OpGen, Inc. (NASDAQ:OPGN) is a precision medicine company that has faced significant challenges in recent years. The company, along with its subsidiaries Curetis and Ares Genetics, developed and commercialized molecular microbiology solutions to help guide clinicians with more rapid and actionable information about life-threatening infections. However, the company's financial performance has been disappointing, with annual net income of -$32,668,530, annual revenue of $3,418,320, annual operating cash flow of -$14,319,542, and annual free cash flow of -$15,119,954 in the most recent fiscal year.

Financials

In the first quarter of 2024, the company's total revenue decreased by approximately 82% to $168,149, compared to $913,444 in the same period of 2023. This significant decline was primarily attributable to the exclusion of Curetis' and Ares Genetics' product sales in the 2024 period following their insolvency filings in November 2023 and the resulting deconsolidation of the subsidiaries. The company's laboratory services revenue increased by 24% in the first quarter of 2024 compared to the same period in 2023, due to an increase in the number of AREScloud subscriptions sold. However, the company's collaboration revenue decreased by 100% in the first quarter of 2024 compared to the same period in 2023, as the company is no longer a party to the collaboration agreement with FIND following Curetis' insolvency filing.

The company's total operating expenses for the first quarter of 2024 decreased by approximately 69% to $1,871,367, compared to $5,983,555 in the same period of 2023. This decrease was primarily attributable to the company no longer including expenses related to Curetis and Ares Genetics in the consolidated figures as a result of the deconsolidation following their insolvency filings, as well as the scaling down of operations at the company while it pursues a strategic transaction.

The company's total other income (expense) for the first quarter of 2024 increased to a net income of $2.1 million, compared to a net expense of $0.7 million in the same period in 2023. This was primarily due to the company's recording of a gain on lease indemnification of $2.1 million in the first quarter of 2024. Effective April 1, 2024, the company entered into a lease assignment agreement where the company assigned the lease at its Rockville, Maryland headquarters to another tenant, and the new tenant indemnified the company from any liabilities resulting from obligations arising on or after the lease assignment date.

Liquidity

As of March 31, 2024, the company had cash and cash equivalents of $0.3 million, compared to $1.2 million at December 31, 2023. The company has historically funded its operations primarily through external investor financing arrangements, and has raised funds in 2024 and 2023, including a best-efforts public offering in January 2023 that raised approximately $6.9 million in net proceeds, a best-efforts public offering in May 2023 that raised approximately $3.0 million in net proceeds, and a securities purchase agreement with a single investor in October 2023 that was expected to raise $1.0 million in gross proceeds, of which $250,000 was received.

In March 2024, the company entered into a securities purchase agreement with David E. Lazar, pursuant to which the company agreed to sell 3,000,000 shares of Series E Convertible Preferred Stock to Mr. Lazar at a price of $1.00 per share for aggregate gross proceeds of $3.0 million. Mr. Lazar has paid $550,000 to date, with the remaining $2.45 million expected to be funded in the third quarter of 2024. The company believes that the current cash, including the funds received from Mr. Lazar, will only be sufficient to fund operations into the third quarter of 2024. This has led management to conclude that there is substantial doubt about the company's ability to continue as a going concern.

Recent Developments

The company's financial challenges have been exacerbated by the insolvency filings of its subsidiaries, Curetis and Ares Genetics, in November 2023. The insolvency proceedings of Curetis and Ares Genetics were adjudicated under the insolvency laws of Germany and Austria, respectively, and the insolvency administrators assumed control over the assets and liabilities of the subsidiaries, eliminating the authority and power of the company and its officers to act on behalf of the subsidiaries. As a result, the company no longer includes Curetis and Ares Genetics in its consolidated financial statements.

In April 2024, the insolvency administrator for Curetis notified the company that all of Curetis' assets were sold to Camtech Pte Ltd., a Singaporean family office. In April 2024, the insolvency administrator for Ares Genetics notified the company that all of Ares Genetics' assets were sold to bioMerieux S.A. Since the insolvency filings and through the three months ended March 31, 2024, the company continues to sell the Curetis Unyvero products to its existing customers in the United States via drop shipments from Curetis directly to customer locations.

Outlook

The company's focus going forward under new leadership and a new Board of Directors, appointed in connection with the March 2024 Purchase Agreement with David E. Lazar, will be on the sale of the company or the identification of a privately held company to complete a reverse merger or similar strategic transaction. The company's ability to execute on this strategy and secure additional funding will be critical to its future viability.

In terms of the company's geographic breakdown, all of its revenue in the first quarter of 2024 was generated from domestic sales, compared to 87% domestic and 13% international in the first quarter of 2023. This shift is due to the exclusion of Curetis' and Ares Genetics' international sales following their insolvency filings.

Regarding the company's liquidity situation, as of March 31, 2024, the company had cash and cash equivalents of $0.3 million, compared to $1.2 million at December 31, 2023. The company's current cash is only expected to be sufficient to fund operations into the third quarter of 2024, which has led management to conclude that there is substantial doubt about the company's ability to continue as a going concern. The company will need to secure additional funding or identify a strategic transaction partner in the near future to continue its operations.

In terms of the company's financial ratios, as of March 31, 2024, the company had a current ratio of 0.05, a quick ratio of 0.05, and a cash ratio of 0.02, indicating a very limited ability to meet its short-term obligations. The company's debt ratio was 4.40, and its debt-to-equity ratio was -1.22, reflecting a highly leveraged capital structure.

Business Overview

OpGen, Inc. was incorporated in Delaware in 2001 and, until November 2023, operated as a precision medicine company harnessing the power of molecular diagnostics and informatics to help combat infectious disease. The company, along with its subsidiaries Curetis and Ares Genetics, developed and commercialized molecular microbiology solutions to guide clinicians with more rapid and actionable information about life-threatening infections. However, the company's financial performance has been poor, and it has faced significant challenges, including the insolvency filings of its subsidiaries. The company is now focused on exploring strategic alternatives, including the sale of the company or a reverse merger with a privately held company.

Risks and Challenges

In terms of risks, the company faces significant liquidity challenges, as its current cash is only expected to be sufficient to fund operations into the third quarter of 2024. The company will need to secure additional funding or identify a strategic transaction partner in the near future to continue its operations. Additionally, the company's financial performance has been poor, with annual net income of -$32,668,530, annual revenue of $3,418,320, annual operating cash flow of -$14,319,542, and annual free cash flow of -$15,119,954 in the most recent fiscal year. The company's ability to execute on its strategic alternatives and return to profitability is uncertain.

Conclusion

Overall, OpGen, Inc. is facing significant challenges as it navigates the aftermath of the insolvency filings of its subsidiaries and seeks to secure its long-term viability through strategic alternatives. The company's financial performance has been disappointing, and its liquidity situation is precarious. Investors should closely monitor the company's progress in identifying and executing on a strategic transaction that can provide the necessary funding and direction to turn the business around.