BNB Plus Corp. (BNBX) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon, and welcome to Applied DNA Sciences Incorporated First Quarter Fiscal 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Investor Relations at Applied DNA. Please go ahead.

Thank you, Gary. Good afternoon, everyone, and welcome to Applied DNA’s conference call to discuss our first quarter fiscal year 2022 financial results. You can access the press release that was issued after market closed today as well as the accompanying slide presentation to this call on the Investor Relations section of our corporate website. Speaking on the call today are Dr. James Hayward, our Chairman, President and CEO; and Beth Jantzen, our CFO; Judy Murrah, our COO; and Clay Shorrock, our Chief Legal Officer and Head of Business Development, will also be available to answer 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 2 of the presentation and our Form 10-Q filed a short while ago for important risk factors that could cause the company’s actual performance and results to 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. I also want to inform you that management will participate virtually in next month Annual ROTH Conference. Please get in touch with your ROTH representative to schedule a one-on-one with us. Additional conferences will be posted in the coming weeks. Now it’s my pleasure to introduce our first speaker in today’s call, Beth Jantzen. Please go ahead, ma’am.

Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our first quarter fiscal 2022 investor call. I’ll begin today with a review of our consolidated financial results for the first quarter of fiscal 2022, which ended on December 31, 2021. I will then turn the call over to Dr. James Hayward, our President and CEO, who will summarize our operational performance for the quarter and outline key initiatives for the balance of fiscal 2022. We will then open the call to all of our analysts and institutional investors. Beginning with the statement of operations. As a reminder, we now present the revenue and the cost of providing testing services performed by our clinical laboratory, Applied DNA Clinical Labs or ADCL, has separate line items in the statement of operations. Following our record high revenue performance in fiscal 2021, we are pleased to start fiscal 2022 with a record revenue quarter. We are seeing continued momentum in COVID-19 testing, which provides population scale, integrated testing solutions and services to enterprises and institutions, such as the City University of New York school systems or CUNY, and other institutes of higher and lower education as well as commercial businesses. Total revenues for Q1 were $4.2 million as compared to $1.6 million in the year ago quarter and $3 million in Q4 of 2021. This year-over-year increase in quarterly revenue is primarily attributable to increased clinical laboratory service revenue, comprising testing and related services. On a sequential basis, Q1 revenues increased 37%. It was also due to an increase in clinical laboratory service revenue. To offer context on the strength we are seeing in testing, our record revenue performance was achieved despite schools’ winter recess during which testing demand softens. Product revenues were $826,000 in Q1 compared to $550,000 in the year ago period. The year-over-year increase of $267,000 was due to increased sales of $308,000 for the final shipment of DNA molecular taggant for a textile application. This increase was offset by a decrease of $52,000 in sales of our Linea 1.0 Assay. Service revenues were $139,000 compared to $290,000 in the year ago period. This decrease of $154,000 reflects the completion of R&D projects in our pharma, nutraceutical vertical, as well as at LineaRx. Service revenues comprise research and development pilot projects and authentication services associated with our industrial DNA business. Clinical laboratory service revenues increased to $3.2 million compared to $773,000 in the year ago period. On a sequential basis, clinical laboratory service revenues almost doubled from $1.6 million in Q4. The increase was driven by higher COVID-19 testing, within which our testing contract with CUNY was the primary contributor. As a reminder, our CUNY contract was entered into midway through our fourth quarter, making therefore Q1 was our first full quarter under this contract. Starting this quarter, we began allocating depreciation expense versus showing it as a separate line item on the P&L. As a result, we are presenting a gross profit line on the face of the statement of operations. This change will continue going forward. The gross profit percentage was 27% and 68% through Q1 and then the year ago period respectively. The decline in gross profit percentage resulted from a substantial portion of clinical laboratory service revenues coming from testing contracts, where we also provide the staff and testing centers. These contracts have higher costs associated with them compared with our testing contracts, where we do not staff testing centers. To a lesser extent, the decrease in gross profit percentage was due to product sales mix. Our sales during the year ago period included a higher volume of sales of our Linea COVID-19 1.0 Assay Kit, which had a higher gross margin. Total operating expenses in Q1 increased 41% or $1.6 million to $5.7 million, compared to $4.1 million in the year ago period. The year-over-year increase is attributable to an increase in stock-based compensation expense of $1.1 million, primarily relating to officer stock option grants that vested immediately, as well as to the annual non-employee Board of Directors grants. To a lesser extent, the increase reflects higher research and development costs associated with outsourced service contracts and increased payroll associated with our ongoing animal vaccine study, a next-generation sequencing project. Our Q1 net loss declined to $4.7 million from $4.8 million in the year ago period. Net loss per share improved to $0.63 from $0.88 in the year ago period on a higher number of weighted average shares outstanding. Excluding non-cash expenses, consolidated adjusted EBITDA was - for Q1 was negative $2.7 million compared to negative $2.4 million in the year ago period, and narrowed compared to a negative $3.3 million in Q4. Turning to our balance sheet. Cash and cash equivalents total $2.7 million on December 31. We used $3.7 million of cash during Q1 consisting primarily of our net loss. Our accounts receivable balance stood at $3.9 million on December 31 compared to $2.8 million on September 30, and inventories were flat at $1.3 million for both periods. Our warrant balance remains unchanged, and we carry no debt on our balance sheet. We disclosed in our fiscal 2021 10-K and have also disclosed in our first quarter of fiscal 2022 10-Q that there’s substantial doubt about the company’s ability to continue as a going concern for one year from the issuance of the financial statements. Our ability to continue as a going concern is dependent on our ability to further implement our business plan, raise capital and generate revenues. Our cash position on January 31 was approximately $2.3 million. This concludes my prepared remarks. Thank you for joining us today. I will now turn the call over to Jim for his comments.

Thank you, Beth, and good afternoon, everyone. Thank you for joining us on our first quarter call. We began fiscal 2022 with a record revenue quarter on the heels of a record revenue fiscal year. Our top line performance continues to be driven primarily by our diagnostics business, Applied DNA Clinical Labs or ADCL, which is presently centered on COVID-19 testing. Our Q1 gross margin performance was less impressive, a function of the hype positivity rates fueled by Omicron, and as Beth noted, costs associated with our COVID-19 collection sites. The decrease in COVID-19 positivity rates recorded in recent weeks should yield far greater efficiencies in our workflows. We should provide margin uplifts going forward. In addition, if sample numbers remain at the higher levels recorded by safeCircle through January 22, we would expect enhanced absorption of fixed costs for the collection centers in New York City. The takeaway is that the pandemic is evolving rapidly, as are our services and testing capability. This then gives us every opportunity to continue to build on our recent financial performance. Now, my remarks this afternoon will initially focus on the business development path forward for COVID-19 testing to continue our revenue momentum. And I use the word momentum intentionally. As part of our first quarter results, we announced that we have followed them up with a record testing revenue month, with more than $2 million generated in January. The growth in revenues we are seeing validates our diagnostic strategy. We expect it to begin to temper our use of cash, thereby freeing up resources to advance the development of our biotherapeutic growth vehicle, which is our LinearDNA platform. The second half of my comments will center on the LinearDNA platform, the recent progress made and some compelling market opportunities that are well suited to the platform. Revenue momentum from COVID-19 testing is validating the investments we made to establish a CLEP-CLIA certified clinical lab, a high-volume COVID-19 testing practice and a diagnostics development plan under the FDA’s EUA guidance. The first quarter of this fiscal year benefited from our first full quarter with our largest testing customer, the City University of New York, and the acquisition of new clients seeking to deploy safeCircle in an environment where fully 64% of the population is vaccinated and the federal government is distributing free rapid antigen tests. Our COVID-19 strategy is evolving to parallel with the pandemic to keep safeCircle relevant and on the path of profit maximization. The emergence of Omicron and its increased transmissibility and ability to evade vaccine-based immunity makes it clear that the need for accurate and large-scale enterprise testing persists to keep workforces working and supply chains functioning. While antigen-based tests have grown in prevalence, in our opinion, they cannot supplant the gold standard PCR testing, and especially for large-scale population testing. Antigen tests have reduced sensitivity as compared to PCR tests. They’re also ill suited for large-scale enterprise population monitoring and management, which requires the rapid and seamless flow of data obtained from automated high throughput testing lines. In addition, by design, antigen tests are best at testing high viral loads, and are not suited for providing early detection for efficient and rapid management of large populations. Thus, while antigen test plays an important role in the continued fight against the pandemic, we believe they cannot replace high throughput PCR testing for large populations. Our safeCircle platform is further and considerably differentiated in the marketplace as an integrated full service offering that combines our testing services with the cleared four platform for data management, access control, and vaccination management. This positions ADCL as a one-stop shop, thereby enhancing our pricing and margins relative to standalone testing services. This integrated approach we feel has significant utility beyond testing and beyond COVID-19, as the pandemic evolves, so does safeCircle. In the first quarter, we requested and secured LDT authorization for our Linea 2 COVID-19 Assay from New York State, meaning that we can continue to serve as all clients in the state, while retaining the favorable economics of our self-manufactured test. We’ve also filed an EUA request with FDA for the Linea 2 Assay that includes an associated Linea Unsupervised At-Home Sample Collection Kit. This collection kit, once authorized, will provide for the unsupervised collection and direct shipment of COVID-19 samples to our clinical lab. We have several testing customers interested in using our collection kit, and we believe the collection kit may drive increased testing volumes from our customers. In addition, once the EUA is authorized, we will have the opportunity to pursue the acquisition of safeCircle clients nationally, which is made feasible by the collection kit. Based on our interactions with FDA, we have a high degree of confidence in securing EUA approval from our interactions with them. The timing of approval, however, is not under our control. In the near-term, CUNY anticipates increased demand for weekly testing and a robust random testing program to ensure a safe start to the spring semester for a larger on-campus population. Concurrently, we are progressing strategies to penetrate more durable market segments, such as skilled nursing facilities, where residents are more susceptible to COVID-19 infection and the detrimental impact of the virus is greater than in the general population. In addition, we have validated a high sensitivity PCR-based assay that simultaneously tests for COVID-19 and flu. Given the similar symptoms of both diseases, we believe the combination of COVID-19 and flu testing will be in demand beyond the immediate pandemic. Now while we believe COVID-19 testing will continue to drive revenue over the near-term, we are preparing for an eventual diminution in COVID-19 testing demand, that is likely when the pandemic shifts to an endemic stage. Our long-term vision for the diagnostics business is one that will provide a broader offering of molecular and genetic testing capabilities to empower better control of one’s health with diagnostic insights. In turn, we believe this gives us multiple paths to continue top line growth from diagnostics. Now we have a unique opportunity with ADCL. In the short-term, we plan to validate and bring to market several new molecular and genetic tests over this fiscal year that will supplement our COVID-19 testing. Over the longer-term, we will evolve its diagnostic offerings to parallel the vial therapeutic LinearDNA products we bring to the clinic for our LinearDNA customers in our own pipeline. This strategy will empower companion diagnostics for the clinical indications of LinearDNA therapies and aid the course of therapy. In addition, as a subsidiary of Applied DNA, ADCL has access to an exceptionally deep scientific and regulatory bench from which to pull. We are confident we have the expertise to develop and offer a wide variety of diagnostic tests that will leverage the investments we have already made. To ensure that we are targeting tests for which there is strong commercial demand, we are presently engaged with hospital systems and provider networks in the tri state area to capitalize on the unmet testing needs of the local medical community. We also have established key institutional relationships via our COVID-19 testing, which will provide a strong foundation of non-COVID clinical testing grant. In the future, we see ADCL as a profit center for Applied DNA that will help empower the development of our LinearDNA platform. Before I delve into the LinearDNA platform, I’ll offer a short background there to provide context on the market opportunity we seek to penetrate more fully. And you will hear much more about our LinearDNA platform in the coming quarters as we amplify developments and successes to partners, customers and the industry. Our LinearDNA platform is a PCR-based manufacturing platform that produces high-quality DNA at large-scale enzymatically and completely without the use of living cells. Like plasmid DNA, LinearDNA is agnostic to any particular nucleic acid therapy, meaning both forms may be used in a wide range of treatments, including messenger RNA vaccines, redirected cells and gene therapy. But unlike LinearDNA, which only contains the desire DNA sequence, plasmid DNA, which is circular and derived from bacteria, is typically comprised of about 50% unwanted DNA in the form of non-therapeutic and sometimes dangerous bacterial DNA sequences. So, let’s talk about COVID. Plasmid DNA was scaled several decades before we develop the methods to scale LinearDNA. As such, plasmid DNA was the first to market and it is the basis of nearly all nucleic acid-based therapies and vaccines on the market today or in clinical development. Plasmid DNA uses fermentation methods, a process that is inherently complex, slow and expensive with limited capacity. The global demand for plasmid DNA as a manufacturing platform has exploded over the past several years, driven principally by the emergency of the mRNA vaccines, as well as cell and gene therapies. Plasmid DNA capacity constraints were evident before COVID-19. But production bottlenecks were manageable, given the then nascent pipelines, and the FDA is lengthy and rigorous review process. Today, with the regulatory approval of two Messenger RNA vaccines, the proverbial gloves have come off and the demand for DNA has increased exponentially. What was once a somewhat minor component of niche high-value therapeutics has become a critical ingredient for the Messenger RNA-based vaccines that have turned the tide against COVID-19. In addition to mRNA therapeutics, currently, there are only about 20 FDA or EMA approved or authorized DNA-based therapies that are available. But the therapeutic and commercial successes of these few have spurred strong interest by the industry, especially in CAR T and gene therapies. Most biotech clinical development pipelines are focused on therapies that require DNA for production. And as these therapies move through late-stage clinical phases, these demands drivers are exacerbating plasmid DNA capacity constraints and highlighting the clinical chinks in their armor. We believe these demand trends have opened a window of significant opportunity for LinearDNA. In comparison with plasmid DNA, LinearDNA is a much simpler process that utilizes four ingredients, none of which are bacterial in nature, and therefore, there is no risk of bacterial contamination and antibiotic resistance. The manufacturing process is highly efficient resulting in a highly pure product. Batch-to-batch consistency is excellent, which is critical for any regulatory body reviewing a therapeutic that could make it into hundreds of thousands or even millions or billions of doses. In addition, unlike plasmid DNA, LinearDNA exists without a plasmid backbone, meaning it only consists of the therapeutic relevant DNA sequence. In fact, our early studies have shown that LinearDNA requires only between one-third and one half the amount of plasmid DNA to effect a similar degree of trans gene expression. We believe that LinearDNA can be used in any therapy in place of plasmid DNA. Customers are currently using our platform to supply DNA as components of in vitro diagnostic tests. And for preclinical nucleic acid-based therapeutic developments in the fields of CAR T, a form of redirected cells; DNA vaccines, both antiviral and anti-cancer; messenger RNA therapies; CRISPR-based therapies; and gene therapies. To date, these are contract research orders that are principally for use as a research development tool for therapeutics, or in the case of diagnostics, fully commercial applications that require minute amounts of LinearDNA. Given the window, our development priorities are focused on further validation of our platform and initiatives that support the fastest paths to the market. Our end goal is to advance the platform, so that we can incentivize contract research customers to take our LinearDNA into the clinic with us as the manufacturer of record for their therapeutic and to support our own therapeutic development pipeline. The cGMP roadmap that I detailed last quarter was catalyzed by customers seeking to move forward with LinearDNA. Now we see two paths to commercialize the LinearDNA platform in biotherapeutics. Firstly, LinearDNA is a direct replacement for plasmid DNA in existing therapeutic manufacturing workflows; and two, LinearDNA has a direct therapeutics such as a DNA vaccine. We believe that using LinearDNA is the direct replacement for plasmid DNA in existing therapeutic manufacturing workflows is the near-term to commerce. And we are generating the data necessary to prove it in simple replacement experiments. Currently, we are evaluating LinearDNA for use in mRNA CAR T and AAV or gene therapy workflows. We are not designing a novel therapeutic or method of manufacturing. Instead, we are simply acting as a direct replacement for a plasmid DNA. And given the growing supply chain constraints and drawbacks of plasmid DNA, we believe this is to be a very large market, in which we can be very competitive. One possible standout application of LinearDNA is the production of mRNA. mRNA therapeutics are made from a linear form of plasmid produced by cutting DNA out of the circular plasmid. We believe that LinearDNA, which by its very nature, is already linear, is an excellent alternative to plasmid DNA in mRNA manufacturing workflows. Our early in-house experiments have shown this concept is sound, and we are busy gathering additional data. Farther afield, LinearDNA has already been shown to be an effective direct therapeutic, such as in a DNA vaccine. We have proven in multiple animal models that our LinearDNA COVID-19 vaccine candidates, elicit strong antibody and cellular immune responses. We believe that the LinearDNA vaccines carry great promise in the vaccine field, particularly in the areas of rapid pandemic response, personalized medicine, and cancer immunotherapy. While the past to commercialization for LinearDNA vaccines is more complex than existing therapeutic pathways, we believe that the sizeable potential upside justifies our continued development. To these ends, during fiscal 2021, we built out and staffed a cell biology facility to enhance our capability to optimize the design transfection and functional quantification of LinearDNA. As a result of this investment, we have made several breakthroughs in cellular transfection and expression, including deploying an in-house Lipid Nanoparticle or LNP, capability for encapsulation and transfection. of nucleic acid therapies. We believe our LNP capability makes LinearDNA a much more compelling proposition for a developer evaluating DNA-based manufacturing platforms against that of capacity constraint plasmid DNA. Now, the data that we our partners and our customers have generated to date have been highly encouraging. And last quarter, I spoke of a publication by the Institute of Hematology and Blood Transfusion in Prague, on their use of LinearDNA as a suitable and cost-effective replacement to plasmid DNA in the production of CAR T cells with similar efficacy to the CAR cells manufactured with plasma. Their paper highlights the use of LinearDNA with a non-viral transfection system, in their case, a transpose on transposes system. There is valuable validation for us as many of our CRO customers are ordering LinearDNA for CAR T cell applications. And as the next step with the University of Prague, we expect the program will engage in human clinical trials using our Linear GLP grade DNA amplified from their CAR construct. The European Medicines Agency or EMA provides a regulatory path to the clinic using GLP grade Linear DNA and with our collaborators finishing the drug product, yielding a cGMP therapy. The trial would be a milestone for Applied DNA, the first-in-humans trial for LinearDNA. As we are still defining the trial, I cannot share many details other than to say that the client has already completed validation of the functionality of their CAR plasmid construct in vitro. It now falls to us to complete the preparation of the Linear DNA construct. We estimate several months of work before clinical trial protocol development and we will keep you updated along the way. Now, Slide 10 shows the promise of our approach. This is a fluorescent image of cells transfected by our cell biology scientist, using a LinearDNA construct of the genes necessary to obtain CAR T cells that are redirected to attack cancer cells in the blood. And you can see clearly, the expression in green of the protein encoded by our LinearDNA. Now separately and in parallel, our LNP capacity has peaked our customers’ interest. In the coming quarters, we expect our LinearDNA CRO customers will be requesting us to encapsulate the LinearDNA into LNPs for their side-by-side transfection studies. We, in turn, will be optimizing the LNP workflow for LinearDNA. In addition, in conjunction with our partners of Evvivax/Takis in Italy, we’ve completed a manuscript detailing our data validating the use of LinearDNA as an immunotherapy pan cancer vaccine in mouse models. The data show that a LinearDNA vaccine in a mouse model can elicit strong antigen specific immune responses, and significantly reduced tumor growth when administered with immune checkpoint inhibitors. The manuscript has been submitted for publication in a peer-reviewed journal and a non-peer-reviewed preprint server. We will provide additional details upon publication. Finally, we recently completed the first phase of our LinearDNA COVID-19 vaccine trial in ferrets in conjunction with Cornell University. While the data produced by the clinical style – trial are still being analyzed, initial findings show that a prime and booster dose regiment of the vaccine was protective against SARS-CoV-2 infection in the challenge trial. We plan to publish the data from the clinical trial in the coming months, which we believe will serve as an important validation of our platform for DNA vaccines. Now I’ll end my remarks this afternoon with an update on our industrial DNA business. We are very encouraged by the receipt of a $1.6 million order to 10 textiles that was received this past fourth quarter. And we view it as a sign of the reopening of the textile supply chain, from which we have historically derived most of our revenue. As the textile supply chain runs through China and Southeast Asia, the emergence of Omicron late last year followed by the Chinese New Year and now the Olympics in China this year, have cumulatively slowed the pace of the opening. Brands and their manufacturers has spent the pandemic reassessing their supply chains aligned with customer expectations around traceability and provenance. More recently, new governmental regulations in the U.S. and those proposed in the EU, related to forced labor should spotlight our certainty platform to validate a brand’s cotton source forensically. Overall, we are excited by our Q1 results, both from a record revenue standpoint and the successful continued development of the LinearDNA platform. Now this concludes my prepared remarks. Operator, please open the call to questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jonathan Aschoff with ROTH. Please go ahead.

Thank you very much. Hello, guys, and congrats on the progress, certainly, the top line. So are you saying, James, that your current testing revenue right now in February is not trending down along with New York State’s daily testing rate, which went from about 400,000, a day a month ago to right now, about 150,000 a day in New York State?

We have our most significant customer, who is that’s CUNY, City University of New York, who is dramatically increasing the amount of people on their campus by a very significant percentage of the total. So as a consequence, the numbers are actually expected to increase, not decrease over the term of beginning, really, right now and through much of the spring semester. So as you know, it’s a little difficult to predict much further than that. But we expect that the next few months should see an increase, not a decrease.

Okay. That’s great. If you get an EUA for the 2.0, what sort of a time lag is there between a self collection thousands of miles away to a result at ADCL? And is that time differential a problem at all?

I don’t think it will be. And we’re actually operating with some folks who are sending us samples a long distance now. And that shipment takes less than a full day. And we push to get 24 to 36-hour turnaround on the sample from the moment it arrives at our lab. So the answer is, no, I don’t think that should be problematic.

Okay. Can you help us understand the types of genetic and molecular tests that you will initially commercialize you were saying over the next year, or perhaps over the next – the rest of the calendar year or your fiscal year, I wasn’t sure about that. But can you help us understand the types that might first come out?

Sure. We don’t want to give away our long-term molecular and genetic testing. But in the short-term, simple things like the combination of Flu A, Flu B, with COVID, which in the current season, is still very important. Thereafter, we’re looking at surveillance and diagnostic assays that would apply, for example, to skilled nursing facilities, where the issue of pathogen contagion is important, and you want to be able to catch infection in the early stage. So those are the kinds of targets we have underway.

Okay. My last one is a little more housekeeping. Can you help me out with the SG&A expense trend going at least through fiscal 2022? And I guess the same for the total COGS percentage, how that might slide down over the year from 73%?

Sure. So the main reason for the increase this quarter in SG&A was some stock compensation – was stock compensation expense that vest in immediately. So all of it was taken this quarter. So after that, I would say that SG&A should trend fairly consistently or slightly lower than it was for this quarter. And then as for COGS…

So not dropping back to fiscal 2021 fourth quarter like $2.5 million, it’ll stay around for something.

No, it should go back. I’m sorry. I meant it, it should go back down to where it has been historically.

Okay, thank you. And then the COGS you were saying?

COGS, we’re expecting to improve. We had two things happening – the colleges, specifically CUNY and some of the others where we have the testing collection sites, those are at a lower gross margin. However, that is offset by now the increase in testing volume at those helps a better absorption of some of the fixed fees for staffing the sites and things like that. So that should improve it. And also, with the positivity rate going down, we can go back to our pooling, which helps our gross profit in that our consumables and things are used at a lot lower upper rate.

So just on Beth’s last point, the impact of pooling at low positivity is we effectively contest five samples at a time. And if those five samples are negative for that, well, we’re seeing an 80% increase in productivity. Now, of course, not every well is negative and you have to disambiguate wells that are positive. But I think currently, low positivity rates, pooling yields, at least a 60% increase in efficiency.

That makes a lot of sense, James. Thank you, guys.

You’re welcome.

The next question is from Yi Chen with H.C. Wainwright. Please go ahead.

Hey, everyone, congratulations on the progress. I’m [indiscernible] on behalf of Yi Chen. I just have a couple of clarification. So the increase in clinical lab service revenues of $2.4 million during the fiscal, is that completely related to COVID?

Yeah, that’s all COVID testing.

Okay. And please bear with me, and how much of January’s $2 million is related to COVID? Or did you say it was all related to COVID?

Significantly, yeah, essentially, all of it, the majority.

Okay, great, great. And I don’t know you spoke about the molecular and genetic testing services that are on the horizon. And my apologies if I didn’t catch it, but when did you say you are going to start these other testing services?

Sure. The validation is already in hand. So, for example, we have already validated the – what’s called the ABC Assay that is for Flu A, Flu B, and COVID. And we’re essentially ready to deploy. And other assays, the home collection, which is essentially the same collection of assays, but now on a much broader sampling population that will begin as soon as we’re granted the EUA, which we’re expecting in short course.

Awesome, thank you. And I know you briefly touched upon the pan cancer, LinearDNA vaccine. Is there any other color that you could provide at this time, maybe plans of potential clinical studies or the type of patient populations that you’re looking at, or maybe even more preclinical validation?

Yes. Pan cancer vaccine is especially relevant to the domestic pet marketplace, especially dogs. And so we plan to enter into clinical trials there. And we have strong interest in a number of other vaccines that can be serviced by LinearDNA. And some of these vaccines are unique to the African animal marketplace. And remember, with LinearDNA, we have an extraordinarily stable nucleic acid product. The marketplace has come to perceive the mRNA vaccines as highly unstable. But by comparison, LinearDNA vaccines, you can ship across the Sahara without a serious worry. And so there are some interesting applications that really needs solution in the African virology marketplace.

Interesting. Thank you so much, and congratulations once again.

Thank you.

[Operator Instructions] The next question is from Jason McCarthy was Maxim Group. Please go ahead.

Hi, Jim, thanks for taking the question. So I just want to go back to a question that Jonathan was asking earlier about volumes in New York State. Is the expectation that the volumes just based on your customer base? Is going to be relatively the same going forward? And how do you see that with a shifting environment? We’re seeing these more restrictive states, even New York, kind of go against CDC guidelines and even though lighthouse, and as soon as Hoko [ph] teams is going to take all the restrictions off, we would think that testing below and volumes would kind of go with it. How do you reconcile that?

Yeah, I appreciate the logic and it’s not flawed. It is an issue that specific to our customer base. So in testing, for example, large institutions, the rapid antigen tests are not an adequate substitute for screening, for asymptomatic infection. You – they’re not built for high volume for high throughput. They’re built for very low volume, high speed. And so our customer base is large institution. In the case of CUNY, total population of over 300,000. And so you can only address those volumes in the long-term, as long as testing remains relevant. And it certainly will students come back for the first time to the campus. What happens thereafter, it’s still hard to predict.

So then where – do you see a – because of the pandemic, even if it becomes endemic, there’s got to be some level of testing that’s going to have to remain. How do you see the COVID and flu, dual test for Applied rolling out or playing a role in this, right? Because if you look at a flu test, or it used to be, it was just an antigen test. But if it’s now we’re dealing with two different serious illnesses, you can’t do two antigen tests, maybe it makes more sense to differentiate the two if PCR, that where a core opportunity lies for Applied?

Yeah, in particular, in populations that are susceptible to more serious morbidities than the general population. So, for example, in skilled nursing facilities, that kind of an essay could be extremely relevant. And it will affect the course of therapy, and what caregivers have to do to ensure the outcome of these infections are not drastic.

Got it. Okay, my last question. It’s just – I think, I don’t know if I heard it correctly, it was a comment you made about the clinical path for linear vaccines may be more complex than traditional vaccines. If I heard that right, can you just clarify that and maybe give us a little bit more color as to why?

Sure. FDA has not approved linear vaccine today. So I’m really referring only to the compliance issues. The science is very straightforward. The manufacturing is much easier than the methods that are used now. The scalability is terrific. So I think the only challenges that will say, so the initial ones in gaining regulatory clearance. But I do think that the degree of comfort with nucleic acid therapies in general, has increased so much that the top has really been blown off the opportunities. While there were only 20 approved nucleic acid drugs right now, two years ago, FDA projected 200 BLAs for this current calendar year. And I’m sure that number is increasing. So I think that the demand is there, the markets are there, and the marketplace needs diversity beyond messenger RNA, and it can’t be met by plasmid DNA. And I think we have a better product safer and more readily manufactured and cleaner.

Got it. Thank you, Jim.

You’re welcome. Thank you.

The next question is from Matt Bullock with Maxim Group. Please go ahead.

Hi, yeah, thanks for taking my question. If you do get this emergency use authorization for the At-Home Collection Kit, I was hoping you might be able to talk a little bit more about the revenue opportunity there and maybe the margin profile.

Sure. Again, our interest is in large institutions, large companies, and large companies that have locations from coast to coast. That is a particular opportunity. And a lot of those large companies are seeing a reluctance, even with the pandemic receding. For employees to come back to the office, they have to offer them away, providing a safe circle. And that’s our goal in utilizing the unsupervised home collection.

Excellent, makes a lot of sense. And then if you could just touch on what you’re seeing in terms of tagging demand, I think, last quarter, you mentioned some potential textile projects with the apparel brands in the pipeline. If you could give us an update, that’d be great.

Sure. If anything, COVID seems to have increased global awareness about the need for authenticity and for understanding the point of origin of products. In particular, the situation in China right now, with the Uighur [ph] facing, what they’re facing, and no means of identifying cottons that are forbidden from entry into the United States. We believe that the opportunities and we’re seeing it by the interest coming from brands themselves. We believe in the long-term, the drivers will be the brands not so much the manufacturers. The brands will demand it from their contract manufacturers that they can provide forensic provable proof of origin.

Excellent. Thank you very much. I’ll hop back in queue.

Okay, thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Hayward for any closing remarks.

Okay. Thank you, operator. The level of activity surrounding our LinearDNA platform really is unrivaled in the company’s history. And we are attacking a window of opportunity, as I put it earlier, opened by COVID 19 while being supported by our team’s excellent execution on our diagnostic strategy. And we look forward to updating you all our progress made across all aspects of the company via our press releases and on our next investor call in May, and we’re grateful to all of you for participating today. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.