Co-Diagnostics Inc

NASDAQ:CODX

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, and welcome to Co-Diagnostics Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would like now to introduce Andrew Benson, Head of Investor Relations.

[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 third quarter ended September 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 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 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 issued shortly before this call, which contains reconciliations for 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 Third Quarter 2024 Earnings Call. I want to begin by extending my gratitude and thanks to everyone involved with Co-Diagnostics. Our employees have continued to work extraordinarily hard to propel our platform and test pipeline forward this quarter. And we are pleased with the progress we have made.

Our Co-Dx PCR platform includes a low-cost, easy-to-use and highly portable point-of-care, real-time PCR instrument and mobile app, all designed to support a multitude of different tests. Over the past 3 months, our team has been focused on advancing the development of our platform and associated test pipeline. As we have reported previously, earlier this year, in June, we submitted a 510(k) application to the FDA, seeking clearance for over-the-counter use of the Co-Dx PCR Pro instrument and Co-Dx PCR COVID-19 Test Cup.

The FDA is substantively reviewing the application. And we continue to engage in the interactive review process and communications with the FDA. While we retain full confidence in the quality and integrity of the platform, the company can't predict the remaining review process time line or outcomes. However, during this time, we have also been actively taking steps to broaden the potential reach of the Co-Dx PCR platform by continuing the development of our tuberculosis, respiratory multiplex, HPV multiplex and Strep A test, which I will discuss in greater detail shortly.

I am excited by the progress that we continue to make each quarter and believe that Co-Diagnostics is well positioned to execute our strategy and goals through the remainder of 2024 and into 2025.

During our last earnings call, we discussed our submission of a 510(k) application to the U.S. FDA for the Co-Dx PCR Pro, the mobile app and the Co-Dx PCR COVID-19 test for over-the-counter or OTC use. 510(k) OTC clearance would allow the platform to be utilized in the home, workplace and point-of-care settings, including skilled nursing and assisted living facilities and physicians' offices in the U.S.

As we continue to remain in active dialogue with the FDA regarding their review of our submission, we also are preparing for clinical evaluations and regulatory submissions outside of the U.S. for COVID as well as TB, HPV multiplex and respiratory multiplex in Central and South America, Africa, the Middle East and India, where we believe there is an unmet need and an opportunity to accelerate the commercial adoption of our platform.

We plan to target local health centers, point-of-care settings, and remote settings in these regions. In India, for example, we are preparing to seek clearance for multiple tests on the new platform from the Central Drugs Standard Control Organization, or CDSCO in a region where we have gained a comprehensive understanding of the commercial and regulatory landscape through our joint venture, CoSara Diagnostics.

CoSara has an established sales network throughout the India for its 15 infectious disease PCR test cleared by the CDSCO for IVD use in clinical labs. Ultimately, international markets remain in high need of a decentralized, portable, low-cost testing system, all of which we believe this platform can provide.

During the quarter, we also attended several trade shows to showcase the Co-Dx PCR platform as well as an international trade mission to Asia. At the end of September, Co-Diagnostics accompanied Utah Governor, Spencer Cox and the World Trade Center Utah executives to South Korea and Japan, seeking to strengthen the company's relationships with the state of Utah and with potential international partners. We learned a great deal about the health care systems in Asian markets and spoke with several key stakeholders to gain a better understanding of the regulatory and payer landscape.

As we consider commercialization of the new platform outside of the U.S., we continue to identify regions of need and deepen our knowledge of potential market strategies in those regions. Additionally, in the third quarter, we attended, presented and hosted a booth at the 16th next-generation DX Summit in Washington, D.C. The conference was hosted by the Cambridge Healthtech Institute who facilitated transformative discussions on diagnostic advancement.

We also hosted a booth at the Association for Diagnostics and Laboratory Medicine, or ADLM Annual Meeting in late July, where we presented Co-Diagnostics at home and point-of-care PCR platform and its ability to support a wide range of potential indications. We are pleased with our engagement at renowned trade shows and expo and remain focused on driving global exposure for our platform.

It is important to remember that this new technology represents more than a single test or even an instrument, rather, it is a novel and comprehensive sample-to-result platform which we believe has global applications with the potential to be transformative. In connection with these ambitions, we remain highly focused on the development of our tuberculosis or TB test.

To date, Co-Diagnostics has completed several preliminary analytical studies for TB. We plan to initiate clinical trials in South Africa and India in early 2025, which remain our priority markets for TB testing. As mentioned, in India, we plan to pursue a regulatory pathway through the CDSCO and we'll initially target point of care, remote settings and local health centers.

We also plan to pursue South African Health Products Regulatory Authority, or SAFRA, Clearance and World Health Organization or WHO prequalification, which would facilitate introduction of the instrument and TB tests as an in-vitro diagnostic into several African markets.

As Co-Diagnostics pursues the commercial opportunities in India, we remain engaged in discussions with NGOs and potential future customers, gathering detailed data to support the go-to-market strategy for the TB test on the Co-Dx PCR platform. And ultimately contribute to the Indian government's initiative to eradicate TB from the country. For example, the company has conducted dozens of on-site evaluations of higher throughput smear microscopy centers, where many TB samples are currently processed as experts believe that these centers need to rapidly transition to using molecular diagnostics, including gold standard PCR technology.

Turning to our upper respiratory multiplex test, we made great developmental progress in the third quarter. We believe that this test, which has been designed to detect COVID, Flu A, Flu B and RSV infections and at the same time from a single sample, brings significant strength to the point of care in at-home settings globally. By expanding accessibility to low-cost testing through a 4-in-1 multiplex test, the Co-Dx PCR platform has the potential to deliver quick and efficient results to high-need locations.

We see the most initial significant opportunities for this test in the U.S. and Latin America, which represent our initial target markets. In the case of the latter, we believe a U.S. FDA clearance could expedite the registration of the test and instrument in several regions across Central and South America. We are also encouraged by the significant progress that we have made on our HPV multiplex test on the platform.

The Co-Primers based HPV multiplex test has been fully ported over to test cups for the Co-Dx PCR Pro instrument, and results show that chemistry optimization appears to be complete. We expect to begin clinical evaluations early next year. We have emphasized international opportunities for this test and plan to initially target India, followed by Africa, given the higher prevalence of HPV in those regions compared to the rest of the world.

Co-Diagnostics has continued to work closely with our Indian joint venture, CoSara Diagnostics on testing needs in India, where a lack of accessibility remains a large problem. As you may recall, the HPV test development efforts are supported by a grant from the Bill & Melinda Gates Foundation. The work that we are doing with our test is an important step in making testing more accessible and efficient, thanks to the advantages afforded by the Co-Dx PCR platform technology.

We anticipate our clinical locations, regulatory strategy and efforts and target markets to be influenced and facilitated by our HPV testing finding partners. In August, the World Health Organization declared Mpox, formerly Monkeypox, a public health emergency of international concern. More recently, several health officials have indicated that clade 1b Monkeypox or Mpox, a new strain recently found to be circulating among some effective populations, is both more severe and more transmissible between humans.

In response to the recent surge in cases, which includes over 22,800 cases and 622 deaths in Africa alone as of the end of August, Co-Diagnostics conducted an in-silico analysis of the Logix Smart Mpox 2 gene RUO test. The analysis demonstrated that the test designed and developed in 2022 should retain full reactivity against all Mpox strains that have circulated over the past year, including clade 1b.

We are pleased with these results, which highlight the potential for Co-Diagnostics to provide a viable and effective Mpox test to those in need. At the end of August, the World Health Organization asked manufacturers of Mpox tests to submit expressions of interest for their test to be considered for Emergency Use Listing or EUL. At WHO, EUL would allow a test to be used as an in-vitro diagnostic and streamline, its adoption in many African markets, and Co-Diagnostics has been working with the WHO to determine whether an updated version of our Logix Smart test would meet the criteria for an EUL.

Our ongoing emphasis on our new technology is a platform to transform PCR Diagnostics on an international scale has also motivated our recent work with NGOs, which has been a focus of our efforts this last quarter. The initiatives currently in process, primarily center on bringing the tuberculosis and HPV test on the new platform to market in affected regions around the world, through a combination of grant funding opportunities and introductions to other stakeholders with mutually aligned missions in these areas.

They involve granular research into prospective point-of-care and near point-of-care users and distribution pathways, validating and generating pre-analytical data on the test performance, responding to in-depth due diligence requests and regular status updates and deep briefings. We anticipate that our partners in these efforts will be instrumental in helping us achieve our ambitions and that our regular considerable work with them is an investment in the company's near- and medium-term future.

Wrapping up on our pipeline, our team has continued to make progress in the development of a Strep A test, which is one disease area that we anticipate would contribute to our platform's value proposition in point-of-care settings. Use of our vector control business line continued to grow in Q3 of this year. At the beginning of the quarter, we announced that our customer base had expanded to customers across 15 states. And since that time, we have added customers in 3 more states.

There are hundreds of mosquito abatement districts in the United States. These community health programs provide a public service to help improve the quality of life of residents in their districts, which aligns with the mission of our company and of our technology platform, as we support their efforts by providing frontline surveillance against the spread of mosquito-borne pathogens.

Lastly, I wanted to briefly provide an update on the manufacturing capacity for the Co-Dx PCR platform. In addition to the domestic manufacturing facility, the platform inaugurated in April, we are pleased that the expansion of our oligo synthesis facility in India is nearly complete with an inauguration planned in early December. Upon completion, this expanded facility will allow for cost-effective in-country manufacturing of our patented Co-Primers oligonucleotides, and is an important step towards increasing the manufacturing capacity for the platform.

We are excited to build additional in-house manufacturing capacity in India for the instrument and cups and we will continue to work closely with CoSara to advance the project. In summary, I'm pleased with the progress that we have made this quarter, which has enhanced our ability to execute our future pipeline development initiatives. We strongly believe that our platform's differentiated Co-Primers technology, quick turnaround time and low unit cost can unlock accurate and accessible testing capabilities around the world.

Additionally, our cloud-based HIPAA-compliant technology will support improved usability and time to result, especially in developing countries, while also contributing to a future global network of data that delivers invaluable outbreak information to countries and municipalities in real time. We are excited about the potential for our platform to transform global diagnostic testing and look forward to providing more updates in early 2025.

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

[Brian Brown, executive]

Thanks, Dwight, and thanks to everyone who joined today's call. For the third quarter of 2024, total revenue decreased to $0.6 million, as compared to $2.5 million in the prior year same period. Grant revenue in the third quarter of 2024 was $0.4 million and product revenue was $0.2 million. Gross profit for the quarter decreased to $0.3 million compared to $2.2 million in the prior year comparable period.

Total operating expenses for the quarter ended September 30, 2024, decreased to $10.6 million from $11.1 million in the third quarter of 2023. The decrease from the prior year is primarily due to decreased stock-based compensation expense and expenses related to clinical trials for the Co-Dx PCR platform.

Research and development expenses in the third quarter were $4.9 million, compared to $5.8 million in the comparable prior year period. For the third quarter, income before taxes was a loss of $9.7 million, as compared to a loss of $8.1 million reported in the prior year. Net loss for the third quarter of 2024 was $9.7 million or a loss of $0.32 per fully diluted share, compared to a net loss of $6.0 million or a loss of $0.20 per fully diluted share in the prior year.

Adjusted EBITDA was a loss of $8.8 million, compared to an adjusted EBITDA loss of $6.5 million in the prior year. We ended the quarter with $37.7 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 managing its cash position through diligent spending to best position the company for our future commercial launch.

We continue to consider ways that we can improve operational and manufacturing efficiencies, while reducing our expenses. We are very excited about our continued progress and remain optimistic about 2025 and the future developments within our test pipeline. I look forward to providing you with more updates on next quarter's call.

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

[Dwight Egan, executive]

Thank you, Brian. We are very thankful to our Co-Dx employees, distributors and shareholders who make the progression of our test pipeline and Co-Diagnostics' mission possible.

We will now take questions from our analysts. Operator?

[Operator]

[Operator Instructions] Our first question comes from Jade Montgomery of H.C. Wainwright.

[Jade Montgomery, analyst]

I'm on for Yi Chen. So first of all, are you able to disclose any feedback from the FDA for the 510(k) application?

[Dwight Egan, executive]

Thanks for your question, Jade. Co-Diagnostics, has remained in discussions with the FDA regarding our submission. We can't comment on regulatory decisions or time lines by the FDA. Our focus is continue to broaden our other geographic regions where we believe there is a large unmet need and our platform could be extraordinarily beneficial regions like Central and South America, Africa and the Middle East, and India, where we believe large opportunities exist for commercial adoption of our platform.

[Jade Montgomery, analyst]

Okay. more on that then. So how is your demand split between the U.S. and those other global companies customers then do you feel that you have the most opportunity outside of the U.S.?

[Dwight Egan, executive]

That's a very good question. Historically, our revenues have been pretty evenly split between our international customers and our domestic plus customers. So it kind of depends on what the indication is. We certainly believe that the primary markets for tuberculosis are in countries like India and South Africa, whereas our customers for ABCR or 4-plex upper respiratory will highlight the United States as a customer, probably the same for [ COVID ].

So it depends on what the indication is, but the broader mix historically has been about 50-50.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.