Applied DNA Sciences, Inc. (APDN) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Total Revenues $798,000 (decline of $2.1 million or 72% year-over-year) due to the conclusion of the COVID surveillance testing contract for CUNY, which contributed significantly to revenues in the prior year.
Gross Profit $245,000 (31% margin, down from $1.3 million or 44% margin year-over-year) primarily due to decreased COVID-19 testing volumes in the NDX Testing Services segment.
Total Operating Expenses $3.6 million (decrease of $500,000 or 12% year-over-year) due to lower SG&A expenses from reduced stock-based compensation and elimination of certain consultants, partially offset by an increase in R&D expenses.
Operating Loss $3.3 million (increase from $2.9 million year-over-year) reflecting the decline in revenues.
Adjusted EBITDA Negative $3.2 million (decrease of $1.1 million year-over-year) compared to negative $2.1 million in the prior fiscal year period.
Cash and Cash Equivalents $10.4 million (increase from $7.2 million as of September 30, 2023) due to net proceeds of $10.5 million from a public offering.
Average Monthly Cash Burn $1.2 million fiscal year-to-date (increase from $500,000 in the prior year) reflecting catch-up payments and professional fees related to financing.
Accounts Receivable $531,000, with the majority collected after the quarter ended.
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Operating Highlights
New Product Launch: Commercially launched TR8 PGx, our pharmacogenomic testing service.
GMP Facility Completion: On track for completion of our GMP facility by September 30, fiscal year-end.
Market Expansion: Entered into a multiyear agreement with a global cotton apparel manufacturer, Indus, to supply DNA tagging and testing services.
Addressable Market Expansion: The agreement with Indus potentially represents a substantial expansion of our cotton tagging addressable market.
Operational Efficiency: Decrease in total operating expenses by approximately $500,000 to $3.6 million compared to the prior fiscal year period.
Cash Position Improvement: Cash and cash equivalents totaled $10.4 million on June 30, compared to $7.2 million on September 30, 2023.
Strategic Shift: Focus on leveraging expertise in DNA manufacturing and detection to drive commercialization of new nucleic acid therapeutics.
Revenue Growth Strategy: Expecting year-over-year revenue growth starting in the first half of fiscal 2025.
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Risk or Challenges
Revenue Decline: Total revenues for Q3 2024 were approximately $798,000, a decline of $2.1 million compared to $2.9 million in the same period last year, primarily due to the conclusion of a COVID surveillance testing contract.
Operating Loss: Operating loss for Q3 was $3.3 million, an increase from $2.9 million in the prior fiscal period, indicating ongoing financial challenges.
Cash Burn Rate: Average monthly cash burn increased to $1.2 million fiscal year-to-date, compared to $500,000 in the prior year, raising concerns about liquidity.
Going Concern: The company disclosed substantial doubt about its ability to continue as a going concern, dependent on generating revenues or raising capital.
NASDAQ Compliance: Received notice from NASDAQ regarding non-compliance with minimum bid price requirements, with a deadline of January 8, 2025, to regain compliance.
Regulatory Approval Delays: The lengthy review and approval process by the New York State Department of Health for laboratory-developed tests may delay revenue generation.
Market Competition: The company faces competitive pressures in the biotherapeutics and diagnostics markets, which could impact revenue growth.
Supply Chain Risks: The reliance on a single partner, Indus, for cotton tagging may pose risks if demand forecasts are not met.
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Guidance & Outlook
GMP Facility Completion: The company is on track for the completion of its GMP facility by September 30, 2024.
Commercialization Agreement: Entered into a 5-year commercialization agreement with a global cotton apparel manufacturer to supply DNA tagging and testing services.
Pharmacogenomic Testing Service Launch: Commercially launched TR8 PGx, a pharmacogenomic testing service, with a capacity to support up to $25 million in annual revenue.
Revenue Growth Strategy: The company anticipates a return to year-over-year revenue growth starting in the first half of fiscal 2025.
Indus Partnership: The partnership with Indus is expected to provide sustainable growth in the DNA tagging segment.
Revenue Inflection Point: The company expects an imminent revenue inflection starting in the first half of fiscal 2025, primarily driven by developments in LineaRx and DNA tagging segments.
Cash Burn Rate: Average monthly cash burn is $1.2 million fiscal year-to-date, compared to $500,000 in the prior year.
Going Concern: The company has substantial doubt about its ability to continue as a going concern, dependent on generating revenues or raising capital.
Stockholder Approval for Warrants: The exercise of Series A and B warrants could result in additional gross proceeds of approximately $18.4 million each, subject to shareholder approval.
NASDAQ Compliance: The company has until January 8, 2025, to regain compliance with NASDAQ's minimum bid price requirement.
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Shareholder Return Plan
Series A Warrants: Series A warrants to purchase 9.23 million common shares at an exercise price of $1.99 with a 5-year term from the shareholder approval date.
Series B Warrants: Series B warrants to purchase 9.23 million common shares at an exercise price of $1.99 with a 1-year term from the shareholder approval date. The Series B warrants also allow for an alternative cashless exercise option.
Potential Gross Proceeds: The exercise of the Series A warrants could result in additional gross proceeds of approximately $18.4 million to the company. The exercise of the Series B warrants could also result in additional gross proceeds of approximately $18.4 million.
Shareholder Approval: The exercisability of both the Series A and B warrants are subject to shareholder approval.
Reverse Stock Split Proposal: The annual meeting proxy includes a proposal to grant the Board the authority to implement a reverse stock split to meet the minimum bid price requirement under the Nasdaq Capital Market listing rules.
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Key Q&A
Q:How many customers for GMP manufacturing products do you expect to have by the end of 2024?
A:We are launching our GMP facility at the end of fiscal 2024, so we don't expect to have signed contracts today that it launches. We have been through the evaluation process with 2 large customers, and the indications are that those first GMP manufacturing rounds will be early calendar year 2025.
Q:Are there any customers beyond the 2 approved and third pending in conversations?
A:We have verbal commitments for about half of our GMP capacity in early calendar year 2025, and we think we have a robust sales funnel for the rest of that capacity.
Q:What is the level of test volume for TR8 pharmacogenomic testing services you expect to have in the coming quarters?
A:We believe we are the first commercial entity in New York State to offer a broad-based panel, targeting concierge physician practices initially. We expect to build adequate volume of testing in smaller quanta, with the capacity built to service more than $25 million of revenue per year.
Q:Are there any other states that you're targeting?
A:We are completing our registration to sell in 47 additional states, and there is no validation required for those states.
Q:Review of Unclear Management Responses
A:Management did not provide specific numbers for the expected customer uptake beyond 2024, and the response regarding the level of test volume for TR8 pharmacogenomic testing lacked specific details on expected volumes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Capital Market
Clay
DNA tagging
GMP
NASDAQ listing
New York
PGx testing
Series warrant
Services segment
TR
York State
apparel
bid price
cashless exercise
commercialization
commitment
compliance bid
concierge physician
decrease
deployment
enterprise testing
meeting
pharmacogenomics
requirement
shareholder approval
state
stock
stockholder
testing volume
warrant share
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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Where does this earnings call transcript come from?
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Why do some answers appear as “Unclear” or “Inaudible”?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
