Welcome to the OpGen Second Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, they were hold ex-U.S. Q&A session. As a reminder, this conference is being recorded today, August 7, 2019. 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 company's most recent 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 complete the demonstration project with New York State; successfully, timely and cost effectively seek and obtain regulatory clearance for and commercialize its product and service offerings; the rate of adoption of its products and services by hospitals and other healthcare providers; 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 7, 2019. 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 the law.

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

Thank you, operator. And thank you, everyone, for joining us this afternoon. On today's call, we will review our second quarter 2019 financial results, provide an update on the business and discuss recent progress towards key objectives for the year.

Our discussion will include updates on OpGen's product pipeline, our completed and planned FDA submissions and our commercialization initiatives, including the New York State infectious disease digital health initiative. We had a solid first half of the year.

Total revenue for the 6-month period ended June 30 increased 24% to $2 million compared to $1.6 million in 2018. During the second quarter, OpGen continued to execute on our highest priority to bring our novel Acuitas AMR Gene Panel and Acuitas Lighthouse Software to market.

In May, we filed a 510(k) submission seeking FDA clearance of the Acuitas AMR Gene Panel product for the detection of antimicrobial resistance genes in bacterial isolates. We are proud of the robust application, and we are pleased with how the review process is progressing. Our ongoing dialogue with the agency has been encouraging.

We received our first formal feedback from the agency in July, and we are working to address their requests for additional information. We anticipate providing our first responses to the agency through the interactive review process in early August, and we will continue to provide technical data in support of our submission through the early fall.

Assuming we successfully work to this time line and the FDA supports our responses, we would anticipate receiving clearance for the Acuitas AMR Gene Panel for use with bacterial isolates in the fourth quarter. Concurrently, we are diligently pursuing 2 follow-on FDA submissions for the Acuitas AMR Gene Panel Urine for the Acuitas Lighthouse Software.

The urine indication and the accompanying software will provide for pathogen identification and antibiotic resistance detection and prediction direct from urine patients versus -- direct from patients suspected of urinary tract infections. In July, we initiated testing to support the FDA submission for the AMR Gene Panel Urine FDA submission.

We have 8 clinical sites under contract, and we expect to complete the majority of the third-party clinical trial work during the mid- to late fall. We plan to submit the de novo 510(k) submission late in the fourth quarter or in the first quarter of 2020 depending on the pacing of our clinical trials and subsequent DNA sequencing work.

In addition to the progress made with our FDA submissions, we are working to strengthen OpGen's presence in the marketplace and to establish the company as a leader in precision medicine through peer-reviewed scientific data presentations and publications. In June, we had a strong presence at the ASM Microbe Conference, the industry's premier event.

Data from the clinical verification study for the Acuitas AMR Gene Panel test for urine was presented by Geisinger. In this study, over 500 remnant urine specimens collected and tested at Beth Israel Deaconess Medical Center, Geisinger and Intermountain Healthcare were analyzed.

The data demonstrated that the Acuitas AMR Gene Panel had greater than 90% agreement with quantitative culture for semiquantitative pathogen detection and that the Acuitas Lighthouse phenotype predictions had greater than 90% average total agreement with antibiotic susceptibility testing for E.

coli and klebsiella pneumoniae, the most common pathogens that cause urinary tract infections.

These data support our view that an Acuitas product offering that provides test results in under 3 hours versus the 2 days with the current standard of care has the potential to fundamentally transform patient care for patients with urinary tract infections.

Investigators from Intermountain Healthcare presented data from a collaborative study with Beth Israel Deaconess Medical Center and OpGen, demonstrating the potential of the Acuitas AMR Gene Panel and the Acuitas Lighthouse Software to be used as a rapid diagnostic to guide early empiric antibiotic use in patients with UTI from antibiotic-resistant bacteria.

And finally, an analysis comparing the AMR Gene Panel with whole genome sequencing, or WGS, for carbapenemas-producing organism outbreak investigations was presented by the New York State Department of Health Wadsworth laboratory.

Acuitas data was concordant to the WGS reference method but with a faster turnaround time, suggesting that the Acuitas AMR Gene Panel and the Acuitas Lighthouse Software can be used as frontline tools in clinical settings for transmission and outbreak detection.

This is one of the key capabilities that supports the use of the OpGen suite of Acuitas products in the New York State digital health initiative.

In the fall of 2018, we announced our collaboration with the New York State Department of Health and Merck's ILUM Health Solutions to develop an infectious disease digital health and precision medicine platform that connects healthcare institutions throughout the state to the Department of Health.

The ultimate goal of this collaboration is to improve patient outcomes by establishing state-wide surveillance for multidrug-resistant pathogens and helping to control and manage antimicrobial resistance in acute care patients. The project continues to advance well, and we achieved our second project milestone at the end of the second quarter.

The milestone included development of customized software to support the integration of the Acuitas Lighthouse Software with the Merck ILÚM software and deployment of the Acuitas AMR Gene Panel systems in 2 of the 3 anticipated health systems.

In parallel, the Wadsworth Center has continued to achieve their project milestones with the validation of the Acuitas AMR Gene Panel RUO and received a conditional New York State Department of Health Clinical Laboratory Evaluation Program, or CLEP, approval by the Wadsworth Center, New York State DOH.

Conditional approval means that Wadsworth is authorized to use the Acuitas test for testing while the review of the validation package is finalized by the DOH regulatory group. This is considered an important designation, which comes from an extensive evaluation of our product by the Wadsworth Center.

It is another step, which supports the accuracy and reliability of the Acuitas AMR Gene Panel test.

With regard to the New York State initiative, the next step will be for the health system laboratories to complete their own validations following the Wadsworth protocols, and after approval is received, those laboratories may begin prospective testing. OpGen has now received $1 million in program funding from the initiative this year.

We anticipate receiving the remaining milestone payments over the next 3 quarters. We believe there is a significant opportunity to continue the project in the future years, and we have begun initial discussions regarding potential next steps after a successful pilot phase.

With that, I'll now turn the call over to Tim Dec, our Chief Financial Officer, who will discuss our financial results.

Tim?.

Thank you, Evan. On today's call, I will touch on the highlights of our second quarter and first half of 2019 financial results. Revenue for the second quarter of 2019 was $1 million compared with $800,000 for the second quarter of 2018, which represents a 28% increase quarter-over-quarter.

Operating expenses for the second quarter of 2019 were $3.6 million compared with $4 million in the second quarter of 2018. The slight decrease in operating expense was due to lower R&D costs and G&A.

The company reported a net loss attributable to common stockholders for the second quarter of 2019 of $2.6 million or $0.15 per share compared to a net loss attributable to common stockholders of $3.3 million or $0.57 per share for the second quarter of 2018.

Total revenue for the first half of 2019 was $2 million compared with $1.6 million, a 20% increase over the same period of 2018. Operating expenses were $8.4 million compared with $7.9 million for the first half of 2018.

This increase was primarily due to the clinical trial work associated with the development of our Acuitas AMR Gene Panel for use with bacterial isolates. The net loss for the first half of 2019 was $6.4 million or $0.48 per share compared to a net loss of $6.4 million or $1.29 per share for the first half of 2018. Turning to our balance sheet.

We had cash and cash equivalents of $3.1 million at the end of June. While we are not providing guidance on future revenue growth, we anticipate that upon achieving FDA clearance, we will see continued revenue growth in our top line from our Acuitas AMR Gene Panel beginning in early 2020.

In terms of the New York State initiative, we have achieved the second project milestone and have recognized a total of $1 million of the $1.6 million contract.

As Evan just mentioned, we believe that there is a significant opportunity for OpGen to get involved in a larger capacity with the initiative as we move past the development stage of the contract. As we prepare for our next FDA submission and completion of our urine clinical trials in Q4 of this year, we expect our R&D spend to increase.

In total, we expect to spend roughly $1.2 million on clinical trial for the urine submission, and we expect the R&D to be spent starting in late Q3 and throughout Q4 of this year. In terms of our commercialization plans, we are looking to strategically add to our sales, manufacturing and assembling teams as we finalize our go-to-market strategy.

These additions will be made at the proper time. We are actively considering ways to strengthen our balance sheet and cash position by assessing various strategic options. We are actively assessing partnerships, business combinations and M&A transactions as well as other financial approaches that will extend our cash runway.

And finally, it is imperative for OpGen to retain our Nasdaq listing and for our shares to continue to trade on a major stock exchange in order to maximize our strategic discussions. Our continued listing on Nasdaq is subject to the company regaining compliance with the minimum stock price of $1 on or before November 4 of this year.

Executing a reverse stock split will ensure that we meet the requirements and able us to move forward with our strategic priorities. Overall, we are committed to the critical objectives we laid out at the beginning of the year, and we'll continue to do everything in our power to maximize shareholder value. With that, I'll turn the call back to Evan..

obtaining FDA clearance to market the AMR Gene Panel for bacterial isolates; recognizing program milestones for the demonstration project phase of the New York State infectious disease digital health Initiative as we complete software development and validations to support prospective deployment studies in the second half of 2019; completing clinical studies and filing de novo FDA submissions with the FDA for the Acuitas AMR Gene Panel Urine and Acuitas Lighthouse Software for rapid testing of urine specimens and prediction of antibiotic resistance to frontline antibiotics; continuing to install Acuitas AMR Gene Panel systems in support of research-use-only sales and full launch following first FDA clearance; expanding commercial activities to successfully launch the Acuitas product family following FDA clearance and commercializing rapid testing products and software in South America, using Colombia as a springboard, where we have already closed our first customer accounts.

I'm pleased with the momentum we have generated in the first half of the year, and I'm excited about the progress to come. We appreciate your support, and thank you for your time this afternoon. We are now ready for questions.

Operator?.

Thank you. [Operator Instructions] Your first question comes from Yi Chen of H.C. Wainwright. Your line is now open..

This is [Faizan] on for Yi Chen.

The first question I had was when do you plan to submit the next 510(k) application for the panel for urine samples?.

Good afternoon. We mentioned in our remarks and the press release that we would file the FDA submission for the AMR Gene Panel Urine in the fourth quarter or the first quarter of 2020..

Okay. Thank you.Sorry about that. And then just a follow-up.

When -- what can we expect in terms of revenue potential in 2020 for the panel for bacterial isolates if it obtains approval in 2019?.

A very important question. We've tried to stay away from giving precise revenue guidance. We can say that our goals are to convert the existing accounts, to continue our success in New York State and then to expand the customer base that, frankly, could be the majority of large healthcare systems in the United States.

So we'll work to achieve that goal. It won't all occur in year 1, but we're certainly optimistic about the potential growth outlook..

Yes. It's just a little bit early to provide guidance at this point, but as we get further along our journey. We'll be doing that..

Great. Thank you. That's all for me..

Thank you so much. And your next question comes from Nathan Weinstein of Aegis Capital. Your line is now open. .

Hey, Evan and Tim, just thinking about how you might gear up for being a commercial-stage organization? And with regards to the Acuitas products and potentially adding sales headcount, have you thought about how many more sales people you might need to add? I think you said you're at 5 right now..

Nathan, thanks for calling in and joining the call. So the 5 that we have includes the full gamut of our commercial organization. It's really a pretty small team when you think about the work that needs to be done.

And the expansion will include both some senior leadership talent to help guide the commercial ramp, but then down in the field both technical support, but additionally, sales coverage, as you mentioned, which likely would be in the 5 to 6 person sizing initially, and then growing from there as revenues dictate..

Okay. And then just thinking in terms of geographies, if you were to enter into potential partnerships, do you foresee that, that could be with a U.S.

partner and/or could it be multiple partners if you look to bring your products abroad?.

There are definitely opportunities to partner internationally. Having said that, the U.S. remains an important focus for us, and we see the opportunity being potentially split into different segments. For instance, you have the public health market, which would be laboratories similar to the Wadsworth labs or the CDC.

There are, I'll just say, the 50 states and more. And then there's the hospital laboratory segment, and the last segment that is pretty attractive is in terms of physicians' offices and urology, which is a fee-for-service opportunity..

Okay.

And then just another one in terms of, I guess, the top-down view of the market from you guys, when you started down this path to develop the Acuitas suite of products and you saw this niche, when you look at the market today and including new technologies that may have come on in the meantime, do you still see the same niche and potential larger market opportunity for Acuitas?.

I would say we see a larger opportunity. Some of you may have seen the coverage in the New York Times, I think it was about a month ago, talking about how the urinary tract as an indication has become one of the most serious ones in the healthcare arena because of the rise of resistance there.

We had seen that in some of our early work, which led us to pick UTI as our first indication. But to be fair, we had no idea that it would explode to the kind of major clinical issue that exists today.

So realistically, the 1 million patients we see for high-acuity UTI testing could potentially expand well beyond that when you think about testing more of the 10 million UTIs a year to address this rising resistance..

And just one final one for me. Obviously, these products that we've discussed have been focused on antibacterial, but antifungal is an interesting area as well and you'd mentioned it in the past. You talked about Candida auris as a public health threat.

Is the antifungal testing and susceptibility testing with regards to those pathogens something that you guys could expand into in the future?.

It definitely could be. We already have a test for yeast infection, for instance, in our FISH product line, and we've begun to see some increase in demand there during 2019. We don't test today for Candida auris, which is a resistant fungi, but we could potentially in the future..

Thanks for taking my question. .

Thank you. And your next question comes from Ben Haynor of Alliance Global. Your line is now open. .

Good afternoon guys. Thanks for taking my questions. First for me, you mentioned early in the -- earlier in the prepared remarks about kind of going back and forth into early fall with the FDA.

This might be a little bit pedantic, but would you say fall, are you referring to kind of meteorological fall starting in September or astronomical fall starting on the fall Equinox? I'm not going to be consulting a Zodiac soothsayer or anything, I'm just curious on the timing there..

I love that question. I'm not sure we want to parse it that carefully for you. What I will say is that we were encouraged by the feedback from the FDA. We don't believe that there are any new studies that are required.

We are recutting the data for the agency, polishing some of the data that we want to resubmit, and as soon as we get that in to the agency, we will. There's a -- the agency has been very forward-thinking and cooperative in that they have established an interactive review process for us. So we've agreed to provide them the information on ongoing basis.

And I mentioned that in the next days, we'll be making our first response to the agency. So their review will be ongoing. And then as soon as we have finished submitting all the data, that'll be followed by the -- what you could think of as the official 510(k) filing.

But all of the data we anticipate will have been previously reviewed by the agency, and that then could move along pretty quickly towards the labeling phase..

Okay. That's very helpful. So as you see it, the discussions that you've had so far, it sounds like the FDA is forward-thinking. You don't really see any showstoppers out there.

Is that the correct way to understand your comments?.

It's -- we're going to be careful because we're not inside the thinking of the agency, but we've been in conversation with them, very cooperative discussions. And they would, I think -- I believe, like to see our product get to market. And we, on the other hand, have to complete the regulatory work to get there, and we're doing that.

We know it needs to be done. The questions from the agency are very detailed but understandable and straightforward and ones that we can address..

Okay. That makes sense. And then I guess lastly for me, knowing the capital needs that you have, and you've had the mentions of potential partnerships, strategic alignments, combinations, et cetera, I think you mentioned those in the past as well.

Is there anything that you have on your plate that's advancing at this moment that gives you some sense that something could come sooner rather than later? Or what's a good way to think about that? If -- any color there would be helpful..

So I think the best way to answer that is we spend quite a bit of time, obviously, on our prepared remarks and put them together in such a way that we would lead you to certain thoughts. But I think the best way I can answer that is, we're very active, and we will continue to be active here in the short term..

There are no currently questions at this time. I will now turn the call back to Mr. Jones for closing remarks..

Thank you very much. And thank you, everyone, for joining this afternoon. I did want to mention that as part of our beginning to step up the commercial activity around our products, we've completed a rebranding of the company. If you take a look at the company's website, www.opgen.com, you'll see some of the new look and feel. We're proud of it.

We've gotten good feedback from customers. And we look forward to updating you on further progress as things progress. Thank you very much..

Thank you..

Thank you so much. This concludes today's conference call. You may now disconnect..