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Applied Dna Sciences (APDN)

Participants
Sanjay Hurry Investor Relations
Beth Jantzen Chief Financial Officer
James Hayward Chairman, President & Chief Executive Officer
Jonathan Aschoff ROTH Capital Partners
Jason McCarty Maxim Group
Jon Salmanson Cantella
Call transcript
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Operator

Good evening, and welcome to Applied DNA Sciences' Fiscal Second Quarter 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note, being recorded. Please now Sanjay Hurry, would like to to over conference the Head turn I of Relations. Investor ahead, go sir. Please

Sanjay Hurry

Thank our everyone, conference you, financial evening, to Ryan. DNA’s Applied results. and call quarter second welcome discuss fiscal XXXX to Good

access on was after You website. section our the today, Investor the market presentation slide release the corporate as Relations well accompanying press accompanying closed that can issued as this call of

CEO; and on Shorrock, our portion and to Speaking Q&A and of the call Chairman, Murrah, Development, Judy available Dr. today our Business questions also will Officer Clay Jantzen, Hayward, James Beth the our the are Legal Head and call. CFO, of on answer be our President COO; Chief

you actual to of during performance provided discussion a for of XX-Q Before factors a obligation we expressed forward-looking no begin, short undertake statements. please results forward-looking from the Form this any information that new ago statements as could of note to information hear may presentation our will that Slide consist filed refer while statements. future the or on some you I developments. our information two risk or and We or in those today call differ or forward-looking other implied materially important or result any cause company’s results revise update the to and of

Jantzen. Please ma’am. pleasure introduce in ahead, to call, our go my it’s Beth speaker Now, first today’s

Beth Jantzen

XXXX, key President our turn I second financial will the quarter of Hayward, Thank Dr. you begin the over call. and initiatives I for a will our review for quarter the will operational with summarize for on our the of outline half you, who joining fiscal investor James results CEO, second call ended Sanjay. XXXX XXXX. XX. and to performance then afternoon, March fiscal second Good everyone. Thank consolidated quarter on for which today fiscal us of our

and analysts our quarters. my the financial two call have of We our we then and execution to results, review operational Prefacing consecutive institutional will open financial excellent for investors. demonstrated now

could Labs, revenue power Law Our half impressive XXXX. source entirety revenue ADCL. total Clinical the by flow revenue DNA clinical labs Forced for the to total subsidiary ADCL, Prevention Total operations we operations. as Applied revenue XXXX. December statement from fiscal And company's from now revenue demand of the revenues the That ADCL the providing as Cotton performance. our and in exceeded reminder, first into Tagged performed overall items of in The continues Uyghur reason serve increase of shortly, services Labor fiscal a with have in Federal has present to to catalyzed as to that future Beginning or XXXX helped supplement Act passed believe have cash burn statement we cost by and a separate of we a reduce line will rate. of that cash our the for have laboratory, Jim hear clinical proximity you and testing to

record revenue. of We quarter second are a report to pleased consecutive

testing. our was performance I COVID-XX noted, As mainly top by line driven

of services. of were attributable The QX. of is $XXX,XXX $XX,XXX On to Our offset QX, are is of decrease $XXX,XXX $X.X approximately year-over-year year-over-year approximately sales of revenue year laboratory an to period. comprise fueled in also testing This itself that increase spike increase increase a revenues ago ago laboratory by Assay $X.X shipment quarterly $X.X attributable total Linea clinical to testing increase Kit. XX%. sequential a to projects due revenues a revenues decrease The QX to textiles, $XXX,XXX was attributable on the decrease in today. ago QX the COVID-XX million service COVID-XX of tagging $XXX,XXX of impact transfer of in in are QX year The compared the an cotton revenues The year for in increase a and quarter customers. for the in million, primarily That our and compared and $XX,XXX Omicron demand increase sequential due of revenue. period. linear to DNA were unit Product in to began in $XXX,XXX in basis, in million the continues is revenue is CRO service to clinical in the increased India. primarily DNA Service XXX,XXX related for through compared to related

as as year comprise ago and revenues our revenues XX% million pilot million with research sequential to million period. industrial associated clinical services increased QX. Clinical As development, DNA $X.X the business. service a $X.X service On well increased laboratory compared a revenues basis, authentication in $X.X in from service to projects, reminder, Laboratory

was I basis sequential the fuel As noted earlier, by on driven a increase the spike. Omicron

a as our beginning item You we on allocating QX, expense, operations. of separate versus depreciation in statement showing line it began

quarter to of XXXX a higher provide of gross testing, spike gross high profit fiscal are eliminated peak margins we quarter our have the As These from percentage line XX% of sales product from lab Kit, gross gross To for XX% generates your period linear QX, decrease lesser from surveillance margin. percentages, a XX. the our higher laboratory service profit revenue also to clinical resulted costs and pooled we the the the was contracts, contracts at clinical and ability a for first of with staff and I improvement sales the substantial portion The second levels volume to profit gross in provide infection XX% draw coming the to at ago ago are centers. year our the conduct where was The in which The statement clinical and higher profit fiscal the the for gross higher of result, a a attention associated of -- Assay our respectively. operations. sequential extent, contracts. during substantial mix compared lab. sales testing which testing percentage staff a a on in testing period for profit the year due XX% presenting Omicron included percentage COVID-XX of decline

As conduct are pooled infection coupled with margins as increased levels again our fiscal to QX That improved to we the and margins gross the QX, during lab. testing, rates clinical testing the declined, result. able improved a once versus led for

during we a consequence. as ADCL's summer Given they concentration months testing anticipate a as these their educational of baseline approach clients, and lower demand for break,

be our course, the as if increases, currently positivity are testing this Of region. in could demand increasing offset rates

and increase decreases expenses. is and to that and Total over array into expenses in demand similar professional CEO. compensation million QX, months having to ago increased year of $XXX,XXX reported with support also to in size to can testing a closely accrual to monitoring summer going year research in The offset an an operating by to fees. we the by million The $X.X increase increases aim accrued D&O attributable support to margin or was stock profit development XX% XXXX We pull was our the period. maintain QX in bonus reversal year are $X.X compared These were levels an an right levers have we $XXX,XXX of in and approximately an forgiven to what QX. due based fiscal premium a insurance increase increase for of to

optimization. of and cost structure our primarily stage position within we of applications from for Resources a achieve industrial towards growth program QX, early we implementation for next about. LinearDNA have under bio diagnostic optimize the current talk development elimination at to maximum shareholders program did management will to workforce priority been as future on LinearDNA programs opportunities. are allocating to platform the a tagging initiated power strategy pursuits anticipate well actions, designed development such ADCL and that focused value stage these Initiatives costs We cannabis, from cost not and platform, centered cost on material OpEx. market realigned During therapeutic the savings as DNA the the as rather to and Jim the of

in in $XXX,XXX, of outstanding. higher per warrants ago quarter with loss transaction liabilities. February were per loss $X.X that costs net $X.X to an of $X.XX loss value the expense versus versus ended allocated unrealized of QX, number an net as shares common Net loss QX change XX warrant fair the gain for is a XX, well and direct in the associated year share for March to the our Our a at weighted of million. XXXX, year a registered $XXX,XXX increased period of average share as from period, Included million in was $X.XX ago of

expenses, million a adjusted $X.X million Excluding QX narrow period, in compared and in million, the ago to year negative a $X.X $X.X was negative to consolidated QX. for compared non-cash negative EBITDA

conducted the proceeds equivalents totaled cash is balance Turning for March the during cash This net quarter of million to and direct figure million. $X.X inclusive XX. our sheet, $X.X on registered of

a caught XXst to during with additional in occurred at $X.X in collections $X.X million stood $X.X QX. December accounts at receivable cash at collected up an million large million receivable XX. strong compared Our increase We March April. Accounts that

balance a warrant no outstanding on February approximately have and sheet. warrants $X the We of outstanding carry million Our our as balance result direct. now debt a increased of registered total

and/or our concern raise is further Our ability just as maintains filed generate ability dependent second XX-Q opinion, our to the that on and implement a going concern a for quarter revenues. plan, going our continue capital to business

$X million. joining my for position the This over cash for April you Jim today. to Our comments. approximately prepared call concludes will us XX was Thank I now turn on remarks. his

James Hayward

our Well, thank good Beth. you XXXX. Thank call joining quarter everyone. afternoon you, fiscal us of on for And second

for industrial reaction of allow chain tests the record these and quarter. afternoon by remarks very to biotechnology legs DNA and to by subsidiary, the selling thank not plans commercialize concentrations, team significant line of continue based their to polymerase hard The PCR produced clinical top has company to LinearDNA revenue PCR, company produced And the applications. will cash Applied costs platform the diagnostic three DNA but to top to PCR the this DNA pleased avoid or are LinearDNA and a commercialize the I in molecular therapeutic bio how only provide its accomplishes and the means sectors. balanced risk its My Applied revenue results support personally dedication. help also platform. ADCL. work the laboratories performing the one which by want on DNA flow in We singular focus growth, the retain the for focus line company with for And stool

We a In stool believe order to the our While once for will stand, bring development. that all and therapies, technology to will shareholders. value it it almost contribute. LinearDNA advanced is each commercialized, platform legged legs must is of is three under fully that platform the transformative our impact truly the

top our have of the growth. I that Over most a enable line our to quarters, has past we moment, clinical arm top in a strong we line. contributions continue discuss And ADCL several to plan our will as driven will with believe

has are revenue. first of been seeing promising quarter extremely DNA growth. we And our unlock a developing line as sector industrial based today. coalescence sale next material been share I'll the on discussed to that projects of the pandemic, the We've putting world industrial finally, Beginning the And provided with the true clinical several emerging in which we and we believe a is during place of sector historically hard driver. contributor first will of from to you clinical our LinearDNA platform. QX And data, validating -- which this ADCL's Our phase new value at will and our join with call, DNA work the lab. labs the on fiscal compelling total our laws the platform, there very signs top our company.

and We in of that in the new are the volume XX of our vary their region. with mindful of rise the variants will pathogenicity. pandemic with And COVID testing state rate

near growth. foundational a employing cushion that in ADCL's to ADCLs components roadmap, is of We designed while place phased XX approach future uncertainty testing diagnostic diversifying in the around COVID term, to are the putting concurrently

the likely continues. I'll clients will who maximize has our to their for indicated to us for summer announced with testing testing from derived it Test month at our wide who his new demand renew the diminished that we seasonally concentration testing the be inherent upcoming contract And we are last key client year. levels contract clients XX services to enter engaged allowing for financial break about First, from client COVID opportunities. that's the educational continue expects it testing. company has sessions. that the One academic

susceptible New estimated In that Omicron CUNY variants. relevant been the that majority more York more of addition, The will COVID quarter than City A month, infected some remain sub for variant by time. with only about variants. its catching suggests be adults, cases XX% testing in on for report accounting a likely report region. adults that's some XX% of by this of of bouquet expanding would about to infectious epidemiologists earlier But released and sub the the still from have Omicron's

expected surge virus. challenging Just in sub The Meanwhile, no collective increased institutional for in of rates the And to this House's this immune variant become positivity week, the up. that White first the minds our New throughout Clearly, our City. to and time come. how immune personal some for are warning matter SARS-COV-X be systems virus hospitalizations the months has show time results fall. will substantially York have an many

high testing. value Now, great beyond COVID-XX we in in ADCL genetic see promise

leveraging testing, specifically semesters, a testing testing of disease. determines form an including online prepared one reduce more assets non platform cutting by institution molecular value by and We potential academic three that is testing genetic aim FDA a New we to are same ADCL's for our their Over impact the or we Long At that of to high generally, edge are Island will the and genetics medicines genetic PGx from the in rapidly cultivate or testing. That testing, time, in on that summer clinical downturn area diverse flow, research market for our include opportunities supplementary cancer genetic infectious our respond based. existing molecular COVID-XX Pharmacogenetic COVID-XX bringing are tests we offering empowers growing educational is based approved a to certain testing. where to sales cash individual PGx on months, pharmacogenetic next how for which State genes. a is York shows underserved customers.

commercially. expertise PGx end test validation is third validation. by across our indications. on PGx State York is our us validation with assay to PGx test To panel the we management clinical by group PGx will to cardiac will Plus believe and lab this Validation a Once scientists. achieve performed test calendar engaged market, commercially reviewed offered assist will help drugs psychiatric, group first deep must of is tests reads testing that it approved summer party and New we've and of that Department beginning before a complete, test speed the in the Our be path analytical the validation pain XX be be by available us This a has year. Health

primary Our lab go-to-market strategy for testing, testing. PGx focuses on direct-to-consumer reference markets, two and

be expense fee systems, to lab will for where other set located ADCL without reimbursement and in focus York, New us favorable primary Our market sample believe labs hospital allow are is PGx party These third our test test-on-contract complications opportunities the and of very the a clinical those we reference underserved. per to with acquisition. test to added and marketing starting and

On to better the can this economics We revenue that of the a believe is testing. and genetic PGx excited cancer revenue generation institutions genetic per novel molecular ADCL significant to growing continue also Longer a using We're other currently or biomarkers will to the we us are be risk assessment shown regarding leveraged testing a ADCL will develop successfully than for it in and has as test and develop diagnostic, believe clinical for tests. addition, talks to company. COVID-XX be we testing. phase of several long test. will COVID-XX ADCL with testing direct-to-consumer very next the PGx collaborations for next monetize marketed In platform tests. on PGx panel novel We're used term, contributor ADCL. meaningful testing that prognostic to durable, be for demand can provide PGx same and term basis,

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to together updated. keep put for clinical this lymphoma sure we vaccine, the design we you be will anti-canine As

the lot opening just before to we brief of covered recap, call let a me a material. Now, offer questions,

Firstly, we to are executing on our differentiated development. Biotherapeutics approach

profitably and a ability and CertainT Our approach adoption stand that we development. to our run of cash having increased cash platform flow, currently ginning that having is conversations suggest phase unique. potentially are And believe customer second ADCL LinearDNA to have a season. middle mitigating burn our in platform has ramifications textiles ADCL of business with of the and associated the further out. growth up is diagnostic proven we pandemic. revenue upcoming starting could would its mapped a And with

relevant We speed place in world. to It's it. our operationally execute are acid ability base carve developmental nucleic we're therapeutic window with highly from confident to a the in today opportunity. current a and And has to of moving LinearDNA both our perspective.

for Operator, thank afternoon. and call this open the your attention time questions. please to Now, you

Operator

Capital sir. We first ROTH Partners. Jonathan Please the will of begin answer question with go question from and session. comes line now ahead, [Operator Our the Instructions] Aschoff

Jonathan Aschoff

thank you. Hi,

So two quarter the share what over expect coming This owing ADCL quarters? quarter should next to institutions? we revenue from academic and lion's kind of drop in next the

James Hayward

be It's about should anything. question, for think just we I And prepared a good Jonathan.

that York said, are City. that major customers our in New However,

City very York risen. in And the is a midst uptake, rate in XX% hospitalizations of is York. have population of a significant New the New general positivity having

a for the testing, of population size. in it up lower decrement end levels So Could albeit levels. the need moderating higher in testing

just I think and to see. wait have we'll

Jonathan Aschoff

half than less It rather half? sounds more like than something you're than expecting like

James Hayward

a I level. our positivity that is alarming. And at Right speculated just rate is now, somewhat speculation. Anything be that pretty time our at would run this constant

can So certainty, don't I think with much say Jonathan. you

Jonathan Aschoff

Okay.

give did go market pick that So Just those going Most two color pursuits you're a because size? time me ultimate there? or of the picked after. market LinearDNA of you you two because to to aggressively, little

James Hayward

Sure. It's a combination of both of those.

growing is ever of BLAs opportunity, template our FDA that of the know is the than many as unique, mRNA before number is kind it's expansively. larger been. And You IVT advantages. market But an we have

collectively insertion. So said, mRNA had two continual on of to quickly small unique seeing over world based so snapped suited effective. patient therapies that That And eliminated the our the been if that totally is we're lot the and when around of some mRNA become a That it of risk application. the speed, therapies gene convert those being that's are well were more utilize vaccines delivered that basis. really gene a mRNA risk is driver and therapies more a DNA market it's than how delivered pretty once, gene have to therapies size instead to position And approaches. or

Jonathan Aschoff

you Congrats Thank much. very Jim. Okay, on progress.

James Hayward

Okay. Thank you.

Operator

Thank you.

Maxim comes question with go Jason of Please ahead. next the from Group. Our line McCarty

Jason McCarty

or going glad on get -- trial, Jim, lymphoma. to information a Hey, the endpoints would know terms what to in an I'm is hear everything's if platform in in of canines trial even vaccine LinearDNA specifically, the what of about curious or pilot a more in I don't a look PFS And for more the endpoint. canines extension well. really like canine? OS there's like look

James Hayward

and much not the therapies too extending. palliative degree some now to Right are Sure. life

think and the not long be clinical trials would large, as so will to internally clinical would of typically it is extension safety that the shown. those be So of negotiated size USDA. life. are have as and But both with I And efficacy endpoint

Jason McCarty

look scan opportunity of significant burden. a to the in showing that reductions kind Is people very there trials those studies imaging tumor to these with T stage that types an of early programs? CT they're Is would -- something CAR use of did similar part be it's because where what to was pilot very,

James Hayward

It's considering. something we're

methods liquid we these would consider given also, biopsy tumors. think, I

still that so And is under consideration.

Jason McCarty

In this for are lastly lymphoma CDXX? on a this, what type for canine? comparable like Is of antigen CDXX, target a would something they you and

James Hayward

great what our the have not antigens. antigen in midst And would And target this is in to unique in but echoed design. our Takis, want at that we're I time of We is, design skill a its of the skill. say partner,

Jason McCarty

that Is possibly expect that you'd program to start a it. this Got year? that something

James Hayward

We'd then soon like possible. canines. We'd bridging like as start as beforehand. Yes. But on to move to probably a study do to

Jason McCarty

generally, right that an little right New that other uptick, pooled just Is senses, COVID universities impacting seemingly a your And that mentioned of is lot had on demand in it. in a of testing you you're York Because bit testing Got there's use now. of now? in of with the side, terms diagnostic doing correct? testing

Jason McCarty

much that added close in and larger positivity and in steady City, right here our rates York moreover, over spreads very the we're our strike, the see high. testing does has And actually cohorts durable when what throughout our contacts. happens And Long We're just very anecdotally, it's in are have New we'll rapidly that a diagnostic the been cohorts Island, rate. family And at on Well, seeing now to patient's infection local seeing summer. customers. we've both

populations, demand available see by other factors. fund gets a that of circumstances, those personally, affected variety and psyche, higher whether testing need under is realized, programs it, the So, or not to for I

and we're we're So, every cautious preparing for eventuality.

Jason McCarty

you the taking it. question. Got for Thank

James Hayward

Okay. you. Thank

Operator

from go Instructions] [Operator with Salmanson of next you. question Thank the line Our ahead. comes Jon Please Cantella.

Jon Salmanson

you. question for quick Jim, Yes,

the How on cotton you'll APDN? press You've increasing demand on from release coming see basis call your do and June a a a lot XX. meaningful that on starts you think demand scale quickly Act the for in the tagged talked that about

James Hayward

is activity Well, very significantly. I implementation been very The the level already can who mix interest you from has strong. for our brands preparing are Act tell very, that impacted the of this

logistic the impacted. going all The are to folks fabric finished the spinners, the from be of chains weavers, All

I as wait perfect We an see. personally, have to to So some storm. in our it it's already business. increase indications of have and a that tagging something said, lead We'll will

Jon Salmanson

Okay. Thank you.

James Hayward

you, Thank Jon. Okay.

Operator

Thank the Hayward closing conference our back like session. remarks. answer over to question Dr. you. for would any concludes James I This and turn to

James Hayward

compelling you And look we're the to forward joined Thank be summer to hope Well, Okay. reasons you. and given back the long to DNA's keeping you. our near We about you updated grateful you. I future. over term on excited listeners Thank today. Applied term Operator, progress we've that us months. coming

Operator

you. Thank The today's has for you conference concluded. attending presentation. Thank now

You lines. may your disconnect