Ladies and gentlemen, welcome to the OpGen Second Quarter 2022 Earnings Call and Business Update. Today, OpGen management will provide an update on the company's current business and outlook for the future. Following OpGen's prepared remarks, there will be a live Q&A session.

As a reminder, this conference call is being recorded today, August 11, 2022, and all participants are in a listen-only mode. At this time, we will turn the call over to Alyssa Factor, OpGen's IR representative to provide the opening statement. Please, go ahead..

Good afternoon, everyone, and thank you Operator for the introduction. Before we begin, I would like to note that any comments made by management during this conference call may contain forward-looking statements regarding the operations and future results of OpGen, including its subsidiaries, 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 and form 10-Q for the second quarter and the first half of 2022 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, the success of the Company’s commercialization efforts and partnering strategies; its ability to successfully, timely, and cost-effectively develop, seek, and obtain regulatory clearance for and commercialize its product and service offerings; the Company’s ability to continue to successfully achieve the expected synergies from the Company’s completed business combination with Curetis and to implement its commercial strategy; the impact of the continuing global COVID-19 pandemic on the Company’s business and operations and on capital markets and general economic conditions; the Company’s use of proceeds from recent financings, as well as its ability to access additional financing in the future; the Company’s ability to satisfy debt obligations under its loan with the European Investment Bank; the rate of adoption of its products and services by hospitals and other healthcare providers in general, as well as during the current COVID-19 pandemic, and geopolitical situation, in particular; the effect of the military action in Russia and Ukraine on its distributors, collaborators, and service providers; the effect on the Company’s 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 the date of this live call August 11, 2022. 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 are Oliver Schacht, OpGen's President and CEO, and Albert Weber, its CFO. Now, I’ll turn the call over to Oliver Schacht for introductory remarks..

Thank you, Alyssa. And thank you, everyone, for joining us this afternoon. Albert and I are glad to be here together in Rockville, at OpGen's global headquarters and look forward to sharing our progress. We're excited about our strong performance throughout the second quarter and developments through the first half of 2022.

This past year, we focused on commercialization and our efforts have come to fruition through new and existing partnerships. We look forward to updating everyone on Options milestones and achievements throughout this call to highlight our continued growth.

Today, I will begin with a recap of previous highlights disclosed during the first half of 2022, followed by recent updates on our products and R&D pipeline. Albert will review the Q2 and first half 2022 financial highlights and offer guidance.

I will then provide an outlook on OpGen's ongoing activities and upcoming milestones and business development. We'll close out the call with a Q&A session. We want to start off by highlighting that OpGen has completed two commercial contracts for our Acuitas AMR Gene Panel in the United States with two major hospitals.

Our first commercial deal was completed in June with a large 1,000-plus bed and well-respected teaching hospital in the Northeast. And the second deal was signed in July with a prominent 400-plus bed children's hospital in the Midwest.

Just as a reminder, the FDA cleared Acuitas AMR Gene Panel, allows testing for a comprehensive panel of 28 genetic AMR markers in isolated bacterial colonies from 26 different pathogens in just 2.5 hours.

This is an exciting milestone for OpGen, as they set the stage for more commercial contracts to come, and there are several active commercial contract proposals in front of accounts that we expect to come to fruition here in the second half of 2022.

This past quarter has had the healthiest pipeline for partnerships and collaborations throughout our Austrian subsidiary Ares Genetics life cycle. One of these collaborations includes the extension of our Ares collaboration agreement with Sandoz, the world leading provider of generic antibiotics until January 31, 2025.

In the initial phase of the collaboration, Ares developed a digital anti-infective platform, which combines established microbiology laboratory practices with advanced bioinformatics and artificial intelligence methods to support the identification of effective antimicrobial compounds or compound combinations to address critical pathogens.

Sandoz uses this to make portfolio and commercial decisions. In the next phase, both parties plan to leverage RS next-generation sequencing, or NGS, and bioinformatics technologies to focus further on antibiotic stewardship by enabling genomic surveillance for resistant pathogens.

AMR accounts for approximately 1.3 million deaths worldwide each year, and this collaboration is a major step towards reducing this number by providing the information to accurately prescribe antibiotics. Third major milestone for Ares Genetics was the commercial launch of a series of new genome sequencing services globally.

To help minimize the spread of AMR pathogens, Ares announced the expansion of its commercial offering sequencing and analysis services aimed at microbiologists, public health, infection prevention and control specialists. The services include ARESid and ARESiss Express.

ARESid is a sequencing service for the accurate and thorough detection of pathogens commensals or environmental microbes directly from native patient specimen or environmental samples. ARESiss builds on Ares clinically validated platform from whole genome sequencing bacterial isolates and reduces turnaround times by more than 80%.

This means that it can provide results in as few as five business days, which allows microbiologists anti-epidemiologists to analyze and respond to local outbreaks, accurately and efficiently. First orders for ARESiss Express and ARESid have been received.

This quarter, we've made significant progress throughout our Unyvero urinary tract infection panel clinical trial. At the beginning of Q2, we announced the results from an interim analysis on the initial 150 US patient samples across the three trial sites for the UTI panel.

The interim analysis showed that there were no significant variations in results between the testing sites and that the blinded sample and data collection across all sites was executed as planned.

The positive results allowed us to continue enrollment towards our study goal of 1500 prospective samples which is expected within the third quarter of 2022. In June, we announced our 1000th patient sample enrolled in the clinical trial for the Unyvero urinary tract infection or UTI panel.

We also added a fourth trial site to optimize enrollment and accelerate the trial completion. We’re pleased with the momentum of enrollment towards the goal of 1500 prospective samples as required by applicable FDA guidance. And as of today we have enrolled over 1300 patient samples already.

We expect to complete the UTI trial and have the final data readout in the second half of this year. This is an exciting milestone as we plan for a subsequent submission to the FDA as we believe there is a clear unmet medical need for rapid and comprehensive testing for urinary tract infections.

We already see evidence of that in the increasing traction of our UTI research use only product sales in the United States. Earlier this quarter we announced some exciting news for our German subsidiary Curetis.

In June Curetis entered into a distribution agreement with Leader Life Sciences via their trading company Leader Medical Supplies Trading LLC part of the Leader Healthcare Group for distribution of Unyvero systems in the United Arab Emirates or UAE and Qatar. The agreement has an initial term of three years and can be extended in 1-year increments.

Leader Life Sciences has committed to a minimum purchase of Unyvero instruments and application cartridges for a total value of approximately $1 million in revenue to OpGen during the initial three-year term. This is exciting for OpGen as Leader Healthcare Group is one of the Middle East regions leading istributors and has a presence in the region.

There are a significant number of hospitalized patients suffering from healthcare associated infections in the Middle East. Therefore, rapid and comprehensive detection of the pathogens and their antibiotic resistance markers with Unyvero will meaningfully improve the outcomes for patients.

This partnership aligns with OpGens goal to expand our commercial presence as industry leaders in the molecular diagnostics and bioinformatics space. We’re increasing our global footprint and plan to continue to work closely with Leader Life Sciences to explore potential expansion into additional countries within the region going forward.

We have recently also added Keis Group as a distribution partner in Kosovo, following their successful bid in a World Bank funded tender for Unyvero. We expect to deliver the first system and cartridges in the third quarter of 2022 already and have entered into a three-year exclusive distribution agreement with Keis.

Another relationship we’ve continued to strengthen is with Menarini Diagnostics our Pan-European distribution partner. Last quarter we announced the progression of our existing partnership with an expansion of our 5-year strategic distribution agreement with Menarini.

We previously announced a major increase in the minimum purchase commitments for the coming 12 months by over 50% compared to the last 12 months and over a 2-year period by a total of more than 80% higher minimum revenues compared to the last 12 months.

During the second quarter we also signed a commercial deal for around 70 Unyvero systems installed in nine different European countries with Menarini as well. We’tr sent over the invoice for more than $360000 in incremental revenue in 2022 which was recognized in the second quarter of 2022.

OpGen was featured in multiple peer-reviewed journal publications throughout the second quarter of 2022 that we would like to highlight. In May the results from a major clinical study using Unyvero Hospitalized Pneumonia or HPN panel in The Lancet Respiratory Medicine were published.

The authors of the publication assessed the clinical utility and impact of the Unyvero panel in hospitalized adult patients, with suspicion of pneumonia, a clinical indication for bronchoscopy and at risk for infection with gram-negative bacteria, with the study endpoint being the duration of inappropriate antibiotic therapy.

The trial clearly demonstrates that using Unyvero HPN panel in hospitalized pneumonia patients for the examination of bronchoalveolar lavage or BAL in combination with antibiotic stewardship decreases the duration of inappropriate antibiotic therapy of hospitalized patients with pneumonia at risk for gram-negative bacteria and supports antibiotic de-escalation in 66% of patients.

Other major findings include a reduction of inappropriate antibiotic therapy by 45% and a decrease in the overall duration of antibiotic therapy by 22.5% in the Unyvero Group. Overall, patients treated in the Unyvero Group had three times higher probability of appropriate antibiotic therapy.

This study shows the significant and actionable impact of the Unyvero Hospitalized Pneumonia panel on the time to appropriate antibiotic therapy in patients. In July, we announced the release of a new peer-reviewed journal publication from a study conducted at Karolinska University Hospital in Solna, Stockholm, Sweden.

This publication demonstrates the ability of the Unyvero Hospitalized Pneumonia or HPN panel to detect potential pneumonia pathogens earlier than culture, or at the very early signs of an infection.

The Unyvero Hospitalized Pneumonia panel detected bacterial pathogens from lower respiratory tract samples from critically ill COVID-19 patients at a higher diagnostic yield and bacterial culture.

This is a significant milestone because it enables reliable and rapid diagnosis of pathogens in just five hours for patients hospitalized with COVID-19 pneumonia. Overall, we've achieved great progress with our products this quarter and year-to-date and continue to focus on commercialization.

We're excited about the revenue driven by product sales that continue to grow. I'll now turn the call over to Albert Weber OpGen's Chief Financial Officer. He will review financial results for the second quarter and the first half of 2022 and recent financial developments.

Albert?.

Thank you, Oliver, and welcome to everyone on the call. I will briefly discuss the second quarter and first half 2022 highlights, our balance sheet position, and underlying growth drivers for the business and conclude with some thoughts on guidance. We are excited to announce our second quarter 2022 revenue of close to $1 million.

We closed out the second quarter with approximately $967,000 of revenue, a 19% increase from this time last year, while revenue in the first half of 2022 added up to $1.4 million compared to $1.6 million in the six months period of 2021. The increase in revenue in the second quarter is primarily due to a significant increase in product sales.

Compared to the second quarter of 2021, our product sales have increased by approximately $582,000 or a 189% increase year-over-year. The increase in product sales is attributable to sales of a pool of Unyvero instruments to Menarini, which Oliver discussed previously as well as an increase in Unyvero sales in the US.

To be clear, Q2 revenues did not yet include any product sales from Acuitas AMR Gene panel in the U.S. as the first commercial contract for this product was signed in late June. Later in the call, Oliver will discuss our expanding pipeline for increasing sales within the U.S. and internationally.

In addition to increasing our revenue, we also decreased our operating expenses for the three months ending June 30, 2022, by almost 10% to $6.2 million compared to nearly $7 million in the second quarter of 2021.

For the first half of 2022, we saw a decrease by more than 10% in operating expenses from $14 million in the six months of 2021 to $12.6 million in the comparable period this year. Our second quarter 2022 R&D expenses were $2.3 million compared to $2.9 million in Q2 of 2021, a 20% reduction.

R&D expenses in the first half of 2022 were $4.6 million, down by 19% from $5.7 million in the first half of 2021. The decreases were primarily due to a decrease in payroll-related costs.

Our focus towards smaller and more efficient R&D teams has proven to be successful, in addition to our focus shifting increasingly towards commercial efforts and our future next-generation sequencing or NGS lab services. Second quarter 2022 G&A expenses were $2.1 million, down by about 22% from our Q2 2021 G&A expenses of $2.7 million.

In the first half of 2022, G&A expenses amounted to $4.8 million, which corresponds to a decrease of about 11% from $5.4 million in the first half of the previous year. Leveraging of synergies following the completion of our business integration has allowed us to reduce G&A expenses.

Second quarter and first half 2022 sales and marketing expenses were $1.2 million and $2.2 million respectively, compared to $800,000 during the second quarter of 2021 and $1.7 million in the first half of 2021.

We are continuing to expand our sales and business development team, as they are crucial in expanding our partnerships and driving overall revenue.

We have also seen the return of live in-person conferences and exhibitions internationally as well as here in the US, which has also contributed to increased marketing spend in return for much improved customer access and interact. Turning to our net loss.

We have significantly decreased our loss in the second quarter of 2022 compared to the same time last year. Our net loss available to common stockholders in the second quarter of 2022 was $5.8 million or $0.13 per share, which is substantially lower than $7.1 million or $0.19 per share in the second quarter of 2021.

The half year net loss was $12.6 million or $0.27 per share in the current year and $21.9 million or $0.65 per share in 2021. Increased revenues, improved gross margins and significantly reduced operating expenses on the R&D and G&A side have all contributed to this much improved results.

This was reinforced by a much stronger US dollar versus the euro in 2022, which has made our European operations more cost effective on a US dollar basis. Finishing off with our cash position, we ended the first half of 2022 with approximately $16.6 million, a decrease compared to our cash position at the end of 2021 of $36.1 million.

The company continues to closely monitor its cash burn rate. As mentioned on our last earnings call, our subsidiary Curetis and the European Investment Bank, EIB has agreed to amortize the debt tranche originally due in April 2022 over the next 12 months.

We repaid €5 million in April 2022 and in May began monthly installment payments for the remainder of the debt tranche of approximately €8.4 million over the 12 months period until April 2023.

There are two additional tranches of €3 million and €f5 million, principal plus accumulated and deferred interest that become due in June 2023 and June 2024, respectively. At this point these tranches remain unchanged by the agreement with EIB. Additionally in June, the company entered into a new ATM agreement with H.C.

Wainwright, allowing the company to sell up to approximately $10.7 million worth in shares of its common stock. Company will continue to explore additional strategic and tactical equity and debt financing opportunities throughout the remainder of the year to further strengthen its balance sheet.

As mentioned in our previous earnings call, our operating expenses remain in line with our expectations and track well against our guidance for yearly net cash consumption. We anticipate continuing that track record this year at an expected net cash consumption of around $5 million to $6 million per quarter from our operations.

Following the recently announced restructuring of our EIB debt, we expect to see an additional cash outflow of approximately $700,000 per month. We are continuing to see growth especially with product sales here in the US and with Ares Genetics services in collaborations.

Ares has a strong business development and collaboration opportunity funnel, which we remain optimistic about with several potential partnering deals that each would contribute to revenue growth lined up for the second half of 2022 and beyond.

Our international distribution business, which is focused on the Unyvero product line outside of the US has produced positive revenue growth in the second quarter.

The new IVDR came into effect in May 2022 and given the multiyear rate period for any of our products with prior CE IVD marking to continue to be sold, we expect this to continue for the coming year.

Our Pan-European distribution partner, Menarini significantly increased minimum commitments for the coming two contract years, starting in April 2022 by 50% in the coming 12 months and overall by the end of the fifth year by more than 80%, compared to last contract years minimum.

Additionally, our distribution agreement with Leader Life Sciences in the UAE and Qatar has an initial total deal value of $1 million in revenue over a three-year period. This agreement has the option to be extended in one-year increments for a continuous revenue stream.

With the recent the addition of a distribution partnership with Keis Group in Kosovo, we have added another commercial deal expected to be contributing to revenue growth from the third quarter 2022 onwards.

As a result of our progress in the second quarter of 2022 and year-to-date, we expect continued growth in the commercial rollout of Unyvero product and the acute AMR Gene Panel. We are focused on expanding and progressing our commercial pipeline for the AMR Gene panel with several ongoing discussions with hospitals and direct customer access.

This year we have signed the first two commercial agreements in June and July already and expect this number to increase as the year progress. Just as a reminder, the typical range for these acuities accounts once fully implemented into clinical routine is expected in the $50,000 to $150,000 range per annum in recurring consumable revenue screen.

We are looking forward to our clinical trial update and regulatory submissions for Unyvero UTI and invasive joint infections, or IJI products. As mentioned, previously the UTI clinical trial has progressed throughout this year and we are looking forward to an upcoming data readout in the second half of 2022 towards an FDA submission.

We are also advancing towards the initiation of a prospective multi-center clinical trial in the US on Unyvero A30 platform for IJI. Our goals for the longer-term include expanding Ares Genetics strategic collaborations and partnerships. We have multiple ongoing consultations with leading organizations in NGS, diagnostics and pharma.

We look forward to the opening of our NGS service lab for the US here in Rockville, Maryland in the coming weeks to help us with upcoming commercial launch of services and solutions in 2022 and beyond. We expect revenue growth from our product and services globally for 2022 to be in a range of somewhere around 25% compared to last year.

We expect to gain significant traction in direct sales in the US and acceleration in Ares Genetics related revenues from additional collaborations services and software solutions. Additionally, we would like to mention the At The Market, ATM sales facility for up to approximately $10.7 million that commenced in June 2022.

We have the option to sell from time-to-time in an At The Market offering shares of common stock. Our activity level remained modest with around 150,000 shares for close to $80,000 sold in July and approximately 1.7 million shares sold for approximately $1 million of net proceeds in August to-date.

With that, I'll turn the call back to Oliver to discuss the company's achievements and upcoming milestones.

Oliver?.

Thank you Albert. I'll now discuss upcoming milestones and plans to look forward to in the upcoming quarters. As mentioned earlier on this call, our Unyvero UTI clinical trial has enrolled more than 1,300 patient samples as of today.

We're getting very close to achieving our study goal of 1,500 prospective patient samples and are on track to complete the trial enrollment by the end of the quarter, followed by the final data readout in the second half of 2022 towards an FDA submission.

We offer the UTI test as a research use only product in the US ahead of the FDA submission and clearance. We've seen an increase in monthly ordering volumes that continue to increase from the previous quarter. We're also currently progressing on track with our Unyvero A30 platform on an IJI panel from synovial fluids.

IJI assays are currently in development and our cartridge development remains on track as well. Our goal is to initiate a prospective multi-center clinical trial in the US on the Unyvero A30 platform pending current ongoing strategic discussions followed by a subsequent FDA submission.

As we progress with development of the A30 for clinical trials and upcoming FDA submission and clearance and commercialization, we have continued to deepen our conversations for licensing and strategic partnering. These conversations are among others that expand across the United States, Europe and Asia.

On the Ares Genetics front we're on track to open Ares Genetics own service lab at OpGen's headquarters in Rockwell, Maryland. This is a major step as we will continue to expand our capabilities in our own backyard.

We're currently undergoing final stages of process validation and have successfully completed the tech transfer from Vienna to Rockville and we look forward to launching our own direct-to-customer services here still in the third quarter 2022 right on schedule. We shared some exciting news from our subsidiary Ares Genetics last month.

In July, Ares Genetics entered into a collaboration agreement with the Belgian National Reference Center for invasive strep pneumonia located at UZ Leuven. This agreement is aimed at developing and evaluating computation tools developed by Ares Genetics for the identification and characterization of streptococcus pneumonia for diagnostic purposes.

The estimated annual deaths that might have been prevented by effective antimicrobial therapy has grown to 1.7 million deaths annually and Ares and UZ Leuven aim to help reduce this number by advancing predictive antibiotic susceptibility testing.

As described above, Ares has the healthiest pipeline for partnering and collaboration since the start of the company. We're seeing a significant amount of growth in their collaboration opportunity funnel. Currently, we have many partners working under NDA and scope discussions with multiple leading companies in this space.

Our update with China's National Medical Product Administration or NMPA is currently still pending COVID-related lockdown restrictions in major cities. Once these restrictions end, we plan to generate data in China for an estimated 600 supplementary clinical samples.

We're planning for submission and potential approval for a pneumonia cartridge and the subsequent commercial launch. We continue to be in very regular communication with the staff at Beijing Clear Bio and their CRO as well as their regulatory advisers.

But at this time, we simply do not have visibility as to the timeline of clinical trials to be possible to get started and executed in China. Furthermore, on August 8th, 2022, we submitted to NASDAQ our request for an additional 180-day period in which we can regain compliance with the minimum bid price of $1 rule.

We believe that we do meet all criteria for such an extension and anticipate NASDAQ's response and decision which we anticipate towards the end of the month. In conclusion, we're pleased with our positive results for the second quarter of 2022 and year-to-date.

We're continuing to see growth especially in the US with direct product sales and Ares with strong business development and an expanding collaboration opportunity funnel. We're planning for an aggressive push in the second half of the year both domestically and with our partners internationally.

We have seen more commercial proposals come across the last few weeks than we had previously seen in several quarters. And we look forward to progressing, these deals along and continue to realize increasing revenues.

As always, we will continue to provide updates on our strategic partnership discussions and progress in our commercialization efforts as they continue throughout 2022. Thank you for your continued support and for participating in this afternoon's call. I would now like to turn the call back to the operator, for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Soo Romanoff from Edison Group. Please go ahead..

Hi congratulations there, Oliver, Albert. There's a lot to cover here so let me jump in with a few questions. The two Acuitas AMR wins were nice to see sizable organization.

Can you give me an idea of the sales cycle and maybe update us on the 60 entities you are targeting? Do you see any increasing opportunities for cross-selling? The second one is there's some nice traction internationally. Could you give us a little bit more color on the geographic and product details? And the last one is more housekeeping.

The 23% growth in the quarter was nice to see. But could you provide us context on the apples-to-apples comparable for the first half decline with the net contribution -- net is contribution in the first quarter of 2021? Thank you..

Yeah. Sure. Now, in terms of Acuitas sales cycles I'd just reiterate what we said and have been saying consistently for quarter-after-quarter sales cycle-wise you anticipate a six-to-12-month sales cycle.

When you look at the two agreements that we actually signed in terms of time to agreement they range from north of six months from a first draft to closing to less than 60 days from first draft of agreement to closing. So overtime I would certainly anticipate that, there's going to be a regular rhythm of agreements.

And again, we have a nice funnel of these opportunities in front of a number of accounts where obviously we have to be working on those opportunities for a number of months. So I wouldn't anticipate there to be a regular flow of additional Acuitas agreements coming through.

And again the guidance six to 12 months, but since we started the broad launch and rollout campaign back in October of 2021 fair to say that a lot of these conversations have also progressed quite nicely over recent months.

In terms of the international business, it's really, obviously, a big focus on the Menarini partnership and then it depends on which country which region you're still seeing Asian markets, places like Singapore suffering from late phases of COVID-related restrictions.

But adding additional international distribution partnerships, that's going to be a recurring theme.

And so, that's really what we're going to be focusing on, working with Menarini to drive the growth across the existing key European markets and adding international distribution whether it's Asia Pacific, Middle East, Latin America, that's going to remain the focus.

And just to remind, I mean, we have for example the collaboration with Annar Dx in Colombia. They've been working very diligently on the launch during the first half. First Unyvero systems are already over there, have been installed at customer hospital labs.

And again, we actually have team members who will be on the ground with the Annar team in Colombia later this quarter, supporting the various launch initiatives. Again, there are opportunities for multiple additional systems and obvious growth in the early phases of that uptick. In terms of the numbers, first half, I mean. you're absolutely right.

If you look at the decline, it's really, on the one hand the growth in the product sales. And then you've got to take out the FISH business, which was roughly $170,000 in the first quarter of last year before we sunset that.

And then the New York State collaboration project, which was a research collaboration that ended and concluded at the end of the third quarter of 2021. So basically you had six months of that with several hundred thousand dollars.

So the underlying product sales of Unyvero in both internationally as well as in the US has grown, but the net-net effect of taking out the FISH business and the non-recurring collaboration basically led to the net decline. .

Ms.

Romanoff, do you have any more questions for the management?.

No that's great. Thank you. .

Ladies and gentlemen, that's all the time we have for today. I will now turn the call back to Dr. Schacht for closing remarks..

I'd like to thank everybody for joining today and please visit the Investors section of our website or our SEC filings for updates on the company. Thank you very much. Have a great day..

Thank you, sir. Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect your line..