Dyadic International, Inc. (NASDAQ:DYAI) Q2 2022 Earnings Conference Call August 10, 2022 5:00 PM ET
Corporate Participants
Ping Rawson – Chief Financial Officer
Mark Emalfarb – President & Chief Executive Officer
Joe Hazelton – Chief Business Officer
Conference Call Participants
John Vandermosten – Zacks
Vernon Bernardino – HC Wainwright
Operator
Good day and welcome to the Dyadic International Incorporated Second Quarter 2022 Financial Results Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Ping Rawson, Chief Financial Officer. Please go ahead.
Ping Rawson
Thank you. Good evening and welcome everyone to Dyadic International’s second quarter 2022 conference call. I hope you have had opportunity to review Dyadic’s press release announcing financial results for the quarter ended June 30, 2022 and the recent company highlights. You may access our release and Form 10-Q under the Investors section of the company’s website at dyadic.com.
On today’s call our President and CEO, Mark Emalfarb will give a review of our second quarter 2022 business and corporate highlights, including a brief summary of our research and the business development efforts. Our Chief Business Officer, Joe Hazelton will join Mark for the business update. I will follow with a review of our financial results in more detail. We’ll then hold a brief Q&A session.
At this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties and other factors that could cause Dyadic’s actual results performance, scientific or otherwise, or achievements to be materially different from those expressed or implied by these forward-looking statements.
Dyadic expressly disclaims any duty to provide updates to its forward-looking statements whether as a result of new information future events or otherwise. Participants are directed to the risk factors set forth in Dyadic’s reports filed with the SEC.
It is now my pleasure to pass the call to our CEO, Mark Emalfarb. Mark?
Mark Emalfarb
Thank you, Ping. Hello, everyone. And thank you for joining Dyadic second quarter update call.
As you will hear on today’s call, there is much to be excited about here at Dyadic. In Q1, we discussed the company’s intent to focus on our core business. The company now has commercial agreements in each of its three core verticals, human health, animal health and alternative proteins.
Today, I would like to discuss the progress we’ve made in each of these areas, and how we believe that the progress will shape the future of dyadic. At the fundamental level, Dyadic’s mission is to help make protein for World Health. The foundation of dyadic is and will continue to be our science and our highly efficient microbial platforms and the advancement of that science to create revenue, profits, long-term shareholder value, while simultaneously helping to increase access to biologic vaccines and drugs globally.
The commitment to build a protein production platform to support life science manufacturing. It takes an unwavering belief that the potential monetary and social impact outweighs the significant investment of not just capital, but persistence, focus and the determination to see the process through.
To the many scientists, we continue to work with in academia, industry and government, our collaborators, shareholders and board members, I want to thank you for your support during this critical journey. While admittedly, it has been an arduous at times as you will hear today, we are on the verge of several transformational milestones in life sciences. As we get closer to demonstrating that producing proteins using our C1 technology are safe for use in humans. Doing so will lead to our ability to open opportunities within our core verticals and capitalize on existing and new revenue opportunity for Dyadic and our collaborators.
First, I’d like to focus on the significant milestone we have achieved in human health. I’m proud to announce the recent submission of our first in human clinical trial application CTA with the South African Health Products Regulatory Authority SAHPRA. To initiate a Phase-1 study to support clinical safety and to demonstrate preliminary efficacy of our DYAI-100 COVID-19 recombinant protein booster vaccine.
This is an important step towards establishing C1 as a safe and transformative option as a protein production platform for the development and manufacture of a growing number of biopharmaceuticals for infectious and other diseases, including oncology, arthritis, and diabetes. Our Chief Business Officer, Joe Hazleton has been overseeing our efforts in regard to this submission.
I’ll now turn the call over to Joe to discuss the timing and relevant aspects of the clinical trial application CTA for Dyadic.
JoeHazleton
Thank you, Mark.
The primary purpose of the Phase-1 study is to evaluate the safety of the new drug candidate before it proceeds to further clinical studies. When joining Dyadic what was most surprising wasn’t just the amount of preclinical safety data that had already been generated across animal species regarding the C1 platform for a smaller biotech organization. But unlike E coli, CHO, insect or baculovirus cells, the C1 cells themselves are free of viruses and endotoxins.
Many of the most common cell lines used for biologic vaccines and drug production inherently have viruses and/or endotoxins that must be removed during downstream processing, impacting productivity, cost of purification, and ultimately delaying product release. Additionally, in 2009, Dyadic C1 cells were used to produce an enzyme that received generally recognized as safe or GRAS status from the U.S. FDA, which means safe for use as an additive in food and feed for animals and humans.
Essentially, we’re starting the bio manufacturing process with what we and a growing number of scientists believe is an extremely safe micro organism. Data from vaccines produced from C1 proteins have repeatedly demonstrated safety and efficacy in a range of infectious diseases in animal trials with cattle, lambs, chicken, rabbits, hamsters and mice, again, demonstrating the preliminary safety of proteins produced from the C1 protein production system. Specifically with our DYAI-100 vaccine candidate, we have demonstrated safety in mice studies, and our successful rabbit toxicology study performed at [in Vigo] [ph]. In Vigo has extensive experience in conducting GLP toxicology studies to help establish safety and dosing protocols, which are required for an IND or IMD regulatory filing. Which brings me to today’s announcement of our submission of a CTA or Clinical Trial Application with South Africa to initiate a Phase-1 study to support clinical safety of proteins produced from our proprietary and patented C1 cell protein production platform.
In addition to establishing a track record of safety and humans for antigens produced from our C1 cells, the Phase-1 study is also expected to demonstrate preliminary efficacy of our DYAI-100 COVID-19 recombinant protein booster vaccine candidate.
The DYAI-100 application is currently under regulatory review and pending approval, we anticipate dosing could be initiated late in third quarter with the potential for preliminary safety data readout in the late fourth quarter of 2022. As you’re all aware, it is challenging to accurately provide timing of clinical development. And it is dependent on many variables, with the only constant being that the environment today will be different tomorrow. We will keep you informed of any business or regulatory factors that may impact these proposed timelines.
Our success outcome to the Phase-1 trial for DYAI-100 would not only bring another weapon closer to approval in the battle against COVID-19, but also provide safety validation for ourselves and our collaborators, reducing their developmental risk for new vaccines. Safety is the first hurdle to commercialization for any new life science product, whether COVID-19, oncology or rheumatoid arthritis. That same safety challenge exists for platform technologies, but with the additional hurdles of speed and productivity.
As we have stated previously, Dyadic has dedicated the time, effort and resources to demonstrate that the C1 protein expression platform is capable of unparalleled scale and productivity in terms of vaccine production. And our platform has been well characterized, and that the C1 organism has a pedigree that we believe will demonstrate its safe use in humans for producing greater quantities of lower cost of vaccines.
We expect that the Phase-1 clinical trial in South Africa and later Phase-1 trial in India with Epygen, which Mark will speak about later will be a pivotal point in the many ongoing discussions we are having with top tier pharma, biotech and government agencies globally. Staying with our ongoing successful efforts in vaccine business development, I’d like to highlight our efforts regarding expressing the neuraminidase antigen or NA which has broad potential use in the development of better seasonal and pandemic flu vaccines.
The NA antigen has historically been difficult to produce reliability at high levels and with the right biological activities. The addition of NA to standard flu vaccines can enhance the immune response to provide even greater protection to patients. Our current level of expression of 800 milligrams per liter in 168 hours has generated interest with large pharmaceutical and biotech companies within the human vaccine industry.
The successful high-level expression of biologically active hemagglutinin or HA and neuraminidase NA from C1 cells for use in developing better performing influenza vaccines alone or in combination with COVID-19 antigens is only one example of the many opportunities we believe will accelerate the adoption of the C1 platform in addition to the first in human safety data for a C1 produced protein from the upcoming DYAI-100 Phase-1 trial.
I would like now to turn back to Mark for further updates on our progress in life sciences. Mark?
Mark Emalfarb
Thank you, Joe. Each project we undertake is selected with a specific objective to either further the advancement of our science or enhance the breadth and scope of where we and our collaborators may be able to apply the C1 platform. The output of these projects and collaborations validates the application of C1 as a differentiated bio manufacturing platform for developing and producing vaccines, antibodies, and other therapeutic proteins rapidly at higher yields, and lower costs for the prevention and treatment of infectious and other diseases such as oncology, arthritis, and diabetes.
For example, we are in discussion with potential partners for rabies vaccine candidates highlighted in today’s press release that is a collaboration with EU scientists to prevent rabies infection in humans after an exposure. This opportunity is similar to neuraminidase, Joe, highlighted earlier. As INA opportunity was born from a collaboration with an academic institution. In addition to DYAI-100, we believe neuraminidase and HA, both influenza antigens will anchor and further support our business development opportunities in infectious disease. We have additional animal trials ongoing, with C1 producing antigens for potentially more effective seasonal influenza vaccine.
Additionally, in conjunction with others, we’re evaluating if and how we may use C1 to develop and manufacture a COVID-19 seasonal and our pandemic vaccine candidate. Expanding our vaccine licensing as early reported, Epygen, one of Dyadic’s non-exclusive licensees received funding from the Indian Government to advance development, manufacture and conduct Phase-1 two clinical trials using Dyadic C1 protein production platform for their COVID-19 vaccine candidate produced from C1 cells.
To update our efforts in adoption of the C1 vaccine platform in South Africa, our collaboration with the Rubic consortium is intended to develop end-to-end solutions for vaccine discovery, development and manufacture for the African market. Tech transfer of the C1 protein production platform is advancing on target and has been substantially completed and Rubic had been engineering and growing C1 cells. Our discussions with Rubic in South Africa, as recently as this morning are targeting a growing number of antigens for human and animal health that they believe are commercially relevant to the African continent.
Now I’d like to focus you for a moment on an area there’s another key life science growth market for Dyadic, therapeutic proteins. Global therapeutic proteins are $280 billion market that is expanding at a compound annual growth rate of around 7%. This has increased as demand has surged for protein based therapeutic drugs to treat COVID-19 and other infectious disease and other ailments. And that demand has spread to other disease areas in human and animal health.
Joe just took us through the various preclinical animal models tested in a brief analysis of what we expect shortly allow us to demonstrate the big pharma, biotech companies in government and academia globally the safety profile for recombinant antigens produced using our C1 platform for the commercial production of recombinant vaccines.
To further support our science regarding therapeutic proteins, we announced today that the dosing has completed for a fully funded, non-human primate study of a C1 produced COVID-19 monoclonal antibody [indiscernible] read out anticipated later this year. This monoclonal antibody has already demonstrated broad neutralization and protection against Omicron BA.1 and BA.2 and other variants of concerns and hamsters. The importance of this data is that we’ll be able to begin to demonstrate safety and efficacy of a C1 produced therapeutic protein in a non-human primate study, through this fully funded initiative, with one of our third-party collaborators.
Furthermore, this non-humane primate study is anticipated to lead to fund a GLP toxicology study, cGMP manufacturing of drug substance and potentially a Phase-1 clinical trial, this time demonstrating safety for a therapeutic protein manufactured from a C1 cell for the first time in humans.
Establishing safety and efficacy to these Phase-1 trials for vaccines and monoclonal antibodies is a key gating item for big pharma, biotech and government agencies such as BARDA. And we expect this to accelerate the use of our C1 platform to produce safe and effective vaccines and therapeutic proteins and therefore anticipate the Dyadic and our C1 technology produced in speeding development and lowering the cost of manufacturing biologics will lead to several places potentially an acquisition target in infectious disease and other disease biologics markets.
We recently made presentations at Bio, NIIMBL and other industry conferences as well as a growing number of inbound requests for information related to the advancement of our work on development and other biologics. As we are focusing our attention on the quality aspects related to the development of biosimilars and bio-betters, we continue to push the advancement of productivity to new levels.
The level of the recent scientific achievements in our C1 technology are nothing short of amazing. And we are applying these advances to support the development of the C1 platform for our own projects, as well as those in collaboration programs, such as the work we’re doing with Janssen Biotech.
While we still have work to do, the interest we are generating in a knowledge gain a rapidly expanding interest not only in the roadmap, but also across many areas in which our C1 platform can be applied for rapid production to large quantities of antibodies, vaccines cause large and mid-sized pharmaceutical companies and human and animal health.
Our collaboration with Janssen Biotech to develop C1 cell lines to produce targeted therapeutic, protein candidates demonstrates our ability to attract the attention of large pharmaceutical partners, progress is ongoing and on time. And we anticipate this will lead to development milestone, eventually commercial revenues, generating from one or more of the Janssen target proteins.
I also want to highlight that our work on the grant awarded to Dyadic by NIIMBL, funded through the White House’s American rescue plan has been successful. We’ve already begun the second phase, we’re applying some of the advanced scientific breakthroughs I discussed earlier. Under this grant Dyadic has already started to receive $690,000 in funding to engineer a C1 protein production platform to produce two different antibodies, with a focus on availing evaluating the ability of the C1 platform to rapidly produce medical countermeasures and vaccines in response to future pandemics.
Now I would like to turn our focus to animal health and expanding opportunities for business development to exist within this core vertical. You may have noticed in today’s press release that Phibro/Abic recently expanded their license agreement to include an additional research project to develop another animal vaccine for livestock produced from C1. Global animal health vaccines market is an estimated $15 billion market and we are just beginning to penetrate this segment. There are similarities and needs between human and animal health markets for vaccines and therapeutic proteins. I have asked Joe to expand our efforts to identify opportunities within this core vertical for monetization. I will ask Joe provide his thoughts on the market penetration.
JoeHazleton
Thank you, Mark.
As you know that the animal health vaccine market is an attractive segment for Dyadic. Like human health, the demand is increasing for the rapid production of large quantities of vaccines and antibodies to address the feed independent animal markets alike. The global animal health market overall was nearly a 50 billion market in 2021. The rising demand for animal food protein and therefore livestock, rising pet ownership, and increases in zoonotic diseases are driving increased interest in vaccines and therapeutics for animals as well as humans.
As I discussed earlier, we have demonstrated the safety and efficacy of our vaccines in many animal models. For example, we have successfully tested a vaccine to protect livestock from zoonotic diseases such as rift valley fever. Initially, we’re exploring opportunities within animal vaccines for zoonotic diseases, we have already expressed and tested within the C1 platform for fully funded collaborations targeting companion animals, which is the next fastest growing animal vaccine market.
We are also currently in discussions with several potential partners for therapeutic proteins for livestock and companion animals. Our focus is to speed the acceptance of our C1 protein production platform, which we believe can serve as an accelerator to drug and vaccine development and commercialization by shortening the time from preclinical to phase trials, increasing productivity, and improving cost efficiencies within animal health. Back to you Mark.
Mark Emalfarb
Finally, I would like to speak about our alternative proteins. This core vertical is home to our nutrition and wellness initiatives and partnerships, driven by our fully funded joint development agreement with our global food ingredients collaborator. Dyadic is dedicating resources and support for [just-in] [ph] projects within this rapidly growing market. Today, we announced the launch of the death of this platform, which is a fungal base microbial platform for use in non-pharmaceutical applications, such as food, nutrition, health and wellness. Joe will describe our strategy for maximizing the potential of this core vertical.
JoeHazleton
Thank you, Mark. As was stated in our press release our recently developed Dapibus microbial cell line is gaining interest across multiple applications and industries for the development and manufacture of alternative proteins. As an example, we’re currently in discussions with several companies in the cultured meat and seafood industry. These companies represent and product bio design and cell culture media and share a commonality, the need for a large quantity of high-quality yet affordable recombinant proteins. This is a $3 billion market that is still in the demonstration scale, with a significant cost and production bottlenecks that the entire industry is trying to solve and saw over $1.3 billion invested in 2021 alone. This will be a key area of focus for a Dyadic as we believe our Dapibus microbial cell line provides our partners the ability to meet scale and cost demands for recombinant proteins within the global cultured meat industry. Beyond cultured meat, we are in active discussions and actively seeking partnerships and collaborations for non-animal food proteins, nutraceuticals and metabolites.
As I turn it back to Mark to close out our business update, hopefully Mark and I have been able to share with you today is through the dramatic and continuing advances in our science and the focus on clear business objectives. The monetizable opportunities are multiplying and coming to the forefront where we can apply our microbial technologies to address several emerging and growing market opportunities to drive value for shareholders. Mark back to you.
Mark Emalfarb
Development of a protein expression platform for use in life sciences is lengthy and challenging process. What I’m most proud of is that we have leveraged the learnings of C1 in commercial scale, industrial manufacturing to accelerate that development process. In parallel, we remain fiscally responsible and R&D partnerships and collaborations defined advancement of our science and critical areas. Result is it seen was much further along, its lifecycle development for life sciences than the industrial cell line development was within the same timeframe at a fraction of the costs, with equally high prospects for success.
We’ve refined our business development focus and objectives with the core areas or technologies can have the greatest impact. The results of this focus is being realized, as dyadic is gaining industry recognition to further develop the platform to human and animal health organizations worldwide. At the same time, we’re evaluating new opportunities aligned with our verticals in targeted markets of high potential return.
With that, I’d like to turn the call over to our CFO to run our financials.
Ping Rawson
Thank you, Mark.
In addition to the financial results I’ll be discussing now, you can find additional information in our Form-10Q which we filed earlier today.
Research and development revenue and the license revenue for the second quarter of 2022 was approximately 659,000 compared to 937,000 for the same period a year ago. R&D revenue and the license revenue for the six months ended June 30, 2022, was approximately $1,306,000 compared to $1,397,000 for the same period a year ago.
Cost of R&D revenue for the second quarter was approximately $411,000 compared to $830,000 for the same period a year ago. Cost of R&D revenue for the six months ended June 30, 2022, was approximately $816,000 compared to $1,220,000 for the same period a year ago. The decrease in revenue and cost of revenue was due to the decrease in the number of ongoing research collaborations as a result of our strategic refocus on the company’s core business.
R&D expenses for the second quarter decreased to approximately $1,831,000 compared to $2,209,000 for the same period a year ago. R&D expenses for the six months ended June 30, 2022 decreased to approximately $3,174,000 compared to $4,017,000 for the same period a year ago.
The decrease in R&D expense is primarily due to the winding down of activities of contract research, organization, and pharmaceutical quality and the regulatory consultants to manage and support the preclinical and the clinical development as well as a decrease in cGMP manufacturing costs as the company moves towards its anticipated Phase-1 clinical trial of our DYAI-100 COVID-19 vaccine candidates.
G&A expenses for the second quarter decreased to approximately $1,714,000 compared to $1,748,000 for the same period a year ago. G&A expenses for six months ended June 30, 2022, increased to approximately $3,370,000 compared to $3,302,000 for the same period a year ago. Net loss for the second quarter was approximately $3,288,000 or $0.12 per share, compared to $3,846,000 or $0.14 per share for the same period a year ago. Net loss for the six months ended June 30, 2022 was approximately $5,780,000 or $0.20 per share, compared to $7,141,000 or $0.26 per share for the same period a year ago.
Our cash, cash equivalents and the carrying value of investment grade securities as of June 30, 2022, including accrued interests were approximately $15.7 million compared to $20.4 million as of December 31, 2021.
Based on our current plans, the company expects that its existing cash, cash equivalents and investment grade securities will be sufficient to fund Phase-1 clinical trials of DYAI-100 and is operating expenses into 2024.
With that, I will now ask the operator to begin our Q&A session. Senior management team will join Mark and I to answer your questions. Each caller will be allowed one question and one follow up question to provide all callers an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. Operator?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. And we will go first to John Vandermosten with Zacks.
John Vandermosten
Hey, good evening, everyone. I saw that global cultured meat note and wanted to know what the regulatory requirements are for getting that out there?
Mark Emalfarb
Joe, you want to answer that?
Joe Hazelton
Hey, these are all standard the USDA Food grades and requirements that there are no, I guess, additional requirements that we would expect, I guess, [indiscernible] have.
John Vandermosten
Okay. All right. Yes, I mean, definitely I’m not too familiar with. So I’m sure that there’s some kind of hurdles that are required to get that cleared, I guess, to be used with food product.
Joe Hazelton
Yes, for all GMP manufacturing processes. And obviously, you’d have to have your USD certification for any of the plants that you’d be producing these materials at. But the areas that we’re looking at would be more on wholesale. So the organizations that we would be partnering with would already have their certifications and licenses.
John Vandermosten
Okay. So it sounds like a lot, definitely a lot easier than going down the former route.
Joe Hazelton
Yes.
John Vandermosten
Second question for me is on South Africa, and possibly also India as well, in terms of the Phase-1, and the next steps there? I mean, I think for South Africa, you submitted the CTA, which I assume is similar to an IND in the United States, is there some kind of time period there? And maybe can you differentiate that relative to an IND, and kind of what’s required and to start the trial after that submitted?
Joe Hazelton
Yes. It’s Joe Hazelton, it’s very similar to an IND, there is an eight-week review period after submission, or at least for COVID. In South Africa, there is an eight-week review period at the current time. And after following the review period, if approved, then you are given the green light to begin initiation of your trial. So in the U.S., it’s a little bit different when you file an IND, you provide your data package and if you do not hear back from the FDA, within 30 days, you can start your trial. So it’s a little bit — a little different. But the specifications or the requirements are roughly the same of what you’re asked to provide. It’s just a little different process.
John Vandermosten
Okay. And then last thing is just on Epygen, for the same — I’m sorry, Mark, you’re saying something.
Mark Emalfarb
I think it’s important to know that we basically produce this material, the drug substance and drug products under EMA and FDA quality standards, to produce CMC, so to overcome in the future, not only for this particular product, but we’ve demonstrated now, proof that we can produce CMC quality materials for future products as well.
Joe Hazelton
It’s the same data package that you would submit to any regulatory authority. Yes, absolutely.
Mark Emalfarb
So there’s no cutting corners and no cutting out quality. We spend the time and the money and the effort with the quality consultants, regulatory and CMC consultants like our [indiscernible] and others to make sure that we would be able to use this knowledge and expertise and leverage it for decades to come.
John Vandermosten
Great. And then is that kind of IND type of thing the next step in India?
Mark Emalfarb
Well, I think in India, they’re not as far advanced as we are, because they just started later. But they’re in the process of doing their qualification for their CMC package right now. And from there, have been moving towards finishing some of their preclinical studies that they have to do, and then moving into their potential Phase-1, Phase-2 clinical trial funded by [Biorac] [ph] for the Indian government, but we certainly expect to be into the clinic much faster than they are with this South African filing that we made on the 22nd of July.
John Vandermosten
Okay, great. Thank you, Mark and thank you, Joe.
Operator
And we will go next to Vernon Bernardino with HC Wainwright.
Vernon Bernardino
Hi, Mark, Ping and Joe. Thanks for taking my question. Congrats on the process with all the efforts and business development —
[Call ended Abruptly]
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