Co-Diagnostics Q3 2024 Earnings Report

Co-Diagnostics EPS Results

• Actual EPS: -$9.60
• Consensus EPS: -$9.90
• Beat/Miss: Beat by +$0.30
• One Year Ago EPS: -$6.00

Co-Diagnostics Revenue Results

• Actual Revenue: $0.64 million
• Expected Revenue: $0.40 million
• Beat/Miss: Beat by +$240.00 thousand
• YoY Revenue Growth: N/A

Co-Diagnostics Announcement Details

• Quarter: Q3 2024
• Date: 11/7/2024
• Time: After Market Closes
• Conference Call Date: Thursday, November 7, 2024
• Conference Call Time: 4:30PM ET

Co-Diagnostics (NASDAQ:CODX) is a molecular diagnostics company that develops, manufactures, and commercializes diagnostic technologies and test systems. Based in Salt Lake City, Utah, the company focuses on polymerase chain reaction (PCR) testing and related applications for detecting infectious diseases and other medical conditions.

The company’s core technology is its CoPrimer platform, a proprietary approach to designing molecular diagnostic tests intended to support sensitive and specific detection while helping reduce certain costs associated with conventional PCR testing. Co-Diagnostics has developed Logix Smart molecular diagnostic assays for targets that have included respiratory pathogens, tuberculosis, mosquito-borne diseases, and other infectious diseases. It has also worked on integrated testing systems, including instruments and associated software designed for use with its assays.

Co-Diagnostics was founded in 2013 and has sought to serve clinical, public-health, and research customers in the United States and international markets, including through distribution and collaboration arrangements. Its products and technologies have been developed for applications ranging from centralized laboratories to decentralized and point-of-care testing environments. The company’s offerings and regulatory availability may vary by jurisdiction.

Co-Diagnostics Q3 2024 Earnings Call Transcript

Key Takeaways

• Co Diagnostics is actively engaging in FDA’s interactive review of its 510(k) OTC application for the Kodiak’s PCR Pro instrument and accompanying COVID-19 test, though the approval timeline remains uncertain.
• The company is advancing its test pipeline with clinical trials planned in early 2025 for a tuberculosis assay in South Africa and India, alongside development of respiratory multiplex, HPV multiplex, Strep A, and updated mpox tests.
• An international commercialization strategy targets Central/South America, Africa, the Middle East and India—leveraging a joint venture with COSARA Diagnostics in India and pursuing regulatory clearances from CDSCO, SAHPRA and WHO prequalification.
• In Q3 2024, Co Diagnostics reported revenue of $0.6 million (down from $2.5 million), a net loss of $9.7 million ($0.32 per share), adjusted EBITDA loss of $8.8 million, and ending cash of $37.7 million while reducing operating expenses.
• Manufacturing capacity is being expanded with a new domestic PCR instrument facility online and a nearly completed oligonucleotide synthesis plant in India set to inaugurate in December to support low-cost production.

Presentation

[Operator]

Good afternoon and welcome to Co-Diagnostics' Third Quarter 2024 Earnings 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would like now to introduce Andrew Benson, Head of Investor Relations. Please go ahead.

[Andrew Benson, Head of Investor Relations at Co-Diagnostics]

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 30th, 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.

[Andrew Benson, Head of Investor Relations at Co-Diagnostics]

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 reconciliation 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, CEO at Co-Diagnostics]

Thank you, Andrew. 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 three 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 timeline 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 tests, 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.

[Dwight Egan, CEO at Co-Diagnostics]

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.

[Dwight Egan, CEO at Co-Diagnostics]

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 India for its 15 infectious disease PCR tests 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 healthcare systems in Asian markets and spoke with several key stakeholders to gain a better understanding of the regulatory and payor 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 expos 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 will initially target point-of-care, remote settings, and local health centers. We also plan to pursue South African Health Products Regulatory Authority, or SAHPRA, clearance and World Health Organization, or WHO, pre-qualification, which would facilitate introduction of the instrument and TB test 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 at the same time from a single sample, brings significant strength to the point-of-care and at-home settings globally. By expanding accessibility to low-cost testing through a four-in-one 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.

[Dwight Egan, CEO at Co-Diagnostics]

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.

[Dwight Egan, CEO at Co-Diagnostics]

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 funding 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 affected populations, is both more severe and more transmissible between humans.

[Dwight Egan, CEO at Co-Diagnostics]

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 tests 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.

[Dwight Egan, CEO at Co-Diagnostics]

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 as 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 tests 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 debriefings.

[Dwight Egan, CEO at Co-Diagnostics]

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 three more states. There are hundreds of mosquito abatement districts in the United States.

[Dwight Egan, CEO at Co-Diagnostics]

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 oligosynthesis 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.

[Dwight Egan, CEO at Co-Diagnostics]

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.

[Dwight Egan, CEO at Co-Diagnostics]

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

[Brian Brown, CFO at Co-Diagnostics]

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's 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.

[Brian Brown, CFO at Co-Diagnostics]

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.

[Brian Brown, CFO at Co-Diagnostics]

Co-Diagnostics remains focused on managing its cash position through diligent spending to best position the company for a 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, CEO at Co-Diagnostics]

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]

We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad.

[Operator]

You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause momentarily to assemble our roster. Our first question comes from Jade Montgomery of H.C. Wainwright. Please go ahead.

[Jade Montgomery, Associate Biotech Research Analyst at H.C. Wainwright]

Hi. Thanks for taking my question. 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, CEO at Co-Diagnostics]

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 timelines by the FDA. Our focus has continued to broaden our other geographic regions where we believe there's a large unmet need, and our platform could be extraordinarily beneficial.

[Dwight Egan, CEO at Co-Diagnostics]

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, Associate Biotech Research Analyst at H.C. Wainwright]

Okay. Thank you. 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, CEO at Co-Diagnostics]

That's a very good question. Historically, our revenues have been pretty evenly split between our international customers and our domestic 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 an ABCR or fourplex 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.

[Jade Montgomery, Associate Biotech Research Analyst at H.C. Wainwright]

Right.

[Jade Montgomery, Associate Biotech Research Analyst at H.C. Wainwright]

Thank you so much. That's all I have.

[Operator]

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

Participants

Executives

• Andrew Benson, Head of Investor Relations
• Dwight Egan, CEO
• Brian Brown, CFO

Analysts

• Jade Montgomery, Associate Biotech Research Analyst at H.C. Wainwright