Daily Stock Watch: APDN Stock Leaps by Over 100%

By Duncan Ferris

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Applied DNA Sciences (NASDAQ: APDN) has seen its share price more than double after big news for its clinical laboratory subsidiary. Is APDN stock one to watch?

Applied DNA Sciences Inc (NASDAQ: APDN) stock has exploded in price on Tuesday after the company said it had commenced analytical validation of a PCR-based monkeypox virus test.

Validation is taking place in the business’ wholly-owned clinical laboratory subsidiary, Applied DNA Clinical Labs. If validation is achieved at the subsidiary labs, a validation package will be submitted to New York State Department of Health for approval.

Approval will see the test will be used to power Applied DNA Clinical Labs’ monkeypox testing services.

What is Applied DNA Sciences?

Applied DNA Sciences is a life sciences company which is focused on the production and detection of DNA.

The business develops and markets DNA-based technology solutions for use in 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 that provide forensic power and protection for various applications used to fortify brand protection efforts and strengthen supply chain security, as well as mark, track, and convict criminals.

The company also manufactures and sells COVID-19 PCR-based molecular diagnostic test kit under the LineaTM COVID-19 Assay Kit trademark and COVID-19 diagnostic test kits to prevent virus spread within a community, school, or workplace under the safeCircle trademark.

The company also provides preclinical contract research and manufacturing services for the nucleic acid-based therapeutic markets and contract research services to RNA based drug and biologic 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.

Subsidiaries

The company has two subsidiaries, with these being: 

  • Applied DNA Clinical Labs is the company’s clinical laboratory subsidiary, and it is permitted by the State of New York to provide and develop clinical molecular diagnostics testing services.

  • LinearRx is the company through which APDN is developing its LinearDNA platform, which seeks to enable the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in nucleic acid-based therapeutics.

How Does Applied DNA Sciences Make Money?

The business makes the vast majority of its revenues from its clinical laboratory services at the moment, with its second quarter performance outstripping top line revenues for the whole of the company’s 2021 fiscal year.

This business makes revenues by winning contracts with clients to provide testing and associated services.

APDN Stock Financials

The company’s second quarter earnings results for 2022, which cover the three-month period ended 31 March showed that APDN recorded: 

  • Revenues increased 130% to $6.1m.

  • Total operating expenses increased to $4.5m from $4.0m.

  • Net loss applicable to common stockholders of $0.23, compared with $0.21.

  • Cash and cash equivalents stood at $6.5m on 31 March, compared with $6.6m six months earlier.

Across the year to date the company’s share price has fallen by more than 53% at the time of writing.

APDN Growth Potential

The company’s growth strategy is to primarily focus its resources on the further development, commercialization, and customer adoption of its Therapeutic DNA Production Services, including the expansion of its contract development and manufacturing operation for the manufacture of DNA for nucleic acid-based therapies and the development of its own product candidates in veterinary health.

To offset these development costs, the business intends to leverage its MDx Testing Services and its DNA Tagging and Security Products and Services business to generate cashflows.

That means that, looking to the long term, the company’s growth prospects appear to hinge on the success of its LinearDNA platform. This is the company’s platform for enabling the rapid, efficient, and large-scale cell-free manufacture of high-fidelity DNA sequences for use in nucleic acid-based therapeutics. 

The product of this process is an alternative to plasmid-based DNA manufacturing technologies that have supplied the DNA used in biotherapeutics 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 which have grown each year. This indicates strong demand for DNA for research, clinical development, and therapeutic manufacturing.

APDN says traditionally used plasmid DNA manufacture is complex and failing to meet current levels of demand, stating that LinearDNA is well-placed to pick up the slack.

APDN Investment Risks

With the business currently investing significantly in its DNA production services, the primary risk the business faces is running out of money before this segment of the business can begin producing meaningful revenues. 

This means cash burn is squarely in focus. However, cash burn has been on the downturn due to the impressive revenue growth seen from the company’s clinical laboratory subsidiary over the past 12 months.

However, declining demand for testing could pose a significant risk to this high-performing business segment and therefor the business at large. The business has acknowledged that demand is likely to decline over the summer months due to its significant academic client base, though it does expect a resumption in demand as the new academic year begins in autumn.

Additionally, there is the risk that research data concerning LinearDNA could not be as positive as hoped.

The second half of the year is expected to 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. While previous data has been positive, a poor showing in any kind of research could throw a spanner in the company’s efforts to pursue commercialization.

Is APDN Stock a Good Investment?

Applied DNA Sciences is an intriguing proposition. The business has adeptly reduced cash burn with the success of its clinical laboratory offering and is focussed on production of therapeutic DNA. Revenue growth is solid and the company has been able to raise funds from investors, giving it a good platform from which to invest in its own development.

However, the company’s long-term goals seem much more uncertain. There is little guarantee that testing will continue to be such a concern, so the solid revenues achieved by the clinical lab business could dry up before APDN’s LinearDNA offering starts bringing in its own revenues. 

However, if LinearDNA’s commercialization is successful, returns for investors could be very large.

Though APDN is already producing revenues and has a fairly diverse offering, it carries similar risks to investing in a clinical stage pharmaceutical business. That is because its long-term efforts are geared towards a product which is not yet at the commercial stage. As such, any investment in the business is inherently risky.

Want to check out more trending stocks? Read our take on Mobile Gaming Esports' stock price surge!

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Topics:
Life Sciences Tools and Services
Covid-19
Industries:
Healthcare
Companies:
Applied DNA Sciences

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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