DYAI: Dapibus on the Menu

By John Vandermosten, CFA

NASDAQ:DYAI

READ THE FULL DYAI RESEARCH REPORT

Second Quarter 2022 Operational & Financial Results

Dyadic International Inc. DYAI provided second quarter 2022 operational and financial results in a press release on August 10, 2022, filed its Form 10-Q with the SEC and hosted a conference call with investors. Dyadic is more explicitly orienting its efforts towards three core verticals including Human Health, Animal Health and Alternative Proteins. Its most important efforts center on the fully-owned C1 produced COVID vaccine that is expected to enter human clinical trials in 3Q:22 in a Phase I trial in South Africa. Historically, C1 has dominated the company's product set. Now, there is a new platform dubbed Dapibus that has just been introduced to investors. Similar to C1, it is a fungal-based microbial platform but geared towards non-pharmaceutical applications.

Highlights for the first quarter and to-date include:

➢ Presentations at multiple conferences – April 2022

➢ Government funding granted for Epygen to advance C1 COVID vaccine in clinical trials – April 2022

➢ Toxicologic Pathology journal publication of DYAI-100 toxicology data – May 2022

➢ Collaboration agreement with cheese producing global foods company – May 2022

➢ Submission of Clinical Trial Application (CTA) to SAHPRA – June 2022

➢ Launch of Dapibus platform for non-pharmaceutical applications – 2Q:22

➢ Non-human primate study completed dosing for COVID antibody – mid-2022

➢ Expansion of license agreement with Phibro/Abic – July 2022

➢ Revenues were $0.7 million, down 30% from $0.9 million and cost of revenues were $0.4 million vs. $0.8 million. The decrease in revenue and cost of research was attributable to a lower number of research collaborations;

➢ Research and development expenses totaled $1.8 million, down 17% from $2.2 million. The decrease was attributable to reduced activity levels by Dyadic's contract research organization and pharmaceutical quality and regulatory consultants for pre-clinical and clinical development work. The decline also reflected a reduction in cGMP manufacturing costs;

➢ General and administrative expenses were $1.7 million, essentially even with the prior year period. Lower legal, business development and investor relations expenses were offset by higher insurance and other expenses;

➢ Net loss amounted to ($3.3) million compared to ($3.8) million. On a per average share balance, net loss was ($0.12) and ($0.14), respectively.

As of June 30, 2022, cash, equivalents and short-term securities totaled $15.6 million compared to $20.3 million at the end of 2021. Quarterly cash burn was ($1.8) million compared with ($2.4) million in 2Q:21. Financing cash flows were minimal. Dyadic holds no debt on its balance sheet.

Clinical Trial Application Submitted in South Africa

In June 2022, Dyadic submitted a Clinical Trial Application (CTA) to the South African Health Products Regulatory Authority (SAHPRA) in order to gain approval to initiate a Phase I study. The anticipated trial will use C1-produced recombinant protein in the DYAI-100 COVID-19 study. SAHPRA customarily takes 60 days to review the application, and if it is acceptable, the agency provides clearance to start. Based on management estimates, enrollment should begin in late 3Q:22, with topline data available by late 4Q:22.

Other Initiatives

In its second quarter report, Dyadic introduced a full slate of new initiatives, offerings and movement toward clinical trials. The achievements range from its codified focus on three primary verticals in Human Health, Animal Health and Alternative Proteins to continued advancement towards Phase I studies for DYAI-100 in South Africa and India. The Dapibus platform was introduced. It is a new fungal expression system targeting the rapid development and large-scale manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications such as food, nutrition, and wellness. It is being applied in the Leprino and cultured meat initiatives.

A new protein was expressed by C1 called neuraminidase which is a type of enzyme that is used to develop influenza vaccines. Neuraminidase appears on the surface of the flu virus and seeks to neutralize antibodies. As it is a feature of the flu virus, it is also an antigen that the immune system can recognize to build resistance. The neuraminidase antigen has been difficult to manufacture at efficient volumes and with an optimal profile, making it an attractive candidate for C1 and for pharmaceutical, biotechnology and government entities that are developing vaccines.

New Collaboration with Mozzarella Manufacturer Leprino Foods

In mid-May, Dyadic announced a new collaboration with Leprino Foods Company to develop and manufacture a number of animal free ingredient products. The project is funded by Leprino for up to €3.6 million which will be allocated to developing proprietary production cell lines for manufacture of animal free food products. If certain productivity and activity thresholds are achieved, Dyadic will receive success fees. Commercialization fees in the low eight figures will be paid upon commercialization and royalties in the low single digits based on sales will be paid. Additional information related to the agreement is provided in the Form 8-K filing.

While the core focus of Dyadic is for development of its C1 platform in developing and manufacturing biopharmaceuticals, the company will take advantage of other opportunities that arise to enhance value to shareholders.

Leprino Foods started in 1950 in Denver, Colorado and matured to be a mozzarella cheese manufacturer with national and later global reach. The company was recognized as the largest supplier of cheese for pizzas in the United States in the 1990s. In recent years the company has further expanded into Asia and Latin America. With the shift away from animal-based foods and success from other animal-free products such as Beyond Meat we hypothesize that the collaboration intends to develop an animal-free cheese product.

Epygen Biotech COVID Funding

In mid-April, Dyadic announced that its partner Epygen Biotech, which had originally become a partner in October 2020, was granted government funding to support Phase I and II clinical trials of Epygen's COVID vaccine candidate. The Indian government's Department of Biotechnology has selected Epygen's vaccine, which uses Dyadic's C1 protein production platform, for funding to support clinical trials. The efforts are expected to develop vaccines that can address new COVID variants and produce 100 million doses per year at a cost of $2 per dose. Additional funding will be needed to support pivotal studies and Epygen is seeking to raise $26 million to support a Phase III trial. Next steps for Epygen on the road to Phase I are preparing the chemistry, manufacturing and control (CMC) package and scaling up the operations to produce clinical quantities of DYAI-100.

Publication of DYAI-100 Toxicology Data

Toxicology data for Dyadic's DYAI-100 was published in the journal "Toxicology Pathology" as reported in a May 9^th press release. The data demonstrated a favorable safety profile and support further use in human trials. The study, is titled "Toxicity and Local Tolerance of a Novel Spike Protein RBD Vaccine Against SARS-CoV-2, Produced Using the C1 Thermothelomyces Heterothallica Protein Expression Platform." It summarized the toxicological evaluation of DYAI-100 conducted in the New Zealand White rabbit animal model. No signs of toxicity were observed, including the lack of injection site reactions. Thirteen days post-injection, ELISA studies revealed SARS-CoV-2 specific IgG antibodies were further elevated in the sera of the animals vaccinated. Histopathology evaluation and immunohistochemistry (IHC) staining revealed follicular hyperplasia, consisting of B-cell type, in the spleen and inguinal lymph nodes of the treated animals that were sustained throughout the recovery phase. One of the scientists working on the project, Dr. Abraham Nyska, finds that the observations in the model show a sustained immunogenic response against RBD. See link here for the original published article.

Phibro Exclusive License Agreement

On February 10, 2022, Dyadic announced an exclusive license agreement with Phibro Animal Health PAHC to develop and commercialize an animal health vaccine for a Phibro targeted disease. Phibro is a leading global animal health and mineral nutrition company. The agreement was realized after previous proof of concept development work between the two companies. Under the terms of the agreement, Dyadic granted Phibro exclusive license to use C1 to produce specific targeted antigens for a poultry vaccine in a disease of Phibro's choice. Following the agreement in February, the partnership expanded to one more animal vaccine candidate for livestock using C1 in July 2022. Phibro offers more than 25 poultry vaccines including Infectious Bursal Disease, Infectious Bronchitis and Newcastle Disease. Poultry vaccines are estimated to be a ~$2 billion market.¹

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1. Poultry Vaccine Market Size, Share | Global Industry Report, 2019-2026 (grandviewresearch.com)