Business Overview and History
OpGen, Inc. (OPGN) is a dynamic company that has undergone a remarkable transformation in recent years. Founded in 2001, the company originally operated as a precision medicine company, harnessing the power of molecular diagnostics and informatics to combat infectious diseases. However, in 2023, the company faced significant challenges as its subsidiaries, Curetis GmbH and Ares Genetics GmbH, filed for insolvency, leading to the deconsolidation of these entities from OpGen's financial statements.
OpGen's journey began in 2001 when it was incorporated in Delaware. The company initially focused on precision medicine, leveraging molecular diagnostics and informatics to combat infectious diseases. OpGen, along with its subsidiaries Curetis GmbH and Ares Genetics GmbH, developed and commercialized molecular microbiology solutions to provide clinicians with rapid and actionable information about life-threatening infections, aiming to improve patient outcomes and decrease the spread of infections caused by multidrug-resistant microorganisms.
A significant milestone in OpGen's history occurred in April 2020 when the company completed a business combination transaction with Curetis N.V., a public company in the Netherlands. Through this transaction, OpGen acquired all the shares of Curetis GmbH and certain other assets and liabilities of Curetis N.V., including Ares Genetics GmbH. This strategic move expanded OpGen's product offerings and global footprint, positioning the company for growth in the molecular diagnostics market.
However, the company faced a major setback in November 2023 when its subsidiaries Curetis GmbH and Ares Genetics GmbH filed for insolvency in Germany and Austria, respectively. The insolvency administrators assumed control over the assets and liabilities of these subsidiaries, eliminating OpGen's authority and power to act on their behalf. As a consequence, OpGen was required to deconsolidate Curetis and Ares Genetics from its financial statements, marking a significant turning point in the company's trajectory.
Following these events, OpGen has been working to reposition itself. In March 2024, the company entered into a securities purchase agreement with David E. Lazar, whereby OpGen agreed to sell 3.00 million shares of Series E Convertible Preferred Stock to Mr. Lazar for aggregate gross proceeds of $3.00 million. This transaction resulted in a change in the company's Board of Directors, with Mr. Lazar being appointed as the new Chairman.
In July 2024, Mr. Lazar sold his Series E Preferred Stock to AEI Capital Ltd., and AEI Capital Ltd. subsequently purchased the remaining 2.45 million shares of Series E Preferred Stock from the company in August 2024. All 3.0 million shares of Series E Preferred Stock were then converted into 7.2 million shares of OpGen's common stock.
Under the new leadership, OpGen is planning to scale down its legacy operations and sell the remaining Unyvero assets in inventory, with the intention of exiting the Unyvero business. Going forward, the company is positioning itself to launch a new business in the financial technology industry, supporting digital investment banking activities, and potentially engaging in the provision of listing consultancy services to international companies seeking to list their securities on exchanges.
Financial Performance and Liquidity
OpGen's financial performance has been significantly impacted by the challenges faced by its subsidiaries. For the year ended December 31, 2023, the company reported revenue of $3.42 million, a net loss of $32.67 million, and negative operating cash flow of $14.32 million. The company's annual free cash flow for 2023 was negative $15.12 million.
The financial situation deteriorated further in 2024. For the third quarter of 2024, OpGen reported no revenue, primarily due to the exclusion of Curetis and Ares Genetics product sales following their insolvency filings in November 2023. Despite the lack of revenue, the company reported a net income of $8.93 million for Q3 2024, primarily due to recognizing a gain on extinguishment of debt following the settlement of the EIB loan guaranty and a gain on settlement of compensation expenses. The operating cash flow for Q3 2024 was negative $2.83 million, with free cash flow also at negative $2.83 million.
As of September 30, 2024, OpGen had cash and cash equivalents of $1.63 million, up from $1.20 million at the end of 2023. The company's current liquidity situation has been bolstered by the financing arrangements it has entered into, such as the securities purchase agreement with David E. Lazar and the August 2024 Securities Purchase Agreement with AEI Capital Ltd.
In August 2024, OpGen entered into the August 2024 Securities Purchase Agreement with AEI Capital Ltd., which grants the company the right to sell shares of its common stock to AEI Capital Ltd. for an aggregate value of up to $9.00 million, with the ability to sell shares until December 31, 2025. As of September 30, 2024, the company has already sold $2.00 million worth of shares to AEI Capital Ltd., leaving up to an additional $7.0 million available for sale prior to December 31, 2025.
OpGen's liquidity ratios as of September 30, 2024, show a current ratio and quick ratio of 5.46, indicating a relatively strong short-term liquidity position. The company's debt-to-equity ratio stood at 0.06, suggesting a low level of financial leverage.
Product Segment and Revenue Sources
Prior to the insolvency filings of Curetis and Ares Genetics, OpGen's revenue was derived from three main sources:
1. Product Sales: This segment included sales of OpGen's Unyvero instruments and consumables, as well as Ares Genetics' AI-powered prediction models and solutions. For the nine months ended September 30, 2024, product sales decreased by approximately 88% to $169,370 compared to the same period in 2023, primarily due to the exclusion of Curetis and Ares Genetics product sales following their insolvency filings.
2. Laboratory Services: This segment included revenue generated from services provided by OpGen and its subsidiaries. For the nine months ended September 30, 2024, laboratory services revenue decreased by approximately 76% to $26,780 compared to the same period in 2023, mainly attributable to the discontinuation of Ares Genetics-related products and services.
3. Collaboration Revenue: OpGen and its subsidiaries had entered into research and development collaborations with third parties, such as the agreement with the Foundation for Innovative New Diagnostics (FIND). For the nine months ended September 30, 2024, collaboration revenue decreased by 100% to $0 compared to the same period in 2023 due to the deconsolidation of Curetis following its insolvency filing.
The company primarily sold its products and services in the United States, although no specific geographic market breakdown for revenue was provided.
Risks and Challenges
OpGen has faced several challenges in recent years, including the insolvency filings of its subsidiaries, Curetis and Ares Genetics, in 2023. This led to the deconsolidation of these entities from the company's financial statements, significantly impacting its operations and financial performance.
Additionally, OpGen has struggled to maintain compliance with the Nasdaq minimum stockholders' equity requirement, which led to the company receiving a delisting notice from Nasdaq in June 2024. The company has appealed this decision and is currently awaiting the outcome of the Nasdaq Listing and Hearing Review Council's review.
The company's ability to successfully execute its new business strategy in the financial technology industry and listing consultancy services is also subject to execution risk and the competitive landscape in these sectors.
Outlook and Guidance
OpGen has not provided any formal guidance or outlook for the future. The company's primary focus is on scaling down its legacy operations, selling the remaining Unyvero assets, and transitioning to its new business initiatives in the financial technology and listing consultancy services sectors.
Conclusion
OpGen has faced significant challenges in recent years, including the insolvency of its subsidiaries and the resulting deconsolidation of these entities from its financial statements. However, the company has undertaken a strategic shift, with new leadership and a focus on entering the financial technology and listing consultancy services industries.
While the company's path forward is not without risks, OpGen's ability to secure financing and the potential opportunities in its new business areas provide a glimmer of hope for the company's future. The recent financial arrangements, including the securities purchase agreement with AEI Capital Ltd., have improved the company's liquidity position. However, the lack of revenue in the most recent quarter and the significant decline in product sales and laboratory services revenue highlight the challenges OpGen faces in its transition.
Investors should closely monitor the company's progress as it navigates this transition, particularly its ability to successfully launch and grow its new business initiatives in the financial technology sector. The company's future success will depend on its ability to leverage its new strategic direction, manage its cash position effectively, and create sustainable value for shareholders in its new business areas.