On May 14, 2020 Applied DNA Sciences Inc. (Nasdaq: APDN) ("Applied DNA" or the "Company") a leader in Polymerase Chain Reaction (PCR)-based DNA manufacturing that enables in vitro diagnostics, pre-clinical nucleic acid-based therapeutic drug candidates, supply chain security, anti-counterfeiting and anti-theft technology, reported consolidated financial results for the fiscal second quarter and the six months ended March 31, 2020 (Press release, Applied DNA Sciences, MAY 14, 2020, View Source [SID1234558023]).
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"Continued execution on our strategic priorities in our second fiscal quarter resulted in an expansion of our linear DNA story to include COVID-19 vaccine candidate and diagnostic kit programs and the addition of new development customers. These new development customers, several of which are leaders in the field of gene and redirected-cell therapies, demonstrate broadening interest and adoption of our proprietary linear DNA approach to preclinical biotherapeutics and diagnostics development and further validate linear DNA as a viable alternative for plasmid DNA," stated Dr. James A. Hayward, president and CEO of Applied DNA.
"Most of our activities during the quarter were devoted to our COVID-19 development programs that serve to also elevate the profile of our PCR-based LinearDNA platform to the biopharma industry as a powerful, large-scale tool for the rapid manufacture of DNA-based therapeutics," continued Dr. Hayward. "The global focus on the pandemic and the speed with which vaccine candidates are being developed are laying bare the limitations of modern vaccine development that are almost-exclusively reliant on plasmid-based technologies that are often slow and require much more downstream processing. Because our linear DNA approach does not require bacterial fermentation and has the added advantage of essentially no risk of contamination by genes for antibiotic resistance and other genetic contaminants, we believe our platform is well suited for such DNA-based therapeutics as engineered T cells, gene therapies, RNAi, and vaccines, such as for COVID-19 or future emerging infectious diseases. One new development customer, a global Top-20 pharmaceutical manufacturer, is evaluating the full scope of our platform to potentially serve as a foundational tool for their future genetic therapy pipeline. As the industry comes to terms with the limitations of plasmid-based technologies in terms of production speed and risk, we believe this will set the stage for a paradigm shift towards the rapid manufacturing of linear DNA vaccines with our LinearDNA platform as the accelerator."
Concluded Dr. Hayward, "Looking ahead, we remain focused on driving interest and building demand for our linear DNA approach across certain highly-regulated markets, such as drug development, that we believe offer a path to higher and more recurring revenue. Takis Biotech ("Takis") has initiated preclinical animal trials of our LinearDNA version of their vaccine candidates that we believe will demonstrate similar, robust immune responses to their plasmid-based constructs, but with the added advantage of speed and scalability to manufacture for global use. Concurrently, we are preparing for the possibility for Takis to progress to human trials this fall by readying our facility for compliance with the FDA’s cGMP regulations that govern the quality of biologics for human use. We have also developed our Linea COVID-19 high-throughput and high-sensitivity SARS-CoV-2 detection kit to enable mass-testing that can be a crucial tool in the toolbox of health systems and governments in the fight to further ‘flatten the curve’. Having received Emergency Use Authorization from the FDA today, we are now focused on the commercialization of our kit to assist frontline workers leading the charge against the pandemic. Pharmaceutical molecular tagging is another target market and one where the FDA has granted us entry into its Emerging Technology Program that gives us a path to drive the industry’s adoption of our authentication technologies and mitigate participation of counterfeit and adulterated drugs in the legitimate pharmaceutical supply chain. We will continue to build our business development pipeline and execute on our strategy to advance and prove the capabilities of linear DNA to drug developers and the broader pharmaceutical industry."
Fiscal Second Quarter 2020 Financial Results:
·Revenues decreased 29% for the second quarter of fiscal 2020 to $552 thousand, compared with $778 thousand reported in the same period of the prior fiscal year and decreased 13% from $634 for the first quarter of fiscal 2020. This decrease in revenues year over year is due to a decrease of $305 thousand in service revenues, offset by an increase of $79 thousand in product revenues. The decrease in service revenues is primarily attributable to a decrease from a government contract award that ended during the second half of fiscal 2019 and a decline in precommercial feasibility projects in both textiles and cannabis. The increase in product revenues was primarily related to an increase in biopharmaceutical revenues during the quarter ended March 31, 2020.
·Total operating expenses decreased to $3.1 million for the second fiscal quarter of 2020, compared with $3.3 million in the prior fiscal year’s second quarter. This decrease is attributable to a decrease in professional fees of approximately $183 thousand due to reduced legal fees. To a lesser extent, the decrease relates to a reduction of approximately $64 thousand in travel fees as result of travel restrictions associated with COVID-19. This decrease was offset by an increase in research and development expenses of $52 thousand.
·Net loss for the quarter ended March 31, 2020 was $3.0 million, or $0.79 per share, compared with a net loss of $2.7 million, or $3.22 per share, for the quarter ended March 31, 2019, an increase of 10%, and a net loss of $2.7 million, or $1.12 per share, for the quarter ended December 31, 2019.
·Excluding non-cash expenses, Adjusted EBITDA was negative $2.6 million and a negative $2.3 million for the quarters ended March 31, 2020 and 2019, respectively. See below for information regarding non-GAAP measures.
·Cash was $8.7 million at March 31, 2020 that includes the exercise of warrants associated with the November 15, 2019 underwritten public offering ("the offering") totaling approximately $2.8 million in net proceeds. Subsequent to March 31, 2020 the Company received a further $2.9 million of net proceeds through the exercise of warrants associated with the offering. There are a total of approximately 1.5 million warrants outstanding from the offering at May 14, 2020.
Six Months Ended March 31, 2020 Financial Results:
·Revenues decreased 29% for the first half of fiscal 2020 to $1.2 million, compared with $1.7 million reported in the same period of the prior fiscal year. This decrease in revenue year over year is due to a decrease of $472 thousand in service revenues and a decrease of $5 thousand in product revenues. The decrease in service revenues is primarily attributable to a decrease from a government contract award that ended during the second half of fiscal 2019.
·Total operating expenses decreased to $6.1 million for the six months ended March 31, 2020, compared with $7.2 million in the prior fiscal year’s first six months. This decrease is primarily attributable to decreases in payroll of approximately $272 thousand, attributable to headcount reductions, a decrease in stock-based compensation expense of approximately $262 thousand as well as decreases in legal and professional fees of $139 thousand, consulting fees of $121 thousand, reduced travel expenses of $110 thousand and research and development of $93 thousand.
·Net loss for the six-month period ended March 31, 2020 was $5.6 million, or $1.76 per share, compared with a net loss of $5.9 million, or $6.51 per share, for the six months ended March 31, 2019, an improvement of 5%.
·Excluding non-cash expenses, Adjusted EBITDA was negative $5.0 million and a negative $4.9 million for the six months ended March 31, 2020 and 2019, respectively. See below for information regarding non-GAAP measures.
Select Quarterly Operational Highlights:
Applied DNA progressed its COVID-19 development program that spans both vaccine development and clinical diagnostic kit development:
·On May 14, 2020, Applied DNA announced that it had received Emergency Use Authorization for its COVID-19 diagnostic Assay kit from the U.S. Food and Drug Administration ("FDA"). Clinical laboratories in the United States certified under Clinical Laboratory Improvement Amendments can immediately begin ordering and using the LineaTM COVID-19 assay kit to detect SARS-CoV-2, the virus that causes COVID-19;
·On May 5, 2020, the Company announced that it had applied to the U.S. FDA for Emergency Use Authorization for its COVID-19 diagnostic kit, Linea COVID-19, a RT-PCR-based, high-sensitivity and high-throughput COVID-19 diagnostic test;
·On May 4, 2020, Applied DNA and its COVID-19 development partner, Takis, announced that the first injections of their DNA vaccine candidates against the Spike protein (‘S’ gene) of the SARS-CoV-2 virus that causes the COVID-19 disease, have produced neutralizing antibodies in test animals. The studies were completed at the renowned Lazzaro Spallanzani National Institute for Infectious Diseases in Rome. These initial results were obtained using plasmids (the templates for LinearDNA) to baseline results; Applied DNA’s linear DNA dose-response trials begin in the week of May 4, 2020;
·On April 21, 2020, the Company signed an agreement with Stony Brook University Hospital to validate and implement the Company’s COVID-19 diagnostic test: Linea COVID-19. The diagnostic test targets the SARS-CoV-2 Spike (S) gene, which is also the subject of the Company’s COVID-19 vaccine development program;
·On April 15, 2020, Applied DNA announced that it had shipped five linear DNA versions of COVID-19 vaccine candidates to its drug development partner, Takis, to support the immediate start of preclinical animal testing. Shipment of the vaccine candidates follows Takis’ receipt of approval from Italy’s Ministry of Health to begin preclinical testing. Concurrent with Takis’ animal trials, Applied DNA is preparing for cGMP production of selected vaccine candidate(s) to support human trials scheduled to begin this fall; and
·On March 24, the Company announced that it had filed a provisional patent application with the U.S. Patent and Trademark Office for a diagnostic assay for COVID-19.
The Company’s LinearDNA platform for preclinical biotherapeutic (gene and redirected-cell therapies) and diagnostic applications development continued to shift towards broader adoption:
·On March 26, the Company announced that it had shipped CAR T amplicons proprietary to a new development customer, the biologics subsidiary of a U.S.-based, global biopharmaceutical company, for use in evaluating the use of linear DNA; and
·On March 20, Applied DNA announced the signing of a research agreement with a new development customer, a global Top-20 pharmaceutical manufacturer, to evaluate the full scope of the Company’s linear DNA platform to potentially improve the efficacy and safety of the customer’s CAR T therapy pipeline. The research agreement includes the Company’s patented technologies to maximize protein expression and unique linear DNA anti-CD19 CAR T construct for the treatment of acute lymphocytic leukemia.
The Company’s DNA tagging business for supply chain security continued to build awareness and adoption:
·On February 24, the Company announced the receipt of international patents on its Beacon secure optical molecular market technologies in China, Canada, and the U.S., each a key market for brand protection and assurance for Applied DNA;
·On February 20, Applied DNA received Pareve kosher certification for products within its SigNature and CertainT brands from Orthodox Union, the world’s largest and most widely recognized international kosher certification agency. Certification supports the Company’s business development efforts in the food, pharmaceutical, and dietary supplements markets to maximize adoption of its molecular-based tagging platform; and
·On February 19, the Company entered the dietary supplements market with a multi-year contract with Nutrition21, a trusted developer and supplier of novel and clinically substantiated branded ingredients for the nutritional supplement industry. Under the terms of the contract, the application of Applied DNA’s CertainT platform to Nutrition21’s leading sports supplement, Nitrosigine, offers Nutrition21 the certainty of its ingredients all the way through to their customers’ finished products and onto retail shelves and online stores. Separately, the two companies signed an additional agreement to enable Nutrition21 to represent the CertainT platform throughout Nutrition21’s extensive network in the dietary supplement market.
Fiscal Second Quarter 2020 Conference Call Information
The Company will hold a conference call and webcast to discuss its fiscal second quarter-end 2020 results on Thursday, May 14, 2020 at 4:30 PM EDT. To participate on 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, due to the large number of expected participants, not all questions may be answered.
To Participate:
·Participant Toll Free: 1-844-887-9402
·Participant Toll: 1-412-317-6798
·Please ask to be joined to the Applied DNA call
Live webcast: View Source
Replay (available 1 hour following the conclusion of the live call through May 21, 2020):
·Participant Toll Free: 1-877-344-7529
·Participant Toll: 1-412-317-0088
·Participant Passcode: 10141899
·Webcast replay: View Source
For those unable to attend the live call, a copy of management’s PowerPoint presentation will be available for review under the ‘Events and Presentations’ section of the company’s Investor Relations web site: View Source