Q3 2023 Co-Diagnostics Inc Earnings Call

Hello, and welcome to the code diagnostics third quarter 'twenty 'twenty earnings Conference call.

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And I'll, let just like how much over Andrew about set of Investor Relations. Please go ahead Sir.

Thank you good afternoon, everyone. Thank you for participating in today's conference call on the line today from co diagnostics, we have Dwight Egan, Chief Executive Officer, and Brian Brown, Chief Financial Officer earlier today Co diagnostics released financial results for the quarter ended September 32023.

The press release is available on the company's website.

We will begin the call with management's prepared remarks, and then open up the call to analyst Q&A before we begin we would like to inform the listeners that certain statements made by co diagnostics. During this call may constitute forward looking statements.

Any statement about company expectations beliefs plans objectives assumptions of future events or performance are forward looking statements. For example statements concerning 2023 financial and operational guidance the development regulatory clearance commercialization and features of new products plans and objectives of management and market trends are all forward.

Looking statements.

This includes statements concerning the companys forward, a forthcoming Kodiak PCR testing platform, which requires regulatory approval for diagnostic use is subject to U S. F. D. A N local regulatory marketing authorization status and is currently not for sale. The company believes these statements are based on reasonable assumptions. However, these statements are not guarantees of perf.

<unk> and involve known and unknown risks and uncertainties that may cause the actual results to be materially different from any future results expressed or implied by such statements.

Factors, which could cause actual results to differ materially from those in these forward looking statements are detailed in co diagnostics filings with the SEC.

So diagnostics assumes no obligation and expressly disclaims any duty to update any forward looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events.

In addition, the company may discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release out shortly before this call which contains reconciliations of the non-GAAP financial measures presented to the most comparable GAAP results.

This time I would like to turn the call over to co diagnostics, Chief Executive Officer, <unk> wait wait.

Right.

Thank you Andrew Good afternoon, everyone. Thank you all for joining Kodiak is third quarter 2023 earnings call.

They we will provide an update on our third quarter financial performance and discuss recent developments of the company as we have continued to make progress towards our long term goals. These developments have included building out capacity in our new manufacturing facility for the Kodiak PCR platform instruments and test Cups.

Initiating a third party evaluation on our tuberculosis or T. B S. A.

And most importantly, completing the clinical evaluations for our COVID-19 assay on our new platform, which will support an EUA filing before the end of the year.

Notably we were pleased to also recently announced a nearly $9 million grant from the Bill and Melinda Gates Foundation for the tuberculosis assay under development to be run on the Kodiak Pcr platform.

This grant follows three other grants received in July to support our development initiatives. The first of these was a $1.2 million grant from the National Institute of Health right Ex Tech program.

Which is being used to support our upper respiratory multiplex test development.

Second and third grants were awarded by the Bill and Melinda Gates Foundation, and the amounts of 1.33 million and 987000 to support the development of respective test for TB and human papilloma virus or H P V.

Both funding organizations conducted extensive independent diligence prior to the execution of these grants covering our technology research approach scientific team and manufacturing capability.

Ignition from global thought leading organizations highlights the disruptive nature of our technology and the value. We believe our company can provide to our global health care infrastructure.

This last quarter, we also appointed Ivory Chang's, our Chief Regulatory Affairs Officer, Ms. Cheng has years of experience working at global diagnostic companies and we are confident that her expertise in regulatory affairs, including regulatory submissions for point of care and in vitro diagnostic products will be invaluable to <unk>.

<unk> future regulatory submissions.

Amidst the work that we have continued to put into our platform since our last call. We participated in a number of industry and investor conferences sharing code diagnostics vision for increasing accessibility of PCR diagnostics worldwide, our unique value proposition and updates on our new platform.

We also showcased our platform at other Tradeshows and expose where our presence has reinforced the global unmet need for an easy to use accurate and affordable point of care diagnostic platform.

Overall, it has been a busy time at <unk> diagnostics and we anticipate the next several months to be an exciting time for the company as well as.

As we look ahead I'd like to discuss the reasons why we are so excited about the near future co diagnostics is a leading diagnostics company developing high quality real time, PCR solutions across multiple infectious diseases to be delivered at home and at point of care settings, We have designed and developed the plot.

<unk> technology, including a simple easy to use real time PCR instrument that uses a disposable test Cup and delivers PCR results to a user's mobile device and approximately 30 minutes.

The assays are tests that run on our new platform utilize our patented co primary TCR technology developed by <unk> diagnostics, which improves the quality of test results by dramatically, reducing the occurrence of amplification errors known as primary dimers, which can lead to false positive results.

These assays provide reliable PCR diagnostics results, which can drive improve health care outcomes. Additionally, because our platform is real time PCR. It is better suited for multiplexing or testing for multiple disease indications within the same sample and reaction when compared to other <unk>.

Technologies.

When combined our co primaries technology and multiplexing capabilities augment the already disruptive nature of a totally ex Pcr platform.

Diagnostics has taken additional additional steps to evaluate the Kodiak platform through third party studies.

Meyer to initial glad awards from the Bill and Melinda Gates Foundation in July the Apollo project organized by Seattle based path and funded in part by the Gates Foundation performed in analytical and usability study on the Coty X P. C. Our platform data from this study with path demonstrated the perf.

Foreman and ease of use of the COVID-19 test on the new platform.

Which confirmed our belief in the potential effectiveness of the test in both at home and point of care settings. More recently, another third party initiated a study to evaluate the performance and usability of our new tuberculosis test. Both studies had been insightful and have substantiated the quality of our point of care PCR technology.

And we are pleased to have additional evidence from third parties that supports the value and utility of our platform.

With the clinical evaluations for the COVID-19 tests now complete we are currently on schedule to submit our EUA for F. D. A review by the end of this year as previously projected.

In the meantime, clinical evaluations will continue in order to gather requisite data for future five 10-K submission as well we plan to introduce the Kodiak PCR platform. Initially for COVID-19 detection and later for other diseases Covid.

COVID-19 is a prevalent disease and it is believed by experts so that will remain so as it moves toward an endemic stage and we believe we have identified many environments, where our platform represents a compelling solution for ongoing COVID-19 testing.

Research and pre market feedback indicates that high volume point of care settings, like skilled nursing facilities should be diligently testing patients visitors and employees to reduce the spread of respiratory infection justifying the need for reliable point of care of COVID-19 testing solutions overdue.

Time, we expect to also focus on other institutional settings, where some of the most vulnerable patients reside such as assisted living centers. This will be an addition to physicians offices clinics schools and the at home setting.

Ultimately, we believe that our COVID-19 tests will serve as the first in a series of indications that will open the diagnostics market opportunity for other tests on the Kodiak Pcr platform.

Diagnostics has been developing a menu of assays across several indications that we believe will bring significant value to patients and health care providers as.

As we discussed on our last earnings call. We are also developing a multiplex upper respiratory tests with support from the NIH is Red X Tech Grant.

Which will test for flu, a and B COVID-19 in RSV. We believe this test will provide extensive value across many end markets, including those we initially planned to target with our Covid test.

Another important goal for the near future is the development of the HPV test H B V is one of the most common stis in the world and one of the greatest risk factors for cervical cancer, which is the fourth most common cancer in the world more than 85% of the estimated 264000 and cervical cancer deaths.

Each year are in low and middle income countries, all of which the world Health organization or W. H O believes can be dramatically reduced by access to diagnostics vaccinations and cancer screenings.

We believe that point of care testing for H B V could be a significant value to the HPV and STI testing markets and look forward to providing you with further updates on the roll co diagnostics could play in these efforts.

One of the most important initiatives for the company at this stage is the TB test for our new PCR platform, we believe that a significant opportunity exists for code diagnostics within the global TV market, given the speed and quality of our platform as well as our co primary technology.

A lack of accessibility to TV testing is a global problem and we believe the Kodiak PCR platform will play a key role in the solution.

This belief has been reinforced by the nearly $9 million of additional grant funding recently awarded to us by the Bill and Melinda Gates Foundation.

This grant will be applied towards regulatory and clinical validation activities for our test increasing manufacturing capacity and additional platform software development, we anticipate beginning clinical evaluations for the TB test sometime within the first half of 'twenty 'twenty four.

The commercialization strategy for the TV test includes plans to accelerate development, while also increasing our manufacturing capacity, both domestically and in India through our joint venture Coursera.

We are confident that coursera has the capacity to effectively manufacture and support the commercialization of our TB test.

In addition to providing manufacturing support Coursera will distribute the Coty X P C. Our point of care platform throughout India or.

T V. Currently takes the lives of two people every three minutes and which prime Minister Modi is committed towards committed to eradicating.

We expect the demand for our platform in India will be robust and we plan to utilize our most recent grant to offset additional costs since.

Since 2019, Coursera has received approval from the Indian C. D. S. Yellow for 14 in vitro diagnostic tests that utilize our co primary technology, which gives us additional confidence in our regulatory and commercialization approach in that country.

In response to broader international efforts to eradicate T V. An important element of our TV strategy includes receiving a recommendation from the World Health organization.

A W. H O recommendation as a requirement for sales in many regions across the world, including countries in Africa, which bear disproportionately high TB burden and where are we anticipate introducing the platform with our TB test we plan to initially pursue a regulatory pathway for this test to the Australian regulatory authority.

The T G E.

I'll be followed by a submission to the C. D S T O in India.

As authorizations from both the T. G. A N C. D. S. C. O are recognized by the W. H O when it makes recommendations for diagnostics.

We will look forward to providing further updates as we continue to make progress on these fronts.

While we plan to initially target point of care settings with the tests that are under development. We believe that our platform also has the potential to serve as the cornerstone of a local regional or national health care monitoring infrastructure.

One of the most exciting features of the Kodiak TCR platform will be direct real time, HIPAA compliant integration into the EMR, creating additional use cases for our platform, including outbreak monitoring in the wake of the Covid pandemic disease monitoring has become a focal point for government health officials around the <unk>.

World.

Officials are actively looking at solutions to ensure epidemiological data can be collected and sorted efficiently to identify and monitor disease clusters and outbreaks ultimately in part due to cloud based analytics. The device is expected to include the capability to automatically report D identified test results whether from <unk>.

Just a living facility physician's office or the home directly to regional public health officials or.

Over the past few months, we have also had initial conversations with government entities in the United States about how this technology could be used to help slow or even prevent large outbreaks of infectious disease in the United States and abroad.

We are particularly encouraged by the pandemic and all hazards preparedness and response act or <unk> and <unk>.

Which the federal government is contemplating a significant.

Out of initiatives in the context of outbreak and monitoring capabilities.

The proposed act further supports the use and need for real time, PCR testing and a device with technology that can support outbreak and disease monitoring.

Over time, we believe the new platform's ability to support these initiatives will become another competitive differentiator for our end users.

To close we remain confident that the quality ease of use affordability and quick turnaround time of our platform will deliver an impact to patients and communities around the world we.

We are excited about the future of co diagnostics and the value that our disruptive technology can provide to a global health care infrastructure.

In the near term, we look forward to the potential FDA authorization for our COVID-19 tests on the Kodiak Pcr platform.

Our company is well funded with $63 4 million in cash and equivalents on the balance sheet Grant support from notable international leaders and health care and with more funding potentially available via additional grants, we look forward to providing future updates on our development regulatory and commercial progress in the coming quarters.

With that I will turn the call over to Brian to discuss our third quarter financials in greater detail Brian.

Thanks, Blake and.

And thanks to everyone who joined today's call.

For the third quarter of 2023 total revenue decreased to $2 $5 million as compared to $5 $1 million in the prior year same period.

Grant revenue for Q3, 2023 was $2 $3 million recognized from a portion of our grants announced earlier in the quarter.

Product revenue was 0.2 million, which declined year over year due to the impact of decreased global demand for COVID-19 testing.

Gross profit for the quarter decreased to $2 $2 million compared to $4 $3 million in the prior year comparable period.

The reported gross profit percentage in the third quarter of 2023 increased to 89, 6% compared to 84, 9% in Q3 of 2022 due to a mix shift and type of revenue reported.

Total operating expenses for the three months ended September 32023 were $11 $1 million compared to $10 $9 million in the third quarter of fiscal 2022.

In the third quarter, we continued to increase our investments in research and development to further support the development regulatory and commercialization processes for our forthcoming codecs Pcr platform.

Research and development expenses in the third quarter were $5 $8 million compared to $5.0 million in the comparable prior year period.

This increase primarily reflects continued investment in our Kodiak PCR platform as well as other company initiatives.

With clinical evaluations for our COVID-19 tests completed and ongoing development of the previously discussed menu of tests, we continue to invest additional resources to bring our revolutionary diagnostic testing platform to market.

For the third quarter of 2023 income before taxes decreased to a loss of $8 $1 million as compared to a loss of $3 $5 million reported in the prior year same period.

We experienced an income tax benefit for the third quarter of $2 $1 million Rep.

Representing an effective tax rate of 26, 1%.

We have previously discussed that our effective tax rate will differ from the U S federal statutory rate of 21.0%.

Due to state taxes permanent items and discrete items.

Net loss for the third quarter of 2023 was $6.0 million or a loss of <unk> 20 per fully diluted share compared to a net loss of $1 4 million or four cents per fully diluted share in the prior year same period.

Adjusted EBITDA for the third quarter of 2023 was a loss of $6 $5 million compared to an adjusted EBITDA loss of $4 $1 million in the prior year period.

We continue to be deliberate interactions as we manage the health and flexibility of our balance sheet to ensure positioning for long term growth.

We ended the quarter at $63 $4 million in cash cash equivalents in marketable securities.

As Dwight mentioned earlier, we were selected to receive another grant from the Bill and Melinda Gates Foundation.

Funds from this grant are not reflected in the ending balance of cash cash equivalents and marketable securities at September 30 of 2023.

Thus far during Q4, we have received $3 $5 million under this new grant revenue.

Revenue recognition for the cash received is currently being evaluated based on the terms of the grant agreement and current accounting standards.

Additionally, in the quarter, we repurchased approximately 150000 shares of common stock at an average price of $1 12 per share through our $30 million share repurchase program.

As of September 32023, we have just under $15 million remaining within our share repurchase program and plan to strategically repurchase shares as we see opportunities.

We are committed to maintaining a strong cash position through diligent expense management to ensure code diagnostics is well capitalized to execute our long term growth initiatives.

As we approach commercialization, we will remain conservative when evaluating future opportunities.

As we discussed on our second quarter earnings call. We believe our success should be measured in terms of progress made toward our development and our operational goals.

As such we will not be providing financial guidance at this time.

In summary, co diagnostics is well capitalized and disciplined in its capital allocation strategy. While also receiving support from World class organizations, who are aligned with our long term strategy.

We are closer to a commercial launch for our Kodiak Pcr platform.

And continue to make progress towards our development goals.

Look forward to updating you further on our next earnings call.

With that I will now turn the presentation back over to Dwight.

Thank you Brian.

Before opening for Q&A I want to take a moment to extend our thanks to all of our shareholders as well as the whole kodak's family of employees distributors and consultants.

We look forward to talking with you again after the next quarter, we will now take calls from our analysts operator.

Yes. Thank you at this time, we will begin the question and answer session.

Ask a question you May press Star then one on your Touchtone phone.

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At this time, we will pause momentarily to assemble our roster.

And once more pressing star then one will allow you to ask a question and we do have a question from Jade Montgomery from H C. Wainwright.

Hi, Thank you for the call today.

Uh huh.

Wanting to know how soon could the S T a complaint.

Your E submission once it's submitted.

You have any idea.

Yeah.

Thank you for the question.

The FDA has their own timeline. So we don't really have a estimation of what kind of time, they're going to take to review. The application. All we can tell you is that we believe our application will be there is a very solid application when we make it so we're enthused to be to that milestone but.

As the timetable for the FDA to respond we don't have a way to predict that.

Okay.

And would you be able to provide an estimate of the initial amount at the order size.

<unk> is launched.

Yeah.

That's an interesting question, we don't have any way and we haven't provided any guidance as we said in our script that the theres no guidance that we're providing so we don't have information to provide to the public currently on orders that would be placed we I mean, the product is now in the market. So we can't take orders at this point at this point anyway. So.

Yes.

Alright.

So.

Primary market, then I know you're.

You're looking at more sort of.

Right.

Nursing homes that sort of that sort of market or.

Yes.

The markets.

Give us an opportunity to have significant throughput from each device placed.

Our areas of first concern.

Our marketing plans and that includes.

Things like skilled nursing facilities.

And there are lots of those around the country that it's one of our primary targets. They have a very strong need to continue to test patients and.

And employees for.

Covid and of course, as we increase the menu over time, there a prime market for that as well, but if the point of care, where there is a oh.

The larger opportunity for throughput per device is our initial traction from a marketing standpoint.

Thank you so much for answering my questions I have a great day.

Thank you.

Thank you and this concludes our question and answer session as well as Hal. Thank you. So much for attending today's presentation and you may now disconnect your lines.