Welcome back, everybody. We have Applied DNA with us, ticker symbol APDN. CEO Dr. James Hayward. Comfortable out there at Stony Brook, where APDN is located. It turns out that all three of us, Michael, James, and I, had all gone to Stony Brook at one point or another, over our lifetimes. So it's an interesting factoid. So, you know, we've been working with APDN in research for a number of years, quite some time now, and really what been going on over the last year or two, and I think is really important, is that this company is really transitioning, and it's transitioned, in my view, to being a basically a pure-play biotech, right? This company is a biotech company.
They've moved into a segment that focuses on linear DNA, particularly for therapeutics, and manufacturing of therapeutics. It's something I call, and Michael and I would characterize as like a tangential play to biotech drug development companies.
We saw this with another group called, like, BioLife Solutions, and you could see where that market cap has gone, where their cell culture media and their technology and things that they do for the biotech community kind of embeds them in drug development processes, and they become a part of drug development, and that is how we see Applied today, and I think investors haven't done it yet, but I think they're starting to turn that corner, in their view of what APDN is, and I think it's a different investor base that's kind of moving into the story.
Yeah
From what it was, and I think it's best told by James. So welcome back, and I think it's a good opportunity now with your GMP approaching, right, to get people kind of primed for the next segment of what APDN is.
Excellent. Let's see if we can do that. So it's a pleasure to join you. Thanks so much. And the segment you're referring to, we call Linea Rx, really based on the product of the enzymatic manufacture of synthetic DNA, and it's for the use in the production of genetic medicines comprised of either DNA or RNA. And as you pointed out, we're about to achieve a major milestone in GMP production that would initiate commercial orders and really drive our future growth. Now, the sheer scale of production of mRNA-based COVID vaccines and their deployment in very compressed timeframes brought to the forefront of the investment world, the inherent limitations of plasmid DNA that are currently used in the production of most genetic medicines today.
No doubt your audience knows that the plasmid DNA has been the industry standard for over 40 years, and during this time, it's really been a suboptimal approach due to its high cost, its inconsistent batch-to-batch production qualities, and the propensity, first of all, to pass along genetic content, other than the gene of interest, including antibiotic-resistance genes. Due to the success of the mRNA-based COVID-19 vaccines, the number of genetic medicines has proliferated, and it's accelerating further. Within that, of course, mRNA currently dominates, and according to a recent report by the American Society of Gene and Cell Therapy, there were about 450 mRNA therapies in development during Q2 of this year, globally. Now, of those, 66% of these therapies are preclinical and will drive demand for DNA as these assets mature toward the clinic.
We have developed two technology platforms to meet the industry's growing demand for DNA, and the first is our Linear DNA platform. It's entirely cell-free. It can produce DNA in quantities ranging from milligrams to grams. Our second platform is our Linea IVT platform. That pairs our IVT templates with our proprietary RNA polymerase to enable RNA manufacturers to make better RNA, faster, and via simplified workflows and reduced double-stranded RNA contamination. We're currently engaged with numerous biotech, pharma, and large CDMOs who are evaluating our Linea IVT templates, with GMP supply discussions already well underway and in coordination with our GMP coming online. In conclusion, we're at the last stage of two years of extraordinary effort, as you mentioned, to pivot, to create a new growth opportunity for Applied DNA, and DNA production for biotherapeutic applications is now Applied DNA's primary business going forward.
With that, I appreciate the opportunity, Jason.
No, no, no, pleasure is ours. So there's a number of groups that work in this space. You could look at, like, Ginkgo Bioworks. Everybody was all excited about them. And before I get into the kind of details of some of the issues using mRNA vaccines as the example, maybe you could talk at a high level about the acquisition of Spindle Biotech, bringing in the RNAP enzyme, and what that... 'Cause that's really what set the stage for where you are now.
Yeah, it certainly helped bring us along a quantum leap. The RNAP enzyme provides us the opportunity for increased output, and in combination with our linear DNA, it gives us a much bigger percentage of the cost of goods of mRNA manufacture, so that increased our TAM by about sixfold alone. And it allows us to make modifications to mRNA with facility. It's easy to do. It nearly totally avoids the production of double-stranded RNA, kind of essential in future therapeutics. It increases output, and most importantly, it diminishes the time that it takes to manufacture RNA, and we'll get into that in just a moment, how important the time to produce product is.
So maybe talk, can you talk a little bit about, well, COVID and the mRNA vaccines really ushered in mRNA to most people don't really know, outside of us molecular biology people, for the most part, right? Maybe, or whoever. That scalability became such an issue, right, and huge bottlenecks, like, and people don't understand, like, the scale really at how mRNA and how vaccines and how fast they were deployed, right? So and then you look at Moderna, right? How much... Moderna was basically-
Mm
... printing money, right? And what is the first thing that they go out and buy? Something to try to deal with their manufacturing linear DNA, something to make it a lot easier. Can you talk about manufacturing bottlenecks, cost of goods, where you could save money, and why Moderna did what it did, and then where you fit into that?
Sure. Sure, so we utilize PCR in a very simplified format that works very, very fast. You know, we have a very brief period between establishing a goal with a customer and actually delivering the first prototype to them, and the same is true when we're talking about manufacturing scale. We can knock months off the time required for production, and that's going to be so important in the development of personalized medicines, which is a direction the industry is definitely going in, in things like personalized vaccines or in treatments for rare diseases. So, you know, the move that Moderna made certainly validated the direction we were heading in. We think our platform is even better and will have a larger impact.
They bought Omni, what was the name of the company they bought? Do you... I don't recall.
Yes, Orsi or something like that.
Something like that, but it was with all that money, it wasn't a blockbuster, splashy acquisition. They bought something to deal with a fundamental problem that's costing them probably billions of dollars, right?
Yes, absolutely. So we knew we're on the right track.
I'd like to tee off that a little bit and see if you could talk. Who would be the primary target customer for this sort of technology? Are there any specific fields where the improvements to speed, consistency, and margins would make the biggest difference?
Sure, sure. You know, we've had, just recently, two very large companies tell us that our IVT templates were the best performing templates they've ever seen. And as I said, we get them to them very, very fast. We typically exceed the quality specs that customers are expecting for plasmid-based IVT templates, purity and homogeneity of the homopolymers, transfection efficiencies, et cetera. We simplify the RNA workflow. We don't require a master cell bank, as plasmids do. That eliminates a major regulatory hurdle. We don't have to linearize the IVT process. We don't have to conduct downstream filtration, and we give a very significant speed advantage. We can empower a CDMO to produce end-to-end mRNA product in less than 45 days, and you can imagine the impact on the development of a cancer vaccine.
And within those 45 days, we can go from sequence to template in about 21 days, and our goal is to really reduce that to 14 days, two weeks.
What's the traditional process take?
What's the-
How long does the traditional process take if you're using plasmid-based production?
Months. It's typically six to eight months. You know, so by comparison, 45 days, and I know we can shorten it.
On a percentage basis, what is the cost savings for, like, mRNA manufacturing by going a linear DNA route?
The cost savings aren't, are not the driving issue, but, you know, the qualities that I enumerated for you, I think are what attract our customers. There is a cost savings because of that speed, and, you know, at this time, I don't think I could quote a specific percentage.
But so in addition to Moderna and it was OriCiro. That was the name of the company.
That's it.
Look it up. Pfizer did the Touchlight thing for the Doggybone technology. Not exactly what you do, but in the same vein, right?
Yeah.
So how important is it that large pharma, the ones who are producing these medicines at scale, have all started to align themselves with initiatives to make it a bit easier on their manufacturing side? And it presents opportunities for APDN.
Yeah, I think it's essential. You know, as I was saying, speed, quality, those are the driving issues, especially as the focus becomes more and more on personalized medicines and not just prophylactics against pathogens, you know, large-scale vaccines. I think the opportunity for manufacture, perhaps even one day very close to the bedside, because this requires a very small footprint. The cGMP space we're about to open is less than 2,000 sq ft, and could easily be located in a hospital to facilitate the end-to-end production of an RNA cancer vaccine.
From an RNA production perspective, I think most people don't know this, the issue with that mRNA that you're getting, whether it's a vaccine or otherwise, it's single-stranded, right? It doesn't come double-stranded, but you do get double-stranded RNA contaminants in the manufacturing process that then have to be purified or extracted. Can you talk a little bit about that problem and how you solve it by going with linear IVT?
Sure. Well, double-stranded RNA is perceived by your body essentially as a viral invader, and it provokes a very significant inflammatory response. And there's some strong suspicions that in the COVID-19 vaccine, that double-stranded RNA may have been responsible for the myocarditis that was associated with young men, but I don't think the proof of that is quite solid yet. But our proprietary RNA polymerase comes very close to eliminating double-stranded RNA, so that essentially either not a is problem or much less of a problem. Also, our RNA polymerase is a modified polymerase. It facilitates higher fidelity manufacturing, and that's beneficial as well.
All right, so, I would like to touch a little bit on where you are in the process of gaining GMP status, 'cause that's a key part of the story here. And perhaps you could talk a little bit about what kind of capacity that could support at peak, how many customers this could be, and if you have those figures, what kind of revenue you could be producing from it?
Sure. So, our expectation, the equipment is being installed just below me, on the floor below, is that we'll have this complete and in place and validated, ready to run in early calendar 2025, just in a few months. And the potential revenue for us in this roughly 2,000 sq ft, but highly segmented space, is in the range of about $6 million for a single shift operation. But of course, we would move to multiple shifts the moment the demand was there. And by the inclusion of our proprietary RNA polymerase, it increases the revenue opportunity up to fivefold compared to the IVT templates alone. So that gets us closer to $16 million-$24 million in a single shift basis. So we're optimistic.
We already have a dialogue with clients that would occupy this space for the first six months of installation, and I think once we get rolling, we'll fill the second six months as well, quite quickly, and before you know it, we'll be running multiple shifts. So it generates a much better economic for us in combination of using our IVT platform with our RNA polymerase.
So you'd mentioned that the more specialized RNA, the RNAP enzyme, gets you fivefold potentially increase on the revenue side. But just generally, can you help everybody understand, like, everybody's using plasmids for the past forty years. They're also using a very vanilla T7 RNA polymerase. It's different, right? And so what you have overcome some of the obstacles that T7 has. Can you talk a little bit about that?
Sure. It's a modified RNAP, and it essentially has the capacity to guide the DNA template through the active site of the enzyme. It increases efficiency, turnover, productivity, and fidelity. So, it's a very useful modification to that enzyme. But we've also recently kicked off a custom enzyme development program with a very well-known enzyme developer partner, and part of this is specifically focused on manufacturing self-amplifying RNA IVT templates, for which we have been seeing a lot of customer interest. And as I said, more than just prophylactic anti-pathogen vaccines, our opportunity, we believe, is highly in the area of personalized, customized vaccines, neo-antigens.
For all those molecular biology geeks, like y'all of us here, but when you open that New England Biolabs catalog, these are the expensive enzymes.
Yeah.
You can't buy with your grant money on the bench, but,
Modifying-
It matters
Modifying them, specifically is also expensive, but it'll give us a real advantage in real time.
But that's the expensive piece, right? I think people don't understand that the enzyme might be the most expensive piece for manufacturers as part of the equation.
Absolutely.
Anybody. Pfizer, it could be anybody. It's expensive.
Absolutely. Protein engineering and enzyme production are the expensive end. But likewise, we'll be looking, and we are looking, and about to start a clinical trial. We're not starting the clinical trial, we're supporting a clinical trial for a partner in CAR T therapies, using our linear platform, and we're hopeful there as well.
All right, so I but like, before we wrap up, and we're coming up on time, just because you did mention the use of your technology within drug development, there's a concept that we have within the cell and gene therapy tool space of the stickiness of the technology. So if your tech is used by a particular drug developer, does that then get baked into the protocol or the IND and kind of become a reliable, recurring revenue source as this goes through development?
Yes, absolutely. That puts us in a position of being the manufacturer of record and supporting, first of all, our client through the clinic, but more importantly, and beyond.
So I think, you know, since we're out of time, the big catalyst that's coming is gonna be the GMP, right? We wanna be watching out for that. But for investors, I think as I said in the beginning, is that investor base starts to shift towards biotech investors. When you look at APDN just as a stock, right, as a company over its history, and it's had a bumpy road, right?
Yeah.
It's transforming itself into a biotech, and you look at where valuation is now, the GMP is the key. That's the... It's imminent at this point. It's in the next... Yeah, it's coming soon, right?
Yeah.
I would expect it, you know, within before the end of this year, just to be conservative, and then you have customers onboarded. You know, you're gonna turn into a GMP. The I think now's the time. Biotech investors, you wanna look at something that's inexpensive, this is it, and, and I think there's a number of things coming up in the near future, as it pivots towards being a biotech, that are absolutely worthwhile. And if you need examples, just look at what Pfizer and these other groups did. They are aligning themselves with this in these initiatives. It's not sleek and sexy like CAR T and gene therapies and splashy that everybody talks about, but it is really important to them, and I think it it creates opportunities for APDN, so something to watch out for, with this company. But Jim-
Absolutely
Thanks for having for coming on with us. It's always a pleasure to have you, but we are out of time.
Likewise. Thank you, all. Cheers.
Thank you. Take care.