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spk05: Welcome to the Opgen fourth quarter and full year 2020 earnings call and business update. At this time, all participants are in listen-only mode. Following management's prepared remarks, there will be a Q&A session. As a reminder, this conference call is being recorded today, March 25, 2021. Before we begin, I would like to caution you that comments made during this conference call by management may contain forward-looking statements regarding the operations of and future results of Opgen. including its subsidiaries, Curitas and Aries Genetics. I encourage you to review options filing with the Securities and Exchange Commission, including, without limitation, the company's most recent Form 10-K for 2020 that will be filed with the SEC, which will 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 Caritas and to implement the combined company's 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 and financing, such as the November 2020 pipe and February 2021 registered direct. Pursuit of FDA clearance, the Q&S AMR gene panel for use of bacterial isolates and for our other products and services. The rate of adoption for our products and services by hospitals and 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 on 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 this date of the live call, March 25, 2021. 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 Schock, President and CEO of and Tim Deck, CFO of Opgen. I would now like to turn the call over to Oliver Schock for introductory remarks.
spk04: Thank you to everyone joining us on the call this afternoon. I would like to begin by thanking Evan Jones, former CEO and currently a director of Opgen, for his years of dedication to this company and for making the strategic business combination of Opgen and Curatus possible in 2020. Evan has decided, for purely personal reasons, not to seek re-election to the Board of Directors at our upcoming stockholder meeting in June. We thank him for his tremendous commitment and wish him continued success in his next endeavors. As you're all aware, the global pandemic continues to evolve, and while there is tremendous progress being made on the vaccination front, the residual effects on part of our business are still present. Despite this, we ended 2020 on a strong note with a solid quarter and today have a very strong tech position that will allow our business, product portfolio, and pipeline opportunities to grow significantly. We were able to execute and make significant progress across our key products and showed investors that our diversified product portfolio with unique and differentiated proprietary assets, post-to-business combination, can support an attractive combination of revenue and partnership growth. This is driven by the continued success of our award-winning diagnostics and technology that has established us as a force to be reckoned with in the molecular diagnostics and bioinformatics space targeting AMR, or antimicrobial resistance. On today's call, we will begin by briefly reviewing the status of the reprioritization efforts announced last quarter, and then we'll discuss recent business highlights as they relate to the company's core capabilities and top-line growth prospects. at which point I will pass the call over to Tim to review financial highlights from the fourth quarter and full year 2020, as well as recent financing activities. We'll then wrap up the call with an update on the company's strategic initiatives and pipeline outlook. As a reminder, last quarter we discussed the outcome and subsequent reprioritization measures being taken by the company following extensive feedback from a 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. The analysis and application of this feedback resulted in a reprioritization of the product portfolio, including a renewed focus on the company's proprietary Univero platform and unique bioinformatics capabilities. This includes expanding the platform to include complicated urinary tract infections and invasive joint infections in the U.S., with clinical trials for future FDA submission and clearance anticipated to start in the second half of 2021. We will submit materials for possible pre-submission meetings with the FDA on each of these two products during the first half of 2021. Actually, having just submitted a first pre-sub package for the Univero UTI earlier this month. Similar products in both clinical indications using identical corresponding sample types have been successfully developed on the Univero platform and CE-IVD marked and are commercially available today in Europe and other markets. Another key focus will be developing our rapid molecular diagnostic platform offerings with an increased focus on bioinformatics solutions including Iris Genetics' next-generation sequencing-based and artificial intelligence-powered antimicrobial resistance, AMR, and susceptibility, AST, prediction capabilities. The reprioritization has also included a platform consolidation to realize significant operational synergies and cost savings over time. As part of the reprioritization, we have successfully discontinued the legacy fish product, including quick fish and P&A fish globally, ahead of schedule in early 2021. We delivered significant end-of-product lifecycle sales in the fourth quarter of 2020 and remaining revenue in the early first quarter of this year and have completed the wind down by now. We will no longer manufacture nor sell or ship commercial fish products going forward. As it relates to our renewed focus on expanding the Univero platform, we were excited to announce that Options Subsidiary Curatus has entered into a distribution partnership with Anar Health Technologies for Columbia in the fourth quarter. Anar, headquartered in Bogota, is Columbia's leading diagnostics distributor that is already working with numerous renowned global IVD manufacturers. Under the distribution agreement, ANAR has the exclusive right to commercialize the Univero 850 instrument system and its full suite of Univero infectious disease diagnostic application cartridges in Colombia. The distribution agreement has an initial term of three years and can be extended in one-year increments. In return, ANAR has committed to significant minimum purchases of Univero instruments and application cartridges over the initial three-year term. amounting to a total of at least 10 Univero systems plus significant numbers of Univero cartridges. Anar is responsible for product registration, which is expected to be obtained by the second half of 2021, and has committed to significantly invest in the market introduction of the Univero product line in Colombia. We're thrilled with this partnership as it strengthens our commercial presence in Latin America and is in alignment with our core commercialization and revenue growth strategy. Product registration process is in full swing for the entire portfolio of Univero A50-related products, and during early 2021, a highly successful key opinion leader event was held, which included participating option representatives and KOLs as part of the launch preparation. Now, shifting gears, I would like to discuss option subsidiary RS Genetics activity, contributing to top-line growth this quarter. In November, we announced the launch of an early access program for the ARIS Genetics Novel Next Generation Sequencing, or NGS-based, molecular antibiotic resistance test for comprehensive profiling of genetic AMR markers from native specimen by hybrid capture-based targeted NGS assay. It is an expanded version of the award-winning RSUPA, or Universal Pathogenome Assay, that was initially launched in 2019. RS Genetics has received commercial orders for hundreds of the novel RSUPA tests exceeding a bulk order volume of $250,000. We believe these initial orders demonstrate the need for universal AMR profiling and native specimens in the context of surveillance and infection prevention and control. Revenue recognition has started in early 2021 and will likely continue throughout the year. RS Genetics also joined the JPI AMR network. for integrating microbial sequencing and platforms for antimicrobial resistance. In collaboration with interdisciplinary subject matter experts and One Health AMR stakeholders, the network will provide guidelines and solutions to microbial sequencing for the detection, surveillance, and management of difficult-to-treat infections caused by AMR microorganisms. More recently, we were excited to announce that Ars Genetics and Sondos, the number one supplier of generics antibiotics globally, extended their collaboration within its pharma partnering program in the fourth quarter of 2020, and then again for another joint project in the first quarter of 2021 to assess the potential of molecular surveillance for better informed therapeutic guidance and antibiotic stewardship. The overall goal of this partnership is to develop a digital anti-infectious platform combining established microbiology laboratory methods with advanced bioinformatics and artificial intelligence methods to support drug development and lifecycle management. Following the presentation of final results from the initial collaboration phase on optimal positioning of phosphomycin, combination therapies, bimolecular AST, and in silico modeling at the Antimicrobial Resistance Genomes, Big Data, and Emerging Technologies Virtual Conference in November 2020, The next phase explores the potential of combining NGS-based surveillance with predictive AST for improved guidance of antimicrobial therapy and better antibiotic stewardship. Additionally, our genetics was granted a key patent on antimicrobial resistance prediction from genomic data, supporting the company's vision to improve guidance for antimicrobial therapy through AI-powered prediction of AMR and the discovery of diagnostic biomarkers. In the first quarter of 2021, OPTION continued to see publications by its subsidiary, Irish Genetics, and collaborators. The most recent study highlights best practice techniques for accurate antimicrobial resistance prediction from whole genome sequencing data and supports harmonization of development of good machine learning practices. This study adds to Ars Genetics' publication record, further validating our approach to becoming a globally recognized leader in the development of AI-powered, next-generation sequencing solutions for infectious disease testing. Addressing the United States FDA action plan by developing good machine learning practice and robust algorithms will be key to moving our AI-powered solutions into clinical practice. applying the proposed best practice techniques to RCB allowed us to further improve predictive performance of whole genome sequencing-based PAST. In this context, we're currently also working with several leading clinical centers in the United States to further demonstrate the potential of accurate whole genome sequence-based PAST in independent validation studies. In addition, Optin also announced the publication of results from a 1,400-patient sample multicenter study that highlighted the Univero LRT BAL panel's ability to accurately detect lower respiratory tract infections in bronchoalveolar lavage fluid samples, allowing for early diagnosis and proper choice of antimicrobials, crucial for the successful management of pneumonia. The performance data, comprehensive coverage, and fast time to result of this panel suggest significant clinical value for choosing appropriate antibiotics and for antibiotic stewardship. Additionally, very recently, we announced final data from the Karolinska Institute study getting published in a peer-reviewed journal. This paper highlights Optin's Univero HPN product for hospitalized patients with pneumonia and demonstrating a higher diagnostic yield than bacterial culture with a high negative predictive value of 99.8% for pathogen detection. This strong performance data, comprehensive coverage, and turnaround time of less than five hours from sample to result provides clinicians earlier data to inform antimicrobial decisions, especially in critically ill COVID-19 patients. Over the last 12 months, Optgen and its subsidiaries, Curatus and Arts Genetics, have announced about 10 peer-reviewed publications highlighting the power of molecular diagnostics and bioinformatics to help combat infectious disease. It is very important to highlight that such publications play a crucial role in the commercial rollout of any novel molecular diagnostic product, and thus they help drive top-line revenue growth as medical publications and journals inform a wide variety of healthcare professionals who must routinely and efficiently identify and deliver the most effective treatment for their patients. In addition, Optin was awarded two German federal government grants to its subsidiary curators and collaborators. One project is coordinated by Jena University Hospital and designed to use artificial intelligence-based assay development for carbapenem resistance in gram-negative bacteria. And the other project looks at the Univero 830 RQ platform concept for veterinary applications, which could present an additional future growth opportunity. I will now turn the call over to our CFO, Tim Deck, who will review financial results for the fourth quarter and full year 2020 and recent financial developments for the business. Tim?
spk02: Thank you, Oliver, and welcome to everyone on the call today. On today's call, I will touch briefly on the highlights of the fourth quarter and review the full year 2020 financial results, discuss our recent financings, update you on our balance sheet position, and end with some thoughts on guidance. Please keep in mind that the business combination closed on April 1, 2020. Therefore, Q4 2020 results include the full quarter as combined company, whereas Q4 2019 is only for opt-in stand-alone. The full year numbers for 2020 only include nine months as a combined company, and all references to 2019 pertain to the option-only numbers. Any pro forma reference will be noted separately. Revenue for the fourth quarter of 2020 was $1.4 million, up from $800,000 for the prior year period. This increase is largely due to collaboration revenue from Aerie Kinetics, as well as international sales from Curatex. all set in part by lower collaboration revenue related to our New York State project and lower fish revenue. Total revenue for the 12 months ended December 31, 2020, was $4.2 million, compared with $3.5 million for the 12 months ended December 31, 2019. The increase was due to the inclusion of Univero product sales, SARS-CoV-2 kit sales, and Aries Genetics collaboration and service revenues. all set in part by lower fish revenue and lower collaboration revenue from the New York State Department of Health project. Total pro forma revenue for the 12 months ended December 31, 2020, was $5.2 million compared with $6.1 million for the 12 months ended December 31, 2019. Operating expenses for OpChain is a combined company for the fourth quarter of 2020, were $7.4 million compared with $3.3 million in the fourth quarter of 2019. Operating expenses for the 12 months ended December 31, 2020, were $26.9 million compared with $15.8 million for the 12 months ended December 31, 2019. Just a reminder, the Q4 and the full year 2019 numbers were option standalone only and not as a combined company. I would like to provide some granularity in terms of our operating expenses since the business combination April 1st. R&D expenses for the fourth quarter of 2020 were $3.3 million, compared to $2.4 million in the third quarter and $3 million for the second quarter of 2020. The dip in the second quarter expenses was due to the halted ACUITUS urine trial and COVID-19-related shifting expenses, as well as key activities in our Univera 830 platform development program, only picked up later in the year. R&D expenses for the year end of 2020 were $10 million, compared with $5.1 million for the year end of December 2019. Again, the increase was due to the business combination during the last three quarters of 2020. G&A expenses for the fourth quarter of 2020 were $2.3 million, as compared to 2.4 for the third quarter and 2.5 for the second quarter of 2020, essentially flat quarter over quarter since the business combination. G&A expenses for the year ended 2020 were $8.8 million compared with $6.3 million for the year ended 2019, again reflecting the combined business during the last three quarters of the year. Sales and marketing expenses for the fourth quarter of 2020 was $800,000, as compared to $900,000 in the third quarter and $1 million in the second quarter of 2020, essentially flat quarter over quarter since the business combination and reflective of COVID-19-related restrictions on travel and lower in-person meetings and conferences in 2020. Sales and marketing expenses for the year into 2020 were $3.1 million compared with $1.5 million for the year end of 2019. again, reflecting the business combination for the last three quarters. Net loss for the fourth quarter of 2020 was $7.1 million, with 34 cents per share, compared to $2.5 million, or 61 cents per share, in the fourth quarter of 2019. Again, mostly driven by the business combination in 2020 and a higher number of shares outstanding in Q4 2020 versus the same period in 2019. The net loss for the 12 months ended December 31, 2020, was $26.2 million, or $1.66 per share, compared with the net loss of $12.4 million, or $7.70 per share, for the 12 months ended December 31, 2019. Since the time we announced the business combination with Curitis in late 2019, we have had a tremendous amount of interest from various groups in investing funds into the organization. Our story appears to have resonated very well with investors during 2020 and continues into 2021. In fact, our company's market cap has gone from roughly $6 million at the end of 2019 to over $100 million today. During this time, we have moved the company strategically to strengthen our balance sheet for the long haul with several highly successful finance From the beginning of 2020 through today, we have raised approximately $70 million of additional capital. The increase in capital is attributable to several moves that were timely placed throughout the year. Staggered utilization of our ATM facility as prices were rising in early to mid-2020 raised $16.7 million. Warrant exercises from the November 2019 offering of $8.7 million a private placement of $10 million in November 2020, a $25 million registered direct offering in February of 2021 at a very strong price point, and a warrant exercise and exchange of $9.7 million in March of this year. Both the registered direct and the warrant exercise and exchange carry warrants at a strong strike price of $355 and $356 respectively. These warrants, along with the company's remaining capacity under resisting shelf, could generate an additional proceeds of up to $37.9 million for the company if all were exercised in full. The company expects to have a cash balance of approximately $40 million at the end of Q1 2021. Total shares outstanding as of today are approximately 38.3 million shares. In terms of our guidance, the foundation for a comprehensively constructed and accurate forecast is still very challenging due to the continued COVID pandemic and its impact across many parts of the world and across all areas of our business. Therefore, we will refrain from offering specific guidance today. However, I will provide some color now and hope to provide more detail on our May earnings call. The major underlying growth drivers in our business is expected to come from a number of areas. Our Univero core business is expected to grow internationally via distributors as well as in the U.S. We are seeing Univero UTI usage by several labs in an RUL setting in late 2020 and are starting to gain commercial traction in 2021. We're also seeing additional Univera system placements and customer account conversions from Univera LRT, LRT-BAL in the United States. A significant portion, a significant long-term growth driver would be China. Currently, the timeline for NMPA approval of the pneumonia cartridge is unclear, and we have limited visibility there. Once approved, our partner, Beijing ClearBio, has committed to a minimum purchase of 360 Univaro systems and 1.5 million cartridges, accumulating over an eight-year time period. Just a reminder, everyone, this contract is signed and in place already, so there is no need to negotiate the commercial aspects of a China partnership. For further information on the partnership deal, please see our S4 filing from February of last year. The ARIES partnering revenue will be subject to the timing and specific structuring of any potential partnering and licensing deal. Given the stage of negotiations, it would be prudent to assume that any material deal would not happen until later this year. Revenue from potential partnering deals, such as ARIES genetics licensing and collaboration deal, and our partnership around the Univera 830 platform would highly depend on timing and structure. However, It is clear that from a cash flow perspective, both of these assets have the potential to help generate significant amount of non-diluted deal-based funding to option over the coming years with significant upside coming from future product sales or revenue. Also, with the significant strength in balance sheet adoption, we are now also in a position to determine when the best possible point in time and what the best possible type of partnering deal for either asset might be. In order to maximize value from Opgen and our shareholders in the long run, we are not under the same pressure we may have been under prior to our financing to sign a particular deal. It is clear that the further we can drive Curitis and Aries Genetic product development ourselves, the more value we can generate and the better possible future deal might look in terms of deal structure. And finally, cash burn. Given the expected cost savings from our fish products being terminated, ending the acute AMR urine trial, yet at the same time initiating two large prospective clinical trials for Univero UTI and IJI in the United States, respectively. And further investment and OPEX into our Aries Genetic and Univero A30 platform would likely lead to a fairly similar pattern of $5 million to $6 million cash burn per quarter in 2021. With that, I turn the call over to Oliver to discuss additional key milestones. Thank you, Tim.
spk04: I would now like to highlight some of OPTION's key upcoming milestones in our development programs and commercial activities. As stated earlier and on previous calls, OPTION has remained in constant dialogue with the FDA regarding the status of the ACUTUS AMR gene panel for isolates by 10K submissions. despite the ongoing delays in their review of non-COVID-19 related submissions. Last October, Optum had issued our formal response to the agency's additional information request received earlier in the year. Following this submission in November, we had received notice from the FDA indicating they would be reallocating CDRH staff from open submissions to prioritize emergency use authorization or EUIA requests for in vitro diagnostics intended to address the COVID-19 pandemic. While the staffing focus on COVID-19-related EUAs within the FDA continues, we're very pleased to report that at the end of January, the FDA informed Optum that they have formally resumed the review of our submission. Due to the high volume of EUA requests and the limitations on review resources, we understand that the FDA cannot currently commit to specific review and clearance timelines, or so-called Medusa timelines. We are, however, confident that OPTION has addressed all of the agency's remaining requests for additional information, and we anticipate a clearance decision at the FDA review team's earliest opportunity as time managed between review resources and COVID-19-related EUAs permit. While the FDA is working towards their final clearance decision, we have continued full steam ahead with commercial launch readiness activities. We have successfully manufactured already several batches of the QRIS AMR gene panel price list product in preparation for commercial release, and our commercial team is poised for launch. We've used time to our advantage to ensure that we are equipped to meet any customer demands as soon as we have received our FDA clearance decision. Excitingly, earlier this first quarter of 2021, we received Univero system as an IBD instrument system in China from the Chinese NMPA. Options subsidiary Kratis and its Chinese partner, Beijing Clear Bio, continue to interact closely with the NMPA during the interactive review of the submission for the Univero A50 pneumonia cartridge as their first Univero-based diagnostic application for the Chinese market. A dossier for the review and potential future approval of the pneumonia cartridge was submitted as early as February 2019. and it includes comprehensive data from various clinical trials and regulatory submissions of the Univero LRT and LRT-BAL products, both of which are FDA-cleared here in the United States, and the Univero HPN cartridge for hospitalized pneumonia patients, which is CEIVD-marked in Europe. Timelines for NMDA response submissions and review have been extended by several months in 2020 due to the COVID-19 pandemic. Now that the NMPA has completed the registration of the Univero system as IVD for the Chinese market, the start of commercialization by our partner, BCB, however, remains subject to also getting approval of the pneumonia cartridge first. We hope to be able to provide updates on the Chinese regulatory approval process and subsequently planned commercial launch in the coming quarters in 2021. But at this point in time, the NMPA does not provide any specific guidance or timeline for their reviews. As mentioned before, the commercial side of this contract with Beijing ClearBio has been fully negotiated, and the deal was signed several years ago. So to reemphasize, there is absolutely no need to negotiate a commercial deal in China anymore. That is already in place, and it contains minimum commitments over an eight-year period of 360 Univero systems and 1.5 million cartridges, cumulatively adding to about $180 million in revenue to option at current transfer prices in the agreement and at current euro-dollar foreign exchange rates. We've also made excellent progress in the final development phases of Univero 830RQ platform. We expect that by the middle of 2021, we should have a small series of about 10 instrument systems readily available for final verification and validation testing. We've already established several assays on 830 cartridges, including one for SARS-CoV-2, flu A and flu B, and RSV, but also several antibiotic resistance marker assays. We mentioned in our last call that Option has continued the dialogue with several potential partners for such a platform, and we have continued doing so. It received specifications for several potential products that could be developed onto such a system, and we believe that a partnering opportunity for option around the A30 platform assets may present itself in the next several quarters. Earlier in 2020, we had announced the extension of our partnership with the New York State Department into a second year to detect, track, and manage antimicrobial-resistant infections at healthcare institutions statewide. In the third quarter of 2020, sites that had previously been put on hold under the program due to the COVID-19 pandemic have begun to reopen, and during the fourth quarter of 2020 and first quarter of 2021 to date, all testing sites have been actively running ACUTUS AMR gene panel testing. As of today, four testing centers that run the ACUTUS AMR gene panel tests on isolates from an affiliated network totaling more than 30 hospitals across New York City and the state of New York are up and running. we've seen significant ramp-up in testing volumes in the fourth quarter of 2020 and into the first quarter of 2021. Given that COVID-19 had slowed the testing during the earlier parts of 2020, we're currently in a very active dialogue with the New York State Department of Health on how to extend and expand upon the Year 2 program, which would otherwise end on March 31, 2021. We're confident that the testing will be extended and expanded at attractive commercial terms to opt-ins with significant revenue totaling more than $300,000 and potentially up to half a million in the next two quarters. We will also be discussing, during such extension, the path forward with the New York State Department of Health on how to think about a broader statewide rollout in a third year and beyond of our collaboration. Going forward, we also look to some of the New York State sites to become early adopters of our FDA-cleared, accuted AMR gene panel for isolates products. rather than the research-use-only version, which Descartes used. In closing, we're very pleased with the progress being made at Optium and with our fourth quarter and full year results. We have significant momentum across our entire product portfolio. The post-business combination portfolio realignments we've implemented successfully will only further ensure our focus remains growing the company's core products and capabilities to drive top-line revenue growth and shareholder value. Optin is very well positioned in the market with an exciting portfolio of products, which we believe will help us achieve strong roles towards becoming one of the industry's leaders in the antimicrobial resistance and bioinformatics space. This market position has been reinforced by our collaboration. the numerous notable peer-reviewed publications, awards, grants, and a pipeline that includes prospects such as the pending FDA clearance decision and swift subsequent commercial launch of the Acutis AMR gene panel bracelet in the United States, along with additional clinical trials of the Univaro UTI and IJI and their future U.S. FDA regulatory milestones, such as submissions and eventual clearances. Finally, I would like to wholeheartedly thank all of our option group companies and employees globally. for their phenomenal work ethic, focus, and execution as we've worked tirelessly through the pandemic to successfully combine our companies and product portfolios this past year. I look forward to a new, exciting year ahead and to the many continued successes we will achieve together. I would now like to turn the call back to the operator for questions. Operator?
spk06: Thank you. We will now begin the question and answer session. If you do have a question, please press star 1 now to be placed in the queue. One moment, please, while we poll for questions. Our first question is from Yi Chen of HC Wainwright. Please state your question.
spk00: I was wondering if you could clarify how soon you could commercially launch the AMR gene panel once approved, and what your projected revenues from this panel for the first full year would be after launch?
spk04: Sure. Now, as I said, we have continued to prepare. So, you know, usually once you get FDA clearance in any molecular diagnostic product, it will typically take a number of weeks. It's called, you know, anywhere from, you know, six to eight weeks. in order to truly launch. Now, we've tried to shorten and compress that period as best we can. As I said, we have produced and manufactured several batches of the QDIS AMR gene pedal product. It has basically run through our QC process. It's on QC hold pending the FDA clearance. We obviously need the appropriate label to be affixed to the product once we have FDA clearance. The marketing and sales organizations have been trained. The collateral has been done. You know, we're certainly in active dialogue, and I mentioned as a couple of examples the various customers today that run the Acutis AMR RUO for possibly converting them over to the FDA-cleared product. You know, in terms of first full-year revenue, we're not providing any specific guidance at this point yet, Again, typically you would anticipate that you will have – these are complex products. It's going to be a first-in-class and a first-of-its-kind type product. We anticipate the Acutis AMR gene panel for isolates to be the broadest panel of genetic antimicrobial resistance markers that the FDA would have cleared once it's cleared. So sales cycles for complicated products in truly novel indication area are fairly lengthy. Again, if you look at the industry comparables, it's not uncommon to see anything from six to nine or even 12 months in some larger hospital networks. But, again, from then on out, you know, utilization per instrument system, and that's the way to think about it. You know, how many systems can you place? What's the annuity, if you will, on any given system? You're looking at tests that are somewhere in the 100 to $150 ballpark per test. And if you can run, you know, on any given instrument system, several hundreds, potentially a couple of thousand tests per year, obviously makes for very attractive annuities. That boils down to how many of these systems can we place in a 12-month period? Again, we're at this point not given any specific guidance because, again, we need to see the final FDA labeling and claims they allow us to make. But, again, the funnel is being prepared, and we're going to try to drive this out of the gate as hard as we can.
spk00: All right. That's very helpful. Thanks very much. And, you know, we look forward to continued success. Thanks.
spk06: Our next question is from Max Jacobs of Edison Group. Please take your question. Hi, guys.
spk01: Thanks for taking my question. So I was just wondering, with regards to, like, the China deal, how – like – what sorts of revenues can we expect to see in the first year after marketing approval?
spk04: So I'll, you know, again, what's previously been publicly disclosed, and this actually, if you look back at some of the previous greatest disclosure, that the original contract with B Station Clear was for five years. During that initial five-year period, That was 260 instrument systems, and the cumulative revenue would have been up to 60 million euros. And then years 6, 7, and 8 that were negotiated and added at a later stage basically added on another 100 systems as a minimum, and it added on another approximately 90 million in cumulative revenue. So if you take the 60 million euros, which in U.S. dollar terms is about $72 million or so right now, over a six-year term, I think it is fair to say that this is not going to be linear. You're going to have sort of an exponential growth phase early on. Clearly, you're going to see in the first, you know, one, two, three years, you're going to see the bulk of instrument placements, and then you'll see the cartridge pull-through and utilization following as each account goes through their internal validation, et cetera. So, again, you know, if you take that 60 million euros, $72 million, five-year cumulative number, and then adjust it and build yourself a little S-shaped curve, you're probably going to come up with as close an approximation as we can provide at this stage.
spk01: Okay, great. That was helpful. And then just on Columbia, kind of a similar question, but not necessarily just based on year one, what sort of revenue opportunity do you think that is? Can you give us something in the ballpark?
spk04: Sure. So, again, I mean, so what we've disclosed is that over the three years, it's a minimum of 10 Univero instrument systems. If you look at a typical Univero system, you know, running anywhere from the low end, let's call it, you know, 200, 300 tests, and the high end could be up to 1,000 tests a year. You look at the end customer pricing, which is likely going to be, you know, somewhat lower than here in the United States. But, again, a per test revenue towards end customers likely going to be in that $120 to $180 ballpark, you know, with the typical distributor margin in our industry usually being in the 30%, 40% ballpark. But we, of course, generate our revenue as option through the transfer price-based sales. You sort of get a sense on, again, on a per instrument basis, this is, you know, from, you know, high five figures to low six figures annuity per instrument per atom. And, of course, you know, if you look strategically, you look at the Anar relationship, the initial deal is for Colombia and Colombia only. They're certainly in their country. They're number one. They're ahead of some of the brand names in the diagnostic industry. They're certainly ambitious in looking at expanding beyond Colombia into additional Latin American markets. So the way to look at this really is the beginning of a strategic partnership that could go well beyond Colombia over the coming years. And at least from an initial interest level, there was several hundred participants in that K-Opinion Leader event a couple of weeks back with, you know, tremendously positive feedback. Right now the focus is to get the regulatory paperwork done. The good news here, no clinical trial. There is no, it's not like an FDA review. It's basically us providing the CE mark documentation and technical files for each of the products. I mean, remember, there's the Univero system, and then there's five CE-marked cartridges in five disease areas, pneumonia, implant tissue infection, blood culture, urinary tract infection, and intra-abdominal infection. They're taking all five products through the Colombian process. But, again, it's purely paper-based. We've submitted pretty much the full gambit of documents, and we're expecting probably a – second half, fall season 2021 clearance, and then they can go right and launch the product portfolio in the Colombian market.
spk01: Great. That was an extremely helpful caller. Thank you so much.
spk04: And if you actually, I mean, just as you think about this, Colombia being a prototypical deal, you know, we have additional such deals, for example, in Vietnam, which is First, basically a copycat of that type of agreement. Three years, minimum commitments on instruments, same regulatory process. So, you know, it's always worth – we continue to expand our geographic scope, clearly continue to drive the top line here.
spk01: Wonderful. Those were all my questions. Thank you.
spk06: Our final question comes from Ben Hainer of Alliance Global Partners. Appreciate your question.
spk03: Good afternoon, gentlemen. Thanks for taking the questions, and congrats on the progress. Thank you, Ben. Good to have you. Just, yeah, no, so first for me, I know there's been a lot of ground covered on China, but have you heard any more from BCB? You know, it sounds like NMPA, you're not going to hear anything from them, but have you heard from BCB on any of their expectations? And, you know, would it be possible to launch as a research use-only test? It doesn't sound like it the way I'm hearing you. And then I think if I'm not mistaken, there are a handful in the study installed there or not. Any more color there, I guess, is the question. Yeah.
spk04: Sure, sure. Yeah, I mean, look, our partner has taken the Univero platform and the pneumonia application through all of the required analytical and clinical testing and studies. They've had a number of systems and, you know, give you a sense, we've roughly over the last couple of years sold about a dozen Univero systems to them. They've deployed these at a number of very large hospital systems in Shanghai and Beijing and, There's even been a publication of the Sino-Japanese Friendship Hospital, again, one of the largest, you know, top-end institutions. So, yes, they have certainly some early adopters. I'm not going to speculate on their regulatory strategy with regards to RUO. Now, we do know that they're in very active dialogue with the NMPA, and the way, you know, we certainly get a sense of that is that by – specific requests for specific ancillary documentation and data. I'll give you one example. In the late fourth quarter of 2020, through our partner, Beijing Clear, and their regulatory advisors, we got a request list from the NMPA for any ancillary trial data that we had. Now, we've already provided them the U.S. FDA trial data on both of our LRT and LLTBAL and all of our HPN European data. But, of course, there have been a number and increasing number of peer-reviewed journal publications, investigator-initiated studies from reputable institutions here in the United States, Northwestern in Chicago and Beaumont, Michigan, to name a couple, as well as institutions like Karolinska in Europe. So we've provided all of that feedback as best we know. And, again, it is China, so I'll always, having done business there for the better part of the last decade, I'll take everything with a grain of salt. But we believe that they have provided all of that documentation and dossier to the NMPA. And it's likely going to be not too dissimilar from the U.S. FDA, because if you compare it from a procedural standpoint, from a level of diligence and request. The NMPA is right now on par with the United States FDA. They ask typically the very same questions, same quality of data. So I guess the days when you would get by with just relationship, a little bit of guanxi and goodwill, those days were long past. So, again, we believe we've submitted everything there. Frankly, we've submitted everything that there is in the world. It's been good enough to get the product approved in the United States. It's been good enough to get the product into European markets. It's been good enough to get Singaporean health authority approval, Thailand, and Malaysia, to name another couple of countries. So I've got to believe fundamentally that that product has a strong body of evidence, not just analytical but really clinical data to support that. Again, we really need to focus on getting the remaining questions back and You know, it's probably going to boil down to either they're going to clear it or approve it based on foreign data with, you know, whatever local Chinese data that's already been generated, or they might request specific ancillary data to be generated in China. Again, there is multiple installed systems. Incidence rates of pneumonia are huge in China, so from a throughput and duration, that shouldn't be a big issue. We're certainly ready to support our partners. But right now, you know, we have a hard enough time to second-guess the United States FDA, and we're talking to their reviewers directly every week, and we speak the same language. We're in the same country. So, you know, we're like three layers removed from the Chinese NMPA here. But, again, I think all signals are definitely trending in a good direction, and we're confident that it's marching in a good direction. I was, frankly, positively surprised when, without, you know, after we submitted everything that we hadn't heard for, you know, a couple of months, out of the blue we get the approval. Chinese letter, red seal, there it was, right? I mean, there wasn't sort of a pre-warning or anything. That just arrived. So, again, let's... Let's focus on answering any questions there may be, but we're certainly doing everything we can with all partners to kind of make it all happen.
spk03: Okay. That makes sense, and I definitely appreciate the details there. So then, you know, just thinking about how BCP would begin commercialization on that, you know, obviously the terms are what the terms are. But, you know, do you have a sense of, you know, are they rearing to go, get out of the gate real quickly? Do they have, you know, they already kind of trained their personnel and salespeople? Or, you know, how does that aspect of it kind of sit at the moment? Yeah.
spk04: Yeah, I mean, they clearly – they're a, you know, sort of a decent-sized organization across all 31 provinces plus Hong Kong and Taiwan. So, you know, they're a sizable company. They have had Univero systems established. Now, their initial launch and focus, like pretty much for any modern, cutting-edge Western technology in China, you're not going to go to 31 provinces in rural China. You're going to go to the big cities, of which, frankly, there's more than enough in China, and the AAA hospitals, as they're called in China. And, again, there is over 1,000 AAA hospitals in China. So, again, I would anticipate, you know, the launch to focus on Beijing, Shanghai, China, some of the other major cities, um, and, and those top tier hospitals, the team there has been fully trained. Again, they have worked with multiple installed systems over the last couple of years. So their, their commercial team, their technical team, their marketing team, um, they're working very closely with our team in Europe. Um, we've, we've continued to have face-to-face meetings, um, uh, with them on a very regular basis. Um, so, um, You know, the one data point I would throw out there, and this is the relationship we've been building with Beijing Clear, was based on a referral by one of our other strategic corporate partners, Jerez Medical, many years ago. Beijing Clear has been the exclusive commercial distributor for Jerez Medical for almost 15 years. The CEO of Jerez Medical basically told me we've never been disappointed by these guys. It's a very professional team. They've come through, and they've grown the business year over year, and they've even invested in additional manufacturing capacity for Horea. So we're clearly excited. So far, all I can say is they've been holding up their end of the bargain, and we're excited to be working with them.
spk03: That's great. And then just thinking about the strength of balance sheet, and I appreciate the color on the – potential to drive better terms on some of these licensing or partnership agreements that you could have. But, you know, just with the strength and balance sheet, have you also seen increased interest, you know, or changes to the negotiating posture of the folks that you're already dealing with?
spk04: That's a good question. I mean... I would say not really. I mean, all the conversations, and again, at this point, we have multiple parallel conversations with several large corporate partners ongoing simultaneously. They're all aware that there are multiple partnering avenues we're pursuing, and, you know, so... You know, if you look at some of the partnerships that ours genetics has had for a number of years, you know, whether it's Sandoz or QIAGEN, but also, you know, other potential large players in the diagnostics industry, I would say the focus remains really on how to build, strategically build a franchise around the bioinformatics AI-powered algorithms. I would certainly say this. While six months ago, any partner... simply taking a look at our Qs or Ks and our balance sheet would have known that we're going to be between a rock and a hard place and we're going to be signing just about any deal.
spk00: That has just gone away.
spk04: So I think the ability to say, look, let's be really strategic here. Let's focus on what we can do together, but also let's not trade too much of the value and too much of the upside. too early on prematurely at, you know, a relatively, you know, small amount up front and then a pittance on the downstream royalty, the value is going to be in the ultimate product. So it's going to be in product revenue and royalty upon that of any potential license fee. So, you know, the ability to, you know, drive this further and potentially co-invest on the R&D side along with a partner is, looking at are there areas that strategically you may want to carve out commercially. You know, that certainly gives us a very different ability to discuss strategic collaborations rather than going for the quickest possible licensing deal just to make sure we get R&D funding covered here for the next year or two.
spk03: That makes a lot of sense. Just lastly for me, just wondering kind of the response that you've gotten from the RS Genetics, you know, the AI best practices publication. I mean, that seems more like something that's going to resonate more meaningfully to industry than investors. But, you know, what's been kind of the response there? And then... You know, it seems like that kind of establishes some thought leadership as well. You know, how should investors look at it? Yeah.
spk04: It certainly has put ours genetics on the map. And, again, you know, ours genetics has been invited. We talked about the JPIMR, but there's another large global consortium. Both of these, ours genetics has been invited to join. And, you know, given some of the leadership roles on the AI bioinformatics side of things, so, again, I would, you know, the – FDA guidance is one part. To this date, Ars Genetics is the only company globally that has actually had peer-reviewed, multi-center publication demonstrating the ability to not only predict antimicrobial resistance, but really to predict antibiotic susceptibility with extremely high levels of accuracy. That is a true first-mover advantage, and that's where the USP of Ars Genetics and the RSDB lies. So, If you look at those consortia and you look at who the players are, it's the usual suspects of the global pharmaceutical industry in antibiotics, the global diagnostics leadership in microbiology. For them to invite Irish Genetics and take a leadership role in these syndicates is definitely great, and it's put us on the map, which is good to see. But it will require us to continue investing and furthering the assets because, of course, you're going to have players out there that – certainly aren't sitting on their hands, and we've got to keep that first mover advantage with the databases from a combined Merck pharmaceutical strain collection with the Siemens strain collection, which is RSDB today with its 55,000 isolates, you know, next-gen sequenced and phenotypically looked at against over 100 antibiotics in total. We've got to stay at the forefront of that, and What we've certainly seen is a number of inbound interest requests from top-tier U.S. academic centers and clinical centers to explore, you know, collaboration opportunities to sort of look at this as a truly next-generation solution that goes beyond PCR, that goes into NGS and AI.
spk03: That's great. Well, that's it for me. Congrats, gentlemen, and all the progress.
spk06: All right. That's all the time we have today. I will now turn the call back to Mr. Schacht for closing remarks.
spk04: Well, thank you, everyone, for joining today. Please visit the investor section of our website or our ICC findings for updates on the company. Thank you very much and appreciate your attendance. Thank you.
spk06: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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