Q2 2022 Applied DNA Sciences Inc Earnings Call
[music].
Good evening and welcome to the applied DNA Sciences fiscal second quarter 2022 financial results conference call.
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I would now like to turn the conference over to Sanjay Hurry head of Investor Relations.
Please go ahead Sir.
Thank you Ryan good evening, everyone and welcome to applied DNA conference call to discuss our second quarter fiscal 2016 financial results you can access the press release that was issued after market close today as well as the slide presentation accompanying 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 .
Judy Murrah, our CLO and <unk>, our chief legal officer, and head of business development.
Also be available to answer questions on the Q&A portion of the call.
Before 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 to our Form 10-Q filed a short while ago for important risk factors that could cause the company's actual performance and results to differ materially from those expressed or implied.
Any forward looking statements.
We undertake no obligation to update or revise any forward looking statements or other information information provided on this call as a result of new information or future results or developments.
Now, it's my pleasure to introduce our first speaker on today's call Beth Jantzen. Please go ahead.
Thank you Sanjay good afternoon, everyone.
For joining us on our second quarter fiscal 2022 investor call.
I will begin today with a review of our consolidated financial results for the second quarter of fiscal 2022 which ended on March 31st.
I will then turn the call over to Dr. James Hayward, our president and CEO .
Hello summarize our operational performance for the quarter and outline key initiatives for the second half half of fiscal 'twenty two.
We will then open the call to our analysts and institutional investors.
Yeah.
I haven't seen my review of our financial results, we have now demonstrated excellent operational and financial execution for two consecutive quarter.
Our clinical labs subsidiary applied DNA clinical lab.
<unk> yeah.
<unk> continues to power our impressive total revenue performance.
Total first half fiscal 2022 revenues have exceeded total revenue for the entirety of fiscal 2020 one.
The increase in revenue from a D. C. O has helped to reduce the overall company's cash burn rate.
And as you will hear from Jim shortly.
We have reason to believe that we have proximity to the men are tagged cotton okay.
<unk>.
By the Weger forced Labor Prevention Act that passed into federal law in December 2021.
It could serve as a source of future revenue and cash flow to supplement adcs.
Beginning with the statement of operations.
As a reminder, we now present the revenue and cost of providing testing services performed by our clinical laboratory a separate line item in our statement of operations.
We are pleased to report a second consecutive quarter of record revenue.
As I noted our topline performance was driven mainly by COVID-19 testing.
Our total revenues for Q2 were $6 1 million compared to $2 7 million in the year ago quarter, and $4 2 million in Q1.
The year over year increase in corn in quarterly revenue is primarily attributable to increased clinical laboratory service revenue.
Comprised of COVID-19 testing.
And related services.
On a sequential basis Q2 revenues increased 45%.
There were also due to an increase in clinical laboratory service revenue.
This is crucial increase is due to the impact of the army Cranfield Spike on testing demand that began in Q1 and continues through today.
Product revenues were 408000 in Q2 compared to 965000 in the year ago period.
The year over year decrease of 555000 is primarily related to a decrease of approximately 605000 in sales of our linear COVID-19.
Assay kit.
This decrease was offset by an increase of approximately 85000 in textile.
It's also attributable to the shipment of DNA transfer units for the tagging of cotton in India.
Service revenues were 249000 compared to 152000 in a year ago period.
The increase of 97000 is attributable to linear DNA project for CRO customers.
As a reminder.
<unk> revenues comprise research and development pilot projects as.
As well as authentication services associated with our industrial DNA business.
Okay.
Clinical laboratory service revenue increased to $5 5 million compared to $1 6 million in a year ago period.
On a sequential basis Clint.
Clinical laboratory service revenues increased 72% from $3 2 million in Q1.
Okay.
As I noted earlier the increase on a sequential basis was driven by the omicron feels like.
<unk>.
Beginning in Q1, we began allocating depreciation expense versus showing it as a separate line item on our statement of operations.
As a result, we are presenting a gross profit line on the statement of operation.
The gross profit percentage was 40% and 65% for Q2 and the year ago period, respectively.
The decline in the gross profit percentage resulted from a substantial portion of <unk>.
Clinical laboratory service revenue cut.
Coming from testing contracts, where he also provides a staff provide and staff the testing side.
These contracts have higher associated costs compared with our surveillance testing contract.
To a lesser extent the decrease in gross profit percentage was.
Due to a product sales mix.
Sales during the year ago period included a higher volume of sales of our linear COVID-19 assay kits.
Which are at a higher gross margin.
I draw your attention to the substantial sequential improvement in clinical lab gross profit percentages from 18% for the first quarter of fiscal 2020 two.
42% for the second quarter of fiscal 'twenty two.
The high infection levels at the peak of Army Kron Spike eliminated our ability to conduct pool testing, which generates higher margins for our crap clinical lab.
As infection rates declined we are once again able to conduct pool testing and our margins improved as a result.
This coupled with the increased testing levels during fiscal Q2 versus Q1 led to the improved gross margins for the clinical lab.
Yeah.
Given adcs concentration of educational clients and as they approach their summer break we anticipate a lower baseline for testing demand during these months as a consequence.
Of course, this could be offset if testing demand increases as the positivity rates are currently increasing in our region.
We are closely monitoring support levels going into the summer months and have an array of levers we can pull to right size support to testing demand with an aim to maintain a similar profit margin what we reported in Q2.
Hum.
Total operating expenses in Q1 increased 11% or 436000.
Two $4 5 million.
Compared to $4 1 million in a year ago period.
The year over year increase is attributable to fiscal 2021 Q2, having.
Having a reversal of an accrual of approximately 817000 or an accrued bonus that was forgiven by our CEO .
The increase was also due to increased D&O insurance premium.
And to an increase in research and development expenses.
These increases were offset by decreases in stock based compensation and professional fees.
During Q2, we initiated a cost management program designed to optimize our cost structure to position our linear DNA platform for.
For biotherapeutic applications to achieve maximum value for shareholders.
Current and future opportunities.
[noise] initiatives under the program, primarily focused on the elimination of early stage industrial DNA and market pursuits, such as cannabis tagging and workforce optimization.
Resources have been realigned towards priority development programs centered on the linear DNA platform.
As well as the development and implementation of a diagnostic strategy to power. The next stage of growth at a D. C L.
Jim will talk about.
We do not anticipate material cost savings from these actions rather we are reallocating costs within opex.
Our Q2 net loss increased to $1 8 million versus a year ago period at $1 5 million.
Included in net loss for the quarter ended March 31st 2022.
As an unrealized gain from the change in fair value of common one.
Associated with our February 22 registered direct of 783000 as well as <unk>.
And expense of 391000 for transaction cost that were allocated to the warrant liability.
Net loss per share was 23 cents in Q2.
First as a loss per share of <unk> 21 cents in the year ago period on a higher number of weighted average shares outstanding.
Excluding noncash expenses consolidated adjusted EBITDA for Q2 was negative $1 6 million.
Compared to a negative $1 5 million in the year ago period, and narrow compared to a negative $2 7 million in Q1.
Hum.
Turning to our balance sheet cash and cash equivalents totaled $6 5 million on March 31st.
This figure is inclusive of the registered direct conducted during the quarter.
For net proceeds of $3 7 million.
Our strong cash collections caught up with the large increase in accounts receivable that occurred in Q1.
Accounts receivable stood at $3 9 million.
At December 31st compared to $2 6 million at March 31.
We collected an additional $1 1 million during April .
Yeah.
Our outstanding warrant balance increased as a result of the February registered direct we now have a total of approximately 3 million warrants outstanding and.
Carrying no debt on our balance sheet.
Our just filed 10-Q for the second quarter maintains a going concern opinion and that our ability to continue as a going concern is dependent on our ability to further implement our business plan raise capital <unk>.
<unk> generate revenue.
Our cash position on April 30th was approximately $5 million.
This concludes my prepared remarks.
Thank you for joining us today I will now I will turn the call over to Jim for his comments.
Well, thank you Beth and good afternoon, everyone. Thank you for joining us on our second quarter call of fiscal 'twenty two.
We are very pleased with the record top line results for the quarter.
I want to personally thank the applied DNA team for their hard work and dedication.
My remarks. This afternoon will focus on how the company plans to retain its significant topline revenue growth.
<unk> costs and continue to commercialize the linear DNA platform.
Applied DNA has one singular focus.
To commercialize DNA produced by the polymerase chain reaction or PCR, which the company accomplishes by selling PCR produced DNA in the biotechnology and industrial sectors.
And by performing PCR based molecular diagnostic tests and his clinical laboratories subsidiary a D C L.
These three legs of the stool not only allow the company to avoid risk concentrations.
But also provide a means of revenue.
Cash flow to help support the linear DNA platform for biotherapeutic applications, while the platform is under development.
We believe that the linear DNA platform is a truly transformative technology that will impact almost all advanced therapies and once it is fully commercialized it will bring value to our shareholders.
In order for a three legged stool to stand each of the legs must contribute over the past several quarters, our clinical lab has driven most of our topline growth.
As I will discuss in a moment, we have a plan that we believe will enable <unk> to continue its strong contributions to our topline.
Our sale of DNA to the industrial sector has historically been our topline driver.
And based on the coalescence of new laws in a world of emerging from the pandemic. We are seeing very promising signs that our industrial DNA sector will join the clinical labs.
Two real contributor to our total revenue.
And finally, there is our linear DNA platform, which we believe will unlock the true value of the company.
We've been hard at work developing and validating this platform and during Q2 several projects provided extremely compelling data, which I'll share with you today.
Beginning with the clinical lab.
On our first.
Fiscal first quarter call, we discussed putting in place the next phase.
The <unk> growth, we are mindful that COVID-19 testing will vary in volume with the state of the pandemic in our region and with the rate of rise of new variance and pathogenicity.
We are employing a phased approach to diversifying adcs diagnostic roadmap that is designed to cushion uncertainty around COVID-19 testing in the near term.
While concurrently putting in place the foundational components of <unk> future growth.
First we will continue to maximize our COVID-19 testing opportunities.
Testing demand from our clients continues.
Albeit likely diminished levels, allowing for the seasonally.
In Heron.
Testing concentration is derived from the academic clients, who are about to enter their summer break sessions.
One key educational client has indicated that it expects to renew its contract for the upcoming year.
And we announced last month that the contract with the new financial services client, who has engaged us for company wide testing.
In addition.
Covid testing will likely remain relevant for some time.
A report released by Epidemiologists from CUNY earlier this month.
Estimated that only about a quarter of New York City adults, who have been infected by Amazon and its sub variants.
But with the more infectious up their accounting for more than 90% of cases in the region.
Reports suggest that the majority of adults that's about 75%.
We'd still be susceptible to catching normal crumbs, expanding bouquet of sub variants.
Just this week.
<unk> shown that this various has substantially increased positivity rates throughout New York City and for the first time in many months hospitalizations are up.
Meanwhile, the white house's warning of an expected surge in the fall.
Clearly no matter, how immune our collective mines have become to the Sars Covid two virus.
The virus will be challenging our personal and institutional immune systems for some time to come.
Now beyond COVID-19, we see great promise in ADC L in high value genetic testing.
Over the next three months, which include the academic summer semesters, we are prepared for a potential downturn and COVID-19 from our educational institution customers.
We aim to reduce the impact to <unk> sales cash flow by leveraging our existing clinical assets to cultivate supplementary non COVID-19 testing opportunities.
By offering one or more FDA approved molecular tests for cancer and for infectious disease.
At that same time.
We are bringing online a cutting edge molecular genetics platform.
Power's diverse genetic testing.
Including pharmacogenetics testing.
<unk> genetic testing or P. G X.
As a form of high value genetic testing that determines how an individual will respond to certain medicines based on their genes.
PGS testing is a rapidly growing area of genetic testing.
Our market research shows is underserved in New York State generally.
And on long Island, specifically, where we are based.
Our first PGS test will be a panel that reads on 80 plus drugs.
Across psychiatric cardiac and pain management indications.
Validation testing is beginning this summer and will be performed by our clinical lab scientists.
Once validation is complete the tests must be reviewed and approved by New York State Department of health.
Before it is offered commercially.
To speed, our PGS tests path to market.
We've engaged a third party analytical validation group to assist us with the assay validation.
This group has deep expertise in PGS test validation that we believe will help us achieve a commercially available PGS test by the end of the calendar year.
Our go to market strategy for PGS focuses on two primary markets.
Our reference lab testing.
And direct to consumer testing.
Our primary focus will be marketing, our PGS test to other clinical labs and hospital systems, starting with those located in New York, where we believe the market is underserved.
These reference lab opportunities are very favorable to <unk> and allow us to test on contract.
For a set fee per test without the added expense and complications of third party reimbursement and sample acquisition.
In addition, the ADC LPG ex panel will also be marketed as a direct to consumer test.
On a per test basis.
The economics of PGS testing, two <unk> are better than COVID-19 testing.
We believe that <unk> demand is growing and durable.
And we will provide for long term meaningful revenue for a D C L.
Longer term.
The very same genetic testing platform used for PGS testing can be leveraged to develop other novel genetic or molecular tests. We're currently in talks with several institutions.
Regarding collaborations on using novel Biomarkers to develop next generation cancer diagnostic prognostic and risk assessment test.
COVID-19 has shown us that we can successfully monetize clinical testing.
We're excited for this next phase of <unk> and we believe we will continue to be a significant revenue contributor to the company.
Let's now consider textile tagging.
As our second cash flow stream.
Our industrial DNA business, comprising supply chain authentication and support systems was originally envisioned.
To play the cash flow rose <unk> presently occupies.
The growth of our industrial DNA business was negatively impacted by COVID-19.
But we believe that recent world events have shifted its future prospects significantly for the better.
The passage of the Weger forced Labor Prevention Act that passed into law last December .
Has the potential to be catalytic for us.
The act establishes a rebuttal bolt presumption that the importation of any goods, whereas articles and merchandise that's mine produced or manufactured wholly or in part in the Xinjiang Uyghur autonomous region or swap region of the People's work.
<unk>, China or produced by certain entities.
Is prohibited and goods are not entitled to entry to the United States.
With its passage interest and our certainty platform to prevent the incursion of textiles from the Xinjiang region into the U S has really grown substantially.
On the business development side, what was previously a once a week certainty presentation request has now turned into daily presentation.
And the urgency on the part of brands and their suppliers.
Is palpable.
We've been hard at work positioning our certainty platform before federal and congressional officials during the Ax public comment period.
<unk> presented to more than 75 congressional offices made requests to multiple relevant federal branches for funds with which to advance our next generation sequencing capacity applied to global cotton sources to develop a forensic DNA based curated.
Origin Library.
We've given testimony on the Hill and we have provided written comments responses on the act in March and in April .
While the act does not mandate DNA tagging, we do believe that our certainty platform is the best solution for compliance with the act.
Now if you read the Guardian last week.
You're aware that in an investigation conducted in Europe . Several large athletic brands were recently found to have jinjiang cotton in their finished goods. Despite.
The brands, having previously declared their products free of cotton from that region.
If the same investigation were conducted in an American port.
Easy to see how testing finished goods can leave brands to incur significant losses at <unk>.
<unk> with the evidence of been counting on us.
Supply chain security must start with the source of the textile and.
And follow the entirety of the supply chain.
No. The act goes into full force on June 21st.
Cbp's threshold is for.
Detainment based on reasonable, but not conclusive information, indicating forced labor to us.
Withhold release orders.
CBP wide latitude in detaining any inbound shipments coming from those wall region.
I suspect that has been involved with forced labor.
The importer has three months to demonstrate that the goods to attain were not produced with slave labor. It's the importers paper trail cannot convince CBP the importer, most export the goods elsewhere or destroy them.
We believe the potential for both legitimate.
Legitimate goods to get carbon CBP is actions is high.
And the onus is on the supply chain to prove legitimacy.
This makes for a perfect storm.
For demand potential for certainty.
In advance of the full enforcement of the act.
We in our cotton merchant partner received a request to ship tagged cotton under a new arrangement entered into a year ago. When the branded question began to make preparations for the act.
The order through the brand supply chain will be partially delivered this summer with the balance expected to be delivered by the upcoming cotton ginning season.
As we noted in our earnings press release today, the value of the order is immaterial relative to the intent behind it.
That is we believe this is year one of the brands multiyear commitment to deploy certainty within its many supply chains.
This implies a natural uplift to demand for tagged cotton as it displaces unmarked car.
Cotton used by the brands supply chain.
And we should have more to say on this development in the brand's intentions as we approach the start of the cotton ginning season.
We believe that this is just the beginning.
And that the act will be catalytic for our certainty platform.
We anticipate that our industrial tagging business will drawing ADC L. As a meaningful contributor to our top line and we look forward to providing you future updates.
And now for a progress update on linear DNA.
Our activities at <unk> and industrial DNA.
Have a more rapid path to market and their associated revenues can support the advancement of higher value linear DNA.
To produce DNA for biotherapeutics.
Excuse me.
One second.
On prior calls I'll discuss the window of opportunity that is open for novel DNA production approaches.
To circumvent the bottlenecks presented vice plasmid DNA and the manufacturer the next generation of nucleic acid based therapies.
[laughter].
The global demand for DNA continues to rise at a breakneck pace.
According to <unk> 2021 report from the American Society of gene and cell therapy.
1745 gene or cell therapies, and 600 RNA therapies, we're in development.
These numbers have continued to grow over the past year.
The net result is an unprecedented demand for DNA, both for research and clinical development and for therapeutic manufacturing.
The industry needs, a new form and source of DNA.
And we believe that linear DNA is it.
While linear DNA may be substituted for plasmid DNA and the majority of new clay.
Asset based therapies.
We are currently focusing on two applications.
Firstly.
Templating for I V T or in vitro transcription.
To empower mrna therapeutics, and secondly, DNA vaccines for the veterinary market.
We believe these two applications, which are in essence, two sides of the same coin.
Represent the fastest path to commercialization revenue an increased valuation.
Mrna therapies have transformed the world Covid.
COVID-19 highlighted the power of the mrna therapies in biotechnology companies.
Off to the races with pipelines full of mrna and self amplifying RNA.
These therapies that target diverse indications ranging from infectious disease to cancer.
And gene therapy.
Linear DNA can accelerate and simplify RNA research and production workflows, so that have traditionally used plasmid DNA.
Unlike plasmid, DNA, which must be linearized.
Spencer restriction enzymes for ICT linear DNA is ready for IBD use without further modification. Moreover, contamination of linear plasmids, but even trace amounts of residual circular DNA can lead to heterogeneous transcripts and issue complete.
We are avoided by our linear DNA.
In addition, since linear DNA is free of plasmid DNA backbone sequences. There are no adventitious DNA sequences to remove.
Furthermore, a key aspect of mrna production is the inclusion of poly or poly adenylate tail.
Normally ranging from 80 to 120 nucleotide in life.
Plasmid based DNA production method struggle to produce DNA sequences that contain long nucleotide repeats such as those that are necessary to produce a poly a tail.
While Smith based amplification of sequences containing such long nucleotide repeats often produce heterogeneous DNA sequences, which leads to problematic heterogeneous mrna construct after IV.
The linear DNA platform on the other hand produces DNA with a precise number of long nucleotide repeats which results in highly homogeneous mrna construct containing a precise number of poly as.
Finally.
We believe that plasmid based DNA manufacturing cannot match the speed of our linear DNA platform recently, we conducted a proof of concept study in which a commercial scale batch of linear DNA was produced.
A de novo synthetic DNA template.
In just 10 days.
Highlighting linear DNA is unparalleled speed of production.
Given its enormous advantages linear DNA is the idea.
Deals starting material for mrna production.
And to this end, we recently conducted a study in which RNA produced via linear DNA Aibt template.
Was compared to RNA produced via plasma diabetes template and you can see in this slide.
That the templates produced.
Denticle RNA from.
From both plasmid in linear DNA.
We believe that this study establishes the linear DNA platform is a rapid cell free platform for IBD Templating that offers MLR RNA therapeutic developers many advantages over the industries for decades, plus plasmid DNA approach.
And we will be publishing more about this study soon.
In addition, we are currently working with a leading enzyme manufacturer to reduce the cost of DNA polymerase.
While at the same time, increasing DNA manufacturing yield.
We believe these developments will further strengthen the advantages of linear DNA over a plasma DNA.
So in sum.
We have both the capacity and the expertise to supply a better IV T template to day.
And we will be attending and presenting at the M. RNA based therapeutics summit in Boston, taking place in late July .
Which will serve as the formal launch of this exciting new services.
Moving now to our DNA vaccine work.
Linear DNA hold several advantages over plasmid DNA as a vaccine <unk>.
Including speed purity simplicity or lack of adventitious DNA sequences, such as the genes for antibiotic resistance and the origin of replication.
As well as a higher therapeutic index producing a similar therapeutic response at a lower total amount of DNA.
Now we've been working on DNA vaccine since the early days of the pandemic and have generated much valuable data our data supporting the efficacy of linear DNA vaccines in mice ferrets and fee lines are robust and.
And show that linear DNA vaccines invoke a powerful moral response with high antibody titers in a cellular immune response that often exceeds plasmid DNA.
Recently in Q2.
We achieved a pivotal milestone with the conclusion of phase one of our Ferret Sars Covid two challenge trial.
The data showed that in addition to eliciting a strong antibody and cellular response or a linear DNA vaccine delivered by electro gene transfer.
Was protective against Sars, Covid, two and a challenge test.
As you are aware Sars Covid two was the disease, we chose at that time as a testbed for our linear DNA platform.
Tend to publish data upon the conclusion of our phase II trial.
We are planning to use phase II trial to evaluate lipid nanoparticle mediated intramuscular delivery of linear DNA vaccines.
Our cell bio suite and.
And investments made in fiscal 2021 recently concluded in vitro studies that prove the LNP encapsulated linear DNA manufactured by applied DNA can transfect and express the desired protein.
Based on these promising data and the results of the phase one trial, we intend to initiate a bridging study in mice in the next few weeks that if successful.
We'll itself provoke initiation of the phase two favorite trial in which LNP linear DNA COVID-19 vaccine will be administered to ferrous via intramuscular injection.
The combination of LNP and linear DNA provides a differentiated DNA vaccine platform that we believe has wide ranging applications in the veterinary market.
Yeah.
We believe that the platform can be used both for prophylactic vaccines against infectious diseases.
And therapeutic vaccines and immuno oncology and immunotherapy.
Yeah.
[laughter] excuse me.
We believe the best use of our linear DNA vaccine platform is the veterinary market.
Immuno oncology drug.
During Q2, we.
We co authored and published a manuscript that detailed the results of a preclinical study.
And which linear DNA based vaccines for cancer immunotherapy produced a strong immune and specific anti tumor response in mouse models.
Armed with these data as well as the data from the phase one <unk> trial and our successful feline trial we.
We have identified an initial candidate for the linear DNA vaccine platform.
Our canine lymphoma therapeutic DNA vaccine.
That is used in conjunction with standard of care chemotherapy.
We've licensed the DNA sequence for the vaccine from taxis biotech in Italy.
Who previously conducted successful canine trials.
Using a combination of DNA vaccine and chop chemotherapy.
The linear DNA vaccine is currently administered via electro gene transfer potentially could be delivered intramuscularly via lipid nano particles based on the results of our ongoing trials.
[laughter].
Our market research into the canine immuno oncology space.
<unk> is a rapid.
The rapidly growing total addressable market.
Served by limiting existed existing therapeutics that are expensive.
And have an uncertain outcome for survival beyond palliative care.
Lymphoma is the number one cancer in canines, representing up to 24% of all canine cancers and.
And is estimated to impact one out of every 15 dogs.
In addition, the regulatory pathway through USDA for veterinary DNA vaccine differs substantially from human Therapeutics and provides for a potential conditional approval of certain therapies based on smaller clinical trials.
Our goal is USDA conditional approval at which point.
We will seek to lights out license the therapy to an animal health company that owns the last mile to market.
For which we would be the manufacturer of record.
We believe this is a proven commercialization path in the veterinary market.
With severally conditionally approved therapies developed by smaller biotech companies being licensed to larger veterinary health companies.
As we put together the clinical design for this and the canine lymphoma vaccine, we will be sure to keep you updated.
Now before opening the call to questions. Let me just offer a brief recap we covered a lot of material.
Firstly, we are executing on our differentiated approach to.
<unk> Biotherapeutics development.
Our approach is unique.
<unk> is currently mitigating cash burn associated with linear DNA platform development.
And we are having customer conversations that we believe could suggest increased adoption.
Of our certainty platform in textiles that with a further revenue applications to revenue and cash flow potentially starting with the upcoming ginning season.
<unk> is the second phase of its growth mapped out and having proven our ability to stand up and profitably run a diagnostic business in the middle of a pandemic. We are confident in our ability to execute both operationally and from a developmental perspective.
[laughter].
Linear DNA has a window of opportunity.
It's highly relevant today too.
The current nucleic acid based therapeutic world and we are moving with speed to carve our place in it.
No. Thank you for your time and attention. This afternoon operator, please open the call to questions.
Sure.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time your question has been addressed.
And you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from the line of Jonathan Aschoff with Roth Capital Partners. Please go ahead Sir.
Hi, Thank you.
So what kind of drop in <unk> revenue should we expect over the next two quarters this quarter and next quarter owing to the.
The lions share coming from academic institutions.
It's a good question Jonathan.
I think we should be prepared for just about anything however that said.
You know that our major customers are in New York City.
New York City is in the midst of a very significant uptick the general population is having a positivity rate of 20% in New York.
And hospitalizations of wisdom.
So the need for higher levels of testing.
Be it in our lower population.
Yes.
Could end up moderating the decrement in testing levels.
I think we'll just have to wait and see.
It sounds like Youre expecting something like more than half rather than less than half.
Yeah.
All right.
Anything that I speculated at this time would be just that speculation right now our run rate is.
Pretty constant level.
And our positivity is.
Somewhat alarming.
So I don't think you can say with much certainty Jonathan.
Okay.
The two <unk>.
A linear DNA pursuits that youre going to go after most aggressively did you pick those two because of time to market or because of ultimate market size.
I would call it in that.
Sure.
It's a combination of both of those.
That the mrna market.
As growing expensively.
And.
The number.
DLH before FDA is larger than it's ever been.
But.
Our opportunity.
<unk> tend to play.
Is kind of unique we have many advantages so that's really been the driver.
More than market size or speed, it's our unique position and how well suited it is to that application.
That said.
The world's head snapped around collectively pretty quickly when the two mrna vaccines.
Were so effective.
And.
Gene therapies.
Utilized DNA and have some small risk of insertion.
That risk is totally eliminate it as those gene therapies become mrna therapies that instead of being delivered once.
<unk> delivered to the patient on a more continual basis, and we're seeing a lot of gene therapies convert over to mrna based approaches.
Okay. Thank you very much and congrats on time.
Okay. Thank you.
Thank you.
Next question comes from the line of Jason Mccarthy with Maxim Group. Please go ahead.
Joe glad to hear everything is going well I'm really curious about.
We get more information on that linear DNA vaccine platform and canine lymphoma.
And more specifically.
What a trial.
Even a pilot trial would look like in terms of.
An endpoint I don't know if theres endpoints in canines or what is the extension of.
PFS or OS look like in a canine.
Sure.
The.
Right now the therapies are to some degree palliative and not too much life extending.
So.
That clinical endpoint, we will have to be negotiated both internally.
And with USDA.
Sure.
I would think it would be extension of lives.
And.
You know the size of those clinical trials typically are not so large as long as the safety and efficacy is as shown.
Is there.
An opportunity to use imaging scan.
Yeah.
So look this is kind of similar to what the car T people did.
With those early stage trial, those pilot studies, where they're showing.
Very very significant reductions in tumor burden.
Is that something that would be a part of these types of programs.
It's something we're considering I think also we would consider liquid biopsy methods given these tumors.
And.
So that still is under consideration.
And just lastly on this.
What type of antigen would you target for lymphoma under canine.
As there are no available <unk> 19 to something like a CD 19.
We have great skill.
And the <unk>.
Skill is echoed in our partner Tac is in the design.
<unk> unique antigens.
I would not want to say at this time, what our target antigen is but.
Where.
In the midst of it.
<unk> design.
Got it is that is that something that a program that you'd expect to.
Starting this year.
Yes, wed like to start as soon as possible, we'd like to probably do a bridging study beforehand.
But then move on to <unk>.
Got it.
And just generally in terms of demand on the Covid testing side, you had mentioned that theres, a little bit of an uptick.
Seemingly in New York right now is that.
Impacting.
Use of of your diagnostic testing right now because youre doing a lot of pool.
Testing with universities and other sense is that correct.
Well right now our diagnostic testing has been durable steady rate.
And.
We've actually added customers.
Then.
We'll have to see what happens over the summer.
We're seeing both in our local cohorts here on long Island.
And in our much larger cohorts in New York City that the positivity rates are very high.
Moreover, just anecdotally, we're seeing that.
Infection does strike.
It spreads very rapidly throughout the patients family.
And close contacts.
So under those circumstances personally I see.
Higher need for testing, whether or not that demand gets realized is affected by.
The population psyche programs available to fund it.
And a.
Alrighty of other factors so.
We're cautious and we're preparing for every eventuality.
Got it thank you for taking the question.
Okay. Thank you.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press Star then one.
Our next question comes from the line of John <unk>.
With Ken Taylor. Please go ahead.
Yes, Jim quick question for you you've talked a lot on the call and in our press release about the tagged cotton demand increasing coming from the act that starts on June 21.
How quickly.
Do you think.
You'll see your demand scale on a meaningful basis day PJM.
Well I can tell you that our activity mix has already been impacted very significantly the interest level from the brands who are preparing for the implementation of this act is very very strong.
All of the logistics chains.
From the spinners the weavers.
Finished fabric folks are all going to be impacted.
Personally as I said, it's something of a perfect storm, we'll have to wait and see we already have some indications that it will lead to an increase in our tagging business.
Okay. Thank you.
Okay. Thank you Chuck.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Dr. James Hayward for any closing remarks.
Okay. Thank you.
I hope, we've given our listeners compelling reasons to be excited about applied DNA is near term and long term future.
We look forward to keeping you updated on the progress over the coming summer months and we're grateful that you joined us today.
Operator back to you.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may disconnect your lines.
Okay.
Yes.
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Yes.
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