DYAI: Two New Deals & A Pharma in the Wings

·9 min read

By John Vandermosten, CFA




Third Quarter 2021 Operational & Financial Results

Dyadic International Inc. (NASDAQ:DYAI) released third quarter 2021 operational and financial results on November 10, 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

➢ Term sheet with Sorrento - August 2021

➢ Appointment of Chief Business Officer - November 2021

➢ Announcement of two new fully funded research collaborations - November 2021

Dyadic generated research and development revenue of $693,000 in the quarter ended September 30, 2021 versus $416,000 in the prior year period. Dyadic incurred operating expenses of ($4.0) million yielding net loss of ($1.7) million, or ($0.06) per share. This compares to prior year third quarter operating expenditures of ($3.0) million and net loss of ($2.5) million or ($0.09) per share.

Financial results for the quarter ended September 30, 2021, versus the same ending September 30, 2020:

➢ Revenues were $693,000, up 66% from $416,000 due to higher revenue and cost of revenue amounts for individual projects, including ZAPI, compared to the same period a year ago;

➢ Research and development expenses 1 were $2.3 million, up 83% from $1.2 million; the increase primarily reflected the Phase 1 clinical trial cost of DYAI-100 in the amount of $1.2 million, offset by a decrease of $292,000 related to internal research projects;

➢ General and administrative expenses were $1.7 million, up 3% from $1.6 million;

➢ Loss from operations was ($3.3) million compared to ($2.6) million. Factoring in other income which includes the gain on the sale of BDI, net loss was ($1.7) million and ($2.5) million, or ($0.06) and ($0.09), respectively on a per share basis.

Cash, equivalents and short term investments totaled $22.7 million. Cash burn year-to-date was ($8.6) million versus ($5.3) million in the prior year period with the increase representing initiation of clinical trial costs related to DYAI-100.

Addition to Executive Leadership Team

Dyadic added Joe Hazelton to the executive leadership team as Chief Business Officer in November. The CBO role will support the global commercialization of the company’s business initiatives in corporate strategy, business development and licensing. Mr. Hazelton offers 20 years of pharmaceutical industry experience in product and business development, licensing, and commercialization. He joins Dyadic from Charleston Laboratories where he served as Chief Operating Officer and Chief Commercial Officer, responsible for the strategic management of Charleston's product and portfolio management, alliance management, regulatory oversight, and global commercialization activities. Mr. Hazelton began his career at Novartis Pharmaceuticals Corporation, where over a 15 year period he ascended to roles of increasing responsibility. While at Novartis, he held leadership positions within the core functions of sales, marketing, market access, pricing, contracting, and strategic alliances for various retail and specialty pharmaceuticals across a broad spectrum of therapeutic areas and several blockbuster products. Mr. Hazelton earned his Bachelor of Arts from the College of the Holy Cross in Worcester, MA.

Collaboration Update

In conjunction with the third quarter financial update, Dyadic announced that it had signed two new fully funded research and development collaborations with academia and industry. New details were also provided for DYAI-100 as the GLP animal toxicology study has demonstrated preliminary safety and has generated SARS-CoV-2 virus specific antibodies in animal models in the various studies being conducted. CMC development for DYAI-100 drug substance is near final stages of purification and drug substance manufacturing.

C1 COVID vaccine collaborations are in full swing, with technology transfer taking place between Dyadic and Rubic Consortium, Syngene International, Medytox and Sorrento Therapeutics. Further advancements with these partners have also taken place such as discussions about other vaccine targets, development of nanoparticle vaccine, and delivery of the Delta strain of the receptor binding domain (RBD). Dyadic and Sorrento continue to negotiate the details of the license agreement.

Other collaborations were mentioned as ongoing including non-specific commentary regarding the animal health and human health work. The ZAPI project has published a peer reviewed article entitled “Development of a Modular Vaccine Platform for Multimeric Antigen Display Using an Orthobunyavirus Virus Model” in the journal Vaccines.

Sorrento Collaboration

In August, Dyadic energized investors with the announcement of a deal with Sorrento Therapeutics (NASDAQ:SRNE) that included upfront cash and a host of other financial benefits. However, the initial terms of the deal became less certain as management updated details regarding the ongoing negotiations, noting that the ultimate terms of the license agreement may be materially different than the ones outlined in the binding term sheet. The parties have not executed the out-license agreement within the 45 day time period first promulgated. In its initially announced form, the arrangement anticipated not only reimbursement for research and development expenses but also $10 million in an up-front payment, milestones and royalty payments. Upon signing a definitive agreement, Sorrento was to 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 was to be denominated in equal parts cash and Sorrento stock followed by 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 as well as royalty payments based on sales were also outlined in the term sheet.

While a final agreement has not yet been completed and may be different from the details outlined above, a technology transfer to Sorrento for DYAI-100 and the C1 platform has been initiated.

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.

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


In early November, Dyadic appointed Joe Hazelton as its Chief Business Officer to support the global commercialization of the company’s business initiatives in corporate strategy, business development and licensing. Management provided an update on the collaboration portfolio with technology transfer for the COVID vaccine completed for four partners. Without disclosing specifics, Dyadic noted progress in its other initiatives in animal health, internal projects and other non-COVID programs. In the financial realm, Dyadic generated research and development revenue of $693,000 and generated a net loss of ($0.06) per share. Cash levels of $22.7 million were augmented by the sale of Dyadic’s equity interest in BDI for $1.6 million.

The recently announced Sorrento deal has yet to crystallize, but may represent a step up from previous arrangements due to the potential for reimbursements, upfronts, milestones and royalties throughout the duration of the agreement. Through this and other 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. During the 3Q conference call, management hinted at the possibility of an additional human pharmaceutical collaboration to be signed prior to year-end. The potential exists to create 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 near term 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.

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.

2. Dyadic Announces Technology Transfer and Licensing Agreement With South Africa’s Rubic Consortium Aiming to Develop and Commercialize Vaccines for Distribution Throughout the African Continent (irdirect.net)