DYAI: 1Q:21 Results

By John Vandermosten, CFA

NASDAQ:DYAI

READ THE FULL DYAI RESEARCH REPORT

First Quarter 2021 Operational & Financial Results

Dyadic International Inc. DYAI released first quarter 2021 operational and financial results on May 13, 2021 and concurrently filed its Form 10-Q with the SEC. Following the release, an investor conference call was held.

Highlights for the first quarter and to-date include:

➢ Appointment of Patrick Lucy to Board - January 2021

➢ Collaboration with TurtleTree Scientific - February 2021

➢ Presentation at ZAPI Stakeholders Meeting - March 2021

➢ Completion of IIBR challenge studies for DYAI-100 in murine ACE2 model - March 2021

➢ Consummation of Master services agreement with CR2O - March 2021

➢ Collaboration with Medytox for COVID-19 vaccine in Korea and SE Asia - March 2021

➢ Launch of human health research collaboration with new partner to develop antigen - March 2021

➢ Fully funded research collaboration with CR2O for COVID-19 antibody - April 2021

➢ Expansion of IDBiologics collaboration for second antibody - April 2021

Dyadic produced research and development revenue of $460,520 in the quarter ended March 31, 2021 versus $315,372 in the first quarter 2020. Dyadic incurred operating expense of ($3.78) million yielding net loss of ($3.29) million, or ($0.12) per share.

Financial results for the quarter ended March 31, 2021, compared to the quarter ending March 31, 2020:

➢ Revenues were $460,520, up 46% from $315,372 on an increased number (8 vs 5) of on-going research collaborations;

➢ Research and development expenses rose 139% to $1.81 million from $755,000, driven by Phase I clinical trial costs for DYAI-100 and other internal research projects;

➢ General and administrative expenses decreased 6% to $1.55 million vs $1.65 million, on reductions in travel and rent expense as well as other outside services, slightly offset by an increase in legal expenses;

➢ Loss from operations was ($3.30) million compared to ($2.21) million. On a per average share balance, net loss was ($0.12) and ($0.08), respectively.

Cash and equivalents balance as of March 31, 2021 totaled $27.1 million. Cash burn was ($1.9) million, offset by a small amount of cash from financing representing the exercise of options. For fiscal year 2021, Dyadic expects to burn between ($10) to ($12) million, with the year-over-year increase attributable to the Phase I safety study for the COVID vaccine.

Phase I Safety Study

On March 18, 2021, Dyadic announced its plans to launch clinical studies for a COVID vaccine. This candidate, designated DYAI-100, will be an antigen that mimics the receptor binding domain of SARS-CoV-2 spike protein. This announcement follows successful animal trials conducted by the Israel Institute for Biological Research (IIBR) and work with the Zoonoses Anticipation and Preparedness Initiative (ZAPI) program. Dyadic entered into a master services agreement with contract research organization CR2O to manage preclinical and clinical development of DYAI-100. Dyadic has initiated toxicology studies. Other milestones include preparing and filing an investigational new drug application (IND) over the summer and obtaining clearance from the FDA to begin and launch its trial by the end of August 2021. The primary goal of the clinical trial is to validate the safety of C1-produced proteins in humans, which will be the first incidence of this use.

C1-expressed receptor binding domain (RBD) is being used in animal trials by 10 different research groups, government agencies and biopharma companies including IIBR, scientists from Oxford U, Utrecht U, Erasmus Medical Center, U of Veterinary Medicine Hannover, DE (TiHo) and others around the globe, testing RBD alone or with nanoparticles and adjuvants.

Dyadic's COVID-19 vaccine milestones include:

➢ C1 expression of SARS-CoV-2 mAb achieved - 2H:20

➢ Record expression of SARS-CoV-2 RBD antigen - 2H:20

➢ VTT C1 engineering of full spike protein & RBD antigen of SARS-CoV-2 – 2H:20

➢ Non-exclusive technology usage agreement with Epygen Biotech - 2H:20

➢ 10 ongoing animal trials of SARS-CoV-2-S-RBD – 2020/2021

➢ CR2O master services agreement - March 2021

➢ ZAPI Update - March 2021

➢ CR2O antibody research collaboration - April 2021

➢ DYAI-100 toxicology study - April 2021

➢ DYAI-100 Phase I initiation – 2H:21

Medytox Collaboration

Dyadic plans to work with Medytox, Inc. to develop vaccines against COVID variants in a research collaboration announced on March 22, 2021. Medytox is a South Korean-based biopharmaceutical company with both commercialized products and a development pipeline in a variety of areas. Dyadic had been informally working with Medytox on animal studies since July 2020 and expanded their relationship with the company to develop C1 enabled COVID vaccines and boosters that will include antigens representing multiple COVID variants. Dyadic has granted its partner an exclusive license for South Korea and other Southeast Asian countries if the development yields an approved product. Medytox' head of R&D, Dr. Gi-Hyeok Yang, believes that C1 is "the most realistic technology to develop and manufacture multi-valent…vaccines, rapidly and affordably…without the need for a large-scale bioreactor facility."

Vaccines that are now being used to address COVID are monovalent vaccines that may not address new strains of the coronavirus. To address this shortcoming, Dyadic expects to engineer additional C1 cells to develop variant antigens for use in multivalent vaccine candidates.

ZAPI Scientific Achievements

Dyadic participated in the Zoonotic Anticipation and Preparedness Initiative (ZAPI) Final Stakeholders virtual web meeting in early February 2021 to discuss participants' achievements. Dyadic's C1 was a frequent topic of discussion and praise. Distinguished participants in the effort, such as Dr. Albert Osterhaus of the Erasmus Medical Centre highlighted the relatively large volumes of antigens that C1 can produce. He noted that during a pandemic that requires a lot of vaccine quickly, C1 would be an ideal expression system to develop further.

Another prominent participant Dr. Alexander Brix of Boehringer Ingelheim identified C1 as the key advantage for yields and purity for ZAPI's vaccines and antibodies. He noted that C1 can address the periodic need for surge capacity and is particularly suited to smaller fermentation systems, such as single use bioreactors in the 10, 50 and 100 liter range.

The goal of the ZAPI program is to protect human and animal health by creating a platform to rapidly respond to emerging infectious disease threats. The program is now using Dyadic's C1 platform to express antigens for the Schmallenberg virus (SBV) and Rift Valley Fever virus with yields up to 300 fold greater compared with alternate production hosts such as Baculovirus. The SBV antigen was safe and effective in animals and animal trials continue to generate safety and efficacy data.

Success with the ZAPI program has led to discussions and relationships with scientists and biotechnology and pharmaceutical companies to investigate other uses of C1 in animal health, COVID-19, human biopharmaceutical programs such as nivolumab and to strengthen relationships with stakeholders in the academic, public and private drug development sphere.

Presentation at ZAPI Stakeholders Virtual Meeting

On February 4, 2021, Dyadic presented at the ZAPI Stakeholder Virtual Meeting. Dyadic's Chief Scientific Officer Ronen Tchelet, presented Dyadic's experience as a participant in the ZAPI project, including a demonstration of Dyadic's fungal expression platform's performance in producing high yield at scale. Dyadic had already demonstrated C1's abilities in Schmallenberg virus (SBV) and Rift Valley Fever (RVFV), comparing favorably to baculovirus cell expression for the two antigens. Participation in the ZAPI project demonstrated C1's impressive ability to produce high yield requiring minimal fermenter volume, the success of which has led to several fully funded animal health collaborations outside of the project.

Oslo Study

Dyadic is conducting a feasibility study with the University of Oslo for an influenza vaccine. C1 has already shown that it can express hemagglutinin at a high level and that the glycoprotein can induce a high level of neutralizing antibody response in a mouse study. The results of a comparison between a C1 recombinant hemagglutinin (rHA) and the Baculovirus produced protein that was tested by Sanofi Pasteur in 2015 demonstrated much higher immunogenicity at similar concentrations for the C1 sample providing support for this approach.

Summary

Dyadic continues to make progress on partnerships and research collaborations, as well as its COVID-19 candidate, DYAI-100. Highlights for the first quarter include addition of Patrick Lucy to the board, entering into collaborations with new partners TurtleTree and Medytox, and follow-on agreements with existing partners BDI, CR2O and IDBiologics.

We are optimistic on the company entering into an agreement that provides upfronts, milestones and royalties based on a successful candidate in animal health, human health or as a vaccine for SARS-CoV-2. The most important recent announcement is the move into Phase I studies to test the safety of a COVID vaccine. The company has guided towards a second half start for the in-human safety study which is primarily intended to validate that C1-produced proteins are safe in humans.

The pandemic may catalyze the pathway forward for C1 to be used as an expression system for producing vaccines and other therapeutic proteins. Using a C1-expressed protein in human trials would be a tremendous achievement and one is now planned with contract research organization CR2O. C1 may be able to provide much higher output with improved characteristics compared to current approaches which addresses one of the primary bottlenecks when manufacturing sufficient quantities of vaccine for global populations.

Dyadic's balance sheet is strong with numerous fully funded collaborations and multiple years' worth of cash at 2021 anticipated burn rates. Cash burn guidance of ($10) to ($12) million for 2021 includes amounts necessary to fund the clinical trial and advance the programs already underway.

There is substantial value in Dyadic's broad portfolio of options and in its exciting technology that can revolutionize the protein expression industry. Future favorable catalysts include the addition of more collaborators, achieving output milestones and launching the planned clinical trial.

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1. Source: Dyadic March 2021 Corporate Presentation

2. Source: Dyadic Corporate Presentation, PEGS Conference, May 2021

3. Source: Zacks Research and Dyadic corporate filings. Green highlight indicates animal health collaboration. Blue highlight indicates academic collaborator, orange indicates a follow-on project with a previous partner.