OpGen Inc (OPGN) 2016 Q1 法說會逐字稿

Welcome to the OpGen First Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a Q&A session.

(Operator Instructions)

As a reminder, this conference is being recorded May 12, 2016.

I would now like to turn the conference over to Kim Golodetz. Please go ahead, ma'am.

Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from OpGen, Inc. are Evan Jones, Chief Executive Officer; Tim Dec, Chief Financial Officer and Dr. Kevin Krenitsky, President.

Earlier this afternoon, OpGen announced financial results for the first quarter of 2016. If you have not received this news release or if you would like to be added to the Company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of OpGen, Inc. I encourage you to review the Company's filings with the Securities and Exchange Commission including without limitation, the Company's forms 10-K and 10-Q which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Factors that may affect the Company's results include, but are not limited to, the rate of adoption of its products and services by hospitals, the success of its commercialization efforts, the successful completion of its new product development efforts, the effect on its business of existing and new regulatory requirements and other economic and competitive factors.

The contents of this conference call contains time-sensitive information that is accurate only as of the date of the live call, today May 12, 2016. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that said, I would like to turn the call over to Evan Jones. Evan?

During the first quarter of 2016, and in recent weeks, we continue to make excellent progress in building and enhancing our growing portfolio of molecular information products and services. We achieved meaningful revenue growth from both product sales and laboratory services and accomplished several important commercial and technical milestones.

As many of you know, in recent months, the threat of antibiotic resistance continue to rise in prominence as a fundamental health care issue globally. Our goal as a company is to help address this rising threat by transforming infectious disease management with precision medicine solutions driven by innovation and informatics and clinical diagnostics.

This afternoon we will provide an update on our progress and discuss the financial results for the first quarter. Tim Dec will discuss our financial results. Doctor Krenitsky will review commercial and operations progress and activities. And I will conclude by reviewing strategic development plans at the Company. Tim?

This afternoon I will touch on the highlights of our first quarter financial results and summarize our first quarter 2016 performance. Total revenue for the first quarter of 2016 was $1.1 million compared with $500,000 for the first quarter of 2015, a 128% increase. This increase was attributable to sales of our rapid pathogen ID molecular diagnostic products, following our acquisition last summer.

Gross margin on product sales 63.5% for the first quarter of 2015 compared with 37.3% in the first quarter of 2015. Total operating expenses for the first quarter of 2016 were $5.6 million compared with $3 million for the first quarter of 2015. The increase was primarily due to the following items. Research and development expense of $2 million in the first quarter of 2016 compared with $1.1 million in the first quarter of 2015. The increase in expense was due to costs related to the QuickFISH digital image program.

General and administrative expenses of $1.5 million in the first quarter of 2016 compared with $700,000 in the first quarter of 2015. The increase was primarily due to increased salary cost, public company costs and stock-based compensation. Sales and marketing expense of $1.4 million in the first quarter of 2016 compared to $1 million in the first quarter of 2015. This modest increase in expense was due to additional salary costs.

The Company reported a net loss of $4.5 million for the first quarter of 2016 compared with a net loss of $2.6 million for the first quarter of 2015. The net loss available to common stockholders for the first quarter of 2016 was $4.5 million or $0.36 per share compared with the net loss available to the common stockholders for the first quarter of 2015 of $2.8 million or $5.61 per share. Turning to the balance sheet, the Company had cash and cash equivalents of $4 million as of March 31 compared with $7.8 million as of December 31, 2015.

Earlier today we announced the pricing of a private placement financing. With gross proceeds of $10.4 million in which, upon closing, we will issue units consisting of one share of common stock, and a warrant to acquire 0.75 of a share of common stock for an expected total issuance of 9.1 million shares of common stock, and 6.8 million stock purchase warrants. The warrants are exercisable at the option of the holder, beginning 90 days after issuance for a period of five years and an exercise price equal to 1.25% of the common stock. The net proceeds of the transaction will be used for working capital and other general corporate purposes.

We are very pleased with the progress we have made as a company since our IPO last year. Early next week after the closing of our equity financing, we will announce the investment banking team and the investors in the transaction. We are very pleased to have successfully completed this transaction in these very difficult capital markets.

As I mentioned previously on our calls, we will continue to monitor our operating expense and burn rate very carefully. However, investment in R&D and sales and marketing continue to be important to our growth strategy. The financing we announced today supports the strength of what we are building and will be instrumental in supporting these investments for what we believe will be an exciting 2016 and beyond.

With that, I will turn the call over to Kevin, who will provide an update on the commercial and operational activities. Kevin?

We've continued to make steady progress with our commercial activities on several fronts. Adoption of our QuickFISH products continue with the addition of several large- and mid-sized hospital accounts since our last call.

In addition, we have completed the patient accrual phase of the HARP-DC study, which is the large metro area MDRO surveillance program that we have mentioned previously. As a brief recap, 15 top healthcare facilities in the Washington D.C. Metro area came together with OpGen and the D.C. Hospital Association, as well as the CDC to conduct the first ever citywide effort in the united states, to quantify the superbug problem. As noted in the recent press release, the prevalence of CRE pathogens was between 5% and 6%, or about 1 in 20 patients.

We are currently engaged in follow-on discussions regarding next steps as the results support ongoing surveillance of hospital patients. We believe this ongoing work will show both positive clinical utility, as well as beneficial health economic outcomes. We have received strong feedback that the combination of OpGen's testing capabilities along with our Lighthouse bioinformatics capabilities, can provide a comprehensive solution to the current issues hospital systems face with the implementation of effective antimicrobial stewardship programs.

To that point we are planning on the launch of a novel comprehensive product and service solution in the second half of the year. We will share more details as they become available. However, given the scope of our current CLIA lab testing and rapid diagnostic client base, we are well on our way to deploy this integrated offering for both MDRO surveillance and rapid diagnosis in acutely ill patients all grounded and anchored by our Lighthouse data warehouse.

Speaking of our database efforts, we have continued to make excellent progress in the building of our globally applicable Lighthouse data warehouse. The official commercial launch of the Acuitas Lighthouse portal is planned for later this Spring.

The Lighthouse portal allows all OpGen clients to access and track all of our testing and surveillance results in one user-friendly interface. It's a very powerful tool to help fight the growing MDRO problem and also serves as a definitive lab portal for patient-specific testing results, allowing better clinical decision making. All of the institutions in the HARP study, for example, have been using the portal since the study inception last Fall.

Regarding the large health outcomes initiative with one of the nation's most respected integrated health networks, we have successfully completed the first phase of this multiphase project. Phase one of the study, which was completed in the first quarter, included a retrospective analysis of over 3 million health records to document the scope of the current MDRO incidents and also demonstrated the value of preemptive knowledge in earlier intervention in patients who become acutely ill with highly resistant pathogens.

We are now documenting the cost and burden of the realtime antibiotic resistance MDRO incidents in the system. The results are consistent with expectations and should be a powerful tool to help drive adoption of our products and services.

We will continue to report on this important initiative during 2016 and beyond. But as I previously mentioned, the initiative is anticipated to have multiple phases including prospective implementation phases that will employ real time data generation to manage and guide decisions in settings where MDRO affected patients are found. We will be discussing and disclosing much more about this seminal study as it progresses.

As many of you are aware, current projections have the MDRO epidemic, if remaining unchecked, causing 10 million deaths per year by 2050, surpassing even cancer. These are alarming projections. OpGen already has several on-market and service offerings to help halt the progression of this epidemic and to aid physicians in guiding patient therapy.

In addition, we are building tomorrow's solutions to fight the problem even more aggressively. With the combination of world-class bioinformatics tools, our Lighthouse database and rapid diagnostics, we're posed to combat the program globally.

I will now turn the call over to Evan. Evan?

As highlighted by Kevin and Tim, we are making great progress developing our molecular information business. In the remaining time, I will comment on our R&D programs, corporate development activities and key strategic initiatives for the Company.

The commercial launch of our Lighthouse portal is planned for later this Spring. This is a complete solution that integrates Acuitas molecular testing, Lighthouse profiling and whole genome sequencing along with real-time patient management information. At the ECCMID conference in April, we previewed our new automated QuickFISH digital imager.

As noted previously, we anticipate the international launch of the device and FDA submissions in the first half of 2017. Customer feedback has been positive and we continue to believe this product will support the long-term growth prospects for our FISH products and related product and service offerings. A digital imager will also enhance our competitive position in the marketplace.

As noted on our last conference call, we are developing an innovative new molecular method for rapid antibiotic resistance analysis. We now have a significant focus on this program with the objective of achieving key validation milestones before the end of 2016. The program includes assay development, further development of the Lighthouse data warehouse and proprietary analytics.

This technology will be integrated into a series of Acuitas offerings; we expect commercialization will start in 2017. Our longer term goal is to develop and provide fully automated, one-hour rapid tests for helping physicians manage antibiotic decision making.

During 2016, we are working to accomplish a number of strategic initiatives. These include expanding our pharma and health system relationships, strengthening our global distribution network, accessing additional enabling products, services and technologies and strengthening our balance sheet.

Earlier today, we announced the pricing of a $10 million equity financing. The offering is an important step towards improving our overall financial position. We anticipate making additional progress on these initiatives during 2016.

We were encouraged by the results of the first quarter. Its total revenue increased 128% to $1.1 million up from $500,000 in the prior year period. Looking forward, we anticipate continued progress in revenue growth for the Company during the year as we build momentum for our rapid diagnostics, bioinformatics and CLIA lab service offerings.

Thank you for your support and for taking the time to join us today. Operator, we are ready to take questions.

(Operator Instructions)

We have no questions in queue at this time.

I'd like to thank all of you for participating in today's conference call and we look forward to joining you and sharing our progress on our next call. Thank you very much.

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