Good afternoon, welcome to the Applied DNA Sciences first quarter fiscal 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Head of Investor Relations and Corporate Communications. Please go ahead.
Thank you, Gary. Good afternoon, everyone, and welcome to Applied DNA's conference call to discuss our first quarter fiscal 2023 financial results. You can access the press release that was issued after market close today, as well as a slide presentation accompanying 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 this 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 two of the presentation and to 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. Now, it's my pleasure to introduce our first call speaker on today's call, Beth Jantzen. Please go ahead, Beth.
Thank you, Sanjay. Good afternoon, everyone. Thank you for joining us on our fiscal first quarter investor call. I will start this afternoon with an overview of our results for the quarter ended December 31st, 2022. I will turn the call over to Dr. James Hayward, our President and CEO, who will discuss progress against our strategic initiatives. We will open the line for questions from our analysts and institutional investors. Before I begin my review, as a reminder, we now report segment data that reflects the results of operations for our three reporting segments. The executive management team uses this data to manage the company's performance on a segment basis, assess expected future cash flows, and make more informed decisions about each segment going forward. We provide this data to investors as a measure of transparency into our management of these segments.
Our three reporting segments are therapeutic DNA production, identified as LineaRx, our majority-owned biotherapeutic subsidiary, MDx or Molecular Diagnostic testing services, which is our ADCL clinical laboratory, and DNA tagging and security products, which is our supply chain traceability segment. To begin, we are pleased to report a solid start to the fiscal year, with both sequential and year-over-year revenue growth. Our revenue performance in Q1 was driven primarily by ADCL and its COVID-19 testing service. Orders for LinearDNA and deferred cotton tagging revenues also contributed to the quarter's top- line performance. Turning to our consolidated results for the quarter, total revenue in Q1 was $5.3 million, an increase of 26% from $4.2 million in the prior fiscal period. On a sequential basis, Q1 revenues increased 48% from $3.6 million.
The $1.1 million increase in Q1 revenues was due to an increase in COVID-19 testing revenues associated with a key client. Notable in Q1's revenues were orders for research and development quantities of LinearDNA by first-time biopharma customers for their mRNA development efforts, as well as a recurring commercial order from an existing biotherapeutic customer. The increase in revenues was offset by a decline in product revenues of $310,000 that was primarily attributable to a decrease in sales of our MDx test kits and supplies. Our key COVID-19 testing client is an academic institution. As such, testing demand is subject to lulls due to semester breaks and school holidays. The current quarter, fiscal Q2 testing levels includes approximately three weeks of winter break, during which testing levels were muted.
With the start of the spring semester, testing levels are ramping up. Gross profit was $2.4 million or 45% compared to $1.1 million or 27% in the prior fiscal year period. The improvement in gross margin was the result of an improved gross margin at ADCL. Higher testing levels, coupled with cost management efforts for our testing contracts, where we also provide and staff test collection centers, were the main contributors to the improved gross profit. To a lesser extent, the improvement in gross margin for the current period was due to the prior fiscal year period having high COVID-19 positivity rates, which resulted in a reduction in pooling size that had a negative impact on gross margin due to higher consumable costs per sample.
Our total operating expenses declined by $2.2 million or 38% in Q1 to $3.6 million from $5.8 million in the prior fiscal period. The decline was primarily attributable to lower stock-based compensation expense of $1.6 million. The balance of the decrease is related to a decrease in bad debt expense of $300,000 for the collection of an outstanding receivable balance that was previously fully reserved for. Our operating loss for Q1 was $1.2 million, compared to an operating loss of $4.7 million in the prior fiscal period. Given the unrealized change in fair value of the warrant liabilities included in our net loss, we highlight loss from operations to be the best representation of the company's operations.
Net loss for Q1 decreased to $3.8 million or $0.30 per share, versus a net loss of $4.7 million or $0.53 per share in the prior period. Excluding non-cash expenses, consolidated adjusted EBITDA for Q1 was - $1.1 million, compared to - $2.7 million in the year- ago period. Turning to our balance sheet. Cash and cash equivalents totaled $12.9 million on December 31st. As of December 31st, accounts receivable stood at $4.1 million. We expect to collect the bulk of this amount in the current quarter. For Q1, our average monthly burn stood at $779,000 and was essentially flat with average monthly burn for the prior fiscal period.
Our current warrants outstanding balance on December 31st, 2022 remained unchanged at $7.3 million as our share price did not breach warrant exercise prices during the quarter. Approximately $2.2 million of the $7.3 million warrants have exercise prices ranging from $2.80-$2.84 per warrant share, which, if exercised, could result in exercise proceeds to the company of approximately $6.3 million. $5.1 million of these warrants have an exercise price of $4 per warrant share, which is exercised to result in total exercise proceeds of approximately $20.3 million. Of the $5.1 million warrants, $2.1 million expire September 2023, which, if exercised, with total proceeds of $8.4 million.
Our cash position on January 31st was approximately $10.8 million. Before I turn the call over to Jim, earlier this afternoon, the New York State and the Empire State Development Corporation announced our receipt of an Excelsior Jobs Program award valued at up to $1.5 million. The award, which was announced on the New York State website, could result in refundable tax credits for qualifying net new job creation over a benefit period of 10 years. We intend to use the award to support LinearDNA's platform development path for use in the manufacture of nucleic acid-based therapies. Jim's remarks will go into greater detail on progress by this business segment and why we're excited about its future process. This concludes my prepared remarks.
Thank you for joining us today. I will now turn the call over to Jim for his comments.
Okay. Thank you, Beth. Good afternoon, everyone. Thank you for joining us on our quarterly investor call. Our performance in the first quarter was one of improving execution. At the same time, we achieved progress on strategic initiatives focused on laying the foundation for a compelling biotherapeutic story, supported by two PCR-enabled businesses with the potential for growth and future cash flows. On prior quarterly calls, I've identified the biotherapeutic application of our PCR expertise as the company's chief creator of shareholder value. I've discussed that DNA underpins most nucleic acid pipelines, either in the manufacture of the therapy, as in the case with messenger RNA, or with DNA as the direct therapeutic itself.
The demand for DNA is expected to grow going forward. The plasmid DNA, which is the industry's incumbent DNA production technology, suffers from long lead times, high complexity, and high capital and labor costs as it moves to scale to support the growing number of nucleic acid-based therapies under development. Plasmid DNA scalability and related cost and process issues are negatively impacting developers in real time. It's common today for a developer to encounter delays for a manufacturing slot up to 12-18 months out. A delay of this magnitude for an industry that's reliant on development milestones and clinical data can alter cash runways, prospects for strategic partnerships, and paths to commercialization. The industry requires an alternative to plasmid DNA. It is actively seeking it out.
The industry acknowledges non-plasmid DNA's potential for enabling companies across a nucleic acid-based therapy sector to simplify and accelerate DNA manufacturing. The ability to iterate R&D faster via enzymatically produced DNA to bring product to the clinic and to market faster confers a valuable advantage to a sector where therapy development has historically taken a decade or more and at considerable cost. So much has changed. Interest from major pharmaceutical players in non-plasmid DNA manufacturing is rapidly increasing, with two enzymatic DNA manufacturing companies being acquired in the last 18 months, one by Merck and the second last month by Moderna. In addition, Pfizer last summer inked a licensing agreement with a third enzymatic DNA manufacturing company. Unlike those companies, we are a relative newcomer with a differentiated PCR-based technology platform that excels at manufacturing the specific DNA needed to empower next-generation mRNA workflows.
In light of the favorable macro environments for both enzymatic DNA manufacturing and mRNA therapies, we believe the timing is right to find long-term strategic partners to assist Applied DNA in its broad-scale commercialization of the platform. Now, my prepared remarks today will focus on why we believe we are in the right place at the right time with the right expertise to be integral to the future of nucleic acid-based therapies as a direct alternative to plasmid DNA. I'll also touch on ADCL, our molecular diagnostics clinical lab, and our DNA tagging business, also beneficiaries of our PCR expertise. I'll update you on recent developments as we position them for long-term profitable growth and positive cash flows. Our ability to make enzymatic DNA for nucleic acid-based therapies is based on very, very large-scale PCR, which is grounded in our 15 + years of development experience.
Our LineaRx subsidiary produces DNA enzymatically, which we have branded LinearDNA. We view LinearDNA as a direct alternative to plasmid DNA with improved safety and efficacy and performance, all with reduced manufacturing times. Since forming LineaRx four years ago, we've made tremendous strides in developing our LinearDNA platform. DNA is therapy-agnostic, therefore, LinearDNA's relevance to nucleic acid-based therapies is at least equally broad. To name just a few of those applications, mRNA uses DNA as an in vitro transcription template. Or an IVT template. DNA is used to make the viral vectors that empower gene therapies. DNA is also used to reprogram cells into CAR T cells used in the treatment of certain cancers. Of course, DNA itself can be used as a direct therapeutic agent in the form of DNA vaccines, targeting a wide range of indications from infectious disease to cancer.
To date, we have cultivated an enviable roster of biopharma companies that have used LinearDNA for R&D purposes to inform their therapy pipelines. As Beth Jantzen noted in her remarks, we acquired a pair of first-time LinearDNA customers during the first quarter that are engaged in mRNA therapy development. Given that LinearDNA's relevance to nucleic acid-based therapies is so broad, we have carefully examined the market and have deliberately chosen to focus on two near-term opportunities that we believe offer the nearest term revenues and can serve as a jumping-off point for applying our platform to the broader genetic medicines opportunities. I'll spend a few minutes speaking to each in turn. They are, firstly, in vitro transcription templates, known as IVT templates, for mRNA production and DNA therapeutics.
We have spent the last 12 months optimizing the LinearDNA platform for the enzymatic production of LinearDNA IVT mRNA templates. This was not an easy task, as conventional PCR is not really an option due to the unique homopolymer sequences that are found in IVT templates, specifically the poly- T in the DNA template that is transcribed into poly- A in the mRNA. Nevertheless, by using the many tools in our particular PCR toolbox, we overcame these challenges and developed a workflow that utilizes specialized PCR primers in the PCR process to achieve highly homogeneous IVT templates, thus creating a differentiated production platform with many advantages over plasmid DNA manufacturing. We launched our IVT template service this past summer, and the response from industry has been overwhelmingly positive. Our IVT templating workflow, as shown in the slide, is a simple five-step process.
We take a DNA template, which can be a plasmid, a linear amplicon, or any type of synthetic DNA. In step two, we optimize it for yield and fidelity. It goes through our production platform, which is step three. This step conducts the amplification of the optimized template by means of our PCR production platform, which, in the case of our current R&D stage company customers, produces small-scale orders that can be easily scaled up for production for recurring larger orders. Through this reaction, we can deliver high quality, enzymatically produced template, complete with long and homogeneous poly- T tails. It then goes through purification and quality control, as indicated in step four, and batch release to the customer is step five.
For customers with existing DNA templates, this entire process can currently be completed in under two weeks for a milligram scale, with faster turnaround times and scale a part of our platform roadmap. Our end product is pure. It only produces the gene of interest, and in doing that, we eliminate endotoxin risks and the risk of including genes responsible for ampicillin resistance. It is efficient. You can use less quantity of LinearDNA to drive similar or higher yields than the equivalent of plasmid DNA. It offers unparalleled flexibility. We provide a suite of IVT template modification options for specific performance requirements, such as chemical modifications and the addition of precise poly- T sequences. These poly- T sequences are highly homogeneous in the DNA sequence, including the lengths of these repeat homopolymer sequences, all necessary for optimal function.
It is scalable in a facility that is a fraction of the cost and a footprint, and a fraction of the footprint of a plasmid DNA facility. In addition, by providing an IVT template that is already linear in form, we estimate that our LinearDNA IVT templates can eliminate about 35% of the process steps required by conventional plasmid DNA-based mRNA production workflows. Moreover, unlike plasmid DNA templates that require expensive restriction enzymes to linearize the DNA, our linear template has no such requirement, thus eliminating expensive input materials from an RNA manufacturing workflow. The combination of all of these advantages forms a compelling use case for our customers. Our second term focus is on DNA therapeutics and veterinary biologics within this field. The veterinary market is now beginning to grow based on advances in human therapies.
The veterinary biologics market goes through USDA and has a lower regulatory threshold via conditional approval and offers a path to commercialization at a substantially lower cost compared to FDA. The veterinary market is also a green field for nucleic acid-based therapies and can serve as a proving ground for LinearDNA's eventual application to human health. In the past year, we've demonstrated that LinearDNA can be used as a direct therapeutic. With this capacity established, our first entrée is with a direct therapeutic targeting the veterinary immuno-oncology market. There are currently no veterinary lymphoma immunotherapy treatments being marketed. We've taken a de-risked approach by in-licensing a canine lymphoma immunotherapy from a close partner whose data from a plasmid DNA version of this therapy showed a threefold increase in treated dogs' survival times. These data are compelling.
However, USDA declined their request for conditional approval based in part on the therapy's use of plasmid DNA. Given the host of drawbacks associated with plasmids, antibiotic resistance, the origin of replication, chief among them, USDA did not want the therapy used on companion animals. Our partner also faced manufacturing challenges due to their therapy's plasmid DNA and adenovirus composition. Our LinearDNA version of the same therapy has demonstrated a similar immune response to the plasmid version of the therapy, but incurs none of the plasmid drawbacks. LinearDNA is well-suited for the economics of veterinary biologics because we can manufacture DNA cost-effectively. We're also investigating the use of off-patent, inexpensive lipid nanoparticles or LNPs as the delivery mechanism for lymphoma therapy. This would give us an integrated offering across the veterinary cancer therapy value chain.
We have concluded our initial screening studies on numerous LNP formulations that have resulted in promising results in vitro. Early studies have shown that the LNP LinearDNA compositions are highly stable at four degrees Celsius, which gives us a large commercial advantage over the LNP mRNA formulations that require an extremely cold chain. We plan to share our important findings in the coming months. Our plan is to now take our most promising LNP formulation into animal studies to arrive at a final formulation. Once complete, we will use the optimized LNP LinearDNA formulation to empower our canine lymphoma immunotherapy and seek U.S. conditional approval via a small canine clinical trial. Upon conditional approval, there is a well-established commercial path of out-licensing the therapeutic to an animal health company that would secure final regulatory approval and take the product to commerce.
In looking ahead, where are we today? LinearDNA really stands at an inflection point. We have proven the platform to be an attractive and viable alternative to plasmid DNA. We've cultivated a marquee biopharma customer base, and we are constantly optimizing and improving our workflows, supporting genetic medicines. The gating factor for us has never been the ability to produce DNA at scale. Instead, it's been the ability to make LinearDNA at a cGMP grade required to take a customer's therapy into the clinic. In effect, it's really been a question of funding. Our capital raise this past August served as the funding basis for establishing a small-scale cGMP production capacity by the end of this calendar year. This capacity was tasked to the manufacturer of DNA products to support customers from early-stage drug discovery through late-phase clinical trials, subject to necessary regulatory approvals.
Now, our timeline to cGMP is unaltered. In recent weeks, we've been offered space adjacent to our corporate footprint that is already fit for purpose. We have opportunistically secured this space that, though smaller than the standalone space initially planned, is more cost-efficient and adequately sized to manufacture cGMP-grade mRNA-based starting materials at quantities necessary to support early and mid-stage clinical applications. We expect to have the space that we've allocated and ready for cGMP production of IVT templates by calendar year-end. We expect to complete this space without the need for additional CapEx relative to our allocation for fiscal 2023. We expect this new space postpones our need for a standalone capacity by 12-24 months while allowing us to pilot our manufacturing processes that will be integral to expanding our production roadmap.
In addition to meeting current demand, we believe bringing to market cGMP product as soon as possible will facilitate the opportunity to secure strategic partners who are seeking enzymatic DNA production to inform their therapy pipelines. In addition, we are not standing still on the development of our platform, and we're focusing on two platform improvements. First, we're currently working to increase our platform manufacturing speed by leveraging one of PCR's biggest advantages, the ability to use de novo synthesized DNA as a starting material. This would enable us to go from digital DNA sequence received in an email to milligrams or grams of DNA in a very short period of time. This is made possible by the fact that our PCR-based platform does not require a plasmid DNA template.
Leveraging the unique power of PCR, our goal is a completely plasmid-free, high-speed IVT template production workflow capable of going from digital DNA sequences to large quantities of IVT template in only 14 days. We are currently working with our input materials partners and believe that this goal is achievable. Second, and again leveraging the unique attributes of PCR, we are also investigating the use of chemically modified IVT templates via PCR to enable a next generation of RNA polymerase to increase IVT yields and reduce double-stranded RNA production. Data from our early studies with a partner company have been very promising, with large increases in RNA yield and decreased double-stranded RNA production as compared to conventional IVT. We look forward to providing more information on these exciting improvements in the near future.
Now let me update you on our activities in ADCL and our DNA tagging business before opening the call to questions. We have successfully completed our clinical validation and data analysis for our pharmacogenomics or PGx testing panel and have secured partners to enable an end-to-end order-to-result workflow. We plan to file our validation package with the New York State Department of Health in the near future for approval as a laboratory-developed test. Approval will allow us to initiate a PGx testing service here in New York and allow us to receive samples collected nationally from states that conform to New York's Clinical Laboratory Evaluation Program or CLEP. We believe we have set up our PGx service for success for two primary reasons. First, we've taken a differentiated approach to this testing service.
Our business model is predicated on servicing enterprise-scale customers, similar to what we did in our COVID testing model, which worked very well. Under this model, we contract with large organizations to analyze their populations, conferring a benefit to both the enterprise and the constitutive individuals. This model allows us to charge a single entity for testing, thus eliminating the need to seek out reimbursement on an individual patient basis, simplifying our services, and removing the need to employ a large billing reimbursement department, such as you would find at a typical clinical lab. Second, we've been speaking with prospective customers in the marketplace for many months to cultivate interest in our service. Their feedback has helped us shape our commercial strategy. We're targeting regional health systems and large self-insured entities in the New York operating area.
Enterprises where the return on investment of PGx testing is not only measured in its clinical utilities and improved patient outcomes and improved standards of care, but also its economic value in terms of cost savings to the enterprise customer by reducing direct and indirect healthcare costs for the overall population. I also note that unlike COVID-19 testing, where turnaround times are measured in hours, PGx testing has no such imperative. Without this constraint, we can move to commercialize the panel nationally from our laboratory here at Stony Brook. We anticipate the state's review of our validation package will take several months and are targeting a service launch shortly thereafter. Based on feedback from our prospective customers, it is likely that a commercial-scale testing contract will be preceded by a soft launch to ensure optimized workflow for any customer-specific processes.
The prospective customers we are currently speaking to represent individual cohorts of over 50,000 potential patient samples each. Our submission to the state for approval comes on the heels of an expected cessation of the COVID-19 public health emergency by the Biden administration this coming May. PGx testing compared with COVID-19 will roll out at much lower testing levels, but with a higher anticipated gross margin per test. At this time, COVID-19 testing customers have not indicated how they will respond to the end of the public health emergency. Finally, as for our supply chain traceability segment, we are heartened to see that the recently enacted Federal Omnibus Spending Bill includes funds that support a sizable increase in Customs and Border Protection personnel and for the development of technology the agency uses to support forced labor enforcement efforts.
You will recall, CBP recognizes isotopic abundance testing and DNA tagging as two technologies that are able to deliver compliance with the Uyghur Forced Labor Prevention Act. In total, the bill provides $101 million to support efforts to prevent imports of goods produced with forced labor in fiscal 2023. That's on top of the $51 million that CBP received for forced labor enforcement in fiscal 2022. The increase in funding dovetails with the volume of goods and anticipated scale of petitions of compliance that CBP expects in fiscal 2023 as it enforces the Uyghur Forced Labor Prevention Act. During the first quarter, we added several new customers for CertainT isotopic analysis testing, which serves as a complementary diagnostic to tagging for customers in our cotton pipeline. I've provided a lot of commentary today, and let me offer a brief recap.
Our LinearDNA sits at the intersection of the expansion of nucleic acid-based therapies and the industry's movement toward enzymatic DNA manufacturing platforms that are faster, less complex to operate, and less investment intensive. We are maintaining our timeline to cGMP, but now with the deployment of a more cost-efficient space, so as to capitalize on interest from customers, platform development partners, and even strategic partners. At ADCL, our PGx platform is incredibly well-positioned to leverage the population health platform we built during the pandemic to propel this subsidiary into the genetic testing marketplace of the future. PGx is anticipated to be realized at a higher margin and lower testing volumes than COVID. The omnibus spending bill puts some real teeth behind implementation and compliance with the Uyghur Forced Labor Prevention Act.
More customers and border protection staff means more capacity to interrogate shipments, which increases the value proposition of our CertainT platform. Before I open the call to questions, on behalf of Applied DNA, its board of directors, the executive management and staff, I'd like to thank Governor Hochul and the Empire State Development team for their award under the Excelsior Jobs Program and the support from our county and town governments. In the context of my prepared remarks this afternoon and the opportunities we are pursuing in the life sciences sector, this award is timely and will help us achieve our goals here on Long Island in New York and to the benefit of all. This concludes my prepared remarks. Operator, please open the call to questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Jason McCarthy with Maxim Group. Please go ahead.
Hey, James. Thanks for taking the question. Can you talk a little bit about, you had mentioned earlier in your remarks that there were two linear or enzymatic based DNA manufacturing groups that were acquired by Moderna just recently in January, and then one by Merck, and then Pfizer did something with Touchlight. Can you talk a little bit about what those acquisitions or licensing agreements bring to those companies in light of all the things going on with mRNA? How does Applied DNA kinda measure up to those types of groups?
Sure. It's a great question. Well, first of all, it makes clear that the manufacturing environment for mRNA is a dynamic one and is in the midst of change. Pfizer had announced that they would prefer to walk away from plasmid-based operations. They licensed in a kind of try it and see license with Touchlight from the U.K., which uses a rolling circle platform that requires additional enzymes and purification and cost compared to our own. We'll have to see how that evaluation goes. Moderna acquired a Japanese company that is not as well known in the U.S., but that we'll have to see how their evaluation turns out.
We feel that by comparison, our technology is much more flexible, much simpler, and we feel we're on the path to very shortened development times and greater efficiencies in manufacture. The fact that we are just about the only company last on the dance floor puts us, I think, in a strong position because we have big plans. To execute on them, we're going to need partners. I think this will allow us to attract partners over the coming year or two.
That's an interesting point. If Moderna took OriCiro and Pfizer's doing its thing with Touchlight, I forgot who Merck picked up and when that was, but if Applied DNA or LineaRx is kinda the only game left in town, how can you leverage that you're saying through partnerships? Because everybody else has nowhere to go, right? If there's nobody else in the space doing enzymatic DNA amplification.
We're looking at opportunities for JVs to improve our enzymes, for example, and to accelerate our workflow. Given the number of nucleic acid therapies in the U.S. pipeline, speed and efficiency are going to be critical, and we think we can speak to those key issues.
Are more of your customers new customers that are coming on board for the LinearDNA skewed towards the mRNA or RNA space, given all the momentum we've seen around that category?
Yeah, absolutely. I think that will begin to diversify over time, and I think the nearly 5,000 of these therapies that are heading toward clinical trials will begin to whittle down, and the other applications will become clearer and clearer. You know, as we gain experience with the use of LinearDNA, not just as a template for mRNA, but as a direct therapeutic itself. LinearDNA is much more stable than messenger RNA, and it's much easier to manufacture. The key issue will be proving to FDA that integration does not take place. All of our evidence so far is that it does not. I think that our opportunities on the back end of growing our IVT business will be for direct use of LinearDNA as well.
Okay, just jumping over to the canine lymphoma immunotherapy opportunity. You had said you're moving soon or relatively soon, I think, into a small animal study to finalize your formulation. Can you just help us understand a little bit about one, the timeline to get there? two, what is the development path for a canine immune therapy? Is one small trial enough, or do you need to go through several phases like you would in human development?
Sure. Clay, if you'd like to speak to the issue of the timeframe and the size of the trial necessary to get preliminary approval from USDA. It's a simple trial, and it's really life extension. You know, when it comes to older dogs, many of them get lymphoma. Their prognosis typically is measured in months. I think impacting that prognosis with a longer lifetime will be the hallmark of success for the therapy.
Thanks, Jim. Hey, Jason. Yeah, it's going through USDA, right? It's not going through FDA, since it's a veterinary biologic. Most of the data points we have for trial size and trial time are coming out of the onco drugs going through FDA, right? Your chemotherapies. Those getting approval are quite small trial sizes, well under 50, in terms of the canines enrolled. As Jim said, the endpoints are not that high. It's really just increasing the life expectancy. What we've seen from USDA for conditional approval, right? We're not going for full approval. Our goal here is conditional approval. We've seen trial sizes as small as probably 20. Again, that endpoint is pretty permissive. We think it's a very reachable endpoint with the product that we're looking to develop.
Once we get that conditional approval, we would attempt to off-license.
Who on the larger pharma side has the most attractive veterinary arms in their portfolio that you might look towards for potential partnering for something like this? I thought Pfizer was, and then they weren't. I'm not sure if they're still in the vet space.
Yeah. I mean, Jim, I don't know how you feel, but, you know, right now to really target the next- generation chemotherapy drug companies in the veterinary space. Right? There's been a couple new approvals in the chemo space for canine lymphoma, and this therapy acts as a companion therapy to those. It's, you know, the logical choice for us is to run those in our trial and then seek out them as a companion therapy.
That's exactly it. That this is a companion approach to increase the efficacy of chemotherapy for which there are, I believe, right now, two in the market.
Okay, great. Thank you. I'll jump back in the queue.
Okay, thanks.
The next question is from Yi Chen with H.C. Wainwright & Co. Please go ahead.
Thank you for taking my question. Could you comment on when the current contract with the big customer for COVID-19 test end, and whether the customer will renew that contract, depending on the government's official emergency status for COVID? Thank you.
Sure. I can tell you that the customer has given us no commentary about the their plans after the summer. I can tell you that they have been remarkably conservative in terms of the care of their population, and they've shown their willingness to go to great ends to do so.
Okay. With respect to PGx testing, you mentioned that you will file your validation package with New York State Department of Health. How much revenue should we expect to see later this fiscal year coming from PGx testing by panel?
Yeah. PGx testing has the capacity to roughly replace our COVID testing one-to-one.
Mm-hmm. Okay.
That's a function of what capacity we build to, but increasing scale is relatively simple. It's just a matter of more equipment.
Okay. Got it. When will you feel comfortable to provide some top-line guidance? Could it happen later this fiscal year?
It really will be a function of depending on when we get the PGx up and running and have more progress on the cGMP and the LineaRx front. But hopefully in that timeframe or soon thereafter.
We will need contracts that give us the ability to forecast.
Okay. The package filing, is it going to occur in the current quarter or in the first half of this calendar year?
We'll be filing in the current quarter. Clay, are you comfortable with that?
I am. Our clinical validation wound up in December. We pulled the data packs together. It looks good. We're just in the process of finalizing the package set file.
Got it. Okay, great. Thank you.
You're welcome.
Again, if you have a question, please press star then one. Please stand by as we poll for questions. Showing no further questions, this concludes our question and answer session. I would like to turn the conference back over to Dr. Hayward for any closing remarks.
Yes, we'd like to thank you all for participating in today's dialogue. We look forward to speaking with you again at the end of the current quarter. Thank you.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.