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spk05: Greetings. Welcome to the OpGen Incorporated Q3 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Megan Paul, Investor Relations. You may begin.
spk00: Welcome to the OpGen third quarter 2020 earnings call and business update. At this time, all participants are in listen-only mode. Following management's prepared remarks, there will be a Q&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 OpGens. including its subsidiary, Curitus and Aries Genetics. I encourage you to review opt-in filings with the Securities and Exchange Commission, including, without limitation, the company's most recent Form 10-K and Form 10-Q for the third quarter of 2020 that will be filed with the SEC, which identifies 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 Curitas 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 Acutis 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 Deck, CFO of OpGen. I would now like to turn the call over to Oliver Schacht for introductory remarks.
spk03: 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, Curatus in Germany, and RS Genetics in Vienna, Austria, during this tumultuous time. During the third quarter of 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 options recently announced corporate strategy, and reprioritization efforts, including further color on the product portfolio and platform pipeline changes. We will also address developments relating to the COVID-19 pandemic and the next wave causing 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 two quarters, Following a review of insights and conclusions derived from this research, Opgen and its board have decided to focus the company's product portfolio on our proprietary Univero 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 bioinformatics solutions, including ours genetics next-generation sequencing-based and artificial intelligence powered antimicrobial resistance, or AMR, and susceptibility, AST, prediction capability. In addition to focusing on RS Genetics AMR prediction capabilities, following the successful completion of all three phases of the partnered R&D program, as announced in our Q2 earnings call, RS Genetics has recently received formal notification from its undisclosed global leading IVD corporation partner that they have exercised their option to exclusively negotiate with Aris Genetics the scope and terms of a potential worldwide exclusive license or other arrangement to Aris Genetics technology in the field of human clinical diagnostics in the coming months. It is also important to note that during this third quarter, Aris Genetics successfully completed a technology feasibility study for yet another major global IVD corporate partner who has since been duly informed of the 90-day exclusive negotiation with the other partners. following the exercise of their option as mentioned before. Furthermore, Ars 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 Ars 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 Univero 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 two products during the first half of 2021. Similar products in both clinical indications using identical sample types have already been successfully developed and C-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 Acuitous AMR Gene Panel for Isolates. I will discuss the anticipated timing of the FDA's final review a little later. If cleared by the FDA, Optin anticipates swift commercial launch in the U.S. in the following month. As part of the reprioritization, we will be discontinuing the legacy fish products business, including quick fish and P&A 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 ACUITIS AMR gene panel urine clinical trial and have informed all clinical trial sites accordingly. This will help us shift our focus towards the univaro 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 this 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 in antimicrobial resistance. Switching gears to the persisting global COVID-19 pandemic, While recovery efforts ensue, it is important to review how the pandemic has continued to affect options business and operations. The hospital environment continues to be very challenging. However, elective surgeries are being scheduled regularly and various non-COVID related clinical studies are beginning to re-enroll patient samples in specific regions and 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 pose continuing challenges to the commercial distribution of our product across many key markets. Accordingly, we have started to take decisive action in 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 Manarini Silicon Biosystems here in the U.S. to market and co-promote Manarini'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 curated subsidiary, announced last quarter the successful completion of the development of our own proprietary PCR-based COVID-2 test kit. We're excited to announce that this rapid one-hour test that includes our proprietary PCR-compatible universal license buffer called PULP obtains CE-IBD marking in the European Union for the detection of SARS-CoV-2 in August of 2020. With the launch of our CE-Marked COVID-2 kit, we also announced the termination of distribution of the BGI kits as we have a significantly greater pricing flexibility and much-improved margin profile on our own proprietary tests, which, again, takes only about one hour to result compared to the almost three hours for the BGI test. As we continue to work with Manarini in the U.S., no decision has been made yet as to whether or if the when we might seek FDA EUA for this SARS-CoV-2 test ourselves, as the market in the U.S. already comprises a large number of EUA PCR test kits. In the first half of 2020, we have announced an investigator-initiated collaboration with the Karolinska Institute in Sweden to identify bacterial co-infections in patients admitted to the intensive care unit for COVID-19 pneumonia using the Univero HPN or hospitalized pneumonia panel. Options Univero HPN panel for pneumonia identifies life-threatening bacterial co-infections in COVID-19 patients in just five hours. and Univero 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 Univero HPN panel was presented by the Karolinska investigators at ECVIT 2020. The study demonstrated reliable performance and potentially high clinical utility of the Univero 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 a final culture result was 68 hours, during which patients continued to receive empiric antibiotics, while the Univero HPN panel reduced turnaround times from days to less than five hours. We believe such rapid and accurate detection is essential to assess bacterial pneumonia co-infections and critically ill COVID-19 patients. The study investigators concluded, quote, that the univaro HPN panel 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, Optin announced the publication of two notable peer-reviewed studies, the first being a publication that demonstrated the clinical utility of the Univero LRT panel and its potential impact on antibiotic use in hospitalized patients with suspected pneumonia compared to treatment directed based on microbiological culture results only. Additionally, Optin's subsidiary, Ars 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 Staphylozane Tazobactin resistance, or by its trade name, also known as Zervaxa, in Pseudomonas aeruginosa, in the Journal of Clinical Infectious Diseases. Along with peer-reviewed studies came awards. Options subsidiary Ars 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 RSUPA, universal pathogenome assay. In addition to pipeline updates and awards, Optum was awarded two grants during the third quarter, which will contribute to non-dilutive German government funding towards some of our R&D programs. With our Univero A30 platform, we recently announced the award of a German federal government grant to our subsidiary, Curatus, and collaborators Karpagen, Münster 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 are 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. OpGyn also issued a press release regarding the award of a German federal government grant to its subsidiary creators and collaborators at the research campus InfectiGnostics. The project is coordinated by Jena University Hospital and designed to use artificial intelligence-based assay development for carbapenem 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 Deck, to review financial results for the third quarter 2020 and recent financial developments for the business. Tim?
spk02: 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 nine-month numbers only include six months as a combined company, and all references to 2019 pertain to opt-in-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 Aries Genetics, as well as international sales from Curitis. offset in part by lower collaboration revenue related to our New York State project and lower fish product revenue. Total revenue for the nine months ended September 30th, 2020 was $2.9 million compared with $2.7 million for the nine months ended September 30th, 2019. Again, the increase is primarily due to strong collaboration revenue from Aries Gen X, 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 nine months ended September 30th, 2020 were $19.6 million compared with $12.4 million for the nine months ended September 30th, 2019. I would like to provide some granularity in terms of our operating expenses since the business combinations. 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 urine clinical trials. GNA 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 40 cents per share compared with 3.5 million or $3.95 per share in the third quarter of 2019. The net loss for the nine months ended September 30th, 2020 was 19.1 million or $1.36 per share compared with the net loss of 9.9 million or $13.32 per share for the nine months ended September 30th, 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. Option to maintain 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 nine 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 warrants from the October 2019 for combined gross proceeds proceeds of $24.4 million. Total current shares outstanding as of today are approximately 20.1 million shares. As of September 30th, 2020, we reported 10.5 million in cash. With that, I'll turn the call back to Oliver to discuss additional key milestones.
spk03: Thank you, Tim. I would now like to highlight some of the options key upcoming milestones in our development programs and commercial activity. First and foremost, let me comment on the FDA clearance process for our Acutis AMR gene panel product for isolates. As stated on previous calls, we had submitted the Acutis AMR gene panel isolates 510K to the FDA in the second quarter of 2019 and had subsequently received two formal AI requests, so-called additional information requests, from the agency. The first in July of 2019 and the second in early 2020. While a 180-day response deadline is normally imposed for these requests, the Optin response was delayed in June of 2020 as a consequence of the COVID-19 pandemic when all pre-market submissions on hold as of March 2020 were issued a 90-day extension to the previously established response deadline. During recent weeks and months, Optin 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 13th of 2020. Despite the impact of the COVID-19 pandemic on FDA review of open submissions as experienced this calendar year, Optin has maintained an open dialogue, has remained an open dialogue with the FDA regarding the status of the ACUIDIS AMR gene panel for isolates 510 case 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 option Acutis AMR gene panel for isolate submissions. since our October 13th formal response to the FDA's AI letters. To date, we believe that Optin has addressed all of the FDA's requests for additional information, and given the timelines under the statutory review period for a 510K, 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 permit. 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 pandemic. Based on strong validating data published by Ars 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 ARIS about the scope and direction of a potential future collaboration and possible licensing of ARIS-DB 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 ClearBio, having submitted a comprehensive response package to the NMPA for the Univero system, and have received additional data for the Univero 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 eight years following NMPA approval, our distribution partner, Beijing ClearBio, has committed to minimum volumes of products to be purchased from options curated subsidiary to the tune of about 60 million euros during the first five years and another 90 million euros in the out years six, seven, and eight. Hence, the Chinese regulatory approval and commercial launch are expected to be key milestones towards future growth trajectory of our international univaro business. Furthermore, we have significantly progressed the development of our Univero 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 data sets, 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've continued the dialogue with several potential partners, We're such a platform and will provide updates as these discussions progress and come to fruition, which we believe could be a 2021 partnering milestone for Opgen. Earlier in the year, we had announced the completion of the final milestone during the first year of our partnership with the New York State Department of Health and IDC. We had also announced in the second quarter that this partnership has been extended into a second year to detect, track, and manage antimicrobial-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 Wadsworth Center and participating hospitals during the second quarter. But in Q3, sites have begun running increasing numbers of tests again, a trend we expect to continue into the fourth quarter and into Q1 of 2021. There's a tremendous amount of excitement around the ability to not only look at so-called CREs, carbapenem-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, reprioritized strategic outlook for our product portfolio and pipeline. Although uncertainty remains surrounding the COVID-19 pandemic and market volatility, We believe Optin is in a strong position to pursue value-creating opportunities to meet our growth and profitability targets for 2020 and beyond. Optin's combined proprietary product portfolio and pipeline includes many exciting prospects, such as the pending FDA clearance decision and swift subsequent commercial launch of the Acutis AMR gene panel for isolates in the U.S. Along with additional clinical trials of Univero UTI and IJI, and their future US 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.
spk05: Operator? Thank you. Thank you. We will now begin the question and answer session. If you do have a question, please press star 1 on your telephone keypad now to be placed in the queue. Also, if you'd like to remove your question from the queue, you may press star 2. Our first question is from Maxon Jacobs with Edison Group. Please proceed with your question.
spk01: Hi, guys. Thanks for taking my question. I was wondering, what could an heiress genetics license with the global IBD corporation potentially look like?
spk03: Sure. Well, thanks, Maxim, for the question. I think, you know, in general terms, one might consider all the typical elements of such a strategic collaboration and licensing deal. So, potentially, there might be an upfront license or technology access fee, quite possibly some ongoing R&D funding to RS Genetics for continued R&D work, possibly milestone payments, some often, you know, upon hitting certain developmental regulatory and or commercial milestones. And, you know, if a license gets taken, ongoing royalties on our partner's future product sales. The amounts of all of these are, of course, highly variable and will depend on factors such as the geographic scope. You know, is it really going to be global versus regional? Degree of exclusivity. Scope of a potential license, i.e., you know, 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 a deal comes together and, you know, once it's been negotiated and would get implemented, we will, of course, provide updates and guidance on how this might be looked at. But, you know, you'd expect all the typical elements of a sort of strategic collaboration on that front.
spk01: Okay, wonderful. And then just with regards to the gene panel urine analysis, trial discontinuation. I was just wondering, is that a sign that you're kind of moving away from the ACQUADIS gene panel platform in general?
spk03: Well, no. First of all, I mean, we are obviously committed to the ACQUADIS platform, which, for memory, that is based on the Thermo Fisher Quant Studio 5 for the AMR gene panel for isolate. But generally, we believe in the value of adding multiple indications and multiple panels on a single platform, one that we actually own and control in the Univero platform. So that's what we're going to primarily focus on in terms of menu and content. But we're not discontinuing the Acutis platform as we're getting ready to basically get FDA clearance and then launch commercially the platform for the isolates panel.
spk01: And does the isolate, I mean, is the isolate handled by itself? I mean, I remember kind of the whole idea of it was, like, bacterial isolates was kind of like a good first step, but then once you get the urine clearance, then, you know, the time to result would be significantly faster. So I'm just wondering, like, is the isolate, I mean, how viable is the isolate product by itself?
spk03: Well, so first off, the time to result on the ACURUS AMR gene panel platform is basically the same, whether it's an isolate or urine. So it's about three hours' time to result. On univiral, depending on the panel and sample types, between four and five hours. One of the key learnings, I would say, and feedbacks from the market research was indeed that from a customer perspective – whether it's three hours, four hours, or five hours, it's 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.
spk01: Okay, great. And that was very helpful. And then just one last question. So, you know, for the Univero trials and, like, for CUTI and IJI, you know, when do you think they might start and what do you think they might look like, like in terms of sample size, et cetera?
spk03: 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 three clinical trial sites. Typically, and you've seen this with both the previous curatus trials as well as the option trials, probably a number between, call it five and 10 trial sites is more likely. It's going to have a minimum of 1,500 prospectively collected specimen for specificity, as well as a significant number of N per pathogen or per analyte that you put on your panel. So, you know, 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 will be 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, you know, the UTI and then the IJI, ideally both in, you know, 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 and multi-year collaboration with these sites. We've reached out to all of them. We've made it very clear that while Of course, we could understand their disappointment for terminating an ongoing clinical trial. We're more than excited to have them join the Univero UTI trial, and we've gotten very positive feedback from multiple of these trial sites. So the infrastructure is there. The team is there. You know, 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, you know, 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, you know, 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, you know, a submission to the FDA, you know, in 2022.
spk01: Great. That's all extremely helpful. Thank you so much.
spk05: And our next question is from Yijin with HC Wainwright. Please proceed with your question.
spk06: Thank you for taking my questions. First question is, in view of the COVID-19 resurg in Europe and new lockdowns in Germany and France and the UK 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 Medirini COVID-19 tested product in the U.S. as well? Thank you.
spk03: Yeah, Yichen, 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 two of us launching our own SARS-CoV-2 kit in Europe, 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. We know that some of our distribution partners have ongoing tender applications in a number of countries, and these can be bulky. They could be on a per-tender basis be, you know, 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, you know, 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 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, 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 – a 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 Menorini 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 Menorini portfolio. The way the deal works, it's a co-promotion. We go out. If we refer a customer, a potential customer, over to Menorini, They will do the order fulfillment. They will invoice. They'll recognize the top-line revenue. We get paid a commission, which, you know, clearly from a top-line revenue is only, you know, a small part of the overall, but to us it's pure profit. There is no, you know, 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 Menorini. 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, you know, 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 funnel. I think by last count they've gone through something like 560 EUAs over the past couple of months.
spk06: Got it, got it. Second question, once the FDA clears the ACUTUS AMR gene panel for isolates, and option launch the product. Do you think the launch will face the challenge of the COVID-19 pandemic? In a similar way, do you think placing univiral instruments in laboratories will also face the same challenge?
spk03: That's certainly not completely out of the realm of possibilities. Now, again, if you look at sort of some of the strategy and launch planning, obviously, you know, you start from a network of existing sites. We obviously have, you know, 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 projects. 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, you know, obviously the ability to make, you know, diagnostic label claims that you can only make once you have FDA clearance. Okay. 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 Again, having something that's FDA-cleared, where you have a clear mandate from instructions for use and intended use statement, will just make it significantly easier to really go out and actively promote and market the product. Got it.
spk06: And last question, regarding ARIS genetics. So it's artificial intelligence-powered AMR and AST prediction capabilities. Is that in any way complementary to the AST capability of the Acutis platform? And in the future, do you think these platforms can be combined into a single platform offering the services to customers?
spk03: Yes. So it's not just Acuitis, it's actually Univero as well. So you basically, ours genetics, fundamentally, the database is based on next generation sequencing, molecular data, basically antimicrobial resistance markers, 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 nor there. I think the power of AMR prediction has been proven by PCR platforms with, you know, data from Acutis, data from Univero, data from other platforms to be pretty accurate when you have sort of multiplex sizes of, you know, 30, 40-plus analytes on your panel. Now, to predict accurately antibiotic susceptibility, some of the data that, for example, Mayo Clinic and Johns Hopkins have published together with RS 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 panel using NGS. But from a technology standpoint, you're absolutely spot on. I mean, combining the AI bioinformatics 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 you know, 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 our 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 Akiota's Lighthouse data with the RS genetics into the RSDB so that we have the full capability here by now, you know, 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 Akiota's Lighthouse with RSDB. Okay, thank you.
spk05: And again, as a reminder, if you have a question, you may press star 1 on your telephone keypad. Our next question is from Brandon Hagenard with Alliance Global Partners. Please proceed with your question.
spk04: Good afternoon, gentlemen. Thanks for taking the questions. First off, for me, just with the RAS genetics option being exercised, you know, I would presume that there's some urgency on the part of the potential partner, you know, to make a decision, you know, go to market, you know, you know, if they decide to go that route or, I mean, I think that would be the way that they would go, but is there also a decision-making process where it, you know, requires this large firm to a lot of bureaucracy and a lot of time to make the decision and, you know, goes the full 90 days?
spk03: I mean, a full 90 days, you know, frankly, from my experience of almost 25 years in this industry and dealmaking would be pretty, pretty darn fast for truly negotiating and striking a complex strategic deal. I'm not going to speculate on their sense of urgency. Now, the facts are simple. There is a 90-day period, which started on October 12th, which is when they exercised the option. So it runs through the middle of January 2021. during which they have the exclusive right to negotiate with ours genetics. I think we have a good sense and have been working very, very closely for over a year now with the team. So I think there's a good common and 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 one data point I can give you is when we negotiated the original acquisition of the intellectual property and all of the rights from Siemens, arguably also a global huge corporate, from the very first encounter we had and the very first sort of non-binding 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 7th, I believe it was, in 2016, was about three months. So it is possible. But again, a lot of things need to come together here. Now, what happens if that 90-day period, from today's perspective, collapses? Now, of course, as mentioned, you know, Ars 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, they're all a small enough universe, they can all speculate, they all know that there is other interest. So, you know, 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 are additional parties who are interested.
spk04: Right. I was just thinking about it from the second party's standpoint, you know, if it makes the first party more or have a greater urgency. But like I 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 two businesses. Is there anything big left to do or is it down to the short strokes or any color there would be helpful?
spk03: 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, you know, winding down the fish business, obviously, you know, we'll continue that through June 30th of 2021. You know, 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, you certain aspects of just, you know, additional quality and regulatory oversight. You know, 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 Univero-driven, UTI and IJI. But again, through the middle of next year, we're going to continue executing. And, you know, again, I think part of the the interesting dynamic here that we're witnessing in the fourth quarter, as we put out the notice to all customers and distributors, there is a heightened sense of urgency by anybody who wants to stock up. So we might also be looking at some nice, uh, stocking orders and chunky bite sizes. So we'll need, uh, need the team to execute on that. Um, but you know, for all intents and purposes, um, beyond that, really the integration is complete. Um, you know, we've, uh, hit things in stride. The team's 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 involved, obviously, the core R&D team and quality and regulatory leadership here at Option. It involved some of the commercial leadership and scientific affairs leadership, old Curatus US, as well as the R&D leadership over in Europe, given the experience we have with, you know, a couple of Univero FDA clearances. So that was a true team effort and testament to just how well the integration has worked. So I think it's a team that works well together and, you know, I think has worked as smooth as I've ever seen sort of a business integration work in that short of a period of time. Awesome.
spk04: Well, thanks for all the color there. Congrats on the progress with everything, and I'll take the rest of my questions offline. Thanks a lot, guys. Thank you. Thanks, Ben.
spk05: And that is all the time we have today. I will now turn the call back to Mr. Schott for closing remarks.
spk03: 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 investor 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.
spk05: And this concludes today's conference call. You may disconnect your line. Thank you, and have a good day.
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