On February 9, 2023 Applied DNA Sciences, Inc. (NASDAQ: APDN) ("Applied DNA" or the "Company"), a leader in PCR-based DNA technologies, reported its consolidated financial results for the first quarter of fiscal 2023, ended December 31, 2022 (Press release, Applied DNA Sciences, FEB 9, 2023, View Source;id=254293&p=2257612&I=1206939-c7Z3G6f3m8 [SID1234627011]).
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"Applied DNA delivered a solid start to the fiscal year with sequential and year-over-year revenue growth driven by molecular diagnostic testing demand at ADCL, our clinical laboratory subsidiary, several orders for linearDNA, including a pair of orders from first-time biopharma customers for mRNA research and development use, and from deferred textile DNA tagging revenue," stated Dr. James A. Hayward, president and CEO of Applied DNA. "Our top-line performance was paired with a 72% and 74% reduction in operating loss sequentially and year-over-year, respectively, due in part to higher testing volumes coupled with cost management actions previously taken at ADCL.
"We also achieved progress on our strategic priority of establishing linearDNA and our LinearDNA platform as the common denominator for the manufacture of the next generation of nucleic acid-based therapies while working to concurrently position ADCL and our supply chain traceability businesses for profitable growth and positive cash flows," continued Dr. Hayward. "Since the launch of our linearDNA IVT template production offering last summer, interest has grown steadily as the industry gains an appreciation for our capacity for high quality, enzymatically produced template to meet therapy developers’ need for this critical mRNA manufacturing starting material. Concurrently, the industry’s clinical interest in mRNA extends beyond COVID-19 vaccines to new applications for mRNA, such as personalized cancer treatments and other therapeutic uses. Our linearDNA IVT templates can be produced rapidly with chemical modifications and highly homogeneous poly(T) tails that we believe are very well suited to support this next chapter in mRNA therapeutics.
"Our linearDNA activities were also centered on fine-tuning our platform and forging relationships with platform materials partners to create a rapid, end-to-end production platform to capture commercial-scale IVT templating and, potentially, mRNA production opportunities empowered by the unique qualities of linearDNA. To that end, we remain committed to our timeline to building a cGMP manufacturing facility by the end of the current calendar year but are pivoting to a cost-efficient footprint within our corporate headquarters that maintains our ability to produce cGMP-grade product for current and prospective customers to validate for use in clinical trials. We also plan to leverage our platform advantages in the coming months to offer industry-leading DNA-sequence-to-IVT-template turnaround times."
Concluded Dr. Hayward, "At ADCL, we believe we are well positioned to leverage the population health platform we built during the pandemic to propel this subsidiary into the genetic testing marketplace of the future. Approaching enterprise customers with a reference lab model differentiates ADCL from those labs struggling to gain reimbursement from third parties and insurance companies. We have successfully completed our clinical validation and data analysis for our pharmacogenomics (PGx) testing panel and plan to file our validation package with New York State Department of Health in the coming weeks. Prospective PGx customer feedback has been very encouraging and gives us confidence that PGx testing can be a profitable post-pandemic path forward. In our supply chain traceability business, we continued to add CertainT platform customers for isotopic analysis testing, which is an excellent complement to DNA tagging. We are encouraged by the macro environment for textile material provenance testing following the recent passage of the federal Omnibus Bill that increases funding for compliance with the Uyghur Forced Labor Prevention Act."
First Quarter Fiscal 2023 Financial Highlights:
Total revenues increased 26% to $5.3 million, which included $4.5 million in clinical laboratory service revenues (COVID-19 testing revenue). This compares with total revenues of $4.2 million in the prior fiscal year period, which included $3.2 million of clinical laboratory service revenues.
The year-over-year increase was offset by a decrease in product revenues of $310 thousand due to a decrease in sales of our molecular diagnostics (MDx) test kits and supplies.
Gross profit was $2.4 million, or 45%, compared to $1.1 million, or 27%, in the prior fiscal year period. The improvement in gross margin was primarily the result of an improved gross profit margin for our MDx testing service. This improvement was the result of higher testing volumes, coupled with cost management efforts for our contracts where we also provide and staff the test collection centers. To a lesser extent, the improvement in gross profit for the current period was due to the prior fiscal year period having a high COVID-19 positivity rate, which resulted in our clinical laboratory having to reduce the test pooling size, which increased the cost of consumables per sample, therefore having a negative impact on gross profit.
Total operating expenses were $3.6 million compared to $5.8 million in the prior fiscal year period, reflecting a decrease in stock-based compensation expense of $1,6 million, primarily relating to officer stock option grants during the first three months of fiscal 2022, that vested immediately, as well as to the annual non-employee board of director grant that vests one-year from the date of grant. The remainder of the decrease primarily relates to a decrease in bad debt expense of $300,000 for the collection of an outstanding receivable that was previously fully reserved for.
Operating loss was $1.2 million compared to an operating loss of $4.7 million in the prior fiscal year period.
Excluding non-cash expenses, Adjusted EBITDA was negative $1.1 million compared to negative $2.7 million in the prior fiscal year period. See below for information regarding non-GAAP measures.
Cash and cash equivalents stood at $12.9 million on December 31, 2022, compared with $15.2 million as of September 30, 2022.
Our current warrants outstanding on December 31, 2022, stood at 7.3 million. Approximately 2.2 million of these warrants have exercise prices ranging from $2.80 to $2.84 per warrant share, which, if exercised, could result in exercise proceeds to the Company of approximately $6.3 million; 5.1 million of these warrants have an exercise price of $4.00 per warrant share, which, if exercised, could result in total exercise proceeds of approximately $20.3 million. Of the 5.1 million warrants, 2.1 million expire in September 2023, which, if exercised, would total proceeds of $8.4 million.
First Quarter Fiscal 2023 Conference Call Information
The Company will hold a conference call and webcast to discuss its first quarter of fiscal year 2023 financial results on Thursday, February 9, 2023, at 4:30 PM ET. To participate in the conference call, please follow the instructions below. While every attempt will be made to answer investors’ questions on the Q&A portion of the call, not all questions may be answered.