Fed contract for Applied DNA Sciences

Applied DNA Sciences Inc. is unprofitable, and its stock sells for pennies a share. But that is only part of the story. The other part, the part that some analysts believe could one day put the Stony Brook-based company on the map, can be summed up in a word: counterfeiting.

The World Customs Organization estimates the total value of items counterfeited will double, to about $1.2 trillion, by 2014, from a few years ago.

On Tuesday, Applied DNA Sciences announced a significant agreement with a U.S. government agency that it declines to name to demonstrate the advantage of using its unique technology to block counterfeit computer chips.

Company chief executive James Hayward said the agreement is largely secret for security reasons. But Applied technology has been attracting attention. The company's technology extracts DNA from plants, scrambles it into unique genetic codes that are unlike anything in nature, and imprints it on product labels and other items, or even onto the products themselves.

Jeff Kessler, managing director for the investment-banking firm Imperial Capital, who has studied the industry, now considers Applied a "leader" in the business. "DNA seems to be about the only way we have been able to mark these products and technologies that is virtually permanent and is not clone-able," Kessler said.

Hayward said the importance of the new government contract is its future potential. While Applied has provided its DNA markers on apparel, pharmaceutical products and cosmetics, the need for anti-counterfeiting on chips is enormous.

"This [counterfeiting of chips] is a global issue that affects governments and corporations alike," Hayward said.

For years, Kessler said, Applied had been primarily considered a research and development company populated by eggheads. It does not often make news. That may change. He said Applied has entered a new phase: selling its products.