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Research: Healthcare
OpGen’s Q322 revenues of $0.4m missed consensus estimates (following a strong Q222 performance), with management attributing the softness to longer than expected sales cycles for ARES and lower Unyvero A50 sales in international markets. Encouragingly though, the quarter was marked by business advancements – signing a second Acuitas AMR Gene Panel commercial contract, completing the UTI test panel patient enrollment in the US, launching ARES sequencing services in the US and announcing collaborations with FIND and BioVersys – which all present monetization opportunities to potentially support revenue uplift starting in FY23. The Q322 miss, however, has triggered a guidance downgrade, with FY22 revenue expected to be $2.5–3.0m (previously 25% y-o-y growth; c $4.5m in revenue). In light of these developments, we withdraw our estimates and valuation while we await further clarity on the installed base, revenue mix and margins.
OpGen |
Guidance revision triggered by softer Q322 |
Q322 results |
Pharma and biotech |
14 November 2022 |
Share price performance
Business description
Analysts
OpGen is a research client of Edison Investment Research Limited |
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OpGen’s Q322 revenues of $0.4m missed consensus estimates (following a strong Q222 performance), with management attributing the softness to longer than expected sales cycles for ARES and lower Unyvero A50 sales in international markets. Encouragingly though, the quarter was marked by business advancements – signing a second Acuitas AMR Gene Panel commercial contract, completing the UTI test panel patient enrollment in the US, launching ARES sequencing services in the US and announcing collaborations with FIND and BioVersys – which all present monetization opportunities to potentially support revenue uplift starting in FY23. The Q322 miss, however, has triggered a guidance downgrade, with FY22 revenue expected to be $2.5–3.0m (previously 25% y-o-y growth; c $4.5m in revenue). In light of these developments, we withdraw our estimates and valuation while we await further clarity on the installed base, revenue mix and margins.
Year end |
Revenue ($m) |
EBITDA* ($m) |
PBT* |
EPS* |
EV/rev (x) |
P/E |
Net debt** ($) |
12/20 |
4.2 |
(19.6) |
(24.7) |
(1.6) |
2.5 |
N/A |
6.7 |
12/21 |
4.3 |
(20.4) |
(35.7) |
(1.2) |
2.4 |
N/A |
(14.4) |
Note: *EBITDA, PBT and EPS are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.
OpGen reported Q322 revenues of $0.4m (down from Q321’s $1.2m) and EBITDA losses of $6.0m (versus a $4.3m loss in Q321). It also wrote off $7.0m in goodwill from the AdvanDx (July 2015) and Curetis (April 2020) acquisitions, reflecting its assessment of the current market valuation of the assets based on progress to date and the outlook. While we await more detail from management, we understand the Q322 miss was due to slower international Unyvero sales as well as longer than anticipated sales cycles for ARES. The revised full-year guidance suggests Q422 revenues will be $0.6–1.1m, which we see as achievable, contingent on the anticipated contribution from the two Acuitas antimicrobial resistance installed systems and improved traction from Unyvero and ARES.
We also anticipate a ramp-up in revenue in FY23, based on our expectation of the two Acuitas systems reaching full capacity, commercial conversions of the strong sales pipeline (Unyvero, ARES and Acuitas) and the contribution from the FIND collaboration ($700k over Q123) and BioVersys clinical trials ($100–200k across 18 months, starting in 2023). Management also anticipates the unblinding of data from the Unyvero UTI trial around year-end 2022 and FDA admission in 2023.
Importantly, OpGen notes that a new Chinese government directive now requires its subsidiary Curetis to resubmit the Unyvero clinical trial application under a new electronic filing system, which could potentially result in the rollout being delayed by 24–30 months. This would push commercialization to 2025, versus our earlier estimate of 2023, and would likely affect our valuation of the company.
We expect the pro forma gross cash balance of c $13.3m (including $3m in net proceeds from the October private placement) to fund operations into Q123 based on anticipated operating cash burn of c $5m per quarter and $700k/month in EIB loan repayment. OpGen will continue to explore other financing opportunities, as well as potential strategic alternative options to strengthen its cash position.
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Research: Healthcare
In its Q322 report, Mendus highlighted key developments in the period, and some significant post-period events, as the company prepares to present key survival and immunomonitoring data from its cancer relapse vaccine, DCP-001, at the American Society of Hematology (ASH) 2022 conference in December. This data will be important in framing DCP-001’s clinical utility versus (and in combination with) the main competitor in acute myeloid leukaemia (AML) maintenance, azacitidine. Mendus’s Q322 financials held no surprises, therefore our forecasts for FY22 and FY23 are largely unchanged. With SEK250m of debt financing secured and a net cash position of SEK15.7m at end-Q322, we expect Mendus’s operations to be sufficiently funded into H224. We value Mendus at SEK1.8bn or SEK9.1 per share (previously SEK1.87bn or SEK9.35 per share).
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