Dyadic International, Inc. (DYAI) Earnings Call Transcript & Summary

Good day, and welcome to the Dyadic International 2020 Annual Meeting of Stockholders. I would now like to turn the conference over to Michael Tarnok. Please go ahead.

Good morning. I'm Michael Tarnok, Chairman of the Board of Directors of Dyadic International, Inc. and Chairman of today's meeting. On behalf of the company, I want to welcome you to our 2020 Annual Meeting of Shareholders. And due to the ongoing pandemic, we're holding this meeting virtually in order to provide for the safety of the attendees and to comply with evolving government regulations regarding assembling. I now formally call the meeting to order. We will start with Ms. Ping Rawson, our Chief Financial Officer and Corporate Secretary, providing the safe harbor disclosure regarding potential forward-looking statements.

Thank you, Michael. Good morning, everyone. I would like to inform you that certain commentary made in this virtual shareholder meeting may be considered forward-looking statements, which involves 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. Dyadic expressly disclaims any intent or obligation to update any forward-looking statements, except as required by law. For more information about factors that may cause actual results to be materially different from forward-looking statements, please refer to the press release we issued today as well as risks described in our annual report on Form 10-K for the year ended December 31, 2019, and our quarterly report on Form 10-Q for the quarter ended March 31, 2020, particularly in the section titled Risk Factors. This information can be found in our other filings with the SEC when available. With that, I'd like to turn the call back to Mike.

Thank you, Ping. I'll now begin by introducing the Directors of the company in attendance today Dr. Arindam Bose; Dr. Barry Buckland; Seth Herbst, M.D.; Jack Kaye; and Mark Emalfarb who is also the Chief Executive Officer. I would also like to once again introduce Ping Rawson, the company's Chief Financial Officer and Corporate Secretary, as she will also be acting as the inspector of elections. Also attending today are Christine McAlarney and [ Jessica Ginoder ], representing Mayer Hoffman McCann P.C., our independent auditors, for the year ended December 31, 2019; and Kimberly Petillo-Decossard, representing Cahill Gordon & Reindel LLP, our outside Counsel. Our order of business this morning will be to address the proposals to be considered, collect any remaining votes and then receive a report from the inspector of elections about the results. Immediately following the formal portion of the meeting, our CEO, Mr. Mark Emalfarb, will make a short presentation, highlighting various things that we are working on. The slides from Mark's presentation will be broadcast live and then we will answer the questions you may have about the company and in accordance with the posted rules of conduct. [Operator Instructions] This brings us to the first item on the agenda, which is the determination of a quorum. The company bylaws and Delaware law require that the presence in person or by proxy of the majority of the shares of common stock outstanding on the record date, May 4, 2020, constitutes a quorum. Ping, do we have a quorum?

Yes, we do. A majority of the shares of common stock outstanding as of the record day, May 4, 2020, are presented at the meeting today.

Thank you, Ping. There are 3 proposals to be voted on by the shareholders. The first proposal is the election of Dr. Arindam Bose and Seth Herbst, M.D. as Directors to hold office until the annual meeting in 2023 and until their successors have been elected and qualified. The second proposal is to ratify the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the year ended December 31, 2020. The third proposal is to approve, on an advisory basis, the compensation of the company's named executive officers as disclosed in the proxy. Now if there is any shareholder of record as of May 4, 2020 who has not voted by proxy and now wants to vote in person, or has previously voted by proxy but now wants to change their vote. If you've already sent your proxy card and do not want to change your vote, you do not need to do anything now. I'll wait a few moments to give anyone a chance to vote or to change their vote. [Voting]

Okay. I now declare that the polls are closed. I'll now ask the inspector of elections to provide a preliminary report on the votes.

Mr. Chairman, both of the nominees for Director have been approved. The ratification of the appointment of Mayer Hoffman McCann P.C. as the company's independent registered public accounting firm for the year ending December 31, 2020, has been approved. The advisory vote of the company's named executive officers has been approved.

Thank you, Ping. That completes our formal business for today. I declare the meeting closed. Thank you very much for your ongoing support and your time and effort to attend this meeting. I'll now turn it over to Mark Emalfarb for a short presentation on company activities, which will be followed by an open Q&A. [Operator Instructions] I will read the questions and direct the questions to management or board members, whoever may be most appropriate to answer your questions. Mark?

Great. Thank you very much, Mike. Welcome, everybody, for joining us on our 2019 (sic) [ 2020 ] annual meeting. We appreciate your confidence and support over all the years. And I'd like to thank each and every one of you for your support, and we look forward to having a very, very excellent remaining 2020 and beyond. And I'm going to get into that now. Hopefully, you can see the slides that we prepared for this meeting. The first one shows you the main team here, the C1 technology platform. And again, I want to stress, this is a platform technology that's robust, versatile. It's advancing scientifically, rapidly to allow us to reach into more broader opportunities in both animal and human health to make health care accessible and affordable to patients and animals globally. Safe harbor statement as it shows here that certain statements contained in this presentation are forward-looking statements. On Slide #3, 2019 accomplishments. As you know, we added 6 new proof-of-concept collaborators in 2019, collaborations with leading human and animal health providers. We centered and concentrated on various classes of proteins including monoclonal antibodies, mAbs, vaccines, antigens and a variety of other protein molecules. We expanded an existing animal health collaboration to express 1 additional protein for one of the top 4 animal health companies we're working with in 2019. We added a new collaboration with the Serum Institute of India, world's largest vaccine manufacturer by volume, who supply vaccines to 140-plus countries. Collaboration with Serum is to express and manufacture, using C1, up to 12 antibodies and vaccines. Research funding, milestone payments and royalties upon commercialization for 15 years, if and when any of those products advance into the clinic and become commercialized. We have increased the robust yield and purity data for C1 protein expression. The results we're achieving in certain of our projects are overwhelming and astonishing in some ways. Fermentation results of the ZAPI antigen against the Schmallenberg virus, the SBV. If you recall, the target was 100 milligrams, we hit over 1,700 or 17x initially targeted expression level, and over 300x the next closest expression level platform, which happened to be baculovirus. We reached G0 glycosylation levels of up to 95%, exceeding our initial objectives of 90%. We achieved Man3 glycan structures of over 99% in 2019. Two new sub-licensing agreements with Luina Bio, Novavax using C1 to develop biologic vaccines, drugs for companion animals; Alphazyme, producing enzymes for custom DNA, RNA molecules, genomic medicines and genetic testing. Two new nonexclusive research licensing agreements, one with the University of Iowa, and an affiliate of a top-25 pharma company. We up-listed at the NASDAQ exchange and added to the Russell Microcap Index in 2019. Accomplishments on the next slide, in 2020. COVID-19 initiatives. We were selected recently by the Frederick National Laboratory to engineer C1 cell lines to produce a number of COVID-19 vaccine candidates. We expanded our research collaboration with the Israel Institute for Biological Research, IIBR, to explore the potential of C1 to express gene sequences and targets developed by IIBR, both for vaccine candidates and potentially monoclonal antibodies for COVID-19 outbreak. Ufovax, a Scripps spin-out. We're working with Ufovax to produce HIV vaccine candidates and COVID-19 candidates for vaccines. CR2O, Erasmus, Utrecht, TiHo Hannover. This is a group of scientists, 3 of the top-20 coronavirus experts in the world, according to certain publications, are involved in this project with us. And these are moving forward as well into animal studies over the next 4 to 5 weeks. The Israelis, by the way, are also moving into July into animal studies very, very quickly, potentially even starting this week. Fully-funded research collaboration with a top animal health company. Feasibility study for 2 proteins using the C1 platform. We're now working with 3 of the top-4 animal health companies. University of Oslo, feasibility study. If you remember, we had some great data in the past showing that C1 can produce hemagglutinin for the seasonal flu. And so we're now evaluating C1's potential, yet again, to express influenza virus antigen proteins with a renowned world expertise university, dealing with seasonal and other flus. We entered into a nonexclusive research license with the WuXi Biologics. WuXi is a leading contract development manufacturing organization, CDMO, one of the top 10 in the world, evaluating C1 in a CGMP facility and performing experiments to C1 cell lines, where WuXi is going to be trained by us how to clone, express and grow a variety of different proteins using C1, funding supported by WuXi. Scientific achievements. Continued progress in glycoengineering C1 cells to impart human-like glycan structures. We've made elimination of protease activities, making the C1 cell line more efficient, more stable, leaving even higher expression levels and lower cost and excellent progress on those cellulase background proteins. We've reduced the protease background approximately 50-fold since the beginning of knocking out protease genes in C1. And then again, recently, as announced today, we were added to the Russell 2000 Index and the Russell 3000 Index. Let me go over some of the developing new commercialization opportunities for COVID-19. We got involved in COVID-19 because we can make a difference. C1 has the potential to mass produce antigens at much higher level, as was demonstrated in the SBV project with ZAPI, where we produced 300x more of that SBV antigen than they can do with baculovirus. And I think that's very important for everybody to recognize the robust platform to produce large quantities of affordable recombinant vaccines and drugs for pandemics, not only for the pandemic today, but to be better prepared by getting C1 adopted and used to these clinical trials that we potentially have opportunities if these animal studies go well with the Israel Institute for Biological Research with the CR2O, Utrecht, TiHo Hannover group, which is the selective ZAPI scientist that we spoke about, potentially with the Frederick National Laboratory, which is the vaccine research center in the NIH and NIAID, that could be well advanced into human trials if their animal studies go well and they continue to move that forward. We have many additional opportunities and discussions. In addition to Ufovax and Scripps, the spin-out company that has another unique novel vaccine candidate that we're expressing or attempting to express in C1. So we were selected by the Frederick National Laboratory to engineer its patented and proprietary C1 cell lines, our own cell lines, to try to make COVID-19 vaccines which can be utilized by them at the vaccine research center which is part of the National Institute of Allergy and Infectious Diseases, NIAID, at the National Institute of Health. If any of these programs move into clinical trials, human trials, Phase I, let alone Phase II, let alone Phase III and get commercialized, if we just get into Phase I and demonstrate the safety of this program, any of these programs or one or more of these programs, it will speed the adoption and the use of C1 more broadly, more quickly, more widely globally, not just for COVID-19 potential vaccines and antibodies, but for traditional prescription drugs. Yes, it could be a major milestone as to getting a Phase I study done, improving the safety as long as the efficacy of these vaccines demonstrate the power and the potential, let alone to commercialize any of these, if not several of them. So that's where we are as a company. In terms of COVID-19, we have a lot of things going on. I don't want people to think about Dyadic as a one-horse pony; it's a many horses in the race. It's not just about COVID-19. That's just helping us speed the adoption and use potentially by getting into the clinic human trials, having the potential to have an enormous benefit of helping the world with not only this pandemic, but future pandemics. If you saw on our website, we posted recently a few weeks back, not only were we successful in producing the SBV antigen at 300-fold higher levels than the baculovirus, which was the second best cell line in the ZAPI program, but we also showed in the Rift Valley fever virus, in the RFV antigen, that we were able to produce approximately 1 gram per liter, which is very, very high for an antigen. And in baculovirus, they weren't able to produce it at all. So that product wouldn't have gone forward or couldn't go forward. So for antigens from recombinant proteins produced in our 14x strain, we're really, really showing and demonstrating extremely high productivity versus other cell lines for these types of antigens, whether those be in yeast or baculovirus or CHO cells or E. Coli, we think we have one of, if not the most productive cell lines for these types of antigens. And I think that puts us in a great position for both animal health and human health to really make a difference to globally save lives, reduce pain and suffering for both animals and humans. So with that, I would take questions from the audience.

Our first item is a comment and question from [ Brian Murray ]. Your team is doing great. Thanks for your long hours and dedication. The article titled Dyadic: A company shrouded in mystery, sums up my question: What determines when you can disclose and PR information and do you see Dyadic being able to be more transparent in the future? Mr. Murray, thank you for your comments, for your question. I'll pass this to Mark.

Thanks, Brian. I think we're as transparent as our partners allow us to be. As you know, if we're dealing with 3 of the top 4 animal health companies, they won't let us use their names specifically, but we've been transparent, it's the top-4 animal health companies are Zoetis, Elanco, Boehringer Ingelheim and Merck. And so does it really matter which of the 3 out of the 4 that we're working with? I really don't think so. It would be nice to be able to use their name. But at some point, when these -- I would say the collaborations get more mature as the science comes in and they want to expand and potentially take a license, then you'll find out which of those 3 we're working with on those projects and the future ones as they come up. So if our partners allow us, like Sanofi, which was large enough with 7 proteins that have met a threshold that we had to announce the name, and we had to explain that to them, and they agreed to do that. The same thing with the Serum Institute, where we -- it was large enough of a material program that we had to announce that according to the SEC rules and the NASDAQ rules, and they allowed us to do that. The Frederick National laboratory was significant enough as well, not so much in a dollar standpoint, but in the opportunity of being able to work with the Frederick National Laboratory, potentially not just with COVID, but for future pandemics, epidemics, other things that they're working on to prepare the world and make it a more safe place and to be better prepared for the future. So we try to do what we can, but we don't turn down agreements with customers just in order to be able to use them as a PR event. In the end, we're running a business, and that's what we're focused on, and business is first as well as science, and we'll announce things if and when we can. So we try to be as transparent as possible. So hopefully, that answers your question.

Thank you, Mark. There are no active questions. So once again, with our thanks for your support and effort to attend, I'll bring the meeting to close.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.