This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Good day, and welcome to the Applied DNA Sciences second fiscal quarter 2021 financial results call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded, and I'd like to turn the conference over to Sanjay Hari. Please go ahead.
spk04: Thank you, Jason. Good afternoon, everyone. and welcome to ApplyDNA's conference call to discuss our second fiscal quarter 2021 financial results and business updates. You can access the press release that was issued after market closed today, as well as the accompanying slide presentation to this call by going to the IR calendar page of our website. Speaking on the call today are Dr. James Hayward, our CEO, and Beth Jansen, our CFO. Judy Murrah, COO, and newly appointed Chief Legal Officer, Clay Chirac, will also be available to take your questions on the Q&A portion of the call. Before we begin, please note that some of the information you will hear today during our discussion may consist of forward-looking statements. I refer you to slide two of the presentation and to the company's Form 10-Q file today and Form 10-K filed on December 17, 2020, for important risk factors that could cause the company's actual performance and results that differ materially from those expressed or implied in any forward-looking statements. We undertake no obligation to update or revise any forward-looking statements or other information provided on this call as a result of new information or future results or developments. Now, it's my pleasure to introduce our first speaker on today's call, Beth Jansen. Please go ahead, Beth.
spk02: Thank you, Sanjay. Good afternoon, everyone, and thank you for joining us. I will begin this afternoon with a review of our consolidated financial results for the second fiscal quarter of 2021. Dr. James Hayward, our president and CEO, will then update you on developments across our COVID-19 diagnostics and surveillance testing businesses, as well as progress being made in our biotherapeutic and supply chain security markets. We will then open the call to questions from analysts and investors. To begin, we are pleased to report significant revenue in the fiscal second quarter, both on a year-over-year and quarter-over-quarter basis that was driven by demand for our linear COVID-19 assay kits and SafeCircle pooled COVID-19 surveillance testing service. despite the ongoing impact of the pandemic on our supply chain security business. Starting with the consolidated statement of operations, total revenues for the second fiscal quarter of 2021 increased to $2.7 million from $552,000 in the prior period. This year-over-year increase of 384% is primarily attributable to an increase in service revenue of $1.4 million, which was associated with Safe Circle that reflects a full quarter of testing for clients secured in the prior quarter. Second fiscal quarter revenues were up 65% as compared to first fiscal quarter revenues of $1.6 million. Product revenues increased to $965,000 for the second quarter of fiscal 2021 compared to $198,000 in the same period in the prior fiscal year. This increase is primarily due to sales of our COVID-19 Diagnostic Assay Kit. Cost of revenue as a percentage of product revenue in the second quarter fell to 37% compared to 91% for the prior period. The year-over-year improvement is due in part to a shift in product revenue mix, as our assay kit sales are at a higher gross margin. The decrease is also the result of certain fixed costs that were not fully absorbed with the level of product revenues in the prior period as compared to the period we are reporting today. Total operating expenses increased 52% or by 1.6 million to 4.6 million in the second quarter as compared to 3.1 million in the prior period. This increase was driven principally by greater SG&A and depreciation and amortization expenses. The increase in D&A relates primarily to equipment purchase to support our Safe Circle service and to produce our assay kits. SG&A expenses for the second quarter increased by $1.3 million to $3.6 million from $2.3 million in the prior period. The increase reflects higher stock-based compensation of approximately $422,000 and a higher headcount at our ADCL subsidiary, from which our Safe Circle service is based, of about $315,000. The balance of the increase in SG&A is attributable to supply purchases to support ADCL as well as to increase legal fees. R&D expenses increased by $171,000 to $874,000 from $703,000 over the prior period. This increase is mainly due to increased purchases relating to our clinical lab build-out as well as for the development of our recently announced COVID variant mutation panels that Jim will speak more about. Net loss for the second quarter narrowed to 1.5 million compared to 3 million in the year-ago period. Net loss for the second quarter includes a non-cash gain of $840,000 related to the extinguishment of notes payable associated with the full forgiveness of our PPP loan. Net loss per share for the second quarter improved to 21 cents compared to a net loss per share of 79 cents for the same period in fiscal 2020 on a higher number of weighted average shares outstanding. Excluding non-cash expenses, consolidated adjusted EBITDA improved to a negative 1.5 million for the second quarter compared to a negative 2.6 million in the prior period. Now turning to our balance sheet, given our enduring commitment to financial strength and liquidity and a purposeful approach to reducing debt, our balance sheet is at its strongest in several years. This affords us substantial strategic flexibility and the capacity to make investments in R&D and commercial initiatives to further enhance our growth profile. Cash and cash equivalents totaled $13.9 million on March 31st. This figure includes net proceeds of approximately $13.8 million from a registered direct offering conducted in January. Our working capital increased by $11.7 million in the second fiscal quarter of 2021 to $15.3 million, up from $3.6 million at the end of the first fiscal quarter of 2021. Accounts receivable stood at $2.2 million at March 31 compared to $1 million at December 31, 2020. And following the extinguishment of our PPP loan, we are now debt-free. Our average monthly cash burn rate net of financing and warrant exercise proceeds for the three months ended March 31, 2021, was $1.4 million compared to $893,000 for the year-ago period, an increase of 58%. The increase is primarily due to capital expenditures for our clinical lab subsidiary. and purchases of the equipment that underpins the production of our diagnostic assay. Now that our clinical lab is fully operational, we expect our capital expenditures to normalize, which coupled with the increased revenue levels compared to the prior fiscal year, should result in a trend of lower cash burn in the second half of fiscal 2021. Our cash position on April 30th was approximately $13.4 million. We believe we have adequate cash to fund operations for at least the next 12 months from today. Our warrants balance remains unchanged. Approximately 460,000 November 2019 warrants remain outstanding as of May 12th, 2021. that carry an exercise price of $5.25. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.
spk08: Thank you, Beth, and good afternoon, everyone. Thank you for joining us on our quarterly call. I hope you and your families are keeping well. The seeds of our financial performance in the second quarter And in the first half of the year, really, we're planted one year ago with the EUA for our linear COVID-19 assay kit, which we secured in May, and the launch of Safe Circle surveillance platform in our September quarter. While pleased with our execution of the commercialization of our diagnostics to fight SARS-CoV-2, We are equally pleased with the concurrent execution on our long-term goal to establish linear DNA as a manufacturing platform and a disruptive alternative to today's DNA sourcing standard, which is plasmids. Before I begin, I'm happy to welcome back Clay Chirac to the Applied DNA team. Clay previously led our regulatory and IP efforts both internally and more recently as a valued external counsel. His return as a member of the management team highlights our pursuit of highly regulated markets with our linear DNA platform that will be greatly informed by his expertise. COVID-19, while devastating to so many, has also triggered change, innovation, and investment across the biopharmaceutical industry that will have benefit to society for years to come. It spurred profound change, allowing a role for many new drug mechanisms to be effective, whether it's messenger RNA or lipid nanoparticles or even viral vectors like AAV. The pandemic has also had a benefit for diagnostic manufacturers with over 300 authorized COVID-19 tests currently in the marketplace. The health sciences components of our business have been made more relevant by the pandemic. We see this interest manifested within our linear Rx products and services where we are seeing greater interest in linear DNA, as an alternative to the plasmid-based manufacture of nucleic acid-based therapies. The pandemic also accelerated our own push into the diagnostics field with the development of our assay kit and the launch of our Safe Circle service. The commercial success of our COVID-19 testing business has shown On this slide, in the commencement of the first-ever clinical trial for a linear DNA-based therapeutic at LinearX has brought these health sciences endeavors to the forefront of our business. As Beth stated, our supply chain security business has been negatively impacted by the pandemic, but the brands and their supply chains have been changed by the pandemic, and they are moving to emerge from it. operationally different from when they entered it. As they emerge, we believe our certainty platform, also powered by our linear DNA platform, offers a unique multi-layered approach to supply chain security to enable the trust that both brands and consumers seek more intensely than 18 months ago. I'll focus my remarks today on our strategic and operational execution during the quarter to advance our goal of establishing our linear DNA manufacturing platform and to offer certain milestones in the second half of the financial year, which you can use to benchmark our progress. Our goal is straightforward. We want to be a key player in the global alternative to viral vectors and to that plasmid manufacturing markets that were valued together in 2020 as $2.2 billion and are expected to grow at a compounded annual growth rate of almost 20% through 2028. Our strategy is to develop and advance a pipeline of linear DNA-based therapeutic candidates, the clinical data from which will make linear DNA relevant to the broader universe of preclinical nucleic acid-based therapies being developed. This simultaneously gives us a path to commercial sales, as is the case with our veterinary COVID-19 candidate trial. Now, as Beth also noted, we do have a strong balance sheet, in fact, the best in years, and that provides us the strategic flexibility to pursue the promise of linear DNA. We have and continue to make investments in our operations, the payoff from which we expect to see both in the near term and beyond. Our assay kit is the foundation of our COVID-19 testing business. It serves to power our Safe Circle Pool surveillance testing service and is available for diagnostic use in CLIA-certified labs such as our own. During the second quarter, we received a third purchase order from our key customer for our assay kit. And after quarter end, we received a fourth To date, we've seen no decrement in testing rates for this customer. To the contrary, a recent order for commencement related testing has increased the rate of testing. We are in discussion about a fall semester return strategy when more students and faculty are expected to be on campus. And vigilance about the then relevant variants of concern will likely be greater. Safe Circle, and by extension, ADCL, our clinical lab, has been a standout performer for the company. We do not intend to report operating metrics on a per-subsidiary basis, but to offer some important context on this business that is only two quarters old, ADCL was solidly profitable exiting the fiscal second quarter. Vaccine distribution is an enormous success in the US. This accomplishment, combined with adherence to social distancing, is driving expectations for an attenuation of testing rates. But our strategy differentiates us from the crowd of companies offering traditional positive negative testing. Let me tell you how, using the pillars of lab certification, the extension of REUA, and the growing impact of variants. On Tuesday of this week, we announced ADCL's receipt of CLIA certification by the New York State Department of Health Clinical Laboratory Evaluation Program, or CLEP. for COVID-19 testing using EUA-authorized methods and devices. Now, this is potentially a game-changer development for the clinical lab, certainly one that has ramifications beyond COVID. ADCL is now able to serve as a diagnostic laboratory to conduct high-throughput diagnostic COVID testing using our assay kit. meaning that we can now attack testing markets previously unavailable to us, such as overflow diagnostic business from third-party and hospital clinical labs, and we are in the midst of a hospital environment. It also means that we can report the individual results from the disambiguation of a positive pool in our surveillance testing, Now this requires diagnostic testing that we previously outsourced to third party labs. Now we can capture a greater percentage of the safe circle economics. And as we announced just yesterday, we received a reissued EUA from FDA, expanding the intended use of the linear assay kit to include asymptomatic serial screening testing. Now, we're really excited about the expanded use of our assay kit, and we'll provide more details on how an asymptomatic serial screening program, say that three times fast, will be implemented by ADCL. Our goal has always been to make the testing process as easy as possible for a client. Service and turnaround time have been two of our important market differentiators. With asymptomatic serial screening, we are building a testing workflow wherein there is no need for individual testing subjects to obtain an individual prescription from their healthcare provider for testing, thereby streamlining their access to testing. As part of this client-centric workflow, any necessary prescriptions for asymptomatic serial screening testing will be provided by a standing order or a blanket prescription obtained from a healthcare provider that's engaged by our clinical lab. This process will definitely be appreciated by our testing customers, and we believe that this streamlined testing program which can provide individual testing results to serially tested individuals with or without COVID symptoms, is a compelling offering to support the safe opening of the economy and to help curb COVID outbreaks in communal locations such as schools, businesses, and skilled nursing facilities. Specifically, we are targeting profitable market niches where the high touch service we have brought to private clients and businesses, and in particular to schools, is readily applied. Our sales and marketing efforts have pivoted to summer camps now that are reopening and other venues that can serve as a nexus for vaccinated and under vaccinated populations coming together. with increasing frequency. Within our deep base of schools, we are already part of conversations to extend testing into the new academic year. Higher education, given the confluence of different age populations with different vaccination rates and a mix of in-state and out-of-state students, are particularly well served to continue testing to mitigate outbreaks to avoid a second consecutive year of disruption. Now CLIA certification also gives us the ability to offer a client the choice between serial diagnostic testing or pooled non-diagnostic surveillance testing to meet the unique testing requirements of a diverse range of clients and their reopening strategies. Our approach to the evolving variants is grounded in our ability to detect the salient mutations that characterize the variants in order to expand our addressable market. One only needs to look back 10 or so weeks to see the rise of variants, some of which demonstrate increased infectivity, and have displaced the wild-type virus and their driving infection rates today. The launch of our SGS panel also serves to expand our addressable market for testing and the opportunity for additional revenues. The SGS panel reflects our belief that efficient identification is key to limiting the spread of variants that can potentially render vaccinations and certain therapies ineffective. We believe that our panel, currently available as Research Use Only, or RUA, RUO, solves two issues. First, when used in conjunction with our assay kit, the SGS panel screens for currently seven mutations that comprise certain variants of concern, with additional relevant mutation targets added as they arise. This approach allows the rapid and inexpensive identification of mutations that are concerning in the clinical community, such as those that confer resistance to certain therapies or specific antibodies. In comparison, NGS, or next generation sequencing, can take several days to conduct, and likely longer, still given the limited capacity available nationally. This weight can have a clinical impact on a patient's outcome. The second standard of care for COVID-19 is currently based on positivity and not variance. Upon confirmation of infection, a patient is typically treated with a monoclonal antibody typically right there in the emergency room, to reduce viral load and improve outcomes, thereby keeping them out of the hospital. The FDA recently cited the frequency of variants as the primary reason for why the EUA for a key monoclonal antibody was rescinded. Contained in the FDA's revocation letter was the following phrase, and I quote, Additionally, there are currently no testing technologies available that enable healthcare providers to test patients for SARS-CoV-2 viral variants prior to the start of treatment with monoclonal antibodies. We believe that our SGS panel, in effect, is the tool that FDA and all healthcare providers need in this pandemic to ensure the continuing efficacy of therapies being deployed. It could be used to identify variants in patients while they're still in the emergency room. It can help doctors choose monoclonal antibody cocktail therapies on the basis of variant identification. Over the long term, we can envisage use of the panel in this manner to lead to more effective clinical standards of care and to actually lower the monoclonal antibody doses and in turn lower the risk for the patient and the cost for the healthcare system. Finally, it can help to match convalescent plasma by variant. The development and validation of our panel has progressed extremely well. Through a partnership with Northwell Health, we have run over 1,200 clinical positive samples. The results are quite compelling, and they show that our qPCR-based mutation panel can identify clinically relevant mutations that impact antibody treatments in real time. Furthermore, we have generated our first NGS data using our new in-house capability. The result is that we have a great body of data. The SGS panel works as we expected, and we saw 100% concordance on all seven mutations. Given these findings, we expect to file a pre-application for an EUA for our SGS panel soon to demonstrate to the FDA that the tool our country needs is already available and validation well underway. We believe that the need for testing, be it for infectivity or variant discrimination, is still going to persist, especially in the venues I outlined. Our efforts in this regard have not wavered. And to that end, our expansion into genomic surveillance and NGS sequencing offers the opportunity for additional new markets and revenue. Now, longer term, as we gain additional diagnostic approvals from New York State via validations and proficiency testing, our CLIA certification broadens the scope of our clinical lab business to include the development and commercialization of a growing portfolio of novel diagnostics and complementary services, including the fields of oncology, virology, infectious diseases, among others. The ability to develop laboratory-developed tests or LDTs can monetize our invasive circulating tumor cell platform beyond our current revenue producing collaboration on a pancreatic cancer trial. You may be aware that our ICTC platform is a novel liquid biopsy platform that uses a patented functional assay to capture live invasive circulating tumor cells and associated lymphocytes that can be identified and expanded for further analysis. The ability to compile evidence of ICTC count correlation with cancer disease and therapeutic efficacy could be a significant benefit to oncologists everywhere who would send us samples that we would run at Applied DNA's clinical lab. Now let's turn to LineaRx. We are progressing along two current paths. Now with respect to our supply of DNA to other manufacturers of diagnostics, we are growing this business at a time principally through one customer who has expanded its use of linear DNA from one to three diagnostic assays incorporated into their equipment-based platform. The first, used in the early detection of liver cancer, is already in market and the demand is leading to recurrent orders for our DNA. The other two are in the R&D phase and we believe they are both proceeding along their respective development paths toward commercialization using linear DNA as the functional DNA component. Now, with respect to DNA-based therapeutics, we continue to provide linear DNA to companies evaluating it against plasmids for their own therapeutic constructs. And at the start of this call, I noted that the pandemic has catalyzed interest and deployment of new drug development technologies, particularly related to nucleic acid therapies. To put this into context, prior to the pandemic, there were very few nucleic acid-based therapies that had been approved by FDA. Over the past 15 months, We've witnessed EUAs for three nucleic acid-based vaccines developed and trialed with hundreds of millions of the vaccinations administered in the U.S. alone. As I also noted, we see this interest manifested at our own linear Rx with more customers and more complex projects coming to us driven by linear DNA. An environment that finds both therapeutic companies and the FDA more receptive to novel technologies is an opportune time to further develop and commercialize our unique platform. So the time is now. Our approach to our linear DNA therapeutic strategy is to first focus on veterinary solutions because they have a lower regulatory threshold than human therapies and theoretically an easier path to market. They require less regulatory work, are less expensive, and for us, more immediately achievable. Data generated in pursuit of a veterinary vaccine is useful in our eventual pursuit of a human therapy. Key to this strategy is to seek out sponsorship to help us better manage the regulatory pathway for linear DNA-based therapies. Now, we have a therapy in the clinic, our linear DNA-19 veterinary vaccine candidate that was first tested in family-owned domestic cats. Immune responses in our cohort have been very robust, and in fact, beyond our expectations following administration of the booster vaccine. In the next few weeks, we'll provide data on cellular immunity given prior preclinical trials that we conducted in mice. It would strongly suggest response durability. The current domestic feline trial will continue through September. when we measure long-term neutralizing antibody titers. Given the USDA, the regulatory body that governs veterinary clinical trials, and their focus on the protection of agricultural animals such as minks against SARS-CoV-2, excuse me, we intend to initiate a mink challenge trial as soon as practicable. The challenge trial will accrue the same data we have reported to date in cats. However, we now have a basis for our expectations, and we will generate this data in minks. A mink challenge trial will also incorporate dose and response data. The second half of the mink trial will include challenging vaccinated versus unvaccinated minks. to generate the percent protection data very similar to the data we've all seen for the human vaccines. If our endpoints are met, we plan to use these data to approach USDA for conditional licensure of our vaccine candidate for minks. Should the USDA express interest in the protection of domestic felines or should cats become a viral vector for human transmission, we would immediately pursue a feline challenge trial. Beyond the veterinary COVID-19 trial, we are continuing the preclinical development of our linear DNA platform to optimize its application to human therapies. Now, on prior investor calls, I've spoken about our CRO customer base that is comprised of the who's who of the pharmaceutical industry. As these customers succeed in their free clinical work, they begin to contemplate the human clinic and eventually product launches. To sustain deeper commercial relationships with these companies, we continue to a phase-based approach to FDA-compliant CGMP capacity that's sufficient to support a deeper commercial interest in our linear DNA, as well as our own needs for our veterinary vaccine candidate. We are aligning our CGMP upgrades to meet customer requirements throughout this year, Complementing our infrastructure and regulatory work, we needed to pave our path to market. We will continue progress in our foundational technology. We have enhanced our production capacity and our ability to simultaneously manufacture multiple linear DNA constructs. Now, some customers have asked us to develop the capacity to deliver fully formulated therapeutic linear DNA, including the delivery vector. To that end, we are working with an outside development team to design and produce lipid nanoparticles similar to those utilized by the two commercialized messenger RNA COVID vaccines. And to enhance these studies and provide preliminary proof of concept, we are expanding our cell biology suites to better enable us to quantify transfection and expression of therapeutic linear DNAs after delivery to the nucleus. Now, we previously talked about the impact of the pandemic on our supply chain security business. And within this, textiles have been particularly hard hit. At the same time, supply chain security has not been without certain successes. Year-over-year revenues from the wellness and dietary supplement and market of this business saw a 2.5-fold increase in the fiscal second quarter. This was driven by Nutrition 21 and its transition to our CertainT platform late last year to secure its entire portfolio of dietary supplement ingredients. We are expecting growth in this supplement sector. In terms of textiles, we have seen brands use the pandemic time on their development activities to ensure an even stronger market position coming out of the pandemic. Their efforts have centered around sustainability, brand protection, and supply chain traceability. Within cotton, we anticipate a resumption of tagging orders coincident with the macroeconomic trends of household goods upgrades. Himatsinka, our cotton ally in India, is benefiting from a home textiles market made strong by stay-at-home orders. Beyond home textiles, we continue to investigate the potential for our entry into the substantially larger apparel market. Cotton is also where we can apply our newly acquired NGS, next generation sequencing capability. Gossypium hirsutum, also known as upland cotton, is the most widely planted species of cotton in the world. Globally, about 90% of all cotton production is of cultivars that are derived from this species. As such, it's hard to discriminate between upland cotton grown in one part of the world from another. But the passage of the Uyghur Forced Labor Prevention Act and with the US Customs and Border Patrol now holding textile goods in ports pending verification of provenance. Suppliers, retailers, and brands are at the mercy of Xinjiang cotton that comprises fully 20% of the global cotton supply. We've initiated an R&D plan that will leverage our deep expertise in cotton genotyping and next generation sequencing capability. to support brands seeking to meet these new regulatory requirements. We have seen this regulatory action drive a significant uptick in interest in our certainty platform from those seeking to mitigate heightened supply chain risk following the passage of the Act. If successful, the Act could serve to catalyze the adoption of certainty more broadly. Over the course of the pandemic, we have been working a leading supplier to brands whose products are pervasive in the textile industry with whom we believe that an imminent new product launch serves as a bellwether event for our textiles practice. In the process, we have eliminated what was previously an obstacle to broader adoption of our CertainT platform. the ability for brands to do their own DNA testing. We anticipate announcing additional details about this launch in the next month or so, but I'd like to applaud our textile team for setting us up for what we feel is a market signaling accomplishment. In this regard, stay tuned. Last, the award last week by the Defense Logistics Agency for counterfeit mitigation, continues a contract first awarded to us in 2014. The continuity of contracts from DLA reflects the testing and validation of our platform previously conducted and proven, a platform that remains efficacious in its counterfeit mitigation role with the federal government to this day. So with that, I would like to ask the operator to open the call to questions. As a reminder, both Judy and Clay are available to offer additional color or clarification on your questions.
spk06: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Jonathan Ashkoff from Roth Capital Partners. Please go ahead.
spk01: Thank you, guys, and congrats on the progress. My first question is, what is your sense of the commercial appetite and thus the partnership potential for a mink vaccine?
spk08: Without the vaccine, the mink industry can't return to its prior status. So it's the only way for the mink industry to come back. And we think that is the nearest term and greatest opportunity. The USDA is not currently accepting applications for domestic felines. But we hope that they revisit that issue as we've laid really the groundwork in domestic cats. I note also that the similarity of the clinical picture in affected minks, ferrets, and humans and the efficient replication of SARS-CoV-T in the mink upper respiratory tracts makes them a highly suitable model for evaluating human vaccine candidates. So I think the pivot to mink is perfectly timed and well-suited for our future.
spk01: You know, regarding relatively near-term revenue opportunities, can you update us on the cannabis tagging and the invasive CTC programs? I'm sorry if I missed this. I missed some of the call.
spk08: No, you didn't miss. I didn't really speak to the cannabis issue today. We see a tremendous amount of interest and some very creative business approaches. You know, it's still very much an industry in flux, but it's definitely moving forward. State after state has made cannabis legal. And we think that we'll have opportunities both at the level of state governments and at the corporations who are developing the products. So we are very excited about cannabis tagging.
spk01: And then the invasive CTC, that seems a little more under your control, I would imagine.
spk08: Yes, and obtaining the CLIA certification will be a big help. So right now our ICTC business is based on an RUO platform, a research use only platform. But in that context, we're working with oncologists and working with Time Pharmaceutics in a phase three clinical trial on stage four pancreatic cancer patients. And we're excited about that study, and it's yielding good data. We've learned we can develop organoids from these patient cell cultures, and that may be an opportunity for precision medicine in the future. And with the CLIA certification, we hope to develop tests that we can get approved by New York State Department of Health. And I think that oncologists would be very interested in the utility of that assay.
spk01: Did you guys give any update to 2021 revenue with the CLIA certification and being able to test asymptomatic patients?
spk08: No, we've not provided any guidance at this stage, Jonathan.
spk01: Okay. Thank you very much, James.
spk08: You're welcome. Thank you.
spk06: Again, if you have a question, please press star, then one. Our next question comes from Anthony Vendetti from Maxson Group. Please go ahead.
spk07: Thanks. Jim, you mentioned on the linear DNA platform, you have two in the R&D stage working with some of these large pharmaceutical companies, and then you have one that's moving forward. I was wondering if you could, without giving their names, but just quantify the opportunity, what this could mean, could mean both from a business standpoint and then potentially from a revenue standpoint down the road?
spk08: Sure. Well, for the initial commercial effort that's already in the marketplace, that client is ordering grams of DNA effectively each quarter. and we have steadily delivered high-performing product. And that's really led them to develop two more for an equipment platform that's already being deployed all over the world. And so I think it's likely that those two in development will also succeed in the marketplace. And that's just a reflection of a single customer. And while that was our first customer in the sale of DNA to diagnostics, it parallels our development in the sale of DNA for therapeutics for which we have dozens of customers.
spk07: On the therapeutic side, you have dozens of potential customers.
spk08: We have dozens that we're working with in a CRO modality, a couple of which are really on the verge of becoming CMO customers, and they're part of the reason, part of the drive to ensure we have CGMP capability primed and ready to produce the product that they would need for higher animal studies or for the first human clinicals.
spk07: Okay, great. And then just shifting gears, you said you anticipate a pickup in cotton as things return to normal. Do you have a timeframe where you think that that could start to pick up? Is that this quarter? Is that towards the end of this year? Or is that more of a fiscal 2022 situation for you?
spk08: Yeah, the timing can be a little difficult to estimate. You know, the ginning season for cotton really doesn't begin until October, and it begins in earnest really at the end of the calendar year. So we've seen orders before as early as June, but there's no telling really. back pressure that's developed in consumers in their purchasing of cotton products is that this customer, this client, is growing their cotton business quite well, and so we're hopeful that their needs will be strong.
spk07: Okay, great. I'll jump back in the queue. Thank you.
spk06: Okay, thanks so much. Again, if you have a question, please press star, then 1. Our next question comes from Jay Rogers from Rogers Investor. Please go ahead.
spk05: Yes. The last 10 years that I've been a total believer in your company, Mr. Hayward, how do you see the next year in your mind versus the last 10? Yeah.
spk08: This definitely feels like a transitional year. I mean, it has been already in such a short time. We spawned a brand new business, very relevant to our core capability, that is PCR. We've used PCR as a diagnostic tool. We've achieved certification in the most difficult state in the union to do so. and we've built a business out of it. And so I think there's opportunity there, and it's perfectly matched with our therapeutic capabilities. So when you combine the ability to do diagnostics and the ability to develop therapeutics, you have in the same location the ability to steadily improve your approach to that therapeutic. So I think we're in great shape for rapid change, and we've captured the attention of the biotech marketplace with our linear DNA platform. More and more of those big players understand the value proposition we offered them originally two years ago, which is gradually becoming more and more visible. Thank you. You're welcome.
spk06: Thank you, Jay. Again, if you have a question, please press star, then 1. Our next question comes from Anthony Vendetti from Maxon Group.
spk07: Please go ahead. Yeah, just a quick follow-up on the supplement side of the business, Jim. Nutrition 21, can you talk a little bit more about that opportunity, the magnitude for what that could mean? Is it early in terms of that market opportunity, or could that develop into a significant market for you over time?
spk08: Sure. Well, Judy Murrah, our COO, has been spearheading this business, and I pass the question to her.
spk03: Okay. Thank you. Anthony, the Nutrition 21 opportunity that we have is really the beginning. It has established a case study and validation of our tagging technology for in the tagging and in managing their contract compliance with their customers, how much of their ingredient is being put into the products, as well as IP protection. So the value proposition for them is very strong. They're very vocal about it, and we'll be able to use that into other markets or into other customers within that segment. And just like we were talking about home goods, the pandemic has spawned a consumer interest in health and wellness. So the dietary supplement business itself is seeing pretty high growth rates.
spk07: Okay, great. And that seems like a good market opportunity because the supplement business isn't FDA regulated. So there's obviously plenty of instances that I've come across, and I'm sure you have as well, where a particular supplement says it has X amount of this supplement or this chemical compound or mineral, and it really doesn't, right? So this is the ability to tag it and make sure that it's it is adhering to compliance and so forth, seems like a perfect match for what applied DNA could do.
spk03: It is, and our molecular tag has certain benefits that other technologies of that sort, whether they're UV-based or other competitive things, just can't do. So we have very high-resolution testing, and and the legal forensic testing labs to help put some teeth behind it. The other thing is it's a nice use case to help to establish tagging in the pharmaceutical area as well. That's only just like one half step away of a market. So we can use this as well.
spk07: Okay, great, that's helpful. Thank you very much.
spk06: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Dr. James Hayward for any closing remarks.
spk08: Okay, thank you very much. So our remarks today serve to highlight our focus on executing on the diverse opportunities that are ahead of us. We've had strong top-line growth And by demonstrating disciplined investment in our operations, we have the foundation for continued execution in the second half of the year. We have the financial means, the enhanced management depth, and a singular focus to turn the promise of linear DNA into reality. Well, thank you all, and stay safe.
spk06: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer