Kim Golodetz - LHA Investor Relations Evan Jones - Chairman and Chief Executive Officer Tim Dec - Chief Financial Officer.

Analysts:.

Welcome to the OpGen Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded, August 8, 2017. I would now like to turn the conference over to Kim Golodetz.

Please go ahead ma’am..

Thank you, operator. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of OpGen, Inc.

I encourage you to review the Company's filings with the Securities and Exchange Commission including, without limitation, the Company's Forms 10-K and 10-Q, which 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, the rate of adoption of its products and services by hospitals and other healthcare providers, the success of its commercialization efforts, the successful completion of its new product development efforts, the effect on its business of existing and new regulatory requirements and other economic and competitive factors.

The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call, today, August 8, 2017. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

I would now like to turn the call over to Evan Jones, OpGen's Chairman and CEO.

Evan?.

Thank you, Kim, and thank you for joining us today. This afternoon, we will review our Q2 2017 financial results and provide an update on our business plans and progress towards achieving key operational objectives.

During the second quarter and in recent weeks, we achieved important milestones in the development of our Acuitas Rapid Test and the Acuitas Lighthouse Knowledgebase. We presented groundbreaking scientific data, highlighting the performance of our precision medicine offerings.

We strengthened our balance sheet through a public offering with $10 million of gross proceeds. We want to extend a welcome to our new stockholders and thank you to all of our stockholders for your support and confidence.

During the quarter, we took steps to reduce our cost structure with a goal of improving our overall efficiency and reducing our cash burn rate by approximately 25% to 30%.

These steps and the development progress we made during the quarter position us to achieve our goals in 2017 and beyond and to be a leader in the fight against drug-resistant infections.

In the second quarter, we completed design of our new Rapid Test for Complicated Urinary Tract Infections, or CUTI and the associated Acuitas Lighthouse Knowledgebase for predicting antibiotic susceptibility using resistance gene test results.

We are completing development and initial verification activities with a goal of having test kits for clinical evaluation in third-party sites during the fourth quarter. This program is proceeding close to schedule and I will now provide an update on several key program areas.

In June, we entered into a global supply agreement to use Thermo Fisher Scientific's Technology to support the commercialization of our Rapid molecular products and Informatic system.

OpGen will combine Thermo Fisher's real-time PCR solutions with its Genomic Analysis and Bioinformatics Technology to help healthcare providers rapidly and accurately identify bacterial infections using antibiotic-resistant gene profile to aid antibiotic management decision-making.

Under the terms of the agreement, OpGen will commercialize Acuitas Rapid Test for pathogen IV and resistance gene on Thermo Fisher's new QuantStudio 5 mid-throughput real-time PCR system. OpGen will distribute the QuantStudio 5 to clinical labs along with Acuitas Rapid Tests.

Labs will interpret results using customized analysis software and OpGen's Cloud-based Acuitas Lighthouse Knowledgebase to match genomic analysis data with antibiotic susceptibility information to identify microbial information in individual patients.

Thermo Fisher's market-leading position in PCR and its global installed base of thousands of instruments makes them an ideal partner for our Acuitas Rapid Test. The New Acuitas CUTI Test identifies five key pathogens along with critical information regarding the level of each pathogen.

The test also detects 47 antibiotic-resistance genes that can be used with the Acuitas Lighthouse to assess antibiotic susceptibility. The lab test and Acuitas Lighthouse Knowledgebase base assessment can be completed in under three hours. For comparison, traditional methods take one to two days to provide similar results.

At the ECCMID and ASM Micro Meetings this spring, we provided initial performance results highlighting the accuracy of using gene profiles and our Lighthouse Knowledgebase algorithms for predicting antibiotic resistance. Having compared PCR results for 126 families of resistance genes with phenotypic AST across 2,000 E.

coli and 1,500 klebsiella pneumoniae clinical isolates, we demonstrated a 67% to 96% accuracy for predicting resistance of 25 different antibiotics. As we move closer to commercialization, accuracy for these two top CUTI pathogens has further improved and is now in the 85% to 95% range.

During the third quarter, we are completing a large performance verification on blinded clinical isolates to further assess test performance before we go into clinical evaluations in the field.

This performance verification of our Acuitas Lighthouse prediction algorithms will be an important part of our publication strategy for the Acuitas Lighthouse Knowledgebase and our new Rapid Test.

These encouraging results are the culmination of years of investment to realize the power of molecular technology to help improve antibiotic selection decision-making for patients with acute infections.

As part of this effort, we developed our genomics discovery engine, our Acuitas Lighthouse Infrastructure, and we are now in the final stages of manufacturing the first Acuitas Rapid Test. Development of the Acuitas Lighthouse Knowledgebase and data warehouse, compliant web portals and the initial antibiotic analytics engine are complete.

Development of our first genotype phenotype predictive algorithm is also complete. These algorithms are based on testing of 7,000 clinical isolates from the Merck's SMART Surveillance network and clinical collaborators and are part of the 11,000 isolates currently the Acuitas Lighthouse Knowledgebase.

Initial performance confirmation is complete for the top CUTI pathogens. The design and development phase for the initial RUO test is expected to be complete in the third quarter and as noted earlier, we anticipate beginning clinical performance evaluations in the fourth quarter.

This effort will expand to include early access customer evaluations in the fourth quarter and initial commercialization of the CUTI Rapid Test in the first half of 2018. Following the RUO launch, we will work to gain CE Mark approval and to complete clinical trials for FDA approval.

The second Acuitas Rapid Test we envision developing is for acute lower respiratory infections. The U.S. market for these two tests in hospitals with 500 or more beds is estimated to be approximately $500 million annually. This segment is part of the larger $2 billion Rapid Testing market opportunity we are addressing with our new technology.

These OpGen branded tests are anticipated to be important growth drivers for the company in coming years. A second component of our strategy is to partner our technology and capabilities with at least one established rapid IVD test market participant to provide additional channel access.

This is an exciting time to be at the company as we work to bring our pioneering new technology to market. I will now turn the call over to Tim Dec, our Chief Financial Officer, who will provide a brief summary of our second quarter results.

Tim?.

Thank you, Evan. This afternoon, I will touch on our second quarter financial results and summarize our second quarter 2017 performance. Total revenue for the second quarter of 2017 was $700,000, compared with $1.2 million for the second quarter of 2016 and $800,000 for the first quarter of 2017.

This decrease was anticipated and highlighted on previous calls, due to the phase out of our OpGen's legacy whole genome mapping products in late 2016.

The reduction from the discontinuance of our legacy whole genome mapping products was approximately $300,000 and the remaining $200,000 decrease was due to decreased sales of our FISH based rapid pathogen IV products. Total operating expenses for the second quarter of 2017 were $4.9 million, compared with $6.2 million for the second quarter of 2016.

The decrease was primarily due to the following items, research and development expense of $1.8 million in the second quarter of 2017, compared with $2.3 million in the second quarter of 2016. The decrease was attributable to expenses associated with the QuickFISH automation project.

General and administrative expenses of $1.8 million in the second quarter of 2017 was flat with $1.8 million in the second quarter of 2016. Sales and marketing expenses of $900,000 in the second quarter of 2017, compared to $1.6 million in the second quarter of 2016.

The decrease was due to reduced cost associated with our sales and marketing team and the completion of the Intermountain Healthcare Retrospective Study in 2016. The company reported a net loss of $4.2 million for the second quarter of 2017, compared with a net loss of $5 million for the second quarter of 2016.

The net loss attributable to common stockholders for the second quarter of 2016 was $4.2 million or $0.15 per share, compared with a net loss attributable to common stockholders for the second quarter of 2016 of $5.4 million or $0.37 per share.

Total revenue for the six months ended June 30, 2017 was $1.5 million, compared with $2.3 million for the six months ended June 30, 2016.

The decrease was due to a reduction in the sale of our FISH-based Rapid Pathogen IV products relative to the prior year, a $300,000 reduction in the discontinued whole genome mapping products and services, and reduction in laboratory services of approximately $100,000.

Total operating expenses for the six months ended June 30, 2017 were $10.6 million, as compared to $11.8 million in the same period of 2016. The decrease was due to research and development cost of $3.9 million, as compared to $4.3 million. The decrease was primarily due to the reduced expenses associated with the QuickFISH automation project.

General and administrative expenses of $3.7 million, as compared to $3.3 million due to increased legal and public company costs. Sales and marketing cost of $3 million, as compared to - excuse me, sales and marketing cost of $2 million, as compared to $3 million.

The decrease was due to lower cost associated with our sales and marketing team and again, the completion of the Intermountain Healthcare Retrospective Study. Net loss was $9.2 million for the six months ended June 30, 2017, as compared to a net loss of 9.6 million in the same period last year.

The net loss attributable to common stockholders was $9.2 million for the six months ended June 30 for $0.34 per share, compared with a net loss per common stockholders of $9.9 million or $0.74 per share. Turning to the balance sheet, the company had cash and cash equivalents of $200,000 as of June 30, 2017.

As Evan mentioned, last month we closed the public offering raising gross proceeds of approximately $10 million with net proceeds of $8.7 million. Each unit sold for $0.40 and includes one share of common stock and one warrant to purchase one share of common stock at an exercise price of 42.5 cents per share.

The common warrants are exercisable immediately and have a five-year term from the date of issuance. Proceeds from the warrants, if exercised, could be as much as $10.6 million and certain members of the management team invested in this transaction.

In early June of this year, we commenced the strategic realignment of our operations to improve efficiency and reduce our cost structure.

We expect the decrease in the operating expenses of approximately 25% to 30% in the second half of 2017, as compared to the first half of the year, which is a reduction of $4 million to $5 million on an annualized basis, which will result in a marketed improvement in our cash burn going forward.

The overall plan anticipates that we will consolidate operations for FDA cleared and CE Marked products in Gaithersburg, Maryland, reduce the size of our commercial organization while we work to complete the development of our Acuitas Rapid Test and Acuitas Lighthouse Knowledgebase products and services.

During the quarter, we saw our net loss reduce by more than $800,000 from the same quarter of 2016. You will continue to see our quarterly net loss and cash burn reduce as we work through the balance of 2017.

We have made a great deal of progress this year and are – and we are optimistic for continued improvement in the second half of the year and beyond. As mentioned during our previous calls, we are very mindful of our expenses and cash burn.

However, we will judiciously invest in our future growth through targeted research and development critical to our success. With that, I will now turn the call back over to Evan..

Thank you, Tim. We believe that OpGen is well-positioned to become a global leader in using genomic analysis technology and informatics to help combat and manage drug-resistant infections globally.

In the time that remains, I will touch on several of the key accomplishments from the second quarter and highlight several anticipated corporate milestones. In July, we announced that the New York State Department of Health has approved the Acuitas MDRO Gene Test for use by physicians and healthcare providers in the state.

The approval of OpGen's Clear Laboratory to perform testing in New York State includes approval for the complete OpGen MDRO testing workflow including MDRO gene testing on perianal swabs and clinical isolates.

The New York State Clinical Lab Evaluation Program conducts rigorous evaluations on new clinical lab tests and we are honored to receive this important approval for our technology.

With this approval, we can now make our testing services available to New York State healthcare providers and looking forward, we believe that this approval will help support the use of Acuitas Lighthouse Knowledgebase in New York in the future.

Earlier in the year, we indicated our plans to select a world-class instrument and chemistry partner to support the development of our Acuitas Rapid Test. The supply partnership with Thermo Fisher that I described earlier, represents an important step forward for OpGen both from a technical and commercial perspective.

In addition to the QuantStudio 5, Thermo Fisher has a large installed base of PCR instruments and its leading global presence to help accelerate the commercialization of our Rapid Testing products.

We are working to establish additional distribution and partnering relationships to support commercialization of the Acuitas Rapid Test and Acuitas Lighthouse Knowledgebase in international markets. With the first OpGen branded test coming to market completing a third-party IVD and Acuitas Lighthouse strategic partnership is now a priority.

Our partner of choice will have a large installed base of Rapid multiplex testing devices and interest in combining our test content in Acuitas Lighthouse informatics with their product offerings. Our team has been working to win several outstanding federal contracts from government agencies who are working to combat drug-resistant infections.

We anticipate receiving initial feedbacks on these efforts in the coming months. 2017 will be a year of significant accomplishment. We are on track with the development of our Acuitas brand of genomic-based Rapid diagnostics in parallel with building our Acuitas Lighthouse Knowledgebase that will help guide appropriate antibiotic decision-making.

All of us at OpGen are committed to building a world-class company that will help play an important role in the first against drug-resistant infections. We've made significant investments over the last several years to accomplish this vision and in 2017, the results of these investments should begin to bear fruit.

We appreciate your support and we look forward to realizing our potential as a company in 2017 and beyond. Thank you for your time this afternoon and we are now ready for questions..

[Operator Instructions] Our first question is from Yi Chen with H.C. Wainwright. Please go ahead with your question..

Hi there. This is Mitchell on for Yi. Thank you for taking our questions.

My first question is, how will the recent New York approval of the Acuitas MDRO gene test impact your revenue and marketing expenses? And how are you pricing that?.

Thanks for joining the call, Mitch. I think it's fair to say that in recent periods, we’ve deemphasized these screening solutions that we developed initially at the company here. They are a potential source of revenue, but we don't want to get out ahead of things in terms of prospects in New York State.

Where we do see this could be very important is in terms of the approval support infrastructure to commercialize our Acuitas Lighthouse, alongside with our new tests. So, in some ways you can think of that this is providing the infrastructure for our new testing product going forward..

Okay. That makes sense. Thank you.

And overall, how can we think about gross margins going forward?.

Going forward from gross margin, you should expect that to be really in a range you've seen historically, really in the 40% to 60% range..

Okay. Thank you so much for your time..

Sure, thanks..

[Operator Instructions] There are no further questions at this time in queue. You may proceed with your presentation or any closing remarks..

Thank you. I want to thank all of you for joining this afternoon and I want to mention that we'll be presenting at the Rodman & Renshaw Conference being held in September on the 11th and 12th. So, hopefully, we'll have a chance to see you there and we also look forward to updating you on our next conference call. Thank you very much..

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines..