Co-Diagnostics Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 10, 2023

There are 4 speakers on the call.

Operator

Welcome to the Co Diagnostics Second Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

Speaker 1

I would now like to turn

Operator

the conference over to Andrew Benson, of Investor Relations, please go ahead.

Speaker 2

Thank you. Good afternoon, everyone. Thank you for participating in today's conference call. On the call from Co Diagnostics, we have Dwight Egan, Chief Executive Officer and Brian Brown, Chief Financial Officer. Earlier today, Co Diagnostics released financial results from the Q2 ended June 30, 2023.

Speaker 2

A copy of the press release is available on the company's website. We will begin the call with management's prepared remarks and then open up the call to analyst Q and A. Before we begin, we would like to inform the listeners that certain Statements made by Co Diagnostics during this call may constitute forward looking statements. Any statement about company expectations, Beliefs, plans, objectives, assumptions of future events or performance are forward looking statements. For example, statements concerning 2023 financial and operational guidance, the development, regulatory clearance, commercialization and features of new products, Plans and objectives of management's and market trends are all forward looking statements.

Speaker 2

This includes statements concerning the company's forthcoming Kodiak's PCR home However, these statements are not guarantees of performance and involve known and unknown risks and uncertainties that may cause the actual results to be materially different For many future results expressed or implied by such statements, important factors which could cause actual results To differ materially from those in these forward looking statements are detailed in Co Diagnostics' filings with the SEC. Co Diagnostics assumes no obligation and expressly disclaims any duty to update any forward looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company may discuss certain non GAAP financial measures during today's call. These non GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release out shortly before this call, which contains reconciliation to the non GAAP financial measures presented to their most comparable GAAP results.

Speaker 2

At this time, I would like to turn the call over to Co Diagnostics' Chief Executive Officer, Dwight Egan. Dwight?

Speaker 3

Thank you, Andrew. Good afternoon, everyone. Thank you all for joining CotyX's Q2 2023 earnings call. Today, we are excited to provide details regarding our financial results as well as recent developments relating to our product development pipeline. I'm proud of the work our team has done Our recent grants, which I will discuss shortly, exemplify the interest in our new Kodiak's PCR home platform and further validate that we are on target to service some of healthcare's greatest unmet needs.

Speaker 3

As a reminder, we are leveraging our unique patented co primer technology, which has been used in tens of millions of PCR assays sold around the world to develop tests for our new platform and instrument that can be deployed in a variety of point of care and point of treatment centers and even right down to the home. The platform, which is currently undergoing Clinical evaluations for our initial COVID-nineteen test is small, portable and will be available at a fraction of the cost of conventional PCR technology used in high complexity clinical labs today. Photos and videos of this device are available on our website. The high demand for affordable and accurate PCR testing around the world was reinforced at the American Academy Foot traffic and interest from a broad cross section of visitors. Having a presence at conferences like AACC Provides valuable market awareness as showcasing our technology and progress helps to confirm to market participants We are moving in the direction of filling an unmet need and remain committed to our mission.

Speaker 3

While there, we also discussed Some recent grant activity as well as the clinical evaluations for our Kodiak's PCR home device. These Trials are going well and we remain on schedule to complete them in our initial regulatory submission by the end of this year. And we are encouraged by early data we're seeing. In previous earnings calls, we shared that a third party analytical and usability study with PATH Funded by the Bill and Melinda Gates Foundation was in process. Now complete, we are happy to share that the resulting data from this study further demonstrated The ease of use and performance of our COVID-nineteen assay for the new platform.

Speaker 3

The study was insightful and confirmed that we are on the right track We have been awarded. Recall that last quarter, we discussed the potential of grants awarded by notable parties to help us advance our innovative Kodiak's PCR Home product. The first is from RadixTech, which is an arm of the NIH This $1,200,000 grant will be used to support what we believe will be one of our first products to reach clinics at the point of care, which is our respiratory multiplex test that will include detection for flu A and B, COVID and RSV. While we view COVID-nineteen as the first target indication that will accelerate our PCR home devices path to commercialization, We see an even greater market opportunity within the market for other respiratory diseases, and we still expect to begin the clinical evaluations for this multiplex test both through the new PCR home platform along with another version that will be suitable to meet demand from our centralized laboratory customers and distributor base. The second and third grants were awarded by the Bill and Melinda Gates Foundation to support the development of 2 new tests on the platform, Tuberculosis or TB and human papillomavirus or HPV, 2 diseases that continue to have High global incidence and mortality rates.

Speaker 3

The World Health Organization has been committed to addressing the world's TB crisis Through its end TB initiative, which aims to significantly reduce global TB infection by 2,030. Due to lack of testing access and the shift in focus since the pandemic towards addressing COVID, the World Health Organization and United Nations have fallen off track to meet this goal and TB infections have risen in the last few years. According to the Gates Foundation, about 3,000,000 Of the estimated 10,000,000 new annual TB cases go undiagnosed and or unreported, It is our mission to reduce global TB incidents by providing a more accessible and affordable test, accompanied by a recommendation from the World Health Organization. We expect to begin clinical evaluations for this test in 2024. We are evaluating different jurisdictions to conduct these studies and future regulatory filings using as criteria, Those that we believe will provide the most direct path to regulatory clearance and ultimately the recommendation by the World Health Organization.

Speaker 3

The 3rd grant award will be used to help us develop an HPV test also on the new platform, which is expected to be used as a companion diagnostic to a therapeutic vaccine. HPV is one of the most common STIs in the world And one of the greatest risk factors for cervical cancer, which is the 4th most common cancer in the world. We look forward to providing updates on this project as We are honored to have been awarded grants by these prestigious organizations that seek to improve quality of life by providing crucial access to diagnostic testing. As we advance our platform and assays through the regulatory approval process, We are pleased to align ourselves with such insightful and experienced supporters. The Kodiak's PCR home Has been designed as a platform that looks beyond the present and into the future.

Speaker 3

As such, we are utilizing all cutting edge Tools available to us, including leveraging artificial intelligence or AI to help keep in front of healthcare trends. For several years now, Kodiak has incorporated machine learning into our co primers test development. Now as more and more tests are run on our Kodiak PCR Home platform, we are training an AI model to help make the platform software even more robust than before. And As the devices are gradually deployed around the world in the future, we intend to further leverage the power of AI to make the Community monitoring component of the software more powerful and effective, using it to analyze the de identified test result data for trends that might otherwise have been overlooked and to control for outlier results, all with the aim of ultimately being better able to help Lastly, in anticipation of demand for our new platform, we have been focused on ramping up our manufacturing capacity. We leased space for a new manufacturing facility right here in Salt Lake City that is scheduled to be operational by the end of this year.

Speaker 3

Currently, the plan is to install 12 new lines that will manufacture assays and instruments at scale. The construction of this plant ensures that Co Diagnostics will be aptly prepared to meet end market demand upon the commercial launch of our new products. We also intend to utilize the capacity and resources available to us through COSERA Diagnostics, our manufacturing joint venture in India, to help service the diagnostic needs of that country and other low and middle income countries around the world. There has never been a more exciting time at Kodiak's as we pivot our strategy to expand beyond the walls of a lab To enable testing in places with the greatest needs, our new development partnerships, market interest, strong early clinical trial data and capacity for expansion all position us very well moving forward. As we seek to advance a diversified product mix, We expect to win market share by leveraging our existing global distribution footprint and strong branding.

Speaker 3

I'm excited to witness the continued progress that the company will make and look forward to updating you further as we progress toward our milestones. With that, I will turn the call over to Brian to discuss our Q2 financials in greater detail. Brian?

Speaker 1

Thanks, Dwight, and thanks to everyone who joined today's call. The decline in global COVID testing had an unfavorable impact on sales of our LOGICS Smart COVID-nineteen tests and resulted in a decline in our financial results compared to the prior year period. For the Q2 of 2023, revenue decreased to $200,000 as compared to $5,000,000 in the prior year same period. Gross profit for the quarter decreased to negative $300,000 compared to $4,100,000 in the prior The negative gross profit for the quarter reflects a larger amount of fixed costs as compared to the reported sales in the quarter. Total operating expenses for the 3 months ended June 30, 2023 were $11,700,000 An approximate increase of 42.1 percent compared to $8,300,000 in the Q2 of fiscal 2022.

Speaker 1

The increase was driven by continued investments in research and development and general and administrative expenses to further support the development, Regulatory and commercialization processes for our forthcoming Kodiak's PCR Home platform. Research and development expenses in the 2nd quarter were $6,000,000 compared to $3,900,000 in the prior year period. The increase primarily reflects continued investment in our at home endpoint of care Kodiak's PCR home platform and other company initiatives. With clinical trials for our platform ongoing, we continue to invest additional time and resources to bring our revolutionary diagnostic testing platform For the Q2 of 2023, income before taxes decreased to a loss of $11,200,000 as compared to a loss of $3,400,000 reported in the prior year same period. We experienced an income tax benefit for the 2nd quarter of $2,200,000 representing an effective tax rate of 20.0%.

Speaker 1

As stated on previous calls, Our effective tax rate will differ from the U. S. Federal statutory rate of 21.0 percent due to state taxes, permanent items and discrete items. Net loss for the Q2 of 2023 was $8,900,000 or a loss of $0.31 per fully diluted share compared to a net loss of $2,700,000 or $0.08 per fully diluted share in the prior year same period. Adjusted EBITDA for the Q2 of 2023 Was a loss of $9,600,000 compared to an adjusted EBITDA loss of $2,300,000 in the prior year period.

Speaker 1

We continue to be deliberate in our actions as we manage the health and flexibility of our balance sheet to ensure positioning for long term growth. As we make further progress on clinical trials of our platform, we remain deliberate and discerning while we evaluate opportunities that enhance our capabilities Cash, cash equivalents and marketable securities End of the quarter at $69,100,000 As was highlighted in Dwight's remarks, we recently announced that we were selected to receive multiple grants, which will provide us with additional financial resources and flexibility as we continue to progress on bringing our new at home and point of care platform to market. The funds received from these grants are not reflected in the ending balance of cash, cash equivalents and marketable securities at June 30, 2023. Our balance sheet remains solid, and we remain committed to maintaining a strong cash position, while also preserving the health and flexibility of our balance sheet. Our highly liquid no debt balance sheet enables us to utilize our resources to achieve short and long term goals and enables us to opportunistically allocate capital with the goal of maximizing long term value for shareholders.

Speaker 1

As mentioned on the Q1 earnings call, we believe our current company's success will be measured in terms of progress made toward our development and operational goals. As such, we will not be providing financial guidance at this time. Our solid cash position combined with our grant awards provides us with adequate foundation to support near term financial demands and deploy capital in a disciplined manner in support of our long term strategy, including our at home endpoint of care, Kodiak's PCR home platform. 2023 will be a monumental year for the company and one that will position us for the long term future. We continue to consider additional ways to increase returns and create greater value for shareholders.

Speaker 1

With that, I will now turn the presentation back over to Dwight.

Speaker 3

Thank you, Brian. We will now take calls from our analysts. Operator?

Speaker 1

And with that, we will conclude our question and answer session. I'd like to turn the conference back over to Dwight Egan for any closing remarks.

Speaker 3

We want to take a moment to extend our thanks to all of our Thank you, and good morning everyone. We will now begin the call for questions.

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Earnings Conference Call
Co-Diagnostics Q2 2023
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