Zacks Small Cap Research – DYAI: Capital Raise to Accelerate Near Term Revenue Growth – Technologist

By John Vandermosten, CFA

NASDAQ:DYAI

READ THE FULL DYAI RESEARCH REPORT

2023 Operational & Financial Results

Dyadic International Inc. (NASDAQ:DYAI) provided 2023 operational and financial results in a press release on March 28, 2024, filed its Form 10-K with the SEC and held a conference call with investors. Dyadic announced a slate of new, repeat or expanded arrangements with at least seven counterparties since the company’s previous earnings update in November. These include a top 10 pharmaceutical company, Phibro Animal Health, Cygnus Technologies and an albumin manufacturer. Other news of note includes changes to the board of directors including a new Chairman and the elevation of Joe Hazelton to Chief Operating Officer. Dyadic also added to this a heavy load of attendance at investor, trade and scientific meetings including BIO CEO, Future Food Tech, World Vaccine Congress and JP Morgan Healthcare Conference. Finally, the company executed a $6 million capital raise with convertible notes that will be allocated towards accelerating near term revenue growth and commercialization.

Highlights include:

➢ Sale of Alphazyme interest – January 2023

➢ INZYMES Collaboration – September 2023

➢ bYoRNA Collaboration – September 2023

➢ Inclusion in self-assembling vaccine consortium with Mass General – October 2023

➢ Topline announcement for DYAI-100 Phase I trial – November 2023

➢ Collaboration agreement with leading global biopharmaceutical company – February 2024

➢ Partnership with Cygnus Technologies for C1 HCP ELISA Kit – February 2024

➢ New collaboration with IIBR – February 2024

➢ Strategic partnership with Rabian BV for rabies vaccines – February 2024

➢ $6.0 million in convertible notes issued – March 2024

➢ Nature Publication: C1 produced mAbs in animal models for COVID – March 2024

➢ Phibro Animal Health/ Abic Biological Labs collaboration expansion (poultry) – March 2024

➢ Research collaboration with top ten pharmaceutical company (mAb) – March 2024

Financial results for the quarter ending December 31, 2023, compared to prior year period:

➢ Revenues were $2.9 million, essentially flat with the prior year period. Revenue was generated from 16 collaborations vs. 14. A slight increase in license revenue was offset by a decrease in research and development revenue;

➢ Research and development expenses totaled $5.3 million, down 20%. The decrease was attributable to the reduction in expenses related to the DYAI-100 clinical trial;

➢ General and administrative expenses were $5.8 million, down 9% from $6.4 million. Reduced management incentives, business development and investor relations expenses, insurance expenses and legal expenses were partially offset by other miscellaneous increases;

➢ Interest income increased to $417,000 from $180,000 due to higher yields on securities held;

➢ Other income was $1.0 million compared to $250,000 and reflected the sale of the company’s interest in Alphazyme;

➢ Net loss amounted to ($6.8) million compared to ($9.7) million. On a per share basis, net loss was ($0.24) vs. ($0.34).

As of December 31, 2023, cash, equivalents and short-term securities totaled $7.3 million compared to $12.6 million at the end of 2022. 2023 cash burn was ($6.7) million compared with ($8.1) million in 2022. Financing cash flows were zero. As of year-end 2023, Dyadic held no debt on its balance sheet. However, in March of 2024, the company closed a $6.0 million convertible note issuance with the proceeds available for development of the C1 and Dapibus platforms.

Dyadic has maintained its high intensity pace of working on development projects with others. Several new collaborations and partnerships were signed in 2024 building on last year’s efforts. To support these new arrangements and to advance the efforts with a global albumin manufacturer and distributor, Dyadic was able to secure additional funding that is expected to help deliver Dyadic’s serum albumin products into the market within the next year.

New Collaborations and Partnerships

Rubic and Afreximaxbank

Last November, the company announced an expansion of development efforts with its African licensee, Rubic One Health with funding entity Afreximaxbank. Afreximaxbank has signed an agreement with Rubic that will fund the vaccine manufacturing facility using the C1 platform in South Africa. Production from this facility will supply the entire continent of Africa. The presence of a biologics manufacturing facility will provide a base for production of many therapeutic proteins that can be expressed using Dyadic’s C1 platform.

Global Biopharmaceutical Company

An unidentified global biopharmaceutical company signed a new research and development collaboration agreement with Dyadic, as shared on February 6th. The fully funded agreement includes a commercial option and will support the development and design of four recombinant proteins produced by C1.

Cygnus Technologies

On February 13th, Dyadic announced that it is working with Cygnus Technologies to develop an enzyme-linked immunosorbent assay (ELISA) test to evaluate C1 derived proteins for impurities and to quantify host cell proteins (HCPs). Cygnus, which was acquired by Maravai LifeSciences in 2016, develops a wide variety of assays, kits and other biologics testing products. It has been working with Dyadic to develop an ELISA test which is critical for evaluating monoclonal antibody outputs from C1 to determine if there are any contaminants that may produce an undesired immune response or impact drug stability. While this type of testing is not necessary for vaccines, it is required for other proteins such as monoclonal antibodies before they can be used in humans. Furthermore, biopharmaceutical manufacturers monitor HCPs to demonstrate reproducibility of their purification process, ensure HCP clearance and perform product lot release testing. The antibody deployed in the Cygnus C1 ELISA kit has been evaluated for over 1,000 HCPs that have appeared in C1-produced product, as determined by antibody affinity extraction and mass spectrometry methods. The availability of the test is an important tool for Dyadic collaborators and partners as it makes testing easier, faster and more accurate compared to other methods.

Israel Institute for Biological Research (IIBR)

Dyadic deepens its ties with the Israel Institute for Biological Research (IIBR) targeting bio-threats and emerging disease. During the COVID pandemic, Dyadic worked with the IIBR to develop a vaccine. However, after the Pfizer and Moderna vaccines were shown to be effective, these collaborations were suspended. The parties have picked up the relationship again now to rejuvenate the partnership to utilize Dyadic’s expertise in microbial platforms for flexible scale protein bioproduction and the IIBR’s antibodies and antigens discovery capabilities to develop and manufacture solutions for addressing emerging diseases and potential bio-threats. Through this collaboration, both parties will work to develop effective treatments and vaccines for emerging threats.

Rabian BV

Dyadic’s Dutch subsidiary, Dyadic Nederland BV, has signed a strategic partnership with Rabian BV to develop rabies prophylactics and vaccines using C1. Rabian has received government and agency funding from the EU and related entities to support developing a vaccine for rabies. Rabian will receive €1.7 million to support the project. In return for its expertise and contribution of its protein expression platform, Dyadic will receive and equity stake, fully funded research and development costs, and specified product milestones and royalties upon commercialization. Rabian’s scientists have previously been acquainted with Dyadic through their work together on the ZAPI project and other EU vaccine initiatives.

Top 10 Pharmaceutical Company

In late March, Dyadic announced that it had entered into another collaboration with a top ten pharmaceutical company to develop an infectious disease monoclonal antibody and vaccine antigen.

Biftec Incorporated

Dyadic entered into a co-promotion agreement with Biftec Incorporated which provides animal-free growth medium supplement. The product is intended to reduce the cost of culture media and will employ Dyadic’s platform technology for production.

$6.0 Million Convertible Note Issuance

On March 11th, Dyadic closed a private placement of $6.0 million in convertible notes. The instruments yield 8.0% in cash and have a conversion price of $1.79 per share. This equates to 558.66 shares per $1,000 principal note. The notes are due on March 8th, 2027. Proceeds will support efforts to further develop the C1 and Dapibus protein production platforms across pharmaceutical and non-pharmaceutical applications. Dyadic CEO Mark Emalfarb anticipates that Dyadic will benefit from multiple revenue streams that were enabled by this cash infusion. Management cites the recent catalyst of successful safety from a C1 produced vaccine driving further interest in the platform expanding collaborations and partnerships that will be supported by these funds.

Management and Board Changes

A March 28th press release notified stakeholders that Dyadic’s Chairman of the Board, Michael Tarnok, will be replaced as chairman by board member Patrick Lucy. Mr. Tarnok will continue to sit on the board through the end of his current term which will end in June 2025. Dr. Barry Buckland, who also sits on the board, will retire at the end of his current term this year. In the executive suite, Joseph Hazelton, who had been serving as Chief Business Officer, will now ascend into the role of Chief Operating Officer. He will lead the effort to expand the internal pipeline of high-value biologic products and accelerate the commercialization of assets.

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