Q1 2024 Applied DNA Sciences Inc Earnings Call
Good day and welcome to the applied DNA science. Its just the first quarter of 2024 financial results Conference call.
Operator: Good day, and welcome to the Applied DNA Sciences Fiscal First Quarter 2024 Financial Results Conference. All participants will be in listen-only mode.
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.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Head of Investor Relations. Please do so.
After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded I would now.
I'd like to turn the conference over to Sanjay Hurry head of Investor Relations. Please go ahead.
Thank you Scott good afternoon, everyone and welcome to applied DNA <unk> conference call to discuss our first quarter fiscal 2024 financial results.
Sanjay M. Hurry: Thank you, Scott. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our first quarter fiscal 2024 financial results and access the press release that was issued after the market closed today, as well as a slide presentation accompanying this call in the investor relations section of our corporate website. Speaking on the call today are Dr. James Hayward, our Chairman, President, and CEO, and Beth Jansen, our Chief Financial Officer. Clay Scharrock, our Chief Legal Officer and Head of Business Development, and Judy Murrah, our Chief Operating Officer, will also be available to answer questions during the Q&A portion of the webinar. Before we get started, I would like to take this opportunity to remind you that our remarks today may include forward-looking statements.
The press release that was issued after market close today as well as a slide presentation accompanying this call on the Investor Relations section of our corporate website.
Speaking on the call today are Dr. James Hayward, Chairman, President and CEO, and Beth Jantzen, Chief Financial Officer.
<unk>, our chief legal officer, and head of business development, and Judy Murrah, Our Chief operating officer will also be available to answer questions on the Q&A portion of this fall.
Before we get started I would like to take this opportunity to remind you that our remarks today may include forward looking statements.
Sanjay M. Hurry: I refer you to Slide 2 of the presentation and 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 in any forward-looking statements. 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 or developments. Now, it's my pleasure to introduce our first speaker on today's call, Beth Janssen. Please go ahead.
I refer you to slide two of the presentation and 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 in any forward looking statements.
No obligation to update or revise any forward looking statements or other information provided on this call as a result of new information or future results or developments now it's my pleasure to introduce our first speaker on today's call. James. Please go ahead.
Thank you Sanjay.
Beth Janssen: Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our first quarter fiscal 2024 investor call. I will start this afternoon with an overview of our results for the quarter ended December 31st, 2021. I will then turn the call over to Dr. James Hayward, our President and CEO, who will update you on our ongoing business initiatives. We will then open the line for questions from our analysts and institutional investors. Beginning with our Statement of Operations, Total Revenues for the First Quarter of Fiscal 2024 and did December 31, 2023, were approximately 891,000, or a decline of 4.4 million, compared to 5.3 million for the same period in the prior fiscal year. Approximately 4.2 million of this decrease in total revenue is attributable to lower clinical laboratory service revenue.
Good afternoon, everyone. Thank you for joining us on our first quarter fiscal of 'twenty 'twenty four investor call.
I will start this afternoon with an overview of our results for the quarter ended December 31st 2023.
I will then turn the call over to Dr. James Hayward, our president and CEO.
We will update you on our ongoing business initiatives.
We will then open the line for questions from analysts and institutional investors.
Okay.
Yes.
Beginning with our statement of operations total revenues for the first quarter of fiscal 2024.
And at December 31st 2023.
Were approximately 891000.
Or a decline of 4.4 million.
Compared to $5 3 million for the same period in the prior fiscal year.
Approximately $4 2 million of this decrease.
In total revenue is attributable to lower clinical laboratory service revenues.
Beth Janssen: This revenue line item reflects an ongoing and unfavorable year-over-year comparison in our COVID-19 testing, as the prior year period included testing revenues under our contract with CUNY, that expired in June of 2020. Additionally, approximately $210,000 of the decrease in total revenue was attributable to lower product revenue, and specifically lower cotton DNA tagging revenue, within our DNA Tagging and Security Products and Services segment. Service revenues increased approximately 15,000 year-over-year and approximately 78,000 sequentially, driven primarily by demand for isotopic testing within our DNA tagging and security products and services segment. Gross profit was $231,000, or 26%, compared to 2.4 million, or 45%, in the prior fiscal year period.
This revenue line item reflects an ongoing and unfavorable year over year comparison in our COVID-19 testing.
The prior year period included testing revenues under our contract with CUNY that expired in June of 'twenty to 'twenty three.
Okay.
Approximately 210000 of the decrease in total revenue.
The charitable to lower product revenues and.
Specifically lower cotton DNA tagging revenue within our DNA tagging and security products and services segment.
Yeah.
Service revenues increased approximately 15000 year over year and approximately 78000 sequentially.
That were driven primarily by demand for ISO topic testing, but then our DNA tagging and security products and services segment.
Gross profit was 231000 or 26%.
Compared to 2.4 million or 45% in the prior fiscal year period.
The decline in gross margin was primarily due to a higher percentage of COVID-19 testing service revenue.
Beth Janssen: The decline in gross margin was primarily due to a higher percentage of COVID-19 testing service revenue, and the three months ended December 31st, 22, generated a higher gross profit compared to the three months ended December 31st, 2023. Thank you. To a lesser extent, the decline in gross profit percentage was due to lower product revenues during the three-month period ending.
In the three months ended December 31 22.
Generated a higher gross profit compared to the three months ended December 31st 2023.
Yeah.
To a lesser extent the decline in gross profit percentage was due to lower product revenues.
During the three months period ending.
December 31 23.
Beth Janssen: December 31, 2023, as compared to the same period in the prior fiscal year. The lower volume of product revenues in the current period was not able to fully absorb the fixed costs that are included in the cost of product revenues. Total operating expenses increased by $424,000, to $4 million, compared to 3.6 million in the prior fiscal year period. This increase in total operating expenses reflects higher SG&A costs as the prior three-month period had a credit in bad debt expense of approximately $290,000 from a customer balance that was written off and was subsequently collected during the three-month period ended December 31st, 2021. The remainder of the increase is related to an increase in stock-based compensation expense of $247,000 that relates to the timing of the annual non-employee board of director grant that vests one year from the date of grant. The increases were offset by a decrease in payroll of approximately $107,000. Operating loss for the first quarter was $3.8 million, compared to 1.2 million in the prior fiscal period.
Paired to the same period in the prior fiscal year.
The lower volume of product revenues in the current period was not able to fully absorb the fixed costs that are included in cost of product revenues.
Total operating expenses increased by 424000.
Two 4 million compared to $3 6 million in the prior fiscal year period.
This increase in total operating expenses reflect higher SG&A costs as the prior three month period.
Had the credit in bad debt expense of approximately 290000.
From a customer balance that was written off and was subsequently collected during the three month period ended December 30 for 2022.
Yes.
The remainder of the increase is related to an increase in stock based compensation expense of 247000.
That relates to the timing of the annual non employee board of director Grant that that's one year from the date of grant.
These increases.
Were offset by a decrease in payroll up approximately 107000.
Operating loss for the first quarter was $3 8 million compared to $1 2 million in the prior fiscal period.
Turning to slide five excluding noncash expenses.
Adjusted EBITDA deteriorated by $2 1 million to.
To a negative $3 2 million.
Beth Janssen: Turning to slide 5, excluding non-cash expenses, adjusted EBITDA deteriorated by 2.1 million to a negative 3.2 million, compared to a negative 1.1 million in the prior fiscal year period. Now turning to our balance sheet on slide 6, accounts receivable stood at $451,000 at December 31.
Compared to a negative $1 1 million in the prior fiscal year period.
Now turning to our balance sheet on slide six.
Accounts receivable stood at 451000 at December 31st.
With payment terms, ranging from 30 to 60 days.
On cash and cash equivalents totaled $3 4 million on December 31st.
Compared to $7 2 million on September 30th 2023.
Fiscal year to date, our average monthly cash burn was 1.3 million compared to 780000 in the prior fiscal year.
Beth Janssen: Payment terms ranging from 30 to 60 days, on cash and cash equivalents totaled $3.4 million on December 31st, compared to $7.2 million on September 30th. Fiscal year to date, our average monthly cash burn was $1.3 million, compared to $780,000 in the prior fiscal year. Staying with the balance sheet a moment longer, we close on a registered direct public offering on February 2, 2024, for gross proceeds of approximately $3.4 million. Full details of the offering are provided in the Subsequent Events section of our Form 10-Q file. We issued approximately 3.2 million shares and pre-funded warrants to purchase up to 2.4 million shares of common stock, and in a concurrent private placement, unregistered common warrants to purchase up to 11.3 million shares of common stock were issued with an exercise price of $0.609 per warrant share. These common warrants are subject to shareholder approval at a stockholder meeting that must be held by April 15th of this year, in accordance with the terms of the private police.
Okay.
Staying with the balance sheet a moment longer.
We closed on a registered direct public offering on February 2nd 2024.
For gross proceeds of approximately $3 4 million.
Full details of the offering are provided in the subsequent events section of our Form 10-Q filing.
We issued approximately three 2 million shares and pre funded warrants to purchase up to $2 4 million shares of common stock.
In a concurrent private placement unregistered common warrants to purchase up to 11.3 million shares of common stock.
Were issued with an exercise price of 0.609 per why aren't sure.
These common noir are subject to shareholder approval at a stockholder meeting that must be held by April 15th of this year.
In accordance with the terms of the private placement.
Subject to approval by stockholders at our stockholder meeting.
The exercise price of these wars could result in additional gross proceeds of $6 9 million to the company.
Yeah.
We also agreed to reduce the exercised price of war previously issued to the purchasers.
With exercise prices ranging from $1 29 to $4 per watt.
2.609 per watt.
We also agreed to extend the expiration date of these warrants to August 2028 days.
These weren't reductions are also subject to stockholder approval.
Beth Janssen: Subject to approval by stockholders at a stockholder meeting, the exercise price of these warrants could result in additional growth proceeds of $6.9 million to the company. We also agreed to reduce the exercise price of warrants previously issued to the purchasers, with exercise prices ranging from $1.29 to $4.00 per warrant.
Subject to approval the exercise of the warrants issued discussed above as well as the now reduced warrants.
Could result in total gross proceeds of up to $8 6 million to the company.
Turning to our at the market facility.
The ATM was terminated in accordance with the terms of and to facilitate the registered direct offering.
Inclusive of the proceeds from the registered direct.
Cash and cash equivalents was approximately $5 1 million on February 2nd.
Before turning the call over to Jim the commercialization of our linear I V T and linear DNA platforms remains our primary objective.
Beth Janssen: 2.609 per wire transfer. We also agreed to extend the expiration date of these warrants to August 2028. These warrant reductions are also subject to stockholder approval. Subject to approval, the exercise of the warrants issued as discussed above, as well as the now-reduced warrants, could result in total gross proceeds of up to $8.6 million to the company. Turning to our at-the-market facility, the ATM was terminated in accordance with the terms of and to facilitate this registered direct offering. Inclusive of the proceeds from the registered direct, cash, and cash equivalents were approximately $5.1 million on February 2nd.
To that end, we are committed to capital allocation that support our biotherapeutic goes well identifying an undertaking operation operating efficiencies throughout the company.
She'll steps are being taken to manage a leaner organization aligned behind our highest ROI opportunities.
This concludes my prepared remarks, thank you for joining us today I will now I'll turn the call over to Jim for his comments.
Well. Thank you Beth good afternoon, everyone. Thank you for joining us on today's call.
Yeah.
It was an important quarter for our bio therapeutic goals.
Afternoon, My remarks will update you on the progress we've made during the quarter to advance the commercialization of our linear <unk> T platform.
And establish a GMP capacity to manufacture critical starting materials for clinical grade Messenger RNA therapeutics.
Beth Janssen: Before turning the call over to Jim, the commercialization of our Linea IVT and Linea DNA platforms remains our primary objective. To that end, we are committed to capital allocations that support our biotherapeutic goals while identifying and undertaking operating efficiencies throughout the company. Initial steps are being taken to manage a leaner organization, a line behind our highest ROI opportunities. 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. Good afternoon, everyone.
So just to set the ground rules I E T stands for in vitro transcription.
In vitro means that it has performed outside of the body and transcription as a process by which the sequence in template DNA.
Such as our linear DNA templates is turned into the sequence of messenger RNA.
RNA polymerase.
Our linear I E. T platform is comprised of both our linear DNA I'd be T templates, and our proprietary RNA polymerase.
Dr. James Hayward: Thank you for joining us on today's call. It was an important quarter for our biotherapeutic goal. This afternoon, my remarks will update you on the progress we've made during the quarter to advance the commercialization of our Linea IVT platform and establish a GMP capacity to manufacture critical starting materials for clinical-grade messenger RNA therapeutics. Now, just to set the ground rules, IVT stands for in vitro transcription. In vitro means that it is performed outside of the body, and transcription is the process by which the sequence in template DNA, such as our linear DNA templates, is turned into the sequence of messenger RNA via RNA polymerase.
Ready for use in in vitro transcription of an M. R N a drug.
I will also share some representative customer profiles and their intended use cases for our linear DNA and linearity D T platforms.
These customers and their future needs for mrna starting materials form the basis for applied DNA is strategic growth.
We are not yet at a point, where we can divulge their names. However, yeah applications being contemplated underscore the potential long term need for linear I V T.
Establishing a first phase GMP capacity to deliver messenger RNA critical starting materials under applicable G N P and large scale.
Dr. James Hayward: Our Linea IVT platform is comprised of both our Linea DNA IVT templates and our proprietary RNA polymerase, ready for use in in vitro transcription of an mRNA drug. I will also share some representative customer profiles and their intended use cases for our LinearDNA and LinearIVT platforms. These customers and their future needs for mRNA starting materials form the basis for Applied DNA Strategic Growth. However, we are not yet at a point where we can divulge their names.
Is crucial to our ability.
To mature our current research and development scale customers into long term supply agreements for linear I E T.
And as you can see in this slide in fiscal 'twenty, 'twenty, three which was year one of our linearity B T commercialization plan, we firstly.
Launched lineage M E T as a platform for the manufacturer of them are on the right.
Secondly, we have expanded our presence across the global marketplace and thirdly, we grew a robust sales pipeline of more key customers and initiated proof of concept studies.
Dr. James Hayward: However, the applications being contemplated underscore the potential and long-term need for Linear IVT. Establishing a first-phase GMP capacity to deliver messenger RNA critical starting materials under applicable GMP and at large scale is crucial to our ability to mature our current research and development scale customers into long-term supply agreements for linear IVT. And as you can see in this slide, in fiscal 2023, which was year one of our Linear IVT commercialization plan, we firstly launched Linear IVT as a platform for the manufacture of mRNA, and secondly, we expanded our presence across the global marketplace.
These efforts were supported by the establishment of the G. M. P roadmap to transition on manufacturing capacity from research use only milligrams scale DNA template orders to multi ground.
<unk> G M T orders capable of supporting our customers early stage toxicology pharmacokinetics and clinical trials.
And year to our current fiscal year, we are focused on migrating our customers to scale up agreements for lineal that'd be T templates.
Dr. James Hayward: And thirdly, we grew a robust sales pipeline of marquee customers and initiated proof-of-concept studies. These efforts were supported by the establishment of the GMP Roadmap to transition our manufacturing capacity from research-use-only, milligram-scale DNA template orders to multigram-scale GMP orders capable of supporting our customers' early stage toxicology, pharmacokinetics, and clinical trials. In year two, our current fiscal year, we are focused on migrating our customers to scale up agreements for linear IVT templates, coupled with our linear RNA polymerase, manufactured under applicable GMPs to support their clinical RNA object, with approximately 425 messenger RNA therapies currently in development. And judging from our slate of meetings at the J.P. Morgan Health Care Conference last month, it is evident that the biotherapeutics industry is beginning a surge Consequently, after the first quarter's end, we closed on the equity offering that will fund us through implementing our initial GMP footprint.
Coupled with our linear RNA polymerase.
Manufactured under applicable G M p's to support their clinical our M&A objectives.
With approximately 425 messenger RNA therapies currently in development.
And judging from our slate of meetings at the JP Morgan Healthcare conference last month.
It is evident that the bio therapeutics industry is beginning a surge in mrna demand.
Consequently, after the first quarter's end, we closed on the equity offering that will fund us through implementing our initials GNP footprint.
As indicated on this slide we reiterate the timing of this facility to come online. It is during the first half of calendar 'twenty 'twenty four.
Now establishing a G M P footprint takes a phased approach.
To simultaneously support existing and new customers through their clinical trial process.
Our unique business model.
And which I remind you linear RV T is comprised of linear I V T template paired with.
Our high value RNA polymerase.
Allows us to drive substantial revenue from a very small space.
Dr. James Hayward: As indicated on the slide, we reiterate the timing of this facility to come online is during the first half of calendar 2024. Now establishing a GMP footprint takes a phased approach to simultaneously support existing and new customers through their clinical trial process, our unique business model. In which I remind you, Linear IVT is comprised of a Linear IVT template paired with a high-value RNA polymerase allows us to drive substantial revenue from a very small space. We project that this first phase capacity will enable an annual revenue capacity of up to $15 million from a footprint of less than 1,000 square feet. Incremental Capacity will be straightforward to ask. However, it is important to note that this annual figure does not serve as financial guidance.
We project that this first phase capacity.
We will enable on annual revenue capacity of up to $15 million from a footprint of less than 1000 square feet.
Incremental capacity.
We will be straightforward to.
It is important to note that this annual figure does not serve those financial guidance. Instead. This figure is informed by internal modeling utilizing current pricing projections and industry figures and based on the combined sales of linear D.
N a R E T templates linear RNA polymerase and a royalty for a technology license.
With 67% of that mrna a development pipeline in pre clinical development.
Dr. James Hayward: Instead, this figure is informed by internal modeling utilizing current pricing projections and industry figures and based on the combined sales of linear DNA IVT templates, linear RNA polymerase, and a royalty for a technology license, with 67% of that mRNA development pipeline in preclinical development. The industry is quickly progressing to clinical and eventually commercial stages. In year three, or 2025, we believe that the economics of our unique business model will be fully realized as we initiate large-scale GMP supply to customers as they advance in the clinic and prepare for commercial launch. Now turning to our customers. Our sales pipeline is populated both by cutting-edge biotech companies who manufacture their own products and by CDMOs, which are contract development and manufacturing organizations that operate as suppliers to biotech and pharma companies. Each of these segments represents an outcome that could materially and positively alter applied DNA's biotherapeutic profile once successfully engaged.
The industry is quickly progressing to clinical and eventually commercial stages.
In year, three or 2022 five we believe that the economics of our unique business model will be fully realized as we initiate large scale GMP supply to customers as they advance in the clinic and prepare.
Or for commercial launch.
Now turning to our customers.
Our sales pipeline is populated both by cutting edge biotech company.
Companies.
Who manufacture their own products.
And by C. D M O's, which our contract development and manufacturing organizations that are operating are suppliers to biotech and pharma companies.
Each of these segments represents an outcome that could materially and positively alter.
Applied DNA is bio therapeutic profile.
<unk> successfully engaged.
Dr. James Hayward: On this slide, you will find a select sampling of customers and applications relevant to Linea IVT that span mRNA vaccines against common respiratory illnesses to Autoimmune and Oncology Therapy. From the application column, it should be clear that we are being evaluated for our ability to deliver on broadly relevant clinical indications. With our GMP capacity about to come online, much of our sales and business development efforts have been focused on converting interest in linear DNA as the IVT template material into evaluations of our Linear IVT platform with the ultimate goal of securing long-term supply agreements. Momentum in our sales pipeline has continued to build, and our conversion efforts are paying off.
On this slide you will find us select sampling of customers and applications relevant to linear I E T.
That span mrna vaccines against common respiratory illness.
Two autoimmune and oncology therapies.
From the application calm it should be clear that we are being evaluated for our ability to deliver on broadly relevant clinical indications.
With our GMP capacity about to come online much of our sales and business development efforts have been focused on converting interest in linear DNA as the I V E template material.
Into evaluations of our linear I V T platform with the ultimate goal of <unk>.
Securing long term supply agreements.
Yeah.
Momentum in our sales pipeline has continued to build and our conversion efforts are paying off.
We completed multiple successful evaluations by customers for our linear DNA and linear that'd be T platforms during the quarter.
Dr. James Hayward: We completed multiple successful evaluations by customers for our linear DNA and linear IVT platforms during the quarter. The pace of linear DNA customers initiating evaluations of linear IVT has quickened, and the size of the potential opportunities is increasing. We are already in several Linear IVT platform evaluation cycles, a notable milestone given our acquisition of linear RNA polymerase was only six months ago. Particularly noteworthy, we recently completed an evaluation with a clinical stage mRNA customer in which our IVT templates met or exceeded all customer quality metrics and with a manufacturing speed that exceeded all other IVT template suppliers that the customer had evaluated. Based on this successful evaluation, we are now being asked to provide quotes for scale-up materials under GMP.
The pace of linear DNA customers initiating evaluations of linear I V T has quickened.
And the size of the potential opportunities is increasing.
We are already in several lineal that'd be T platform evaluation cycles.
Notable milestone.
Given our acquisition of linear RNA polymerase was only six months ago.
Particularly noteworthy.
We recently completed and a valuation with the clinical stage mrna customer in which our IV <unk> templates met or exceeded all customer quality metrics and with the manufacturing speed.
That exceeded all other IV T template suppliers that the customer had evaluated.
Based on the successful evaluation, we are now being asked to provide quotes for a scandal materials under GMP.
In addition, we are starting to see the seeds of our business development efforts with respect.
Dr. James Hayward: In addition, we are starting to see the seeds of our business development efforts with respect to large CDMOs begin to bear fruit with recent interest from several U.S.-based mRNA CDMOs. Now CDMOs have substantial underutilized manufacturing capacity available after the decrease in demand for COVID-19 vaccines. We believe that Linear IVT provides these CDMOs with significant differentiators in the marketplace at a time when the mRNA modality is gaining preclinical momentum. We are in real-time discussions with CDMOs actively seeking a differentiated workflow to bring new mRNA customers into their underutilized manufacturing capacity. CDMOs are showing particular interest in self-amplifying mRNA during the first quarter.
Of large C. D M o's begin to bear fruit with recent interest from several U S based mrna C. D M O's.
No C D M o's have substantial underutilized manufacturing capacity available after the decrease in demand for COVID-19 vaccines.
We believe the linear I V. T provides the C D and those with significant differentiators in the marketplace at a time when the mrna modelo to use gaining preclinical and momentum.
We are in real time discussions with C. D. M. O is actively seeking a differentiated workflow to bring new mrna customers into their underutilized manufacturing capacity.
C D M OS showing particular interest in self amplifying mrna.
During the first quarter.
Dr. James Hayward: We shipped our first self-amplifying mRNA IVT template to a preclinical therapeutic manufacturer, thereby demonstrating the linear DNA platform's ability to enzymatically produce the challenging and large DNA sequences needed to manufacture self-amplifying mRNA at scale. We believe this puts us at the forefront of template manufacturing for this promising and growing messenger RNA modality. We have validated Linear IVT for the small-scale manufacture of mRNA-critical starting material.
We shipped our first self amplifying mrna I E T template to a preclinical therapeutic manufacturer.
Thereby demonstrating that the linear DNA is platform's ability to enzymatically produce the challenging and large DNA sequences needed to manufacture self amplifying mrna at scale.
We believe this puts us at the forefront of template manufacturing for this promising and growing messenger RNA modality that is self amplifying RNA.
We have validated linear I E T for the small scale manufacturer of mrna critical starting materials.
Dr. James Hayward: To support customers' much larger commercial aspirations with linear IVT, we need to substantiate linear IVT's performance at scale within a commercial manufacturing setting. In partnering with the CDMO Kudo Bile, which was announced this quarter, we have entered the arena of commercial-scale manufacturing. Our first CDMO partner, Kudo, will help validate the commercial scale-up of the Linear IVT platform. In KudoBio's workflow, our Linear IVT platform would serve as the front end of an integrated GMP mRNA drug product manufacturing workflow. We believe that KUDO's integration of our Linear IVT platform to simplify mRNA production and to drive double-stranded RNA mitigation gives them a substantial leg up over other CDMOs.
To support customers much larger commercial aspirations with linear I V. Two we need to substantiate linear that'd be to use performance at scale within our commercial manufacturing setting.
In partnering with the C. D M O Kudo bio which was announced this quarter.
We have entered the arena commercial scale manufacturing.
Our first C D M O partner Kudo.
We'll help validate the commercial scale up of the linear on V T plus one.
In kudu bio's workflow.
Our linear I E T platform would serve as the front end of an integrated GMP mrna drug product manufacturing workflow.
We believe that kudos integration of our linear that'd be T platform to simplify them on a production and to drive double stranded RNA mitigation.
Gives them a substantial leg up over other C D M a hose.
Now during the quarter. We also entered into a scale up manufacturing agreement with an enzyme manufacturer for linear RNA polymerase enzyme to scale its production for commercial scale use.
Dr. James Hayward: During the quarter, we also entered into a scale-up manufacturing agreement with an enzyme manufacturer for our linear RNA polymerase enzyme to scale its production for commercial scale use. This is part of our efforts to increase efficiencies and reduce Linear IVT's cost of goods sold, as we move to deploy our improved workflow into cGMP.
This is part of our efforts to increase efficiencies and reduce linea <unk> Ts cost to goods sold.
As we moved to deploy our improved workflow into C. G M P.
Dr. James Hayward: In brief, we believe this project, once completed, will ensure we can manufacture our linear RNA polymerase at scale and a reduced cost of goods to enable profitable growth of Linear IVT, and we expect to announce this agreement in a press release soon. This quarter also saw us generate new compelling data that further substantiate the capacity of our linear IVT platform to create equal or greater RNA yield with mitigated double-stranded RNA contamination at levels that are 10 to 50 times lower than those found using conventional mRNA production technologies. Now, this is a very strong selling point to mRNA therapy developers and CDMOs today that are seeking ways to mitigate double-stranded RNA without sacrificing their mRNA production use. We see our ability to drastically mitigate double-stranded RNA, which enables the IVT platform to produce better RNA faster, as a key differentiator against our competitors. In a further application of linear DNA, our partnership with the Institute of Hematology and Blood Transfusion in Prague on their CD123 CAR therapy has moved past the experimental stage.
Capacity.
In brief we believe this project once completed.
We will ensure we can manufacture our linear RNA polymerase at a scale and a reduced cost of goods.
To enable profitable growth linear at D T.
And we expect to announce this agreement in a press release soon.
This quarter also saw us generate new compelling data.
But further substantiate the capacity of our linear I V T platform to create equal or greater RNA yields with mitigated double stranded RNA contamination at levels that are 10 to 50 times lower than those found using conventional.
A lot more on a production technologies Oh. This is a very strong selling point to mrna therapy developers and.
And C. D M. <unk> today that are seeking ways to mitigate double stranded RNA without sacrificing their mrna production yields.
We see our ability to drastically mitigate double stranded RNA.
Which enables the IBD platform to produce better RNA faster as a key differ differentiator against our competitors.
And a further application of linear DNA, our partnership with the Institute of Hematology and blood transfusion in Prague.
On their C. D 123 car therapy as move past the experimental stage.
Dr. James Hayward: Pending the finalization of a supply agreement with us, we expect the Institute of Hematology and Blood Transfusion in Prague will receive EU regulatory approval to proceed with a Phase 1 CD123 clinical trial to dose 10 compassionate use patients with their CAR-T therapy. The phase 1 trial is expected to begin before the end of this calendar year. This is a significant milestone for linear DNA and its application to the rapid and efficient manufacture of CAR T-cells without the need for complicated virus production or plasmid DNA.
Pending the Finalization of the supply agreement with US we expect the institute of Hematology and blood transfusion in Brugge will receive EU regulatory approval to proceed with the phase one.
C D 123 clinical trial to dose 10, compassionate use patients with their car T therapy.
The phase one trial is expected to begin before the end of this calendar year.
No. This is a significant milestone for linear DNA and its application to the rapid and efficient manufacturer of car T cells.
Without the need for complicated virus production.
Or plasmid DNA.
We congratulate the institute and look forward to the results with great anticipation.
Dr. James Hayward: We congratulate the Institute and look forward to the results with great anticipation. Now, before I open our call to questions, I want to impress on our investors that we have made substantial headway in bringing a more rapid, cost-efficient, and qualitative process to creating DNA at a scale for commercial availability. We feel that the imminent establishment of our GMP footprint keeps us firmly on a growth company trajectory with positive ramifications for long-term shareholder value. Now, this concludes my prepared remarks.
Now before I open our call to questions I want to impress on all of our investors that we have made substantial headway in bringing a more rapid cost efficient.
And the qualitative process to creating DNA.
On a scale for commercial availability.
We feel that the imminent establishment of our GMP footprint.
Keep us firmly on a growth company trajectory with positive ramifications for long term shareholder value.
Now this concludes my prepared remarks, operator, please open the call to questions.
Operator: Operator, please open the call to questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key.
Okay.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys withdraw.
Jason Wesly McCarthy: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our rock. And our first question today comes from Jason McCarthy with Maxim Group. Please go ahead. Hi, Jim.
Withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And our first question today comes from Jason Mccarthy with Maxim Group. Please go ahead.
Hi, James Thanks for taking the questions first just on your on your last point there from the Prague Hematology Institute doing the C. D 123.
Dr. James Hayward: Thanks for taking the questions. First, just on your last point there, from the Prague Hematology Institute doing the CD123. Howard, can you talk a little bit more about what they're targeting or maybe even some of their preclinical work that they have done, and since they are expecting to move from preclinical to clinical, at least in the EU, is that going to require GMP-grade materials from? Applied, great question, Jason. Well, first of all, I have to tell you these folks are great scientists and a delight to work with. Having done my Ph.
All work can you talk a little bit more about.
What they're targeting or maybe even some are there.
Preclinical work that they had done it since they are theyre expecting to move.
From preclinical to clinical.
The E U.
Is that going to require a GMP grade.
Materials from.
Applied.
Great question, Jason first of all I have to tell you. These folks are great scientist.
Deloitte to work with.
Having done my ph D in hematology.
Dr. James Hayward: D. in hematology, I can appreciate the quality of their work. So they have an entire CAR T program laid out, and they find value in our approach to the karate. The European authorities have indicated that they will approve and up-label our research use DNA Construct to CGMP at their facility. And so after an inspection here and... some additional correspondence with the EMA, we expect that to happen forthwith. Their animal study results were superb.
No.
Sure the quality of their work.
So they haven't and tie her car T program laid out.
And are they.
Three.
Find value in our approach to the.
So car T.
The European authorities of indicated Oh, they will approve.
And up labeling or research use.
Oh.
DNA construct.
To cgmp.
At their facility.
And so after an inspection here and some additional correspondence.
With the E M and we expect that to happen in the fourth with their animal study results were superb.
And it's based on that.
Dr. James Hayward: And it's based on that the European authorities are taking their position that compassionate use would be appropriate. So what degree or what level of, or actually, rather, amount of product do they need for starting material? Or, I mean, in a clinical Phase I trial for CAR-T, we can probably do just a handful of patients. So I'm assuming that maybe it's not that much material that you'll need.
European authorities are taking their position, but compassionate use would be a purple.
So what degree are or what level of.
Or actually rather amount of product do they need for starting material or I mean, a clinical phase one trial for car T. We could probably do just a handful of patients.
I'm, assuming that maybe it's not that much material that you'll need.
Yeah, that's probably enough material to treat I'd say about 10 patients I don't want to speak for them.
Dr. James Hayward: Yeah, it's probably enough material to treat, I'd say, about 10 patients. I don't want to speak for them because the details are under their control, but that's what I'm expecting, and so that should be no problem for us. Do you have, has it been publicly disclosed who the principal investigator is at the Prague Hematology Institute? I'm sorry, could you try that again, Jason? Do I have one?
Two are under their control, but that's.
I am expecting.
So that should be no problem for us.
Do you have.
Publicly disclose who the principle investigator is at the Prague Hematology Institute.
I'm, sorry could you try that again Jason.
Is it publicly available who the principle investigator is at at the Prague Institute.
Dr. James Hayward: Is it publicly available who the principal investigator is at the Prague Institute? I'm just thinking we can pull some papers and read some of them. Oh, sure. I'd be happy to verify that it is. And then I'll not only get their names for you, but I'd be happy to put you in touch with them. And, you know, you can pull all the papers as well.
I'm just thinking you pulled some papers each read coming down.
Oh sure you know I'd be happy to verify that it is and then I'll not only get their names for you, but I'd be happy to put you in touch with them.
And.
You can pull all the papers as well.
Dr. James Hayward: And also, just moving over to the KUDO-Bio relationship that was updated back in December, as a CDMO in the mRNA space, can you give us a little bit of color on kind of maybe who they're producing for or what they're producing mRNA products for, and I guess at what scale? Are they a significantly large player compared to others in the space? They are a large player with international facilities, including in Boston, and Clay, you're on the line, correct me if I'm wrong, but I believe they also have facilities in Singapore. And their scale is quite large, so they have the opportunity to really be an end-to-end mRNA manufacturer at a very significant scale. Yeah, and I can jump in there, too.
Great and then also just moving over to the kudos bio relationship that was updated back in December.
As a C D M O M in the mrna states.
Can you give us a little bit of color on kind of maybe who they're producing for or what they're producing mrna products for and I guess at what scale.
They are significantly large player.
Compared to others in this space.
They are a large player or with international facilities, including in Boston.
Clay you're on the line correct me, if I'm wrong, but I believe they also have facilities in Singapore.
And the their scale is quite large so.
Has the opportunity to really be an end to end more on a manufacturer a very significant scale.
Yeah, and I can jump in there too thanks, Tim Yeah. So they have the ability as Jason in the U S. They also have their main manufacturing facility in China.
Clay Scharrock: Thanks, Jim. Yeah, so they have facilities, Jason, in the U.S. But they also have their main manufacturing facilities in China.
Clay Scharrock: They are currently manufacturing clinical materials for clinical trials in China and also Australia. They're a great partner, to be frank, and they are new to the mRNA manufacturing space, but they do have the ability to scale to a very large commercial scale, as Jim noted, but there's also potential additional synergies there that we are investing in. Are they taking on the RNF enzyme as well as part of all this work that you're doing with them?
They are currently manufacturing clinical materials for clinical trials in China and also Australia.
They're a great partner to be Frank and you know.
They are new to the mrna manufacturing space, but they do have the ability to scale.
You know very large commercial scale.
Jim noted, but there's also the potential additional.
Synergies there that we are investigating.
Are they taking on the B R NAV and time as well as part of all of this work that you're doing with them.
Clay Scharrock: Yeah, so under the disclosed contract, yes. So the joint development agreement that was disclosed, the goal of that agreement is to scale Linea IVT to commercial scale, right? Right now, we've proven that Linea IVT works extremely well at a small scale.
Yeah, So I wonder if that.
Contract Yeah. So the joint development agreement that was disclosed the goal of that agreement is to scale. Many of IDT to commercial scale right right now we've proven that with linear ITT works extremely well at the small scale, we need that validation that the platform scale too.
Clay Scharrock: We need that validation that the platform scales to multi-liter IVT scale, right? And that's what we are doing with them. And then we'll bring the results in mRNA through LNP encapsulation into Drosop, and then- Got it. Last question.
Multi leader IBD scale right and that's what we are doing with them and then we'll bring the result in mrna through LNP encapsulation, and Hugh dress up and the drug product.
Got it last question just briefly on slide nine you gave us.
Jason Wesly McCarthy: Just briefly on slide nine, you give a sample of select customers in the biotherapeutic space and kind of what they're working on. Can you tell us how many customers you do have in total and if you're expecting any of them to potentially transition from any in vitro or preclinical work to clinical this year? Thank you. Absolutely. Absolutely. Clay, do you want to take that too?
Sample of select Oh.
Customers in the Biotherapeutics states and kind of what they're working on can you tell us how many customers do you have in total.
And if you're expecting and you have then to potentially transition from.
And Ian.
In vitro or in preclinical work to clinical Ah This year.
Thank you.
Yeah.
Clay you want to take that too.
Clay Scharrock: Sure, absolutely. So, yeah, obviously, we can't just lose names, Jason, but since the launch of Linear IVT in August 2023, we've really seen more rapid adoption of the platform. That's been driven, you know, I would say in equal parts by the enzymatic IVT template story, but also the ability to. Our early customers are IVT template customers. They are not enzyme customers since we didn't have the enzyme at the time. And we're seeing those customers come through successful evaluations, and we're getting asked for the first time to quote on, you know, what would scale-up look like. What does scale-up under GMP look like?
Sure absolutely. So yeah. So obviously, we can't disclose names Jason but.
Since the launch of linear IV T. In August 2023, you know, we've really seen more rapid adoption of the platform. That's been driven you know I would say an equal part of the enzymatic I eat halfway story, but also the ability to reduce the DSI RNA right. So.
Our early customers are IGT template customers. They are not <unk> customers since we didn't have the enzyme at the time.
And we're seeing those customers come through successful evaluations and we're getting asked for the first time to quote upon you know what would scale up look like what does scale up on your GMP look like and that's what that's why we have this urgency for this GMP facility, but importantly.
Clay Scharrock: And that's why we have this urgency for this GMP facility. But importantly, we are also now seeing adoption from both large CDMOs and also some therapeutic customers of the joint linear IVT platform. And that's important because the economics of selling that enzyme along with the template are so much more advantageous for us. So we've had some early successful evaluations of that platform. The first one was actually with KUDO, and we're seeing some follow-on evaluations now.
We also now are seeing adoption both from large C. D M O's and after some therapeutic customers of the joint linear IV key platform and that's important because the economics I'm selling that enzyme along with the template are so much more advantageous for us so.
We've had some first successful evaluation of that platform and the first one was actually with cuda.
And we're seeing some follow on evaluations now and the Readouts have been fantastic and we had a read out last week from one of our customers on the template.
Clay Scharrock: Readouts have been fantastic, and we had a readout last week from one of our customers on the template, and as Jim noted in his prepared remarks, we actually met or surpassed all specifications, and our time to manufacture beat everyone else that they were looking at. It's quite promising. Thank you, fellas. Thank you. Our next question comes from the line of Dipesh Patel with HC Wainwright.
And as Jim noted in his prepared remarks, we actually met or exceeded all specs and our time to.
Manufacturer beat everyone else that they were looking at it.
Uh huh.
It's quite promising.
Great. Thank you Paolo.
Thank you. Thank you.
Our next question comes from the line of dispatch the child with H C. Wainwright. Please go ahead.
Dipesh Patel: Please go ahead. Hi James, and thank you for the additional details there. Regarding slide 9, just a follow-up question, are you able to share more color on the percentage of customers that you have in the US and the ex-US? And how might you expect this to trend over the coming quarter? Yeah, the bulk of our customers are US at the moment, but we have a good smattering of international customers coming both from Asia and from the European Union.
Hi, James and thank you for the additional details there.
Regarding slide nine just a follow up question.
Are you able to share more color on the percentage of customers that you have in the U S and ex U S.
And how long you expect this I expect this to trend over the coming quarters.
Yeah.
Bulk of our customers are U S at the moment, but with a good smattering of international customers coming both from Asia.
From the European Union.
I expect that we will see more from the European Union over the course of.
Dr. James Hayward: I expect that we'll see more from the European Union over the course of the next year or so. And, you know, while we profiled only six customers on slide 9, we have many more customers than that. And what's really compelling is that many of those customers are returning for additional orders and for orders of greater volume. And then last question, with regard to the projection that you noted of up to $15 million annual for linear IVT revenue, what assumptions can we kind of take away from that in terms of are you... putting in 100% utilization of the 1,000 square foot facility that you mentioned? Yeah, the capacity is actually slightly greater than that at 100% utilization. Of course, you never want to get to 100% utilization, but the facilities are quite clonable, if you'll pardon the pun, and it would be easy to prepare additional space. I can see a future where customers are beginning to lay out their plans for pharmacokinetics and toxicology and clinical trials and their approach to FDA. And not only will they be placing orders, but I suspect they'll be booking time, too.
The next year or so.
And you know, while we profiled in slide nine only six Oh, we have many more customers, though not.
And what's really compelling is that many of those customers are returning.
For additional orders and.
For orders of greater volume.
Great and then last question.
With regards to your the projection that you noted of up to $15 million annual for.
For the linear IGT revenue.
Hmm, what assumptions can we kind of takeaway from that in terms of our U puts.
Putting in like 100% utilization of the thousand square foot facility that you mentioned.
Yeah, the capacity is actually slightly greater than the 100% utilization of course, you never want to get to a 100% utilization, but the facilities are quite callable, if you'll pardon the pun.
Hum.
It would be easy to prepare additional space I can see a future.
Where our customers.
Are beginning to lay out their plans for a pharmacokinetics and toxicology and clinical trials and their approach to F. D. A.
And not only will they be placing orders, but I suspect there'll be booking time.
Dr. James Hayward: And so as that begins to happen, we have to ensure that we have the capacity to accommodate more time, as it were. And it'll be a straightforward process. We've already mapped out how to do it, so we're set and ready to go. Great. Thank you so much for the update, gentlemen. Thank you. Again, if you have a question, please press star then 1. Our next question comes from the line of Jeffrey Bernstein with Silverberg Bernstein Capital. Please go ahead. Hey guys, I just wanted to understand when you talked about being benchmarked against competitors and having a higher speed of production, are we talking about enzymatic guys like Twist and Anza, those kinds of folks? I can take that damn if you want it.
And so as that begins to happen we have to ensure that we have the capacity to accommodate more time as it were.
And.
That'll be a straightforward process, we've already mapped out how to do it. So we're all set.
Set and ready to go.
Alright. Thank you so much for the update gentlemen.
Thank you.
Again, if you have a question. Please press Star then one.
Our next question comes from the line of Jeffrey Bernstein with Silverberg Bernstein capital. Please go ahead.
Hey, guys I just wanted to understand when you talked about being benchmarked against competitors.
And having a higher speed of production are we talking about the enzymatic guys like twist in and those kinds of folks.
Well I think at the end of Q1.
Sure.
Dr. James Hayward: Sure. Okay. Hey, Jeff.
Okay, Hey, Jeff.
Clay Scharrock: So, yes and no. We're talking about some of our competitors in the enzymatic scale-up, not the enzymatic synthesis. But we don't know which customers they are particularly.
So now we're talking about some of our competitors in the enzymatic scale up not the antibiotics in Bethesda.
So we don't know which customers. They are particularly all we know is that we are being benchmarked against other enzymatic manufacturers and we are exceeding their turnaround time.
Clay Scharrock: All we know is that we are being benchmarked against other enzymatic manufacturers, and we are exceeding their... Okay, so those would potentially be like CDMOs that are offering these capabilities. Exactly, right. So, again, there are two enzymatic uses. There's the synthesis of that initial template, which is not what we do, and then there's the use of enzymatic manufacturing to scan a lot, which is what
Yeah.
Okay. So those would potentially be like C. D. M OS that that's that are offering these capabilities.
Exactly right so they're there.
Few antimatter Houston and.
The San Francisco, Nashville, template, which is not what we do and then they're using enzymatic manufacturing to scale up which is what we do okay.
Clay Scharrock: Yeah. Okay. That's great. Thanks. Again, if you have questions, please press star then 1.
Thank you.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to James Hayward for any closing remarks.
Operator: This concludes our question and answer session. I would like to turn the conference back over to James Hayward for any closing remarks. Well, thank you all for joining us, and we look forward to keeping you closely informed as we move ahead through these exciting times. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Well. Thank you all for joining us and we look forward to keeping you closely apprised.
We can move ahead through these exciting times. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Dr. James Hayward: Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent, www.kenkinslinger.com www.kinstlinger.com, Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Copyright 2020 New Thinking Allowed Foundation, America.
Yeah.
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