OpGen — Interim milestone achieved for R&D collaboration

OpGen (NASDAQ: OPGN)

Last close As at 21/05/2024

USD0.49

0.05 (11.62%)

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Research: Healthcare

OpGen — Interim milestone achieved for R&D collaboration

OpGen has announced the achievement of two interim milestones as part of its research project (PREPLEX) in collaboration with InfectoGnostics (a research campus for diagnosis of infectious diseases and pathogens) under Jena University, Germany. The initial joint R&D project, announced in September 2020, aims to develop AI-based assay for phenotypic carbapenemase resistance in Gram-negative bacteria. Completion of the interim milestones is related to the identification of novel markers for phenotypic carbapenemase resistance in Klebsiella pneumoniae and Pseudomonas aeruginosa (two pathogens on the World Health Organization’s list of concern), which was further validated by the OpGen’s ARESdb database. This encouraging development presents the opportunity for a potential expansion of the project. Given the company’s current focus on building AI models to predict antibiotic susceptibility, we believe this development provides further momentum to OpGen’s plans.

Adam McCarter

Written by

Adam McCarter

Associate Analyst

Laboratory Opgen

Healthcare

OpGen

Interim milestone achieved for R&D collaboration

Collaboration update

Pharma and biotech

4 April 2023

Price

US$1.33

Market cap

US$7m

Pro-forma net cash (US$m) at 31 December 2022 (including net proceeds from January 2023 equity raise)

2.4

Shares in issue

5.5m

Free float

92.5%

Code

OPGN

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

Business description

OpGen is primarily a lab diagnostic manufacturer focused on identifying and treating bacterial infections. With the acquisition of Curetis in H120, management has the technology necessary to detect pathogens and predict resistance. Through the dual platform offering of the AMR Gene Panel and Unyvero, the company can provide diagnostic results in hours instead of days under legacy technologies.

Analysts

Adam McCarter

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

OpGen is a research client of Edison Investment Research Limited

OpGen has announced the achievement of two interim milestones as part of its research project (PREPLEX) in collaboration with InfectoGnostics (a research campus for diagnosis of infectious diseases and pathogens) under Jena University, Germany. The initial joint R&D project, announced in September 2020, aims to develop AI-based assay for phenotypic carbapenemase resistance in Gram-negative bacteria. Completion of the interim milestones is related to the identification of novel markers for phenotypic carbapenemase resistance in Klebsiella pneumoniae and Pseudomonas aeruginosa (two pathogens on the World Health Organization’s list of concern), which was further validated by the OpGen’s ARESdb database. This encouraging development presents the opportunity for a potential expansion of the project. Given the company’s current focus on building AI models to predict antibiotic susceptibility, we believe this development provides further momentum to OpGen’s plans.

Year

end

Revenue
($m)

EBITDA*
($m)

PBT*
($m)

EPS*
($)

P/E
(x)

Net debt/ (cash) ($m)

12/21

4.3

(20.4)

(35.7)

(23.4)

N/A

(14.4)

12/22

2.6

(20.6)

(25.3)

(10.4)

N/A

4.4

12/23e

4.7

(17.7)

(21.0)

(3.8)

N/A

17.6

12/24e

7.9

(15.3)

(19.6)

(3.6)

N/A

37.5

Note: *Figures are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments. EPS adjusted for the 1:20 share consolidation in January 2023.

As a reminder, Curetis (OpGen’s Austria-based subsidiary) collaborated on an R&D project with InfectoGnostics Research Campus under Jena University (a public research university in Germany) in September 2020. The five-year project (until August 2025) aims to develop molecular diagnostics for resistance to carbapenems (antibiotics used for multidrug-resistant bacterial infections), along with resistance mechanisms in difficult-to-treat, Gram-negative pathogens like enterobacteria, pseudomonas and acinetobacter. We note that carbapenems are often last-resort antibiotics for treating Gram-negative bacteria that show resistance against cephalosporins, and this resistance usually arises from conditions like porin loss or efflux pump overexpression. As part of the project, Curetis was to provide support in identifying detection methods for carbapenem resistance based on porin loss and efflux pump overexpression. While the project started with total funding of more than €350k, provided by the German Federal Ministry of Education and Research to Curetis, OpGen currently estimates a total project volume of c $0.9m.

Management anticipates that milestone achievement might result in funding of another few hundred thousand dollars for its Curetis research team in the near to medium term, which could provide a further boost to its research capabilities. We believe the latest development reinforces management’s commitment to AI-based diagnostics capabilities and may open up further opportunities for such collaborations. With recent management guidance of a cash burn rate of $4.5–5m per quarter, we estimate that OpGen has a cash runway to Q223, with a fund-raising requirement of $15m expected in FY23.

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 £60,000 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.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 2023 Edison Investment Research Limited (Edison).

Australia

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

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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