Applied DNA Sciences (NASDAQ: APDN) reported Q3 EPS of ($0.72), $0.05 worse than the analyst estimate of ($0.67).

“We continued during the quarter to position the Company to serve the unmet and evolving needs for COVID-19 testing solutions and vaccine development,” said Dr. James A. Hayward, president and CEO of Applied DNA Sciences. “Upon the receipt of FDA Emergency Use Authorization (“EUA”) for our Linea™ COVID-19 diagnostic assay kit (for use with nasopharyngeal (NP) swab and anterior nasal swab (ANS) sample collections), we put into place the foundation of our COVID-19 diagnostics business: we established the requisite supply chains and inventory to support anticipated growth in assay kit demand; we formed a clinical lab subsidiary (Applied DNA Clinical Labs) that, once certified by the State of New York, will offer testing as a service (“TaaS”) whose potential economics to us is more favorable than that of standalone kit sales; and we applied for amendments to our EUA to expand the addressable market for our kits and improve customer testing turnaround time and throughput. We are in the marketplace today with what we believe to be a highly sensitive and purpose-designed platform for the high-throughput workflows found at clinical diagnostic laboratories nationally. We are currently pursuing diagnostic kit contracts and, upon State certification, commercial testing contracts.”

Continued Dr. Hayward, “The U.S. is facing bottlenecks in testing capacity with supply shortages and testing backlogs at laboratories that, together with the spike in infection numbers in the southern and western parts of the country, suggests greater and long-term demand for testing. We believe we are well-positioned to deliver greater patient access to testing and increased market penetration in the coming quarters. The recent amendments to our EUA advance our go-to-market strategy significantly: they greatly enhance our opportunity for commercial kit sales by increasing the size of the installed base of RT-PCR systems upon which our kit can run and they enable the use of automated RNA extraction robotics at third-party labs and at Applied DNA Clinical Labs LLC, when licensed, to increase testing throughput.

“We have also recruited our first research sponsors who have funded the development of pooling models for the testing of asymptomatic patients (screening testing), which we will be presenting to FDA. We believe that our ability to sample for the virus using the less-invasive ANS will enhance compliance among students and asymptomatic individuals who may require multiple rounds of testing. Several academic institutions are contemplating COVID-19 safety programs based upon the use of our diagnostic kit to enhance the safety of students, faculty, and staff. We have recruited both internal and external sales infrastructures to drive demand for our diagnostic kit.”

Commenting on the development of the Company’s vaccine candidates co-developed with Takis S.R.L. and Evvivax S.R.L. (collectively, “Takis Biotech”), Dr. Hayward stated, “Tests on the linear DNA™ forms of our COVID-19 vaccine candidates provoked seroconversion in mouse models that are consistent with prior data from the plasmid forms of the vaccine candidates by Takis Biotech. Our results suggest that a low-dose vaccine could be potentially effective in providing protection while the T cell response suggests potential long-term persistence. We believe our results in animal models echo the effectiveness announced by some of the COVID-19 vaccines already in human trials. We have attracted the attention of ‘Big Pharma’ and are presently negotiating rights to novel delivery systems and funding for sophisticated toxicology screens done in collaboration with our partner Takis Biotech and their network of service partners.”

With regard to the Company’s non-biological business segment, Dr. Hayward said, “Our supply chain security segment felt the full brunt of COVID-19 in the fiscal third quarter that resulted in a further weakening of demand for tagging and related services across the global supply chain chains we serve. We remain focused on business-building in key industrial and regulated markets, including textiles, cannabis, personal care, nutraceuticals, and pharmaceuticals, ahead of the return of increased demand patterns.”

Concluded Dr. Hayward, “Looking ahead, we are focused on advancing our COVID-19 diagnostic kit and TaaS market strategy and progressing the development of the linear DNA™ forms of our vaccine candidates. To drive broader adoption of our kit by laboratories and to increase TaaS opportunities, we plan additional EUA amendments to further expand the base of RT-PCR systems relevant to our kit and to secure the ability to conduct asymptomatic screening testing, which we believe would confer onto us a potentially significant commercial advantage in the marketplace. We also await New York State certification of Applied DNA Clinical Labs LLC that would initiate commercial testing revenues.

“In the development of our vaccine candidates, we expect to launch toxicology screens once funding is secured followed by higher animal studies before initiating human trials. We are recruiting industry partners to lead on the regulatory process and distribution with Applied DNA serving as the sole-source manufacturer globally. With our linear DNA™ manufacturing platform, we are differentiated not only for our ability to manufacture any linear DNA™ form of a COVID-19 vaccine at extremely large scale, but also for our ability to react to any new variants of the virus with unrivaled speed.”

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