Applied DNA Sciences(APDN) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2021 increased to $2.7 million from $552,000 in the prior period, representing a year-over-year increase of 384% and a quarter-over-quarter increase of 65% [6][9] - Product revenues rose to $965,000 for Q2 2021 compared to $198,000 in the same period last year, primarily due to sales of the COVID-19 Diagnostic Assay Kit [7] - Net loss for Q2 narrowed to $1.5 million compared to $3 million in the year-ago period, with net loss per share improving to $0.21 from $0.79 [9][10] - Cash and cash equivalents totaled $13.9 million as of March 31, 2021, reflecting a strong balance sheet and increased working capital [10] Business Line Data and Key Metrics Changes - The safeCircle pooled COVID-19 surveillance testing service significantly contributed to service revenue, with an increase of $1.4 million attributed to a full quarter of testing for clients secured in the prior quarter [5][6] - Operating expenses increased by 52% to $4.6 million, driven by higher SG&A and depreciation expenses, with SG&A expenses rising to $3.6 million from $2.3 million [8][9] - R&D expenses increased to $874,000 from $703,000, mainly due to clinical lab build-out and development of COVID-variant mutation panels [9] Market Data and Key Metrics Changes - The pandemic has increased the relevance of the Health Sciences components of the business, particularly in diagnostics and the development of LinearDNA as an alternative to plasmid-based therapies [15][16] - Year-over-year revenues from the wellness and dietary supplement market saw a 2.5-fold increase, driven by Nutrition21's transition to the CertainT platform [39] - The supply chain security business has been negatively impacted by the pandemic, but brands are adapting to operational changes, which may lead to future growth [16][39] Company Strategy and Development Direction - The company aims to establish LinearDNA as a manufacturing platform and a disruptive alternative to current DNA sourcing standards, with a focus on developing a pipeline of LinearDNA-based therapeutic candidates [13][17] - The strategy includes targeting profitable market niches, particularly in diagnostics and therapeutics, while leveraging the pandemic's impact to enhance growth opportunities [24][30] - The company is expanding its CLIA-certified lab capabilities to include high-throughput diagnostic testing and developing a portfolio of novel diagnostics and complementary services [21][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the successful commercialization of COVID-19 diagnostics and the potential for LinearDNA in therapeutic applications [13][17] - The company anticipates a normalization of capital expenditures as the clinical lab becomes fully operational, which should lead to lower cash burn in the second half of fiscal 2021 [11] - Management noted that the pandemic has spurred innovation and investment in the biopharmaceutical industry, which could benefit the company in the long term [14][15] Other Important Information - The company received a reissued EUA from the FDA, expanding the intended use of the Linea Assay Kit to include asymptomatic serial screening testing [22] - The SGS Panel was launched to identify mutations associated with COVID-19 variants, which could enhance the company's market position in diagnostics [26][30] - The company is exploring entry into the larger apparel market, leveraging its expertise in cotton genotyping and next-generation sequencing capabilities [41][42] Q&A Session Summary Question: What is your sense of the commercial appetite and thus, the partnership potential for a mink vaccine? - Management believes the mink vaccine is crucial for the industry's recovery and presents a significant opportunity, especially given the similarities in clinical responses between minks and humans [47] Question: Can you update us on the cannabis tagging and the invasive CTC programs? - Management sees strong interest in cannabis tagging as the industry evolves, while the invasive CTC program is progressing well, with plans for CLIA certification to enhance its marketability [49][51] Question: Did you provide any update to 2021 revenue with the CLIA certification and testing asymptomatic patients? - Management has not provided specific revenue guidance at this stage [53] Question: Can you quantify the opportunity from the LinearDNA platform? - The initial commercial effort has led to significant orders from a key customer, with expectations for further success from additional projects in development [55][57] Question: When do you anticipate a pickup in cotton demand? - Management indicated that cotton demand may begin to pick up around the ginning season starting in October, with potential orders as early as June [59]