Q1 2022 Applied DNA Sciences Inc Earnings Call
Good afternoon, and welcome to the applied DNA Sciences incorporated first quarter fiscal 2022 financial results Conference call.
Speaker 1: Good afternoon and welcome to the Applied DNA Sciences Incorporated first quarter fiscal 2022 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Speaker 1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.
Please note. This event is being recorded I would now like to turn the conference over to Sanjay Hurry Investor Relations at applied DNA. Please go ahead.
Speaker 1: Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Huri, Investor Relations at Applied BNA. Please go ahead.
Thank you Gary Good afternoon, everyone and welcome to applied DNA <unk> conference call to discuss our first quarter fiscal 2022 financial results.
Speaker 2: Thank you, Gary. Good afternoon, everyone, and welcome to FlyDNA's conference call to discuss our first quarter fiscal 2022 financial results.
To access the press release that was issued after market close today as well as the accompanying slide presentation to this call on the Investor Relations section of our corporate website.
Speaker 2: You can access the press release that was issued after market close today, as well as the accompanying slide presentation to this call on the investor relations section of our corporate website.
Speaking on the call today are Dr. James Hayward, our chairman, President and CEO and Beth Jantzen our CFO .
Speaker 2: Speaking on the call today are Dr. James Hayward, our Chairman, President and CEO , and Beth Janssen, our CEO .
Judy Murrah.
Speaker 2: Judy Murrah, our COO, and Clay Chirac, our Chief Legal Officer and Head of Business Development, will also be available to answer questions on the Q&A portion of the call.
In place of rock, our Chief legal officer, and head of business development will also be available to answer questions on the Q&A portion of the call.
Before we begin.
Speaker 2: Before we begin, please note that some of the information you will hear today during our discussion may consist of forward-looking states.
We begin please note that some of the information you will hear today during our discussion may consist of forward looking statements.
I refer you to slide two of the presentation and our Form 10-Q filed a short while ago for important risk factors cause the company's actual performance and results to differ materially from those expressed or implied in any forward looking statements. We undertake no obligation to update or revise any forward looking statements or other information.
Speaker 2: I refer you to slide two of the presentation and our form 10Q files a short while ago for important risks factors.
Speaker 2: cause the company's actual performance and results differ materially from those expressed or implied in any forward-looking speech.
Speaker 2: we undertake 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 are developed.
Provided on this call as a result of new information or future results or developments I also want to inform you that management.
Speaker 2: I also want to inform you that management will participate virtually in next month's annual Roth conference. Please get in touch with your Roth representative to schedule a one-on-one with us. Additional conferences will be posted in the coming weeks.
Well participate virtually and next month's annual Roth Conference. Please get in touch with your representatives to schedule a one on one with US additional conferences will be posted in the coming weeks.
Now, it's my pleasure to introduce our first speaker on today's call Beth Jantzen. Please go ahead.
Speaker 2: Now it's my pleasure to introduce our first speaker on today's call, Beth Janssen. Please go ahead.
Thank you.
Speaker 3: Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our first quarter fiscal 2022 investor call.
Thank you Sanjay good afternoon, everyone. Thank.
Thank you for joining us on our first quarter fiscal 2022 investor call.
I will begin today with a review of our consolidated financial results for the first quarter of fiscal 2022, which ended on December .
Speaker 3: I will begin today with a review of our consolidated financial results for the first quarter of fiscal 2022, which ended on December 1, 31, 2021.
31st 2021.
I will then turn the call over to Dr. James Hayward, our president and CEO , who will summarize our operational performance for the quarter and outline key initiatives for the balance of fiscal 2022 .
Speaker 3: I will then turn the call over to Dr. James Hayward, our president and CEO , who will summarize our operational performance for the quarter and outline key initiatives for the balance of fiscal 2022.
We will then open the call to all of our analysts and institutional investors.
Speaker 3: We will then open a call to all of our analysts and institutional investors.
Beginning with the statement of operations as a reminder, we now present the revenue and the cost of providing testing services performed by our clinical laboratory applied DNA clinical labs.
Speaker 3: Beginning with the statement of operations, as a reminder, we now present the revenue and the cost of providing testing services performed by our clinical laboratory, applied by DNA clinical labs.
Or a T C L.
As separate line items in the statement of operations.
Speaker 3: as separate line items in the statement of operations.
Following a record high revenue performance in fiscal 2021, we.
Speaker 3: Following our record high revenue performance in fiscal 2021, we are pleased to start fiscal 2022 with a record revenue quarter.
We are pleased to start fiscal 2022 with a record revenue quarter.
We are seeing continued momentum and COVID-19 testing, which provides population scale integrated testing solutions and services.
Speaker 3: We are seeing continued momentum in COVID-19 testing, which provides population scale, integrated testing solutions and services to enterprises and institutions.
Enterprises and institutions.
Such as the city University of New York School systems, or CUNY, and other institutes of higher and lower education as well as commercial businesses.
Speaker 3: such as the City University of New York School Systems, or CUNY, and other institutes of higher and lower education as well as commercial business.
Yeah.
Total revenues for Q1 were $4 $2 million as compared to $1 6 million in the year ago quarter.
Speaker 3: Total revenues for Q1 were $4.2 million as compared to $1.6 million in the year-ago quarter and $3 million in Q4 of 2021.
And 3 million in Q4 of 2021.
This year over year increase in quarterly revenue is primarily attributable to increased clinical laboratory service revenue.
Speaker 3: This year-over-year increase in quarterly revenue is primarily attributable to increased clinical laboratory service revenue, comprising testing and related services.
Comprising testing and related services.
Yeah.
On a sequential basis Q1 revenues increased 37%.
Speaker 3: On a sequential basis, Q1 revenues increased 37%.
And was also due to an increase in clinical laboratory service revenue.
Speaker 3: and was also due to an increase in clinical laboratory service revenue.
To offer contact on the strength, we're seeing in testing.
Speaker 3: To offer context on the strength we are seeing in testing, our record revenue performance was achieved despite schools' winter recess during which testing demands saw...
Our record revenue performance was achieved despite schools winter resets during which testing demand soften.
Product revenues were 826000 in Q1.
Speaker 3: Product revenues were $826,000 in Q1.
Compared to 550000 in the year ago period.
Speaker 3: compared to $550,000 in the year-ago period. The year-over-year increase of $267,000 was due to increased sales of $308,000.
The year over year increase of $267000 was due to increased sales of 308000.
For the final shipment of DNA molecular taggant very textile application.
Speaker 3: for the final shipment of DNA molecular taggants for a textile application.
This increase was offset by a decrease of 52000 in sales of our linear one point O assay.
Speaker 3: This increase was offset by a decrease of 52,000 in sales of our linear 1.0 asset.
Service revenues were 139000 compared to 290000.
Speaker 3: Service revenues were $139,000 compared to $290,000.
In the year ago period. This decrease of 154000 reflects the completion of R&D projects in our pharma nutraceuticals vertical as well is that linear RF.
Speaker 3: in the year-ago period. This decrease of 154,000 reflects the completion of R&D projects in our pharma, nutraceutical vertical, as well as at linear RX.
Service revenues comprised of research and development pilot project and authentication services.
Speaker 3: Service revenues comprise research and development pilot projects and authentication services associated with our industrial DNA business.
Associated with our industrial DNA business.
Clinical laboratory service revenues increased to $3 2 million compared to 773000 in a year ago period.
Speaker 3: Clinical laboratory service revenues increased to $3.2 million compared to $773,000 in the year-ago period.
On a sequential basis clinical laboratory service revenues almost doubled.
Speaker 3: On a sequential basis, clinical laboratory service revenues almost doubled from $1.6 million
From $1 6 million in Q4.
The increase was driven by higher COVID-19 testing within which our testing contract with CUNY was the primary contributor.
Speaker 3: The increase was driven by higher COVID-19 testing, within which our testing contract with CUNY was the primary contributor.
As a reminder, our CUNY contract was entered into mid way through our fourth quarter.
Speaker 3: As a reminder, our CUNY contract was entered into midway through our fourth quarter, making therefore Q1 was our first full quarter under this contract.
Making there for Q1 was our first full quarter under this contract.
Starting this quarter, we began allocating depreciation expense versus showing it as a separate line item on the P&L.
Speaker 3: Starting this quarter, we began allocating depreciation expense versus showing it as a separate line item on the P&L.
As a result, we are presenting a gross profit line on the face of the statement of operations.
Speaker 3: As a result, we are presenting a gross profit line on the face of the statement of operations.
This change will continue going forward.
The gross profit percentage was 27% and 68% for Q1, and then the year ago period, respectively.
Speaker 3: The gross profit percentage was 27% and 68% through Q1 and in the year ago period respectively.
The decline in gross profit percentage resulted from a substantial portion of clinical laboratory service revenues coming from testing contract, where we also provide the staff and testing centers.
Speaker 3: The decline in gross profit percentage resulted from a substantial portion of clinical laboratory service revenues coming from testing contracts, where we also provide the staff and testing centers.
These contracts have higher cost associated with them.
Speaker 3: These contracts have higher costs associated with them compared with our testing contracts where we do not staff testing centers.
Paired with our testing contract, where we do not staff testing centers.
To a lesser extent the decrease in gross profit percentage was due to product sales mix.
Speaker 3: To a lesser extent, the decrease in gross profit percentage was due to product salesmen.
Our sales during the year ago period included a higher volume of sales of our linear COVID-19, one point O assay kit, which are at a higher gross margin.
Speaker 3: as sales during the year-ago period included a higher volume of sales of our linear COVID-19 1.0 assay kit which are at a higher gross margin.
Total operating expenses in Q1 increased 41% or $1 6 million.
Speaker 3: Total operating expenses in Q1 increased 41%, or 1.6 million.
To $5 7 million compared to $4 1 million in the year ago period.
Speaker 3: to 5.7 million compared to 4.1 million in the year ago period.
The year over year increase is attributable to an increase in stock based compensation expense.
Speaker 3: The year-over-year increase is attributable to an increase in stock-based compensation expense of $1.1 million.
1.1 million.
Primarily relating to officers stock option grants that vested immediately.
Speaker 3: primarily relating to officer staff option grants that vested immediately.
As well as the annual non employee board of directors Grant.
Speaker 3: as well as to the annual non-employee board of directors grant.
To a lesser extent the increase reflects higher research and development costs associated with outsourced service contract and increased payroll.
Speaker 3: To a lesser extent, the increase reflects higher research and development costs associated with outsourced service contracts and increased payroll associated with our ongoing animal vaccine study and next-generation sequencing projects.
Associated with our ongoing animal vaccine study and.
And next generation sequencing projects.
Our Q1 net loss declined to $4 7 million from $4 8 million in the year ago period.
Speaker 3: Our Q1 net loss declined to $4.7 million from $4.8 million in the year-ago period.
Net loss per share improved to 63 cents from 88 cents in the year ago period.
Speaker 3: Net loss per share improved to 63 cents from 88 cents in the year-ago period on a higher number of weighted average shares outstanding.
Higher number of weighted average shares outstanding.
Excluding noncash expenses consolidated adjusted EBITDA was cute for Q1 was negative $2 seven.
Speaker 3: Excluding non-cash expenses, consolidated adjusted EBITDA for Q1 was negative 2.7.
Compared to negative $2.4 million and a year ago period.
Speaker 3: compared to negative 2.4 million in the year ago period, and narrowed compared to a negative 3.3 million in Q4.
And narrowed compared to a negative $3 3 million in Q4.
Okay.
Turning to our balance sheet cash and cash equivalents totaled $2 7 million on December 31st.
Speaker 3: Turning to our balance sheet, cash and cash equivalents totaled $2.7 million on December 31st.
We used $3 7 million of cash during Q1, consisting primarily of our net loss.
Speaker 3: We used $3.7 million of cash during Q1, consisting primarily of our net loss.
Our accounts receivable balance stood at $3 9 million on December 31st compared to $2 8 million on September 30th.
Speaker 3: Our accounts receivable balance stood at 3.9 million on December 31st, compared to 2.8 million on September 30th. And inventories were flat at 1.3 million for both periods.
And inventories were flat at $1 3 million for both periods.
Our warrant balance remains unchanged and we carry no debt on our balance sheet.
Speaker 3: Our warrant balance remains unchanged and we carry no debt on our balance.
We disclosed in our fiscal 2021 10-K and have also disclosed in our first quarter fiscal 2022 10-Q.
Speaker 3: We disclosed in our fiscal 2021 10K and have also disclosed in our first quarter of fiscal 2022 10Q that there is substantial doubt about the company's ability to continue as a going concern for one year from the issuance of the financial statements.
That there is substantial doubt about the company's ability to continue as a going concern for one year from the issuance of the financial statements.
Our ability to continue as a going concern is dependent on our ability to further implement our business plan.
Speaker 3: Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital, and generate revenue.
Raised capital and generate revenues.
Our cash position on January 31st was approximately $2 3 million.
Speaker 3: Our cash position on January 31 was approximately $2.3 million.
This concludes my prepared remarks, thank you for joining us today I will now turn the call over to Jim for his comments.
Speaker 3: This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.
Well, thank you Beth and good afternoon, everyone. Thank you for joining us on our first quarter call.
Speaker 4: So thank you, Beth, and good afternoon, everyone. Thank you for joining us on our first quarter call.
We began fiscal 'twenty two with a record revenue quarter on the heels of a record revenue for the school year.
Speaker 4: We began fiscal 22 with a record revenue quarter on the heels of a record revenue fiscal year. Our top line performance continues to be driven primarily by our diagnostics business, Applied DNA Clinical Labs or ADCL, which is presently centered on COVID-19 tests.
Our top line performance continues to be driven primarily by our diagnostics business applied DNA clinical labs are a D C L.
Which is presently centered on COVID-19 testing.
Our Q1 gross margin performance was less impressive a function of the high positivity rates fueled by omicron.
Speaker 4: Our Q1 gross margin performance was less impressive, a function of the high positivity rates fueled by Omicron, and as Beth noted, costs associated with our COVID-19 collection site.
And as Beth noted costs associated with our COVID-19 collection sites.
The decrease in COVID-19, positivity rates recorded in recent weeks.
Speaker 4: The decrease in COVID-19 positivity rates recorded in recent weeks
<unk> far greater efficiencies in our workflows.
Speaker 4: should yield far greater efficiencies in our workflows.
This should provide margin uplift going forward.
Speaker 4: We should provide margin uplift going forward.
In addition, as sample numbers remain at the higher levels recorded by Safe Circle through January 22.
Speaker 4: In addition, if sample numbers remain at the higher levels recorded by SafeCircle for January 22, the sample numbers remain at the higher levels recorded by SafeCircle for January 22.
We would expect enhanced absorption of fixed costs for the collection centers in New York City.
Speaker 4: we would expect enhanced absorption of fixed costs for the collection centers in New York City.
The takeaway is that the pandemic is evolving rapidly.
Speaker 4: The takeaway is that the pandemic is evolving rapidly, as are our services and testing capability.
Our our services and testing capability.
Sun gives us every opportunity to continue to build on our recent financial performance.
Speaker 4: This then gives us every opportunity to continue to build on our recent financial performance.
My remarks. This afternoon will initially focus on the business development path forward for COVID-19 testing to continue our revenue momentum.
Speaker 4: Now my remarks this afternoon will initially focus on the business development path forward for COVID-19 testing to continue our revenue momentum. And I use the word momentum.
And I used the word momentum intentionally.
As part of our first quarter results, we announced that we have followed them up with a record testing revenue month with more than $2 million generated in January .
Speaker 4: As part of our first quarter results, we announced that we have followed them up with a record testing revenue month with more than $2 million generated in January .
The growth in revenues, we are seeing validates our diagnostic strategy, we expect it to begin to temper our use of cash, thereby freeing up resources to advance the development of our biotherapeutic growth vehicle, which is our linear DNA platform.
Speaker 4: The growth in revenues we are seeing validates our diagnostic strategy. We expect it to begin to temper our use of cash, thereby freeing up resources to advance the development of our biotherapeutic growth vehicle, which is our linear DNA platform.
The second half of my comments will center on the linear DNA platform. The recent progress made and some compelling market opportunities that are well suited to the platform.
Speaker 4: The second half of my comments will center on the LinearDNA platform, the recent progress made and some compelling market opportunities that are well suited to the platform.
Revenue momentum from COVID-19 testing is validating the investments we made to establish a clip CLIA certified clinical lab, a high volume COVID-19 testing practice and a diagnostics development plan under the F D. A.
Speaker 4: Revening momentum from COVID-19 testing is validating the investments we made to establish a CLEP-CLEAR certified clinical lab, a high volume COVID-19 testing practice.
Speaker 4: and a diagnostics development plan under the FDA's EUA guidance.
<unk> EUA guidance.
The first quarter of this fiscal year benefited from our first full quarter with our largest testing customer the city University of New York.
Speaker 4: The first quarter of this fiscal year benefited from our first full quarter with our largest testing customer.
Speaker 4: the City University of New York, and the acquisition of new clients seeking to deploy Safe Circle.
And the acquisition of new clients seeking to deploy safe circle.
In an environment, where fully 64% of the population is vaccinated in the federal government is distributing free rapid antigen tests.
Speaker 4: in an environment where fully 64% of the population is vaccinated, and the federal government is distributing free rapid antigen tests.
Our COVID-19 strategy is evolving to parallel with the pandemic to keep safe circle relevant and on the path of profit maximization.
Speaker 4: Our COVID-19 strategy is evolving to parallel with the pandemic to keep Safe Circle relevant and on the path of profit maximization.
The emergence of all of them are growing and its increased transmissibility inability to the vaccine based immunity makes it clear that the need for accurate and large scale enterprise testing persists to keep workforces working in supply chain is functioning.
Speaker 4: The emergence of Omicron and its increased transmissibility and ability to evade vaccine-based immunity makes it clear that the need for accurate and large-scale enterprise testing persists.
Speaker 4: to keep workforces working and supply chains function.
Well antigen based tests have grown in prevalence in our opinion they cannot supplant the gold standard PCR testing and especially for large scale population testing.
Speaker 4: While antigen-based tests have grown in prevalence, in our opinion, they cannot supplant the gold-standard PCR testing, and especially for large-scale population tests.
Antigen tests have reduced sensitivity as compared to PCR tests.
Speaker 4: Antigen tests have reduced sensitivity as compared to PCR tests.
There are also excuse me.
Speaker 4: They are also ill-suited for large-scale enterprise population monitoring and management, which requires the rapid and seamless flow of data obtained from automated high-throughput testing pound.
Ill suited for large scale enterprise population monitoring and management.
Which requires the rapid and seamless flow data obtained from automated high throughput testing lines in.
In addition by design antigen tests or best of testing high viral loads.
Speaker 4: In addition, by design, antigen tests are best at testing high viral loads and are not suited for providing early detection for efficient and rapid management of large populations.
Not suited for providing early detection for efficient and rapid management.
Large populations, that's well antigen tests play an important role in our continued fight against the pandemic. We believe they cannot replace high throughput PCR testing for large populations.
Our safe circle platform is further and considerably differentiated in the marketplace as an integrated full service offering that combines our testing services with the cleared for platform for data management access control and vaccination management.
Speaker 4: Our Safe Circle platform is further and considerably differentiated in the marketplace as an integrated, full-service offering that combines our testing services with the Cleared4 platform for data management, access control, and vaccination management.
This positions ADC L. A as a one stop shop.
Speaker 4: This positions ADCL as a one-stop shop.
Thereby enhancing our pricing and margins relative to Standalone testing services.
Speaker 4: thereby enhancing our pricing and margins relative to standalone testing service.
This integrated approach, we feel has significant utility beyond testing and beyond COVID-19.
Speaker 4: This integrated approach, we feel, has significant utility beyond testing and beyond COVID-19.
As the pandemic evolves so does save circle in the first quarter, we requested and secured L. D T authorization.
Speaker 4: As the pandemic evolves, so does Safe Circle. In the first quarter, we requested and secured LDT authorization for our Linea II COVID-19 assay from New York State.
For our linear to COVID-19 assay from New York State.
Meaning that we can continue to serve us all clients in the state while retaining the favorable economics of our self manufactured test.
Speaker 4: meaning that we can continue to serve as all clients in the state while retaining the favorable economics of our self-manufactured tests.
We have also filed an EUA request with F. D. A for the linear to US saying that includes an associated linear on supervised at home sample collection kit.
Speaker 4: We have also filed an EUA request with FDA for the Linea 2 assay that includes an associated Linea unsupervised at home sample collection kit.
This collection kit once authorized will provide for the unsupervised collection and direct shipment of.
Speaker 4: This collection kit, once authorized, will provide for the unsupervised collection and direct shipment of COVID-19 samples to our clinical lab.
COVID-19 samples to our clinical lab.
We have several testing customers interested in using our collection kit and we believe the collection kit may drive increased testing volumes from our customers.
Speaker 4: We have several testing customers interested in using our collection kit, and we believe the collection kit may drive increased testing volumes from our customers.
In addition, once the EUA is authorized we will have the opportunity to pursue the acquisition of safe circle clients nationally, which is made feasible by the collection kit.
Speaker 4: In addition, once the EUA is authorized, we will have the opportunity to pursue the acquisition of Safe Circle clients nationally, which is made feasible by the collection kit.
Based on our interactions with FDA, we have a high degree of confidence in securing EUA approval from our interactions with them.
Speaker 4: Based on our interactions with FDA, we have a high degree of confidence in securing EUA approval from our interactions with them.
Timing of approval, however is not under our control.
Speaker 4: The timing of approval, however, is not under our control.
In the near term CUNY anticipates increased demand for weekly testing in a robust random testing program to ensure a safe start to the spring semester for a larger on campus population.
Speaker 4: In the near term, CUNY anticipates increased demand for weekly testing and a robust random testing program to ensure a safe start to the spring semester for a larger on-campus population.
Concurrently we are progressing strategies to penetrate more durable market segments, such as skilled nursing facilities, where residents are more susceptible to COVID-19 infection and the detrimental impact of the virus is greater than the general population.
Speaker 4: Concurrently, we are progressing strategies to penetrate more durable market sectors.
Speaker 4: such as skilled nursing facilities, where residents are more susceptible to COVID-19 infection, and the detrimental impact of the virus is greater than in the general population.
In addition, we have validated a high sensitivity PCR based assay.
Speaker 4: In addition, we have validated a high sensitivity PCR-based assay that simultaneously tests for COVID-19 and flu.
That's simultaneously tests for COVID-19 and flu.
Given the similar symptoms of both diseases. We believe the combination of COVID-19 in flu testing will be in demand beyond the immediate pandemic.
Speaker 4: Given the similar symptoms of both diseases, we believe the combination of COVID-19 and flu testing will be in demand beyond the immediate pandemic.
Now, while we believe COVID-19 testing will continue to drive revenue over the near term.
Speaker 4: Now, while we believe COVID-19 testing will continue to drive revenue over the near term,
We are preparing for an eventual diminution in COVID-19 testing demand that is likely when the pandemic shifts to an endemic stage.
Speaker 4: We are preparing for an eventual diminution in COVID-19 testing demand.
Speaker 4: that is likely when the pandemic shifts to an endemic state.
Our long term vision for the diagnostics business is one that will provide a broader offering of molecular and genetic testing capabilities to empower better control of one's health with diagnostic insights.
Speaker 4: Our long-term vision for the diagnostics business is one that will provide a broader offering of molecular and genetic testing capabilities to empower better control of one's health with diagnostic insight.
In turn we believe this gives us multiple paths to continued topline growth from diagnostics.
Speaker 4: In turn, we believe this gives us multiple paths to continue top-line growth from diagnostics.
We have a unique opportunity with a D. C. L. In the short term, we plan to validate and bring to market several new molecular and genetic tests over this fiscal year that will supplement our COVID-19 testing.
Speaker 4: Now we have a unique opportunity with ADCL. In the short term, we plan to validate and bring to market several new molecular and genetic tests over this fiscal year that will supplement our COVID-19 testing.
Over the longer term.
We will evolve this diagnostic offerings to parallel the biotherapeutic linear DNA products, we bring to the clinic or our linear DNA.
Speaker 4: We will evolve its diagnostic offerings to parallel the biotherapeutic linear DNA products we bring to the clinic for our linear DNA customers and our own customers.
Customers in our own pump pipeline.
This strategy will empower companion diagnostics for the clinical indications of linear DNA therapies and aid the course of therapy.
Speaker 4: This strategy will empower companion diagnostics for the clinical indications of linear DNA therapies and aid the course of therapy.
In addition, as a subsidiary of applied DNA a D. C. L. A has access to an exceptionally deep scientific and regulatory bench from which to pull.
Speaker 4: In addition, as a subsidiary of applied DNA, ADCL has access to an exceptionally deep scientific and regulatory bench from which to pull.
We are confident we have the expertise to develop and offer a wide variety of diagnostic tests that will leverage the investments we have already made.
Speaker 4: We are confident we have the expertise to develop and offer a wide variety of diagnostic tests that will leverage the investments we have already made.
To ensure that we are targeting tests for which there is strong commercial demand. We are presently engaged with hospital systems and provider networks in the Tri state area to capitalize on the unmet testing needs of the local medical community.
Speaker 4: To ensure that we are targeting tests for which there is strong commercial demand, we are presently engaged with hospital systems and provider networks in the tri-state area to capitalize on the unmet testing needs of the local medical community.
We also have established key institutional relationships via our COVID-19 testing, which will provide a strong foundation of NN.
Speaker 4: We also have established key institutional relationships via our COVID-19 test.
Speaker 4: which will provide a strong foundation of non-COVID clinical testing demand.
Non COVID-19 clinical testing demand.
In the future.
We see a D C L.
Speaker 4: We see ADCL as a profit center for applied DNA that will help empower the development of our linear DNA platform.
Profit center for applied DNA that will help empower the development of our linear DNA platform.
Before I delve into the linear DNA platform I'll offer a short background there to provide context on the market opportunity, we seek to penetrate more fully.
Speaker 4: Before I delve into the linear DNA platform, I'll offer a short background there to provide context on the market opportunity we seek to penetrate more fully.
And you will hear much more about our linear DNA platform in the coming quarters, as we amplify developments and successes to partners customers and the industry.
Speaker 4: And you will hear much more about our linear DNA platform in the coming quarters as we amplify developments and successes to partners, customers, and the industry.
Our linear DNA platform is a PCR based manufacturing platform.
Speaker 4: Our linear DNA platform is a PCR based manufacturing platform.
<unk> produces high quality DNA at large scale enzymatically and completely without the use of living cells.
Speaker 4: that produces high quality DNA at large scale and zymatically and completely without the use of living cells.
Like plasmid DNA linear DNA is agnostic to any particular nucleic acid therapy, meaning both forms may be used in a wide wide range of treatments, including messenger RNA.
Speaker 4: Like plasmid DNA, linear DNA is agnostic to any particular nucleic acid therapy, meaning both forms may be used in a wide range of treatments, including messenger RNA, vaccines, redirected cells, and gene therapy.
Vaccines redirect itself in gene therapy.
[laughter] excuse me.
Okay.
Thank you.
But unlike linear DNA, which only contains the desired DNA sequence.
Speaker 4: But unlike linear DNA, which only contains the desired DNA
[laughter] plasmid, DNA, which is circular and derived from bacteria.
Speaker 4: plasmid DNA, which is circular and derived from bacteria.
Is typically comprised of about 50% unwanted DNA.
Speaker 4: is typically comprised of about 50% unwanted DNA.
[laughter] excuse me in.
In the form.
Oh, no I'm therapeutic.
[laughter].
Speaker 4: and sometimes dangerous bacterial DNA sequences. Give me a moment.
Sometimes dangerous bacterial DNA sequences.
Give me a moment.
[laughter].
Yeah.
Yeah.
[laughter].
So all of those talked about Covid.
Yeah.
Plasmid DNA was scaled several decades before we develop the methods.
Speaker 4: Plasmid DNA was scaled several decades before we developed the method.
Speaker 4: to scale linear DNA. As such, plasmid DNA...
Linear DNA.
As such.
Plasmid DNA was the first to market.
It is the basis of nearly all nucleic acid based therapies and vaccines on the market today.
Speaker 4: and it is the basis of nearly all nucleic acid-based therapies and vaccines on the market today or in...
Or in clinical development.
Plasmid DNA uses fermentation methods a process that is inherently complex slow and expensive with limited capacity.
Speaker 4: Plasma DNA uses fermentation methods, a process that is inherently complicated.
Speaker 4: slow and expensive with limited capacity.
The global demand for plasmid DNA as the manufacturing platform.
Speaker 4: The global demand for plasmid DNA as a manufacturing platform has exploded over the past several years, driven principally by the emergency of the mRNA vaccines, as well as
Has exploded over the past several years.
Driven principally by the emergency of the mrna vaccines.
As well our cell and gene therapies.
Plasmid DNA capacity constraints were evident before COVID-19.
Speaker 4: Plasmid DNA capacity constraints were evident before COVID-19.
Yes.
But production bottlenecks were manageable given the then nascent pipelines and the FDA is lengthy and rigorous review process.
Speaker 4: But production bottlenecks were manageable, given the then nascent pipelines and the FDA's lengthy and rigorous review process.
Today with the regulatory approval of two messenger RNA vaccines.
Speaker 4: Today, with the regulatory approval of two messenger RNA vaccines, the proverbial gloves have come off and the demand for DNA has increased exponentially.
Overview of gloves have come off and the demand for DNA has increased exponentially.
What was once a somewhat minor component niche high value therapeutics has become a critical ingredient for the messenger RNA based vaccines that have turned the tide against COVID-19.
Speaker 4: What was once a somewhat minor component of niche high-value therapeutics has become a critical ingredient for the messenger RNA-based vaccines that have turned the tide against COVID-19.
In addition to mrna therapeutics currently there are only about 20, FDA or EMA approved or authorized DNA based therapies that are available.
Speaker 4: In addition to mRNA therapeutics currently, there are only about 20 FDA or EMA approved or authorized DNA-based therapies that are available.
Both the therapeutic and commercial successes of these few have spurred strong interest by the industry, especially in car T and gene therapies.
Speaker 4: But the therapeutic and commercial successes of these few have spurred strong interest by the industry, especially in car-teen gene therapy.
Most biotech clinical development pipelines are focused on therapies that require DNA for production.
Speaker 4: Most biotech clinical development pipelines are focused on therapies that require DNA for production. And as these therapies move through late stage clinical phase.
As these therapies move through late stage clinical phases. These demand drivers are exacerbating plasmid DNA capacity constraints.
Speaker 4: These demand drivers are exacerbating plasmid DNA capacity.
And highlighting the clinical chinks in the armor.
Speaker 4: and highlighting the clinical chinks in their armor.
We believe these demand trends have opened the window a significant opportunity for linear DNA.
Speaker 4: We believe these demand trends have opened the window of significant opportunity for linear DNA.
In comparison with cloud Smith DNA linear DNA is a much simpler process that utilizes utilizes four ingredients, none of which are bacterial in nature and therefore, there is no risk of bacterial contamination and antibiotic resistance the mountain.
Speaker 4: In comparison with plasmid DNA, linear DNA is a much simpler process. It utilizes four ingredients, none of which are bacterial in nature, and therefore there is no risk of bacterial contamination and antibiotic resistance.
Your fracturing process is highly efficient, resulting in a highly pure product batch to batch consistency is excellent.
Speaker 4: The manufacturing process is highly efficient, resulting in a highly pure product. Batch-to-batch consistency is excellent.
Which is critical for any regulatory body reviewing a therapeutic that could make it into hundreds of thousands or even millions or billions of doses.
Speaker 4: which is critical for any regulatory body reviewing a therapeutic that could make it into hundreds of thousands or even millions or billions of those.
In addition, unlike plasmid DNA linear DNA exist without a plasmid backbone means.
Speaker 4: In addition, unlike plasmid DNA, linear DNA exists without a plasmid backbone.
Meaning it only consists of the therapeutic relevant DNA sequence.
Speaker 4: meaning it only consists of the therapeutic relevant DNA.
In fact, our early studies have shown that linear DNA requires only between one third and one half the amount of plasmid DNA to effect a similar degree of Trans gene expression.
Speaker 4: In fact, our early studies have shown that linear DNA requires only between one-third and one-half the amount of plasmid DNA to affect a similar degree of transgene expression.
We believe that linear DNA can be used in.
Speaker 4: We believe that linear DNA can be used in any therapy in place of plasmid DNA.
In any therapy in place of plasmid DNA.
Customers are currently using our platform.
Speaker 4: Customers are currently using our platform to supply DNA as components of in vitro diagnostic.
To supply DNA as components of in vitro diagnostic tests.
And for a preclinical nucleic acid based therapeutic development in the fields of car T.
Speaker 4: And for preclinical nucleic acid-based therapeutic developments in the fields of CAR-T, a form of recycleerate and
Our form of redirected cells.
DNA vaccines, both antiviral and anti cancer Messenger RNA therapies, CRISPR based therapies and gene therapies.
Speaker 4: DNA vaccines, both antiviral and anticancer, messenger RNA therapies, CRISPR-based therapies, and gene therapy.
To date. These are contract research orders that are principally for use as a research development tool for therapeutics or in the case of diagnostics fully commercial applications that require minute amounts of linear DNA.
Speaker 4: To date, these are contract research orders that are principally for use as a research development tool for therapeutics or in the case of diagnostics.
Speaker 4: fully commercial applications that require minute amounts of linear DNA.
Given the window our development priorities are focused on further validation of our platform and initiatives that support the fastest paths to the market.
Speaker 4: Given the window, our development priorities are focused on further validation of our platform and initiatives that support the fastest paths to the market.
Our end goal.
Is to advance the platform. So that we can incentivize contract research customers to take our linear DNA into the clinic with us as the manufacturer of record for their therapeutic and to support our own therapeutic development pipeline.
Speaker 4: is to advance the platform so that we can incentivize contract research customers.
Speaker 4: to take our linear DNA into the clinic with us as the manufacturer of record for their therapeutic and to support our own therapeutic development pipeline.
The cgmp roadmap, but I detailed last quarter was catalyzed by customers seeking to move forward with linear DNA.
Speaker 4: The CGMP roadmap that I detailed last quarter was catalyzed by customers seeking to move forward with linear DNA.
Now, we see two paths to commercialize the linear DNA platform and bio therapeutics.
Speaker 4: Now we see two paths to commercialize the linear DNA platform in biotherapeutics.
Firstly linear DNA is a direct replacement for plasmid DNA and existing therapeutic manufacturing workflows.
Speaker 4: Firstly, linear DNA is a direct replacement for plasmid DNA in existing therapeutic manufacturing workflows.
And to linear DNA as a direct therapeutics such as in a DNA vaccine.
Speaker 4: And two, linear DNA as a direct therapeutic, such as in a DNA vaccine.
We believe that using linear DNA is a direct replacement for plasmid DNA in existing therapeutic.
Speaker 4: We believe that using linear DNA is a direct replacement for plasmid DNA in existing therapeutic
Manufacturing workflows is the near term to commerce.
Speaker 4: manufacturing workflows is the nearer term to come.
And we are generating the data necessary to prove it in simple replacement experiments.
Speaker 4: and we are generating the data necessary to prove it in simple replacement experiments.
Currently we are evaluating linear DNA for use in mrna car T and AAV or gene therapy workflows.
Speaker 4: Currently, we are evaluating linear DNA for use in mRNA, CAR T, and AAV, or gene therapy, workflows.
We are not designing a novel therapeutic or method of manufacturing instead.
Speaker 4: We are not designing a novel therapeutic or method of manufacturing. Instead, we are designing a novel therapeutic or method of manufacturing.
We are simply acting as a direct replacement for plasmid DNA.
Speaker 4: We are simply acting as a direct replacement for plasmid DNA.
And given the growing supply chain constraints and drawbacks of plasmid DNA. We believe this is to be a very large market in which we can be very competitive.
Speaker 4: And given the growing supply chain constraints and drawbacks of plasmid DNA, we believe this is to be a very large market in which we can be very competitive.
One possible stand out application of linear DNA is the production of mrna.
Speaker 4: One possible standout application of linear DNA is the production of mRNA.
And the RNA therapeutics are made from a linear form of plasmid produced by cutting DNA out of the circular plasmid.
Speaker 4: mRNA therapeutics are made from a linear form of plasmid produced by cutting DNA out of the circular plasma.
We believe that linear DNA, which by its very nature has already linear.
Speaker 4: We believe that linear DNA, which by its very nature is already linear.
As an excellent alternative to plasmid DNA mrna manufacturing workflows.
Speaker 4: is an excellent alternative to plasmid DNA in mRNA manufacturing workflows.
Our early in the house experiments have shown this concept is sound and we are busy gathering additional data.
Speaker 4: Our early in-house experiments have shown this concept is sound, and we are busy gathering additional data.
Farther afield linear DNA has already been shown to be an effective direct therapeutic.
Speaker 4: Father of field, linear DNA has already been shown to be an effective direct therapeutic such as in a DNA vaccine.
Such as and other DNA vaccine.
We have proven in multiple animal models that our linear DNA COVID-19 vaccine candidates elicit strong antibody and so cellular immune responses.
Speaker 4: We have proven in multiple animal models that our linear DNA COVID-19 vaccine candidates elicit strong antibody and cellular immune response.
We believe that the linear DNA vaccines carry great promise in the vaccine field.
Speaker 4: We believe that the linear DNA vaccines carry great promise in the vaccine field.
Particularly in the areas of rapid pandemic response personalized medicine in cancer immunotherapy.
Speaker 4: particularly in the areas of rapid pandemic response, personalized medicine, and cancer immunotherapy.
While the path to commercialization for linear DNA vaccines is more complex than existing therapeutic pathways.
Speaker 4: While the path to commercialization for linear DNA vaccines is more complex than existing therapeutic pathways,
We believe that the sizable potential upside justifies our continued development.
Speaker 4: We believe that the sizable potential upside justifies our continued development.
To these ends during fiscal 2021 .
Speaker 4: To these ends, during fiscal 2021, we built out and staffed a cell biology facility to enhance our capability to optimize the design, transfection, and functional quantification of linear DNA. As a result...
We built out and staffed <unk>.
L biology facility to enhance our capability to optimize the design transfection and functional quantification of linear DNA.
As a result of this investment.
We have made several breakthroughs in cellular transfection unexpressed in.
Speaker 4: We have made several breakthroughs in cellular transfection and expression.
Including deploying an in-house lipid nanoparticle or LNP.
Speaker 4: including deploying an in-house lipid nanoparticle, or LNP.
Capability for encapsulation, and transfection of nucleic acid therapies.
Speaker 4: capability for encapsulation and transfection of nucleic acid therapy.
We believe our LNP capability makes linear DNA, a much more compelling proposition for a developer evaluating DNA based manufacturing platforms against out of capacity constrained plasmid DNA.
Speaker 4: We believe our LNP capability makes linear DNA a much more compelling proposition for a developer evaluating DNA-based manufacturing platforms against that of capacity-constrained plasma DNA.
Now the data the we or our partners and our customers have generated to date have been highly encouraging.
Speaker 4: Now the data that we, our partners and our customers have generated to date have been highly encouraged.
Last quarter I spoke of a publication by the institute of Hematology and blood transfusion.
Speaker 4: The last quarter I spoke of a publication by the Institute of Hematology and Blood Transfusion.
In Prague.
Speaker 4: in Prague on their use of linear DNA as a suitable and cost-effective replacement.
On their use of linear DNA is a suitable and cost effective replacement two plasmid DNA in the production of car T cells.
Speaker 4: to plasmid DNA in the production of CAR T cells.
With similar efficacy to the car sells manufactured with plasma.
Speaker 4: with similar efficacy to the car cells manufactured with plasma.
There are paper highlights the use of linear DNA with a non viral transfection system.
Speaker 4: Their paper highlights the use of linear DNA with a non-viral transfection system.
In their case, a transposon transposase system.
Speaker 4: In their case, a transposon transposase cyst.
There is valuable validation for us as many of our C. R. O customers are ordering linear DNA for car T cell applications.
Speaker 4: There is valuable validation for us as many of our CRO customers are ordering linear DNA for CAR T cell applications.
And as the next step with the University of Prague.
Speaker 4: And that's the next step with the University of Prague.
We expect the program will engage in human clinical trials, using our linear G. L. P grade DNA.
Speaker 4: We expect the program will engage in human clinical trials using our linear GLP grade DNA amplified from their CAR construct.
Amplified from their car construct.
The European Medicines agency or EMA provides a regulatory path to the clinic user.
Speaker 4: The European Medicines Agency, or EMA, provides a regulatory path to the clinic using GLP-grade linear DNA and with our collaborators finishing the drug product yielding a CGMP therapy.
Using G L P grade linear DNA.
And with our collaborators, finishing the drug part product, yielding a cgmp therapy.
The trial would be a milestone for applied DNA.
Speaker 4: The trial would be a milestone for applied DNA.
The first in humans trial for linear DNA.
Speaker 4: the first in humans trial for linear DNA.
As we are still defining the trial.
Speaker 4: As we are still defining the trial, I cannot share many details other than to say that the client has already completed validation of the functionality of their CAR plasmid construct in vitro. It now falls to us to complete the preparation of the linear DNA construct.
Cannot share many details other than to say.
The client has already completed validation of the functionality of their car plasmid construct in vitro. It now falls to us to complete the preparation of the linear DNA construct.
We estimate several months of work before clinical trial protocol development and we will keep you updated along the way.
Speaker 4: We estimate several months of work before clinical trial protocol development, and we will keep you updated along the way.
Now slide 10 shows the promise of our approach.
Speaker 4: Now slide 10 shows the promise of our approach.
This is a fluorescent image of cells transfected by our cell biology scientist.
Speaker 4: This is a fluorescent image of cells transfected by our cell biology scientists.
Using a linear DNA construct of the genes necessary to obtain car T cells that are redirected to attack cancer cells in the blood.
Speaker 4: using a linear DNA construct of the genes necessary to obtain CAR T cells that are redirected to attack cancer cells in the blood.
And you can see.
Clearly the.
The expression in green of the protein encoded by our linear DNA.
Speaker 4: the expression in green of the protein encoded by our linear DNA.
Now separately yeah in.
Speaker 4: Now separately, in parallel, our LNP capacity has piqued our customers' interest.
In parallel our LNP capacity.
Has piqued our customers' interest.
In the coming quarters.
We expect our linear DNA <unk> customers will be requesting us to encapsulate the linear DNA into lnp's, where they're side by side Transfection studies.
Speaker 4: We expect our linear DNA CRO customers will be requesting us to encapsulate the linear DNA into LNP's for their side by side transfections.
In turn we will be optimizing the LNP workflow for linear DNA.
Speaker 4: We, in turn, will be optimizing the LNP workflow for linear DNA.
In addition in conjunction with our partners at Aviva ex Tac as in Italy.
Speaker 4: In addition, in conjunction with our partners at EVIVAX TACIS in Italy,
We've completed a manuscript detailing our data validating the use of linear DNA as an immunotherapy pan cancer vaccine in mouse models.
Speaker 4: We've completed a manuscript detailing our data validating the use of linear DNA as an immunotherapy pan-cancer vaccine in mouse models.
The data show that a linear DNA vaccine in a mouse model can elicit strong.
Speaker 4: The data show that a linear DNA vaccine in a mouse model can elicit strong antigen-specific immune response.
<unk> specific immune responses and significantly reduced tumor growth when administered with immune checkpoint inhibitors.
Speaker 4: and significantly reduce tumor growth when administered with immune checkpoint inhibitors.
The manuscript has been submitted for publication in a peer reviewed journal and a non peer reviewed preprint server.
Speaker 4: The manuscript has been submitted for publication in a peer-reviewed journal and a non-peer-reviewed preprint server. We will provide additional details.
We will provide additional details upon publication.
Finally, we recently completed the first phase of our linear DNA COVID-19 vaccine trial in ferrets in conjunction with Cornell University.
Speaker 4: Finally, we recently completed the first phase of our linear DNA COVID-19 vaccine trial in ferrets in conjunction with Cornell University.
While the data produced by the clinical Stowe trial are still being analyzed.
Speaker 4: While the data produced by the clinical style trial are still being analyzed,
Initial findings show that our prime and booster dose regiment of.
Speaker 4: Initial findings show that a prime and booster dose regimen
The vaccine was protective against Sars Cov, two infection in the challenge trial.
Speaker 4: of the vaccine was protective against SARS-CoV-2 infection in the challenge trial.
We plan to publish the data from the clinical trial in the coming months, which we believe will serve as an important validation of our platform.
Speaker 4: We plan to publish the data from the clinical trial in the coming months, which we believe will serve as an important validation of our platform.
For DNA vaccines.
Now I'll end my remarks, this afternoon with an update on our industrial DNA business.
Speaker 4: Now I'll end my remarks this afternoon with an update on our industrial DNA business.
We are very encouraged by the receipt of a $1 6 million or 10 textiles that was received this past fourth quarter and we view it as a sign of the reopening of the textile supply chain from which we have historically derive most of our revenue.
Speaker 4: We are very encouraged by the receipt of a $1.6 million order to tag textiles that was received this past fourth quarter, and we view it as a sign of the reopening of the textile supply chain from which we have historically derived most of our revenue.
As the textile supply chain runs through China and Southeast Asia.
Speaker 4: As the textile supply chain runs through China and Southeast Asia,
The emergence of Omicron late last year, followed by the Chinese new year and now the Olympics in China. This year.
Speaker 4: The emergence of Omicron late last year, followed by the Chinese New Year, and now the Olympics in China this year, have cumulatively slowed the growth of the Chinese New Year.
Has cumulatively slowed the pace of the opening.
Brands and their manufacturers has spent dependent make reassessing their supply chains aligned with customer expectations around traceability and provenance.
Speaker 4: Brands and their manufacturers have spent the pandemic reassessing their supply chains aligned with customer expectations around traceability and problems.
More recently, new governmental regulations in the U S and those proposed in the EU.
Related to forced labor should spotlight, our certainty platform to validate our brands cotton source forensically.
Speaker 4: related to forced labor should spotlight our certaintyjas Explosive
Speaker 4: to validate a brand's cotton source for and succeed.
Overall, we are excited by our Q1 results both from a record revenue standpoint, and the successful continued development of the linear DNA platform.
Speaker 4: Overall, we are excited by our Q1 results, both from a record revenue standpoint and the successful continued development of the linear DNA plus.
Now this concludes my prepared remarks, operator, please open the call to questions.
Speaker 4: Now this concludes my prepared remarks. Operator, please open the call to questions. We will now begin.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
Speaker 1: To ask a question, you may press star then one on your telephone keypad.
If you were using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the key.
Speaker 1: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Jonathan Aschoff with Roth. Please go ahead.
Speaker 1: Our first question comes from Jonathan Ashoff with Ross. Please go ahead.
Thank you very much Hello, guys and congrats on the progress certainly the top line.
Speaker 5: Thank you very much. Hello guys and congrats on the progress, certainly the top line. So are you saying, James, that your current testing revenue, you know, right now in February , is not trending down along with New York State's daily testing rate, which went from about 400,000 a day a month ago to right now about 150,000 a day in New York State?
So are you, saying James that your current testing revenue right now in February is not trending down along with New York States Daily testing rate, which went from about 400000, a day a month ago.
Right now about 150000, a day in New York State.
We have our most significant customer who is that's Q&A City University of New York.
Speaker 4: We have our most significant customer who is, that's CUNY, City University of New York.
Who is.
Dramatically increasing the amount of people on their campus.
Speaker 4: dramatically increasing the amount of people on their campus.
By a very significant percentage of the total.
Speaker 4: by a very significant percentage of the total.
So as a consequence, the numbers are actually expected to increase not decrease over the term of beginning really right now.
Speaker 4: So as a consequence, the numbers are actually expected to increase, not decrease over the term beginning really right now and through
And.
Through much of the spring semester.
So as you know, it's a little difficult to predict much further than that but we expect that the next few months should see an increase not a decrease.
Speaker 4: So, as you know, it's a little difficult to predict much further than that, but we expect that the next few months should see an increase, not a decrease.
Okay.
That's that's.
Speaker 5: That's great. If you get an EUA for the 2.0, what sort of a time lag is there between a self-collection, you know, a thousand thousands of miles away to a result at ADCL and is that time differential a problem?
That's great.
You get an EUA for the two point out what's sort of a time lag is there between a self collection of thousands and thousands of miles away.
<unk> result at <unk> and is that time differential a problem at all.
I don't think it will be and we're actually operating with some folks who are sending us samples will long distance now.
Speaker 4: I don't think it will be, and we're actually operating with some folks who are sending us samples a long distance now.
Speaker 4: And that shipment takes less than a full day. And we push to get 24 to 36 hour turnaround on the sample from the moment it arrives at our last.
And.
That shipment takes less than a full day and we push to get 24 to 36 hour turnaround on the sample for the moment arrives at our lab.
Okay. That's so the answer is no I don't think that should be problematic.
Speaker 4: So the answer is no, I don't think that should be a problem.
Okay can you help us understand the types of genetic and molecular tests that you will initially commercialize you were saying you know over the next year or perhaps over the next the rest of the calendar year or your fiscal year I wasn't sure about that but can you help us understand the types that might come out.
Speaker 5: Okay, can you help us understand the types of genetic and molecular tests that you will initially commercialize? You were saying, you know, over the next year or perhaps over the rest of the calendar year or your fiscal year. I wasn't sure about that. But can you help us understand the types that might first come out?
Sure we do.
Speaker 4: Sure, we don't want to give away our long-term molecular and genetic testing, but in the short term, simple things like the combination of flu A, flu B with COVID.
Oh, we want to give away our long term, a molecular and genetic testing, but in the short term simple things like the combination of flu a flu b with COVID-19 .
Which in the current season is still very important.
Speaker 4: which in the current season is still very important.
Speaker 4: Thereafter, we're looking at surveillance and diagnostic assay.
Thereafter, we're looking surveillance and diagnostic assays.
That would apply for example, two skilled nursing facilities, where the issue of pathogen contagion is important and you want to be able to catch and traction in the early stage.
Speaker 4: That would apply, for example, to skilled nursing facilities, where the issue of pathogen contagion is important and you want to be able to catch infection in the early stage.
Those are the kinds of targets we have.
Speaker 4: So those are the kinds of targets we have underway. Okay.
Underway okay.
My last one is a little more housekeeping can you help me out with the SG&A expense trend going at least through fiscal 2022, and I guess the same for the the total cogs percentage, how that might slide down over the year from 73%.
Speaker 5: My last one's a little more housekeeping. Can you help me out with the SG&A expense trend going, you know, at least through fiscal 2022? And I guess the same for the total COGS percentage, how that might slide down over the year from 73%.
Sure. So the main reason for the increase this quarter in SG&A.
Speaker 3: Sure, so the main reason for the increase this quarter in SG&A was some stock compensation was
Stock compensation.
Stock compensation expense that vested immediately so all of that was taken this quarter.
Speaker 3: Stop compensation expense that vested immediately, so all of it was taken this quarter.
So after that I would say that SG&A should trend fairly consistently will be slightly lower than it was for this quarter.
Speaker 3: So after that I would say that SG&A should trend fairly consistently or be slightly lower than it was for this quarter.
<unk>.
So not dropping back to fiscal 'twenty, one and fourth quarter. It was like two and a half million dollars.
Speaker 5: So not dropping back to fiscal 21 fourth quarter of like two and a half million. It'll stay around four.
It will stay around for something no. It should go back I'm, sorry, I meant it should go back down to where it has been historically.
Speaker 3: No, it should go back. I'm sorry. I meant it should go back down to where it has been.
Thank you.
On the call that you were saying God.
Speaker 3: and then the COGS you were saying? COGS we're expecting to improve. We had two things happening. The COGS we're expecting to improve.
We're expecting to improve we had two things happening.
Speaker 3: The colleges, specifically CUNY and some of the others where we have the testing collection sites, those are at a lower gross margin. However, that is offset by now the increase in testing volume at those helps a better absorption of some of the fixed fees for staffing the sites and things like that. So that should improve it and also with the positivity rate going down, we can go back to our pooling which helps our gross profit and that our consumables and things are used at a lot lower upper rates.
We call. It is specifically Q&A on some of the others, where we have the testing collection sites. Those are at a lower gross margin. However that is offset by now the increase in testing volume at those helped a better absorption of some of the fixed fees for staffing the sites and things like that so that should improve it and also with the positivity rate.
Going down we can go back to our pooling, which helped our gross profit and that our consumables and things are use it a lot lower at that rate.
So just on.
Speaker 4: So just on Beth's last point, the impact of pooling at low positivity.
On best last point, the impact of pooling at low positivity.
As we effectively can test five samples at a time.
Speaker 4: is we effectively can test five samples at a time.
And if those five samples are negative.
Speaker 4: And if those five samples are negative for that well...
For that well.
We're seeing an 80% increase in.
Speaker 4: We're seeing an 80% increase in productivity.
In productivity.
No of course, not every well is negative.
And you have to discern big UAE wells that are positive, but the currently.
Speaker 4: and you have to disambiguate wells that are positive. But at the currently low positivity rate...
Low positivity rates pool.
Pulling yields at least a 60% increase in efficiency.
Speaker 4: pooling yields at least a 60% increase in efficiency.
That makes a lot of sense James Thank you guys.
Youre welcome.
The next question is from <unk> Chen with H C. Wainwright. Please go ahead.
Speaker 1: The next question is from Yi Chen with HC Wainwright. Please go ahead.
Hey, everyone. Congratulations on the progress and cheat on behalf of your Chin.
Speaker 6: Hey everyone, congratulations on the progress and Chet on behalf of you.
I used to have a couple of clarification. So the increase in clinical lab service revenues of $2 4 million.
Speaker 6: I just have a couple of clarifications. So the increase in clinical lab service revenues of 2.4 million during the fiscal, is that completely related to COVID?
The Cisco.
Is that completely related to COVID-19 .
Yeah, that's all Covid testing.
Okay.
Speaker 6: Okay, and please bear with me and and how much of January 2 million is related to COVID? Or did you say it was all related to COVID? Significantly all yes.
Please bear with me and how much of January <unk> 2 million.
Related to Covid.
Or did you see was all related to Covid.
Significantly all essentially all of it the majority.
Okay, great great and.
Speaker 6: Okay, great. I know you spoke about the
I know you spoke about the.
Our molecular and genetic.
Speaker 6: molecular and genetic testing services that are on the horizon.
Testing services.
On the horizon.
Hum.
And my apologies, if I didn't catch it but when when did you say you were going to start these other testing services.
Speaker 6: And my apologies if I didn't catch it. But when did you say you were going to start these other testing services?
Sure.
Speaker 4: Sure. The validation is already in hand. So for example, we have already validated
Validation is already in hand. So for example, we have already validated.
The what's called the a B C.
Speaker 4: the what's called the ABC assay that is for flu A, flu B, and COVID.
I will say that as for flu a flu b and COVID-19 .
And we're essentially ready to deploy.
Speaker 4: and we're essentially ready to deploy. and other assays.
And the other assays.
The home collection.
Which is essentially the same collection of assays, but now in a much broader sampling population that will begin as soon as we were granted the EUA, which we're expecting in short course.
Speaker 4: which is essentially the same collection of assays, but now in a much broader sampling population, that will begin as soon as we're granted the EUA, which we're expecting in short course.
Awesome, Thank you and.
I know you briefly touched upon the pan cancer linear DNA vaccine.
Speaker 6: I know you briefly touched upon the pan cancer linear DNA vaccine. Is there any other color that you could provide at this time? Maybe plans of potential clinical studies or the type of patient populations that you're looking at? Or maybe even more clinical validation?
Is there any other color that you could provide at this time maybe plan so.
Potential clinical studies or.
The type of patient populations that you are looking at or maybe even more preclinical validation.
Yes.
Speaker 4: Yes, you know, pan-cancer...
Pan cancer.
Vaccine.
Especially relevant to the domestic pet marketplace, especially dogs.
Speaker 4: especially relevant to the domestic pet marketplace, especially dogs.
And.
Speaker 4: And so we plan to enter into clinical trials there.
So we.
We plan to enter into clinical trials there.
And.
Speaker 4: And we have strong interest in a number of other vaccines that can be serviced by
We have strong interest in a number of other vaccines that can be serviced.
<unk>.
Linear DNA and some of these vaccines are unique.
Speaker 4: linear DNA. And some of these vaccines are unique.
To the African animal market place.
Speaker 4: to the African animal marketplace.
And remember with linear DNA, we have an extraordinarily stable nucleic acid product, but <unk>.
Speaker 4: And remember with linear DNA we have an extraordinarily stable nucleic acid product.
It places come to proceed.
Speaker 4: The marketplace has come to perceive the mRNA vaccines as highly unstable.
Mrna vaccines.
Hardly unstable.
Both by comparison linear DNA vaccines, you can ship across the Sahara without a serious worry.
Speaker 4: but by comparison, linear DNA vaccines, you can ship across the Sahara without a serious worry.
And so there are some interesting applications that really need solution in the African virology marketplace.
Speaker 4: And so there are some interesting applications that really need solution in the African virology market.
Interesting.
Speaker 6: Interesting. Thank you so much and congratulations once again.
Thank you so much and congratulations once again.
Thank you.
Again, if you have a question. Please press Star then one the next question is from Jason Mccarthy with Maxim Group. Please go ahead hi.
Speaker 1: Again, if you have a question, please press star then 1. The next question is from Jason McCarthy with Maxim Group. Please go ahead. Hi, Jim. Thanks for taking the questions. I just want to go back to... Alright.
Jim Thanks for taking the question just wanted to go back to <unk>.
Question that Jonathan was asking earlier about volume.
Speaker 7: question that Jonathan was asking earlier about volume.
In New York State.
Speaker 7: in New York State. Is the expectation that the volume is just based on your customer base is going to be relatively the same going forward? How do you?
Is the expectation that the volumes just based on your customer base.
Gonna be relatively.
The same going forward.
How do you.
See that with a shifting environment, we're seeing is more restrictive states, even new York.
Speaker 7: see that with a shifting environment where we're seeing these more restrictive states, even New York.
Speaker 7: um you know kind of go against CDC guidelines and even the lighthouse and as soon as HOCL teams is gonna
You know kind of go against C. D C.
Guidelines and even the White House and then as soon as vocal it seems it's going to.
You know take all of the restrictions off we would think that testing.
Speaker 7: you know, take all the restrictions off, we would think that testing flow and volumes would kind of go with it. How do you reconcile that?
Hello, and volumes would kind of go with it.
How do you reconcile that.
Yeah.
Speaker 4: Yeah, I appreciate the logic and it's not flawed.
I appreciate the logic and it's not flawed.
It is an issue that specific to our customer base.
Speaker 4: It is an issue that's specific to our customer base.
So in testing for example.
Speaker 4: So in testing, for example, large institutions,
Large institutions.
The rapid antigen tests are not an adequate substitute.
Speaker 4: The rapid antigen tests are not an adequate substitute.
For screening for asymptomatic infection.
Speaker 4: for screening for asymptomatic infections.
They're not built for a high volume for high throughput.
Speaker 4: They're not built for high volume, for high throughput. They're built for very low volume.
They're built for a very low volume high speed.
And so our customer base is large institution in the case of puny.
Speaker 4: And so our customer base is large institution. In the case of CUNY, the total population of over...
The total population of over 300000.
And so you can only address those volumes in the long term as long as testing remains relevant and it certainly will students come back for the first time to the campus.
Speaker 4: And so you can only address those volumes in the long term, as long as testing remains relevant.
Speaker 4: And it certainly will, as students come back for the first time to the campus.
What happens thereafter, it's still hard to predict.
Speaker 4: What happens thereafter is still hard to predict.
So then were.
Do you see do you see it because of the pandemic, even if it becomes endemic.
Speaker 7: Do you see because of the pandemic, even if it becomes endemic?
Yes, there's going to be some level of testing that's gonna have to remain how do you see.
Speaker 7: There's going to be some level of testing that's going to have to remain. How do you see?
The Covid and flu dual test for applied.
Speaker 7: the COVID and flu dual tests for applied.
Yeah and are playing a role in this right because if you go get a flu test or it used to be it was just an antigen test, but if it now.
Speaker 7: rolling out or playing a role in this, right? Because if you go get a flu test or it used to be, it was just an antigen test, but if it's now...
We're dealing with two different serious illnesses you cant do two antigen tests, maybe it makes more sense to differentiate the two at PCR that where our core opportunity lies for applied.
Speaker 7: we're dealing with two different serious illnesses, you can't do two antigen tests, maybe it makes more sense to differentiate the two with PCR. That where a core opportunity lies for applied.
Yeah in particular in populations.
Speaker 4: Yeah, in particular in populations that are susceptible to more serious morbidity.
Are susceptible to more serious morbidities.
Than the general population so.
Speaker 4: than the general population. So for example, in skilled nursing facilities, that kind of an assay could be extremely relevant.
For example in skilled nursing facilities that kind of and I'll say it could be extremely relevant.
And.
Speaker 4: and it will affect the course of therapy and what caregivers have to do to ensure the outcome of these infections are not drastic.
It will affect the course of therapy.
And what caregivers have to do to ensure.
The outcome of these infections.
We're not drastic.
Got it Okay and then my last question.
It's just I think I don't know if I heard it correctly. It was a comment you made about the clinical path for linear vaccine, maybe more complex than traditional vaccine. If I heard that right can you just clarify that and maybe give us a little bit more color as to why.
Speaker 7: It's just I think, I don't know if I heard it correctly, it was a comment you made about the clinical path for linear vaccine, maybe more complex than traditional vaccines. If I heard that right, can you just clarify that and maybe give us a little bit more color as to why? Sure.
Sure.
Sure.
FDA has not approved a linear vaccine to date, so I'm really referring only to the compliance issues. The science is very straightforward. The menu fracturing is much easier than the methods that are used now.
Speaker 4: FDA has not approved a linear vaccine to date. So I'm really referring only to the compliance issues. The science is very straightforward. The manufacturing is much easier than the methods that are used now.
Scalability is is terrific.
Speaker 4: And the scalability is terrific. So I think the only challenges that we'll face are the initial ones in gaining regulatory clearance. But I do think...
So I think the only challenges that will say so the initial ones in gaining regulatory clearance.
But I do think that the.
Degree of comfort with nucleic acid therapies in general.
Speaker 4: degree of comfort with nucleic acid therapies in general.
Has increased so much the top has really been blown off the opportunities.
Speaker 4: has increased so much that the top has really been blown off the opportunity.
Speaker 4: you know, while there are only 20 approved nucleic acid drugs right now.
While there are only 20 approved nucleic acid drugs right now.
Two years ago F. D. A projected 200 BLA is for this current calendar year.
Speaker 4: Two years ago, FDA projected 200 BLAs for this current calendar year.
And I'm sure that number is increasing so I think that the demand is there.
Speaker 4: So I think that the demand is there, the markets are there, and the marketplace needs diversity beyond messenger RNA and it can't be met by plasmid DNA. I think we have a better product, safer and more readily manufactured and cleaner.
Markets are there.
And you know.
The marketplace needs diversity beyond messenger RNA.
And it can't be met by plasmid, DNA and I think we have a better product safer.
And more readily manufactured and cleaner.
Got it thank you Jim.
Youre welcome. Thank you.
The next question is from Matt Bullock with Maxim Group. Please go ahead.
Speaker 1: The next question is from Matt Bullock with Maxim Group. Please go ahead.
Hi, yes, thanks for taking my question.
Speaker 8: Hi, yeah, thanks for taking my question. If you do get this emergency use authorization to the at home collection kit, I was hoping you might be able to talk a little bit more about the revenue opportunity there and maybe the margin profile.
If you do get the emergency use authorization for the at home collection Kit I was hoping you might be able to talk a little bit more about the revenue opportunity there and maybe the margin profile.
Sure again, our interest is in large institutions large companies.
Speaker 4: Sure. Again, our interest is in large institutions, large companies, and large companies that have locations from coast to coast.
And large companies that have locations from coast to coast.
That is a particular opportunity and a lot of those large companies.
Speaker 4: That is a particular opportunity in a lot of those large companies.
Speaker 4: are seeing a reluctance even with the pandemic receding.
Seeing a reluctance even with the pandemic receding.
For employees to come back to the office they have to offer them a way of providing a safe circle.
Speaker 4: for employees to come back to the office. They have to offer them a way of providing a safe circle. And that's our goal in utilizing the unsupervised home collection.
And that's our goal and utilizing the on supervised home collection.
Excellent makes a lot of sense and then if you could just touch on what Youre seeing in terms of tagging demand I think last quarter, you mentioned some potential textile projects with the apparel brands in the pipeline.
Speaker 8: Excellent. Makes a lot of sense. And then if you could just touch on what you're seeing in terms of tagging demand, I think last quarter you mentioned some potential textile projects with apparel brands in the pipeline. If you could give us an update.
If you could give us an update that'd be great.
Sure.
Speaker 4: Sure. You know, if anything, COVID seems to increase global awareness about the need for authenticity and for understanding the point of origin of
If anything Covid seems too.
Increased global awareness about the need for authenticity and for understanding the point of origin of <unk>.
Products.
In particular to the situation in China right now.
Speaker 4: in particular the situation in China right now.
With the weaker facing.
Speaker 4: with the Uighurs facing...
What they're facing and.
Speaker 4: what they're facing and no means of identifying cottons that are forbidden from entry into the United States.
No means of identifying cottons that are.
For bidding from entry into the United States.
We believe that the opportunities.
Speaker 4: We believe that the opportunities...
And we're seeing it.
Speaker 4: and we are seeing it by the interest coming from brands themselves. We believe in the long term the drivers will be the brands not so much the manufacturers. The brands will demand it from their contract manufacturers that they can provide forensic provable proof of origin.
But the interest coming from brands themselves. We believe in the long term the drivers will be the brands not so much the manufacturers.
<unk> will demand it from their contract manufacturers that they can.
Provide forensic provable proof of origin.
Excellent. Thank you very much I'll hop back in the queue.
Okay. Thanks.
This concludes our question and answer session I would like to turn the conference back over to Jim Hayward for any closing remarks.
Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Jim Hayward for any closing remarks.
Okay. Thank you operator.
Speaker 4: Okay, thank you operator. The level of activity surrounding our linear DNA platform really is unrivaled in the company's history.
The level of activity surrounding our linear DNA platform really is unrivaled in the company's history.
And we are attacking a window of opportunity as I put it earlier opened by COVID-19.
Speaker 4: And we are attacking a window of opportunity, as I put it earlier, opened by COVID-19.
While it's being supported by our team's excellent execution on our diagnostic strategy.
Speaker 4: while being supported by our team's excellent execution on our diagnostic strategy.
And we look forward to updating you all on our progress made across all aspects of the company via our press releases and all along our next investor call in May and we're grateful to all of you for participating today. Thank you.
Speaker 4: and we look forward to updating you all on progress made across all aspects of the company via our press releases and on our next investor call in May. We are grateful to all of you for participating today. Thanks.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker 1: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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