Q2 2020 Earnings Call
[music].
Second quarter 2020 conference call.
Participants will be in listen only mode should you need assistance. They signal conference specialist Kristina Starkey followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Judy Maria. Please go ahead.
Thank you operator.
Good afternoon, everyone and thank you for joining us for fiscal 2022nd quarter financial results Conference call.
A copy of the company's earnings press release, and accompanying Powerpoint presentation to this call are available for download under the events and presentations section to the industry's page of the applied DNA website.
With me on the call today are Dr., James Hayward, Chairman, President and CEO.
<unk> Chief Financial Officer.
Before we begin I would like to remind everyone that this conference call may include forward looking statement.
Please see slide two of the accompanying Powerpoint presentation and the company's does he see filing for important risk factors that could cause the companys actual performance or results to differ materially from those expressed or implied in any forward looking statement.
Applied DNA undertakes no obligation to update or revise any forward looking statements or other information provided on this call as a result of new information or future results or development.
No. It's my pleasure to introduce our first speaker to today's call that chance.
Thank you Judy good afternoon, everyone and thank you for joining us.
Today I will review, our consolidated financial results throughout 2020 fiscal second quarter.
Dr., James Hayward, our president and CEO, well update you on developments in our linear DNA business.
Especially on our call the 19 vaccine and diagnostic development program.
I have focused the company's time and attention, let's see outbreak of the pandemic.
Jim We'll then open the call to your question.
As a result of the coal that 19 pandemic and the mandate by the state of New York to close all non essential businesses until at least may 15th the company reduce the scope of its operation and where possible certain workers have been telecommuting from home.
Portion of the.
Portions of the company's business are deemed to be an essential business and have continued operations.
Such as our government and pharmaceutical contract.
Well as the vaccine and diagnostic candidate development.
However, we have experienced and they continue to experience in the future facility closure is related to our non essential business.
[music].
The impact of cold in 19 to revenue for the second quarter fiscal 2020 was minimal.
However, subsequent to March 31st we have been experiencing a decline in revenues from our non biological tagging and related services that comprise our supply chain security business segment.
This segment services certain global supply chain chains, such as textile that chat transit three geography is in countries in Asia and North America.
We're actively engaged with our partners and customers to monitor business activity levels Journalese unprecedented times.
Regarding our biopharma activities that now take up the majority of our business development activities.
We do not anticipate any barriers to continue to manufacturer linear DNA at scale for therapeutic application.
And in support of our coal the 19 vaccine candidate.
Nor do we see any barrier to continue development and manufacturing relating to our diagnostic kit program.
Starting with the statement of operations.
Total revenues for the period decreased 29% to approximately 552000.
From approximately 778000 in the second quarter fiscal 2019.
Product revenues were 198000 as compared to 119000 in the prior year period.
The increase in product revenues is attributable to increased biopharmaceutical revenues and to a lesser extent initial revenue from the marketing of a nutraceutical supplement.
Offset by lower asset marking revenue.
[laughter] second quarter service revenues were 355000.
As compared to 659000 in the prior year period.
The year over year decrease in service revenues is primarily attributable to revenues in the prior period related to a government contract award that was completed in May of 2019.
As well as a decrease in the number of textile Encana best feasibility projects.
The latter due to our cancel contract with dark huh.
Although we are actively developing leads in cannabis tagging.
Cost of revenue as a percentage of product revenue in our fiscal second quarter of 2020 decreased to 91% as compared to 112% for the year ago period.
The year over year on <unk> improvement was due to the change in product sales next as well as an inventory adjustment during the second quarter fiscal 19.
Total operating expenses decreased 7% or 223002, or 3.1 million and the second fiscal quarter of 2020 compared with approximately three point threemillion.
For the same period and the prior fiscal year.
Reflecting lower selling general and administrative costs due principally to lower professional fees.
To a lesser extent from a decrease in travel as result of Coven 19 travel restrictions.
Second quarter R&D expenses increased by 52002 703000 from 651000 over the prior period.
This increase reflects higher development cost for our biotherapeutic customer as well as an increase in payroll offset by lower development cost for the government contract that was completed in may of 19.
Net loss for the second quarter fiscal 2020 widened by 10% on a year over year basis to 3 million from 2.7 million.
[laughter] as a reminder, we implemented a one for 40 reverse stock split on November for 2019.
As a result reported earnings per share for the second quarter of fiscal 2020, and 2019 have been calculated using opposed to reverse stock split share count.
Weighted average shares outstanding for second quarter fiscal 2020 and 2019.
Our 3 million 758512.
And 834990, respectively.
Net loss per share for the second quarter of 2020 improved to 79 cents compared to a net loss per share of $3.22 for the same period and fiscal 2019.
Excluding noncash expenses adjusted EBITDA was negative 2.6 million for the second quarter fiscal 2020.
Compared to negative 2.3 million in the prior period.
[noise] turning to our balance sheet.
Cash and cash equivalents totaled approximately 8.7 million at March 31st.
This figure includes approximately $2.8 million and net proceeds from the exercise of warrants issued as part of our November 15th 2019 underwritten public offering.
Total debt comprise about secured convertible notes was $1.5 million at quarter end.
Our average monthly cash burn right now a financing and warrant proceeds for the second quarter fiscal 2020.
Was 880000 compared to 399000 for the year ago period, an increase of 121%.
The increase is due to catch up payments made after the November 2019 financing was complete as well as the timing of cash receipts.
[laughter].
Subsequent to March 31st we received additional warrant exercises totaling 2.9 million in that program.
As of yesterday may 13th approximately 1.5 million warrants issued as part of our November 2019 offering remain outstanding.
Our current cash the cash position is approximately 11.5 million dollar.
Finally subsequent to March 31st.
As a bio pharma company with active [laughter], though as yet on sponsored cobot 19 programs across both vaccines in diagnostic cats, we applied and receive paycheck protection program funds.
Totaling $874000 as part of the second tranche of the program.
As we intend to retain our staff, we expect full loan forgiveness full turns of alone are found in our 10-Q filed a short while ago.
This concludes my prepared remarks, thank you for joining us today I would now like to turn it over to Jim for his comments [noise].
Okay. Thank you very much.
Good afternoon, everyone and thank you for joining our call.
Oh that you you families and friends are all staying healthy unsafe.
And on behalf of the entire applied DNA family I want to express our gratitude.
To the men and women on the front line of this crisis.
For the doctors and nurses and everyone working so hard today.
During their health at risk to support the safety and health of our communities in our country.
Given our work on co. Good 19 in close proximity with.
Stony Brook University.
That is right next to us here on the campus.
We have front rows seats to the incredible work these men and women do every single day.
So it all of you.
And to those of you have family members on the front lines, we say a heartfelt. Thank you.
I'll begin my remarks today on a cobot 19 development programs that hold or investors' interest given potential of these programs to recast our revenue profile going forward.
Due to their applicability to the pandemic and the advantages that we offer and these urgent times.
I'll begin first with our co. Good 19 diagnostic kit I'd say for which we have only just received emergency use authorization from the F.D.A.
Sars co retool does not use deanna either way, we do to encode it's gene.
It uses a single Strom the Barney.
Such viruses are detected by a method you I've heard us reference awesome Cold PCR work polymerase chain reaction.
As we are global experts.
On Pcr.
We also use in manufacturing it made perfect. So for us to dedicate the effort to detecting cobot 19 by PCR.
Now, let's talk about the virus, we are battling a little logic of our approach.
Sars Koby too is small about 100 nanometers in diameter roughly 110th the size of most bacteria. It's genome is quite small only about 30000 base pairs long compared to humans 3 billion basis.
But it is complex and not little genome and codes for almost 30 proteins. The pretty not has the attention of the scientists that applied DNA is spike named because that's what it looks like.
When disbursed around the surface through the membrane that surrounds the virus in cross section it looks like a ground, giving the virus its name spike forms that crown.
Spike as the means by which Sars koby to gains entry into a human cell binding to a specific receptor on the surface of its host sells it is an essential part of the mechanism of infection.
For that reason it made sense was to us to target Spike and the gene not encodes it called the yes gene for our diagnostic target and to targeted it again in our approach to vaccines.
Antibodies that falling to the spike protein might neutralize spike from binding to its receptor. So of necessity, we became quite expert spike.
Our test is reversed transcription real time Pcr.
Well molecular diagnostic tool that identifies the virus is genetic material in patient samples.
The reverse transcription step converts the viral on a intuit's homologous DNA, which is easier to copy in the subsequent cycles of DNA based Pcr.
To enable governance to significantly increase patient testing for co bid 19 and played a critical <unk> role in the fight against covert 19 ours is a high throughput kit that allows for mass testing for cobot 19 up to 94 samples protesting wrong.
And each test run can be completed in as little as an hour.
We believe or tested several commercial advantages over other E U way approved coal good 19 diagnostic tests, we've designed our test for ease of use.
Our test is an advanced single well multiplex test that allows for simple setup and higher throughput as compared to test that require multiple wells per test.
The tests targets two portions of the Spike gene, which we believe is unique in the cold that 19 testing space.
These unique targets were selected due to their highly conserved nature.
Based on the analysis of thousands of co bid 19 genetic sequence.
And all we believe we have developed a best in breed us say that has the potential to significantly.
Significantly help flatten the curve, both in New York and nationwide.
Regarding the economics of our covert 19 diagnostic test, we expect the test to be profitable starting a day one.
Weve been careful in choosing our kid components and I've worked closely with our domestic supply chain partners to develop safeguards for continued supply of necessary reagents.
We've made sure that the manufacturing process for our test kit as simple as possible, allowing the company to scale with demand.
During the development of our test kit. We also worked diligently to identify and cultivate initial customers.
We're currently in discussions with a large new York State institution as well as several public and private companies.
We hope to have an update on these and other cells developments as soon as practicable.
[noise] achieving the way is not the end of our diagnostic work. We are currently undertaking further developments regarding our kid, including evaluation studies for additional specimen types like saliva.
And additional testing equipment.
We plan to file Eway amendments in the near future that if granted we believe will further increase the commercial utilities var diagnostic test.
In effect, we plan to fall amendments that we believe will make testing easier and more affordable and therefore enable oh flattening of the curve.
The foundation of all our Cobot 19 development programs is our unique approach of linear DNA.
We're experts in DNA and its manufacturer with the ability to produce linear DNA that very large scale.
Our covert 19 work is a natural extension of our linear DNA based approach.
Two DNA based therapeutics [noise] excuse me that other cutting edge of modern medicine.
From engineered T cells also known as car T therapies to gene therapies are in a high and DNA based vaccines such as Workover 19.
We believe that our DNA platform serves as a large scale tool for the rapid manufactured DNA based therapeutics.
Has the potential to revolutionize an industry.
But to date have been unwilling or unable to move beyond plasmid based technologies.
In effect, we believe cold with 19 could initiate a sea change in the therapeutics development of our linear DNA platform audits for from.
Building awareness and adoption of our platform was taking place before the pandemic spread I know more to say about our success in gaining further validation that linear DNA is being increasingly seen by industry Giants.
Oh viable alternative for plasma DNA.
Well I also want to bring your attention.
Two recent exciting developments in our supply chain security segment.
Now turning again to our covert 19 efforts and specifically our vaccine development for us and for the benefit of new investors. Let me give you a summary of our work with Texas.
That is biotech is our developmental partner for our covert 19 vaccine candidates that are based in Italy, another covert 19 hotspot and.
In Texas was founded by scientists from Merck Research Labs, we first entered into a joint development agreement with Takis in 2018 to develop linear DNA based anti cancer vaccines.
We would go on to jointly develop linear DNA expression vectors for two anticancer vaccine candidates utilizing our live linear DNA technology, one of which is nearing its first clinical trials for the treatment of cancer in dogs and cats.
Plus linear DNA amplicons carrying the DNA sequences for the anti cancer vaccine candidates were delivered to pre clinical animal models bio Takis is proprietary electroporation technology.
If this sounds familiar it is the same roadmap, we and tuck ins have articulated to jointly develop DNA based vaccine candidates for Sars koby to the virus that causes the disease or co. Good 19.
We believe this road map holds much potential initial results from our linear DNA anti cancer vaccines prior to cope with 19 were quite compelling.
We reported last fall that the linear DNA anticancer vaccine showed rapid tumor clearance in test animals.
No most approaches for synthetic genomics use plasmids in small count scale to develop their constructs that contain the DNA design of interest and taxes case.
They created five co bid 19 candidates that target the spike protein.
But unlike our diagnostic we engineered the linear DNA vaccines to use just those segments of spike that are determined to be the most antigenic.
Unlike most vaccines that are made of protein a DNA vaccine can be designed and manufactured very quickly.
DNA vaccines are also more stable than our on any or protein vaccines and can be made more easily and moved through supply chains without the need for refrigeration.
DNA vaccines use the patient as the bio reactor.
The DNA resides for a brief time in the nucleus of the patients cells and his transcribed in translated into the design proteins that provoke the immune response.
And then labeling immune cells than antibodies to recognize spike as foreign.
The DNA is expressed without being integrated into the genome for a period of about just two weeks after which the DNA is destroyed by housekeeping enzymes in the nucleus and immune memory is in place to convey immunity to the virus for the pace.
<unk>.
Preliminary test results from the plasma days DNA vaccine templates show that they were immunogenic and they induced a strong production of antibodies across all five vaccine candidates.
Now based on our prior linear DNA anticancer results.
We expect to close correlation and efficacy between the plasmin templates and our linear DNA vaccines, but without the risks we believed to be safety issues for plasma based manufacturer.
Subsequent to the close of the March 31st quarter, we shipped the five linear DNA versions of the vaccine candidates to taxes.
Last week Tac as reported that it's plus bid constructs had produced neutralizing antibodies intestine animals.
Pack is believes this to be the first vaccine to produce neutralizing antibodies in an animal model.
Using the plasmid results as a baseline taxes began to those test animals with our linear DNA versions of the Cobot 19 vaccine candidates also last week and we expect to see results over the next two months.
At this point people often ask it plows mid constructs work why is there a need for a linear vaccine.
Well there are several advantages some of which have been made all the more imperative in this current pandemic state.
Functionally our approach to linear DNA does not require bacterial fermentation.
This gives it the advantage of potentially lower risk of antibiotic resistance and unwanted genome integration.
Unlike plasmids linear DNA contains only the desired therapeutic DNA sequence.
With no bacterial or antibiotic resistance DNA sequences.
We also have the advantage of speed and scalability to manufacture for global use.
Speed and scalability take on a greater importance today.
In addition.
Linear DNA based vaccines as with DNA vaccines in general.
Our more cost effective to produce a much more stable at a wide variety of temperatures.
Allowing for easier distribution as compared to our in a based vaccines.
Finally.
This virus has already shown a capacity to evolve.
More than 2000 stable variants isolated from humans.
I've been sequenced in a large database that we used to design our co bid 19 diagnostic.
Which is sensitive to every single day aren't.
But what happens if a new variant emerges that is not sensitive to the antibodies evoked bio specific vaccine.
Well Arctic no technological platform would allow us to respond quickly.
Using linear DNA to targets the new variant.
Today, we function as the CEO ROE of contract research organization to many companies, where we designed the linear DNA construct and reduced volumes sufficient for pretty clinical trials.
As our relationship and our customers dnase therapy matures. However.
We begin to function as a CMO a contract manufacturing organization [noise].
Two therapy in drug developers, where our ability to manufacture at scale becomes relevant to larger volumes necessary for clinical trial purposes and pre commercialization.
Similarly should our joint development with tuck has progressed to human clinical trial and under the best case scenario, a linear DNA vaccine is approved for human consumption.
We would be the manufacturers of that linear DNA vaccine potentially on a global scale.
Transitioning from CR owed to CMO is foundational to our bio pharma commercialization strategy and offers a path to greater and more recurring revenue streams.
Our platform is also drug developer agnostic.
If one of the other drug developers gets to a DNA based approval for global use first or any other DNA based therapeutic and other clinical areas such as oncology, we can make it for them again faster at a much higher purity and with a potentially lower risk profile.
On to humans.
And that the drug developers using plasma based manufacturing yeah.
During the March 31st quarter, HM, We added several market leaders to our development customer base I'd like to highlight too.
The first is the biologics subsidiary, although you must based.
Global Biopharmaceutical company that is singularly focused on DNA based therapies.
They sent US two of their proprietary car T amplicons.
And we sent them back linear DNA versions, with which to evaluate our platforms capabilities.
The second customer rather than giving us a development water opted instead.
For research agreement that gives them access to the full scope of our capabilities are linear DNA platform, our own anti Cdnineteen car T construct for the treatment of acute lymphocytic leukemia.
And our collaboration with life sensors sumo fusion technology is to maximize protein expression.
As customers differentiated by its interest in our platform and not for a specific therapy or therapies, but rather as a component of its improvement strategy for the manufacturing process. So all of its cars.
There are pieces moving forward.
No over the last several years the commercialization of our platform has increasingly run through highly regulated markets such as drug development and the F.D.A. is the regulatory body that overseas.
The business verticals service by our supply chain security segment and last month.
We were accepted into the F.D. is emerging technology program that creates a pathway for us to DNA tag Pharmaceuticals and packaging.
The ATP serves to help promote the adoption of innovative approaches to pharmaceutical product design and manufacturing and offers technology companies and their pharmaceutical customers the opportunity to discuss identify and result potential to.
Technical and regulatory pathways early in the development that implementation of a novel technology like ours.
Our inclusion in the GP, we believe.
Should make for a smoother regulatory path for pharmaceutical customers, who seek to employ the DNA marking.
Oh, there pharmaceutical products in order to forensically through their authenticity or their point of origin.
The interest of the F.D.A. in our tagging platform, we expect will help us to recruit manufacturers of drugs, whose patients want to ensure their supply chains on intact.
It is not hard to imagine the positive intact.
We might still have on the opioid crisis or the transformation to come in global supply chains.
So now in conclusion looking ahead to the second half of our fiscal year, we're primarily focused on our covert 19 developments and more broadly our bio pharma opportunity.
With our Eway in hand.
We're focused on commercializing our diagnostic kit, which we strongly believe.
Given its relative advantages in the market.
Kind of help all of us mitigate infection rates.
We will stay the course of our therapeutic applications of linear DNA, especially our promising vaccines with takis.
Our car T therapy, and RCR Roe to CMO business.
No. Its best stated our cash position gives us a cushion with which to pursue our near term objectives.
We're also very grateful to receive phones on the paycheck protection program. So we can continue to pursue our vital work with the full h., Nova applied DNA personnel.
Well. Thank you for your time and attention. This afternoon. This concludes my prepared remarks, operator can you. Please open the call two questions.
Yes to ask a question you May Press Star then one on your Touchtone phone if you're using these speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to.
At this time, we'll pause momentarily to assemble a roster.
Our first question comes from Anthony Vendetti from Maxim. Please go ahead.
Thanks, Thanks, Jim how are you doing.
Very well thank you Anthony how about you.
Okay, They think that.
If you could talk a little bit Jim just there.
I know you have five vaccine candidates with taxes. So the one that you're moving forward with right now how would that how would that work.
You'd be.
Responsible for manufacturing it with taxes, who would who would oh owning it.
How would it work if you were to roll it out.
In terms of revenues to you versus tax.
Sure. Good question. So we are still pursuing all five of our candidate vaccines right now.
Do you have to get to the point, where the molecular analysis of the response they provoke.
And animals is more clearly understood.
We will be moving with attack is through a simple mouse model to more sophisticated animal model to get a complete survey of the response.
This is a joint development program. So we mutually on the products and applied DNA is the intended manufacturer.
Now that said the best path.
For a vaccine to the market.
Is with partners, who have established vaccine divisions.
The marketing, which is unique to vaccines very different from pharma and the regulatory experience to rise to the challenges of vaccines.
So collectively we are talking to a interested parties right now who are large enough and have the wherewithal to get us to a global market. Given Oh, you know, there's a need to vaccinate, perhaps 7 billion people in a relatively short period.
At a time.
Okay. Yeah. That's that's that's helpful.
Obviously, you don't according to at least Dr. <unk> quite testimony theres not a government plan to.
Figure out how to roll it out and his view anyway is that there's not one company that can do there. So it sounds like you went taxes are having.
Joint conversations with multiple companies should one of your vaccine candidates be one of the vaccines that create.
The mass produced.
Yes, and you bring up Anthony the global nature.
And you know the Gates Foundation has spent a.
Lot of money.
Ensuring tight controls low temperature and humidity conditions.
The Oh logistics of vaccine distribution the benefit of freeze dried double stranded DNA vaccines is there a remarkably stable over very close to or more than a 100 degrees centigrade grades span of temperatures. So.
They'll be very stable in distribution and not require finicky tight controls that are very expensive.
All right, there's a lot of the vaccine.
It competing vaccine something they require corporations yours.
[music].
That's right.
And then and there's just one last question on the testing I know obviously receipt.
Anyway emergency use authorization for your your corporate 90 test.
Diagnostic test can you talk a little bit more about exactly how that would.
Rollout.
Yeah, we have right now are our test is approved for use in a particular a platform are very sophisticated PCR device. So we intend to broaden the platform that's relevant to.
In addition, individual certified laboratories can develop what's called an L.D. T lab developed test that's approved not by the federal government, but by the state and that can be on virtually any instrument. The laboratory happens to have so they are.
Able to buy kits directly and begin to deploy them in variations of the theme that we got are you a four.
And in addition, we're planning to increase the sample types.
Things like Swabs, Oh to go beyond simply news Overindulged Swabs, I said swabs I'm in saliva.
And.
So that sample collection is much easier and and faster to process.
And we are speaking with some large entities, who I've shown an interest and ER and helping US assembled these kids at the scale becomes very very large we can manage it ourselves to a very large scale, but once you a consider the global need.
Oh, we may need to manufacture this in multiple locations.
Understood and just lastly, I Wonder if you Jimmy you can just talk a little bit about the census sensitivity and specificity of saliva versus a nasal.
Well in jail swap specimens.
Yeah, you know those studies are still underway, but everything indicates that the viral load and saliva may in fact be higher than the viral load one picks up in a nasal fringe ill swab.
The the issue only with realizes it's a much more dynamic environment than on on flopped Swan that you scrape the far reaches of your nasal passages with.
And so the sample handling is a little bit different but it's more flexible and it's a lot faster and more convenient and patient compliance will be much higher. So we think it's a great way to move forward as a countries localities have to really address.
The issue of.
Some people getting back to work.
Right. So that's the last point I guess is it.
If we're going to.
A test on a massive scale in order to get people back to work.
And have people submit to these tests and get a rapid response.
It sounds like from your perspective.
I would agree that something along the lines about saliva test, where you would get much higher compliance if it can be done correctly on your proper direction instruction.
Could get you a result that.
Accurate enough and you could get that result back in a reasonable amount on time to make a judgment as to whether or not a particular worker should.
Returned to work or or be said he sent home. So just wondering so hey, if you agreed that and then b.
It.
If it turns out that you can do that with the saliva test how fast.
Or is it going to depend on that particular laboratory, but how how fast do you think you can get canceled back in an accurate way and could be test eventually be done.
With high specificity and sensitivity.
At home.
Oh, that's an interesting question. So I can tell you that the test can be done we know already with high sensitivity and specificity with A.O. lower limit of detection below five copies of viral aren't they.
So that's very sensitive.
And using our US a framework that we have.
We know that there is no interference from any other respiratory pathogens and yet at the same time, it's sensitive to the 2000 different variants that have already been sequenced.
No it's quite possible that that this platform will lend itself very well to a point of care.
Analysis, which may mean, the offices and the like can do it for the moment I don't see a test being performed at home.
Not for PCR based diagnostic for the less specific diagnostics the rely on antibodies, but as you know those rollouts have not gone very well they can be done in the kind of a pregnancy test format that would enable.
All testing at home eventually, but not with the kind of resolution you need under the circumstances, where a you know a virus has a 6% mortality rate.
Okay understood that that's very helpful. Thanks, Jim I'll hop back in Q.
Okay sure.
Good.
Next question comes from Yi Chen from H.C. Wainwright. Please go ahead.
Oh. Thank you for taking my question. My first question is.
Have you publicize the number for the sensitivity and specificity that's over 19 test.
Yeah. Those numbers are included in the way, which is publicized on the F.D. is us dedicated site.
Okay has any external dependent institution validated the test.
Yes in fact, our validation was done in close collaboration with Stony Brook University Hospital, and so they had their own.
Collection of you a tests already in hand.
And.
They were kind enough to validate as a third party for test.
Thanks, you mentioned that the test is run only specific PCL platform.
Can you provide us with some color on how many.
The current installed base of the specific PCR platform, the U.S. and whether you have a preference.
Thanks, Vince considering your location.
Do you have a preference to collaborate with a CLIA labs and be in New York State.
First the because of its currently but mostly affected hearing the country.
Yeah that was part of our motivation you from the very beginning was to be able to service first our regional state community and then the U.S. and more broadly.
So I think that that will be relatively straightforward no. We chose our testing platform, which is a very sophisticated PCR machine called the Quantstudio Dx they'd buy applied Biosystems Bell Thermo Fisher.
And that doesn't have a huge installed base, but do you know the installed base does not limit the use of our Kid and we think it will very quickly.
Migrate to will de tease that are developed by laboratories by the larger testing companies.
Like quest and Labcorp very very quickly and in addition, we'll be expanding amending our E away by the inclusion of other.
Bits of hardware or that has a much larger installed base.
We're actually counties. The one we started because it's very precise we're able to learn much more than we might have using a lower quality device.
Got it lastly could you let us know the pricing up the test kits and the.
Manufacturing capacity or the following up the test you will be able to ship within the next let's say the coming quarter.
Yeah sure you know the testing the cost.
It is typically done on a per reaction basis, and we are competitive with the rest of the marketplace I'm not prepared to give you specific dollar amount, but I can tell you we will compete well in that marketplace the without difficult.
<unk>.
And the second half of your question I've forgotten already.
That's the manufacturing capacity or the volume up because you will be able to ship.
Oh, yes.
We think that any request, we get from a within New York State or the East coast to coast will have no trouble handily immediately.
And as a the weeks where on now that we have already you weigh in hand will be increasing capacity. So a you know we think that it.
Who'd be important to be able to supply this on a global scale, perhaps as large as a million reactions per week.
Got it thank you.
Sure.
The next question comes from.
Craig Pierce from Morgan Stanley. Please go ahead.
Hi, Jim.
Greg and Judy in best [noise].
Hi.
I wanted to ask.
Two things one is.
Do you have any sort of big idea of when you could <unk> well anticipate hope to have commercial.
Revenue coming in over the next.
Few quarters from this particular pathway silo.
Yes, we were hoping to ship our first products tomorrow. So.
I would say within the next 24 hours.
So and these are commercial sales if you will.
Well.
Yes, there commercial self.
I'm not sure exactly what you meant by your emphasis but.
No. These are from entities that by hundreds of thousands of reactions per month in some cases or or larger so yes. The commercial.
Definitely commercial ourselves, we're talking with public institutions private companies public companies.
And health care systems.
Okay. So it sounds like you're basically we're ready to go you were just waiting for this oh emergency approval and.
Ready to have the trucks pull up and shipped to stuff out.
Well have you seen the size of the kit.
[laughter] there.
Very small it's more likely than pull up the kids themselves are very very tiny remember the a diagnostic PCR is done microliters at a time, it's done in a very small volume so that the kids themselves all the components.
Our expenses.
They will be doing it at a good margin and but it does not show.
Ship in a very large container.
Well I was more figuratively speaking in terms of yes.
Transport as opposed to literally you know well you know how many [laughter], how many 18 wheelers is going to take.
Alright.
Thank you second question is this whole presentation has been focused on your involvement in helping you being applied DNA sciences involvement with dealing with his pandemic.
What's going on or will be going on as far as getting you know I think that's had mentioned that a lot of the other things that you've been working on or just basically put on hold Fortunately the government is providing the income to the employees salaries or to have them stay on board.
While you're going through.
Going through this pandemic a process.
How and when and where we can all go back to work so to speak but what's what do you see as far as the phasing of getting all of your other silos back on track and I know, it's a multi silos that there's a multi answer it just broadly speaking any sense of.
Oh, how you're preparing and when you're preparing to begin to turn on the dimmer switch on these various silos.
Yeah to be honest, Oh, we may need a twofold switch and not a dimmer to be honest I think the impact of covert 19 on.
It's really interrupted supply chains of all types, including those in diverse industries and it's also showing how quickly criminal players moving to fill the void.
As we've seen in suppliers of inferior antibody test or even counterfeit personal protective equipment or P. P E.
So ironically the human crisis that is covert 19 has pointed out.
Too many the utility of our platform in helping cure many of the global shortfalls that made the world the target for this new Corona virus. So.
So I personally.
Optimistic.
The on the other side.
As business is gradually open.
We will see applications coming to us more freely.
Then they did before the crisis.
The next question comes from Paul Cooney from Joseph Garner. Please go ahead.
Hey, Jim how are you doing congratulations on all the activity you've got going on right now.
Thank you Paul.
You know I don't a couple of these were asked but specifically based on the timing you stated that it.
You could start shipping tomorrow, what is the capacity for shipping right away like whats. Your your capacity, let's just say you got in order for.
A million test kits tomorrow, how fast can do TIGIT could you could you fill that.
Yeah million kids tomorrow, or certainly would be a challenge that'd be a few of us who wouldn't sleep all night.
But you know the remember as I said in a prior reply. The size. These kids is quite small and so it's a matter of getting reagents very carefully very almost a sceptically into a specific containers.
And having them all labeled and prepared in a a GLP kind of manufacturing scenario. So it's the caution that is the time consumer it's not the actual labor. So we'll be able to scale up really very very quickly.
The skill sets required to manufacture these products are had by almost all of our employees and you know having over 50 of others. We can operate a if we need to in three shifts we ended up doing that in the preparation.
Research that had to go into diagnostics and through the weekends and we would do that as well on top of that we've placed orders for robotics that will help us greatly increase our output.
Okay. So I mean like just from now to get to a million.
What would.
Take a need to get it because the packaging and I understand but how long will take to get to that point, where you could do a million because you said earlier that you might be able to do a million.
A week at some point, how far would it be how what will be to get from from here to where you'd be able to produce that.
Oh, that's not very long at all we've worked hard with our domestic suppliers to ensure that we have adequate reserves you know one of the problems that held up the initiation of testing in the United States is that the raw materials were not available we will.
Ensure that does not happen to us and so the response time is simply a matter of production on as I said the production we could rise to the occasion really very quickly put it this way I don't see us being capacity constrained.
For six months or longer and if we see that coming will simply increase the robotics necessary to be able to increase the output.
The robotics can be delivered typically into the three weeks time.
And and all this would be manufactured out of your officers and Stony Brook.
If if god willingness scale gets a very high we have spoken to some very large scale domestic manufacturers, who would be able to help us increase the output of kids.
Okay can you give us the idea of the cost per kit.
Two applied DNA.
[noise] I'd, rather not go through the numerics themselves other than to say right now that the margins are strong and that's the final price is very competitive we can be extremely competitive in the marketplace. We designed for simplicity.
And efficiency.
And you know I think this will be a strong.
Revenue line for us on a recurring basis or at least a until we get this.
Pandemic under control and you know the that's unlikely to happen, but then in my view within the next year.
Okay and you test you have how long does it take to get the results.
Oh, the test can be <unk>, it's one hour.
And we can return the results to the physician the same day they ordered.
All right. So it's not like one of those five minutes as that some people are talking about now.
No. This is a PCR based test. So this is kind of the be all and and all to determine if you have active infection with the virus. This is not an antibody test it's not an antigen test.
Because it's got a very low limit of detection. We think it will also have little chance of a false negatives, which is very important to control the the spread the flattening of the disease and our evidence is that it has almost no false positives.
Okay. So some of the tests that are out there are claiming like 94% accuracy on some of the five and 10 minutes tests are there. Some people are claiming right now so you're thinking you're saying that your should be close to 100% 99 point something percent.
We believe we have 100% specificity yes.
Okay. Thank you.
The next question comes from John Samelson from Cantel. Please go ahead.
Hey, Jim Congratulations on all your hard work I'm really really takes the village there's a whole team your hard work Yep <unk> and we appreciate it would you elaborate a little bit on something that's gotten lost here on the E. T P program.
And what it means to the lead times and what can happen there because that's been in the works for a long time and now that we've been accepted it never could be an exciting other part of the company.
Yeah, we're very excited about the Senate and I'd like to say something.
In general that I hope no one misinterprets, but we have found the F.D.A. to be great partners.
They make us better they ask very tough questions. They examine things very closely.
Honestly, they made me feel better as an American better as a scientist and we're thrilled to be able to work with them in the T T program or ATP.
[music].
They.
Will facilitate all of our meetings with enough D N.
They are their role is to.
To make <unk>.
<unk> less of a hurdle.
Meeting with F.D.A. and of the discussion of regulatory issues. They will advise upfront as opposed to halfway through wouldn't you you've made the mistake so already.
And they will even participate in our discussion with industrial leaders, who are interested in taking up the technology. So you know not everyone gains access to the TP. The members of the TPL called the <unk> emerging technology team we.
He found to be extraordinarily bright and mix and receptive and so we think that this is going to help us very much in our implementation of tagging to increase the safety and security is a pharmaceutical industry.
So did the lead time that used to be you know exceptionally long can now be cut down to something more reasonable so from start to finish it's a whole different process, they're motive and taking us into the E. T. P is to shorten the time frame for implementation.
Okay. Thank you.
Welcome.
Again, if you every question. Please press Star then one.
There are numerous questions in the Q.
Skews me.
Yeah, Shaun Lippincott from F.B.L. consult.
Hello.
I'm sorry, there's no more questions in the Q. This ends the.
A question answer session I'd like to turn the conference back over to Dr., Jim Hayward for any closing remarks.
Okay, well first of all thank you everyone for years steadfast support for our company and your interest we've received lots of phone calls of inquiry over this period, the time and lots of expressions of support for what we're doing I think together both you as investors.
Then we as your partners can make a huge differences in the world and the.
Although it's a very difficult a time for the world in general we're very pleased to be able to offer.
The opportunity to flatten the curve and lessen the Missouri and at the same time to make the world the better place. So thank you very much have a good night.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].