Applied DNA Sciences, Inc. (APDN) Q1 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call revealed a significant decline in total revenue, gross profit, and cash reserves, along with increased operating expenses and losses. While there were some service revenue gains, they were insufficient to offset the overall financial deterioration. The Q&A highlighted ongoing developments and potential in the CD123 CAR therapy and Linea IVT platform, but lacked detailed guidance or significant positive catalysts. The financial challenges and lack of clear guidance suggest a negative sentiment, likely leading to a stock price decrease in the next two weeks.
Key Financial Performance
Total Revenues $891,000, a decline of $4.4 million compared to $5.3 million for the same period in the prior fiscal year. The decrease is primarily due to lower clinical laboratory service revenues, particularly from the expiration of the COVID-19 testing contract with CUNY.
Gross Profit $231,000 or 26%, compared to $2.4 million or 45% in the prior fiscal year period. The decline in gross margin was primarily due to a higher percentage of COVID-19 testing service revenue in the prior year, which generated a higher gross profit.
Total Operating Expenses $4 million, an increase of $424,000 compared to $3.6 million in the prior fiscal year period. This increase reflects higher SG&A costs and an increase in stock-based compensation expense, offset by a decrease in payroll.
Operating Loss $3.8 million, compared to $1.2 million in the prior fiscal period.
Adjusted EBITDA Negative $3.2 million, deteriorating by $2.1 million compared to a negative $1.1 million in the prior fiscal year period.
Cash and Cash Equivalents $3.4 million on December 31, down from $7.2 million on September 30, 2023. The average monthly cash burn increased to $1.3 million from $780,000 in the prior fiscal year.
Accounts Receivable $451,000 at December 31, with payment terms ranging from 30 to 60 days.
Proceeds from Registered Direct Offering Approximately $3.4 million, closed on February 2, 2024.
Potential Gross Proceeds from Warrants Up to $8.6 million, subject to stockholder approval.
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Operating Highlights
Linea IVT platform: The commercialization of the Linea IVT platform remains a primary objective, with a focus on establishing GMP capacity to manufacture critical starting materials for clinical-grade mRNA therapeutics.
Self-amplifying mRNA IVT template: The company shipped its first self-amplifying mRNA IVT template to a preclinical therapeutic manufacturer, demonstrating its capability to produce challenging and large DNA sequences.
Market expansion: The company is expanding its presence across the global marketplace and has initiated proof-of-concept studies with marquee customers.
Partnership with Kudo Bio: Entered into a partnership with Kudo Bio to validate the commercial scale-up of the Linea IVT platform.
GMP capacity establishment: The company is focused on establishing a GMP footprint to support existing and new customers through their clinical trial process.
Cost efficiencies: The company is working to increase efficiencies and reduce the cost of goods sold for Linea IVT.
Equity offering: Closed on an equity offering that will fund the implementation of the initial GMP footprint.
Sales pipeline growth: The sales pipeline has continued to build, with multiple successful evaluations of the Linea DNA and Linea IVT platforms.
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Risk or Challenges
Revenue Decline: Total revenues for Q1 2024 were approximately $891,000, a decline of $4.4 million compared to $5.3 million in the prior year, primarily due to lower clinical laboratory service revenues from the expiration of a COVID-19 testing contract.
Gross Profit Decline: Gross profit decreased to $231,000 (26%) from $2.4 million (45%) in the prior year, attributed to a higher percentage of COVID-19 testing service revenue in the previous year.
Operating Loss: Operating loss for Q1 2024 was $3.8 million, compared to $1.2 million in the prior year, indicating increased financial strain.
Cash Burn Rate: Average monthly cash burn increased to $1.3 million from $780,000 in the prior fiscal year, raising concerns about liquidity.
Regulatory Approval Risks: The company is awaiting shareholder approval for warrants and other financial instruments, which could impact future funding and operational capabilities.
Market Competition: The company faces competitive pressures in the biotherapeutics market, particularly in mRNA production, where they need to establish a strong foothold against established players.
Supply Chain Challenges: The establishment of GMP capacity is crucial for scaling operations, and any delays could hinder the company's ability to meet customer demands.
Economic Factors: The overall economic environment and demand fluctuations in the biotherapeutics sector, particularly post-COVID-19, could impact revenue generation.
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Guidance & Outlook
Commercialization of Linea IVT and Linea DNA platforms: The commercialization of our Linea IVT and Linea DNA platforms remains our primary objective, with a focus on capital allocation to support biotherapeutic goals and operational efficiencies.
GMP Capacity Establishment: Establishing a first-phase GMP capacity to deliver messenger RNA critical starting materials is crucial for transitioning customers to long-term supply agreements.
Sales Pipeline Growth: The sales pipeline is populated by biotech companies and CDMOs, with ongoing evaluations and successful customer engagements indicating strong demand for Linea IVT.
Partnership with Kudo Bio: Entered into a partnership with Kudo Bio for commercial-scale manufacturing, validating the Linea IVT platform's integration into mRNA drug product workflows.
Self-amplifying mRNA: Shipped the first self-amplifying mRNA IVT template to a preclinical therapeutic manufacturer, demonstrating the platform's capability for large DNA sequences.
Revenue Capacity from GMP: The first-phase GMP capacity is projected to enable an annual revenue capacity of up to $15 million from a footprint of less than 1,000 square feet.
Future Revenue Expectations: In year 3 (2025), the company expects to fully realize the economics of its business model as it initiates large-scale GMP supply to customers.
Equity Offering Proceeds: The recent equity offering is expected to fund the implementation of the initial GMP footprint, with cash and cash equivalents totaling approximately $5.1 million post-offering.
Long-term Supply Agreements: The company aims to secure long-term supply agreements as customers advance in clinical trials, with a focus on mRNA therapies.
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Shareholder Return Plan
Registered Direct Offering: Closed on February 2, 2024, for gross proceeds of approximately $3.4 million, issuing approximately 3.2 million shares and pre-funded warrants to purchase up to 2.4 million shares of common stock.
Warrants: Issued unregistered common warrants to purchase up to 11.3 million shares of common stock with an exercise price of $0.609 per warrant share, subject to shareholder approval.
Potential Gross Proceeds from Warrants: Exercise of the new and reduced warrants could result in total gross proceeds of up to $8.6 million.
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Key Q&A
Q:Can you talk a little bit more about what they're targeting or maybe even some of their preclinical work that they had done?
A:They have an entire CAR T program laid out and they find value in our approach to the CAR T. The European authorities have indicated that they will approve an up-labeling of our research use DNA construct to cGMP at their facility.
Q:What degree or what level of or actually rather amount of product do they need for starting material?
A:It's probably enough material to treat about 10 patients.
Q:Is it publicly available who the principal investigator is at the Prague Institute?
A:I'd be happy to verify that it is. And then I'll not only get their names for you, but I'd be happy to put you in touch with them.
Q:Can you give us a little bit of color on kind of maybe who they're producing for or what they're producing mRNA products for, and I guess at what scale?
A:They are a large player with international facilities, including in Boston and Singapore. Their scale is quite large.
Q:Are they taking on the RNF enzyme as well as part of all this work that you're doing with them?
A:Yes, under the disclosed contract, the goal of that agreement is to scale Linea IVT to commercial scale.
Q:Can you tell us how many customers did you do have in total and if you're expecting any of them to potentially transition from any in vitro or preclinical work to clinical this year?
A:We can't disclose names, but since the launch of Linea IVT in August 2023, we've seen more rapid adoption of the platform.
Q:Are you able to share more color on the percentage of your customers that you have in the U.S. and the ex-U.S.?
A:The bulk of our customers are U.S. at the moment, but we expect to see more from the European Union over the course of the next year.
Q:With regards to the projection that you noted of up to $15 million annual for the Linea IVT revenue, what assumptions can we kind of take away from that?
A:The capacity is actually slightly greater than that at 100% utilization.
Q:When you talked about being benchmarked against competitors and having a higher speed of production, are we talking about the enzymatic guys like Twist and Anza?
A:We're talking about some of our competitors in the enzymatic scale-up, not the enzymatic synthesis.
Q:Review of Unclear Management Responses
A:Management did not provide a clear answer regarding the specific details of the principal investigator at the Prague Institute, only stating they would verify and provide names later.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bio
CAR
CDMOs
GMP footprint
Hematology
IVT platform
IVT scale
IVT template
Institute
Phase trial
Prague
agreement IVT
competitor
cost
decrease
effort
enzyme
exercise price
facility
figure
manufacturing capacity
meeting
messenger RNA
month period
name
offering
price warrant
proceeds
product revenue
scale manufacturing
sequence
share
space
stage
starting material
stockholder
transcription
use
utilization
work
APDN Transcript
Earnings call transcript: Applied DNA Sciences Q1 FY25 revenue grows
Unknown2-13
The earnings call reveals multiple red flags: substantial going concern doubts, high cash burn, competitive pressures, and regulatory compliance challenges. Despite revenue growth and cost management improvements, the financial health remains precarious. The Q&A section highlights unclear management responses, especially regarding revenue opportunities. The workforce reduction charge and increased net loss further amplify concerns. These factors suggest a negative outlook, with potential stock decline due to financial instability and operational uncertainties.
Applied DNA Sciences, Inc. (APDN) Q3 2024 Earnings Call Transcript
Unknown8-11
The earnings call summary highlights several concerns: substantial revenue decline, increased cash burn rate, and doubts about the company's ability to continue as a going concern. Regulatory delays and competitive pressures further exacerbate these issues. The Q&A section reveals management's lack of clarity on future customer uptake and test volumes, adding to uncertainties. Despite the potential for additional proceeds from warrant exercises, the overall sentiment is negative due to financial struggles, market competition, and regulatory hurdles. The stock is likely to experience a negative movement of -2% to -8% over the next two weeks.
Applied DNA Sciences, Inc. (APDN) Q1 2024 Earnings Call Transcript
Unknown2-9
The earnings call revealed a significant decline in total revenue, gross profit, and cash reserves, along with increased operating expenses and losses. While there were some service revenue gains, they were insufficient to offset the overall financial deterioration. The Q&A highlighted ongoing developments and potential in the CD123 CAR therapy and Linea IVT platform, but lacked detailed guidance or significant positive catalysts. The financial challenges and lack of clear guidance suggest a negative sentiment, likely leading to a stock price decrease in the next two weeks.
Applied DNA Sciences, Inc. (APDN) Q4 2023 Earnings Call Transcript
Unknown12-8
The earnings call highlights several concerns: declining revenue, reduced gross margin, and flat operating loss and EBITDA. The cash position decreased significantly, indicating financial strain. Although there are promising developments in product adaptation and potential growth in the Linea IVT platform, management's vague responses about timelines and revenue projections add uncertainty. The positive aspects, such as the IND approval and potential revenue growth from new platforms, are overshadowed by the immediate financial challenges and unclear guidance, leading to a negative sentiment.
APDN Report
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