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Nine things investors need to know about OpGen
The fight against so-called superbugs costs the United States an estimated $20bn each year and is set to spiral into a global pandemic, causing up to 10 million deaths by 2050. However, according to our research, Nasdaq-listed OpGen, which has developed fast testing technology designed to stave off this bleak future, is currently undervalued by the market.
Here are nine things investors need to know about the business, the problem it tackles and its investment case.
#1: Potential for upside
Whilst Edison’s current valuation of OpGen is $2.67 per share, the 12-month analyst consensus puts the stock at $4.56. On 8 July 2021, it closed at $2.23. As OpGen moves out of its development phase and into commercialising the tech it has created, newsflow has the potential to transform the market’s view.
#2: The superbug problem – also known as antimicrobial resistance (AMR) – is very real
AMR sits alongside COVID-19 in the World Health Organization’s (WHO) top 10 global health threats to humanity. WHO says that the success of modern medicine is at increased risk if a solution is not found, validating OpGen’s potential market as large and in urgent need.
#3: Slow testing is a hidden driver of danger
Hospital tests for infections are still based on old and slow technologies, often taking days. In the meantime, to save the patient, doctors administer expensive broad-spectrum antibiotics. This depletes our last lines of defence, generates ever-more resistant microbes and could cost many more lives in the years to come. This is why the WHO has warned that fast tests are needed.
#4: Fast testing technology is set to remain relevant for decades
There is no magic solution to AMR. To overcome resistant bacteria, viruses, fungi and parasites, a slew of new drugs is needed, and without sufficient profit or policy intervention, these treatments – especially antibiotics – are in short supply. Extending the lifespan of effectiveness for current antibiotics is therefore a medical priority.
#5: OpGen increases the length of time antibiotics remain effective
OpGen was founded with a mission to break the AMR cycle. It has developed the next generation of infection diagnostic technologies built on genomics and bioinformatics to return results in a few hours, identifying microbes precisely – via their DNA. The technology then advises doctors of the most effective drug treatment. By doing so, the rate of mutation will decrease, and the lifespan of effective drugs will increase.
#6: OpGen’s impact could be felt globally
The business has also developed artificial intelligence (AI) and machine learning (ML) based tools, which deliver powerful prediction models and outbreak tracking. Together with fast tests, use of the wrong antibiotics should decrease and the acceleration of AMR across the world could slow.
#7: Green lights are becoming OpGen’s new normal
China’s authorities have approved OpGen’s Unyvero system – one of the components required for launch. If other elements are approved it will trigger an eight-year deal with partner Beijing Clear Biotech worth €150m. Also, after a hiatus due to COVID-19, the FDA expects to finish its review of a new OpGen product by late August. Meanwhile, the New York State Department of Health has expanded its collaboration to increase testing volumes and data collection. Our Q121 results note has more detail on OpGen’s commercial progress.
#8: Profitability requires capital but is now in view
OpGen has $39.4m in gross cash and $19.7m in debt. We forecast that it will need to raise c $20m in additional capital to reach profitability, currently expected in 2023. Read our deeper analysis here.
#9: Potential gains may not be immediate
Even when there is enormous need, medical technologies take longer than most to diffuse across global markets. Regulation lengthens time to market while competing spending priorities in healthcare throttle back adoption. However, as the world continues to learn from the current COVID-19 pandemic – medically and economically – experts believe the focus will emerge to ensure AMR does not spiral out of control. On this basis, we believe there is significant potential for upside.
OpGen is a client of Edison Group
For the latest content on OpGen, visit here.
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