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spk05: Welcome to the OpGen fourth quarter and full year 2022 earnings call and business update. Before we turn the call over to OpGen's management, please note that any forward-looking statements made during this call are based on management's current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. OPJAN does not undertake any obligations to update publicly any forward-looking statement to reflect events or change circumstances after this call. For discussion of factors that could cause results to differ, please see the company's fillings with the securities. Oh, for discussion of factors that could cause results to differ, please see the company's filings with the securities exchange commissions, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2022, and its reports on Form 10Q, and Form 8K. Joining the call today are Oliver Swartz, OpGen's President and CEO, and Albert Weber, its CFO. Now we'll turn the call over to Mr. Swartz for introductory remarks.
spk01: Thank you all for taking the time to join today's call. We're pleased to have this opportunity to provide a business and financial update to our shareholders. We will then be happy to take questions. I would like to start the call by recapping our fourth quarter milestones and overall achievements in 2022. We started off the fourth quarter 2022 by announcing the successful completion of clinical trial enrollment for the Univero Urinary Tract Infection, or UTI, panel. We had four study sites in the US, and they successfully collected and tested over 1,800 urine samples. Throughout the fourth quarter and in the first quarter of 2023, our team as well as external partners providing additional reference testing data have continued working to review and analyze the unblinded data. Preliminary analysis of all prospectively enrolled samples showed that the primary study endpoint was successfully met by demonstrating an overall weighted average sensitivity of 96.4% and overall weighted average specificity of 97.4% when compared against each trial site's standard of care microbiology results. These findings are also in line with the interim analysis performed during the first part of the trial. The detailed clinical and analytical performance results from this trial are currently being used to prepare a submission package for the FDA, de novo request, which we will discuss in more detail later on. Additionally, in the fourth quarter, we signed a commercial collaboration agreement with Bioversus for the deployment and use of the Univero platform in Bioversus' upcoming Phase II clinical trial of their novel drug candidate BV100. In the planned phase two clinical trial, hospital sites will be using the Univero HPN for hospitalized pneumonia patients as a rapid diagnostic test to help optimize enrollment. The BioVersus team, as well as their CRO partner, have been fully trained and the first Univero systems have been shipped recently and are ready for installation at trial sites. Overall in 2022, there were several business advancements, which we would like to highlight as follows. The two new Acutis AMR gene panel commercial contracts, the commercial launch of isolate sequencing services in the US by our ARIS team, the successful completion of verification and validation testing, as well as lifetime testing for our Univero A30 instruments, and the FIND collaboration project for the A30. The commercial launch of a series of new genome sequencing and analysis services globally, and the expansion of the strategic collaboration that Ars Genetics has with Sandoz until January 31, 2025. I will now turn the call over to Albert Weber, Options Chief Financial Officer. He will review financial results for the fourth quarter and full year 2022 and recent financial developments. Albert?
spk00: Thank you, Oliver, and welcome to everyone on the call. I will briefly discuss the fourth quarter and full year 2022 highlights review the full year 2022 financial results, and conclude with some thoughts on our guidance for 2023. Options. First quarter revenue for 2022 was approximately $722,000 compared to $1.4 million in the fourth quarter of 2021. And for the 12 months ended December 31st, 2022, total revenue was approximately $2.6 million compared to $4.3 million in 2021, which was in line with our most recent guidance. However, compared to the third quarter 2022 revenue of $449,000, we achieved a 61% increase in the final quarter of 2022. This increase was primarily due to the revenue generated from the fine collaboration project, Univero product sales, and revenue we received under our ACUITUS AMR gene panel commercial contract. While we experienced an overall revenue decline from 2021 to 2022 due to the termination of the fish product line and the one-off non-exclusive sale of a portion of the ARIS database, both in 2021, we are working towards increasing product sales across all platforms, i.e., Univero, ACUITUS, and ARIS in 2023. For 2023, we will continue to work on generating revenue from existing commercial agreements as well as from new collaborations and customers. Looking at our operating expenses in fourth quarter of 2022, they amounted to $10.7 million compared to $7.2 million for the same quarter in 2021. The increase in 2022 was mainly attributable to an impairment of the company's indefinite lift In-process R&D intangible assets totaling $5.4 million. For the full year of 2022, operating expenses amounted to $37.2 million compared to $27.6 million in 2021. This increase was again primarily attributable to the aforementioned impairment of the in-process R&D intangible asset, as well as an impairment of goodwill in the third quarter of 2022. Disregarding the non-cash impairment charges in both years, our operating expenses decreased in 2022 by $2.6 million or 9.4%. Our fourth quarter 2022 research and development or R&D expense was $1.6 million compared to $2.9 million for the corresponding period of the previous year. i.e., a 45 percent reduction. Our full-year 2022 R&D expense was $8.2 million, compared to $10.9 million in 2021, an almost 25 percent reduction. Our fourth quarter 2022 general administrative or G&A expense was $2.1 million, compared to $2.5 million for the corresponding period of the previous year, or a 16% reduction. Our G&A expenses in the full year of 2022 were $8.9 million, compared to $9.9 million in the previous year, i.e. a 10% reduction. Our sales and marketing expenses stayed consistent at approximately $1 million in both fourth quarters of 2022 and 2021. Our full year 2022 sales and marketing expenses which included items such as market research, advertising, travel expenses, exhibition and conferences, and other marketing related services was $4.3 million compared to $3.7 million in the previous year. The approximate 16% increase is due to the continued build out of the sales and business development teams compared to the prior year, as well as increases in onsite expenses due to lifted COVID restrictions. Finishing off with our cash position, we ended 2022 with approximately $7.4 million, a decrease compared to our cash position at the end of 2021 of $36.1 million. The company continues to closely monitor its cash consumption rate and to evaluate potential future financing opportunities. At the beginning of the fourth quarter of 2022, we closed the register of direct offering for growth proceeds in excess of $3.3 million. In January 2023, we closed a $7.5 million register direct offering as well. The use of the net proceeds for both raises have and will be used for the following purposes. Support continued commercialization of the FDA-cleared ACUTIV AMR gene panel test for isomers in the U.S. commercialization of our products with a focus on the Univaro platform and its diagnostic test applications, in particular in the U.S., support further development and commercialization of the ARIS genetics database, support direct sales and marketing efforts to the customers and collaborators for our products and services, invest in manufacturing and operations infrastructure to support sales of our products, ongoing R&D for the universal platform and related tests, such as UTI, as well as for the A30 platform, and the repayment of certain outstanding indebtedness of the company. As mentioned on previous earnings calls, our subsidiary Corretas and the European Investment Bank, or EIB, agreed to amortize the first debt range that had originally been due in April 2022 over a 12-month period until April 2023. We repaid 5 million euros in April 2022, and then began monthly installment payments for the remainder of the debt trench, which will total approximately 8.4 million euros over the 12-month period through April 2023. As of today, we have only about 700,000 euros in debt repayment obligations left from that first tranche. There are two additional tranches of 3 million and 5 million euros in principle, plus accumulated and deferred interest that become due in June 2023 and June 2024, respectively. Let me now turn to our guidance for 2023. In 2022, our operating expenses remained in line with our initial expectations and tracked well against our guidance for yearly net cash consumption. We have reduced our R&D expenses significantly and also reduced our G&A expenses. and started growing our sales and marketing expenses in line with the planned shift to more commercial operations, in particular in the U.S. market. We anticipate continuing that track record in 2023 at an expected net cash consumption from our operations of around $4.5 million to $5 million per quarter. In connection with the first round of our EIB debt, we expect an additional cash outflow of approximately 700,000 in April 2023, at which point the first branch will be fully repaid, including interest. We are in an active dialogue with the ERB about the potential to restructure the second branch of 3 million euros principal plus accumulated and deferred interest, which becomes due at the end of June 2023. We see significant revenue growth opportunities here in the U.S., especially with both the Univero product sales, and with our ARIS genetic services. ARIS has a strong business development and collaboration opportunity funnel, which we are optimistic about potential collaboration opportunities and partnering deals that each could begin contributing to revenue growth from 2023 onwards. As a result of our progress in 2022 and here today in 2023, We expect future growth in the commercial rollout of Univero products and the ACUITUS AMR gene panel. We are focused on expanding and progressing our commercial pipeline for the AMR gene panel, as well as Univero LRT and UTI, and are currently in several ongoing discussions with hospitals. In the post-COVID fourth quarter of 2022 and into the first quarter of 2023, we have seen that hospitals have a significant backlog of investment needs and are taking longer than pre-COVID to complete contracts. We have contracts for Univero and Acuitas that we believe are in final review with purchasing departments at several hospitals. Overall, there are several new commercial contracts with U.S. customer accounts across Univero and Acuitas products, as well as ARIS sequencing services which has seen first customer orders coming in and being processed during the first quarter of 2023 already. Taken together, our commercial panel has proposals to customers with significant dollar value annually that are currently in final review and negotiation stages, clearly indicating significant revenue growth potential for options. Based on our final UTI clinical trial data readout, We are currently putting the finishing touches on a regulatory submission for Univaro UTI to the FDA, which we expect in the coming weeks. The study data set also includes the next generation sequencing or NGS data that the ARIS team in the U.S. generated by processing more than 1,000 isolates from our UTI trial, making this a comprehensive data package, further complementing the Univaro UTI results microbiology data from each trial site, as well as standardized central microbiology data on all samples from an independent reference lab. With the slower than anticipated signing of new contracts ramped up in utilization of consumables under already signed contracts and collaboration agreement deal flow, we expect revenue from our products, services, and collaborations globally for 2023 to be in a range of approximately $4 to $5 million. We believe we have a strong pipeline of opportunities with significant revenue growth expected in 2023 and across Univero, Acuitas, and ARIS-related offerings. Having recognized approximately $300,000 from defined collaborations in 2022, we expect to recognize the remaining more than $400,000 in revenue from this project in 2023. We also have an opportunity to possibly expand the initial fine project by adding an expanded scope of work packages and have already begun the discussion of a separate follow-on collaboration project contract for the next phase, including full product development, clinical trials, and regulatory submissions towards commercial availability of the Univero 830 product testing for AMR from blood culture samples in low- and middle-income countries. Also, we have seen the start of revenue generation from the new Bioversus collaboration in late 2022 and expect the bulk of revenue to be generated in 2023 and 2024 as their clinical trial progresses. And finally, we completed our 1 for 20 reverse stock split in January 2023 and received subsequent notification from NASDAQ, confirming that we have regained compliance with their minimum bid price rule. This concludes the financial update. I will now turn the call back to Oliver.
spk04: Thanks, Albert.
spk01: Before we turn to the Q&A, I would like to highlight our progress so far in 2023. On the commercial front, our subsidiary, RS Genetics, announced their successful move to a new Vienna location and received a key patent grant in China. Also, ARIS received its first commercial customer orders here in the U.S. and has begun processing them with revenue generation starting in the first quarter of 2023. With recent significant 28% growth in the number of datasets in our ARIS DB database in the first quarter of this year alone, we believe we're well positioned to continue executing on our plans to expand and improve our menu of accurate artificial intelligence models to predict antibiotic susceptibility from genomic data. As mentioned earlier, based on the UNIVERO UTI panel, U.S. clinical trials final readout, we're now in the process of finalizing the FDA submission package, aiming for a timely submission of our de novo request early in the second quarter. We've been working alongside FIND in the development of the Univero 830 platform for their needs. At the beginning of 2023, we announced that we achieved several key milestones under this collaboration in December of 2022, which triggered a €200,000 milestone payment, which was received in the first quarter of 2023. We're working towards completion of the remaining milestones here in the coming days and expect to receive confirmation of those milestones in the coming weeks. triggering another up to 300,000 milestone payment under the initial phase collaboration contract. Following successful feasibility data, there is great potential for future collaboration opportunities, and we're already in discussions with the FIND team for a follow-on deal that would cover product development steps, including clinical trials and regulatory filings, as well as manufacturing scale-up and preparation to launch the Univero 830 in certain low- and middle-income countries. Also on the Univero A30 platform front, our focus is on non-dilutive partnership opportunities, similar to our collaboration with FIND, as well as certain U.S. government entities that offer funding opportunities and were actively responding to certain broad agency announcements. We have also teamed up with a strategic advisory firm to support a Univero A30-specific corporate business development campaign in China, where we believe there is an attractive opportunity to partner with and possibly license or otherwise monetize the A30 platform. We're still in regular weekly contact with our Chinese Beijing ClearBio partners and are ready to move forward with the clinical studies and working towards a final NMPA submission, review, and eventual clearance. Given the abrupt change by the Chinese government in the first quarter of 2023 on its previous zero COVID policy, we believe there may now be a realistic opportunity to see our local partner, BCB, initiate the outstanding clinical study in China for the Univero pneumonia product. Following an NMPA approval, there is still a commercial distribution agreement in place with our Chinese distributor with potential purchase commitments over an eight-year period of up to $180 million. In closing, our near-term catalysts and milestones, along with our continued commercialization of our existing approved products, puts Option in a good position to increase revenues. We look forward to updating everyone on our developments. So thank you for your continued support and for participating in this afternoon's call. I would now like to turn the call back to the operator for questions.
spk06: Thank you.
spk05: We will now begin the question and answer session. If you have a question, please press star 1 now to be placed in the queue.
spk03: One moment please while we poll for questions.
spk06: Thank you. Our first question is from Nidia Singh with Edison Group.
spk05: Please proceed with your question.
spk07: Hi. Thank you for taking my question. My first question is related to ARIS genetics. It seems we are getting traction on ARIS genetics now. So what kind of contribution can we expect in FY23? And second would be related to fine collaboration. So I believe we are conducting the feasibility stage of UNIVERO 830 under fine collaboration by Q2 2023. So what could you provide an update on the progress to date? Thank you.
spk01: Sure. Thanks, Nidhi. Good questions. So let's start with the traction that we're seeing for US-based NextGen sequencing lab for RS genetics. So we first completed a major in-house project with NextGen sequencing. of over 1,200 isolates from our UTI clinical trial. This was a perfect dry run and test for our processes, throughput, QC measures, and the team to get into the rhythm of processing large numbers of isolates week after week. After we successfully completed that, we have since received the first customer orders for our RS isolate sequencing service offering. The samples have already been received here in Rockville and processed and sequencing data delivered. The first large health network with multiple affiliated hospitals in the southeastern United States has signed a pilot agreement under which we expect to process about 200 isolates over a roughly 90-day period. However, their objective is very clear. Subject to satisfactory completion of this pilot, assuming good performance, of course, in terms of rapid turnaround times, good data quality, etc., they would be looking at several thousand isolates per year to be run through the RS-ISS process. making them a potential strategic key account with annual revenue volumes that could be several hundred thousand dollars in range. We'll communicate further details once these materialize in the coming months, but we're definitely off to a great start. Now on FIND, you're absolutely right. We remain on track to conclude the feasibility stage collaboration here in the coming weeks. The remaining milestone payment, as we said, is roughly 300,000 euros once all of the milestones are delivered. I know the team was traveling here in the last day or two to collect some of the last data with some of our external development partners. So assuming that based on that series of deliverables, including, for example, having prototypes for a dedicated and tailored A30 touchscreen cockpit, additional data generated on the A30 cartridge from the blood culture assay, including many, many antimicrobial resistance markers, as well as a certain data package based on next-gen sequencing of certain strains that we expect to get delivered by find from African countries. But as we said, we're already discussing the potential extension and expansion of that initial contract. That could be a you know, a six-figure extension, which we'll announce as soon as it's been signed. And there will be potentially some additional work packages. And, again, we'll put more color around that as soon as it's done. But already the FIND team and the Curatus team are in discussions about the potential second-stage contract. And that would be, you know, a broader agreement covering final research and development work, the broader clinical trials required for regulatory submission and eventually approvals, and launch preparations in a list of low- and middle-income countries. Now, obviously, any such follow-on deal will be dependent on the successful delivery of the first set of milestones, as well as the completion of contract negotiations. But we're definitely very excited here about the very near-term completion of those milestones, and we'll provide that update as soon as it's confirmed by FIND. and then these negotiations in parallel to a potentially extended phase one would continue throughout Q2 and we'll provide an update as soon as it becomes available. To be very clear, in the guidance that we've provided, and I know Albert spoke about four to five million revenue guidance for 2023, while that does include the current contract. It does not include any potential follow-on contract.
spk03: Thank you.
spk05: Our next question is from Yi Chen with HC Wenright. Please proceed with your question.
spk02: Hi, thank you for taking my questions. My first question is, could you elaborate on the potential in China for the Univero pneumonia product and also the Univero A30 platform in terms of how much more clinical work needs to be done? What is the timeframe for potential regulatory approval and market entry? Thank you.
spk01: Sure. I mean, look, on the A50 HPN pneumonia panel, nothing has changed. So in terms of the potential, that contract has been unchanged in the last couple of years during COVID. As we said, over an eight-year period post-NMPA approval, that would be up to $180 million. And if you go back to the 2020 S4 filing that option did, again, the facts have not changed in terms of number of instrument systems up to 360 Univero systems and up to 1.5 million pneumonia cartridges or HPN, whatever it's going to be branded as in China, Univero cartridges over that eight-year period. In terms of timeline, again, no change to the guidance we've previously provided from the time when we received the information that the NMPA has changed its regulatory process to a new electronic submission. That 24 to 30 month window started counting then. So again, with an opportunity to get the clinical study underway during the course of 2023, and then obviously depending on the final details of that clinical study, we'll update once we have visibility on start date and likely enrollment timeline. And that's the last missing data piece, if you will, to submission because everything else pertaining to the instrument, all of the analytical testing, all other data that is required for the NMPA submission is already available today. So again, there is no changes to that timeline. It all boils down to when the study can get started in China. I think what has changed in the last three months really is China's U-turn on the zero COVID policy and the definitely much brighter prospect for our partners to be able to go into these hospitals and start working with the team. We have a team that is bound for China here in the second quarter, and we anticipate our team to work alongside the Beijing ClearBio team to put everything in place to get the study running. Sorry, go ahead. Go on.
spk02: I was going to ask, do you expect competition from local product offerings or other international product offerings in China?
spk01: At this point, we do not see another local Chinese pneumonia cartridge sample to answer based product in clinical trials or anywhere near that stage. We can never exclude that from happening, but at this point, we don't have any visibility on other pneumonia panels coming on an integrated platform. And given the breadth of the panel, the multiplexing degree, et cetera, it would be very surprising to see something come out of nowhere. Now, on the A30, we have not given any guidance, and at this point we're not in a position to provide specific guidance on a potential transaction or partnership-type arrangement. but suffice it to say that it will be a very proactive approach because we believe specifically in China there's a great product market fit for the A30. If you think about the much smaller footprint, the much lower cost of goods, much faster turnaround time, and the versatility of developing and manufacturing products in China, we're certainly excited about you know, engaging in discussions and seeing how to leverage and monetize that asset in a geography that, frankly, we would never be able to begin doing ourselves.
spk02: Thank you. And my second question is, could you comment on roughly, you know, how many more new contracts do you expect to secure in 2023 for the Acuity's panel?
spk01: We're not providing specific guidance at this point in 2023. We'll need some real-world feedback from the first quarter, but at this point, it's simply premature to provide a guidance on number of contracts.
spk02: Okay. Do you expect the hospital's product review timeframe to be shortened significantly this year?
spk01: It's certainly a sincere hope. It'll boil down to how fast... you know, budgets post-COVID and processes post-COVID, when again, you have hospitals, and this is true not just all across the U.S., it's true all across Europe and rest of the world, you have hospitals that have a backlog of capital expenditure and new technology, new platforms, anything outside of COVID was basically put on hold for two and a half, three years. So we'll need to see how quickly things normalize. Clearly, you know, assuming we stay where we are today with sort of living in a post-pandemic world that should bode well for things to normalize and get back to, you know, a faster turnaround time. But how long that's going to take, again, that would be pure speculation at this stage.
spk02: Got it. And lastly, could you comment on the trend of gross margin going forward? Thank you.
spk01: Yeah, again, we don't foresee any changes to the sort of, you know, at scale, you'd expect gross margins to be sort of in the 60% to 70% range for consumables. No change from that angle. Obviously, when you look at the numbers, you'll obviously always have to back out any changes in inventory, reserves, et cetera, so it's not going to be particularly easy to sort of find the true underlying individual product margins if you purely look at the P&L and the gross margins shown there. But over time, again, no change in the anticipated margin profiles.
spk03: Okay, thank you.
spk06: That's all the time we have today. I will now turn the call back to Oliver for closing remarks.
spk01: Well, thank you everyone for joining today. Please visit the investor section of our website as well as our SEC filings for updates on the company. Definitely some exciting news flow coming up. Thank you all very much and look forward to continuing the dialogue.
spk04: Thank you.
spk06: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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