Q2 2023 OpGen Inc Earnings Call

Welcome to opt in second quarter, 'twenty, 'twenty, three earnings call and business update.

We turn the call over to opt in management. Please note that any forward looking statement made during this call are based on management's current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward looking statements such risks and uncertainties include but are not.

<unk> limited to opt into the ability to continue to finance its business and operations. The result of alternatives to mitigate the company's cash position, including restructuring or refinancing its debt seeking additional capital reducing business activities strategic transactions and other.

Sure, it's including obtaining relief under applicable bankruptcy laws.

<unk> does not undertake any obligation to publicly update any forward looking statement to reflect events or changed circumstances. After this call for a further discussion of factors that could cause results to differ please see the company's filings with the securities and exchange Commission, including without limitation the company.

<unk> most recent Form 10-K and Form 10-Q for the second quarter and the first half of 2023 that will be filed with the STC.

Joining the call today are Oliver Schacht opt ins, President and Chief Executive Officer, and Albert We've our company's financial Officer, now I will turn the call over to Oliver for introductory remarks.

Thank you all for taking the time to join today's call Albert and I look forward to sharing several business and financial updates how do I think the commercialization efforts that have been underway will not be taking questions during today's call.

During the second quarter, we continued to see traction across all our platforms and we've seen several successful recent commercial contract signings.

<unk> continues to emphasize commercialization opportunities to leverage our current platform and further nurture existing partnerships.

Well curated we announced the completion of two interim milestones of our collaboration project with infected gnostics under the pre Plex Grant.

We also completed the first phase, including an expanded scope of our collaboration project with fine in Q2.

Completion of these milestones during the feasibility phase resulted in revenue of approximately $900000 of which 609000 was recognized during the first half of 2023.

The latest milestone deliverables support users in treatment decision, making adding options to allow for mobile and cloud based data access and harnessing the power of next generation sequencing strain analysis.

Based on the successful feasibility phase we extended the collaboration with fine by entering into a second phase of the project and expect to begin full I P. D assay development software development as well as analytical testing during this next phase.

We also had a major U S milestone on the clinical and regulatory front.

Following the successful completion of data readout from our successful unit Barrow UTI clinical trial option submitted a de Novo classification request with the F D a seeking marketing authorization.

Following the F D. A substantive review of our submission we received a formal communication from the FDA requesting certain additional information at the end of June .

The F. D. A has provided option with 180 days to fully responds to all their requests and we anticipate being in a position to complete all of the additional data analysis as well as certain inhouse wet lab testing well before then with the goal of responding to the FDA in full during the fourth quarter of 2023.

We're looking forward to working closely with the FDA during the remainder of their interactive review towards an eventual clearance of the unit URL UTI product for marketing in the United States.

During the second quarter option also entered into a strategic nonexclusive agreement with Fisher healthcare a division of Thermo Fisher scientific for the distribution in the United States. If the unit Arrow, a 50 platform and in vitro diagnostic test for bacterial pneumonia as well as its research use only test for urinary tract infection.

During the quarter, we have successfully completed the vendor setup of option on the Fisher health care systems have.

Held an introductory all hands training session for their entire U S sales team and defined a digital marketing campaign with keep positioning and messaging.

Together with Fisher and the information from their CRM system and customer data, we have already identified several hundred high priority leads across the U S and individuals in depth product sales training of all sales teams is already underway with about half of the territory sales teams already fully trained and the remaining teams expected to complete training done.

The third quarter.

There are already several specific commercial customer opportunities that the Fisher team and our team are collaborating on.

In the month of June opt and received 10 unit barrel, a 30 C series instruments.

<unk> C series instruments incorporate all learnings from extensive testing of the 10 830 P series instrument, which has been upgraded to the latest C series standard also.

The C series instruments have been optimized to improve manufacture ability serviceability and should extend the lifetime of key moving parts inside these instruments. This will also lower the manufacturing cost of 830 instruments.

The assistance of a U S. Chinese strategic advisory firm, we continue to have an active strategic corporate business development campaign to over 40, Chinese corporate IBD companies potentially interested in the unilateral 830 platform.

As mentioned previously we believe there is an attractive opportunity to partner with the Chinese organization familiar with the markets to possibly license or otherwise monetize the 830 platform.

You shouldn't get a barrel a 50 platform collaboration with BCB has included in person meetings in both Germany at the curators development and manufacturing site and in China. During the month of May.

Next steps in the ongoing 50 collaboration in pneumonia with our Chinese distribution partner B C. B would be clinical studies to work towards a final submission for review by the Chinese National Medical product administration right M. P. A.

We expect the overall process to obtain an M. P. A clearance to take somewhere around 24 to 30 months per guidance from Chinese regulatory advisors to our partner.

The Iris isolate sequencing services front, we've also seen progress in Q2.

Following the successful completion of a feasibility phase working with a major health care network in the south Eastern United States. The Iris team is now receiving regular routine clinical isolate shipments twice a week.

Under a commercial contract with that health care network, we would expect annual testing volumes to initially be in the range of one to 2000 samples per year with further our medium term growth potential.

A recently signed agreement and purchase order confirms significant six figure dollar revenue for the first full year from that U S customer alone.

The IP front option subsidiary Ares genetics successfully defended a key patent that was being contested in Europe .

Genetic resistance prediction screening database accurately detects the bacterial infection guiding patient treatment.

<unk> resistance prediction against antimicrobial drugs and microorganisms using structural changes in the genome.

Granted in Europe on January six 2021 and then China on January 10th 2023.

In September two 2021 a Swedish opponent filed an opposition against the patent grant through the European patent office and.

A hearing on Thursday June 22023, the opposition division of the European patent office ruled in favor of maintaining hours patents with broadly Cup, which broadly covers the prediction of EMR and pathogens based on any genetic determinants involving two or more nuclear types.

With that I will now turn the call over to Albert to whatever options Chief Financial Officer. He will review financial results for the second quarter of 2023, and recent financial developments Albert.

Okay.

Thank you Oliver and welcome to everyone on the call.

I will discuss second quarter, and first half year highlights and financial results.

After the second quarter 'twenty.

'twenty 'twenty four it wasn't proximately $736000 compared to revenue of 967000 policies in the second quarter was 2022.

Breast health screening 23 revenue of approximately $165 million grew by approximately 15% compared to 11 U S. Approximately one point to $44 million in the first half false claim in 'twenty two.

This increase in 'twenty 'twenty as to where he was primarily due to the revenue generated from defined collaboration project, but also included any of that.

Product sales.

Revenue received under or acute tests, a M. All gene panel with commercial contracts as well as hours, where they get such as capacity is.

Yeah.

Well the second half of 'twenty to 'twenty three we plan to work on generating revenue from existing commercial agreements, including several recently signed commercial customer contracts in the U S or are you going to go in the queue at this as well as some new collaborations and your customers in the U S. In particular.

Our total operating expenses decreased in the second quarter of 23 to $5 $9 million compared to $6.

$2 million.

In 2022.

Well the first half of 'twenty, where we saw a decrease of approximately 6% and operating expenses of $12 $6 million in the first six months of print in 'twenty two to 11 $9 million in the comparable period this year.

Our second quarter 'twenty to 'twenty, three research and development expense was $1 $4 million compared to $2 $3 million for the Coke all its fundamental theory at the previous year I E.

9% reduction.

This decrease was mainly due to a reduction in payroll related costs as well as the conclusion of the prospective multi center clinical trial with a younger.

Is that what you see in the third quarter what else going on.

First half R&D expense in 'twenty, two where are you.

Sleep on $2 million compared to $4 $6 million during the first half of 2022.

Oh second quarter clean in 'twenty three.

Minutes, that's all G&A expense was $2 $4 million compared to $2 $1 million, what's the corresponding period of the previous year.

<unk> expense remained consistent year over year with the first half of spring 'twenty, two and the first half of 'twenty three at $4.8 million.

Our sales and marketing expenses stayed consistent at approximately one $2 million for both the second quarter was 23 until second quarter of 'twenty to 'twenty two.

Sales and marketing expense will stay consistent at the box the monthly two by $2 million for both the first households, claiming 23 in the first half of 2022.

Taking a look at our cash position, we ended 2022 with approximately $74 million cash.

As of June 30.

2023 had a cash position of approximately three 2 million tons.

In early May of this year, we announced the closing of a 3.5 dollars.

This public offering.

We intend to use the proceeds from this offering for the following.

Support continued commercialization of our FDA cleared the queue at this aim all gene panels tenants test in the U S. Commercial lives all products with a focus on the Omega platform.

Blackstone and diagnostic tests.

Support further development and commercialization of Arris genetics database and related service offerings.

Support sales.

Marketing as well as the customers in California right.

Well all of our products and services.

Invest in manufacturing and operations infrastructure to support the sale of our product continues.

<unk> continues to invest and how do you foresee any of our platforms and product entry pace. So I think the outstanding indebtedness of the company and its subsidiaries.

Having met our debt repayment obligations from the first tranche of our EIB debt in full by April of this year. There are two additional tranches and principal of 3 million in parcel in their risks, respectively, plus accumulated deferred interest to be repaid.

The second tranche initially became due in June we signed a standstill agreement with EIB debt following the powerful payment by us over 1 million viewers in June 2023, Oh bikes or stay on the total repayment of such strong.

November 30 of 'twenty to 'twenty, three or such earlier time that both parties in the best interest of agreed on a restructuring of the outstanding and upcoming repayments.

Now with that.

The temporary stay on the repayment of all debt.

The flu reported and in light of our business performance and current cash position, we do not expect that our current cash will be sufficient to fund operations beyond September when you're finished with it.

Since the end of the second quarter, we have pursued the option stream pool, our cash position or mitigate a liquidity shortfall.

Nevertheless, there is substantial doubt about opportunistic ability to continue as a going concern.

We continue to consider all alternatives, including restructuring or refinancing our debt.

Additional debt or equity capital, reducing or delaying our business activities.

Assets, although strategic transactions and other measures, including obtaining relief under the U S. That's where it is applicable for bankruptcy laws.

There is no guarantee that we will be able to identify and execute any else and as I was telling me pitch or that any of them will be successful.

If we are unable to successfully identify and execute on and you'll see it all the time that this company will happen.

Sufficient cash to continue operating beyond September 20 things to it.

During and since the end of the second quarter, we have had several highlights.

Our revenue generation.

The continued receipt of revenue from such a motion.

Oh jeez this premise.

Are you able to mitigate our cash situation in order to continue as a going concern.

After we acquired technologies to approximately $300000 of new revenue from defined collaboration in 2022 when you're recognized more than $600000 in revenue from this project in the first half.

Oh 2023.

The teams find entry way that's have agreed on the scope of extending the contract.

X pace, we've been looking at for in vitro diagnostic assay development and software development as well as analytical testing of microbes.

Resistance or <unk>, our test for blood culture samples and low end.

I'm Kris are Alex.

This next phase is expected to take about 10 months in person assigned budget of up to approximately $600000 or V. If all mentioned activities.

The first payment of about $200000 became due upon signing of the contract extension.

Remaining amount would be coming in the form of two equally sized smartphone tranches upon delivery of certain data and development packages in the coming quarters.

Subsequent development basis, such as clinical trials regulatory submissions and seeking marketing approval is needed for the specific elements.

For future commercial launch in these countries would be subject to possible further extensions of the collaborations contract between find than us.

Both parties have also agreed that they would in good faith negotiate a license to the extent of your platform for certain elements and the terms and conditions of such a license in the future is that what it become necessary.

Furthermore, we continue to see revenue growth opportunities for our unitary product and Irish genetics services globally, and especially here in the U S, including in particular with respect to our distribution partnership for many of our products with Fisher House scatter.

We entered into during the second quarter.

We expect to see traction and momentum building for all of you have ever seen in the U S and this distribution partnership.

We have also recently signed several new contracts with customers for both of you.

System placements here in the U S, including a strategic account with a global diagnostics corporate customer, but you'll never people ammonia and blood culture reference testing.

The multiyear contract with the hospital from a larger network of hospitals across the Western U S ports.

It doesn't mean that rule of law tea. They all another universe with your eye lip account as well as adding this prestigious children's hospital.

Acute discussed them up.

During the second quarter, we also signed contracts for two new.

Some placements with one off all or acute as customers.

Demonstrating.

The peak potential of our product lines.

Oh Ellis team is also an active dialogue with some of our curators accounts about opportunities of adding S. I S S and arris cloud based offerings for these accounts.

Thus, we are starting to see some upselling and cross selling opportunities across our entire portfolio of either the oh.

Oh offerings in an all.

Taken together in recent weeks, we have signed commercial contracts totaling potential annualized revenue volume of up to one $5 million, adding to our topline revenue growth potential.

Yeah, it's a total of up to $1.5 million and five contract that funding to date additional non dilutive financing opportunities remain a strategic priority for auction.

As shown year to date, we look to complement these opportunities what's the equity funding that will expand our collaboration potential.

It allow us to partner with organizations like find BARDA European Union and other funding bodies.

It is key to understand that none of these are non dilutive funding opportunities provide for 100% pardon me off their respective projects.

Typically if funding quotas range from somewhere in the 40% to maybe 70 or 80% range as.

It is therefore, making sure that option is able to provide its own cofunding, but these prototypes otherwise non dilutive funding would not likely materialize.

This concludes the financial update I will now turn the call back to all of them.

Okay.

Thanks, Albert I would now like to highlight our upcoming activity as.

As we mentioned earlier, we continue to make strong headway on the commercial front, which could not be supported without dedication from our team.

As part of that we will have a changing of the guard and Iris. We're tired of boss has been promoted to our a C E O and your honest Weinberger to Rs Chief Scientific officer as of August 2023.

We're excited to have their direction and this exciting stage of the business. We think our former managing directors aren't in my paranoia and Stefan bicycling for their commitment in building ours to what it is today.

Both of them will stay on as independent part time consultants supporting the Arris team in the next phase of its development.

But the coming quarters, we expect to see a growing number of commercial accounts being signed in the U S. We anticipate growing our revenue base across the unit Arrow acuity was an iris product lines in the U S. Intend to continue working with our international distribution partners in Europe , as well as our current and potential future partners in China. So unilaterally.

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Thank you all for your continued support and for participating in this afternoons call. Please visit the investors section of our website.

Our SEC filings for updates on the company.

Thank you very much.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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