DYAI: Sorrento Deal Provides Upfront Cash
NASDAQ:DYAI
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Second Quarter 2021 Operational & Financial Results
Dyadic International Inc. (NASDAQ:DYAI) released second quarter 2021 operational and financial results on August 12, 2021 and concurrently filed its Form 10-Q with the SEC. Following the release, an investor conference call was held.
Highlights for the year to date include:
➢ TurtleTree collaboration announced – February 2021
➢ Collaboration with Medytox for COVID-19 vaccine in Korea and SE Asia - March 2021
➢ Fully funded research collaboration with CR2O for COVID-19 antibody - April 2021
➢ Expansion of IDBiologics collaboration for second antibody - April 2021
➢ Collaboration with Syngene – May 2021
➢ ZAPI study published in journal Vaccines – June 2021
➢ Licensing agreement with Rubic Consortium – July 2021
➢ Binding term sheet with Sorrento – August 2021
Dyadic generated research and development revenue of $937,000 in the quarter ended June 30, 2021 versus $524,000 in the second quarter of 2020. Dyadic incurred operating expenses of ($3.9) million yielding net loss of ($3.8) million, or ($0.14) per share.
Financial results for the quarter ended June 30, 2021, compared to the quarter ending June 30, 2020:
➢ Revenues were $937,000, up 79% from $524,000 on an increased number (11 vs 9) of on-going research collaborations;
➢ Research and development expenses1 rose 75% to $3.0 million from $1.7 million, driven by Phase I clinical trial costs for DYAI-100 and partially offset by a decline in spending on other internal research projects;
➢ General and administrative expenses rose 18% to $1.7 million vs $1.5 million, on higher legal expenses, business development and investor relations costs, executive and board of director compensation, insurance and other expense increases;
➢ Loss from operations was ($3.8) million compared to ($2.7) million. On a per average share balance, net loss was ($0.14) and ($0.10), respectively.
Cash and equivalents balance as of June 30, 2021 totaled $25.6 million. Cash burn was ($2.4) million, offset by $0.9 million from the exercise of options. Previous cash burn guidance for 2021 had been between ($10) to ($12) million; however, following the consummation of the license agreement with Sorrento, we expect cash burn to improve considerably as much of the COVID vaccine development expense will be reimbursed and future expenditures for the COVID vaccine program will be assumed by Sorrento.
Sorrento’s Binding Term Sheet
Dyadic energized investors with an announcement of another deal, this one with Sorrento Therapeutics (NASDAQ:SRNE). This arrangement is distinct in that it includes not only reimbursement for research and development expenses but also includes $10 million in an up-front payment, milestones and royalty payments. Upon signing a definitive agreement, Sorrento will be granted exclusive rights in North and South America, Europe, Asia and certain other countries to advance C-1 produced proteins for development and commercialization of vaccines, therapeutic antibodies, protein therapeutics and diagnostics for coronaviruses. The $10 million up-front payment will be denominated in equal parts cash and Sorrento stock; there is an additional reimbursement of up to $4 million for preclinical and clinical development costs incurred by Dyadic up to the point that Sorrento takes over the program. An additional $33 million in development milestones are also available as well as royalty payments based on sales.
A binding term sheet has been signed, with an Intellectual Property License Agreement to be finalized over the next 45 days. We see this as an important event in Dyadic’s evolution toward a revenue generating company. As collaborators carve out portions of the market with license agreements, the remaining open spaces become more valuable and we anticipate deals of greater value in coming quarters.
Development of COVID-19 Vaccine in India
On May 26, 2021, Dyadic announced a collaboration with Syngene International Limited (NSE:SYNGENE.NS). Syngene is an India-based, integrated research, development and manufacturing services company which will develop a COVID-19 vaccine candidate using Dyadic’s C1 expression system. Development efforts aim to produce a vaccine that can affordably protect against emerging variants of the coronavirus. India has an enormous population and much of it is in rural areas which lack the necessary infrastructure to efficiently distribute cold chain product. Successful vaccine distribution, especially in less developed areas, requires the ability to produce the vaccine rapidly, affordably, at sufficient scale and without the use of prohibitively specialized technologies and environments. India recently experienced a significant wave of infections, highlighting the need for local vaccine production to address the surge.
Dyadic will work with Syngene to develop a vaccine candidate for immunization against current and future variants of COVID-19, and continues to explore similar arrangements in other geographies.
Technology Transfer and Licensing Agreement with Rubic Consortium
Adding to recent geographical expansion throughout the Asian sphere, Dyadic announced on July 27, 2021 that it had entered into a technology transfer and licensing agreement with Rubic Consortium for research, development and commercialization of COVID-19 vaccine candidates throughout the African continent. Including recent successes with Syngene, Medytox and others, the deal expands C1’s potential reach as a COVID-19 vaccine production solution to ~40% of the global population.
The Rubic Consortium comprises representatives from public health, medical, academia, vaccine technology, technology transfer and economics sectors. Development and implementation of vaccine technologies will be overseen by leading academics directed by the University of the Witwatersrand, Johannesburg (Wits) academic team with the support of Wits Health Consortium. Shabir Madhi, professor of vaccinology, Dean Faculty of Health Sciences at Wits stated, “The need to quickly acquire and commercialize technology and manufacturing capabilities, which addresses the infrastructure necessary to deploy vaccinations for broad populations affordably and timeously has never been a more strategic imperative of African nations than today,” and expressed optimism regarding the high yields and low cost that Dyadic’s C1 platform represents even beyond COVID-19.
Sale of Equity Interests in BDI and VLP
Dyadic has held a 3.3% interest in The Vaccine Company (VLP) and a 16.1% interest in Biotechnology Developments for Industry (BDI) which we have included on our summary of collaborations. In an 8-K filing, Dyadic announced the sale agreement of these two interests on July 26, 2021. Proceeds from the sale, after accounting for transaction costs and legal expenses, were approximately €1.3 million. BDI and VLP are both subsidiaries of the company Spanish Biotechnology Developments for Industry, SL. The partners have provided research services and a service framework agreement that developed C1 for a variety of projects including the development of certolizumab.
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, is 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.
With the introduction of the Sorrento agreement, the cost of development for DYAI-100 will be assumed by Sorrento and up to $4 million of costs incurred to date for the program will be reimbursed. We anticipate that Sorrento will take over IND preparation and submission.
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
➢ Medytox collaboration - March 2021
➢ CR2O antibody research collaboration - April 2021
➢ DYAI-100 toxicology study - April 2021
➢ Syngene collaboration for development of COVID-19 vaccine in India - May 2021
➢ Technology Transfer and Licensing Agreement with Rubic Consortium - July 2021
➢ Sorrento Therapeutics Binding Term Sheet – August 2021
➢ DYAI-100 Phase I initiation – 2H:21
VACCINES Publication
Based on work done with the ZAPI, Dyadic published findings from its participation in the initiative in VACCINES, a leading peer-reviewed journal. The publication was entitled “Development of a Modular Vaccine Platform for Multimeric Antigen Display Using an Orthobunyavirus Model,” and described the development of a robust and versatile self-assembling multimeric protein scaffold particle vaccine platform using lumazine synthase from Aquifex aeolicus. Among the production platforms used to produce the multimers was Dyadic’s C1.
The goal of the ZAPI initiative was to identify the best subunit vaccines and neutralizing antibodies against potential new zoonotic diseases and strains, define optimal manufacturing technologies and processes to produce the vaccines and antibodies in high volumes and facilitate public sector adoption of the top solutions. The peer-reviewed study demonstrated the successful use of Dyadic’s C1 platform to facilitate rapid and high yield protein production.
Summary
Dyadic continues to add partnerships and research collaborations and advance its COVID-19 candidate, DYAI-100. Since our last update, Dyadic has added yet another SARS-CoV-2 vaccine partner that will focus on regions not yet licensed. The Sorrento deal is a step up from previous arrangements in that it offers reimbursements, upfronts, milestones and royalties throughout the duration of the agreement. Through these partnerships C1 should demonstrate the platform’s ability to produce vaccines affordably, rapidly and at high yield.
We expect to see future agreements that provide upfronts, milestones and royalties based on a successful candidate in animal health, human health or as a vaccine for SARS-CoV-2. The most recent announcement creates a global web of partners using C1 as a base to develop a multivalent COVID vaccine effective against multiple variants. We expect to see a second half start for the Phase I in-human safety study and, upon success, a rapid move into Phase II and beyond if results continue to be supportive.
The pandemic may catalyze the pathway forward for C1 to be used as an expression system for producing vaccines and other therapeutic proteins. Advancing a C1-expressed protein in human trials would be a tremendous achievement and the effort is now underway with contract research organization CR2O and multiple partners. 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 anticipated burn rates. Now, with a reduction in cash burn, funds from the VLP/BDI sale, reimbursements and upfronts from Sorrento and no additional clinical trial expenses, we see a very long runway of perhaps over 5 years of operating cash available. 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. We include both cost of R&D revenue and R&D in our calculation of R&D.
3. Source: Dyadic March 2021 Corporate Presentation
