Co-Diagnostics, Inc. (CODX) Q3 2023 Earnings Call Transcript

Co-Diagnostics, Inc. (NASDAQ:CODX) Q3 2023 Earnings Convention Name November 9, 2023 4:30 PM ET

Firm Individuals

Andrew Benson – Head of Investor Relations

Dwight Egan – Chief Govt Officer

Brian Brown – Chief Monetary Officer

Convention Name Individuals

Operator

Hi there. Welcome to the Co-Diagnostics Third Quarter 2023 Earnings Convention Name. All contributors can be in listen-only mode. [Operator Instructions] Please notice at this time’s occasion is being recorded.

I’d now like to show the convention over to Andrew Benson of Investor Relations. Please go forward, sir.

Andrew Benson

Thanks. Good afternoon, everybody and thanks for taking part in at this time’s convention name. On the decision from Co-Diagnostics, we’ve got Dwight Egan, Chief Govt Officer; and Brian Brown, Chief Monetary Officer. Earlier at this time, Co-Diagnostics launched monetary outcomes from the quarter ended September 30, 2023. A replica of the press launch is obtainable on the corporate’s web site. We’ll start the decision with administration’s ready remarks after which open up the decision to analyst Q&A.

Earlier than we start, we want to inform the listeners that sure statements made by Co-Diagnostics throughout this name might represent forward-looking statements. Any assertion about firm expectations, beliefs, plans, aims, assumptions of future occasions or efficiency are forward-looking statements. For instance, statements regarding 2023 monetary and operational steering, the event, regulatory clearance, commercialization and options of latest merchandise, plans and aims of managements and market developments are all forward-looking statements. This contains statements in regards to the firm’s forthcoming Co-Dx PCR testing platform, which required regulatory approval for diagnostic use, is topic to USA FDA and native regulatory advertising and marketing authorization standing and isn’t obtainable on the market. The corporate believes these statements are primarily based on cheap assumptions.

Nevertheless, these statements should not guaranties of efficiency and contain identified and unknown dangers and uncertainties which will trigger the precise outcomes to be materially totally different from any future outcomes expressed or implied by such statements. Essential elements, which might trigger precise outcomes to vary materially from these in these forward-looking statements are detailed in Co-Diagnostics’ filings with the SEC. Co-Diagnostics assumes no obligation and expressly disclaims any responsibility to replace any forward-look statements to replicate occasions or circumstances occurring after this name or to replicate the prevalence of unanticipated occasions.

As well as, the corporate might focus on sure non-GAAP monetary measures throughout at this time’s name. These non-GAAP monetary measures shouldn’t be thought-about a alternative for and ought to be learn along with GAAP outcomes. We refer you to the corporate’s earnings launch out shortly earlier than this name, which incorporates reconciliation to the non-GAAP monetary measures introduced to their most comparable GAAP outcomes.

Right now, I want to flip the decision over to Co-Diagnostics, Chief Govt Officer, Dwight Egan. Dwight?

Dwight Egan

Thanks, Andrew. Good afternoon, everybody. Thanks all for becoming a member of Co-Dx’s third quarter 2023 earnings name. At this time, we’ll present an replace on our third quarter monetary efficiency and focus on current developments on the firm as we’ve got continued to make progress in the direction of our long-term targets. These developments have included build up capability in a brand new manufacturing facility for the Co-Dx PCR platform devices and take a look at cups, initiating a 3rd celebration analysis on our tuberculosis or TB assay. And most significantly, finishing the medical evaluations for our COVID-19 assay on our new platform, which is able to help an EUA submitting earlier than the tip of the yr.

Notably, we have been happy to additionally just lately introduced an almost $9 million grant from the Invoice and Melinda Gates Basis for the tuberculosis assay below improvement to be run on the Co-Dx PCR platform. This grant follows three different grants obtained in July to help our improvement initiatives. The primary of those was a $1.2 million grant from the Nationwide Institutes of Well being’s RADx Tech program, which is getting used to help our higher respiratory multiplex take a look at improvement. The second and third grants have been awarded by the Invoice and Melinda Gates Basis within the quantities of $1.33 million and $987,000 to help the event of respective assessments for TB and human papillomavirus or HPV. Each funding organizations carried out in depth impartial diligence previous to the execution of those grants overlaying our expertise, analysis method, scientific staff and manufacturing functionality. Recognition from world thought main organizations highlights the disruptive nature of our expertise and the worth we imagine our firm can present to a world healthcare infrastructure.

This final quarter we additionally appointed Ivory Chang as our Chief Regulatory Affairs Officer. Ms. Chang has years of expertise working at world diagnostic firms. And we’re assured that her experience in regulatory affairs, together with regulatory submissions for point-of-care, and in vitro diagnostic merchandise can be invaluable to Co-Diagnostics’s future regulatory submissions. Amidst the work that we’ve got continued to place into our platform since our final name, we participated in quite a few business and investor conferences, sharing Co-Diagnostics’s imaginative and prescient for growing accessibility of PCR Diagnostics worldwide, our distinctive worth proposition and updates on our new platform.

We additionally showcased our platform at different commerce reveals and expos the place our presence has bolstered the worldwide unmet want for a straightforward to make use of, correct and inexpensive point-of-care diagnostic platform. Total, it has been a busy time at Co-Diagnostics and we anticipate the subsequent a number of months to be an thrilling time for the corporate as properly. As we glance forward, I might like to debate the explanation why we’re so excited concerning the close to future. Co-Diagnostics is a number one diagnostics firm growing top quality actual time PCR options throughout a number of infectious illnesses to be delivered at residence, and at point-of-care settings. We have now designed and developed the platform expertise, together with a easy, straightforward to make use of actual time PCR instrument that makes use of a disposable take a look at cup, and delivers PCR outcomes to a consumer’s cell system in roughly half-hour. The assays or assessments that run on our new platform make the most of our patented Co-Primers PCR expertise developed by Co-Diagnostics, which improves the standard of take a look at outcomes by dramatically lowering the prevalence of amplification errors generally known as primer dimers, which might result in false optimistic outcomes.

These assays present dependable PCR diagnostics outcomes, which might drive enhance healthcare outcomes. Moreover, as a result of our platform is actual time PCR, it’s higher suited to multiplexing or testing for a number of illness indications inside the identical pattern and response when in comparison with different applied sciences. When mixed, our Co-Primers expertise and multiplexing capabilities increase the already disrupted nature of the Co-Dx PCR platform. Co-Diagnostics has taken further steps to guage the Co-Dx platform via third celebration research. Previous to preliminary grant awards from the Invoice and Melinda Gates Basis in July, the Apollo Challenge organized by Seattle primarily based PATH and funded partly by the Gates Basis, carried out an analytical and usefulness examine on the Co-Dx PCR platform. Information from this examine with PATH demonstrated the efficiency and ease of use of the COVID-19 assessments on the brand new platform, which confirmed our perception within the potential effectiveness of the take a look at in each at residence and point-of-care settings. Extra just lately, one other third celebration initiated a examine to guage the efficiency and usefulness of our new tuberculosis take a look at. Each research have been insightful and have substantiated the standard of our point-of-care PCR expertise. And we’re happy to have further proof from third events that helps the worth and utility of our platform.

With the medical evaluations for the COVID-19 take a look at now full. We’re at the moment on scheduled to submit our EUA for FDA evaluation by the tip of this yr as beforehand projected. Within the meantime, medical evaluations will proceed in an effort to collect requisite information for future 510-Okay submission as properly. We plan to introduce the Co-Dx PCR platform initially for COVID-19 detection, and later for different illnesses. COVID-19 is a prevalent illness and it’s believed by specialists that may stay in order it strikes towards an endemic stage. And we imagine we’ve got recognized many environments the place our platform represents a compelling resolution for ongoing COVID-19 testing. Analysis and pre-market suggestions signifies that prime quantity point-of-care settings like expert nursing amenities ought to be diligently testing sufferers, guests and staff to cut back the unfold of respiratory an infection, justifying the necessity for dependable point-of-care COVID-19 testing options. Over time, we count on to additionally concentrate on different institutional settings the place a number of the most weak sufferers reside, akin to assisted residing facilities. This can be along with physicians’ places of work, clinics, faculties, and the at residence setting. In the end, we imagine that our COVID-19 assessments will function the primary in a collection of indications That can open the diagnostics market alternative for different assessments on the Co-Dx PCR platform.

Co-Diagnostics has been growing a menu of assays throughout a number of indications that we imagine will convey vital worth to sufferers and healthcare suppliers. As we mentioned on our final earnings name, we’re additionally growing a multiplex higher respiratory take a look at with help from the NIH’s RADx Tech grant, which is able to take a look at for flu A and B, COVID and RSV. We imagine this take a look at will present in depth worth throughout many finish markets, together with these we initially deliberate to focus on with our COVID take a look at. One other necessary objective for the close to future is the event of the HPV take a look at. HPV is likely one of the commonest STIs on this planet, and one of many biggest danger elements for cervical most cancers, which is the fourth commonest most cancers on this planet. Greater than 85% of the estimated 264,000 cervical most cancers deaths annually are in low and center earnings nations, all of which the World Well being Group or WHO believes may be dramatically decreased by entry to diagnostics, vaccinations and most cancers screenings.

We imagine that point-of-care testing for HPV could possibly be a major worth to the HPV and STI testing markets and sit up for offering you with additional updates on the function Co-Diagnostics can play in these efforts. One of the crucial necessary initiatives for the corporate at this stage is the TB take a look at for our new PCR platform. We imagine {that a} vital alternative exists for Co-Diagnostics inside the world TB market. Given the pace and high quality of our platform, in addition to our Co-Primers expertise. An absence of accessibility to TB testing is a world downside. And we imagine the Co-Dx PCR platform will play a key function within the resolution. This perception has been bolstered by the almost $9 million of further grant funding just lately awarded to us by the Invoice and Melinda Gates Basis. This grant can be utilized in the direction of regulatory and medical validation actions for our take a look at, growing manufacturing capability and extra platforms software program improvement. We anticipate starting medical evaluations for the TB take a look at someday inside the first half of 2024. The commercialization technique for the TB take a look at contains plans to speed up improvement whereas additionally growing our manufacturing capability, each domestically and in India via our three way partnership CoSara. We’re assured that CoSara has the capability to successfully manufacture and help the commercialization of our TB take a look at.

Along with offering manufacturing help, CoSara will distribute the Co-Dx PCR point-of-care platform all through India, the place TB at the moment takes the lives of two individuals each three minutes, and which Prime Minister Modi is dedicated to eradicating. We count on that demand for our platform in India can be sturdy, and we plan to make the most of our most up-to-date grant to offset further prices. Since 2019, CoSara has obtained approval from the Indian CDSCO for 14 in vitro diagnostic assessments that make the most of our Co-Primers expertise, which provides us further confidence in our regulatory and commercialization method in that nation. In response to broader worldwide efforts to eradicate TB, an necessary factor of our TB technique contains receiving a suggestion from the World Well being Group. A WHO suggestion is a requirement for gross sales in lots of areas internationally, together with nations in Africa, which bear a disproportionately excessive TB burden, and the place we anticipate introducing the platform with our TB take a look at. We plan to initially pursue a regulatory pathway for this take a look at to the Australian Regulatory Authority, the TGA, which can be adopted by a submission to the CDSCO in India, as authorizations for each the TGA and CDSCO are acknowledged by the WHO when it makes suggestions for diagnostics.

We’ll sit up for offering additional updates as we proceed to make progress on these fronts. Whereas we plan to initially goal point-of-care settings with the assessments which might be below improvement, we imagine that our platform additionally has the potential to function the cornerstone of a neighborhood, regional or nationwide healthcare monitoring infrastructure. One of the crucial thrilling options of the Co-Dx PCR platform can be direct actual time HIPAA compliant integration into the EMR, creating further use instances for our platform, together with outbreak monitoring. Within the wake of the COVID pandemic illness monitoring has turn into a focus for presidency well being officers all over the world. Officers are actively options to make sure epidemiological information may be collected and sorted effectively to determine and monitor illness clusters and outbreaks. In the end, partly as a consequence of cloud primarily based analytics, the system is predicted to incorporate the potential to robotically report de-identified take a look at outcomes, whether or not from an assisted residing facility, doctor’s workplace, or the house on to regional public well being officers.

Over the previous few months, we’ve got additionally had preliminary conversations with authorities entities in the US about how this expertise could possibly be used to assist sluggish and even forestall massive outbreaks of infectious illness in the US and overseas. We’re significantly inspired by the Pandemic and All-Hazards Preparedness Act, PAHPA through which the federal authorities is considering a major set of initiatives within the context of outbreak and monitoring capabilities. The proposed act additional helps the use and wish for actual time PCR testing and a tool with expertise that may help outbreak and illness monitoring. Over time, we imagine the brand new platforms skill to help these initiatives will turn into one other aggressive differentiator for our finish customers.

To shut, we stay assured that the standard, ease of use, affordability and fast turnaround time of our platform will ship an affect to sufferers and communities all over the world. We’re enthusiastic about the way forward for Co-Diagnostics and the worth that our disruptive expertise can present to a world healthcare infrastructure. Within the close to time period, we sit up for the potential FDA authorization for our COVID-19 take a look at on the Co-Dx PCR platform. Our firm is properly funded with $63.4 million in money and equivalents on the steadiness sheet, grant help from notable worldwide leaders in well being care. And with extra funding doubtlessly obtainable by way of further grants. We sit up for offering future updates on our improvement, regulatory and industrial progress within the coming quarters.

With that, I’ll flip the decision over to Brian to debate our third quarter financials in higher element. Brian?

Brian Brown

Thanks Dwight. And because of everybody who joined at this time’s name. For the third quarter of 2023, whole income decreased to $2.5 million as in comparison with $5.1 million within the prior yr identical interval. Grant income for Q3 2023 was $2.3 million, acknowledged from a portion of our grants introduced earlier within the quarter. Product income was $0.2 million, which declined year-over-year because of the affect of decreased world demand for COVID-19 testing. Gross revenue for the quarter decreased to $2.2 million, in comparison with $4.3 million within the prior yr comparable interval. The reported gross revenue proportion within the third quarter of 2023 elevated to 89.6% in comparison with 84.9% in Q3 of 2022 as a consequence of a mixture shift in sort of income reported.

Whole working bills for the three months ended September 30 2023 have been $11.1 million, in comparison with $10.9 million within the third quarter of fiscal 2022. Within the third quarter, we proceed to extend our investments in analysis and improvement to additional help the event, regulatory and commercialization processes for our forthcoming Co-Dx PCR platform. Analysis and Improvement bills within the third quarter have been $5.8 million, in comparison with $5.0 million within the comparable prior yr interval. This improve primarily displays continued funding in our Co-Dx PCR platform, in addition to different firm initiatives. With medical evaluations for our COVID-19 take a look at accomplished and ongoing improvement of the beforehand mentioned menu of assessments, we proceed to take a position further assets to convey our revolutionary diagnostic testing platform to market.

For the third quarter of 2023, earnings earlier than tax is decreased to a lack of $8.1 million, as in comparison with a lack of $3.5 million reported within the prior yr identical interval, we skilled an earnings tax profit for the third quarter of $2.1 million, representing an efficient tax fee of 26.1%. We have now beforehand mentioned that our efficient tax fee will differ from the US federal statutory fee of 21.0% as a consequence of state taxes, everlasting objects and discrete objects. Web loss for the third quarter of 2023 was $6.0 million, or a lack of $0.20 per absolutely diluted share in comparison with a web lack of $1.4 million or $0.04 per absolutely diluted share within the prior yr identical interval. Adjusted EBITDA for the third quarter of 2023 was a lack of $6.5 million in comparison with an adjusted EBITDA lack of $4.1 million within the prior yr interval. We proceed to be deliberate in our actions as we handle the well being and adaptability of our steadiness sheet to make sure positioning for long run development.

We ended the quarter at $63.4 million in money, money equivalents and marketable securities. As Dwight talked about earlier, we have been chosen to obtain one other grant from the Invoice and Melinda Gates Basis. Funds from this grant should not mirrored within the ending steadiness of money, money equivalents and marketable securities at September 30, 2023. To date throughout This fall, we’ve got obtained $3.5 million below this new grant. Income recognition for the money obtained is at the moment being evaluated primarily based on the phrases of the grant settlement and present accounting requirements. Moreover, within the quarter, we repurchased roughly 150,000 shares of widespread inventory at a mean worth of $1.12 per share via our $30 million share repurchase program. As of September 30 2023, we’ve got just below $15 million remaining inside our share repurchase program, and plan to strategically repurchase shares as we see alternatives. We’re dedicated to sustaining a powerful money place via diligent expense administration to make sure Co-Diagnostics is properly capitalized to execute our long-term development initiatives.

As we method commercialization, we’ll stay conservative when evaluating future alternatives. As we mentioned on our second quarter earnings name, we imagine our success ought to be measured by way of progress made towards our improvement and operational targets. As such, we is not going to be offering monetary steering at the moment.

In abstract, Co-Diagnostics is properly capitalized and disciplined in its capital allocation technique, whereas additionally receiving help from world class organizations who’re aligned with our long-term technique. We’re nearer to a industrial launch for our Co-Dx PCR platform and proceed to make progress in the direction of our improvement targets. I sit up for updating you additional on our subsequent earnings name.

With that, I’ll now flip the presentation again over to Dwight.

Dwight Egan

Thanks, Brian. Earlier than opening for Q&A, I wish to take a second to increase our because of all of our shareholders in addition to the entire Co-Dx household and staff, distributors and consultants. We sit up for speaking with you once more after the subsequent quarter. We’ll now take calls from our analysts, operator.

Query-and-Reply Session

Operator

[Operator Instructions]

And we do have a query from Jay Montgomery from HC Wainwright.

Unidentified Analyst

Hello. Thanks for the decision at this time. So I used to be simply desirous to know, how quickly might the FDA full the evaluation of your EUA submission as soon as it is submitted? Do you will have any concept?

Dwight Egan

Thanks for the query. The FDA has their very own timeline. So we do not actually have estimation of what sort of time they are going to take to evaluation the appliance. All we are able to let you know is that we imagine our utility can be is a really stable utility once we make it. And so we’re enthused to be to that milestone, however as to timetable for the FDA to reply. We do not have a method to predict them.

Unidentified Analyst

Okay. And would you be capable to present an estimate of the preliminary quantity of the order dimension as soon as the product is launched?

Dwight Egan

That is an fascinating query. We have no manner and we’ve not offered any steering, as we mentioned in our script, that there isn’t any steering that we’re offering. So we do not have info to supply to the general public at the moment on orders that may be positioned. We, I imply, the product is now available on the market. So we will not take orders at this level anyway, no, sure.

Unidentified Analyst

All proper. And so major market then, I imply, you are extra form of, like nursing houses, that form of market or –?

Dwight Egan

Sure, the markets that give us a possibility to have vital throughput from every system positioned our areas of first concern in our advertising and marketing plans, and that features issues like expert nursing amenities. And there are many these across the nation that’s considered one of our major targets, they’ve a really sturdy must proceed to check sufferers and staff for COVID. And naturally, as we improve the menu over time, they are a prime marketplace for that as properly. However the point-of-care the place there is a bigger alternative for throughput per system is our preliminary attraction from a advertising and marketing standpoint.

Operator

And this concludes the query and reply session in addition to the decision. Thanks a lot for attending at this time’s presentation. And you could now disconnect your strains.