Co-Diagnostics Inc

NASDAQ:CODX

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and welcome to the Co-Diagnostics Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Andrew Benson, Head of Investor Relations. Please go ahead.

[Andrew Benson, executive]

Good afternoon, everyone. Thank you all for participating in today's conference call. On the line today 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 second quarter ended June 30, 2024. 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&A.

Before we begin, we would like to inform the listeners that certain statements made by Co-Diagnostics during this call that are not historical facts are forward-looking statements. This includes statements concerning the company's forthcoming Co-Dx PCR testing platform, which requires regulatory approval and marketing authorization for diagnostic use, is currently being reviewed by the U.S. FDA and is not currently for sale. Actual outcomes and results may differ materially from what is expressed or implied in any statement. 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 issued shortly before this call, which contains reconciliations to the non-GAAP financial measures presented to their most comparable GAAP results.

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

[Dwight Egan, executive]

Thank you, Andrew, and good afternoon, everyone. Thank you all for joining Co-Diagnostics Second Quarter 2024 Earnings Call. I want to start by thanking everyone at Co-Diagnostics for all their hard work, which has led to a successful first half of the year on multiple fronts.

Over the past several months, we have made significant progress towards bringing our low-cost, easy-to-use and disrupted point-of-care platform to patients around the world. In June, we submitted our first 510(k) application to the FDA for our Co-Dx PCR Pro and Co-Dx PCR COVID-19 test kit for over-the-counter use, a pivotal milestone for our platform as we approached a commercial launch. During the quarter, we also continued to make progress in the development of our tuberculosis, respiratory multiplex, HPV and strep tests and remain well positioned to advance our development processes throughout the rest of the year.

We focused our commercial efforts on 2 trade shows where we showcased our Co-Dx PCR platform to market participants, demonstrating the impact our technology can have on the broader health ecosystem. I'm very excited by the progress that we have made so far and believe that we can remain in a strong position to execute our goals for the remainder of 2024.

As I mentioned, in the second quarter, we submitted a 510(k) application to the U.S. FDA for our Co-Dx PCR platform for the Co-Dx PCR Pro instrument and the Co-Dx PCR COVID-19 test for over-the-counter or OTC use. We completed the submission through the FDA's electronic Submissions Template and Resource or eSTAR system, which is a comprehensive resource for medical device manufacturers that allowed us to standardize all information in preparation for our 510(k). Our team conducted extensive preparation, research and data to submit what we believe will become a gold standard PCR diagnostics platform for its intended use.

Clearance by the FDA would allow our platform to be utilized in settings such as the home and workplaces. Medical devices cleared for use in OTC settings are automatically categorized as CLIA-waived. Such clearance by the FDA will allow for the PCR Pro instrument, software and COVID-19 test to be used by point of care or POC users, which we believe will help further expand the addressable market and value proposition of our platform. In the meantime, we remain in communication with the FDA on our existing 510(k) submission and look forward to providing you with more updates as they become available.

Upon the full commercialization of our platform for OTC settings, we plan to make it available to consumers and businesses or offices where multiple tests could be run each day as well as for at-home use. For POC users, we plan to initially target high-volume care centers, including skilled nursing facilities, physicians offices, clinics and assisted living centers. We see a large opportunity for high utilization of the our device and associated COVID-19 test kits in skilled nursing facilities where there remains an ongoing requirement and need to perform COVID testing due to the vulnerable populations that reside in them.

Our regulatory strategy for this initial test on the Co-Dx PCR Pro instrument will be crucial commercial platform and paving the path for utilization of additional tests in our pipeline in the future. Shortly following our 510(k) submission and in preparation for commercial launch, we attended 2 highly attended trade shows to showcase our Co-Dx PCR platform, FIME and ADLM.

In June, we attended the Florida International Medical Expo, or FIME, one of the leading medical trade expos for medical device and product purchasers. We are enthused by the turnout at FIME with exhibitors from 116 countries and more than 15,000 professional attendees, which provided us with the opportunity to strengthen our relationships with key suppliers in the global medical device and equipment market, especially in Latin America.

At the end of July, we attended the Association for Diagnostics and Laboratory Medicine, or ADLM 2024 meeting in Chicago, formerly known as AACC. The focus of our presentation at ADLM was centered around the utility of our platform, the development of our tests and the opportunity for PCR diagnostics to test for tuberculosis. Shows like FIME and ADLM play an important role in our initial pre-commercialization efforts and allow us to converse with key prospective customers and distributors on our accomplishments to date, along with our plans moving forward.

Turning to our test pipeline. We are very excited by the development progress we have made so far this year. We remain highly focused on our test for tuberculosis or TB, which remains the deadliest infectious disease in the world. Clinical samples from tuberculosis patients have already been run in TB test cups on the Co-Dx PCR Pro instrument, and we plan to initiate clinical trials on our TB test before the end of the year in South Africa as well as in India, one of our top priority markets for TB testing.

We are working very closely with NGOs and other organizations and groups to ensure that our TB test meets the needs of our target markets. These external groups are also helping to inform our TB commercial strategies surrounding markets of focus, market opportunity and total addressable market. We are iteratively refining our go-to-market strategy for TB, so that our team is best prepared to address the locations of highest need.

Following internal and external market research, we believe the global total addressable market for TB testing may reach over $3.6 billion within the next 4 years. This includes an estimated 17 million near point-of-care TB tests currently being performed in South and East Asia every year and 10 million in Africa. We are working closely with NGOs and other stakeholders in our target countries as we identify how much of the total global market will be serviceable by POC testing as infectious disease diagnostics continues its shift towards decentralization and how much we expect to be able to capture as our commercialization footprint grows.

We are also encouraged by the progress we have made so far this year on our multiplex upper respiratory and HPV tests. As we discussed on our most recent call, the upper respiratory multiplex test has the potential to provide low-cost and easily accessible diagnosis for some of the most pernicious respiratory infections in at-home and point-of-care settings, run on our new Co-Dx PCR Pro instrument, this test is strengthened by a low unit cost and could unlock significant clinical and economic efficiencies enabled by the ability to detect COVID, Flu A, Flu B and RSV infections all at once. We continue to expect clinical evaluations to commence during the upcoming North American flu season.

The development of this specific test has also driven even more innovations on the platform, including enhancements to the instrument and to the software, which we believe will provide local, national and international organizations the ability to monitor and react to disease outbreaks. These continued iterated upgrades are the result of input from prospective markets and customers, which underscores our commitment to design and development process focused on producing results that directly address existing shortcomings in health care, all with the aim of producing diagnostics that could easily be adopted by users searching for better solutions.

And while we remain highly focused on taking the platform to market with the pipeline of tests we have already shared, ongoing R&D is also continually expanding the boundaries of this innovative new platform's capabilities, providing new opportunities for the future that we believe have the potential to dramatically increase its impact well beyond our original vision.

Our team is committed to developing more than just respiratory infection diagnostics as we believe our device can also make other diagnostic processes such as STI testing more efficient. On HPV, Co-Diagnostics has continued to work closely with our Indian joint venture, CoSara Diagnostics, where research shows there exists a significant need for HPV testing and test accessibility.

Our HPV test efforts are supported by the Bill and Melinda Gates Foundation grant that we received last year, which speaks to the importance of the work that we continue to do. Additionally, while our strep A test is the most recent test to be added to our pipeline, we are excited by our development strategy and the opportunity to help diagnose patients in pediatric centers and clinics around the country.

Before closing, I would like to briefly discuss the progress of our vector control business. We are pleased that the Co-Dx vector control footprint continued to grow in the U.S. this quarter with expansion into Nevada, the 15th U.S. state we have reached with this technology. Our vector control suite of product offerings includes Vector Smart PCR tests that can be utilized for mosquito-borne illness surveillance and which deliver same-day results of mosquito pool testing to more quickly mitigate transmission of disease to humans and animals. This comes at a time when nearly 200 people have been infected with dengue virus in New York and New Jersey according to the CDC and a public health emergency for the mosquito-borne illness has been declared in the U.S. territory of Puerto Rico.

As mentioned on our prior call, while our Vector Smart testing products primarily include those for mosquito abatement, our flu A, B and COVID-19 or ABC Logix Smart test has shown capabilities to detect the H5N1 virus or Avian flu. Co-Diagnostics has initiated work to explore ways in which our company can be beneficial in H5N1 detection, which has included initial design work for a more specific Co-Primers H5N1 test. We look forward to the opportunity to develop an effective and efficient detection solution for the H5N1 virus should the need for the product to rise.

To close, I would like to express my confidence in the value proposition that Co-Diagnostics will bring to the global molecular diagnostics market, especially at the point of care. We have strategically positioned ourselves to transform the way that providers test for infectious diseases. Our patented Co-Primers technology significantly reduces the number of false positives, leading to results that health care providers can trust and with enhanced multiplexing capabilities, which are then delivered to the Co-Dx mobile app in approximately 30 minutes through our platform's cloud-based HIPAA-compliant technology.

The size of our instrument, our in-house manufacturing and scale capabilities, efficient management of our balance sheet and the grant support we have received provides Co-Diagnostics with the ability to support a commercial launch that enables platform delivery to populations all around the world. We are excited by the potential that the Co-Dx PCR platform has to increase availability and accessibility of the highest quality of diagnostics and to improve the quality of global health care.

I'm proud of our Co-Diagnostics team and the immense effort that they have dedicated to improving the quality of health care through best-in-class diagnostics. I look forward to providing you with more updates as we progress throughout the remainder of 2024.

With that, I will now turn the call over to Brian to discuss our second quarter financial results.

[Brian Brown, executive]

Thanks, Dwight, and thanks to everyone who joined today's call. For the second quarter of 2024, total revenue increased to $2.7 million as compared to $0.2 million in the prior year same period. Grant revenue in the second quarter of 2024 was $2.5 million and product revenue was $0.2 million. Gross profit for the quarter increased to $2.4 million compared to negative $0.3 million in the prior year comparable period.

Total operating expenses for the quarter ended June 30, 2024, decreased to $10.1 million from $11.7 million in the second quarter of 2023. The decrease from the prior year is primarily due to higher expenses in 2023 related to stock-based compensation, bad debt and expenses related to clinical trials for the Co-Dx PCR platform. Research and development expenses in the second quarter were $5.6 million compared to $6.0 million in the comparable prior year period.

For the second quarter, income before taxes was a loss of $7.7 million as compared to a loss of $11.2 million reported in the prior year. Net loss for the second quarter of 2024 was $7.6 million or a loss of $0.25 per fully diluted share compared to a net loss of $8.9 million or a loss of $0.31 per fully diluted share in the prior year. Adjusted EBITDA was a loss of $5.9 million, compared to an adjusted EBITDA loss of $9.6 million in the prior year.

We ended the quarter with $44.9 million in cash, cash equivalents and marketable investment securities. We continue to manage our spend as we look to maintain a healthy balance sheet to position ourselves for long-term growth. Co-Diagnostics remains focused on maintaining our cash position through appropriate and diligent management to position the company for success upon a future commercial launch of our platform.

We believe that we are operating from a strong cash position, and we'll continue to focus on driving operational efficiencies. We remain excited about our 2024 plan and are very optimistic about our test pipeline and the Co-Dx PCR platform. I look forward to updating you on our next earnings call.

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

[Dwight Egan, executive]

Thank you, Brian. Before opening for Q&A, I want to take this time to extend a thank you to our Co-Dx shareholders in addition to our employees and distributors, who work hard each and every day to progress our platform and the mission of Co-Diagnostics. We will now take questions from our analysts. Operator?

[Operator]

[Operator Instructions] The first question comes from Jade Montgomery with H.C. Wainright.

[Jade Montgomery, analyst]

I am on for Yi Chen at H.C. Wainwright. So my first question, I mean, I know you just admitted it, but have you heard back at all from the FDA yet on the 510(k), any feedback or...?

[Dwight Egan, executive]

Thank you for your question. We have regular contact with the FDA since we have submitted.

[Jade Montgomery, analyst]

Any particular guidance you'd share with us? Or do you know when potentially you could expect that passing clearance?

[Dwight Egan, executive]

We really can't comment on regulatory decisions by the FDA. We're in regular contact with them. We are pleased with their response so far.

[Jade Montgomery, analyst]

Okay. And just, I mean, outside of that has -- with those 2 trade shows, has there been any potential customers that have really indicated their strong interest to place purchase orders once you get that 510(k) or...?

[Dwight Egan, executive]

We have attended a lot of shows. Last year, we attended about 30 different shows. So we're always talking to potential customers about the benefits, progress that we're making. Until we have clearance from the FDA, we're not permitted to sell the product. So we have a lot of constructive conversations about what we're doing in the state of our technology, and we're very enthused by the response that we received from the market.

[Jade Montgomery, analyst]

And that -- I mean, that potential market is both domestic and international or mostly domestic?

[Dwight Egan, executive]

It's both domestic and international. During the last several years, we have sold our product in over 50 different countries around the world. So we have a lot of distributors across the world. So the interest in our product spans the globe.

[Operator]

This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.