On May 11, 2023 Applied DNA Sciences, Inc. (NASDAQ: APDN) ("Applied DNA" or the "Company"), a leader in PCR-based DNA technologies, reported consolidated financial results for the second quarter of fiscal 2023 ended March 31, 2023 (Press release, Applied DNA Sciences, MAY 11, 2023, View Source [SID1234631484]).
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Commenting on the Company’s quarterly performance, Dr. James A. Hayward, president and CEO, stated, "We made steady progress in the execution of our long-term business plan that is centered on the enzymatic production of DNA via PCR for biotherapeutic applications while concurrently managing for a cessation in COVID-19 testing demand by our primary customer. Our current cash position and ongoing focus on cost management should enable us to absorb a short-term increase in cash burn while continuing to execute on key priorities that set us up for multiple value-driving milestones in the coming quarters."
Continued Dr. Hayward, "It has never been clearer that the future of genetic medicine is best served by the enzymatic production of DNA. The biotherapeutics industry is showing strong enthusiasm for alternatives to conventional plasmid DNA production to address critical bottlenecks impacting the growth of nucleic acid-based therapies. We believe we are among the few in the marketplace that can deliver commercial quantities of enzymatically produced DNA with the speed, scale, quality, and cost demanded by genetic medicine customers. Our initial focus on DNA IVT templates for mRNA production is starting to bear fruit, with feedback from initial customer evaluation-scale deliveries of linearDNA affirming that it is well suited to empower the manufacture of mRNA-based therapies. Building on these early successes, we have identified an acquisition target within the mRNA value chain that we believe can significantly increase our total addressable market with better economics than linearDNA IVT templates alone. Our future in biotherapeutics has never been more promising."
Recent Highlights and Anticipated Milestones
Biotherapeutics:
· The Company introduced more efficient production methods and secured orders from new customers to evaluate linearDNA as an IVT template for mRNA production. New customers range from pre/clinical-stage therapy developers to Big Pharma.
· The Company is on track to deliver cGMP-quality linearDNA production of IVT templates by the end of calendar 2023 at quality specifications that customers will require for clinical use. cGMP-quality production will enable the Company, for the first time, to deliver the benefits of non-plasmid IVT templates at every stage of mRNA therapy development, from research and development through the clinic and into commercial production.
· The Company has identified an acquisition target that it believes will deliver substantial commercial advantages to its LinearDNA platform for mRNA production. The Company believes that combining the target’s IP, assets, know-how, and the LinearDNA platform gives the Company broader coverage of the mRNA production value chain and a higher total addressable market with improved economics for customers and the Company. The Company anticipates closing on the acquisition in the fiscal quarter ending June 30. No assurance can be given that the contemplated acquisition will be completed.
Clinical Laboratory Services:
· The Company submitted a validation package to the New York State Department of Health (NYSDOH) in support of approval for a pharmacogenomics (PGx) assay as a laboratory-developed test. The Company anticipates approval of the assay in the coming months with which to launch its population-scale PGx testing service. The Company’s differentiated business model for PGx is centered on institutional payers while avoiding the billing of third-party insurers, which is the model we successfully executed for our COVID-19 testing.
Supply Chain Traceability:
· The Company continues to add CertainT authenticity platform customers for source verification testing (non-DNA tagging), with demand being driven by the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) that requires importers of cotton-based goods into the U.S. market to prove that said goods do not originate in China’s Xinjiang region or have not benefitted from forced labor. Source verification testing is a low-rate testing service positioned to build demand for recurring, high-margin, high-dollar-value contracts for DNA tagging;
· The Company is currently pursuing DNA tagging business development opportunities with apparel manufacturers and upstream supply chain participants, the latter offering the potential for a recurring revenue stream untethered from cotton ginning season cyclicality.
Second Quarter Fiscal 2023 Financial Highlights:
· Total revenues were $4.4 million for the three-month period ended March 31, 2023, as compared to $6.1 million for the same period in the prior fiscal year. The decrease in revenue of approximately $1.7 million was primarily due to a decline in COVID-19 testing revenue of $1.5 million.
· Gross profit for the three-month period ended March 31, 2023, was $1.8 million compared to $2.5 million for the three-month period ended March 31, 2022. The gross profit percentage remained consistent at 41% and 40% for the three-month periods ended March 31, 2023, and 2022, respectively.
· Total operating expenses were $4.5 million for the second quarter of fiscal 2023, compared to $4.6 million for the second quarter of fiscal 2022. The decrease in operating expenses of $131 thousand resulted from a decrease in research and development expenses of $81 thousand and $50 thousand in selling, general and administrative expenses during the three-month period ended March 31, 2023.
· Operating loss was $2.7 million compared to $2.2 million for the three months ended March 31, 2023, and 2022, respectively.
· Excluding non-cash expenses, Adjusted EBITDA was a negative $2.1 million for the second quarter of fiscal 2023 compared to a negative $1.6 million for the same period in fiscal 2022.
· Cash and cash equivalents stood at $12.3 million on March 31, 2023, compared with $15.2 million as of December 31, 2022.
Second Quarter Fiscal 2023 Conference Call Information
The Company will hold a conference call and webcast to discuss its second quarter of fiscal year 2023 financial results on Thursday, May 11, 2023, at 4:30 PM ET. To participate in the conference call, please follow the instructions below. While every attempt will be made to answer investors’ questions on the Q&A portion of the call, not all questions may be answered.
To Participate, please ask to be joined to the ‘Applied DNA Sciences’ call:
· Domestic callers (toll free): 844-887-9402
· Canadian callers (toll free): 866-605-3852
· International callers: 412-317-6798
Live and replay of webcast: View Source
Telephonic replay (available 1 hour following the conclusion of the live call through May 18, 2023):
· Domestic callers (toll free): 1-877-344-7529
· Canadian callers (toll free): 1-855-669-9658
· Participant Passcode: 6050560
An accompanying slide presentation will be embedded in the webcast (live and replay) and can also be accessed in the ‘Company Events’ section of the ‘News & Events’ tab of the Applied DNA investor relations website at View Source
Information about Non-GAAP Financial Measures
As used herein, "GAAP" refers to accounting principles generally accepted in the United States of America. To supplement our condensed consolidated financial statements prepared and presented in accordance with GAAP, this earnings release includes Adjusted EBITDA, which is a non-GAAP financial measure as defined in Rule 101 of Regulation G promulgated by the Securities and Exchange Commission. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information presented in accordance with GAAP. We use this non-GAAP financial measure for internal financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons of the performance and results of operations of our core businesses. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the performance of our businesses by excluding non-cash expenses that may not be indicative of our recurring operating results. We believe this non-GAAP financial measure is useful to investors as they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
"EBITDA"- is defined as earnings (loss) before interest expense, income tax expense and depreciation and amortization expense.
"Adjusted EBITDA"- is defined as EBITDA adjusted to exclude (i) stock-based compensation and (ii) other non-cash expenses.