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Dyadic International, Inc.

DYAI / NasdaqCM / $3.87

May 26, 2021

 

Business Overview

 

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Dyadic International, Inc. (the Company) has developed a patented, robust, and versatile fungal expression platform (C1) for the production of commercial quantities of novel enzymes and other protein products. The immediate focus is on the biopharmaceutical industry to speed the development, lower the capital and operating costs, and improve the therapeutic performance of biologic vaccines, drugs, and other biological products that can be affordably manufactured at flexible commercial scales.

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The Company has a growing body of safety, efficacy, and productivity data from its internal and externally funded R&D programs. It works with many human and animal health research collaborators and focuses on recombinant vaccines and drugs for animal and human health, new biotherapeutics, biosimilars/biobetters (non-Glycosylated and Glycosylated protein markets), metabolites, growth factors, and diagnostics/reagents. The Company conducts its internal and external research programs with several contract research organizations (CROs).

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The market for biologics is a fast-growing drug segment estimated to have been $287 billion worldwide in 2020. The high cost of these drugs has spurred even more rapid growth in the biosimilar market, which for 2020 is estimated to have been $26 billion worldwide.

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Management believes that C1 technology has inherent benefits versus some of the industry standard expression systems for biologics (mammalian cells, bacterial, yeast, and insect cells), enabling the C1 platform to lower the cost of biologics, bring new and improved biologics to market, and help to overcome protein expression challenges for biologics drug candidates.

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Dyadic sold its industrial technology business to the industrial biosciences business of DuPont (DD/NYSE) in 2015, and recent expiration of a non-compete in that arena opens the door to the Company re-entering businesses using the C1 technology for selected industrial biosciences markets.

 

 

COVID-19 Vaccine and Antibody Initiatives

 

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Dyadic and its collaborators are focusing development efforts on a proprietary COVID-19 vaccine candidate (DYAI-100) that is safe and effective, temperature stable, and manufactured at low cost and in large quantities using standard microbial fermenters.

 

On May 24, 2021, Our World in Data reported that only 9.8% of the world population had received at least one dose of a COVID-19 vaccine and that only 5.0% were fully vaccinated. This product candidate could be a breakthrough in addressing manufacturing issues with existing vaccines and COVID-19 mutations for which existing vaccines may prove ineffective.

 

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The vaccine effort is supported by collaboration with The Israel Institute for Biological Research and scientists from Erasmus Medical Centre, University Utrecht, and TiHo Hannover.

 

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The Company has engaged a CRO (CR2O) to manage the project, and it has initiated an animal toxicology study and cGMP production of the SARS-CoV-2 RBD drug product. A Phase 1 human clinical trial is planned to begin by year end. This trial is designed to evaluate both safety and preliminary efficacy using a protein manufactured from the C1 cell line under cGMP conditions. Success would not only advance DYAI-100 development efforts but also de-risk and accelerate adoption and use of the C1 technology platform for development and production of vaccines and therapeutics globally.

 

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The C1 technology may ultimately enable production of vaccines that address multiple COVID-19 variants. The Company has been engineering additional C1 cell lines to produce several SARS-CoV-2 variant antigens and has expressed South African, Brazilian, and UK variant antigens. The Company and its collaborators are also working to produce RBD antigen and full spike proteins for COVID-19 variants.

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On May 26, 2021, the Company announced that it has entered into a collaboration with Syngene International Limited (BSE: 539268; NSE: SYNGENE, ISIN: INE398R01022), an integrated research, development, and manufacturing services company based in Karnataka, India, to develop a COVID-19 vaccine candidate that can protect against the emerging variants of the virus. Syngene has 360 clients, 8 collaborations with the top 10 pharma/biotech companies, 4,200+ scientists, 1.9 million square feet of R&D and manufacturing infrastructure, and 400+ patents.

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An expanded vaccine development partnership with Medytox Inc. (South Korea; 086900/KOSDAQ) is working to develop C1 enabled COVID-19 variant vaccines and/or boosters for use in Korea and Southeast Asia.

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A collaboration with IDBiologics, Inc. is using Company-engineered C1 cells to produce a COVID-19 monoclonal antibody.

 

 

Other Market Opportunities

 

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On-going R&D collaborations, relating to both human and animal health, exhibit promise for 2021. Here are a few highlights:

 

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A fully funded collaboration with TurtleTree Scientific is focused on development of recombinant protein growth factors, which play a role in tissue development and healing.

 

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A collaboration with Jiangsu Hengrui Medicine and two top pharma companies seeks proof of concept for improvement in the production of biologic drugs, including bispecific antibodies.

 

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A feasibility study with the University of Oslo is designed for evaluation of a potential vaccine for influenza.

 

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Initial studies in collaboration with a top global animal health company have demonstrated production of antigens for a potential vaccine for an acute respiratory disease of birds.

 

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The Zoonotic Anticipation and Preparedness Initiative (ZAPI) recently reported positive results from animal studies in mice, sheep, and cattle for a C1-produced SBV antigen, and the collaboration is ongoing.

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Internal research programs, through collaborations with a third-party CRO (VTT Technical Research Centre of Finland, Ltd) and others, are focused on C1 production host improvements. On a longer-term basis, programs related to therapeutic glycoproteins and potential commercialization of Nivolumab (a biosimilar/biobetter for certain human cancers) show promise.

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Management is seeking additional research collaborations, government funding, and partnerships to sub-license or partner its C1 platform technology in the vaccine, antibody, and biosimilar industries. For large pharma companies focused on specific therapeutic agents, the Company seeks funded proof of concept collaborations followed by upfront access fees, milestones, and royalty payments. For smaller biotechnology firms, Dyadic seeks equity, milestones, and royalties.

 

 

Executives and Directors

 

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Mark A. Emalfarb, founder, President, CEO, and a Director. He is an inventor of 25+ U.S. and foreign biotechnology patents and patent applications relating to the proprietary C1 fungal microorganism, and he has been successful in forming several R&D, manufacturing, and marketing relationships with U.S. and foreign partners.

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Ronen Tchelet, Ph.D., VP of Research & Business Development, since January 2016 and with the Company since 2016. During 2007-13, he was the founder and Managing Director of Codexis Laboratories Hungary kft and a VP of Codexis Inc. He earlier served as Chief Technology Officer of Biotechnology at the API Division of TEVA Pharmaceutical Industries LTD.

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Matthew S. Jones, Managing Director of Business Development & Licensing, since March 2017 and with the Company since 2016. Mr. Jones has 20 years commercial leadership and deal-making experience in bioscience businesses in both the U.S. and Europe.

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Ping W. Rawson, CFO, since June 2019 and with the Company since 2016. She previously held accounting positions at ADT security services; NextEra Energy, Inc.; and Deloitte.

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The BoD consists of Mr. Emalfarb and six non-employee members, all with extensive healthcare industry experience. The backgrounds of the Directors are outlined in the Proxy Statement.

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On April 16, 2021, executive officers and directors as a group beneficially owned 26.5% of the common shares outstanding, including 18.9% by Mark A. Emalfarb and 13.5% by the Francisco Trust (for the benefit of the spouse and descendants of Mr. Emalfarb).

 

 

Financials

 

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Income Statement (3 months through 03/31/21 vs. 03/31/20)

 

Research & development revenue: 460,520 vs. 315,372

Cost of R&D revenue: 390,762 vs. 278,182

Research & development: 1,808,098 vs. 755,453

G&A expense: 1,554,007 vs. 1,653,392

Foreign currency exchange loss (gain), net: 28,272 vs. 10,867

Operating income (loss): (3,320,619) vs (2,382,522)

Interest income: 25,670 vs. 168,383

Net income (loss): (3,294,949) vs. (2,214,139)

Earnings (loss) per basic and diluted common share: (0.12) vs. (0.08)

Weighted average common shares outstanding: 27,533,268 vs. 27,452,490

 

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Balance Sheet (03/31/21)

 

Cash & equivalents: 13,055,558

Short-term investments: 14,177,441

Other current assets: 758,353

Total current assets: 27,991,352

Other assets: 290,860

Total assets: 28,282,212

Current liabilities: 2,593,729

Stockholders� equity: 25,688,483

Common shares outstanding (05/12/20): 27,554,157

Stock options outstanding: 5,324,215 at a weighted-average exercise price of $2.84

 

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Dyadic has entered into an ATM agreement with Jefferies LLC under which it may offer and sell, from time to time and at the sole discretion of Dyadic, up to $50.0 million of its common shares pursuant to a Form S-3 registration statement declared effective by the SEC in August 2020. The Company has not sold any shares under this agreement.

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During 2017 and 2018, the Company repurchased 12,253,502 of its common shares outstanding at an average price per share of approximately $1.54. There have been no additional treasury stock purchases since 2018.

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On December 31, 2015, the Company sold its industrial biotech unit to DuPont Danisco for $75 million. Dyadic had licensed the C1 technology platform for industrial uses to Abengoa, BASF, Codexis/Shell, and others, and it received more than $30 million in cash payments for non-exclusive licenses and generated more than $100 million in enzyme product revenues from customers worldwide.

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Public accounting firm: Mayer Hoffman McCann P.C., Clearwater, Florida, since 2008. The 2020 financial statement opinion by MHM was unqualified.

 

 

Valuation Considerations

 

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There is a pressing worldwide need for accelerated development, lower production costs, and improved performance of biologic vaccines, drugs, and other biological products.

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The COVID-19 and other target markets are substantial and growing, and the Company has a proven ability to collaborate and partner with companies and organizations that are well established players in those markets.

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The working capital position is robust ($25,397,623 on 03/31/21), and a large standby ATM program is available for use at the discretion of management.

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The Dyadic enterprise value is well off its 2020 high point despite considerable fundamental progress on a growing number of market opportunities.

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The impact of COVID-19 is an uncertainty relating to Dyadic employees, operations, and research projects. The SEC Form 10-K for 2020 expands upon this risk and lists other risk factors which are hereby incorporated by reference.

 

 

Links to Additional Information

 

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The Potential of the Transformative Dyadic C1 Protein Production Technology in Helping Meet Global Health Challenges.

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Could Dyadic International be a Dark Horse Vaccine MVP?

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C1 Technology; A Transformational Platform that Transcends the Limits of Legacy Protein Production Technologies.

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C1 technology May be Key in the Race to Vaccine-Induced Herd Immunity.

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Upstart Vaccine Maker Says has Faster Way to Vaccinate the World.

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Is Dyadic International Inc. the Key to the Next Wave of Vaccinations?

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Is Dyadic International, Inc. the Key to Scaling Up Global Access to a Viable COVID-19 Vaccine?

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How Dyadic International, Inc. fits into the Vaccine 2.0 Gold Rush

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A Global Quest for a Vaccine Drives C1 Adoption.

 

 

Contacts

 

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Executive offices: 140 International Pointe Drive, Suite 404, Jupiter, FL 33477. Phone: 561.743.8333.

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Other locations: A satellite office in the Netherlands and research organizations performing services in the Netherlands, Finland, and Israel.

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Website: http://www.dyadic.com

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Investor contact: Ping W. Rawson, CFO; prawson@dyadic.com. Phone 561.743.8333.

 

 

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