OpGen, Inc. (NASDAQ:OPGN) is a molecular diagnostics and informatics company that has undergone a significant transformation in recent years. Founded in 2001, the company initially operated as a precision medicine company, leveraging molecular diagnostics and informatics to combat infectious diseases. However, the company's journey has not been without its challenges, as it has faced a series of setbacks that have reshaped its business model and strategic direction.
Business Overview and Historical Developments OpGen was incorporated in Delaware in 2001 and initially focused on developing and commercializing molecular microbiology solutions to provide clinicians with more rapid and actionable information about life-threatening infections. In April 2020, the company completed a business combination transaction with Curetis N.V., a public company based in the Netherlands, which expanded OpGen's product portfolio and global reach.
The acquisition of Curetis N.V. included all the shares of Curetis GmbH, a private company in Germany, and certain other assets and liabilities of Curetis N.V., including Ares Genetics GmbH, a wholly owned subsidiary of Curetis GmbH. This strategic move was aimed at strengthening OpGen's position in the precision medicine market and expanding its capabilities in molecular diagnostics.
Following the acquisition, OpGen, together with its subsidiaries Curetis and Ares Genetics, focused on improving patient outcomes and decreasing the spread of infections caused by multidrug-resistant microorganisms. The company's combined efforts were directed towards developing and commercializing innovative solutions in the field of molecular microbiology.
Challenges and Setbacks However, OpGen's journey has not been without its challenges. In November 2023, the company's subsidiaries, Curetis and Ares Genetics, filed for insolvency proceedings in Germany and Austria, respectively. The insolvency administrators assumed control over the assets and liabilities of these subsidiaries, effectively eliminating the authority and power of OpGen and its officers to act on behalf of the subsidiaries. This led to the deconsolidation of Curetis and Ares Genetics from OpGen's financial statements.
The insolvency proceedings resulted in the sale of Curetis' and Ares Genetics' assets to third-party buyers, but OpGen did not receive any proceeds from these sales, as the proceeds were allocated to the respective entities' creditors. This event had a significant impact on OpGen's business and financial position, as the company lost its core operating subsidiaries and the majority of its revenue-generating activities.
Navigating Challenging Times In the face of these challenges, OpGen has had to reposition and reinvent itself. In March 2024, the company entered into a securities purchase agreement with David E. Lazar, an experienced private investor, who acquired 3,000,000 shares of Series E Convertible Preferred Stock for $3.0 million. This transaction resulted in a change in the company's leadership, as the existing board of directors resigned, and a new board was appointed, with Mr. Lazar taking on the role of Chairman.
Furthermore, in April 2024, OpGen entered into an employment agreement with David E. Lazar, appointing him as the company's Chief Executive Officer. Under the new leadership, OpGen has been working to scale down its legacy operations and sell the remaining Unyvero assets in its inventory, with the intention of exiting the Unyvero business altogether.
Repositioning and Strategic Shift As part of its strategic repositioning, OpGen is planning to launch a new business in the financial technology industry, supporting digital investment banking activities. The company also contemplates engaging in the provision of listing consultancy services to international companies seeking to list their securities on securities exchanges.
To support this transition, OpGen has secured additional financing through a series of transactions. In August 2024, the company entered into a securities purchase agreement with AEI Capital Ltd., granting the company the right to sell up to $9.0 million in additional common stock, with the first tranche of $3.0 million already completed as of September 30, 2024.
In October 2024, OpGen further amended the agreement with AEI Capital Ltd., expanding the company's access to additional financing and extending the agreement until December 31, 2025. This additional financing is expected to provide the necessary resources to fund the company's operations as it navigates its strategic shift.
Financial Performance and Liquidity Due to the deconsolidation of Curetis and Ares Genetics, OpGen's financial performance has been significantly impacted. The company's revenue for the nine months ended September 30, 2024 was $196,150, a 92% decrease compared to the same period in 2023, when the company generated $2,350,000 in revenue.
Financials The company's net income for the nine months ended September 30, 2024 was $7,640,000, compared to a net loss of $15,630,000 in the same period of 2023. However, this net income figure includes significant one-time gains, such as a $9,740,000 gain on extinguishment of debt and a $570,780,000 gain on settlement of compensation expenses.
For the most recent quarter, OpGen reported no revenue, a significant decrease from the previous periods. The net income for the quarter was $8,931,078, while the operating cash flow (OCF) and free cash flow (FCF) were both negative at -$2,833,246. The year-over-year growth rate could not be determined due to the lack of prior quarter financial information.
The decrease in revenue is primarily attributable to the exclusion of Curetis and Ares Genetics product sales following their insolvency filings in November 2023 and the resulting deconsolidation of the subsidiaries, as well as the scaling down of legacy operations at the Company in connection with the Company repositioning its business.
OpGen's total operating expenses for the nine months ended September 30, 2024 decreased by approximately 74% to $4.27 million compared to the same period in 2023. This decrease was primarily attributable to the company no longer including expenses related to Curetis and Ares Genetics in the consolidated figures following their insolvency filings, as well as the scaling down of legacy operations in connection with the company's business repositioning.
For the nine months ended September 30, 2024, OpGen reported a net other income of $11.72 million, compared to a net other expense of $1.83 million in the same period of 2023. This significant increase was primarily due to the company recognizing a $9.74 million gain on extinguishment of debt following the settlement of the EIB loan guaranty, as well as a $570,780 gain on settlement of compensation expenses.
Liquidity As of September 30, 2024, OpGen had cash and cash equivalents of $1,630,000, with the company's access to additional financing from AEI Capital Ltd. providing a crucial source of liquidity as it navigates the transition to its new business model. The Company has the right, in its discretion, to sell to AEI Capital Ltd. shares of common stock having an aggregate value of up to an additional $7 million until December 31, 2025.
The company's current ratio and quick ratio are both 5.46, indicating a strong short-term liquidity position. However, the debt-to-equity ratio could not be determined due to the lack of balance sheet information.
Regulatory and Compliance Challenges In addition to the operational and financial challenges, OpGen has also faced regulatory hurdles. In June 2024, the company received a notice from The Nasdaq Stock Market LLC (Nasdaq) indicating that it was no longer in compliance with the minimum stockholders' equity requirement for continued listing on Nasdaq. The company submitted a plan to regain compliance, but in August 2024, the Nasdaq Hearings Panel denied the company's request for continued listing.
OpGen has appealed the Nasdaq Hearings Panel's decision, and the delisting of the company's securities has been stayed pending the resolution of the appeal. However, there is no assurance that the company will be able to regain or maintain compliance with Nasdaq's listing requirements on an ongoing basis.
Conclusion OpGen's journey has been marked by significant challenges, including the insolvency of its key subsidiaries, Curetis and Ares Genetics, and the subsequent deconsolidation of these entities from its financial statements. The company has had to navigate a complex regulatory environment, including the threat of delisting from the Nasdaq Capital Market.
Despite these obstacles, OpGen has shown resilience and a willingness to adapt. Under the new leadership of David E. Lazar, the company is embarking on a strategic shift, repositioning itself in the financial technology industry and exploring new opportunities in the areas of digital investment banking and listing consultancy services.
While the path ahead may not be without further challenges, OpGen's access to additional financing and its commitment to reinventing itself provide a glimmer of hope for the company's future. Investors and stakeholders will closely monitor OpGen's progress as it navigates this critical transition period and works to establish a sustainable and innovative business model.