Applied DNA inks $2.5M federal contract

Applied DNA CEO Jim Hayward.

Biotech firm Applied DNA Sciences has announced a new $2.5 million contract with “a U.S. government agency” covering the use of its flagship SigNature DNA security and authentication products – the first deal of what’s shaping up as another big fiscal year for the Stony Brook-based startup.

The contract is actually a blanket purchase agreement that runs through March 2021 and has two distinct purposes: to facilitate the sale of existing products from the company to the government and to foster the development of new products over the contract’s five-year term. While the $2.5 million agreement is nothing to sneeze at, its real value for Applied DNA Sciences is the company’s ever-deepening relationship with the federal government – a customer with deep pockets and, more importantly, a big Rolodex.

“Often, these agencies are so impressed with our technology and our ability to deliver that they act as a sales channel,” noted James Hayward, Applied DNA Sciences’ chairman and CEO. “We find ourselves moving across agencies within the federal government by virtue of the introductions they provide.”

The BPA is the latest in a long line of government contracts for the Stony Brook-based manufacturer of DNA-based supply-chain, anti-counterfeiting and anti-theft technologies, as well as product genotyping and product-authentication solutions. In October, Applied DNA announced a two-year contract with the U.S. Department of Defense to apply its SigNature DNA products to the nation’s missile-defense systems.

“We’ve been working across a lot of different Department of Defense and non-DOD agencies,” noted Janice Meraglia, Applied DNA Science’s vice president of government and military programs. “We spend a fair amount of time, and we have the frequent-flier miles to prove it, talking to them about the broad range of what we can do and how we can do it.”

One of the benefits of their particular field, both Hayward and Meraglia noted, is DNA’s vast coding potential – that is, the myriad ways specific identifications and other information can be coded into a DNA marker. That allows different government agencies to dream up many different ways of utilizing Applied DNA Sciences’ products.

“We don’t specifically tell them how to do something,” Meraglia noted. “We just demonstrate the tools we offer and work with them to develop programs to solve their specific needs.”

Because of that work, the company is forever discovering new ways to commercialize its proprietary wares, and not only for government clients.

“We can put a message in a bottle,” Hayward noted. “We can encrypt something like a spreadsheet or a narrative or a PIN number into the DNA, and it can be decrypted by the reader.

“DNA is a pretty adaptable molecule,” he added. “You can put it into adhesives, you can put it into paint and varnishes, you can put it into plastics and all manners of materials. As creative muses go, DNA really kind of tickles the imagination.”

That flexibility will serve Applied DNA Sciences well as it branches into new market segments. The company is still glowing from a strong Fiscal 2015, during which it notched a prestigious index listing – global-index publisher FTSE Russell added Applied DNA Sciences to its Microcap Index– and acquired a West Virginia research company with a proprietary DNA-sequencing technology. It also inked an undisclosed deal with California-based Security Marketing Resource, a training organization connected to 12,000 U.S. police departments.

But the surging biotech is not about to rest on its laurels. In February, the company announced revenues for its first quarter of FY 2016 – which ended Dec. 31, 2015 – totaling $1.32 million, and while those revenues fell short of analyst predictions and snapped Applied DNA Science’s stream of record-revenue quarters at four, they still represented a 6.5 percent jump over revenues reported in 1Q FY2015.

And the best of FY 2016 may be yet to come. Hayward hinted toward enormous potential in the nation’s vast – and easily compromised – pharmaceuticals supply chain.

“We’re definitely talking to that industry,” the CEO noted. “We have a number of existing products that would apply.”

The challenge is enormous – a lot of fingers have access to pharmaceutical products between Point A and Point B, according to Meraglia, and saying Applied DNA Sciences must work hard to stay a step ahead “is a vast understatement.”

“Our adversaries in this area are getting very, very good,” the VP noted.

But overcoming such challenges is sort of Applied DNA’s thing. And the pharmaceuticals industry is especially attractive, according to Hayward, not only for its bottom-line benefits but because it fits nicely with the company’s goals of “not simply generating revenue for ourselves and our shareholders, but being able to do something of consequence.”

“The reports are over 700,000 people in Africa died last year from taking counterfeit pharmaceuticals,” Hayward said, quoting numbers from the World Health Organization. “The global average for counterfeit pharmaceuticals is somewhere between 10 and 30 percent, and on the Internet it’s more like 50 percent.”

His company intends to tackle that problem head on, the CEO added, starting with last week’s announcement that it’s recruited former Pfizer executive Bob Miglani to head Applied DNA Science’s new pharmaceutical security program.

“Pharmaceuticals is an enormous market,” Hayward said. “It’s also one of enormous benefit.”