Applied DNA Sciences (APDN) is a tiny microcap healthcare stock with a 37-year history in business — but no profits, and almost no (less than $5 million annual) revenues. Despite this somewhat mixed resume to recommend it, Applied DNA Sciences stock shot through the roof on Thursday, spiking 71% on news that the FDA has approved its new coronavirus detection test for emergency use.
The test in question, a “patent-pending Linea COVID-19 RT-PCR test for COVID-19,” is a “reverse transcription, Real Time Polymerase Chain Reaction” test to detect the presence of the SARS-CoV-2’s “Spike (S) gene” in a person’s bloodstream. It is designed to run on the FDA-approved Applied Biosystems QuantStudio Dx real-time PCR detection machine, “which allows for testing results for up to 94 samples within one hour, or more than 2,000 tests in 24 hours per device,” explains Applied DNA Sciences.
The Emergency Use Authorization (EUA) under which the test can be used is not equivalent to an actual FDA “approval” of the test. It does, however, permit the test to be used in the hope it will prove effective in diagnosing a “disease or condition” — in this case the novel coronavirus SARS-CoV-2 — during a public health emergency such as the present COVID-19 pandemic.
Nor is this the only iron that Applied DNA Sciences has in the coronavirus fire.
As Maxim analyst Anthony Vendetti explained, Applied DNA Sciences is also one of several biotech firms working on a vaccine to prevent infection with COVID-19. Specifically, on May 4, the company claimed success in generating antibodies to fight the SARS-CoV-19 coronavirus in response to a vaccine administered to mice in a preclinical trial.
Applied DNA Sciences’ vaccine focuses on the same spike gene that its test aims to detect, “a surface protein that plays a key role in viral entry into host cells,” explains Vendetti. The analyst seems especially impressed with the fact that Applied DNA Sciences’ vaccine, in contrast to others being worked on elsewhere, “is effective without insertion into the patient’s genome” and “can be rapidly revised to accommodate mutational drift (in the virus).” This could indeed become important if the novel coronavirus mutates into even more novel forms over time.
Additionally, Vendetti reminds investors that in April, Applied DNA Sciences was admitted to the FDA’s “Emerging Technology Program (ETP) for the molecular tagging of Solid Oral Dosage Forms [which] serves to help promote the adoption of innovative approaches to pharmaceutical product design and manufacturing.”
Of these three coronavirus-related efforts on Applied DNA Sciences’ part, Vendetti seems to place the most weight on the vaccine, albeit (a) it’s not been admitted to any clinical trials yet and (b) the COVID-19 test news hadn’t come out yet at the time the analyst made his recommendation to buy Applied DNA Sciences stock.
Citing “outyear revenue estimates” (presumably 2022 and beyond) and best guesses at Applied DNA Sciences’ “share of the COVID-19 vaccine market and share of revenue generated per vaccine,” Vendetti thinks Applied DNA Sciences stock could be worth as much as $18 a share a year from now, and assigns the stock a “buy” rating.
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