Dyadic International Q4 2023 Earnings Call Transcript

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March 28, 2024

There are 5 speakers on the call.

Operator

Good evening, and welcome to the Dyadic International's Fiscal Year 2023 Year End Conference Call. Currently, all participants are in a listen only mode. Following management's prepared remarks, there will be a brief question and answer session. As a reminder, this conference call is being recorded today, March 28, 2024. I would now like to turn the call over to Ms.

Operator

Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Speaker 1

Thank you, operator. Good evening, and welcome, everyone, to Dyadic International's fiscal year 2023 year end conference call. I hope you have had the chance to an opportunity to review Dyadic's press releases announcing financial results for the year ended December 31, 2023 and a separate press release on changes in Board and management leadership roles. You may access our release and Form 10 ks under the Investors section of the company's website atydix.com. On today's call, our President and CEO, Mark Emalfarb and our new Chief Operating Officer, Joe Hazleton, will give a review of our 2024 business and corporate highlights, including a brief summary of our recent research and the business development efforts.

Speaker 1

I will follow with a review of our financial results of 2023 in more detail. We'll then hold a brief Q and 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. Stadix expressly disclaims any duty to provide updates to its forward looking statements, whether because of new information, future events or otherwise. Participants are directed to the risk factors set forth in Dyadic's reports filed with the SEC.

Speaker 1

It is now my pleasure to pass the call to our CEO, Mark Emmerfa. Mark?

Speaker 2

Thank you, Ping. Hello, everyone, and thank you for joining Dyadic's full year 2023 conference call. I cannot overstate how exciting this time is in Dyadic's history. We are uniquely positioned to rapidly capitalize on the present opportunities and those on the horizon. Over the next 2 years, we anticipate reaching multiple revenue streams and other inflection points through fully funded collaborations in the company's pipeline products to enhance shareholder value.

Speaker 2

We are building upon momentum witnessed in 2023 and we have further accelerated our progress. The claim and acknowledgments of our C1 technology for its speed, productivity and effectiveness persists both domestically and globally, receiving recommendations or commendations from academia, industry and government bodies. The C1 platform's distinction is further bolstered by clinical validation through our successful Phase 1 human trial, which not only demonstrated that the proteins produced from our human cells are safe to use in humans. Additionally, the DYA-one hundred vaccine has been shown to induce immune responses at both dose levels, suggesting its potential efficacy in generating protective immunity against the target virus. We believe that our successful first in human clinical trial of a C1 produced protein redefines the benchmarks for recombinant protein antigen production levels.

Speaker 2

C1's productivity is up to 300 times that of baculovirus cells, coupled with its abbreviated fermentation times and lack of need for viruses or endotoxins needing removal and downstream processing fills the future with a rapid large scale and cost efficient production of recombinant vaccine becomes the norm rather than the exception. Speaking to our pharmaceutical initiatives, I cannot overstate the significance of the positive outcomes from our Phase 1 human study that has bolstered industry attention toward Dyadic and our C1 expression platform. Since the announcement of these top results, heightened interest from industry partners including 2 top 10 pharmaceutical firms has spurred the commencement of over 12 fully funded vaccine and antibody projects. These projects span various disease areas, exemplified by our strategic partnership with Ravian BV, a Dutch innovative SME founded by seasoned entrepreneurs and vaccine scientists. Rabian secured €1,700,000 in funding from Eurostarz for the Avatar project aiming to leverage its virology expertise to develop a rabies vaccine utilizing Dyadic C1 protein production platform.

Speaker 2

Additionally, the Israeli Institute For Biological Research, the IIBR, is harnessing Dyadic's microbial platform expertise in conjunction with their own capabilities and antibodies and antigens discovery to develop and manufacture treatments and vaccines for emerging diseases and potential biothreats for out licensing opportunities. In the realm of infectious diseases, our recombinant vaccine capability continues to attract growing interest. We are engaged in an expanded research collaboration with a top 5 pharmaceutical company to develop a number of antigens preventing and treating various infectious disease. Furthermore, we have initiated a new research collaboration with the Vaccine and Immunotherapy Center, VIC, and Massachusetts General Hospital, which received over $5,000,000 in funding from the Department of Defense, DoD, to develop and test vaccine antigens for influenza A and other infectious diseases, including antigens produced using our C1 platform. Additionally, our DAPAVIS expression platform has exceeded our initial expectations, despite launching a little over a year ago, gaining substantial traction generating revenue in both their alternative protein and bio industrial sectors.

Speaker 2

During today's call, Joe and I will review our strategic blueprint for enhancing revenue growth, highlighting significant technological strides and recent achievements in business development across our primary markets. We will elaborate on our near and longer term strategies aimed at bolstering our revenue outlook and enhancing shareholder value. I would like to extend our gratitude to long term shareholders for their steadfast support as we successfully closed a $6,000,000 convertible note financing. These funds will fuel the acceleration of our goal to introduce revenue generating products targeting both pharmaceutical and non pharmaceutical sectors. Our recent announcements of both business and scientific achievements demonstrate that the success of our corporate strategy is beginning to be realized and that Dyadic is strongly positioned for new area of revenue growth.

Speaker 2

To further support our growth imperatives, we have announced changes in leadership roles at the Board level and management team. We expanded the responsibilities of our Chief Business Officer, Joe Hazleton, appointing him as Chief Operating Officer. His demonstrated pivotal role in advancing our strategic objectives is undeniable. With strength in financial resources and scientific prowess, we are well positioned to execute our strategic business objectives. Michael Tarnock is stepping down as Chairman of Dyadic's Board of Directors and making room for Patrick Lucey, who has been appointed to succeed him effective immediately.

Speaker 2

Mr. Tarnock will continue as a Director through the end of his current term, which ends in June 2025 at the time which he expects to retire. Doctor. Barry Buckland is retiring from the Board at the end of his term in June 2024, which will result in reduction of the size of the Board to 6 members. I would like to thank Mike Tarnock for his leadership as Chairman over the past 10 years and for agreeing to serve out his remaining 1 year term, enabling a smooth transition of Board leadership.

Speaker 2

I'm excited that Mr. Lucey, who has been an outstanding Board member over the past 3 years has agreed to take on the role as Board Chairman in an important time for Dyadic. In our ongoing efforts to make clear our strategy and business perspectives, we will spotlight our focus on our 3 primary sectors: human health, animal health and alternative proteins. Joe and I will outline our achievements and strategic outlook spanning both pharmaceutical and non pharmaceutical domains, along with providing a look into our roadmap for 2024 and beyond. We are poised at the edge of leveraging our microbial protein production platforms, C1 and Dapovis to create antigens, antibodies, enzymes and other recombinant proteins pivotal to each of our core sectors.

Speaker 2

These efforts are anticipated to unlock the monetization avenues, significantly enhancing shareholder value for Dyadic and our partners. In defining Dyadic value proposition against conventional platforms for the manufacturer vaccines and therapeutics, it's pivotal to grasp the foundation of C1's uniqueness, which is in our industrial heritage. This heritage isn't just a backdrop, it's the bedrock of our approach to biologic pharmaceutical production. Traditional cell lines typically evolve from research scales, struggling to balance increasing scale and yield against cost constraints. In stark contrast to that, Dyadic Harnesses microbial platforms and seasoned veterans make economical production of large scale bio industrial proteins and enzymes at large scales.

Speaker 2

This deep rooted experience is being repurposed to navigate the complex landscape of biologic pharmaceutical development production, marrying it with industrial scale efficiencies with pharmaceutical precision. As I highlighted earlier, the C1 platform distinction is further bolstered by its clinical validation through our successful Phase 1 human trial, which not only demonstrated that proteins produced from our C1 cells are safe use in humans and that the DY vaccine has been shown to reduce immune responses at both dose levels, suggesting its potential efficacy in generating protective immunity against the target virus. We believe we are redefining the benchmark for our common protein antigen production levels. We are pleased with the progress of the C1 platform, but it's crucial to keep investing in validating and advancing our technology to match emerging science and support our partners' development efforts. To this end, more than a year ago, we engaged Cygnus Technologies to co develop a C1 host cell protein HCP ELISA kit.

Speaker 2

This step is vital for regulatory reviews and manufacturing, as HCP residues can cause toxicity and affect biologic stability. These kits are essential for detecting and quantifying HCPs during manufacturing to ensure product purity and quality. Necessary for marketing approval and we are excited that C1 HCP ELISA kits are now available to Dyadic and Cygnus customers. Expanding our portfolio with potential new commercial products produced by the C1 platform is equally important. Dyadic has entered into a development and commercialization agreement with EU based Bjorna to explore the development of messenger RNA using our C1 technology.

Speaker 2

This collaboration combines Bjorna's innovative eukaryotic bioRNA platform with Dyadic's proven C1 protein production platform. This aim is to offer the pharmaceutical industry a potentially more cost efficient method for manufacturing large quantities of lower cost messenger RNAs, facilitating broader global access to RNA vaccines and drugs. Turning our focus to our therapeutic proteins, particularly monoclonal antibodies, we see significant potential in utilizing the C1 production system for the production of antibodies targeting infectious and other diseases such as arthritis, oncology and neurological diseases. Therapeutic proteins aimed at combating infectious disease often require shorter term treatment durations, yet they may necessitate larger quantities and shorter manufacturing times to effectively and efficiently address pandemics or outbreaks. Earlier this week, we announced the publication of a manuscript in the esteemed peer reviewed journal Nature Communications, detailing the preclinical studies conducted on a monoclonal antibody produced using the C1 system, utilizing non human primates and hamsters as models.

Speaker 2

In the non human primate challenge study, a C1 produced COVID-nineteen monoclonal antibody previously shown to present broad neutralization protection against various variants, including all the way from Wuhan to BA. 1 and BA. 2 Omicron, as well as the earlier variants concerning enhancers and underwent dosing, findings from the challenge study involving the SARS CoV-two delta variant and non human primates indicated promisingly high levels of protection. This marks the instance of the first instance of a C1 produced monoclonal antibody being employed in non human primate study, preferring both the safety and efficacy of C1 produced antibodies for addressing infectious diseases. These recent findings regarding the safety and efficacy of monoclonal antibodies produced using C1 technology are significant in accelerating the research and development efforts in the field of infectious and other diseases.

Speaker 2

This is particularly noteworthy taken with the previous UFORTA data that C1 produced mAbs are comparable in efficacy and safety to those produced using traditional CHO sinuscanthropic cell lines. Just this week, Dyadic entered into a collaboration with another top 10 pharmaceutical company to develop an infectious disease MOCK1 antibody and a vaccine antigen using C1 technology, which marks a significant step forward in this area. The fact that this collaboration is fully funded by a top 10 pharmaceutical company underscores the confidence in the potential of C1 technology for producing effective treatments and vaccines against infectious and other diseases. Moreover, Dyadic's existing collaborations with industry partners for producing monoclonal antibodies targeting diseases like Ebola and Marburg highlight the versatility and applicability of C1 technology across a range of infectious diseases. Overall, these developments suggest a promising future for C1 technology in the field of infectious and other disease researchers in development, potentially leading to more effective treatments and vaccines against a variety of pathogens for global population.

Speaker 2

We are continuing our efforts to forge and sustain long term strategic partnerships in the pharmaceutical sector for both humans and animals. This is evidenced as well as we enter the 4th year of our expanded collaboration with RubicOne Health to advance commercial products and clinical development of vaccines to human and animal health in Africa. Our collaboration with Fibril, EDGIC to develop C1 produced poultry vaccine is entering its 5th year and has expanded to additional infectious diseases and disease areas over that time. Animal Health remains a targeted segment for Dyadic due to higher margin sensitivity of pharmaceutical biologics and the significant impact of outbreaks on the global supply chain and potentially human health. We continue to expand our presence in the animal health market for vaccines and therapeutic proteins.

Speaker 2

I will now turn the call over to our Chief Operating Officer, Joe Hazleton to provide an update on our non pharmaceutical license and product opportunities. Joe?

Speaker 3

Thank you, Mark. Dyadic remains truly excited about the non therapeutic uses of its microbial platforms, which are adept at producing recombinant proteins and enzymes. We believe this field offers a significant promise in terms of both opportunity and revenue in the near term. To this end, Dyadic is committed to allocating appropriate resources and providing support for current and future products within this rapidly expanding sector. Our gene expression and protein production platforms including the recently launched Daphnis are tailored to facilitate swift development and large scale manufacturing of cost effective enzymes, proteins, metabolites and other biological products.

Speaker 3

These products span the full spectrum of production grades from research to food grade and ultimately pharmaceutical grade materials. Their applications are diverse and encompass diagnostics, research, nutrition, health and wellness reflecting the increasing demand in these areas. Diving deeper into our strategic plans to boost short term revenue potential, we remain focused and confident that identifying and producing high value recombinant targets that can be rapidly and efficiently commercialized provides the best near term revenue potential. We're now seeing the strategy creating value as evidenced by the recent term sheet we've executed with a global albumin manufacturer and distributor to develop and license Dyadic's recombinant serum albumin products initially for diagnostic and research grade purposes. This strategic partnership will allow for more rapid commercialization of our recombinant products to enter the market within the next 12 months.

Speaker 3

And we hope to be able to share more information in the very near future on this important collaboration. Recombinant serum albumin serves as a prime illustration of our focus on valuable recombinant products, offering diverse commercialization prospects across various market segments. For example, pharmaceutical grade ciramadopan holds potential as a disease treatment and is integral to vaccine development serving as a carrier protein for therapeutics and as a standard agent in research and development. Recent completion of certificates of analysis for our recombinant human recombinant bovine albumin affirms their analytical equivalents to currently commercialized research grade products on the market today. Moreover, we're exploring recombinant bovine albumin's application at food grade in cell culture media for cultured meat production.

Speaker 3

This showcases Dyada's capacity to produce animal free recombinant serum albumin across different grades at competitive prices using our efficient and affordable microbial platforms. Such opportunities may lead to broader strategic options including joint ventures or spin offs akin to successful companies like AlbuMedix, which was acquired for over GBP 400,000,000 in 2022. To strengthen that split hold in the alternative protein sector and explore broader exit opportunities, we've executed a co promotion agreement with Turkish company Biftech Inc. Their patent pending animal free growth medium supplement aims to reduce expenses linked to costly culture media components. This collaboration enables Dyadic to extend its reach into the cell culture media domain earning a share of all net sales from VipTech supplement.

Speaker 3

Additionally, our successful initial production of recombinant transferrin using our microbial platforms presents another potential product for the alternative protein and cell culture sectors. Outside of recombinant cell culture products, we believe recombinant non animal dairy products offer Dyadic the potential for more rapid commercialization opportunities. The global animal free dairy products market was valued at over $26,000,000,000 in 2022 and is projected to reach more than $75,000,000,000 by 2,032. Today's animal free dairy products are crafted through precision microbial fermentation technology, a market driven by evolving consumer preferences and concerns over health issues associated with traditional cow milk such as lactose intolerance and allergies. Despite the current high cost of animal free dairy, this obstacle aligns with our expertise in producing large quantities of cost effective recombinant proteins using our microbial expression platforms.

Speaker 3

Our 2023 agreement involving our DAPAVIS platform for developing and commercializing non animal dairy enzymes for food production inclusive of upfront payments, milestones and royalties validates our focus on this sector and reflects growing interest in use of DATOBUS for the development and manufacture of non animal dairy products. We also anticipate success fees from this collaboration in the first half of twenty twenty four. Furthermore, we have engineered a highly productive strain of non animal recombinant alpha lactalbumin, a key whey protein commercially available in large volumes. We're actively sampling our alpha lactalbumin and casein products and have commenced development of beta lactoglobulin, another widely used whey protein and lactoferrin for food grade products, with sampling anticipated to begin in the Q3 of this year. Numerous discussions with potential partners are ongoing, bolstering our confidence in the short term revenue prospects of the non animal dairy segment in 2024.

Speaker 3

Beyond our focus in cell culture and non animal dairy products, we're further expanding our potential pipeline through the development of several bio industrial grade enzymes that have the potential for use in multiple industries such as nutrition, biofuels and biorefining. By increasing the volume of internal pipeline products and external partnerships within non pharmaceutical and pharmaceutical applications, we believe we can accelerate more consistent revenue generation in the coming year that is not strictly reliant on platform licensing and inclusive of potential product licensing for targets such as recombinant albumin, enzyme catalysts or cell culture media components. With the funding secured in the Q1 and the recent organizational adjustments, Dyadic is poised for a new phase of growth. I'm grateful to Mark and Dyadic's Board of Directors for their trust in me as the new Chief Operating Officer. Mark's support has been invaluable and I'm eager to play a more active role in daily operations, aligning our research and development with our business needs, streamlining our operating model to ultimately achieve our goals efficiently.

Speaker 3

While the future looks promising, there's still work ahead to capitalize on the opportunities before us and drive near term revenue growth across our core sectors. Our strategic plan has been refined and we have commenced its implementation in key areas where our technologies such as the Demovus platform can have significant impact. Additionally, we're exploring new opportunities aligned with our verticals in targeted markets with high potential returns, particularly those seeking cost effective solutions for affordable recombinant protein production. With that, I'd like to turn the call over to our CFO, Ping Rawson to go through our financials. Ping?

Speaker 1

Thank you, Joe. Thank you everyone for joining our call today. As Mark mentioned earlier, on March 8, 2024, the company issued an aggregate principal amount of $6,000,000 of 8% senior secured convertible promissory notes due March 8, 2027 in the private placement. The convertible notes have a conversion price of $1.79 with no warrants. The purchasers of the convertible notes include immediate family members and the family trusts related to Mark Immofarpe, our President and CEO the Francisco Trust, an existing holder of more than 5% of the company's outstanding common stock.

Speaker 1

As of December 31, 2023, we have cash and investment grade securities of $7,300,000 Combined with the $6,000,000 we just raised, $1,300,000 from the sale of our equity interest in Alphazyme and $600,000 up from payment from our animal free dairy enzyme licensing agreement in 2022, we believe we are well positioned financially to support our near term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non pharmaceutical applications. I will now go over our key financial results for the year ended December 31, 2023 in more detail. You can find additional information in our earnings press release and Form 10 ks, which we filed earlier today. Research and development revenue and the license revenue for the year ended December 31, 2023 slightly decreased to approximately $2,900,000 compared to $2,930,000 for the year ended December 31, 2022. Cost of research and development revenue for the year ended December 31, 2023 decreased to approximately $2,000,000 compared to $2,100,000 for the year ended December 31, 2022.

Speaker 1

The decrease was related to a higher individual contract amounts on certain research funding and related work performed during 2022. Research and development expenses for the year ended December 31, 2023 decreased to approximately $3,300,000 compared to $4,500,000 for the year ended December 31, 2022. The decrease primarily reflected the winding down of activities related to the company's Phase 1 clinical trial of BYAI-one hundred COVID-nineteen vaccine candidate. G and A expenses for the year ended December 31, 2023 decreased to approximately $5,800,000 compared to $6,400,000 for the year ended December 31, 2022. The decrease principally reflected a decrease in management incentives of $466,000 business development and Investor Relations costs of $219,000 and the legal expenses, partially offset by increases in insurance premiums of $96,000 and other increases.

Speaker 1

Net loss for the year ended December 31, 2023 was approximately $6,800,000 or $0.24 per share, compared to a net loss of $9,700,000 or $0.34 per share for the year ended December 31, 2022. With that, I will now ask the operator to begin our Q and A session. 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?

Operator

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. Our first question comes from the line of John Vandermosten with Zacks. Please proceed with your question.

Speaker 4

Thank you and good evening everyone. Now that Dyadic has C1 produced protein that's been administered to humans and you've completed the trial. And Mark, you also mentioned that several top pharma companies had come in and asked to work with you. Has that changed the nature of what the collaborators want to work on having that data?

Speaker 2

Yes. I'll let Joe answer that first.

Speaker 3

Yes. Hi, Joe. Great question. And to be honest, it has. So traditionally, as you look at some of our projects, they're more comparative using C1 versus products that have already been produced in other cell lines.

Speaker 3

And I'm not saying that's typically not always going to be the case moving forward. But what we've seen is an increase in C1 actually being chosen as either the first or producing hard to target expressed proteins in other systems. So it's less comparative and more actual commercialization targets that are being put into the system.

Speaker 4

Okay. And Joe, congratulations on your ascension to COO. I wanted to mention that to you. And then, my second question is, on some of the partnerships you have. The Arabian partnership, there was an equity component to that.

Speaker 4

And do you have any other arrangements like this? And is this going to be a push in the future to have a component like that as part of the arrangement?

Speaker 2

Well, I think if you look back, Alphazyme was similar to that, where we netted $1,300,000 because when a small biotech company start out, or whether it's biotech or an enzyme industrial company, they don't traditionally have money to spend on license agreements. So we take equity rather than take nothing and sort of leave opportunities on the shelf. BDI, if you remember a couple of years ago, we also got about €1,300,000 So both of those have already turned into cash. So they're both good decisions. Rubik One Health is another example where we actually have an equity position right in that company and of course here with Raytheon.

Speaker 2

So we're gaining not only potential opportunity to get revenue in the future from equity positions, also getting more products in the marketplace, more products in human being to expand the use and adoption and speed the adoption of the technology platforms, whether it be C1 for pharmaceuticals or DAPAVIS for non pharmaceutical applications. So there's a lot of really benefits that are intangibles that you might not see that we see and we're recognizing and we're actually commercializing and in some cases turning to cash as we did with BDI and Albizond already. So we'll do those if and when they make sense. But of course with big pharma and big industrial companies, as we did with Shell and BASF and Amigo in the past and then ultimately, we generated $110,000,000 of non dilutive money by doing those kind of deals, so upfront cash rather than equity. We're looking for upfront cash, milestones and royalties, and those are the goals and objectives.

Speaker 2

But as we take so long to get that in some of these big pharmaceutical companies, but we're on the way.

Speaker 3

And I'd say just to John to that point, we're flexible in that approach. But to Mark's point, it's not our priority. Priority obviously is non dilutive funding as early as possible in any of our agreements. But we need to remain open because Mark's absolutely right. The more products and the more data we can generate especially in human beings potentially non human primates that consistently adds to the validation of the platform.

Speaker 3

But again, it's not going to be our primary focus to retain equity, but we will do so when appropriate.

Speaker 4

Great. Thank you for taking my question.

Speaker 2

And John, just to add to that, the Arabian project not only potentially gives us a payment as an equity of milestone payments and royalties on the product. But just as importantly is these agencies like the WHO, CEPI, the Gates Foundation, PATH, IABBI, IBI, these people are looking at what we're doing with this technology. And the more it gets adopted, the more opportunities we can get to get funding from a lot of these non profit organizations that fund vaccine development and will absolutely need to be funding monoclonal antibody development, we think, which is a game changing platform.

Operator

There are no further questions in the queue. I'd like to hand it back to Mark Emalfarb for closing remarks.

Speaker 2

In fiscal year 2023, we are witnessing the positive impact of our Phase 1 human clinical safety trial, further validating the C1 platform potential for pharmaceutical use in both human and animal health. Moreover, the investment in our DAPLIFZ platform for alternative proteins and enzymes is beginning to yield revenue, marking a significant milestone. Our primary focus remains on enhancing diagnet value within the life science industry, which in turn benefits our shareholders and promotes global access to affordable vaccines and therapeutics. We refined our focus and adjusted our business strategies to capitalize on existing and emerging commercialization opportunities in the near term, aligning with our mission as a global biotechnology company to revolutionize how we feed, fuel and heal the world. The company remains dedicated to driving near term revenue and growth through innovation and commercialization efforts, expanding the use of DAPLIFZ platform for developing alternative or common proteins such as alpha like albumin or common human albumin and non animal dairy enzymes for food production across various other applications.

Speaker 2

Once again, I cannot overstate how exciting this time is in Dyadic's history. We are uniquely positioned to rapidly capitalize on the present opportunities and those on the horizon. Thank you for joining us in today's fiscal year 2023 conference call. We look forward to keeping you informed as we progress in commercial and scientific endeavors during our next call. Please stay tuned for additional updates from us.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Dyadic International Q4 2023
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