Opgen Inc

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.

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?

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.