Applied DNA Sciences Inc (NASDAQ: APDN) Share prices soared on Tuesday after the company announced it had begun analytical validation of a PCR-based monkeypox virus test.
Validation is underway at the company’s wholly-owned clinical laboratory subsidiary, Applied DNA Clinical Labs. If validation is achieved at subsidiary laboratories, a validation dossier will be submitted to the New York State Department of Health for approval.
The approval will see the test be used to power Applied DNA Clinical Labs monkeypox testing services.
What is Applied DNA Science?
Applied DNA Sciences is a life science company focused on DNA production and detection.
The company develops and markets DNA-based technology solutions for the drug development and manufacturing markets, as well as for supply chain security, anti-counterfeiting and anti-theft technology purposes. .
The Company’s supply chain security and product authentication solutions include SigNature Molecular Tags which provide forensic potency and protection for various applications used to enhance brand protection efforts and strengthen the supply chain security, as well as to tag, track and convict criminals.
The Company also manufactures and sells COVID-19 PCR-based molecular diagnostic test kit under the brand name LineaTM COVID-19 Assay Kit and COVID-19 diagnostic test kits to prevent the spread of the virus within a community, school or workplace under the safeCircle brand.
The Company also provides contract research and preclinical manufacturing services for nucleic acid-based therapeutic markets and contract research services to RNA-based drug and biologics customers for preclinical studies.
The company, which was founded in 1983 and is based in Stony Brook, New York, was formerly known as Datalink Systems and changed its name to Applied DNA Sciences, Inc. in 2002.
The company has two subsidiaries, namely:
Applied DNA Clinical Laboratories is the Company’s clinical laboratory subsidiary and is licensed by the State of New York to provide and develop clinical molecular diagnostic testing services.
LinearRx is the company through which APDN is developing its LinearDNA platform, which aims to enable the rapid, efficient, and large-scale cell-free manufacturing of high-fidelity DNA sequences for use in nucleic acid-based therapies.
How Does Applied DNA Science Make Money?
The company currently derives the vast majority of its revenue from clinical laboratory services, with its second-quarter performance outpacing revenue from revenue for the company’s full fiscal year 2021.
This activity generates revenue by winning contracts with customers to provide testing and related services.
Financial data on APDN shares
The company’s results for the second quarter of 2022, which cover the three-month period ended March 31, showed that APDN recorded:
Revenue increased 130% to $6.1 million.
Total operating expenses increased from $4.0 million to $4.5 million.
Net loss applicable to common shareholders of $0.23, compared to $0.21.
Cash and cash equivalents amounted to $6.5 million at March 31, compared to $6.6 million six months earlier.
In the year to date, the company’s share price has fallen more than 53% at the time of writing.
APDN growth potential
The Company’s growth strategy is to focus its resources primarily on the development, commercialization and customer adoption of its therapeutic DNA manufacturing services, including the expansion of its development and manufacturing operations under contract for the manufacture of DNA for nucleic acid therapies and the development of its own product candidates in veterinary health.
To offset these development costs, the company intends to leverage its MDx testing services and DNA tagging and security products and services businesses to generate cash flow.
This means that in the long term, the company’s growth prospects seem to depend on the success of its LinearDNA platform. It is the company’s platform for the rapid, efficient and large-scale manufacture of high-fidelity DNA sequences for use in nucleic acid-based therapies.
The product of this process is an alternative to the plasmid-based DNA manufacturing technologies that have provided the DNA used in biotherapy for the past 40 years.
A May 2021 report from the American Society of Gene and Cell Therapy showed that there were approximately 1,745 gene/cell therapies and 600 RNA therapies in development, numbers that have been growing every year. This indicates a strong demand for DNA for research, clinical development and therapeutic manufacturing.
APDN says the manufacture of plasmid DNA traditionally used is complex and fails to meet current levels of demand, saying LinearDNA is well positioned to pick up the slack.
APDN Investment Risks
With the company currently investing significantly in its DNA production services, the main risk the company faces is running out of cash before this segment of the business can begin to generate meaningful revenue.
This means that cash consumption is the main concern. However, cash burn declined due to the impressive revenue growth of the company’s clinical laboratory subsidiary over the past 12 months.
However, the decline in testing demand could pose a significant risk to this high-performing business segment and, therefore, to the business as a whole. The company acknowledged that demand is expected to decline over the summer months due to its large college clientele, although it expects demand to pick up as the new academic year begins in the fall.
Additionally, there is a risk that the research data regarding LinearDNA may not be as positive as expected.
The second half of the year should bring data on the applicability of the company’s LinearDNA platform to the manufacture of advanced therapies, including mRNA, adoptive cell therapies and DNA-based vaccines. Although previous data has been positive, poor performance in any type of research could hamper the company’s efforts to pursue commercialization.
Is APDN Stock a good investment?
Applied DNA Sciences is an intriguing proposition. The company has cleverly reduced cash burn through the success of its clinical laboratory offering and is focusing on the production of therapeutic DNA. Revenue growth is solid and the company has been able to raise funds from investors, which has given it a good platform to invest in its own development.
However, the company’s long-term goals seem much more uncertain. There are few guarantees that testing will continue to be such a concern, so the strong revenue earned from the clinical laboratory business could dry up before APDN’s LinearDNA offering begins to generate revenue of its own. .
However, if LinearDNA’s commercialization is successful, the returns for investors could be very significant.
Although APDN is already generating revenue and has a fairly diverse offering, it carries similar risks to investing in a clinical-stage pharmaceutical company. Indeed, its long-term efforts are directed towards a product that is not yet at the commercial stage. As such, any investment in the business is inherently risky.
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