Evan Jones - Chairman, CEO Kim Golodetz - SVP, Principal Tim Dec - CFO.
Yi Chen - H.C. Wainwright.
Welcome to the OpGen Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded August 2nd, 2018. I would now like to turn the call conference over to Kim Golodetz..
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.
I encourage you to review OpGen's filings with the Securities and Exchange Commission, including, without limitation, the companies 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, its ability to successfully, timely and cost-effectively develop, seek and obtain regulatory clearance for and commercialize its products and services offerings; the rate of adoption of its products and services by hospitals and other health care providers; the success of its commercialization 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 2nd, 2018. 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.
I would now like to turn the call over to Evan Jones, OpGen's Chairman and CEO..
This afternoon, we will review our 2018 second quarter financial results and provide an update on our business plans and discuss progress towards achieving key objectives for the remaining months of 2018. In the second quarter, we achieved our financial and operational [Technical Difficulty] for the Company.
Revenue increased 12% to $800,000 and net loss was 21% to $3.3 million. Results for the six months of the year also progressed with revenue increasing 11% relative to the prior year to $1.6 million and net loss decreasing 31% from the prior year to $6.4 million.
We continued to advance the development of our lead rapid test, the Acuitas AMR Gene Panel u5.47. We reached agreement with the Food and Drug Administration, or the FDA, regarding the regulatory pathways and clinical trial protocols for clearance of the new AMR gene panel tests and the Acuitas Lighthouse Software.
Our goal is to complete our first clinical trial for bacterial isolates and file an in vitro diagnostic IVD 510(k) submission Acuitas AMR gene panel u5.47 during the fourth quarter of 2018. Subsequent 510(k) submissions are expected to follow during the first quarter of 2019.
We are encouraged by the introduction of the Acuitas AMR gene panel u5.47 Research Use Only earlier this year. At the ASM Microbe Conference in June, we presented positive data from our ongoing clinical verification studies highlighting the performance of the Acuitas AMR gene panel [Technical Difficulty].
Data presented in conjunction with Intermountain Healthcare and Beth Israel Deaconess Medical Center and 229 remnant urine samples were presented along with analysis of test data by the Acuitas Lighthouse Software RUO to predict antibiotic resistance.
These predictions were then compared with conventional antibody susceptibility testing for the four Gram-negative pathogens featured in the presentation, the accuracy of predicting resistance across 12 antibiotics ranged from 91% to 100%.
This followed April's European Congress of Clinical Microbiology and Infectious Diseases where we presented positive results with the Acuitas Lighthouse Software to predict phenotypic resistance for 35 isolates from the CDC and FDA Antibiotic Resistance Isolate Bank.
Importantly, we were able to reduce the time to results to two hours compared to three hours previously with our test and current microbiology standards that require up to two days.
At ASM Microbe, we also presented results from our prospective clinical trial evaluating the impact of using our QuickFISH rapid diagnostic product for the application and treatment of bacteremia and fungemia in hospital intensive care units in Colombia.
The study showed the survival rate for patients tested with the QuickFISH test the 74% compared with just 47% for patients receiving the current standard-of-care. As previously announced, we formed a subsidiary in Colombia to market our products there and throughout the region.
We are awaiting approval from the Colombian regulatory authority for commercialization of the QuickFISH test, after which we anticipate beginning commercial distribution in Colombia later this fall. When cleared, we ultimately intend to market our Acuitas AMR gene panel in the region as well.
Leveraging our strong technical foundation and scientific results, we are starting to see nice commercial momentum for our products. In August, one of our new accounts is beginning testing with the AMR gene panel as part of a pharmaceutical clinical trial.
We are also in the final stages of contract negations for a large commercial contract and multiple [Technical Difficulty] testing opportunities. Revenue from these contracts will begin in the fourth quarter with largest deployment in 2019. I will now turn the call over to Tim Dec, our Chief Financial Officer, who will discuss our financial results..
This afternoon, I'll touch on some of the highlights of our second quarter financial results and summarize our year-to-date performance. Total revenue for the second quarter of 2018 was approximately $800,000, up 12% from $700,000 for the second quarter of 2017.
Product sales continued to report in the $600,000 to $700,000 range for the past six quarters. Collaboration revenue of $150,000 for the second quarter of 2018 was attributable to the CDC contract.
We expect revenue growth to derive from the sale of our RUO Acuitas AMR gene panel u5.47 to large hospitals and clinical research organizations as we move into the second half of 2018 and beyond. Total operating expenses for the second quarter of 2018 were approximately $4 million, down from the $4.5 million from a year ago for a reduction of 17%.
The decrease was due to the following items.
R&D expenses were $1.3 million [Technical Difficulty] $1.8 million, G&A expenses were flat over the prior year at $1.8 million and sales and marketing expenses of approximately $400,000 compared with $900,000 from last year, reflecting reduced costs associated with changes we made to our sales and marketing team last summer.
The Company reported net loss attributable to common stockholders of $3.3 million in the second quarter of 2018 or $0.57 per share. This represents a 21% improvement from the net loss attributable to common stockholders of $4.2 million or $3.73 per share for the second quarter of 2017.
Total revenue for the first six months of 2018 was $1.6 million compared with $1.5 million for the first six months of 2017, an 11% increase. Total operating expenses for the first half of 2018 were $7.9 million, down from $10.6 million for the prior year period. The decrease was primarily due to the following items.
Cost of products sold and services were essentially flat compared with the prior year, R&D expenses were $2.5 million, down from $3.9 million, general and administrative expenses were $3.6 million, down slightly from $3.7 million and sales and marketing expenses approximately $800,000 compared to $2 million for the first half of 2017.
The net loss for the first six months of 2018 was $6.4 million or $1.29 per share, down from a net loss for the first six months of 2017 of $9.2 million or $8.45 per share. Turning to our balance sheet, we had cash and cash equivalents of $7.4 million as of June 30th, 2018 compared with $1.8 million as of December 31st, 2017.
We are currently evaluating our strategic options to strengthen the balance sheet over the coming quarters. As discussed during our first few calls, in June of 2017 we began implementing a strategic realignment of our operations to reduce our cost structure and lower our use of cash.
Our goal is to reduce operating expenses by 25% to 30% in the second half of 2017 and maintain that cost structure going forward. We have achieved this goal with a 20% reduction for the first half of 2018 compared with the first half of 2017.
These actions have had a positive impact on our cash burn, reducing our cash burn from roughly $4.5 million per quarter in 2016 and the first half of 2017 to roughly $2.8 million per quarter for the last year. We continue to look for ways to incrementally manage our cash burn throughout the balance of 2018.
Given our clinical trial work and FDA submissions we expect our quarterly burn to continue to be in the $2.6 million to $2.8 million range. We are optimistic that the investments we have made in OpGen's future growth along with continued focus of funds will support improved shareholder values through the remainder of the year.
With that, I'll turn the call back to Evan..
We believe that OpGen is well positioned to become a global leader in using genomic analysis and informatics to help combat drug-resistant infections. In the time that remains, I will expand on our regulatory and clinical plan for the Acuitas AMR gene panel u5.47 and highlight several anticipated corporate milestones.
Through the FDA Q-sub process, we've clarified the regulatory pathways and plans for the Acuitas AMR gene panel and the Lighthouse Software. While the final details will be subject to ongoing work towards our final regulatory submissions and the outcome of the clearance process, here are our key highlights and expectations.
During the second quarter and through July, we completed extensive work to prepare for the upcoming clinical trials. We have incorporated changes to the DNA test to improve both ease-of-use and robustness as well as to address points raised by the FDA.
New investigational use, or IUO, kits and software are now ready to be deployed in our clinical trials. Internal analytical validation testing is underway. Outside clinical trial sites are under contract and we anticipate sample testing to begin during August. Our first FDA submission will be a class two 510(k) for the AMR gene panel u5.47 isolates.
The indication will be for in vitro diagnostics and infection control based on identification of bacterial nucleic acids and gene sequences associated with antimicrobial resistance in pure bacterial colonies and detection of 47 gene sequences associated with antimicrobial resistance to nine antibiotic classes.
We anticipate the sample type will be bacterial isolates from any primary clinical sample -- blood, urine, lung, wounds and other sample types. Clinical trial is based on testing of approximately 900 stock isolates provided to OpGen from the Merck SMART Surveillance Study and at least 50 fresh isolates obtained at the clinical sites.
Testing will be completed in four sites. The testing is anticipated to take six to eight weeks with compilation of the 510(k) submission beginning in parallel. As noted previously, this is a highly technical and complex multiplex DNA testing submission. As an organization, we are committed to complete this FDA submission in the fourth quarter.
The second FDA submission is anticipated to be a de novo request for a class two 510(k) for the AMR gene panel urine.
The indication will be as an aid in the diagnosis of specific agents of urinary tract infections, or UTI, for patients at risk of complicated UTI with semi-quantitation of Escherichia Coli, Klebsiella Pneumoniae, Proteus Mirabilis, Pseudomonas Aeruginosa and Enterococcus Faecalis and 47 gene sequences associated with antimicrobial resistance to nine antibiotic classes.
The clinical trial will involve testing of approximately 1,500 fresh urine samples and approximately 300 contrived urine samples. Testing will involve six to eight sites and will begin in the fall as we wind down the isolate clinical trial.
The testing time line for this trial has more complexity, but we remain optimistic that the site testing can be completed in eight to 10 weeks to be followed by the FDA submission in the first quarter of 2019.
Following the FDA submission for the Acuitas Lighthouse Software, we do anticipate it to be a de novo request for a class [Technical Difficulty] 510(k).
The indication of relational data from the Acuitas AMR gene panel u5.47 assay using a series of predictive models and based on species identified to predict resistance for nine classes of antibiotics.
The clinical trial will be based on testing of 2000 globally and phenotypically representative stock isolates from the Merck's Surveillance Study and the 1500 urine samples and 300 contrived urine samples collected during the clinical study. The stock isolates have been identified and tested on a blinded basis.
The data will be unblinded and incorporated into the final submission for the fourth quarter. We believe Acuitas Lighthouse Software will be the first molecular produced software of its kind. With regards to the anticipated timing for FDA clearance, we will not be providing specific projections.
Broadly, the statute requires a substantive review and decision from the FDA for a class two 510(k) in 90 days. In practice, obtaining clearance can take 120 days or longer. De novo submissions are more complicated with clearance time lines in the five to six month time frame.
De novo submissions also have potential for further delay during the review process. We believe that [Technical Difficulty] to complete three separate FDA submissions will help mitigate these risks.
Based on these estimates, we anticipate a series of FDA clearances during the middle quarters of 2019 to support commercialization of the AMR gene panel tests and the Acuitas Lighthouse Software. [Technical Difficulty] the third quarter of 2018, we will decommission CLIA laboratory operations.
This initiative will help provide incremental resources in support of efforts to gain FDA clearance for our products. We have worked to establish initial customer base for RUO product offering and infection control applications and for pharmaceutical surveillance studies.
We remain on track [Technical Difficulty] to 20 institutions using the new RUO test for performing clinical research by year end. We currently have installations at six large health centers, CROs and public health laboratories; we anticipate five additional installations during the third quarter.
We achieved the development milestone in the CDC funded program for development of Smartphone based clinical decision support software with hospital testing underway in Colombia at three hospital systems.
This project is part of a broader collaboration with Merck's ILUM Health Solutions business unit in the area of clinical decision support for antibiotic decision-making. Our outreach and discussions to partner with larger in vitro diagnostic companies has been proceeding as planned. We will provide more detail when we have specifics to announce.
We expanded the OpGen clinic advisory board and medical affairs team with the addition Patricia Simner. Dr. Simner is a world respected expert in our field. She is an Associate Professor of Pathology, Director of Bacteriology and Parasitology at the Johns Hopkins Medical Institutions.
In summary, we're very proud of the continued progress we made during the quarter on all fronts -- research and development, commercial, operations and financial. Our years of hard work have put OpGen in a strong position and we are working to capitalize on the large opportunities in front of the Company.
We expect to advance the following business practice during the remainder of 2018 as OpGen transitions to the commercial phase for its molecular and [Technical Difficulty] business; derive revenue from the sale of the Acuitas AMR gene panel u5.47 RUO to large hospitals and CROs and public health laboratories; complete clinical verification studies and clinical trials and file a first 510(k) submission with the FDA in the fourth quarter of 2018 for the Acuitas AMR gene panel u5.47 isolates; enter into additional supply and cooperation agreements in support of the new Acuitas product family under development; complete the CDC contract for development and demonstration in Colombia; development of Smartphone based clinical decision support solutions for antimicrobial stewardship and infection control in low and middle income countries; continue to seek third-party funding for our development programs and maintain cost reductions and overall cash burn rate to extend the operating cash runway.
All of us at OpGen are proud of the work we've accomplished during 2018 and we see a tremendous opportunity in the coming months and into the future. We appreciate your support and thank you for your time this afternoon. We are now ready for questions..
[Operator Instructions] Your first question comes from the line of Yi Chen with H.C. Wainwright..
Just to clarify, what exactly as far as the data we expect see before the filing of the 510(k) registration for the Acuitas AMR gene panel and what additional data should we expect to see before the filing for Acuitas Lighthouse?.
The clinical verification studies that have been ongoing since last winter are nearing completion. We expect those to complete in the coming months. Those data will be both published and presented at scientific meetings leading into 2019. We also have a publication anticipated for our other patient work.
And then looking forward, data, or the data sets that I described to you as part of our FDA submissions, the isolates submission, the prospective urine study and then the pivotal unblinding of the test data for the Acuitas Lighthouse Software..
And once you obtain approval around mid-2019, do you intend to market both the panel and Lighthouse starting from the second half 2019?.
We're already starting to see uptake for the AMR gene panel for use in infection control and in the use of CROs and public health. Already we are marketing that for the approved indications. As soon as we get approval for the isolates 510(k), we'll be able to expand our indications and enter into a marketing phase.
And then as we gain approval for urine and then for the Lighthouse predictions we'll be able to further expand our marketing initiatives.
I just want to make it clear that in order for us to achieve our financial growth projections for 2019, the foundation that we are laying today and have been building among the customers is a way of enabling a positive step..
And finally, could you give us some additional color regarding the strategic option you're considering?.
I really don't feel it would be appropriate to get into much detail there, Yi, except to say we have been in discussions with companies in the in vitro diagnostic sector that you could think of as being good channel partners for us and when we have something ready for announcement, we will let you know..
[Operator Instructions]. And there are no further questions at this time. Please proceed with your presentation or any closing remarks..
We look forward to seeing you on our Q3 conference call in November and have a nice evening. 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 line..