Opgen Inc

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.

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?

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.