Welcome to the OpGen Fourth Quarter and Full Year 2020 Earnings Call and Business Update. At this time, all participants are in 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, March 25, 2021.

Before we begin, I would like to caution you that comments made during this conference call by management may contain forward-looking statements regarding the operations of and future results of OpGen, including its subsidiary Curetis and Ares 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 for 2020 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 from the company’s completed business combination with Curetis and 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 the at-the-market offering that we commenced in February 2020 as well as the proceeds from recent warrant exercises and financing such as the November 2020 pipe and February 2021 Registered Direct. Pursuit of FDA clearance for the Acuitas AMR Gene Panel for use with bacterial isolates and for our other products and services.

The rate of adoption for 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 this date of the live call, March 25, 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 Dec, CFO of OpGen. I would now like to turn the call over to Oliver Schacht for introductory remarks..

Thank you to everyone joining us on the call this afternoon. I would like to begin by thanking Evan Jones, former CEO and currently a Director of OpGen for his years of dedication to this company and for making the strategic business combination of OpGen and Curetis possible in 2020.

Evan has decided for purely personal reasons not to seek reelection to the Board of Directors at our upcoming stockholder meeting in June. We thank him for his tremendous commitment and wish him continued success in his next endeavors.

As you’re all aware, the global pandemic continues to evolve, and while there is tremendous progress being made on the vaccination front, the residual effects on part of our business are still present.

Despite this, we ended 2020 on a strong note with a solid quarter and today have a very strong cash position that will allow our business, product portfolio and pipeline opportunities to grow significantly.

We were able to execute and make significant progress across our key products and showed investors that our diversified product portfolio with unique and differentiated proprietary assets, post the business combination and support an attractive combination of revenue and partnership growth.

This is driven by the continued success of our award-winning diagnostics and technology that has established us as a force to be reckoned with in the molecular diagnostics and bioinformatics space targeting AMR or antimicrobial resistance.

On today’s call, we will begin by briefly reviewing the status of the reprioritization efforts announced last quarter, and then we’ll discuss recent business highlights as they relate to the company’s core capabilities and top line growth prospects, at which point, I will pass the call over to Tim to review financial highlights from the fourth quarter and full year 2020, as well as recent financing activities.

We’ll then wrap up the call with an update on the company’s strategic initiatives and pipeline outlook. As a reminder, last quarter, we discussed the outcome and subsequent reprioritization measures being taken by the company following extensive feedback from a third-party market research and consulting firm.

They conducted a voice of customer survey of 150 stakeholders in the decision-making on new diagnostic platforms and a significant number of key opinion leader interviews.

The analysis and application of this feedback resulted in a reprioritization of the product portfolio, including a renewed focus on the company’s proprietary Unyvero platform and unique bioinformatics capabilities. This includes expanding the platform to include complicated urinary tract infections and invasive joint infections in the U.S.

with clinical trials for future FDA submission and clearance anticipated to start in the second half of 2021. We will submit materials for possible presubmission meetings with the FDA on each of these two products during the first half of 2021. Actually, having just submitted a first pre-sub package for the Unyvero UTI earlier this month.

Similar products in both clinical indications using identical corresponding sample types have been successfully developed on the Unyvero platform and CE-IVD marked and are commercially available today in Europe and other markets.

Another key focus will be developing our rapid molecular diagnostic platform offerings with an increased focus on bioinformatics solutions including Ares Genetics next-generation sequencing based and artificial intelligence powered antimicrobial resistance, AMR and susceptibility, AST prediction capabilities.

The reprioritization has also included a platform consolidation to realize significant operational synergies and cost savings over time. As part of the reprioritization, we have successfully discontinued the legacy fish product including QuickFISH and PNA FISH globally, ahead of schedule in early 2021.

We delivered significant end-of-product lifecycle sales in the fourth quarter of 2020 and remaining revenue in the early first quarter of this year and have completed the wind down by now. We will no longer manufacture nor sell or ship commercial FISH products going forward.

As it relates to our renewed focus on expanding the Unyvero platform, we were excited to announce that OpGen’s subsidiary Curetis has entered into a distribution partnership with Annar Health Technologies for Colombia in the fourth quarter.

Annar headquartered in Bogota is Colombia’s leading diagnostics distributor that is already working with numerous renowned global IVD manufacturers.

Under the distribution agreement, Annar has the exclusive rights to commercialize Unyvero A50 instrument system and its full suite of Unyvero infectious disease diagnostic application cartridges in Colombia. The distribution agreement has an initial term of three years and can be extended in one year increments.

In return, Annar has committed to significant minimum purchases of Unyvero instruments and application cartridges over the initial three-year term, amounting to a total of at least 10 Unyvero systems plus significant numbers of Unyvero Cartridges.

Annar is responsible for product registration, which is expected to be obtained by the second half of 2021, and has committed to significantly invest in the market introduction of the Unyvero product line in Colombia.

We’re thrilled with this partnership as it strengthens our commercial presence in Latin America and is in alignment with our core commercialization and revenue growth strategy.

Product registration process is in full swing for the entire portfolio of Unyvero A50 related products and during early 2021, a highly successful key opinion leader event was held, which includes participating OpGen representatives and KOLs as part of the launch preparation.

Now shifting gears, I would like to discuss options subsidiary Ares Genetics activity, contributing to top line growth this quarter.

In November, we announced the launch of an early access program for the Ares Genetics novel next-generation sequencing or NGS-based molecular antibiotic resistance test for comprehensive profiling of genetic AML markers from native specimen by hybrid capture based targeted NGS assay.

It is an expanded version of the award-winning ARESupa or Universal Pathogenome Assay that was initially launched in 2019. Ares Genetics has received commercial orders for hundreds of the novel ARESupa tests, exceeding a bulk order volume of $250,000.

We believe these initial orders demonstrate the need for universal AMR profiling in native specimen in the context of surveillance and infection prevention and control. Revenue recognition has started in early 2021 and will likely continue throughout the year.

Ares Genetics also joined the JPIAMR Network for Integrating Microbial Sequencing and Platforms for Antimicrobial Resistance, in collaboration with interdisciplinary subject matter experts and One Health AMR stakeholders, the network will provide guidelines and solutions to microbial sequencing of the detection, surveillance and management of difficult-to-treat infection caused by AMR microorganisms.

More recently, we were excited to announce that Ares Genetics and Sandoz, the number one supplier of generic antibiotics globally extended their collaboration within its pharma partnering program in the fourth quarter of 2020, and then again, for another joint project in the first quarter of 2021, to assess the potential of molecular surveillance for better informed therapeutic guidance and anabolic stewardship.

The overall goal of this partnership is to develop a digital anti-infectives platform combining established microbiology laboratory methods with advanced bioinformatics and artificial intelligence methods to support drug development and life cycle management.

Following the presentation of final results from the initial collaboration phase on optimal positioning of fosfomycin combination therapies, bimolecular AST and in silico modeling at the antimicrobial resistance, Genomes, Big Data and Emerging Technologies virtual conference in November 2020, the next phase explores the potential of combining NGS based surveillance with predictive AST for improved guidance of antimicrobial therapy and better antibiotic stewardship.

Additionally, Ares Genetics was granted a key patent on antimicrobial resistance prediction from genomic data, supporting the company’s vision to improve guidance for antimicrobial therapy through AI part prediction of AMR and the discovery of diagnostic biomarkers.

In the first quarter of 2021, OpGen continued to see publications by its subsidiary Ares Genetics and collaborators. The most recent study highlights best practice techniques for accurate antimicrobial resistance prediction from whole genome sequencing data and supports harmonization of the development of good machine learning practices.

This study adds to Ares Genetics publication record, further validating our approach to becoming a globally recognized leader in the development of AI-powered next-generation sequencing solutions for infectious disease testing.

Addressing the United States FDA action plan by developing good machine learning practice and robust algorithms will be key to moving our AI-powered solutions into clinical practice. Applying the proposed best practice techniques to RSDB allowed us to further improve predictive performance of whole genome sequencing-based PAST.

In this context, we’re currently also working with several leading clinical centers in the United States to further demonstrate the potential of accurate whole genome sequence based AST in independent validation studies.

In addition, OpGen also announced the publication of results from a 1,400-patient sample multicenter study that highlighted the Unyvero LRT BAL panel’s ability to accurately detect lower respiratory tract infection and bronchoalveolar lavage fluid samples, allowing for early diagnosis and proper choice of antimicrobials, crucial for the successful management of pneumonia.

The performance data comprehensive coverage and fast time to results of this panel suggests significant clinical value for choosing appropriate antibiotics and for antibiotic stewardship. Additionally, very recently, we announced final data from the Karolinska Institute study getting published in a peer-reviewed journal.

This paper highlights OpGen’s Unyvero HPN product for hospitalized patients with pneumonia, demonstrating a higher diagnostic yield than bacterial culture with a high negative predictive value of 99.8% for pathogen detection.

This strong performance data, comprehensive coverage and turnaround time of less than five hours from sample to results, provides clinicians earlier data to inform antimicrobial decisions, especially in critically ill COVID-19 patients.

Over the last 12 months, OpGen and its subsidiaries, Curetis and Ares Genetics have announced about 10 peer reviewed publication, highlighting the power of molecular diagnostics and bioinformatics to help combat infectious disease.

It is very important to highlight that such publications play a crucial role in the commercial rollout of any novel molecular diagnostic product.

And thus, they help drive top line revenue growth as medical publications and journals inform a wide variety of health care professionals, who must routinely and efficiently identify and deliver the most effective treatment for their patients.

In addition, OpGen was awarded two German Federal Government grants to its subsidiary Curetis and collaborators. One project is coordinated by Jena University Hospital and designed to use artificial intelligence-based assay development for carbapenem resistance in gram-negative bacteria.

And the other project looks at the Unyvero A30 RQ platform concept for veterinary applications, which could present an additional future growth opportunity. I will now turn the call over to our CFO, Tim Dec, who will review financial results for the fourth quarter and full year 2020 and recent financial developments for the business.

Tim?.

Thank you, Oliver, and welcome to everyone on the call today. On today’s call, I will touch briefly on the highlights of the fourth quarter, review the full year 2020 financial results, discuss our recent financings update you on our balance sheet position and end with some thoughts on guidance.

Please keep in mind that the business combination closed on April 1, 2020. Therefore, Q4 2020 results include the full quarter as a combined company, whereas Q4 2019 is only for OpGen stand-alone. The full year numbers for 2020 only include nine months as a combined company and all references to 2019 pertain to the OpGen only numbers.

Any pro forma reference will be noted separately. Revenue for the fourth quarter of 2020 was $1.4 million, up from $800,000 for the prior year period.

This increase is largely due to collaboration revenue from Ares Genetics as well as international sales from Curetis, offset in part by lower collaboration revenue related to our New York State project and lower FISH revenue.

Total revenue for the 12 months ended December 31, 2020, was $4.2 million compared with $3.2 million for the 12 months ended December 31, 2019.

The increase was due to the inclusion of Unyvero product sales, SARS-CoV-2 Kit sales and Ares Genetics collaboration and service revenues, offset in part by lower FISH revenue and lower collaboration revenue from the New York State Department of Health Project.

Total pro forma revenue for the 12 months ended December 31, 2020, was $5.2 million compared with $6.1 million for the 12 months ended December 31, 2019. Operating expenses for OpGen as a combined company for the fourth quarter of 2020 were $7.4 million compared with $3.3 million in the fourth quarter of 2019.

Operating expenses for the 12 months ended December 31, 2020 were $26.9 million, compared to $15.8 million for the 12 months ended December 31, 2019. Just a reminder, the Q4 and the full year 2019 numbers were OpGen’s standalone only and not as a combined company.

I would like to provide some granularity in terms of our operating expenses since the business combination April 1. R&D expenses for the fourth quarter of 2020 were $3.3 million, compared to $2.4 million in the third quarter and $3 million for the second quarter of 2020.

The dip in the second quarter expenses was due to the halt in Acuitas urine trial and COVID-19 related shift and expenses, as well as key activities in our Unyvero A30 platform development program only picked up later in the year. R&D expenses for the year ended 2020 were $10 million compared to $5.1 million for the year ended December 2019.

Again, the increase was due to the basis combination during the last three quarters of 2020. G&A expenses for the fourth quarter of 2020 were $2.3 million as compared to $2.4 million for the third quarter, $2.5 million for the second quarter of 2020, essentially flat quarter-over-quarter since the business combination.

G&A expenses for the year ended 2020 were $8.8 million compared to $6.3 million for the year ended 2019. Again, reflecting the combining business during the last three quarters of the year.

Sales and marketing expenses for the fourth quarter of 2020 was $800,000 as compared to $900,000 in third quarter and $1 million in the second quarter of 2020, essentially flat quarter-over-quarter since the business combination and reflective of COVID-19 related restrictions on travel and lower in-person meetings and conferences in 2020.

Sales and marketing expenses for the year in the 2020 were $3.1 million compared with $1.5 million for the year end of 2019. Again, reflecting the business combination for the last three quarters.

Net loss for the fourth quarter of 2020 was $7.1 million, or $0.34 per share compared to $2.5 million or $0.61 per share in the fourth quarter of 2019, again, mostly driven by the business combination in 2020 and a higher number of shares outstanding in Q4 2020 versus the same period in 2019.

The net loss for the 12 months ended December 31, 2020 was $26.2 million or a $1.66 per share compared with the net loss of $12.4 million or $7.70 per share for the 12 months ended December 31, 2019.

Since the time we announced the business combination with Curetis in late 2019, we have had a tremendous amount of interest from various groups and investment funds into the organization. Our story appears to have resonated very well with investors during 2020 and continues into 2021.

In fact, our company’s market cap has gone from roughly $6 million at the end of 2019 to over $100 million today. During this time, we have moved the company strategically to strengthen our balance sheet for the long haul with several highly successful finances.

From the beginning of 2020 through today, we have raised approximately $70 million of additional capital. The increase in capitals attributable to several moves that were timely placed throughout the year.

Staggered utilization of our ATM facility, as prices were rising in early to mid-2020 raised $16.7 million or an exercises from the November 2019 offering of $8.7 million, a private placement of $10 million in November 2020, a $25 million registered direct offering in February of 2021 at a very strong price point and a warrant exercise and exchange of $9.7 million in March of this year.

Both the registered direct and the warrant exercise and exchange carry warrants had a strong strike price of $3.55 and $3.56 respectively. These warrants along with the company’s remaining capacity under the existing shelf to generate an additional proceeds of up to $37.9 million for the company, if all – excuse me, if all, were exercised in full.

The company expects to have a cash balance of approximately $40 million at the end of Q1 2021. Total shares outstanding as of today are approximately 38.3 million shares.

In terms of our guidance, the foundation for a comprehensibly constructed and accurate forecast is still very challenging due to the continued COVID pandemic and its impact across many parts of the world and across all areas of our business. Therefore, we will refrain from offering specific guidance today.

However, I will provide some color now and hope to provide more detail on our May earnings call. The major underlying growth driver in our business is expected to come from a number of areas. Our Unyvero core businesses is expected to grow internationally via distributors, as well as in the U.S.

We are seeing Unyvero UTI usage by several labs in RUO setting in late 2020, and are starting to gain commercial traction in 2021. We’re also seeing additional Unyvero system placements and customer account conversion from Unyvero LRT BAL in the United States. A significant long-term growth driver would be China.

Currently, the timeline for NMPA approval of the pneumonia cartridge is unclear, and we have limited visibility there, once approved our partner Beijing Clear Bio as committed to a minimum purchase of 360 Unyvero system, and 1.5 million cartridges, cumulating over an eight year time period.

Just reminding everyone, this contract is signed and in place already. So there is no need to negotiate commercial aspects of the China partnership. The further information on the partnership deal, please see our S-4 filing from February of last year.

The Ares partnering revenue will subject to timing and specific structuring of any potential partnering and licensing deal, given the stage of negotiations, it would be prudent to assume that any material deal would not happen until later this year.

Revenue from potential partnering deals such as Ares Genetics’ licensing and collaboration deal and our partnership around the Unyvero A30 platform would highly depend on timing instruction.

However, it is clear that from the cash flow perspective, both of these assets have the potential to help generate significant amounts of non-diluted deal-based funding to auction over the coming years with significant upside coming from future product sales or revenue.

Also, with a significant strength in balance sheet at OpGen, we are now also in a position to determine when the best possible point in time and what’s the best possible type of partnering deal for either asset might be.

In order to maximize value for OpGen and our shareholders in the long run, we are not under the same pressure we may have been under prior to our financing to sign a particular deal.

It is clear that the further we can drive Curetis and Ares Genetics product development ourselves, the more value we can generate and the better possible future deal might look in terms of deal structure. And finally, cash burn.

Given the expected cost savings from our FISH products being terminated, and the Acuitas AMR urine trial, yet at the same time, initiating two large prospective clinical trials for Unyvero UTI and IJI in the United States respectively and further investment and OpEx into our Ares Genetics and Unyvero A30 platform would likely lead to fairly similar pattern of $5 million to $6 million cash burn for quarter in 2021.

With that, I’ll turn the call over Oliver to discuss additional key milestones..

Thank you, Tim.

I would now like to highlight some of OpGen’s key upcoming milestones and our development programs and commercial activities, as stated earlier and on previous calls, OpGen has remained in constant dialogue with the FDA, regarding the status of the Acuitas AMR Gene Panel Isolates 510(k) submission, despite the ongoing delays in their review of non-COVID-19 related submissions.

Last October, OpGen had issued our formal response to the agency’s additional information requests received earlier in the year.

Following the submission in November, we had received notice from the FDA indicating they would be reallocating CDRH staff from open submission to prioritize emergency use authorization or EUA requests for in vitro diagnostics intend to address the COVID-19 pandemic. While the staffing focus on COVID-19 unrelated to EUAs within the FDA continues.

We’re very pleased to report that at the end of January, the FDA informed OpGen that they have formally resumed the review our submission. Due to the high volume of EUA requests and the limitations on review resources, we understand that the FDA cannot currently commit to specific review and clearance timelines or so-called Medusa time line.

We are however confident that OpGen has addressed all of the agency’s remaining requests for additional information and we anticipate a clearance decision as the FDA review team’s earliest opportunity as time managed between review resources and COVID-19 related EUAs permit.

While the FDA is working towards their final clearance decision, we have continued full steam ahead with commercial launch readiness activities. We have successfully manufactured already several batches of the Acuitas AMR Gene Panel priceless products in preparation for commercial release. And our commercial team is poised for launch.

We’ve used time to our advantage to ensure that we are equipped to meet any customer demands as soon as we have received our FDA clearance decision. Excitingly, earlier this first quarter of 2021, we received regulatory approval for the Curetis Unyvero system as an IVD instrument system in China from the Chinese NMPA.

OpGen’s subsidiary Curetis and its Chinese partner Beijing Clear Bio, continue to interact closely with the NMPA during the interactive review of the submission for the Unyvero A50 pneumonia cartridge, as their first Unyvero based diagnostic applications of Chinese market.

A dossier for the review and potential future approval of the pneumonia cartridge was submitted as early as February 2019, and it includes comprehensive data from various clinical trials and regulatory submissions of the Unyvero LRT and LRT BAL products, both of which are FDA cleared here in the United States and the Unyvero HPN cartridge for hospitalized pneumonia patients, which is E-IVD marked in Europe.

Timelines for NMPA response submissions and review has been extended by several months in 2020 due to the COVID-19 pandemic.

Now that the NMPA has completed the registration of the Unyvero system as IVD for the Chinese market, the start of commercialization by our partner BCB, however, remains subject to also getting approval of the pneumonia cartridge first.

We hope to be able to provide updates on the Chinese regulatory approval process and subsequently plan commercial launch in the coming quarters in 2021. But at this point in time, the NMPA does not provide any specific guidance or timeline for their reviews.

As mentioned before, the commercial side of this contract with Beijing Clear Bio has been fully negotiated and the deal was signed several years ago. So to reemphasize, there was absolutely no needs to negotiate a commercial deal in China anymore.

That is already in place and it contains the minimum commitments over an eight-year period of 360 Unyvero systems and 1.5 million cartridges cumulatively adding to about $180 million U.S. in revenue to OpGen at current transfer prices in the agreement and its current euro-dollar foreign exchange rates.

We’ve also made excellent progress in the final development phases of Unyvero A30 RQ platform. We expect that by the middle of 2021, we should have a small series of about 10 instrument system readily available for final verification and validation testing.

We’ve already established several assays on A30 cartridges, including one for SARS-COV-2 Flu A and Flu B and RSV, with also several antibiotic resistance monographs. We mentioned in our last call that OpGen has continued the dialogue with several potential partners for such a platform, and we have continued doing so.

It received specifications for several potential products that could be developed onto such a system. And we believe that a partnering opportunity for OpGen around the A30 platform assets may present itself in the next several quarters.

Earlier in 2020, we had announced the extension of our partnership with the New York State Department into a second year to detect, track, and manage antimicrobial-resistant infections at healthcare institutions statewide.

In the third quarter of 2020, sites that had previously been put on hold under the program due to the COVID-19 pandemic have begun to reopen. And during the fourth quarter of 2020 and first quarter of 2021 today, all testing sites have been actively running Acuitas AMR Gene Panel testing.

As of today, four testing centers that run the Acuitas AMR Gene Panel tests on isolates from affiliated networks totaling more than 30 hospitals across New York City and the state of New York are up and running. We’ve seen significant ramp up in testing volumes in the fourth quarter of 2020 and into the first quarter of 2021.

Given that COVID-19 had slowed the testing during the earlier parts of 2020, we’re currently in a very active dialogue with the New York State Department of Health on how to extend and expand upon the year two program, which would otherwise end on March 31, 2021.

And we’re confident that the testing will be extended and expanded at attractive commercial terms to OpGen with significant revenue totaling more than $300,000 and potentially up to $0.5 million in the next two quarters.

We’ll also be discussing, bring such extension the path forward with the New York State Department of Health on how to think about a broader statewide rollout in a third year and beyond of our collaboration.

Going forward, we also look to some of the New York state sites to become early adopters of our FDA cleared Acuitas AMR Gene Panel priceless product rather than the research use only version which that current used. In closing, we’re very pleased with the progress being made at OpGen and with our fourth quarter and full year results.

We have significant momentum across our entire product portfolio. Post business combination portfolio realignments we’ve implemented successfully will only further ensure our focus remains growing the company’s core products and capabilities to drive top line revenue growth and shareholder value.

OpGen is very well positioned in the market with an exciting portfolio of products, which we believe will help us achieve strong role towards becoming one of the industry leaders in the antimicrobial resistance and bioinformatics space.

This market position has been reinforced by our collaboration, the numerous notable peer reviewed publication, awards, grants, and a pipeline that includes prospects such as the pending FDA clearance decision and switch to subsequent commercial launch of the Acuitas AMR Gene Panel price in the United States, along with additional clinical trials of the Unyvero UTI and IJI and their future U.S.

FDA regulatory milestones, such as submissions and eventual clearances. Finally, I would like to wholeheartedly thank all of our OpGen Group Company’s employees globally for their phenomenal work ethic, focus and execution. As we’ve worked tirelessly through the pandemic to successfully combine our companies and product portfolios this past year.

I look forward to a new exciting year ahead and to the many continued successes we will achieve together. I would now like to turn the call back to the operator for questions.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Yi Chen of H.C. Wainwright. Please state your question..

Hi, guys. This is [indiscernible] speaking behalf of Yi Chen.

I was wondering if you could classify how soon you could commercially launch the AMR Gene Panel once approved and what your projected revenue from this panel for the test full year would be after the launch?.

Sure. As I said, we have continued to prepare. So usually once you get FDA clearance in any molecular diagnostic product, it’ll typically take a number of weeks calling anywhere from six to eight weeks in order to truly launch. Now we’ve tried to shorten and compress that period as best we can.

We have produced and manufactured several batches of Acuitas AMR gene panel product. It has basically run through our QC process. It’s on QC hold and maybe FDA clearance. We obviously need the appropriate label to be a fix to the product. Once we have FDA clearance, the marketing and sales organizations have been trained, the collateral is being done.

We’re certainly in active dialogues and I mentioned as a couple of examples, the various customers today that run the Acuitas AMR RUO for possibly converting them over to the FDA cleared product. In terms of first full year revenue, we’re not providing any specific guidance at this point.

Again, typically, we would anticipate that you will have, these are complex products. It’s going to be a first-in-class and a first of its kind type product. We anticipate the Acuitas AMR Gene Panel for isolates to be the broadest panel of genetic antimicrobial resistance markers at the FDA would have cleared, once it’s cleared.

So sales cycles for complicated product truly novel indication area or fairly lengthy and if you look at the industry comparables, it’s not uncommon to see anything from six to nine or even 12 months in some larger hospital network. But again, from that on out, utilization per instrument system, and that’s the way to think about it.

How many systems can you place? And what’s the annuity, if you will, on any given system? You’re looking at tests that are somewhere in the call, it a $100 to $150 ballpark per test.

And if you can run on any given instrument system, several hundred, potentially a couple of thousand tests per year, obviously, it makes for very attractive annuities that boils down to how many of these systems can we place in a 12 month period? Again, we’re at this point not giving any specific guidance, because again, we need to see the final FDA labeling and claims they allow us to make.

But again, the funnel’s being prepared and we’re going to try to drive this out of the gate as hard as we can..

All right. That’s very helpful. Thanks very much and we support continued success. Thanks..

Our next question is from Max Jacobs of Edison Group. Please state your question..

Hi guys. Thanks for taking my question.

I was just wondering, with regard to like the China deal, how – like what sorts of revenues can we expect to see in the first year after marketing approval?.

So I’ll – again, what’s previously being publicly disclosed and this actually, if you look back at some of the previous greatest disclosure that the original contract with Beijing Clear was for five years. During that initial five-year period, that was a 260 instrument systems.

And the cumulative revenue would have been up to €60 million and then years six, seven and eight that were negotiated and added at a later stage, basically added on another 100 systems as a minimum. And it added on another approximately €90 million in cumulated revenue. So if you take the €60 million, which in U.S.

dollar terms about $70 million, $72 million or so right now. Over a six year term, I think it is fair to say that this is not going to be linear. You’re going to have sort of an exponential growth phase early on.

Clearly, you’re going to see in the first – one, two, three years, you’re going to see the bulk of instrument placements, and then you’ll see the cartridge pull through in utilization, following as each account goes through their internal validation, et cetera.

So again, if you take that €60 million, $72 million five-year cumulative number and then adjust it and build yourself a little S-shaped curve, you’re probably going to come up with as close an approximation as we can provides at stage..

Okay, great. That was helpful. And then just on Columbia, can you – it’s kind of a separate question.

But not necessarily just based on year one, what sort of revenue opportunity do you think that is? Can you give us something in the ballpark?.

Sure. Again, I mean, so what we’ve disclosed is that over the three years at a minimum of 10 Unyvero instrument systems, if you look at a typical Unyvero system, running anywhere from the low end, but let’s call it, 200, 300 tests at the high end could be up to 1,000 tests a year.

You look at the end customer pricing, which likely going to be somewhat lower than here in the United States. But again, per test revenue towards end customers likely going to be in that $120 to $180 ballpark, with the typical distributor margin in our industry, usually being in the 30%, 40% ballpark.

So we of course generate our revenue as OpGen through the transfer price-based sale. You sort of get a sense on – again on a per instrument basis. This is from high five figures, low six figures annuity per instrument per annum.

And of course, if you look strategically, you look at the – an arc relationship, the initial deal is for Columbia and Columbia only, there are certainly, in their country, they’re a number one. They’re ahead of some of the brand names in the diagnostic industry.

They’re certainly ambitious and looking at expanding beyond Columbia into additional Latin American markets.

So the way to look at this really is the beginning of a strategic partnership that could go well beyond Columbia, over the coming years, at least from a initial interest level, there was several hundred participants in that Key Opinion Leader Event, a couple of weeks back with tremendously positive feedback.

Right now, the focus is to get the regulatory paperwork done. The good news here, no clinical trial, there is no – it’s not like an FDA review. It’s basically us providing the CE Mark documentation and technical files for each of the products.

And you remember, there’s the Unyvero system and then there was five CE Mark cartridges and five disease areas, pneumonia, implant tissue infections, blood cultures, urinary tract infection, intra-abdominal infections. They’re taking all five blocks through the Colombian process. Again, it’s purely paper-based.

We’ve submitted pretty much the full – a whole gambit of documents, and we’re expecting probably a second half, fall season 2021 clearance. And then they can go right and launch the product portfolio in the Columbia market..

Great. That was extremely helpful color. Thank you so much..

And if you actually, I mean, just as you think about this Columbia being a prototypical deal, we have the additional such deals, for example, in Vietnam, which is first basically a cop out of that agreement, three years, minimum commitment on instruments, same regulatory process. So it’s always worth.

We continue to expand our geographic scope, clearly, continue to drive the top line..

Wonderful. Those were all my questions. Thank you..

Our final question comes from Ben Haynor of Alliance Global Partners. Please state your question..

Good afternoon, gentlemen. Thanks for taking the questions and congrats on the progress. So first for me, I know there’s been a lot of covered on China. But haven you heard any more BCB, it sounds like NMPA, you’re not going to hear anything from them.

But have you heard from BCB on any of their expectations and would it be possible to launch the researches only to test. So it doesn’t sound like it the way I’m hearing you? And then I think that if I’m not mistaken, there are handful in the 30 installed there, or not. Any more color there for the question..

Sure, sure. Our partner has taken the Unyvero platform and the pneumonia application through all of the required analytical and clinical testing and studies. They’ve had a number of systems, and give you a sense. It’s roughly – over the last couple of years sold about a dozen Unyvero systems to them.

They’ve deployed these at a number of very large hospital systems in Shanghai and Beijing. There’s even been a publication of the Sino-Japanese friendship hospital. Again, one of the largest top end institution, so yes, they have certainly some early adopters. I’m not going to speculate on their regulatory strategy with regards to RUO.

Now we do know that they’re in very active dialogue with the NMPA and the way, we certainly get a sense of that is that by specific requests for specific ancillary documentation and data.

I’ll give you one example in the late fourth quarter of 2020 through our partner Beijing Clear and their regulatory advisers, we got a request list from the NMPA for any ancillary trial data that we have. Now we’ve already provided them the U.S.

FDA trial data on both of our LRT and LRT BAL and all of our HPN European data, but of course, there has been a number and increasing number of peer-reviewed journal publications, investigator-initiated studies from reputable institutions here in the United States.

Give you Northwestern in Chicago and Beaumont, Michigan, to name a couple, as well as institutions like Karolinska in Europe. So we’ve provided all of that feedback, as best we know. And again, it is China, so I’ll always – having done business there for the better part of the last decade, I’ll take everything with a grain of salt.

But we believe that they have provided all of that documentation and dossier to the NMPA and then it’s likely going to be not too dissimilar from the U.S. FDA, because if you compare it from a procedural standpoint, from a level of diligence and request, the NMPA is right now on par with the United States FDA.

They ask typically the very same questions, same quality of data. So I guess, the days when you would get by with just relationship, a little bit with Guangxi and goodwill, those days were long past. So again, we believe we’ve submitted everything there. Frankly, we’ve submitted everything that there is in the world.

It’s been good enough to get the product approved in the United States. It’s been good enough to get the product into European markets. It’s been good enough to get Singaporean Health Authority approval, Thailand and Malaysia to name another couple of countries.

So I’ve got to believe fundamentally that, that product has a strong body of evidence, not just analytical, but really clinical data to support that. Again, we really need to focus on getting the remaining questions back.

And it’s probably going to boil down to either they’re going to clear us or improve it based on foreign data with whatever local Chinese data that’s already being generated or they might request specific ancillary data to be generated in China. Again, there is multiple installed systems. Incidence rates of pneumonia are huge in China.

So from a throughput and duration, that shouldn’t be a big issue. We’re certainly ready to support our partners. But right now, we have a hard enough time to second-guess the United States FDA, and we’re talking to their review directly every week, and we speak the same language. We’re in the same country.

So we’re like three layers removed from the Chinese NMPA here. But again, I think all signals are definitely trending in a good direction, and we’re confident that it’s marginal – I was, frankly, positively surprised when – without – after we submitted everything that we haven’t heard for a couple of months, out of the blue, we get the approval.

Chinese letter, red seal, there it was, right? I mean there wasn’t sort of a pre-warning or anything that just arrived. So again, let’s focus on answering any questions there may be, but we’re certainly doing everything we can with all partners to kind of make it all happen..

Okay. That makes sense. And I definitely appreciate the details there. But then, just thinking about how BCP would begin commercialization on that.

Obviously, the terms are, what the terms are, but do you have a sense of – are they rearing to go, get out of the gate real quickly? Do they – they already kind of train their personnel, sales people? Or how does that aspect of it kind of sits at the moment?.

Yes. I mean, they clearly – they there – sort of a decent-sized organization across all 31 provinces plus Hong Kong and Taiwan. So they’re a sizable company. They have had Unyvero systems. Now their initial launch and focus like pretty much for any modern cutting-edge western technology in China. You’re not going to go to 31 provinces and rural China.

You’re going to go to the big cities, of which, frankly, there’s more than enough in China and the AAA hospitals as they’re called in China. And again, there is over 1,000 AAA hospitals in China. So again, I would anticipate the launch to focus on Beijing, Shanghai, some of the other major cities and those top-tier hospitals.

The team there has been fully trained. Again, they have worked with multiple installed systems over the last couple of years. So their commercial team, their technical team, their marketing team. They’re working very closely with our team in Europe. We continue to have face-to-face meetings with them on a very regular basis.

So the one data point I would throw out there, and this is the relationship we’ve been building with Beijing Clear, was based on a referral by one of our other strategic corporate partners, Heraeus Medical many years ago. Beijing Clear has been the exclusive commercial distributor for Heraeus Medical for almost 15 years.

The CEO of Heraeus Medical basically told me, we’ve never been disappointed by these guys. It’s a very professional team. They’ve come through, and they’ve grown the business year-over-year. And they’ve even invested in additional manufacturing capacity for Heraeus. So we’re clearly excited.

So far, all I can say is they’ve been holding up their end of the bargain, and we’re excited to be working with them. .

That’s great. And then just thinking about the strength of balance sheet, and I appreciate the color the potential to drive better terms on some of these licensing or partnership agreements that you could have.

Just with restricted balance sheet, have you also seen increased interest? Are changes to the negotiating posture of the folks that you’re already dealing with?.

It’s a good question. I mean I would say not really. I mean all of the conversations, and again, at this point, we have multiple parallel conversations with several large corporate partners ongoing simultaneously. They’re all aware that there are multiple partnering avenues we’re pursuing.

And so if you look at some of the partnerships that Ares Genetics has had for a number of years, whether it’s Sandoz or QIAGEN, but also other potential large players in the diagnostics industry. I would say the focus remains really on how to build – strategically build a franchise around the bioinformatics, AI-powered algorithms.

I would certainly say this, while six months ago, any partner looking at – simply taking a look at our Qs or K and our balance sheet would have known that we’re going to be between a rock and hard place, and we’re going to be signing just about any deal. That has just gone away. So I think the ability to say, look, let’s be really strategic here.

Let’s focus on what we can do together, would also let’s not trade too much of the value and too much of the upside, too early on prematurely at a relatively small amount upfront, and then a pittance on the downstream royalty. The value is going to be in the ultimate product.

So it’s going to be in product revenue and a royalty upon that of any potential license fee. So the ability to drive this further and potentially co-invest on the R&D side along with a partner, looking at are there areas that strategically you may want to carve out commercially.

That certainly gives us a very different ability to discuss some strategic collaborations rather than going for the quickest possible licensing deal just to make sure we get R&D funding covered here for the next year or two..

Yes. That makes a lot of sense. And then just lastly for me. Just wondering kind of the response that you’ve gotten from the Ares Genetics, the AI best practices publication.

I mean that seems more like something that’s going to resonate more meaningfully to industry than investors, but what’s been kind of the response there? And then it seems like there – is that kind of establishes the thought leadership as well.

How should investors look at it to the extent that these people?.

It certainly has put Ares Genetics on the map. And again, Ares Genetics has to be invites. We talked about the JPIAMR, but there’s another large global consortium at both of these, Ares Genetics has been invited to join, and given some of the leadership roles on the AI bioinformatics side of things. So again, I would – the FDA guidance is one part.

To this date, Ares Genetics is the only company globally that has actually a peer-reviewed multi-center publication, demonstrating the ability to not only predict antimicrobial resistance, but really to predict antibiotic susceptibility with extremely high levels of accuracy.

That is a true first-mover advantage, and that’s where the USP of Ares Genetics in the RSDB lie.

So if you look at those consortia and you look at who the players are, it’s the usual suspects of the global pharmaceutical industry in antibiotics, the global diagnostics leadership in microbiology, for them to invite Ares Genetics and take a leadership role in these syndicates, it’s definitely great, and it’s put us on the map, which is good to see.

But it will require us to continue investing and furthering the asset, because, of course, you have players out there that certainly aren’t sitting on their hands, and we’ve got to keep that first-mover advantage with the databases from a combined Merck Pharmaceutical strain collection with the Siemens strain collection, which is RSDB today with its 55,000 isolates next-gen sequence, and phenotypically looked at against over 100 antibiotics in total.

We got to stay at the forefront of that. And what we’ve certainly seen is a number of inbound interest requests from top-tier U.S. academic centers and clinical centers to explore collaboration opportunities to sort of look at this as truly next-generation solution that goes beyond PCR that goes into NGS and AI. .

That’s great. That’s it for me. Congrats, Tim and Oliver are there all the progress..

All right..

That’s all the time we have today. I will now turn the call back to Mr. Schacht for closing remarks..

Well, thank you, everyone, for joining today. Please visit the Investors section of our website or our SEC filings for updates on the company. Thank you very much, and appreciate your attendance. Thank you. .

This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation..