Applied DNA Sciences(APDN) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q4 2023 were $780,000, a decrease from $3.6 million in the same period last year, primarily due to a decline in COVID-19 testing services revenue and a reduction in product revenue [5][6][10] - Gross profit was $79,000 (10% margin) compared to $417,000 (12% margin) in the prior year, with the decline attributed to a higher percentage of COVID-19 testing services and textiles revenue in the previous year [6] - Operating loss for Q4 2023 was $4.2 million, slightly improved from a loss of $4.3 million in the prior year [7] - Cash and cash equivalents totaled $7.2 million on September 30, 2023, down from $10.8 million on June 30, 2023 [8] Business Line Data and Key Metrics Changes - The decline in revenue was largely due to a $2.4 million decrease in COVID-19 testing services, following the expiry of a testing contract [6] - The textiles vertical saw a decrease in cotton tagging revenues, contributing to a reduction in product revenue of $341,000 [6] Market Data and Key Metrics Changes - The company is experiencing strong demand in the cotton industry for traceability technologies due to federal and international legislation related to forced labor [18] - Interest in the linearDNA platform is growing, with several large CDMOs as evaluation customers, indicating a positive market response [25][33] Company Strategy and Development Direction - The company is focusing on biotherapeutic manufacturing, particularly through the linearDNA platform, which aims to provide an alternative to plasmid DNA for genetic medicines [12][32] - Plans for fiscal 2024 include launching GMP manufacturing capacity for mRNA starting materials, which is expected to unlock significant revenue opportunities [30][31] - The company aims to convert existing customers into larger, long-term commercial supply agreements, leveraging the anticipated growth in mRNA manufacturing demand [33] Management's Comments on Operating Environment and Future Outlook - Management anticipates a decline in COVID-19 testing revenues, reflecting a broader trend in the industry as public interest wanes [46] - The approval of the first IND for enzymatically-produced DNA is seen as a positive sign for the industry, indicating regulatory acceptance of enzymatic manufacturing [40] - The company is optimistic about the upcoming fiscal year, expecting to secure larger contracts and capitalize on the growing demand for mRNA starting materials [31][33] Other Important Information - The company filed an 8-K disclosing non-compliance with Nasdaq listing rules regarding minimum bid price requirements, with a 180-day period to regain compliance [10] - The average monthly cash burn for Q4 2023 was $1.2 million, aligning with forecasts post-CUNY contract expiry [8] Q&A Session Summary Question: Can you discuss the Spindle RNA polymerase acquisition and its implications? - The acquisition allowed the company to optimize the polymerase for self-amplifying RNA production, which is promising for the IP portfolio and market demand [38] Question: Who received the first IND approval for enzymatically-produced DNA? - The approval was granted to Touchlight Genetics, indicating FDA's willingness to engage with enzymatically-produced materials, which is a positive sign for the company [40] Question: What is the revenue outlook for clinical laboratory services? - A decline is expected, although local increases in COVID positivity may affect this trend [46] Question: How many customers have ordered from the Linea IVT platform? - There are over 10 customers for IVT templates, with 3 evaluation customers for the Linea IVT platform, expecting to sign more substantive agreements soon [50] Question: What is the cash position after September? - The cash position as of November 30th is approximately $4.5 million [53]