Applied DNA Sciences (NASDAQ: APDN) reported Q4 EPS of ($0.82), $0.30 worse than the analyst estimate of ($0.52). Revenue for the quarter came in at $314 thousand versus the consensus estimate of $710 thousand.

Fiscal Fourth Quarter 2020 Financial Results:

• Revenues decreased 81% for the fourth quarter of fiscal 2020 to $314 thousand, compared with $1.7 million reported in the same period of the prior fiscal year and decreased 27% from $432 thousand for the third quarter of fiscal 2020. The decrease in revenues year over year was due primarily to a decrease in product revenues of approximately $1.1 million, which was primarily from shipments of DNA concentrate to protect the cotton supply chain during the prior fiscal year. The year over year decrease is also due to a decrease of $231 thousand in service revenues. The decrease in revenue quarter over quarter was due to a decrease in service revenue of $183 thousand, primarily related to the textile industry.
• Total operating expenses increased to $4.2 million for the fourth fiscal quarter of 2020, compared with $3.2 million in the prior fiscal year’s fourth quarter. This increase is primarily attributable to an approximate $313 thousand increase in payroll. This increase in payroll is primarily attributable to a reversal of voluntary salary reductions and increased staffing at Applied DNA Clinical Laboratories, LLC., as well as an increase in research and development expense of $353 thousand centered on the Company’s Linea™COVID-19 assay kit.
• Net loss applicable to common stockholders for the quarter ended September 30, 2020 was $4.1 million, or $0.82 per share, compared with a net loss of $1.5 million, or $1.44 per share, for the quarter ended September 30, 2019
• Excluding non-cash expenses, Adjusted EBITDA was negative $3.8 million and negative $1.6 million for the quarters ended September 30, 2020 and 2019, respectively. See below for information regarding non-GAAP measures.
• Cash and cash equivalents stood at $7.8 million on September 30, 2020. Subsequent to the fiscal quarter, the Company received two exercises of warrants associated with its November 15, 2019 underwritten public offering (the “2019 Warrants”). The first exercise totaled net proceeds of approximately $1.7 million to the Company that was used to repay all outstanding secured convertible notes of $1.7 million. In accordance with the 2019 Warrants exercise agreement entered into in October 2020, the Company issued approximately 159,000 replacement warrants at an exercise price of $7.52. The second exercise totaled approximately $1.05 million in net proceeds to the Company. Also, in accordance with the 2019 Warrant exercise agreement and the second warrant exercise, the Company issued approximately 100,000 replacement warrants at an exercise price of $6.57 for 50,000 replacement warrants and $6.46 for 50,000 replacement warrants. Approximately 460,000 2019 Warrants are outstanding as of December 10, 2020.

“Our activities in fiscal 2020 were principally devoted to the establishment of our diagnostic and surveillance testing programs for COVID-19 and to further positioning our proprietary LinearDNA™ manufacturing platform as what we believe to be a cleaner and higher-performing alternative to traditional vaccine development technologies in an environment moving at pandemic speeds to bring efficacious COVID-19 vaccines to market,” said Dr. James A. Hayward, president and CEO, Applied DNA. “With the shutdown in global supply chains severely affecting the performance of our supply chain security business, we redirected resources to our Biotherapeutics and Diagnostics markets: we initiated our own human and veterinary linear DNA COVID-19 vaccine development programs with partner Takis Biotech/EvviVax. While having clear public health goals, these programs also serve to validate our linear DNA manufacturing platform and its manufacturing advantages over plasmid DNA production that underpins current vaccine manufacturing technology; having acquired virus expertise as a result of our vaccine development work, we launched our Linea™COVID-19 Assay Kit (the “COVID-19 test”) and related testing services as part of a multi-pronged approach to the pandemic to establish new revenue streams.

“The result of these efforts was the development of a highly sensitive, highly specific, EUA-authorized diagnostic test that, when paired with safeCircle™, our pooled surveillance testing platform, is in the marketplace today as a cost-effective, and convenient means to help break the chain of virus transmission. We ended the fiscal year having secured our first customer of size for our kit, established an initial base of recurring revenue for our safeCircle platform, and initiated a clinical path for our lead veterinary vaccine candidate with an end goal of enabling commercial veterinary sales for domestic felines.”

Continued Dr. Hayward, “Our development efforts in fiscal 2020 have laid the groundwork for multiple inflection points in fiscal 2021. The sales pipelines for our COVID-19 test and safeCircle offerings are building. In particular, safeCircle is experiencing resonance in the marketplace that, together with a recently established ‘return-to-work’ partnership, enables us to target market niches we believe we can exploit profitably, such as local governments, private and enterprise clients, schools, and higher education athletics departments. We anticipate both offerings to scale up their contributions to our top-line over the coming quarters.

“Our own human linear DNA COVID-19 vaccine development program has not progressed as anticipated; however, the preclinical work we have conducted to date serves as the basis for a veterinary COVID-19 vaccine candidate that we believe offers a shorter and less costly regulatory path to commercialization. Domestic cats are a known virus reservoir and can easily transmit the virus to other felines. If all trial endpoints are met, we will apply for conditional licensure from the U.S.D.A., which we project to be in the latter half of the fiscal year. With about 58 million1 domestic cats in the U.S. and a likely first-mover advantage, we believe that a veterinary vaccine could be commercially significant to us if approved. We would then seek to expand the addressable market for our veterinary vaccine to include the farmed mink industry globally that has been ravaged by the virus, resulting in substantial commercial losses.

“As human COVID-19 vaccines obtain regulatory approval, we believe they evidence shortcomings in their manufacture and distribution that we believe are solvable by linear DNA forms of their vaccines. We believe our LinearDNA platform can produce PCR-based linear DNA at large scale enzymatically and likely with an improved safety profile, modify vaccines reliant on plasmids to address mutations in weeks, not months or years, and offer stability in distribution that potentially eliminates the need for expensive cold-chain requirements. This value proposition can benefit not only COVID-19 vaccines but also every nucleic acid-based program under development today. Concurrently, we see an uptick in contract research activity for biotherapeutic applications that we take to reflect the increasing value being placed on linear DNA by drug developers. Today, we are proud to count leading biotechnology and pharmaceutical companies working in the field of nucleic acid-based medicine as contract research customers. As manufacturing and distribution increasingly become key issues in advancing nucleic-acid-based therapeutic development pipelines, we expect that our LinearDNA platform will become increasingly relevant to existing and prospective customers.

“Finally, we await the return of increased demand patterns in our supply chain security market. The need for brand assurance and supply chain integrity remains as evidenced by our new supply agreement for our CertainT® platform with Pillar Technologies as it relates to the authenticity of personal protective equipment being consumed by our front-line healthcare workers, and by Nutrition21 who has transitioned its portfolio of IP-protected ingredients to CertainT. We remain cautiously optimistic on the prospects in this business in the new fiscal year,” concluded Dr. Hayward.

For earnings history and earnings-related data on Applied DNA Sciences (APDN) click here.