U.S. markets open in 3 hours 12 minutes
  • S&P Futures

    -5.50 (-0.15%)
  • Dow Futures

    -81.00 (-0.27%)
  • Nasdaq Futures

    -10.25 (-0.08%)
  • Russell 2000 Futures

    -5.30 (-0.29%)
  • Crude Oil

    -0.02 (-0.04%)
  • Gold

    +13.50 (+0.74%)
  • Silver

    +0.22 (+0.91%)

    -0.0023 (-0.19%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +0.28 (+1.36%)

    -0.0068 (-0.51%)

    +0.3740 (+0.36%)

    -111.96 (-0.58%)
  • CMC Crypto 200

    -5.66 (-1.49%)
  • FTSE 100

    +15.79 (+0.25%)
  • Nikkei 225

    +13.44 (+0.05%)

Edited Transcript of OPGN.OQ earnings conference call or presentation 11-Nov-20 9:30pm GMT

·40 min read

Q3 2020 OpGen Inc Earnings Call GAITHERSBURG Nov 12, 2020 (Thomson StreetEvents) -- Edited Transcript of OpGen Inc earnings conference call or presentation Wednesday, November 11, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Megan Paul * Oliver Schacht OpGen, Inc. - CEO, President & Director * Timothy C. Dec OpGen, Inc. - CFO & Corporate Secretary ================================================================================ Conference Call Participants ================================================================================ * Benjamin Charles Haynor Alliance Global Partners, Research Division - Analyst * Maxim Jacobs Edison Investment Research Limited - Managing Partner & Director of Healthcare Research for North America * Yi Chen H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings. Welcome to the OpGen, Inc. Third Quarter 2020 Earnings Conference Call. (Operator Instructions) I will now turn the conference over to your host, Megan Paul, Investor Relations. You may begin. -------------------------------------------------------------------------------- Megan Paul, [2] -------------------------------------------------------------------------------- Welcome to the OpGen Third Quarter 2020 Earnings Call and Business Update. (Operator Instructions) Following management's prepared remarks, there will be a Q&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 of and future results of OpGen, including its subsidiary Curetis and Ares Genetics. I encourage you to review OpGen's 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. And that will be filed with the SEC, 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 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 Curetis 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 at-the-market offering that we commenced in February 2020 as well as the proceeds from recent warrant exercises. Pursuit of FDA clearance for the Acuitas AMR Gene Panel for use with bacterial isolates and for our other products and services. The rate of adoption of our products and services by hospitals and other healthcare providers in general, as well as in the current COVID-19 pandemic situation in particular. The success of our commercialization efforts and partnering strategy, 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 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 will be Oliver Schacht, President and CEO; and Tim Dec, CFO of OpGen. I would now like to turn the call over to Oliver Schacht for introductory remarks. -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [3] -------------------------------------------------------------------------------- Thank you, Megan, and thank you, everyone, for joining us this afternoon. I would like to start this call by recognizing the hard work and dedication put forth by the committed teams at OpGen here in the United States as well as our OpGen group subsidiaries, Curetis in Germany and Ares Genetics in Vienna, Austria during this 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 R&D efforts, operations and global commercial as well as G&A teams integration. As a combined business, we have a very exciting portfolio of products, which we believe will help us achieve strong growth towards becoming one of the industry leaders in the antimicrobial resistance and bioinformatics space. On today's call, we will be providing more details on OpGen's recently announced corporate strategy and re-prioritization efforts, including further color on the product portfolio and platform pipeline changes. We will also address developments relating to the COVID-19 pandemic and the next wave, calling an uptake in cases around the world. 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 the strategic reprioritization of our product portfolio and platform pipeline going forward. This reprioritization was based on feedback from extensive market research performed by a renowned third-party market research and consulting firm. They 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 2 quarters, following our review of insights and conclusions derived from this research, OpGen and its Board have decided to focus the company's product portfolio in our proprietary Unyvero platform and unique bioinformatics capabilities. I'd like to walk 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 Ares Genetics next-generation sequencing based and artificial intelligence powered antimicrobial resistance or AMR and susceptibility AST prediction capabilities. In addition to focusing on Ares Genetics AMR production capabilities, following the successful completion of all 3 phases of the partnered R&D program, as announced in our Q2 earnings call, Ares Genetics has recently received formal notification from its undisclosed global leading IVD corporation partner that they have exercised their option to exclusively negotiate with Ares Genetics, the scope and terms of a potential worldwide exclusive license or other arrangement to Ares Genetics technology in the field of human clinical diagnostics in the coming months. It is also important to note that during this third quarter, Ares Genetics successfully completed a technology feasibility study for yet another major global IVD 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, Ares Genetics has delivered first next-gen sequencing and bioinformatics 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 Ares could offer in the NGS space using its proprietary AI-powered bioinformatics and prediction models for AMR and AST. The reprioritization also includes a platform consolidation to realize significant operational synergies and cost savings over time. We look to expand the Unyvero 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 clearance anticipated to start next year in 2021. We will aim to hold so-called pre-submission meetings with the FDA on each of the 2 products during the first half of 2021. The similar products in both clinical indications using identical sample types have already been successfully developed and CE marked and are commercially available in Europe and other markets. Additionally, in October, we submitted our formal response to the FDA's January 2020 request for additional information for the Acuitas AMR Gene Panel for isolates. I will discuss the anticipated timing of the FDA's final review a little later. It is cleared by the FDA, OpGen anticipates swift commercial launch in the U.S. in the following months. As part of the reprioritization, we will be discontinuing the legacy FISH products business, including QuickFish and PNA FISH by mid-2021 in Europe, the U.S. 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 Unyvero platform for the complicated UTI and IJI 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 bioinformatics space and antimicrobial resistance. Switching gears to the persistent global COVID-19 pandemic, while recovery efforts in sue, it is important to review how the pandemic has continued to affect OpGen's business and operations. The hospital environment continues to be very challenging. However, elective surgeries are being scheduled regularly and various non-COVID-related clinical studies are beginning to re-enroll patient samples in specific regions in hospitals. Corresponding with healthcare 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 impose 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 assist in the fight against the virus. With that being said, we're excited to continue working with Menarini Silicon Biosystems here in the U.S. to market and co-promote Menarini's 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 products. OpGen via its Curetis subsidiary announced last quarter the successful completion of the development of our own proprietary PCR-based CoV-2 test kit. We're excited to announce that this rapid 1-hour test that includes our proprietary PCR compatible universal license buffer called PULB, obtains CE-IVD marking in the European Union for the detection of SARS-CoV-2 in August of 2020. With the launch of our CE marked CoV-2 kit, we also announced the termination of distribution of the BGI kit as we have a significantly greater pricing flexibility and much improved margin profile on our own proprietary tests, which again, takes only about 1 hour to result compared to the almost 3 hours for the BGI test. As we continue to work with Menarini in the U.S. no decision has been made yet as to weather or if so when we might seek FDA EUA for the SARS-CoV-2 test ourselves as the market in the U.S. already comprises a large number of EUA PCR test kits. The first half of 2020, we have announced an investigator-initiated collaboration with the Karolinska Institutet in Sweden to identify bacterial co-infections in patients admitted to the intensive care unit for COVID-19 pneumonia using the Unyvero HPN or Hospitalized Pneumonia Panel. Option's Unyvero HPN panel for pneumonia identifies life-threatening bacterial co-infections in COVID-19 patients in just 5 hours, and Unyvero LRT and LRT BAL panels are 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 Unyvero HPN panel was presented by the Karolinska investigators at Exhibit 2020. Study demonstrated reliable performance and potentially high clinical utility off the Unyvero HPN panel as a rapid rule out diagnostic tool based on its high negative predictive value of 99.8% observed in this study. The average turnaround time for final culture result was 68 hours during which patients continue to receive empiric antibiotics. While Unyvero HPN panel reduced turnaround times from days to less than 5 hours. We believe such rapid and accurate detection is essential to assess bacterial pneumonia co-infections in critically ill COVID-19 patients. The study investigators conclude "that the Unyvero HPN fan is a useful diagnostic tool to help with the early detection of lower respiratory tract infections and antimicrobial stewardship. And in patients suspected with AMR, the panel can be beneficial for escalation or de-escalation of antibiotics." Additionally, OpGen announced the publication of 2 notable peer-reviewed studies, the first being a publication that demonstrated the clinical utility of the Unyvero LRT panel and its potential impact on antibiotic use and hospitalized patients with suspected pneumonia compared to treatment directed based on microbiological culture results only. Additionally, OpGen's 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 ceftolozane-tazobactam resistance or by its trade name also known as ZERBAXA in pseudomonas aeruginosa in the Journal of Clinical Infectious diseases. Along with peer-reviewed studies game award. Option subsidiary, Ares Genetics won the Austrian National Digitization award and was also nominated for the 40th Austrian Innovation Award for its artificial intelligence powered next-generation sequencing based molecular antibiotic susceptibility test marketed under the brand name ARESupa - Universal Pathogenome Assay. In addition to pipeline updates and awards, OpGen was awarded 2 grants during the third quarter, which will contribute to non-dilutive German government funding towards some of our R&D programs. With our Unyvero 830 platform, we recently announced the award of a German Federal Government grant to our subsidiary, Curetis and collaborators Carpegen, Munster in Germany, and the clinic for small animal internal medicine of the Ludwig-Maximilians University in Munich, Germany. The project will focus on travel-related and enteric diseases in small animals, which is an area of growing concern with increasing incidence rates. Several of these diseases were caused by potential Zoonotic pathogens that could also be passed to humans. While looking at veterinary applications, one might also help prevent human diseases in the future. OpGen also issued a press release regarding the award of a German Federal Government grant to its subsidiary Curetis and collaborators at the research campus, InfectoGnostics. The project is coordinated by Jena University Hospital and designed to use artificial intelligence-based assay development for carbopenem resistance based on porin loss and efflux pump overexpression in gram-negative bacteria. I will now turn the call over to our Chief Financial Officer, Tim Dec, to review financial results for the third quarter 2020 and recent financial developments for the business. Tim? -------------------------------------------------------------------------------- Timothy C. Dec, OpGen, Inc. - CFO & Corporate Secretary [4] -------------------------------------------------------------------------------- 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 1, 2020. Therefore, Q3 results include the full quarter as a combined company. The 9-month numbers only include 6 months as a combined company, and all references to 2019 pertain to OpGen-only numbers. All pro forma reference will be noted separately. Revenue for the third quarter of 2020 was $1.1 million, up from $600,000 for the prior year period. This increase is largely due to the strong collaboration revenue from Ares Genetics as well as international sales from Curetis, offset in part by lower collaboration revenue related to our New York state project and lower FISH product revenue. Total revenue for the 9 months ended September 30, 2020, was $2.9 million compared with $2.7 million for the 9 months ended September 30, 2019. Again, the increase was primarily due to strong collaboration revenue from Ares Genetics, offset in part by lower collaboration revenue related to our New York state project and lower FISH product revenue. Operating expenses for OpGen as a combined company for the third quarter of 2020 were $7.2 million compared with $4.1 million in the third quarter of 2019. Operating expenses for the 9 months ended September 30, 2020 were $19.6 million compared with $12.4 million for the 9 months ended September 30, 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 Q2 2020. This was primarily due to the timing of our year-end clinical trials. G&A 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 $900,000 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 $0.40 per share compared with $3.5 million or $3.95 per share in the third quarter of 2019. The net loss for the 9 months ended September 30, 2020, was $19.1 million or $1.36 per share compared with a net loss of $9.9 million or $13.32 per share for the 9 months ended September 30, 2019. As COVID-19 pandemic continues through the next wave globally, and consequences remain uncertain, we will not be providing any guidance for the company at this time. I would like to conclude my prepared remarks by updating everyone on our cash position. OpGen maintained a strong working capital position in the third quarter of 2020 through the sale of approximately 1.5 million shares of common stock under the company's ATM program and the exercise of 270,000 warrants from the October 2019 financing for combined gross proceeds of $4.3 million during the quarter. During the 9 months ended September 30, 2020, the company sold approximately 7.1 million shares of common stock under the company's ATM program and issued approximately 4.3 million shares of common stock under the exercise of warrant from the October 2019 for combined gross proceeds of $24.4 million. Total current shares outstanding as of today are approximately 20.1 million shares. As of September 30, 2020, we reported $10.5 million in cash. With that, I'll turn the call back to Oliver to discuss additional key milestones. -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [5] -------------------------------------------------------------------------------- Thank you, Tim. I would now like to highlight some of option's key upcoming milestones in our development programs and commercial activities. First and foremost, let me comment on the FDA clearance process for our Acuitas AMR Gene Panel product for Isolate. As stated on previous calls, we have submitted the Acuitas AMR Gene Panel isolates 510(k) to the FDA in the second quarter of 2019 and had subsequently received 2 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 OpGen response was delayed in June of 2020 as a consequence of the COVID-19 pandemic when all premarket submissions on hold as of March 2020 were issued a 90-day extension to the previously established response deadlines. During recent weeks and months, OpGen 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 and feedback that have all been built into a formal response, which we submitted on October 13, 2020. Despite the impact of the COVID-19 pandemic on FDA review of open submissions as experienced this calendar year, OpGen has maintained an open dialogue -- has remained an open dialogue with the FDA regarding the status of the Acuitas AMR Gene Panel for isolates 510(k) submission. More recently, as the agency remains actively engaged in responding to the pandemic, 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 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 EUAs on the OpGen Acuitas AMR Gene Panel for isolates submission since our October 13 formal response to the FDA's AI letters. To date, we believe that OpGen has addressed all of the FDA's request for additional information. And given the timelines under the statutory review period for a 510(k), we anticipate a clearance decision at the FDA review team's earliest opportunity once FDA resource allocation and staffing surges due to COVID-19 related EUAs permits. However, it remains clear that COVID-19 will 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 prudent. Based on strong validating data published by our genetics 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 have continued to work very closely with our first undisclosed global leading IVD corporate partner in defining potential next areas of collaboration especially now that they have exercised their option for a 90-day period of exclusive negotiations with Ares about the scope and direction of a potential future collaboration and possible licensing of RSDB in the field of human clinical diagnostics. We've also seen significant progress with the Chinese NMPA regulatory body. In the regulatory process, together with our partners at Beijing Clear Bio, having submitted a comprehensive response package to the NMPA for the Unyvero system and have received additional data for the Unyvero HPN pneumonia cartridge. We view this as a potential 2021 regulatory approval milestone and subsequent commercial launch in China. Just to remind everyone, in the 8 years following NMPA approval, our distribution partner, Beijing Clear Bio, has committed to minimum volumes of products to be purchased from OpGen Curetis subsidiary to the tune of about EUR 60 million during the first 5 years, and another EUR 90 million in the out years, 6, 7 and 8. Hence, the Chinese regulatory approval and commercial launch are expected to be key milestones towards future growth trajectory of our international Unyvero business. Furthermore, we have significantly progressed the development of our Unyvero 830 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-CoV-2, flu A, flu B and RSV assay. Based on such data, we have continued the dialogue with several potential partners. For such a platform, we'll provide updates as these discussions progress and come to formation, which we believe could be a 2021 partnering milestone for OpGen. Earlier in the year, we had announced the completion of the file milestone during the first year of our partnership with New York state Department of Health and IDC. We had also announced in the second quarter that this partnership has been expanded into a second year to detect, track and manage microbial resistant infections at healthcare institutions statewide. In response to the COVID-19 pandemic in New York state, testing of the program was put on hold by the (inaudible) center and participating hospitals during the second quarter, but in Q3, site has begun running increasing numbers of testing, 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 CRE, carbopenem resistant Enterococci, but also a broader array of hospital superbugs with a focus of gram-negative MDROs or multidrug-resistant organisms. We'll continue to update shareholders regarding the expected ramp-up of this program when 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, reprioritize strategic outlook for our product portfolio and pipeline. Although uncertainty remains surrounding the COVID-19 pandemic and market volatility, we believe OpGen is in a strong position to pursue value-creating opportunities to meet our growth and profitability targets for 2020 and beyond. OpGen combined proprietary product portfolio and pipeline includes many exciting prospects, such as the pending FDA clearance decision and subsequent commercial launch of the Acuitas AMR Gene Panel for Isolates in the U.S. along with additional clinical trials of Unyvero UTI and IJI and their future U.S. FDA regulatory milestones such as submissions and eventual clearances. As always, thank you for your unwavering support and for participating in this afternoon's call. I would now like to turn the call back to the operator for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question is from Maxim Jacobs with Edison Group. -------------------------------------------------------------------------------- Maxim Jacobs, Edison Investment Research Limited - Managing Partner & Director of Healthcare Research for North America [2] -------------------------------------------------------------------------------- I was wondering what could an Ares Genetics license with the global IVD corporation would potentially look like? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [3] -------------------------------------------------------------------------------- Sure. Well, thanks, Maxim, for the question. I think in general terms, we might consider all the typical elements of such a strategic collaboration and licensing deals. So potentially, there might be an upfront license or technology access fee, quite possibly some ongoing R&D funding to Ares Genetics for continued R&D work, possibly milestone payments, so often upon hitting certain developmental, regulatory 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. Is it really going to be global versus regional degree of exclusivity, scope of a potential license, i.e., is this going to be for a specific defined product or a specific clinical indication area or is it truly going to be as broad as all of human clinical diagnostics, et cetera? So as the deal comes together, and once it's been negotiated, would get implemented, we will, of course, provide updates and guidance on how this might be looked at, but you expect all the typical elements of a sort of strategic collaboration on that front. -------------------------------------------------------------------------------- Maxim Jacobs, Edison Investment Research Limited - Managing Partner & Director of Healthcare Research for North America [4] -------------------------------------------------------------------------------- Okay. Wonderful. And then just with regards to the Gene Panel urine 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? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [5] -------------------------------------------------------------------------------- No. No, first of all, I mean, we are obviously committed to the Acuitas platform, which felt memory, that is based on the Thermo Fisher QuantStudio 5 for the AMR Gene panel for Isolates, but generally, we believe in the value of adding multiple indications of multiple panels on a single platform, one that we actually own and control in the Unyvero platform. So that's what we're going to primarily focus on in terms of menu and content, but we're not discontinuing the Acuitas platform as we're getting ready to basically get FDA clearance and then launch commercially the platform for the isolates panel. -------------------------------------------------------------------------------- Maxim Jacobs, Edison Investment Research Limited - Managing Partner & Director of Healthcare Research for North America [6] -------------------------------------------------------------------------------- And does the -- I mean, is it Isolates panel by itself? I mean I remember kind of the whole idea that was like bacterial Isolates was kind of like a good first step, but then once you get the urine clearance, then the time to result would be significantly faster. So I'm just wondering, like is the isolates -- I mean, how viable is the Isolates product by itself? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [7] -------------------------------------------------------------------------------- Well, so first off, the time to result on the Acuitas AMR Gene panel platform is basically the same, whether it's an isolate or urine. So it's about 3 hours on the result. On Unyvero, that depending on the panel and sample types between 4 and 5 hours. One of the key learnings, I would say, on feedback from the market research was indeed that from a customer perspective, whether it's 3 hours, 4 hours or 5 hours is neither here nor there, what they're really interested in is getting: a, the most comprehensive panel with the broadest pathogen and antimicrobial resistance marker coverage; and number two, having a platform that is as easy to use with minimal hands on time, fully integrated sample to answer. So clear preference for a cartridge-based sample-to-answer platform over and above a more open PCR plate based platform. -------------------------------------------------------------------------------- Maxim Jacobs, Edison Investment Research Limited - Managing Partner & Director of Healthcare Research for North America [8] -------------------------------------------------------------------------------- Okay great. That was very helpful. And then just one last question. So for the Unyvero trials and like for cUTI and IJI. When do you think they might start? And what do you think they might look like? Like in terms of sample size, et cetera? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [9] -------------------------------------------------------------------------------- Sure. Sure. Well, so design wise and size-wise, this is driven by basically the FDA's guidance on multiplex infectious disease, PCR panels. So there's going to be a minimum of pre-clinical trial sites. Typically, and you've seen this with both the previous Curetis trials as well as the OpGen trials, probably a number between, call it, 5 and 10 trial sites is more likely. It's going to have a minimum of 1,500 prospectively collected specimen for specificity as well as a significant number of N per pathogen or per analytes that you put on your panel. So typically, these trials will -- ultimately, when all is said and done, on the prospective side, retrospectively collected specimen, contrived specimen, plus all of the analytical and clinical testing the several thousand tests run. When do we expect that to get underway? As I said, we really want to get in front of the FDA with a pre-sub meeting for first, cUTI and then the IJI, ideally both in Q1 and Q2 next year. They're not a requirement, so we could move ahead without those, but it's always a good idea 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 urine trial, we've had a very close multiyear collaboration with these sites. We've reached out to all of them. We made it very clear that while, of course, we could understand their disappointment for terminating an ongoing clinical trial, we're more than excited to have them join the Unyvero UTI trial, and we've gotten very positive feedback from multiple of these trial sites. So the infrastructure is there. The team is there. We have instrument systems here in the United States. We have a UTI cartridge basically readily developed and available. So I see no reason why these trials shouldn't be getting underway, let's call it, middle of next year. And then again, with UTI and the relatively high incident rates, you'd expect a fairly swift enrollment on the prospective side. So we're certainly going to be pushing these trials to completion as rapidly as possible, but then you're probably going to look at a submission to the FDA in 2022. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- And our next question is from Yi Chen with H.C. Wainwright. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [11] -------------------------------------------------------------------------------- First question is, in view of the COVID-19 research in Europe and new lockdowns in Germany and France in the U.K. as well I think, could you comment on the outlook for sales of your own SARS-CoV-2 PCR kit? And could you also comment on sales of the Menarini's COVID-19 tested products in the U.S. as well? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [12] -------------------------------------------------------------------------------- Yes, Yi Chen. So I mean, we're obviously not providing any specific guidance on test numbers or expected revenue, but I'll say this. I mean, within just a week or 2 of us launching our own SARS-CoV-2 kit 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 ramp of testing purchases. Most of the countries -- or 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. It -- on a per tender basis, be 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, you look at PCR-based test kits right now, they're probably anywhere from the high single-digit euros to the very low teens from an end customer selling price. When you look at typical distributor margins and the sort of expectation of ideally, of 30% or more, the good news here is we control our own cost of goods. We manufacture this product. And so we have a lot of margin room to play with. Again, the way we view this, it's -- we are an infectious disease diagnostics company. It's our contribution in certain segments of the market. We're not changing our strategy to becoming a primarily COVID-driven story here. We fundamentally believe that the pandemic underlying COVID-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 things pretty steady there compared to last year with making up for a good chunk with COVID revenue. Here in the U.S., 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 you're not going to see option recognize end customer sales revenue from any U.S. 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 top line revenue. We get paid a commission, which clearly, from a top line revenue is only a small part of the overall, but to us, it's 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 funnel of accounts and our knowledge in infectious disease, working with Menarini, to be fair. If you look at the portfolio they have in the United States, predominantly with the antibody test, the market in recent months has clearly shifted from antibody tests over to antigen tests. So one of the things that we're clearly waiting on is the FDA's emergency use authorization on one of the pipeline products they have, which is a diagnostic antigen test, which once FDA EUA authorization is granted, once added to the collaboration would obviously potentially drive some additional revenue 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've gone through something like 560 EUAs over the past couple of months. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [13] -------------------------------------------------------------------------------- Got it. Got it. Second question, once the FDA clears the Acuitas AMR Gene Panel for isolates and OpGen launch to product. Do you think the launch will face the challenge of the COVID-19 pandemic? In a similar way, do you think placing Unyvero instruments in laboratories were also face the similar, same challenge? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [14] -------------------------------------------------------------------------------- That's certainly not completely out of the realm of possibilities. Now again, I would -- if you look at sort of some of the strategy and launch planning. Obviously, you start from a network of existing sites. We obviously have a number of hospitals and labs in New York state. We're already in the process of expanding 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're using the research use only version of that product. Now as you think about adding new hospitals, it will obviously then be the benefit of having an FDA-cleared version of the product with, obviously, the ability to make diagnostic label claims that you can only make once you have FDA clearance. The need for antimicrobial resistance detection hasn't gone away. I mean, if you talk to clinicians, antibiotic stewardship folks, pharmacists, 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 demand and clear need. And again, having something that's FDA-cleared or you have a clear mandate from an instructions for use and intended use statement, we'll just make it significantly easier to really go out and actively promote and market the product. -------------------------------------------------------------------------------- Yi Chen, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [15] -------------------------------------------------------------------------------- Got it. And last question, regarding Ares Genetics. So it's artificial intelligence powered AMR and AST prediction capabilities. Is that in any way complementary to the AST capability of the Acuitas platform? In the future, do you think these platforms can be combined into a single platform offering the services to customers? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [16] -------------------------------------------------------------------------------- Okay. So it's not just Acuitas, it's actually Unyvero as well. So you basically -- Ares Genetics, fundamentally, the database is based on next-generation sequencing molecular data, basically antimicrobial resistance marker groups. And you're 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 or there. I think the power of AMR prediction has been proven by PCR platforms with data from Acuitas, data from Unyvero, data from other platforms to be pretty accurate when you have sort of multiplex sizes of 30-, 40-plus analyzed 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 Ares Genetics would suggest that you're 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 channel using NGS, but from a technology standpoint, you're absolutely spot-on. I mean, combining the AI by our informatics piece and prediction capabilities are 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 in our labs or customer labs or customers have their own NGS capabilities on-site and just upload data into the cloud, all of that works and all of that is already available from Ares Genetics today, but we're going to be clearly strengthening the bioinformatics capabilities and what we have also done is, as part of the business integration, we have successfully combined the Acuitas Lighthouse data with the Ares Genetics into the ARESdb, so that we have the full capability here by now in excess of 55,000 bacterial isolates that have been deep sequenced and phenotypically tested against over 100 antibiotics. That is the combined power of the Acuitas Lighthouse with Ares DB. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- (Operator Instructions) Our next question is from Benjamin Haynor with Alliance Global Partners. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [18] -------------------------------------------------------------------------------- First off for me, just with the Ares Genetics option being exercised. I would presume that there's some urgency on the part of the potential partner to make a decision, go-to-market if they decide to go that route? Or I mean, I think that would be the -- I think that would be the way that they would go, but is there also a decision-making process where it requires this larger firm to a lot of bureaucracy and a lot of time to make the decision and go as the full 90 days? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [19] -------------------------------------------------------------------------------- I mean, a full 90 days, frankly, from my experience of almost 25 years in this industry in deal-making would be 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 is a 90-day period, which started on October 12, which is when they exercised the option. So it runs through the middle of January 2021, during which they have the exclusive rights to negotiate with Ares Genetics. I think we have a good sense and have been working very, very closely for over a year now with the team. So I think there's a good comment on mutual understanding what's required to design and develop the types of products that they're thinking about on what it would take in terms of number of specimen you need to test, the R&D effort, both bioinformatics-wise as well as lab-wise, we'll see. The experience -- the 1 data point I can give you is when we negotiated the original acquisition of the intellectual property and all of the rights from CEMEX, arguably, also a global huge corporate from the very first in calendar we had in the very first sort of nonbinding bid that we put out there which was in, I believe, it was late may or early June of 2016 to closing the deal on September 7, I believe it was in 2016, it was about 3 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 mentioned, Ares Genetics has already successfully completed very similar feasibility work with another large global corporate and both parties, while neither of them knows the identity of the other, I think they're all small enough universe. They can all speculate. They all know that there is other interest. So we officially had to put the second-party on hold because we're obviously negotiating exclusively with party number one, but it's always good to know that there's additional parties who are interested. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [20] -------------------------------------------------------------------------------- Right. I was just thinking about it from the second-party standpoint, if it makes the first party more have a greater urgency, but like you said, it's good to have multiple potential partners out there. Great. So you mentioned in the prepared remarks that you're almost entirely integrated -- you've almost entirely integrated the 2 businesses. Is there anything big left to do or is it down to the short strokes or any color there would be helpful? -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [21] -------------------------------------------------------------------------------- No, I think -- I mean, from a strategic and organizational standpoint, I think we're pretty much done. Now what obviously remains here as part of the strategy decisions we took as we're winding down the Fish business. Obviously, we'll continue that through June 30, 2021. As I said earlier, we'll 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 additional quality and regulatory oversight, we're probably going to look at the organization and then really adjust it to the going forward needs, which is really going to be Unyvero-driven UTI and IJI, but again, through the middle of next year, we're going to continue executing. And again, I think part of the interesting dynamic care that we're witnessing in the fourth quarter as we put out the notice to our 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 stalking orders and chunky bite sizes. So we'll need the team to execute on that, but for all intents and purposes beyond that, really the integration is complete. We've hit things and strides. The team is working extremely well together across all, I mean, the AMR 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 involves, obviously, the core R&D team and quality and regulatory leadership here at OpGen. It involves some of the commercial leadership and scientific affairs leadership, old Curetis U.S. as well as the R&D leadership over in Europe, given the experience we have with a couple of Unyvero FDA clearances. So that was a true team effort and a testament to just how well the integration has worked. So I think it's a team that works well together and I think has worked as smooth as I've ever seen, sort of a business integration worked in that short of a period of time. -------------------------------------------------------------------------------- Benjamin Charles Haynor, Alliance Global Partners, Research Division - Analyst [22] -------------------------------------------------------------------------------- Congrats on the progress with everything, and I'll take the rest of my questions offline. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Thanks. And that is all the time we have today. I will now turn the call back to Mr. Schacht for closing remarks. -------------------------------------------------------------------------------- Oliver Schacht, OpGen, Inc. - CEO, President & Director [24] -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- And this concludes today's conference call. You may disconnect your lines. Thank you and have a good day.