Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Applied DNA Sciences Inc (NASDAQ:APDN) reported a year-over-year increase in total revenues for the first quarter of fiscal '25, reaching $1.2 million compared to $891,000 in the same period of fiscal '24.
• The company has initiated a strategic restructuring to bolster cash reserves and optimize cost structure, focusing on the growth of its Linear RX subsidiary.
• The certification of the GMP site 1 facility marks a significant milestone, enabling Applied DNA Sciences Inc (NASDAQ:APDN) to produce DNA at scale.
• The company has exited the DNA tagging and security products segment, allowing it to focus resources on more promising areas.
• Linear RX has engaged over 25 customer projects in fiscal 2024, with expectations for multiple projects to enter the clinic in calendar 2025.

Negative Points

• Applied DNA Sciences Inc (NASDAQ:APDN) reported an operating loss of $3 million for the first quarter, although this was an improvement from the $3.8 million loss in the prior year period.
• The company implemented a workforce reduction of approximately 20% of total headcount, primarily affecting employees in the DNA tagging segment.
• Net loss for the first quarter was $2.7 million, compared with $1.1 million in the prior year period, indicating increased financial challenges.
• The company's 10Q filing maintains a disclosure of substantial doubt about its ability to continue as a going concern.
• Applied DNA Sciences Inc (NASDAQ:APDN) faces challenges in achieving profitability, with a need to further implement its business plan and generate revenues or raise capital.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with APDN.

Q: Could you provide any color on the new linear product and how you quantify the opportunity for CRISPR therapies versus conventional IVT or existing CAT therapies? A: Clay Shirock, President of LinarX, explained that there are parallels between the IVT template and donor DNA markets. PCR is effective at making blunt-ended DNA, which is useful for both IVT templates and CRISPR donor DNA. The CRISPR market, particularly in cell and gene therapy, is less mature than mRNA but holds significant potential, especially as CARTs move towards gene editing. The focus is on CART workflows and ex-vivo gene editing.

Q: Where did the revenue increases come from? Were they primarily from new customer acquisitions or increased scaling and manufacturing for existing customers? A: Beth Jansen, CFO, stated that the revenue increase was due to higher product revenues from DNA tagging for marking cotton, a contract with an existing customer, and increased volume in isotopic testing services. Clay Shirock added that the cotton tagging contract is being retained post-restructuring as it aligns with their existing workflows.

Q: What is the timeline and revenue recognition dynamics for the AML therapy in phase one? A: Clay Shirock noted that the phase one trial in the Czech Republic is expected to last about 18 months. The therapy uses a non-viral CAR system, which was chosen over plasmid competitors for its speed and regulatory ease. While the revenue opportunity may not be large due to its hospital-based nature, it serves as critical validation for linear DNA in clinical settings.

Q: Can you elaborate on the strategic restructuring and its impact on the company's focus? A: James Hayward, CEO, explained that the restructuring is aimed at optimizing costs and focusing on Linear RX, which has shown significant potential in the biotherapeutics market. The company exited the DNA tagging segment to concentrate resources on enzymatic DNA production, which is expected to drive sustainable shareholder value.

Q: What are the plans for LinarX in fiscal 2025? A: Clay Shirock outlined that LinarX will focus on monetizing GMP capacity for IVT templates, developing additional products, and leveraging platform scalability. The goal is to achieve growth and profitability with minimal capital expenditure, supported by a robust sales pipeline and ongoing customer engagements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.