Opgen Inc

Welcome to the Op-Gen Second Quarter 2021 Earnings Call and Business Update. At this time, all participants are in a 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, August 12, 2021. Before we begin, I'd like to caution you that any 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 Ars Genetics. I encourage you to review OpGen's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent form 10-K and 10-Q for the second quarter of 2021 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 in the company's completed business combination with Curitus, to implement the combined company strategy, the impact of the continuing global COVID-19 pandemic on our business and operations, our use of proceeds from recent financings, pursuit of FDA clearance for the Acuitous AMR gene panel for use with bacterial isolates, and for our other products and services. the rate of adoption of our products and services by hospitals and other healthcare providers in general, as well as in the current COVID-19 pandemic situation in particular, the success of our commercialization efforts and partnering strategy, the effects 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 the date of this live call, August 12, 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 Schacht, President and CEO, and Tim Deck, CFO of OpGen. I would now like to turn the call over to Oliver Schacht for introductory remarks.

Thank you, Operator, and thank you, everyone, for joining us this afternoon. As always, we appreciate your continued support of OpGen. We're very pleased with our second quarter performance and strong momentum through 2021. We'll focus on our firm progress within our diversified portfolio of products combined with our growing partnerships. We look forward to increased activity in our pipeline in the near future as we continue executing on our strategy of becoming a leader in the molecular diagnostics and bioinformatics industry. On today's call, we'd like to begin with a recap of highlights briefly mentioned on the first quarter earnings call. followed by recent updates in our product and R&D pipeline. I'll then pass the call over to Tim to review financial highlights from the second quarter. We'll then wrap up the call with an outlook on the company's upcoming milestones, followed by a Q&A session. Our previous earnings call, we announced results from the very well-attended multi-presentation webinar titled Pneumonia Diagnosis, Bacterial Superinfection in COVID-19 Patients. Professor and Senior Consultant Physician Christian Gieske at the Department of Laboratory Medicine, Karolinska Institute, Stockholm, Sweden, highlighted several important findings from his study, including key advantages of the Univero HPN panel compared with conventional bacterial culture. Professor Gieske concluded that the Univero demonstrated higher diagnostic yield, specifically 25.3% more detections than bacterial culture, including several key pathogens of concern, notably S. Maltophilia, was called out as an important target on the Univero panel because of its intrinsic resistance against many of the standard antibiotics. An analysis of chart reviews of patients that had multiple lower respiratory cultures ordered during the course of their hospital stay revealed two clinically important cohorts. In group one, culture and univaro HPN results were 100% concordant on the first and all subsequent samples that had been ordered. The findings in this cohort demonstrated that univaro HPN would enable significantly more rapid detection of pathogens not covered by empiric therapy due to intrinsic resistance within five hours as opposed to two and a half days by culture. In group two, Univaro HPN detected bacterial pathogens up to seven days earlier in patient samples that were initially negative by culture, but subsequent cultures ordered during hospital stay were confirmed as positive for the same pathogen at a much later stage. As a consequence of lack of finding antimicrobial etiology by culture, This group of patients was exposed to longer duration of empirical antibiotic treatment. The second presentation focused on a number of clinical cases from the Univero LRT-BAL study that exemplify the performance characteristics and potential clinical impact of this Univero panel in pneumonia diagnostic algorithms, presented by Drew Bell, Medical and Public Health Microbiology Fellow at Indiana University School of Medicine. An analysis of retrospective chart reviews performed on patients suffering with various types of pneumonia, as well as non-pneumonia patients, revealed that based on conventional microbiological results, 41% were undertreated, 19% were overtreated, while only 25% were appropriately treated, and 16% were appropriate without antibiotic treatment. In contrast, the study demonstrated that using the Univero LRT-BAL panel would have enabled prompt and appropriate targeted antibiotic therapy in 41.3% of cases, including escalations and de-escalations, reducing the time to appropriate therapy by 25.7 hours. Additionally, we previously touched on our extended collaboration with the New York State Department of Health through September 30th of 2021. The partnership extension remains valued up to an additional $540,000, which includes a monthly retainer-based project fee, as well as volume-dependent per-test fees. The extension period gives us the time to discuss and evaluate potential future forms of collaboration with the New York State Department of Health across the state. We've seen nice levels of increased testing volumes throughout the second quarter, and we hope to continue and expand our relationship with the department. To that end, a dialogue with the New York State Department of Health is already ongoing. In June, we submitted an updated 510 case summary to the FDA for our ACUITUS AMR gene panel for isolates. The FDA had previously provided substantive feedback on what we believe is all key documents, including the package insert, electronic user guide, and operator manual, in line with their currently expected timeline of doing so by the end of May. The FDA recently reiterated to us that it intends to complete its review by the end of August of 2021. Since submitting our revised documents to the FDA, we have not received any additional feedback nor questions or requests for additional information. Although the FDA clarified that their timelines can be affected by various factors, we're confident in the progress moving us much closer towards reaching a final FDA clearance decision point in the coming weeks based on the FDA's current expected timeline. Recently, we successfully completed the move of our U.S. headquarters labs and operations to a new facility here in Rockville, Maryland. The 10,000-square-foot facility results in net savings of approximately $600,000 annually in operating efficiencies and reduced rent. Going forward, all Univero cartridges, as well as Acutis consumables for the U.S., will be stocked and shipped directly from this facility. Regarding ARIS genetics, ARIS has recently signed several additional collaboration agreements. For example, one with UPMC in Pittsburgh, Pennsylvania, wherein a scientific and clinical collaboration project we will be working on nanopore technology-based approaches. Furthermore, ARIS has entered into a strategic R&D collaboration with a major US-based CRO and reference lab. As part of that collaboration, ARIS has the right to select a large number of key isolates for sequencing and data curation, thereby significantly expanding the ARIS database content and scope as a leading database of AMR markers and AST data. In return, ARIS will provide certain next-generation sequencing services and its AI-powered predictive AST capabilities to the partner lab. Also, during the second quarter of 2021, ARIS amended its licensing agreement with QIAGEN to now allow for non-exclusive access to research use only of the RSDB and thereby opening up the path to adding further collaboration partners for global research uses off the platform. The collaboration with Sandoz has been extended and expanded once again in Q2 And we also expect further projects and collaboration opportunities to be added to the Sandoz partnership during the second half of 2021. Several additional collaborations are currently at various stages of negotiations with pricing discussions ongoing on some of these. Dr. Johannes Weinberger, NGS lab director, recently provided an update on our culture-free genomic assay for AMR surveillance. Dr. Weinberger spoke via virtual presentation at a conference sponsored by Twist Bioscience. Dr. Weinberger commented that, I quote, the sensitivity for AMR marker detection in native urine samples from septic patients with confirmed mono infections in our study was determined to be between 94% and 100% when compared to comparator data obtained from whole genome sequencing of the corresponding bacterial isolate. On day two, after the TWIST Bioscience Conference, Dr. Arna Materna, CEO of ARIS Genetics, presented virtually at the Genomics Track Discussion at the Amazon Web Services Healthcare and Life Sciences Symposium. Dr. Materna discussed that the ARIS Universal Pathogenome Assay, ARIS UPA, is currently being evaluated in a paid-for early access program for which ARIS has already signed up five public health organizations from different European countries. We further extended our R&D updates through two virtual seminars where Dr. Materna presented preliminary data of an ongoing multicenter validation of long-read nanopore sequencing of clinical isolates. We're conducting the multicenter validation by Oxford Nanopore Technology, or ONT, in combination with RS Cloud for data analysis. RS Cloud assisted conversion of ONT data into clinically and epidemiologically relevant information proved highly accurate for participating labs. with average accuracies of consistently 100% for pathogen identification, up to 97% for AMR marker detection, and again, up to 100% for predictive antimicrobial susceptibility testing or AST. As a result, we're planning to assess the performance and utility of ONT-based isolate sequencing for clinical routine use in collaboration with a major U.S. academic hospital. The results from the multicenter validations and subsequent clinical study are targeted to be published in a peer-reviewed scientific journal to expand the workflow adoption in laboratories worldwide. We're extremely pleased with the progress of RS Genetics to commercialize solutions for pathogen and AMR surveillance and are excited by the opportunity to continue developing additional new partnerships with more organizations, both in the United States and overseas. Continuing with more recent presentations and conference attendances, we'd like to note a few highlights. the company announced positive prospective clinical data on the Univero LRT-BAL at a webinar at the end of June, titled One Academic Medical Center's Experience with the Univero Multiplex Platform for Testing Bronchoalveolar Lavage Fluids, Analytical and Clinical Assessment, which studied patients in the intensive care unit for whom BAL specimen was ordered for diagnostic purpose and prospectively evaluated with the Univero LRT-BAL panel in conjunction with quantitative bacterial culture and antimicrobial susceptibility testing. The clinical impact of the UNIVERA results on antibiotic stewardship and patient management were discussed and acted upon in real time, enabling earlier adjustment of antimicrobial therapy in 53% of all cases. At the World Microbe Forum, Dr. Drew Bell of Indiana University School of Medicine reported in an iPoster titled, Clinical Evaluation of a Multiplex Molecular Diagnostic lower respiratory tract panel for bronchial alveolar lavage specimen, which demonstrated that the Univero LRT-BAL provided the basis for appropriate escalation and de-escalation of antibiotic therapies in 42% of cases, reducing time to appropriate therapy by 31 hours. Dr. Corey Hale, infectious disease clinical pharmacist at the Penn State Health Milton S. Hershey Medical Center in Hershey, Pennsylvania, presented on Univero LRT titled Antimicrobial Stewardship Opportunities using results from a multiplex molecular lower respiratory tract panel as compared to conventional culture. Their data characterized the potential impact of Univero LRT on antibiotic therapy in patients being treated for pneumonia. Retrospective chart reviews were performed in 92 of these patients, including 51 critically ill ICU patients and 39 pediatric patients. They reported complete agreement between Univero LRT and culture results in 50% of cases, And in 45.7% of cases, Univero yielded more information than culture alone. In addition, two posters on the ACUITUS AMR gene panel for isolates were presented at the conference by the Wadsworth Center, New York State Department of Health, and their participating sites. The first poster, titled Combating Antimicrobial Resistance in New York State with Public Health Partnerships, highlighted the collaboration project between the Wadsworth Center and OpGen. as part of the New York State Life Science Initiative to demonstrate the benefit of a rapid molecular diagnostic assay in identifying relatedness of antimicrobial resistant organisms indicative of outbreaks or transmission. The second poster, titled Comparative Analysis of a Carbapenemase-Producing Klebsiella Pneumonia Outbreak in a New York State Healthcare Facility Using Multiple Typing Methods, investigated a large outbreak of carbapenemase-producing carbapenem-resistant enterobacteriaceae at a healthcare facility detected through the AR laboratory network. The investigation concluded that the ACUTUS AMR gene panel produced highly concordant results with whole genome sequencing, and that these findings can be used to improve infection control practices in this and other facilities. This type of data provides us the evidence basis for a highly focused and targeted commercial launch campaign once we have obtained FDA clearance for the product. Curatus successfully completed and assembled a batch of 10 final pre-series release Univero A30-RQ analyzers. The Univero A30-RQ platform is designed to deliver rapid and multiplex testing results in under 30 minutes for some assays and in 45 to 90 minutes for more complex samples. The platform has also been designed for competitive mix of features, such as its multiplexing and rapid time to result, optional quantitative assays were needed, all at very favorable cost of goods for both the instrument system and the single-use cartridges. This is a major development milestone in the Univero A30 program, as they are now available for final verification and validation testing. Such V&V testing is actually already underway as we speak, with a focus on mechanical and electric functionality, as well as lifetime testing of the instruments. Aligning with our sales and partnership strategy, the Univero A30 platform can be made available to third-party development and commercialization partners and licensees for their own essay menu and product portfolio. Discussions are currently ongoing with several potential platform partners for various content and licensing or partnering scopes. Finally, we'd like to make a quick note that our US sales force has expanded through the recent hire of Derek Yosting, Senior Vice President of Sales. Recently, Mr. Yosting led the North American expansion for genetic signatures and was focused on expanding the North American sales team and identifying and driving new business opportunities. Prior to that, Mr. Yosting was instrumental in the early success of T2 Biosystems, building and leading the sales team to launch their first FDA-clared products. His 20 years of diagnostics and medical device sales experience include molecular diagnostic sales leadership and pathology sales leadership, as well as sales experience in diagnostic imaging, anesthesia, oral surgery, and ophthalmology. We couldn't be happier with the addition during such an exciting time in the company's history, and we have full confidence in Mr. Yosting's ability to complement our growing team. In fact, Mr. Yosting has already further expanded our U.S. sales team with an additional regional business development director who had previously been responsible for the Northwest Territory at BioFire. We're currently looking to add an additional regional business development team member in the Southwest to complete and round out our combined Univero and Acura's US sales team. I'll now turn the call over to our CFO, Tim Deck, who will review financial results for the second quarter. Tim?

Thank you, Oliver. On today's call, I will briefly touch on the highlights of the second quarter, discuss our balance sheet position, and review underlying growth drivers for the business. Revenue for the second quarter of 2021 was $811,000, down 32% from $1.2 million for the prior year period. Even though revenue for the quarter was down, it is important to note why. Laboratory service revenues increased approximately 926 percent. The increase is primarily attributable to the inclusion of $200,000 of lab service subsequent to the transaction, including COVID testing services performed by the company's Curitis subsidiary. The increase in laboratory service revenue was offset by the following. A decrease of product revenue of approximately 49 percent. The decrease is primarily attributable to a decline of $300,000 due to the strategic exit from the company's fish business and a decrease in collaboration revenue of approximately 58%. The decrease is primarily attributable to a decline of $300,000 due to the conclusion of a non-recurring completed R&D collaboration project with an IVD partner at Aries Genetics in 2020. Revenue for the first half of 2021 was 1.6 million as compared to 1.8 million for the first half of 2020. This decrease is primarily due to a change in revenue from the various product offerings. The company had a decrease in product revenue of approximately 14%. The decrease is primarily attributable to a decline of $400,000 due to the strategic exit from the company's fish business, offset in part by a $300,000 increase due to the inclusion curitis product sales subsequent to the transaction. The company also had a decrease in collaboration revenue of approximately 56 percent. The decrease is primarily attributable to a decline of $500,000 due to the conclusion of a non-recurring R&D collaboration project with an IBD partner at Aries Genetics in 2020. These decreases were offset in part by an increase in lab revenue service. The increase is primarily attributable to the inclusion of $400,000 of laboratory services subsequent to the transaction, including COVID testing services performed by the company's Curitis subsidiary. Operating expenses for the second quarter of 2020 were $7 million, compared with $7.7 million in the second quarter of 2020. Operating expenses for the first half of 2021 was $14 million, as compared to $12.3 million for the first half of 2020. Net loss for the second quarter of 2021 was $7.1 million, or 19 cents per share, compared with $7.5 million, or 49 cents per share, in the second quarter of 2020. The net loss for the first half of 2021 was $21.9 million, or 65 cents per share, as compared with the net loss of $11.4 million, or $1 per share, for the first half of 2020. Our cash position as of June 30, 2021, was $31.2 million. As a reminder, our cash position was bolstered this year as a result of a $25 million registered direct offer in February of 2021 at a strong price point and the warrant exercising exchange of $9.7 million in March of 2021. Our Q2 2021 cash burn was higher than the normal $5 to $6 million per quarter due to three items that all occur during the second quarter and are not expected to occur again until Q2 2022. Our annual DNO insurance renewal of approximately $800,000. Our annual debt interest payments to EIB of approximately $900,000. And 2020 staff bonuses of approximately $700,000 paid in Q2. Total shares outstanding as of today are approximately 38.3 million shares, and the fully diluted number of shares as of today would be 49.3 million shares. As Oliver mentioned in his prepared remarks, there are a number of near-term and long-term milestones that the company is working very diligently on achieving. On August 5th, we determined to cancel the reconvening of the adjourned portion of our annual meeting of stockholders for the consideration of Proposal 2. relating to the increase in the company's authorized shares of common stock. In order to provide the most strategic financial flexibility to the company, we filed $150 million S3 shelf registration this past Monday. This filing does not constitute any offer at this time, but the board and senior management option will continue to evaluate various alternatives for financing the future development and growth of option over the coming months and quarters. As previously mentioned in our first quarter earnings call, due to the ongoing challenges presented by COVID-19 pandemic, we will refrain from any specific revenue guidance today. However, we are excited by the recent development progress in both the Curitus Univero A30 RQ platform and ARIES genetics progress on multiple fronts in strategic partnering, as well as the commercial launch efforts of our service offerings, such as the ARIES ISS and ARIES UPA. We are actively capitalizing on our breakthroughs and are determined to continue our momentum through increased collaboration and partnership efforts. I would also like to note that it comes with bittersweet emotions that as of August 20th, 21, I'll be stepping down as Chief Financial Officer and Corporate Secretary of OpChain. I have a huge amount of respect for our leadership team, management, and all of our employees. I am confident in their ability to continue to apply the strategic focus the necessary support required and continue to drive shareholder value. With that, I'll turn the call back to Oliver.