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An increased focus on Unyvero

OpGen 19 November 2020 Update
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OpGen

An increased focus on Unyvero

Financial update

Pharma & biotech

19 November 2020

Price

US$1.97

Market cap

US$40m

Net debt ($m) at 30 September 2020 plus ATM offering

8.1

Shares in issue

20.2m

Free float

96.6%

Code

OPGN

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(16.9)

(4.8)

78.3

Rel (local)

(18.8)

(9.6)

56.0

52-week high/low

US$4.0

US$1.0

Business description

OpGen is a diagnostic company focused on revolutionizing the identification and treatment of bacterial infections. Following the merger with Curetis, the company has technology to detect pathogens and predict resistance. Importantly, both the AMR Gene Panel and Unyvero platforms have the ability to provide results in hours instead of days like current methods require.

Next events

Acuitas Gene Panel (isolates) 510(k) clearance

2020/21

ARESdb exclusive partnership

2021

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

OpGen is a research client of Edison Investment Research Limited

OpGen Q320 sales were $1.1m, up 63% from Q319, thanks to the merger with Curetis. The company announced that it will be increasing its focus on the Unyvero platform, partly due to its level of automation and ease-of-use and partly due to the desire to improve the company’s operating efficiency. In light of this, OpGen has decided to discontinue the legacy FISH products business as of mid-2021 and also to discontinue the Acuitas AMR Gene Panel clinical trial in urine samples for complicated urinary tract infections (cUTI). The company plans to initiate a clinical trial program for cUTI with the Unyvero platform in mid-2021, expanding into invasive joint infections (IJI) in the US later in that year.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/18

2.9

(13.4)

(44.45)

0.0

N/A

N/A

12/19

3.5

(11.9)

(7.38)

0.0

N/A

N/A

12/20e

3.9

(25.7)

(1.62)

0.0

N/A

N/A

12/21e

10.5

(24.7)

(1.21)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Leading IVD partner exercises option on ARESdb

In Q320, OpGen completed an R&D and option agreement for ARESdb with an unnamed leading in vitro diagnostic (IVD) corporation. That partner in October exercised its option to negotiate an exclusive license agreement. The size and scope of the agreement are being negotiated but may include an upfront license or technology fee, R&D funding as well as milestone and royalty payments.

Bacterial isolates 510(k) clearance update

OpGen filed for 510(k) clearance of its Acuitas AMR Gene Panel test in bacterial isolates with the FDA in Q219. The process appears to be nearing completion, with the company submitting a formal response to additional FDA information requests in October 2020. The company believes it has addressed all of the FDA’s requests for additional information with timing of clearance unknown, as the agency prioritizes emergency use authorizations related to the COVID-19 pandemic for at least the remainder of the year.

Platform consolidation

With the announced platform consolidation to increase the focus on the Unyvero product line, the company expects to realize significant operational synergies from regulatory, quality management, logistic and service standpoints.

Valuation: $59.1m or $2.93 per share

We have decreased our valuation from $68.4m or $3.47 per basic share to $59.1m or $2.93 per share. The decrease is mainly due to higher net debt, the elimination of the legacy FISH business and a higher number of shares outstanding. The company had $10.5m in gross cash at the end of Q320 and added an additional $0.8m through an at-the-market (ATM) offering after the end of the quarter.

Q320 results

OpGen reported revenue of $1.1m for Q320, up 63% compared to $0.6m reported in the same quarter last year mainly due to the inclusion of Curetis products. Product sales were up 5% to $0.6m while collaboration revenue was up 356% to $0.3m, mainly due to Ares Genetics and its partnership with a global IVD corporation. Laboratory services revenue was $0.1m.

R&D expenses increased from $1.1m in Q319 to $2.4m, while SG&A expenses were up from $2.0m to $3.3m. OpGen’s Q320 operating loss was $6.2m (vs $6.5m in Q220 and $3.4m in Q319) and the post-tax loss was $7.7m, up from $3.5m in the same quarter last year.

The company announced in October that it will be increasing its focus on the Unyvero platform. In light of this focus, OpGen has decided to discontinue the legacy FISH products business as of mid-2021 and also to discontinue the Acuitas AMR Gene Panel clinical trial in urine samples for cUTI. The company plans to initiate a clinical trial program for cUTI with the Unyvero platform in mid-2021, expanding into IJI in the US later in that year (the Unyvero system has already received FDA clearance for lower respiratory tract infections/pneumonia in the US). Besides providing users with an improved experience due to Unyvero’s level of automation and ease of use, the company expects to realize significant operational synergies from regulatory, quality management, logistic and service standpoints from having fewer platforms.

The 510(k) clearance process for the Acuitas AMR Gene Panel test in bacterial isolates is ongoing. The company submitted a formal response to additional FDA information requests in October 2020. The company believes it has addressed all of the FDA’s requests for additional information, with the timing of clearance unknown as the agency prioritizes emergency use authorizations related to the COVID-19 pandemic for at least the remainder of the year. OpGen expects to launch the product very shortly after receiving clearance from the FDA.

With regards to China, where OpGen is partnered with Beijing Clear Biotech, there continues to be progress towards approval for the Unyvero system, which the company currently expects to occur in 2021. The current agreement with Beijing Clear Biotech includes minimum purchase levels of 360 Unyvero A50 systems as well as over 1.5m Unyvero cartridges over the duration of the agreement following regulatory clearance by the National Medical Products Administration (NMPA). Based upon previously agreed transfer price levels, this volume equates to €60m in cumulative revenues from China over the first five years for OpGen and then €30m annually over the following three years.

Subsidiary Ares Genetics also continues to make progress. OpGen in Q320 completed an R&D and option agreement for ARESdb with an unnamed leading global IVD corporation. That partner in October exercised its option to exclusively negotiate a potential exclusive license agreement for human clinical diagnostic use. The size and scope of the agreement are being negotiated but may include an upfront license or technology fee, R&D funding as well as milestone and royalty payments.

Valuation

We have decreased our valuation from $68.4m or $3.47 per basic share to $59.1m or $2.93 per share. The decrease is mainly due to higher net debt, the elimination of the legacy FISH business and a higher number of shares outstanding.

Exhibit 1: OpGen valuation table

Product

Main indication

Status

Probability of successful commercialization

Launch year

Peak sales ($m)

Patent protection

Economics

rNPV
($m)

OpGen/Curetis Diagnostic Platform

cUTI, lower respiratory

Market (RUO)/registration

40%

2020

183

2039

100.0%

67.2

Total

 

 

 

 

 

 

 

67.2

Pro forma net cash/(debt) (Q320 plus ATM)

(8.1)

Total firm value

59.1

Total basic shares (m)

20.2

Value per basic share ($)

2.93

Options (m)

2.2

Total number of shares (m)

22.4

Diluted value per share ($)

2.64

Source: Edison Investment Research

Financials

Our FY20 revenue estimate has decreased from $4.6m to $3.9m, due to a lower run rate in the quarter. Additionally, we have lowered our FY21 revenue estimate from $12.5m to $10.5m primarily due to the elimination of the FISH business in the middle of the year. We have also made changes to our operating expense estimates. We have decreased our SG&A estimate by $0.6m for FY20 and by $2.1m for FY21 due to continued expense controls in this area. We have decreased our R&D estimate by $1.1m for FY20 in part because of the discontinuation of the Acuitas AMR Gene Panel trial in urine, however we have increased our FY21 R&D estimate by $2.0m due to the clinical trial costs associated with Unyvero in cUTI and IJI infections.

The company had $10.5m in gross cash at the end of Q320 and added an additional $0.8m through an ATM offering after the end of the quarter. There is also $18.2m in Q320 debt on the balance sheet and $1.2m in short-term debt. We model an additional financing need of $36.6m ($32.4m previously) in total through to profitability in FY23 (including $6.6m through the end of FY20 and an additional $13.5m in FY21, though we believe the company has enough runway to wait until FY21 to raise additional capital). As per our policy, we assume future financings are to be funded with illustrative debt.

Exhibit 2: Financial summary

$'000s

2018

2019

2020e

2021e

Year end 31 December

GAAP

GAAP

GAAP

GAAP

PROFIT & LOSS

Revenue

 

 

2,946

3,499

3,866

10,497

Cost of Sales

(1,848)

(1,632)

(3,459)

(5,511)

Gross Profit

1,098

1,867

407

4,986

Sales, General and Administrative Expenses

(8,601)

(8,496)

(12,601)

(13,861)

Research and Development Expense

(5,677)

(5,121)

(10,130)

(12,359)

EBITDA

 

 

(13,180)

(11,741)

(22,324)

(21,234)

Operating Profit (before amort. and except.)

 

 

(13,180)

(11,741)

(22,324)

(21,234)

Intangible Amortisation

0

0

0

0

Other

0

10

0

0

Exceptionals

0

(521)

(751)

0

Operating Profit

(13,180)

(12,261)

(23,074)

(21,234)

Net Interest

(186)

(188)

(3,349)

(3,483)

Other

(2)

2

(247)

0

Profit Before Tax (norm)

 

 

(13,366)

(11,928)

(25,673)

(24,717)

Profit Before Tax (FRS 3)

 

 

(13,368)

(12,446)

(26,671)

(24,717)

Tax

0

0

0

0

Deferred tax

(0)

(0)

(0)

(0)

Profit After Tax (norm)

(13,366)

(11,928)

(25,673)

(24,717)

Profit After Tax (FRS 3)

(13,368)

(12,446)

(26,671)

(24,717)

Average Number of Shares Outstanding (m)

0.3

1.6

15.5

20.4

EPS - normalised ($)

 

 

(44.45)

(7.38)

(1.62)

(1.21)

EPS - Reported ($)

 

 

(44.49)

(7.70)

(1.72)

(1.21)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

3,167

3,755

29,601

31,390

Intangible Assets

1,686

1,418

23,988

25,809

Tangible Assets

1,222

2,133

5,312

5,280

Other

259

203

301

301

Current Assets

 

 

5,783

6,667

14,735

4,666

Stocks

544

473

2,975

2,975

Debtors

374

568

423

445

Cash

4,572

2,708

11,337

1,246

Other

293

2,918

0

0

Current Liabilities

 

 

(4,381)

(4,939)

(9,415)

(8,258)

Creditors

(3,983)

(4,565)

(8,258)

(8,258)

Short term borrowings

(399)

(374)

(1,157)

0

Long Term Liabilities

 

 

(1,260)

(1,190)

(25,648)

(40,234)

Long term borrowings

(660)

(329)

(24,788)

(39,288)

Other long term liabilities

(600)

(860)

(860)

(946)

Net Assets

 

 

3,309

4,293

9,274

(12,437)

CASH FLOW

Operating Cash Flow

 

 

(11,074)

(11,505)

(23,277)

(22,115)

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(137)

(32)

(13)

(14)

Acquisitions/disposals

0

0

1,267

0

Financing

14,128

13,062

24,421

0

Dividends

0

0

0

0

Other

(293)

(3,836)

0

0

Net Cash Flow

2,624

(2,310)

2,397

(22,129)

Opening net debt/(cash)

 

 

(836)

(3,514)

(2,005)

14,608

HP finance leases initiated

0

0

0

0

Exchange rate movements

(13)

4

(1,067)

0

Other

66

798

-17943

-1305

Closing net debt/(cash)

 

 

(3,514)

(2,005)

14,608

38,042

Source: Company reports, Edison Investment Research


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This report has been commissioned by OpGen and prepared and issued by Edison, in consideration of a fee payable by OpGen. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by OpGen and prepared and issued by Edison, in consideration of a fee payable by OpGen. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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