Applied DNA Sciences (NASDAQ: APDN) reported Q2 EPS of ($0.79), $0.02 worse than the analyst estimate of ($0.77). Revenue for the quarter came in at $552.47 thousand versus the consensus estimate of $950 thousand.

Fiscal Second Quarter 2020 Financial Results:

• Revenues decreased 29% for the second quarter of fiscal 2020 to $552 thousand, compared with $778 thousand reported in the same period of the prior fiscal year and decreased 13% from $634 for the first quarter of fiscal 2020. This decrease in revenues year over year is due to a decrease of $305 thousand in service revenues, offset by an increase of $79 thousand in product revenues. The decrease in service revenues is primarily attributable to a decrease from a government contract award that ended during the second half of fiscal 2019 and a decline in precommercial feasibility projects in both textiles and cannabis. The increase in product revenues was primarily related to an increase in biopharmaceutical revenues during the quarter ended March 31, 2020.
• Total operating expenses decreased to $3.1 million for the second fiscal quarter of 2020, compared with $3.3 million in the prior fiscal year’s second quarter. This decrease is attributable to a decrease in professional fees of approximately $183 thousand due to reduced legal fees. To a lesser extent, the decrease relates to a reduction of approximately $64 thousand in travel fees as result of travel restrictions associated with COVID-19. This decrease was offset by an increase in research and development expenses of $52 thousand.
• Net loss for the quarter ended March 31, 2020 was $3.0 million, or $0.79 per share, compared with a net loss of $2.7 million, or $3.22 per share, for the quarter ended March 31, 2019, an increase of 10%, and a net loss of $2.7 million, or $1.12 per share, for the quarter ended December 31, 2019.
• Excluding non-cash expenses, Adjusted EBITDA was negative $2.6 million and a negative $2.3 million for the quarters ended March 31, 2020 and 2019, respectively. See below for information regarding non-GAAP measures.
• Cash was $8.7 million at March 31, 2020 that includes the exercise of warrants associated with the November 15, 2019 underwritten public offering (“the offering”) totaling approximately $2.8 million in net proceeds. Subsequent to March 31, 2020 the Company received a further $2.9 million of net proceeds through the exercise of warrants associated with the offering. There is a total of approximately 1.5 million warrants outstanding from the offering at May 14, 2020.

“Continued execution on our strategic priorities in our second fiscal quarter resulted in an expansion of our linear DNA story to include COVID-19 vaccine candidate and diagnostic kit programs and the addition of new development customers. These new development customers, several of which are leaders in the field of gene and redirected-cell therapies, demonstrate broadening interest and adoption of our proprietary linear DNA approach to preclinical biotherapeutics and diagnostics development and further validate linear DNA as a viable alternative for plasmid DNA,” stated Dr. James A. Hayward, president and CEO of Applied DNA.

“Most of our activities during the quarter were devoted to our COVID-19 development programs that serve to also elevate the profile of our PCR-based LinearDNA™ platform to the biopharma industry as a powerful, large-scale tool for the rapid manufacture of DNA-based therapeutics,” continued Dr. Hayward. “The global focus on the pandemic and the speed with which vaccine candidates are being developed are laying bare the limitations of modern vaccine development that are almost-exclusively reliant on plasmid-based technologies that are often slow and require much more downstream processing. Because our linear DNA approach does not require bacterial fermentation and has the added advantage of essentially no risk of contamination by genes for antibiotic resistance and other genetic contaminants, we believe our platform is well suited for such DNA-based therapeutics as engineered T cells, gene therapies, RNAi, and vaccines, such as for COVID-19 or future emerging infectious diseases. One new development customer, a global Top-20 pharmaceutical manufacturer, is evaluating the full scope of our platform to potentially serve as a foundational tool for their future genetic therapy pipeline. As the industry comes to terms with the limitations of plasmid-based technologies in terms of production speed and risk, we believe this will set the stage for a paradigm shift towards the rapid manufacturing of linear DNA vaccines with our LinearDNA platform as the accelerator.”

Concluded Dr. Hayward, “Looking ahead, we remain focused on driving interest and building demand for our linear DNA approach across certain highly-regulated markets, such as drug development, that we believe offer a path to higher and more recurring revenue. Takis Biotech (“Takis”) has initiated preclinical animal trials of our LinearDNA version of their vaccine candidates that we believe will demonstrate similar, robust immune responses to their plasmid-based constructs, but with the added advantage of speed and scalability to manufacture for global use. Concurrently, we are preparing for the possibility for Takis to progress to human trials this fall by readying our facility for compliance with the FDA’s cGMP regulations that govern the quality of biologics for human use. We have also developed our Linea™ COVID-19 high-throughput and high-sensitivity SARS-CoV-2 detection kit to enable mass-testing that can be a crucial tool in the toolbox of health systems and governments in the fight to further ‘flatten the curve’. Having received Emergency Use Authorization from the FDA today, we are now focused on the commercialization of our kit to assist frontline workers leading the charge against the pandemic. Pharmaceutical molecular tagging is another target market and one where the FDA has granted us entry into its Emerging Technology Program that gives us a path to drive the industry’s adoption of our authentication technologies and mitigate participation of counterfeit and adulterated drugs in the legitimate pharmaceutical supply chain. We will continue to build our business development pipeline and execute on our strategy to advance and prove the capabilities of linear DNA to drug developers and the broader pharmaceutical industry.”

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