone joining us on the call. This afternoon.
To begin by thanking Evan Jones, former CEO and currently a director of option for his years of dedication to this company and for making the strategic business combination of option and greatest possible in 2020.
Evan has decided for purely personal reasons not to seek reelection to the board of directors at our upcoming stockholder meeting in June we thank him for his tremendous commitment and wish him continued success and his next endeavor.
And as you're all aware of the global pandemic continues to evolve and while there is tremendous progress being made on the backs of nine two for them.
The residual effects on part of our business are still price.
We ended 2020 on a stronghold for the fourth quarter and today have a very strong cash position that will allow our business product portfolio and pipeline opportunities to grow significantly.
We were able to execute and make significant progress across our key product and showed investors and our diversified product portfolio with unique and differentiated proprietary asset post the business combination and support and attract the combination of revenue and partnership role.
This is driven by the continued success of our award winning diagnostics and technology and has established us as a force to be reckoned with and the molecular diagnostic the bioinformatics space targeting amore or antimicrobial resistance.
On today's call. We will begin by briefly reviewing the status of the re prioritization effort announced last quarter and then will the Scotts recent business highlights as they relate to the company's core capabilities and top line gross profit.
At which point I will pass the call over to Tim to review financial highlights from the fourth quarter and full year, 2020 as well as recent financing activity.
And then wrap up the call with an update on the company's strategic initiatives and pipeline.
As a reminder, last quarter, we discussed the outcome and subsequent re prioritization measures being taken by the company. Following extensive feedback from a third party market research and consulting firm.
And he conducted of voice of customer survey of a heart and 50 stakeholders and the decision, making on new diagnostic platforms and a significant number of key opinion leader and the.
Analysis and application of the feedback resulted in a re prioritization of the product portfolio and quoting a renewed focus on the company's proprietary universal platform and unique bioinformatics capabilities.
This includes expanding the platform to include complicated urinary tract infections, and invasive joint infections and the U S with clinical trials for future FDA submission and clearance of anticipated to start and the second half of 2021.
We will submit the material for possible pre submission meetings with the FDA on each of these two products. During the first half of 2021 actually having just submitted a first pre sub package for the unit arrow of Youtube.
Aero UTI earlier this month.
Similar product and both clinical indications using identical corresponding sample type.
Successfully developed on the Universal platform and the IBD market and are commercially available today in Europe and other markets.
Another key focus will be developing a rapid molecular diagnostic platform offerings with an increased focus on bioinformatics solutions Inc.
Arris genetics next generation sequencing based and artificial intelligence powered antimicrobial resistance EMR and <unk>.
Susceptibility I guess the prediction capability.
The re prioritization has also included a platform consolidation to realize significant operational synergies and cost savings over time.
It's part of the re prioritization, we've successfully discontinued the legacy of fish product, including quick fish and PNA pitch globally ahead of schedule and early 2021.
We delivered significant and the product lifecycle sales and the fourth quarter of 2020 and remaining revenue and early first quarter of this year and have completed the wind down by now we will no longer manufacture nor style or ship commercial fish products going forward.
As it relates to our renewed focus on expanding the universe of platform. We were excited to announce the option subsidiary of <unk> has entered into a distribution partnership with the MLR health technologies for Colombia, and the fourth quarter.
And our headquartered in Bogota, Colombia of leading diagnostics distributor that is already working with numerous for now and global IBD manufacturers.
And of the distribution agreement of nor has the exclusive rights to commercialize the unit barrel the instrument system and its full suite of unit Arrow infectious disease diagnostic application Park and Columbia.
The distribution agreement has an initial term of three years and can be extended and one year increments and return and all of our has committed to significant minimum purchases of the unit Aero instruments and application of cartridges over the initial three year term and.
Moving to a total of at least 10 unit of Aero systems for significant numbers of unit of Aero cartridges.
And the Ars responsible for product registration, which is expected to be obtained by the second half of 2021.
And has committed to significantly invest and the market introduction of the universal product line and Columbia.
We're thrilled with this partnership as a strength as our commercial presence in Latin America and is in alignment with our core commercialization and revenue broke strategy.
For the product registration process for the full swing for the entire portfolio of unit of <unk> 50 related products and during early 2021 and a highly successful key opinion leader event was held which included participating opt and representative and pay well as critical launch preparation.
Now shifting gears I would like to discuss options subsidiary Ares genetics activity contributing to top line growth this quarter.
In November we announced the launch of an early access program for the average genetics novel next generation sequencing for MTS base molecular antibiotic resistance testing for comprehensive profiling of genetic ammo and Margaret from nature of specimen by hybrid capture base targeted mgs assay.
And as an expanded version of the award winning <unk> Upa or universal path of genome assay for the.
Initially launched in 2019.
Ares genetics has received commercial orders for hundreds of of the novel Arts Upa tests exceeding the bulk order volume of $250000.
We believe these initial orders demonstrate the need for universal <unk> profiling and nature of specimen and the context of surveillance and infection prevention and control.
Revenue recognition had started in early 2021 and will likely continue throughout the year.
Ares Genetics also joined the <unk> network for integrating microbial sequencing and platforms for antimicrobial resistance and.
The collaboration with interdisciplinary subject matter experts and one healthy of more stakeholders. The network will provide guidelines and solutions for microbial sequencing of the detection surveillance and management of difficult to treat infections caused by AOR microorganisms.
The recently, we were excited to announce that Ares genetics, and Sandoz and the number one supplier of generic antibiotics globally extended their collaboration within its pharma partnering program and the fourth quarter of 2020, and then again for another John project and the first quarter of 2021 to.
And to assess the potential of molecular surveillance for better informed therapeutic guidance and antibiotic stewardship.
The overall goal of this partnership to develop a digital any impact of this platform.
Binding establish microbiology laboratory methods with advanced bioinformatics and artificial intelligence methods, the support drug development and lifecycle management.
Following the presentation of final results from the initial collaboration phase on optimal positioning of thoughtful medicine combination therapies by molecular AFC and and silicone modeling at the antimicrobial resistance genomes and big data and emerging technologies Virtual conference in November 2020. The next phase explores the potential.
Of combining mgs based surveillance with predictive AFC for improved guidance of antimicrobial therapy and better antibiotic stewardship.
Additionally, our genetics was granted a key patents on the antimicrobial resistance of prediction from genomic data supporting the company's vision to improve guidance for antimicrobial therapy for AI powered prediction of EMR and the discovery of diagnostic Biomarkers.
And the first quarter of 2021 option continued to see publications by of subsidiary Ares genetics and collaborators.
Most recent study highlights of best practice techniques for accurate and antimicrobial resistance prediction from whole genome sequencing data and supports harmonization of the development of good machine learning practices.
This study and so ours genetics publication record further validating our approach to becoming a globally recognized leader and the development of AI powered next generation sequencing solutions for infectious disease testing.
Addressing the United States FDA action plan by developing good machine learning practice and robust algorithms will be key to moving our AI powered solutions into clinical practice.
Applying the proposed best practice techniques to RCB allowed us to further improve predicted the performance of whole genome sequencing based the AFC.
And this context. We're currently also working with several leading clinical centers and the United States to further demonstrate the potential of accurate whole genome sequence based asps and independent validation study.
In addition option also announced the publication of results from a 1004 hundred patient sample Multicenter studies that highlighted the unit barrel LRT E. B a L parallel the ability to accurately detect lower respiratory tract infections, and bronchoalveolar lavage fluid samples and allow.
The allowing for the early diagnosis and proper choice of Antimicrobials.
Crucial for the successful management of pneumonia.
The performance of static comprehensive coverage and fast time to result of this panel suggests significant clinical value for choosing appropriate antibiotics and for antibiotic stewardship.
Additionally, very recently, we announced the final data from the Carlin Institute study getting published and a peer reviewed journal.
This paper highlights option options unit barrel HCM product for hospitalized patients with pneumonia.
Demonstrating a higher diagnostic yield and bacterial culture with a high negative predictive value of 99, 8% for pathogen detection.
The strong performance data comprehensive coverage and turnaround time of less than five hours from sample to result provides clinicians earlier data to inform antimicrobial decision, especially and critically ill COVID-19 patients.
Over the last 12 months option and its subsidiaries curators and art genetics have announced about 10 peer reviewed publications highlighting the power of molecular diagnostics and bioinformatics to help combat infectious disease.
And it's very important to highlight that such publications play a crucial role and the commercial rollout of any novel molecular diagnostic product and.
And thus the helped drive topline revenue growth as the medical publications and journals and form a wide variety of health care professionals, who must routinely and efficiently identify and deliver the most effective treatment for their patients.
In addition option was awarded two German federal government grants with subsidiary of curated and collaborators.
One project is coordinated by Gainer of University Hospital, and designed to use artificial intelligence based assay development for carbo, Panama resistance and Gram negative bacteria.
And the other project looks at the unit burrow 830, RQ platform concept for veterinary applications, which could present and additional future growth opportunities.
I will now turn the call over to our CFO, Tim Dec, who will review financial results for the fourth quarter and full year, 2020 and recent financial developments for the business.
Thank you Oliver and welcome to everyone on the call today.
On today's call I will touch briefly on the highlights for the fourth quarter review of the full year 2020 financial results discuss our recent financings and update you on our balance sheet position and and with some thoughts on guidance.
Please keep in mind that the business combination closed on April one 2020, there for Q4 2020 results include the full quarter as a combined company, whereas Q4 2019 is only for option Standalone.
The full year numbers for 2020 only include nine months of the combined company and all references to 2019 for change the option on the numbers.
Any pro forma references will be noted separately.
Revenue for the fourth quarter of 'twenty, and 'twenty was $1 4 million up from 800000 and for the prior year period.
This increase was largely due to collaboration revenue from Ares genetics as well as international sales from threats offset in part by lower collaboration revenue related to our New York State project and lower base revenue.
Total revenue for the 12 months ended December 31, 2020 was $4 2 million compared with $3 5 million and for the 12 months ended December 31 2019.
The increase was due to the inclusion of the.
And there are product sales Sars COVID-19 two kit sales.
And Ares genetics collaboration and service revenue.
Set and part by lower fish revenue and lower collaboration revenue from the New York State Department of Health project.
Total pro forma revenue for the 12 months ended December 31, and 2020 was $5 2 million compared to the $6 1 million for the 12 months ended December 31 2019.
Operating expenses for option as the combined company for the fourth quarter of 2020 for.
And were $7 $4 million compared with $3 $3 million and the fourth quarter of 2019.
Operating expenses for the 12 months ended December 31, 2020, or $26 9 million compared with $15 8 million for the 12 months ended December 31 2019.
Just a reminder of the Q4 and the full year 2019 numbers for option Standalone all of them and not as the combined company.
I would like to provide some granularity in terms of the operating expenses since the business combination of.
April 1st.
R&D expenses for the fourth quarter of 2020 was $3 $3 million compared to $2 4 million and the third quarter and $3 million for the second quarter of 2020.
The dip in the second quarter expenses was due to the halt of the cutest German trial, and COVID-19 related shifting of expenses as well as key activities and our universe of 830 platform development program only picked up later in the year.
R&D expenses for the year ended 2020 were $10 million compared with $5 1 million for the year ended December.
2019 again, the increase was due the basins combination during the last three quarters of 2020.
G&A G&A expenses for the fourth quarter of 2020 were $2 $3 million as compared to two point for for the third quarter to 2.5 for the second quarter, 2020 essentially flat quarter over quarter since the business combination.
G&A expenses for the year ended 2020 was $8 8 million compared with $6 $3 million for the year ended 2019 again day again, reflecting the combined business during the last three quarters of the year.
Sales and marketing expenses for the fourth quarter of 2028.
800000, as compared to 900003rd quarter, and $1 million and the second quarter of 2020 of.
Essentially flat quarter over quarter since the business combination and reflective of COVID-19 related restrictions on travel and low of in person meetings and conferences and 'twenty one.
Sales and marketing expenses for the year end of 'twenty, and 'twenty with $3 1 million compared with $1 5 million for the year ended 2019 again, reflecting the business combination for the last three quarters.
Net loss for the for fourth quarter of 'twenty, and 'twenty was $7 $1 million of 34 cents per share compared the $2 5 million or <unk> 61 per share and the fourth quarter of 2019.
And again, mostly driven by the business combination of Inc, 2020, and a higher number of shares outstanding and Q4, 2020 versus the same period and 2019.
The net loss for the 12 months ended December 31, 'twenty, and 'twenty was $26 2 million or of $1.66 per share compared with the net loss of $12 4 million or $7 70 per share for the 12 months ended December 31 two.
2019.
Since the time, we announced the business combination of pruritus and late 2019, we have had a tremendous amount of interest from various groups and investing funds into the organization.
Our store and appears to have resonated very well with investors during 2020 and continues into 2020, one and two.
In fact, our company's market cap has gone from roughly $6 million at the end of 2019 to over $100 million today.
During this time, we are we have moved the company strategically to strength our balance sheet for the long haul with several highly successful financings from.
And from the beginning of 2020 through today, we have raised approximately $70 million of additional cash.
The increase and capital is attributable to several news that with time and we paced throughout the year.
Staggered utilization of our ATM facility as prices were rising and early to mid 2020 raised $16 7 million warrant exercises from the November 2019, offering of $8 7 million of.
The private placement of $10 million in November 2020 of.
$25 million registered direct offering in February of 'twenty, 'twenty, one and a very strong price point.
And the warrant exercise and exchange of $9 7 million and March of this year.
Both the register direct and the warrant exercise and exchange, Jerry warrants and a strong try and strike price of $3 55, and $3 56, respectively.
These warrants along with the company's remaining capacity under the existing shelf degenerate and additional proceeds of up to $37 $9 million for the company.
[noise] excuse me if all were exercised in full.
[noise] excuse me the.
The company expects to have the cash balance of approximately $40 million at the end of Q1 2021.
Okay.
Total shares outstanding as of today, our approximately $38 3 million shares.
In terms of our guidance the foundation for comprehensively constructed and accurate forecast is still very true LNG.
Due to the continued COVID-19 pandemic and its impact across many parts of the world and across all areas of our business.
Therefore, we will refrain from offering specific guidance today.
However, I will provide some color now and hope to provide more detail on our may earnings call.
Some of the major underlying growth drivers and our business is expected to come from the number of areas. Our universe of our core businesses is expected to grow internationally the of distributors as well as in the U S.
We are seeing unit variable unit there of UTI usage by several labs, and and are you offsetting and late 2020 and are starting to gain commercial traction in 2021.
We're also seeing additional universe system placements and customer account conversions from Union Euro LRT L O T a L and the United States.
A significant portion of.
Smith, a significant long term growth driver would be China for.
Currently the timeline for an M. P. A approval of the pneumonia cartridges and unclear and we have limited visibility there.
And once approved our partner base and clear bio has committed to a minimum purchase of 360 universe of systems, and 1.5 million cartridges and accumulating over an eight year time period, just reminded everyone. This contract is signed and in place already so there's no need to go she eight commercial aspects of.
The China partnership.
For further information on the partnership deal. Please see our S. Four filing from February of last year.
The areas partnering revenue will be subject to the timing and specifics structuring of any potential partnering and licensing deal.
Given the stage of negotiations and would be prudent to assume that any material deal would not happen until later this year.
Revenue from potential partnering deals such as Ares genetics licensing and collaboration deal and of our partnership around the Universal <unk> platform.
With highly depend on timing and structure.
However, it is clear that from the cash flow perspective, both of these assets have the potential of helped generate significant amounts of non dilutive deal based funding to auction over the coming years with significant upside coming from future product sales or revenue.
Also with the significant strength and balance sheet and option.
We are now also and the physician determine when the best possible point and time and what the best possible type of partnering deal for either asset might be.
In order to maximize value from option and our shareholders and the long run we are not under the same pressure. We may have been under priority of our financing to sign of particular D.
And it's clear that the further we can drive curators and Ares genetic product development ourselves the more value, we can generate and the bedroom of possible future deal might look in terms of deal structure.
And finally cash burn.
Given the expected cost savings from our fish products being terminated and even the acuity AMR Euro and trial yet at the same time initiating two large prospective clinical trials for univar of UTI, and Agi and the United States respectively.
And further investment and Opex into our area of generic and Universal <unk> platform would likely lead the fairly similar patterns of $5 million to $6 million cash burn per quarter in 2020 one.
With that I'll turn the call over to Oliver to discuss additional key milestones.
Thank you Tim.
I would now like to highlight some of the options key upcoming milestones and our development program and commercial activities.
As stated earlier and on previous calls option has remained and constant dialogue with the FDA regarding the status of the acuity of say AMR gene panel for isolates five 10-K submission.
Despite the ongoing delays and their review of non COVID-19 related to the Mexican.
Last October option had issued our formal response to the agency's additional information request received earlier in the year for.
Following the submission in November we have received notice from the FDA, indicating they would be reallocating C. D. R. H staff from open submissions to prioritize emergency use authorization of our <unk> request for in vitro diagnostics intended to address the COVID-19 pandemic.
While the staffing focus on COVID-19 related to the U as within the FDA continues and we're very pleased to report and at the end of January the FDA informed the option that they have formally resumed the review of our submission.
Due to the high volume of EUA request and the limitations on review of resources, we understand with the FTA cannot currently commit to a specific review and clearance timelines of our so called Madhu for Bottomline.
We are however, confident that option has addressed all of the agencies remaining requests for additional information and we anticipate a clearance decision at the FDA review teams earliest opportunity as prime manage between really resources and COVID-19 related E waste permit.
While the FDA is working towards their final clearance decision. We have continued full steam ahead with commercial launch readiness activities.
We have successfully manufactured already several batches of the <unk> gene panel price list the product and <unk>.
Preparation for commercial release, and our commercial team is poised for launch.
We've used time to our advantage to ensure that we are equipped to meet any customer demands as soon as we have received our FDA clearance decision.
Exciting the earlier this first quarter of 2021, we received regulatory approval for the creative suite of air system, and an IBD instrument system and China from the Chinese and M. P. A.
Option subsidiary of <unk>, and its Chinese partner base and clear bio continue to interact closely with the M. P. E. During the interactive review of the submission for the unit narrow 815 pneumonia cartridge and.
The first unit of Aero based diagnostic application for the Chinese market.
A dossier for the review and potential future approval of the pneumonia cartridge was submitted as early as February 2019.
And it includes comprehensive data from various clinical trials and regulatory submissions of the unilateral LRT and all of our TBA L products, both of which are of FDA cleared here and the United States.
And again, the Barrow HPN cartridges for hospitalized pneumonia patients, which is the IBD marked and Europe.
Timelines for and MTA response submission and review had been extended by several months and 2020 due to the COVID-19 pandemic.
Now that the NPA has completed the registration of the unit of Aero system of the IBD for Chinese market the <unk>.
Startup commercialization by our partner BCB, However remains subject to also getting approval of the pneumonia cartridge first.
We hope to be able to provide updates on the Chinese regulatory approval process and subsequently planned commercial launch in the coming quarters and 2021 but at this point and time the N M. P. A does not provide any specific guidance for timeline for their reviews.
And as mentioned before the commercial side of the contract with pace and Claire Bio has been fully negotiated and the deal was signed several years ago.
So to reemphasize there was absolutely no needs to negotiate a commercial deal and China anymore that is already in place and it contains the minimum commitments over an eight year period of 360 and of Aerostar and $1 5 million cartridges cumulatively, adding to about 180 million U S dollars and revenue to option at <unk>.
Current transfer prices and the agreement added current Euro dollar foreign exchange rates.
We've also made excellent progress and the final development phases of the unit Vero <unk> RQ platform.
We expect that by the middle of 2021, we should have a small series of about 10 instruments system readily available for final verification and validation testing.
We've already established several assays on a 30 cartridges, including one for Sars Covid, two flu and flu B and RSV.
And also several of antibiotic resistance marker assays.
We mentioned and our last call that option has continued the dialogue with several potential partners for such a platform and we have continued doing so.
We have received specifications for several potential products that could be developed onto such a system and we believe that a part of great opportunity for option around day 30 platform assets may present itself and the next several quarters.
Earlier in 2020, we had announced the extension of our partnership with the New York State Department and to a second tier to detect and track and manage kind of microbial resistant infections and health care institutions statewide.
And the third quarter of 2020 sites that had previously been put out of hold under the program due to the COVID-19 pandemic have begun to reopen and during the fourth quarter of 2020 and first quarter of 2020. Once a day all testing sites have been actively running of Kyoto AMR gene panel testing.
As of today for testing centers that run the acuity of AMR gene panel of tests on isolate from the affiliated network totaling more than 30 hospitals across New York City and the state of New York are up and running.
We have seen significant ramp up and testing volumes and the fourth quarter of 2000, and 'twenty and into the first quarter of 2021.
Given the COVID-19 had slowed the testing during the earlier parts of 2020. We're currently and a very active dialogue with the New York State Department of health on how the extend and expand upon the year two program.
Which would otherwise and on March 31, 2021, and we're confident that the testing will be extended and expanded at attractive commercial terms to option.
The significant revenue totaling more than $300000 and potentially up to how familiar and the next two quarters.
We will also be discussing during such extension of the path forward with the New York State Department of health on how to think about of broader statewide rollout and the third year and beyond of our collaborations.
Going forward. We also look to some of the New York State sites to become early adopters of our FDA cleared the queue of this anr gene panel for isolates product rather than the research use only version which that car for us.
In closing, we're very pleased with the progress being made at auction and with our fourth quarter and full year results, we have significant momentum across our entire product portfolio post.
Post business combination portfolio realignment, we've implemented successfully will only further ensure our focus remains growing the company's core products and capabilities to drive topline revenue growth and shareholder value.
And is very well positioned and the market with an exciting portfolio of products, which we believe will help us achieve strong growth towards becoming one of the industry's leaders and the antimicrobial resistance and bioinformatics space.
This market position has been reinforced by our collaborations the.
And numerous notable peer reviewed publication award grants and a pipeline that includes prospects such as the pending FDA clearance decision and switch and subsequent commercial launch of the acuity of say AMR gene panel price of ore in the United States, along with additional clinical trials of the unit URL, UTI and Iga I and their future U S F.
The regulatory milestones such a submission and eventual clearance.
And finally, I would like to wholeheartedly. Thank all of our option group companies employees globally for their phenomenal work ethic focus and execution as we've worked tirelessly through the pandemic to successfully combine our companies and product portfolio of this past year I look forward to a new exciting year ahead and to the many continued success as we are.
We'll achieve together.
I would now like to turn the call back for the operator for questions operator.
Thank you we will now begin the question and answer session. If you do have a question. Please press star one now to be placed and the Q1 moment, please and while we poll for questions.
Our first question is from the <unk> of H C. Wainwright. Please.
Please state your question.
Hi, there. This is the Mars the here on behalf of the churn I was wondering if you could clarify how soon.
You could commercially launch the AMR gene panel once approved.
And what Youll projected revenue from the panel for the full year it would be off the launch.
Yeah.
Sure.
Now as I said.
We have continued to prepare so yeah, usually once you get FDA clearance and any molecular diagnostic product. It will typically take a number of weeks, it's calling out.
Anywhere from.
Six to eight weeks.
In order to truly truly launch now we've tried to shorten and compress that period as best we can as I said, we have produced and manufactured several batches of the Kyoto AMR gene panel product.
It has basically.
Basically run through our QC process. It saw and QC holds pending the FDA clearance and we obviously need the appropriate label to be of fixed to the product once we have FDA clearance.
The marketing and sales organizations have been trained the collateral is being done.
We're certainly in and active dialogues and I mentioned as a couple of examples of the various customers today that run the acute and <unk> are you owe for possibly converting them over to the FDA cleared product.
And in terms of first full year revenue.
Not providing any specific guidance at this point.
And again typically you would anticipate that you will have the these are complex products, it's going to be a first in class and the first of its kind type product, we anticipate the <unk> AMR gene panel for isolates to be.
The broadest broadest panel of genetic antimicrobial resistance markers at the FDA would have cleared once that's cleared sort of sales cycles for a complicated product and yeah.
Truly novel indication area are fairly lengthy and if you look at the industry comparable it's not uncommon to see anything from six to nine or even 12 months and some larger hospital networks.
But again from from then on out.
Utilization per instrument system and Thats the way to think about and you know how many how many systems can you place and watch the annuity if you will on any given the system.
We're looking at tests that are somewhere.
And somewhere in the call of 100 to $150 ballpark per test.
And if you can run and.
And on any given instrument system.
Several hundreds of potentially a couple of thousand tests per year, obviously makes for very attractive annuity net boils down to how many how many of the systems can replace and the 12 month period again at this point not giving any specific guidance because again, we need to see the final FDA labeling and claims they allow us to make.
But again the funnel is being prepared and were going to try to drive costs out of the gate as hard as we can.
Alright, that's very helpful. Thanks, very much and we look forward to continued success.
[laughter].
Our next question is from Max Jacobs of Edison Group.
Yeah.
Okay.
Hi, guys. Thanks for taking my question. So I was just wondering.
With regards to like the.
China deal how like what types of revenues can we expect to see and the first year after marketing approval.
[laughter], so and so all of you know again, what has previously been publically disclosed and.
And this is actually if you look back at some of the previous the greatest disclosure that the original contract with these payers and clear was for five years.
During that initial five year period.
That was a 260 instrument systems.
And the cumulative revenue would've been up to $60 million euros, and then year of six seven and eight that were negotiated and added that of later stage basically added on another 100 systems at the minimum and it added on another approximately 90 minutes and 90 million and cumulated revenue. So if you.
Take the 60 million euros, which and U S dollar terms about $70 million to $72 million or so right now.
And over a six year term I think it is fair to say that this is not going to be linear youre going to have sort of AR and.
And exponential growth phase early on clearly youre going to see and the first.
You know 123 years youre going to see the bulk of instrument placements and then you'll see the cartridge pull through and utilization following as each of count goes through their internal validation et cetera. So again, if you take that 60 million euro of $72 million five year cumulative number and then.
Sales and build yourself, a little last shaped curve, you're probably going to come up with as close an approximation of us as we can provide at the stage.
Oh, Okay, great and the.
And that was helpful and then just on Colombia.
And you kind of a similar question, but not necessarily just based on your one.
What sort of revenue opportunity do you think that is.
And you could give us something in the ballpark sure sorry, and I mean, the saw what we've disclosed is that over the three years at a minimum of tenure and a barrel of instrument systems. If you look at a typical unit of barrels system.
Now running anywhere from.
And it's the low and but let's call it two.
<unk> 300 tests and the high and could be up to 1000 tests of the year.
You look at the end customer pricing, which lie.
The likely going to be.
Somewhat lower than here in the United States, but again of the per test revenue towards and customers likely going to be and that 128 of $180 ballpark.
You know what the typical of distributor margin and our industry and usually being in the 30, 40% ballpark. So we of course generate our revenue as option through the transfer price based sales you sort of get a sense on the again on a per instrument basis. This is from.
Hi, Hi, five figures to low six figures annuity per instrument per atom.
And of course, if you look strategically you look at the and our relationship. The initial deal is for Colombia, and Colombia only.
There certainly are and their country. There number one theyre ahead of some of the L brand names in the and the diagnostic industry, there certainly ambitious and looking at expanding beyond the Columbia and two additional Latin American market. So the way to look at this really is the beginning of a strategic partnership that could go well beyond the Columbia over.
For the coming years and at least from a from a you know of.
Initial interest level, there was a several hundred participants and that key opinion leader event.
Couple of weeks back was tremendously positive feedback right now the focus is to get the regulatory paperwork done.
The good news here and no clinical trial.
There is no it's not like and FDA review, it's basically all of us providing the CE Mark documentation and technical files for each of the products and you remember there is the unit of Aero system and then there was five CE mark the cartridges and five disease areas pneumonia and.
Plant tissue of infection, what culture of urinary tract infection, and the intra abdominal infections theyre taken all byproducts are.
Through the Colombian process, but again, it's purely pay per base.
We've submitted and pretty much the full a full gambit of the documents and we're expecting.
Probably a second half call it the fall fall season.
And 21 clearance and then they can go right and.
Launch the product portfolio and and the Colombian market.
Great and that was extremely helpful color. Thank you so much.
And if you actually just as you think about this columbia of being a prototypical deal and we have additional such deals for example, and Vietnam, which is.
The first basically of copycat of that type of agreement three years minimum commitments on instrument and the same regulatory process.
So you know.
It's always worth we continue to expand our geographic scope.
Clearly continue to drive the the.
Top line here.
Wonderful.
Those were all my questions. Thank you.
Yeah.
Our final question comes from Bob.
Global partner.
Your question.
Good afternoon, gentlemen, and thanks for taking the questions and congrats and the progress.
Thank you Ben go ahead of you just yeah no. So first for me I know there's been a lot of ground covered on China, but have you heard of any more from BCD and I thought it sounds like and up here and you're not going to hear anything from them, but have you heard from D. C. B.
Any of their expectations and.
And would it be possible to launch of the research is the only test that doesn't.
And why it hits the way I'm hearing you and then I.
I think the if I'm not mistaken there are a handful and the 30.
And solve there.
Or.
No the anymore color there I guess is the question.
Sure sure Yeah.
Our partner has taken the unilateral platform and the pneumonia application through all of the required analytical and clinical testing and studies. They have had a number of systems saw and.
Give you a sense, we have roughly over the over the last couple of years.
About a dozen unit of Aero systems two of them. They have deployed these at a number of very large hospital systems, and Shanghai and Beijing.
There is even being the publication of the Sino Japanese friendship Hospital again, one of the largest the top and institutions. So.
So yes, they have certainly some early adopters I'm not going to speculate on their <unk>.
Regulatory strategy with regards to are you all.
Now, we do know that there and very active dialogue with the N and M. P E and the the way.
We certainly.
Get a sense of that is that bi.
Specific requests for specifics.
Ancillary documentation and data and give you. One example, and the late fourth quarter of 2020.
Through our partner of Beijing clear and their regulatory advisors.
Got a request list from the and NPA for any and.
Ancillary trial data that we had now we'd already provided them. The U S. FDA trial data on both of our L. R T and L E B, a L and all of our HP and European data.
But of course, there have been a number and the increasing number of peer reviewed.
Journal publications and investigator initiated studies from.
Reputable institutions here in the United States and I'll give you a northwestern in Chicago and Beaumont, Michigan's the named a couple of as well and stuff.
Institutions like Carlin, Scott and <unk>.
Europe. So we've provided all of that feedback as best we know and again it is China, So I'll always.
Having done business there for the better part of the last decade, I'll take everything for the grain of salt, but we believe that they have provided all of that documentation and dossier to the N M. P. A.
And then it's likely going to be not too dissimilar from the U S. F. D. A cause for you compared from a procedural standpoint from a level of diligence and request. The NPA is why now on par with the United States FDA. The App typically the very same question same quality of data. So I guess the the days when.
You would get by with the just relationship a little bit of of Guangxi and and goodwill those days of the long past.
So again, we believe we submitted everything there and frankly, we've submitted everything that there is and the world. It's been good enough to get the product approved in the United States. It's been good enough to get the product and.
And two European markets Thats being good enough to get Singaporean Health authority approval, Thailand, and Malaysia to name of another couple of countries.
So I've got to believe fundamentally that that product has a strong body of evidence.
And not just analytical, but really clinical data to support that but again, we will read it and they really need to focus on getting the of the remaining questions back and.
It's probably going to boil down to either they're going to clear it or improve it based on for.
Foreign data.
With you know whatever local Chinese data, there and that's already being generated or they might request specific ancillary data to.
And to be generated and China again, there is multiple installed systems incidence rates of pneumonia are huge and China. So from a.
Throughput and duration of that Shouldnt be a big issue, we're certainly ready to support our partners for right now.
We are of hard enough time to second guess, the United States, the FDA and we're talking to their review of the correctly every week and.
And we speak the same language, where and the same country. So we're like three layers removed from the Chinese N M. P. A here.
But again I think all signals are definitely trending and a good direction and we're confident that it's.
Its margin is good I was frankly positively surprised when.
Without the you know after we had submitted everything that we havent heard for the.
A couple of months out of the Blue and we get the approval Chinese letter Red seal.
And was right I mean it.
And instead of a pre warning or anything that just arrived.
And so again.
And let's focus on answering any questions there may be but.
And we're certainly doing everything we can with all partners I'm, just kind of make it all happen.
Okay.
Makes sense and I definitely appreciate the Oh the details.
Sales there.
And just thinking about Oh, PCB and would begin commercialization on that and obviously with the the terms or what the terms are right.
Do you have a sense of the or.
Are the rearing to go and get out of the gate real quickly to the App you know they already kind of train there.
And the personnel and salespeople or you know how does that that aspect of the kind of stood at the moment.
Yeah, I mean, clearly I mean, they're a.
You know sort of the deal.
And size.
Organization across all 31 provinces, plus Oh, Hong Kong and Taiwan.
So you know there are sizable company they have.
Had the unit of Aero systems.
Their initial launch and focus like pretty much for any modern and cutting edge Western technology, and China Youre not going to go to 31 provinces and rural China, you're going to go to the big cities of which frankly, there's more than enough and China and the AAA hospitals, as they're called and China.
And again, there is over 1000 and AAA hospitals in China.
So again I would anticipate the launch to focus on Beijing Shanghai.
Some of the other major cities.
And and those top tier hospitals. The team there has been fully trained and again they have worked with multiple installed systems over the last couple of years. So all of their commercial team their technical team they are marketing team.
The working very closely with our team in Europe.
We continue to have face to face meetings.
With them on a very regular basis so.
You know the one data point I would throw out there and this is the relationship we're building with Beijing and clear was based on our referrals by one of our other strategic corporate partners.
And the Rayos medical many years ago based and clear has been the exclusive commercial distributor for rayos medical for almost 15 years.
And the CEO of for rails and medical and basically told me we've never been disappointed by these guys.
So you know a very professional team and they've come through and they've grown the business year over year, and they've even invested and additional.
Additional manufacturing capacity for for her Ao. So we're clearly excited so far all I can say is they've been holding up there and of the bargain and we're excited to be working with them.
That's great and then.
Just the just thinking about the strength of balance sheet and I appreciate the color on the potential to drive better terms on some of the is you know the licensee and our partnership agreements or they could have but just with the strength of balance sheet have you also seen increased.
The increased interest.
You know our changes to the the negotiation negotiating posture of the the the folks that you're already dealing with.
So the question I mean.
I would say not really I mean, all of the conversations and again at this point we have multiple parallel.
The conversations with several large corporate partners ongoing simultaneously.
All aware that there are multiple of partnering avenues, we're pursuing them.
So.
And if you look at some of the partnerships that are hours of genetics has had for a number of years, where they're at Sandoz where qiagen.
But also you know other potential of large players and the diagnostics industry.
I would say the focus remains really on how to build strategically built a franchise around the bioinformatics AI powered algorithms.
And.
I would certainly say this wild six months ago any partner looking at simply taken a look at our queues RK and our balance sheet would've known.
We're gonna be between the rock and hard place and we're gonna be signing just about any deal that has just gone away at all I think the ability to say look let's be really strategic here, let's focus on.
What we can do together, but also lets not trades to much of the value and too much of the upside too.
Too early on prematurely at you know.
Relatively and.
And you know small amount upfront and then the opinions on the on the downstream royalty of the value of its going to be and the ultimate product. So it's gonna be and product revenue and the royalty upon that of any potential license fee.
So the ability of the.
Drive for us further and potentially co invest on the R&D side, along with a partner looking at are there areas that strategically you may want to carve out commercially.
You know that certainly gives us the very different ability to to discuss some strategic collaborations rather than going for the quickest possible licensing deal just to make sure we get R&D funding covered here for the next year or two.
And that makes a lot of sense and then just lastly for me and just wondering kind of the the response that you've gotten from the Ares genetics.
And you know the AI the best practices publication, I mean that seems more like something that's going to resonate the more meaningfully to industry than investors, but you know what's been kind of the response there and.
And you know it seems like there.
Kind of a sale of system thought leadership as well if you don't how should investors look at it.
And that's what they accept that the it is meaningful.
It certainly has put Ares genetics on the map and again you know Ares genetics has been invited and we talked about the J P. I M ore, but there is another large a global consortium and both of these Ares genetics has been invited to join.
And given some of the the the leadership roles and I'm on the AI bio informatics side of things so again.
I would you know the.
FDA guidance as one part to this date Ares genetics is the only company globally that has actually of peer reviewed multicenter publication.
Demonstrating the ability to not only predict antimicrobial resistance, but really to predict antibiotic susceptibility with extremely high levels of accuracy out.
As a true first mover advantage and that's where the U S. P of Ares genetics and the Rspb lifestyle.
And if you look at the old consortia and you look at who the players are it's the usual suspects of the global pharmaceutical industry and antibiotics for the global diagnostics leadership and the microbiology.
And for them to invite Ares genetics and take a leadership role and these and these the syndicates.
Definitely great and that's put us on the map, which is good to see but it will require us to continue investing and furthering the.
And the accident.
Of course, you know you have players out there that the.
Certainly arent sitting on their hands and we got to keep that the.
The first mover advantage with the databases from of combined Merck pharmaceutical strained collection with the Siemens strained collection, which is ours to be today with its 55000 isolates the nextgen sequencing and Pheno typically looked at.
Against over 100 antibiotics and total we go and stay at the forefront of bags and.
But we've certainly seen as a number of inbound interest requests from top tier U S academic.
Academic centers and clinical centers to explore collaboration opportunities to sort of look at the just truly next generation solution that goes beyond the PCR that goes into MTS and AI.
Well, that's great well, that's the for me and congrats gentlemen on all of it.
Although all of the progress.
Alright, that's all the time, we had today I will now turn the call back and Mr. Shah for closing remarks.
Well. Thank you everyone for joining today. Please visit the investors section of our website or our SEC filings for updates on the company.
Thank you very much and appreciate your attendance. Thank you.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.