Dyadic International Inc Q4 FY2020 Earnings Call

Good evening. Thank you for holding. Welcome to Dyadic International's Fourth Quarter and Full Year 2020 Financial Results Conference Call. Currently, all participants are in a listen-only mode. Following management's prepared remarks, there will be a brief question-and-answer session. As a reminder, this conference is being recorded today, March 30, 2021. I'd now like to turn the call over to Ms. Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Thank you, Joe. Good evening, everyone, and welcome to Dyadic International's fourth quarter and full year 2020 financial results conference call. Earlier today, Dyadic issued a press release, announcing financial results for the full year ended December 31, 2020 and the recent company highlights. You may access our press release and Form 10-K under the Investors section of the company's website at Dyadic.com. On today's call, our President and CEO, Mark Emalfarb, will review our business and corporate accomplishments for the full year 2020, including a brief summary of our research and business development efforts. I will follow with a review of our financial results in more detail. We will then hold a brief Q&A session. Our senior management team, Matthew Jones and Ronen Tchelet will join Mark and me for the Q&A session. At this time, I'd like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve 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 duty to provide an update to these forward-looking statements, whether as a result of new information, future events or otherwise. Participants are directed to the Risk Factors set forth in Dyadic's reports filed with the SEC. It is now my pleasure to pass the call to our CEO, Mark Emalfarb. Mark?

Thank you, Ping. And welcome, everybody. We are very pleased with the substantial progress made thus far in 2021 and in 2020. 2020 was a year of considerable disruption, suffering and death worldwide as the coronavirus rapidly spread across the globe and the COVID-19 pandemic has and continues to wreak havoc on humankind. Our hearts go out to those who have continued to suffer from this horrible disease. We have been working tirelessly to identify ways in which to apply our C1 technology to help speed the development, increase availability and lower the cost of COVID-19 vaccines and treatments to make them affordable and available to everyone on the planet. We and our collaborators work to introduce the C1 technology to the world to enable as many COVID-19 programs as possible. And we are continuing to do so as COVID-19 variants continue to emerge. Due to our success in several animal studies, where we rapidly engineered C1 cells, we have achieved high levels of antigen productivity and have shown to be safe, effective, and protective. Our C1 technology has therefore gained the attention of a growing number of infectious disease and other scientists in industry and government. This momentum has begun to accelerate after our announcement that a proprietary COVID-19 vaccine candidate, DYAI-100, is advancing into a first-in-human Phase 1 clinical trial, which is expected to begin in the second half of 2021. As SARS-CoV-2 continues to mutate into different variants, we have already begun the engineering of novel C1 cell lines to enable the development of next-generation multivalent COVID-19 vaccine candidates. The purpose of DYAI-100 Phase 1 clinical trial, among others, is to validate that the C1 produced proteins are safe in humans, which we expect will accelerate the C1 technology platform's adoption and commercialization of our prominent protein vaccines and drugs for human use. There are articles almost every day, highlighting that the SARS-CoV-2 mutations like the UK, South African, Brazilian, and now New York, Californian and other emerging COVID-19 variants in Japan, India and elsewhere are here to stay, and new COVID-19 variants are expected to appear yearly, which like the seasonal flu may require annual or even semi-annual booster shots. Just today, CNBC reported that COVID-19 variants could render current COVID-19 vaccines ineffective in a year, epidemiologists warn. In addition to validating that C1 produced proteins are safe in humans, Dyadic's COVID-19 DYAI-100 vaccine candidate clinical trial will help to serve as a proof-of-concept for the development of potential next-generation multivalent COVID-19 variant vaccine candidates, including the B117 UK variant and others. Because of C1's ability to rapidly develop COVID-19 variant vaccine candidates, coupled with its relative advantages of greater productivity and lower costs, the world is waking up to the fact that these variants are here and they are going to keep coming. More companies are recognizing we exist and are expressing interest in potentially using C1 to help solve their manufacturing productivity, speed, and cost concerns. All of these attributes give C1 a tremendous advantage over other vaccine and drug manufacturing platforms. Beyond our COVID-19 initiatives in 2020, we commenced 11 new projects and extended to others, including 5 new funded collaborations with top pharmaceutical companies to produce therapeutics of commercial interest for human health applications. Since the start of this year, we have entered into 2 new and 3 extended programs and are in discussions with others across all sectors of our business, including animal health, non-COVID-19 human health, growth factors, and other potential new biologic product markets where our C1 technology may have the potential to overcome gene expression challenges, improve performance, as well as increase yield and lower cost. In animal health, we continue to build a strong foothold in the animal health market. As we previously announced, we have entered into fully funded agreements with all 4 leading animal health companies, as well as a 5th global animal health company to evaluate C1 for the expression and production of vaccines and therapeutic proteins for animal diseases. We expect candidates expressed using C1 will enter their animal trials this year. We are particularly proud of the progress made in our longstanding successful partnership with the European Zoonoses Anticipation and Preparedness Initiative, ZAPI. ZAPI is a 5-year €20 million initiative that has brought together experts in human and animal health to create new platforms and technologies that will facilitate a fast, coordinated and practical response to new infectious diseases as soon as they emerge. ZAPI selected our C1 technology platform to produce antigens more efficiently that are safe, effective, and protective for both the Schmallenberg and Rift Valley Fever viruses. Notably, the C1 gene expression platform demonstrated greater productivity and stability than the baculovirus insect cells for both the SBV and RVFV antigens, enabling the ZAPI project to meet its objectives of producing enough low-cost doses with reduced fermentation volume capacity. Additionally, the C1 produced antigen demonstrated full protection for cattle, sheep, and mice from the SBV virus. We are very pleased with the growing volume of scientific data and the results we achieved in our own internal and externally funded programs last year and in the first quarter of 2021. Based on a growing amount of productivity, safety, and efficacy data generated, as well as our internal and third-party R&D activities, we are being approached by many companies related to the growing number and type of infectious disease opportunities, both COVID-19 and others. In the non-COVID human health sector, we're constantly looking for ways to improve our shots on goal for building shareholder value. Beyond our COVID-19 collaborations, an increasing number of global pharmaceutical and biotech companies are selecting our C1 technology for diverse applications in human health. Last month, we established a fully funded collaboration with TurtleTree scientific to develop several recombinant protein cofactors, which play a critical role in tissue development and healing, including regenerative therapies. Manufacturing human growth factors at large scale and affordable costs has been a major industry challenge. We're excited about the potential of our C1 technology to overcome this hurdle in a significant new commercial opportunity. We've also expanded our presence in Europe, Asia, and India. In addition to our partnership with Medytox in South Korea, we've established a fully funded collaboration with Jiangsu Hengrui Medicine Company Limited, the largest pharmaceutical company in China by market capitalization for the development of selected Hengrui biologic drugs, as well as a non-exclusive research collaboration with WuXi Biologics, a leading contract development manufacturing organization headquartered in China. From a strategic point of view, we believe these global co-development partnerships have been cornerstones of the company's success to date. The goal is to access commercial opportunities in large and growing human and animal health markets. Importantly, these partnerships also enable us to continually improve and accelerate the development of our C1 platform technology. Now that our non-compete with DuPont has expired, we also remain open to exploring new potential commercial opportunities in the industrial biotech markets. In regard to some of our scientific achievements for internal development, the company continues to make progress in terms of the stability and productivity of the C1 technology, including through glycoengineering, C1 cells to impart human-like glycan structures and reducing the extracellular protease background by 50-fold. Strides in glycoengineering and non-glycoengineering cell lines should broaden the potential applications of the C1 expression platform, producing, developing, and manufacturing vaccines, monoclonal antibodies, and a variety of other therapeutic proteins. In closing, 2020 was marked by many new partnerships and significant progress towards clinical development. We look forward to building on the momentum achieved in 2020 as we work towards advancing our COVID-19 vaccine candidate, DYAI-100 into a Phase 1 clinical trial later this year. We expect our extensive number of collaborations will continue to generate robust scientific data that highlight the broad potential impact of our C1 platform and diverse animal and human health applications. And as always, we will continue to work tirelessly to advance our C1 platform while evaluating other opportunities that maximize its value to meet the global need for rapid, safe and scalable therapeutics. As recently announced, Patrick Lucy has joined our Board of Directors. I've known Patrick for over two decades. His extensive experience in the development, adoption, and commercialization of cell lines in the biopharmaceutical industry will be extremely helpful in guiding our strategic scientific and commercialization efforts. We're very excited to have Patrick join Dyadic's Board of Directors. Lastly, I want to give special thanks to our employees and partners for their commitment and dedication during these challenging times. I also like to thank our shareholders and our board members for their continued confidence and support as we work towards bringing more affordable healthcare solutions to a global population. With that, I'll turn the call over to Ping for a financial update.

Ladies and gentlemen, we're experiencing some technical issues with Ms. Rawson. We will continue shortly.

Mark, as long as the issue persists, can you?

Yeah, I can read it, in the case she is turning it on. In addition to financial results, we will discuss, now you can find additional information on our Form 10-K, which we filed earlier today. Our cash and cash equivalents are approximately $20.6 million for the year ended December 31, 2020 compared to $4.8 million at December 31, 2019. The carrying value of investment-grade securities, including accrued interest at December 31, 2020, was approximately $8.6 million compared to $31.2 million at December 31, 2019. Our cash burn for the year ended December 31, 2020 was approximately $6.6 million in line with previous quarters and our expectations. Our research and development revenue for the year ended December 31, 2020 was approximately $1,602,000 compared to $1,681,000 for the year ended December 31, 2019. We reported a slight decrease in cost of research and development revenue for the year ending December 31, 2020, to approximately $1,425,000 compared to $1,460,000 for the year ending December 31, 2019.

Thank you, Mark. This is Ping. I'm back. Sorry about that. The slight decreases in revenue and cost of research and development revenue for the year ended December 31, 2020 reflected a growing number of research collaborations to 14 compared to 10 collaborations for the year ended December 31, 2019. However, with smaller dollar amounts for each project. Importantly, our fully funded research collaborations continue to provide an additional source of income and particularly offset our ongoing R&D expenses. This has allowed us to mitigate our cash burn to extend and maintain a comfortable position to fund our ongoing business activities. R&D expenses for the year ended December 31, 2020, increased to approximately $3,868,000 compared to $3,088,000 for the year ended December 31, 2019. The increase primarily reflected additional costs of COVID-related projects and other internal research projects. There were no risks in R&D expenses related parties for the year ended December 31, 2020, compared to approximately $869,000 for the year ended December 31, 2019. The decrease was due to the completion of research service agreements with BDI in June 2019. G&A expenses for the year ended December 31, 2020, increased by 10.2% to approximately $6,085,000 compared to $5,520,000 for the year ended December 31, 2019. The increase principally reflected increases in non-cash share-based compensation expenses of $397,000; insurance premiums and other outside services of $216,000; legal and SEC registration expenses of $193,000; business development and investor relations costs of $191,000, offset by reductions in executive compensation costs and accrued incentives of $216,000; trade show and travel expenses of $143,000 and other decreases of $73,000. Interest income for the year ended December 31, 2020, was approximately $447,000 compared to $985,000 for the year ended December 31, 2019. The decrease was primarily due to a decrease in interest rates and yield on the company's investment-grade securities, which are classified as held-to-maturity. For the year ended December 31, 2020, the company also reported an unrealized gain related to its investments in Alphazyme, resulting from the third-party capital contribution. As of December 31, 2020, the fair value of the company's investments in Alphazyme was approximately $285,000. The net loss for the year ended December 31, 2020, was approximately $9.3 million or $0.34 per share, compared to a net loss of $8.3 million or $0.31 per share for the year ended December 31, 2019. Looking forward, we expect our total cash burn for 2021 will be in the range of $10 million to $12 million. Taking into consideration our Phase 1 clinical trials and other ongoing internal research projects, we believe we have sufficient funds to provide the working capital needed for our research and operations for the next couple of years. With that, I will now ask the operator to begin our Q&A session. Dr. Ronen Tchelet and Matthew Jones will be joining Mark and me to answer your questions. Each caller will be allowed one question and one follow-up question to provide all callers an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. Joe?

Thank you. We will now begin the question-and-answer session. Our first question is from Jason Kolbert from Dawson James. Please go ahead.

Hey, Mark. Hey, Ping. Thank you very much for the update. I want to go after a couple of things. Mark, you talked a little bit about the COVID variants. Have you seen reason to believe that any of the vaccines are showing resistance to the variants? My understanding is that they're all targeting the spike protein. While I don't want to use the word that it's a conserved region, so far, to the best of my knowledge, we have not seen mutations that are favorable in terms of resistance to the vaccines. Maybe that's inevitable. But I'm asking you and your team scientifically, do you think that could happen, whether that is likely to happen?

Well, I think that scientists globally, and I think there was a survey today that feels that the mutations of the coronavirus could render their current vaccines ineffective within a year. What ineffective means to these experts in 28 countries? I'm not sure. But our scientists and the ZAPI group scientists we've talked to at Oxford, UCL, and others believe that it's imminent that we're going to need to have variant vaccines to give full protection, especially in some of these countries that aren't getting fully vaccinated for years.

Okay, so what you're saying is that the spike protein is not a concern for that region, and therefore, like a chain of marbles that can rearrange itself. And since all of the vaccines that I'm aware of are targeting that spike protein, that it's inevitable that we will see some escape variants.

Well, you're seeing escape variants now in South Africa, Brazil, Japan, India, and New York.

No, to the best of my knowledge, we have not seen escape variants in Japan, South Africa, or Brazil. I've been really up to date on that. So there have been variants and they have changed the profile, but nothing in terms of the ability to render, say, the mRNA vaccines or the J&J vaccine not effective because the region they're targeting in the spike protein so far has not changed to render the vaccine. And that's why it becomes a very important question.

Well, I think if you look at the J&J vaccine, the Novavax vaccines, and some of these other vaccines, they are certainly less effective on the South African variant. I'll let Ronen answer the question, because he's more technically astute. So, Ronen, are you there?

Yes. Yeah, I think that it was very nicely shown that those variants also have a very important mutation on the receptor-binding motifs. And all of those changes showed higher affinity binding to the H2 receptor. And obviously, I think that shows that there is some benefit by having a different type of antigen. So I think in general, the current vaccination does work on the variants. But actually, it will take time to understand to which level they can really protect the population. And I think the fact that there are still so many infected people around the globe and there are many more variants that appear by all kinds of mutations shows that the ability to be able to quickly respond to any kind of new variant is a very important tool, which is what we are aiming to.

Right. Good, good. No argument from me about that. And what I'd like to do is if we extend the question a little bit further. I know you're working in Israel, Mark, I know you're working with ZAPI. Congratulations on the deal you announced in Korea. Among those deals or others that we're not aware of, are those partners working on different regions so that they could potentially come up with a different vaccine that incorporates the C1 platform, so that you potentially are in a position to offer a new COVID vaccine that would not be one that would be resistant to, say, some of the mRNA vaccines that we're seeing today?

Yeah, the answer is yes. And that's one of the significant advantages of a recombinant protein production system is that we can produce individual vaccines to different variants, whether they be Brazil, South African, UK, etc. Furthermore, we could blend those to specific ratios to allow the vaccine to cover more broad protection and whether that's the full spike or the RBD vaccine or a combination thereof. We also could provide those active ingredients to other people to mix and blend in with their vaccines.

Right, so what I'm getting at, Mark, here is how excited are you with the current partners that you have that you guys will potentially have a novel - that Dyadic could be part of a novel vaccine that could emerge? And what's the timing look like, given the fact that you're starting to go into Phase 1 with this first-generation vaccine? Is it a year? Is it 2 years? How do we get a handle on kind of the timing and catalysts around like COVID-related program?

Well, keep in mind, the first DYAI-100 we're going into human beings, first and foremost to prove safety and initial efficacy, not just for a COVID vaccine, but to demonstrate that proteins, therapeutic proteins and other vaccines for human disease can be produced safely in C1. So that's the primary goal and was always the goal at the beginning. But in addition to that, to your point, we've already started to engineer the UK variant, the South African variant, the South American or Brazilian variant to have these mixtures of vaccines to actually come up with a unique and novel better protecting vaccine. How fast it happens is after we prove safety and preliminary efficacy of the DYAI-100 or before that, and discussions we're having with pharma and biotech companies will they join in and speed that development. And that's what we're hoping will happen either before or after we announce the results, which we believe will be safe and show preliminary efficacy. And I think people are realizing...

Two more quick questions. One is - I want to keep it short, because I know you have other people online.

Sure.

The vaccine economics traditionally haven't been great. And when I look at Dyadic, I'm trying to understand what your vaccine economics are because you're not necessarily the originator, right? You're more of the manufacturing partner. Should I be looking at that, that way or should I be looking at it a little bit differently?

In this particular case, we are the originator. We have the gene sequence, the cell line is ours, and we're moving it into Phase 1 human trials. So it's an owned vaccine from Dyadic, not just as a cell-line provider. All the variants being loaded into C1 for the next multi-broad variants or the multivalent, tetravalent, trivalent vaccines, those are ours. Now, those can be licensed out to other people. But in addition to our own vaccine, we have other people bringing us gene sequences, in addition to this with the second-generation vaccine, which are theirs, which we're helping to enable, and then obviously, sharing the rewards of that. And then in the case of Medytox, we're partners in that deal where we shared greatly in the economics. On the commercialization...

I understand. So two last questions, first of all, in terms of the financial burn guidance, thank you, Ping, your guidance was exactly there. It's been - the expense control, it's been great at the company. And your guidance is right in the middle of my number. So that's exactly right. Thank you. But where I get a little bit confused, Mark, when you and I sat down 2 years ago, we started thinking about all of the different areas where we could see business, we talked about bio-generics, traditional pharma products, and of course, now vaccines. We have said that you could see business development deals and partnerships emerge over the next couple of years from any of those sectors. Today, we're very focused on COVID. But should we still be modeling in deals and partnerships in those other areas?

Absolutely. As we mentioned, we signed deals with 5 people in pharma last year on collaboration, some of the new deals. As we mentioned in some of the recent conference presentations, we have a pharma, big pharma company that funded research last year that's funding additional research moving towards oncology and rheumatoid arthritis with 2 other protein drug candidates. It could go to regulatory; that could turn into a license agreement. We're in discussions with a lot of different animal and human health companies, in addition to the ones that are already engaged in research and development. I think this year you're going to see an accelerated pace. We have 13 or 11 new deals and 2 or 3 extensions last year. We're already at the pace of 5 now, and it's accelerating right now. And it's mostly non-COVID.

Okay, Mark, thank you very much. Really, thanks for letting me take up some time with all the questions. Appreciate it.

Oh, thank you for your help.

Thank you, Jason.

Thank you. Our next question is from John Vandermosten from Zacks Investment Research. Please proceed.

Hey. Good evening. I wanted to ask about the IND and interaction with the FDA, that you're anticipating over the next few months. What do you anticipate some milestones to be in that area, preparing the IND and then ensuring that it gets cleared within the normal timeframe?

Yeah, Ronen, you want to pick that up?

Yeah. So, currently, we are going for the toxicology study that will start soon. And then, I think, once we get the green light, the next step will be to go for the Phase 1 clinical study. We are aiming to start it in August. After that, we should have all the paperwork to submit in order to be able to go for the next clinical studies. Did that answer your questions?

Okay, thank you. And then, looking down the road a bit, how far can Dyadic go with DYAI-100 before you need a partner?

Well, it's not a question of how far we can go; it's how far we want to go. We will look for a partner as soon as we show safety and efficacy or preliminary efficacy. But we're also in discussions and talking about partners right now. The main interest is, again I'm going to repeat, to DYAI-100 is to prove safety in human beings, not just for this COVID opportunity, but for virtually hundreds, if not thousands of potential products in the future for human drugs and vaccines. That's the main purpose. The secondary purpose, in addition to that, is to work on the variants, which we've already started to engineer. We believe that we can make variants in larger amounts in a shorter amount of time, at less cost to help the world out of this horrific situation it's sitting in. We believe that recombinant protein-based technologies and our recombinant-based cell line are far more productive than any other cell line that's out there today. As you know, in the ZAPI program, we've shown a 300-fold improvement in productivity versus insect cells or baculovirus. We've now demonstrated in cattle, sheep, and mice, safety, efficacy and protection. If we achieve the goals and objectives of this clinical trial, not only are we going to demonstrate safety in human beings, it can be leveraged and accelerate the commercialization efforts for human pharmaceuticals. Potentially, we could be the one company that can make the quantities at a cost under flexible commercial scales for tri-valent or tetra-valent COVID-19 vaccines on an annual basis. If that's the case, I believe we're in great shape to pick-up partners to pick this up and run with it, and to finance it all the way.

Yeah, I just want to add a little bit on Mark's comment. From a financial perspective, we are constantly evaluating our collaborators and partners to either co-develop or have non-diluted funding in the case of Medytox. This is a co-developed scenario where Medytox is going to put their own resources and funding into the part of the work that they are doing, much the same as our partnership strategies. We are very careful about our cash and also how we use the money to most economically and make more sense for the shareholders to advance our science while at the same time making it more efficient from a financial perspective. Sorry about dropping off the call earlier; this is just a typical pandemic situation working from home. I tried to un-mute it but hit the wrong button. Sorry for the inconvenience.

Yeah. So John, I think it's important. If you remember, Dr. Yang from Medytox, as you pointed out, they started working with us in July of 2020. And that was after they basically evaluated CHO cells and insect cells. They saw the remarkable versatility and hyper-productivity of C1 with their own hands. We want to transfer them the technology and they've grown it up, and reproduced the productivity in their own tanks. The fungi-derived C1 expression system, in his mind, is the most realistic technology to develop and manufacture multi-valent, or tri-valent, or tetra-valent vaccines for these COVID-19 variants. If people are struggling today to produce one protein, how are they going to do 3 or 4 in an economically viable manner at affordable cost and the volume that the world needs? We believe that this puts us in an even better position this year than we were last year because of the variants and the need. If you realize seasonal flu vaccines are comprised of 4 different proteins. We will need potentially, tetra-valent or quadrivalent vaccines on potentially an annual basis. If that's the case, I believe we can make more for less at flexible commercial scales. With the technology, we've been tech transferred and grown in single-use or stainless-steel standard microbial fermenters that are basically available on every continent and multiple countries. I think we're in a great position to help the world and help our shareholders create significant value. Together, we can help eradicate this horrific disease.

Great. Thanks for taking the questions, guys.

Thank you. Our next question is from Skip Gozzo from Cluny Road Rental. Please proceed.

Hey, Mark, how you doing?

Good, Skip. How about you?

Good. Mark, I want to kind of piggyback off of what Dawson James was talking about, what's the fellow's name there?

Jason Kolbert.

Yeah, Jason. You mentioned to him that this vaccine we're working on, the COVID vaccine, that we have to get through preliminary to make sure that we're safe. You're already going to animal trials. You have every reason to think that it should be safe when it goes into human trials based on the past experience of what you've done. Now, this has been a long road. You sold out the industrial site in June of 2016. Here we are almost 5 years later, and we still don't have any income, right? We haven't - we've been advancing the technology for the last 5 years when you got that $75 million. And we're at the point right now. I'm going to try to dummy down. So that you don't have to be a scientist to understand these phone calls, I've been an investor in this company for a long time. So let's just say we're baking bread, and the bread that we want to make is, whatever, there's only a few ingredients, 3, 4, 5 ingredients, water, sugar, the dough, etc., but not a lot of ingredients. I'm assuming these COVID vaccines that are out right now have a lot of different ingredients in it. Is that right or not right?

Well, they have a number of different components that make up the vaccine candidate that ultimately became the product. DYAI-100 is on the same parallel path comprised of different components that make up the actual vaccine in addition to the protein that we produced from C1.

Okay. Is it the same amount of components or is it much less because of the C1 technology is my question?

Yeah, well, it's actually less not because it is C1 technology. We think keeping it simple allows us to produce an effective safe vaccine that can be made in billions of doses more quickly and more cheaply, using standard manufacturing facilities all over the globe. But it contains an adjuvant, which basically helps boost human agility and other components to make it stable.

Okay. So in the last 5 years, when you got that money and you started focusing on the pharmaceutical side in 2016, you have - I'm assuming that this technology has advanced tremendously with the amount of money that you have spent in the last 5 years. And that's why you're at the point right now to where you're saying, what we're going to take $10 million or $12 million, and we're going to get this into humans and make sure it's safe. And once we get into the humans, I'm just trying to make this as simple as possible. And once we get this into humans, and we know it's safe, now we're going to get people's attention, partners that can come in with a lot of money and start manufacturing either partnerships. I don't see Dyadic doing this alone; you guys are in a royalty business, you're not the manufacturing business and going to be spending hundreds of millions of dollars developing a vaccine, which is what most people think it is.

Yeah, I think what you have to realize is your question over the last 4-plus years, because by the time we transferred the technologies to DuPont and got started with the genetic engineering and synthetic biology. Just as an example, if we didn't knock out these protease genes, which we've knocked out 14 of them in C1, we would not be making these vaccines at the levels we're making them at, with the stability that we have. So the investment in the platform has paid off in spades, not only for Dyadic and its shareholders by making what we believe is the most productive recombinant protein subunit vaccine manufacturing platform on the planet; it's paying off for human beings potentially. And potentially use not only for this pandemic but future pandemics and variants, but also to your point for hundreds, potentially if not more, of vaccines and drugs, once we prove safety in human beings. When this whole thing started, it wasn't to take our own vaccine and make it on our own, but to partner it out to your point. But we wanted to start out this is the quickest, easiest, least expensive way for us to get into human beings, prove safety. And guess what? We're going to do that. And when we do that, to your point, we believe, although we have multiple conversations, multiple collaborations already, more coming. That accelerator will expand dramatically, and we're seeing that now.

So it's almost like you're building a 50-storey building, and you're finally getting to the top floor and now these apartments or whatever it is are starting to - now you're going to reap the benefits, all the hard work has been done over these last 5 years. You made your investment, you got efficient on your technology through your partners, and all these different scientists on every partner that comes in, and now you're getting to the point where you're getting to be able to cross the finish line.

I think if you think about Elon Musk in Tesla, how many naysayers there were, right? We saw the future. We believe that bio-manufacturing was in a vision too slow, too costly to existing technologies that people are using are ineffective and too costly. We looked at we had a way from the industrial business that we had spent 2.5 decades and hundreds of millions of dollars spent by us and our collaborators, and licensees. We felt and have now demonstrated with data a significant amount of data; safety, efficacy, potency in animals, and now we're moving toward humans. We believe from a recombinant protein production system we have the most efficient way to develop and produce recombinant vaccines than any other cell line or any other technology on the planet, and that drives significant value in COVID and otherwise.

So because, I know you're like simple examples where I can the example analogy I usually use is comparing the Microsoft operating system versus Apple. People - how long it takes people to switch from and to realize the benefits of Apple system, which is virus free. I think that kind of what we are doing to introduce C1 system as a new operating system for the biotech industry, and the more people realize the benefit of this, more people doing more test drives like Mark's example. The more people will know this technology and that's how we increase the awareness of it, and that has been done in the past 4-plus years since the DuPont transaction, where I think we did quite a lot of achievements from the collaborations and also the comments from the ZAPI conference. The top-notch scientists have complimented C1 technology. So to convince and to show people the benefits and convince them to switch from Microsoft to Apple computer is a process. At the same time, it takes some leadership and also vision for our people to use it. But at the end of maybe some people just don't like Apple computers.

Well, I think to add, Skip, the pandemic put us on the radar screen of more people than we ever would have imagined. So it brought the attention to the inefficiencies of the current manufacturing processes. Virtually every day somebody is writing an article about one or more of these companies failing to meet the manufacturing quantities that they promised, and the technologies that people are using are failing in some ways. We believe that our technology can solve the problem better, more efficiently at a lower cost, and can be used locally for people to manufacture their own vaccines for the next pandemic of the variants. That's what we're doing, we're looking to partner this technology for animal health, human health, vaccines, COVID vaccines, COVID antibodies, other treatment, all biologics, and we're getting more and more attention because of the results. Pink pointed out, you watch those presentations on ZAPI, the 5-year recap of 8 hours of videos and 14 presentations where they talk about part of there, it's nothing else that came out of ZAPI in 5 years, C1 was fantastic. And if nothing else happened, that was a phenomenal thing. Those are from some of the best independent third-party infectious disease coronavirus scientists on the planet. We didn't pay them to do that. They came up on their own conclusion because they tried it, and they felt it. So when they see it firsthand just like the Israelis, and now like the Koreans. This is the most realistic way to develop recombinant protein antigens for the COVID-19 variants and other protein antigens for traditional vaccines and drugs.

So once we know that it's safe in humans, which we're going to know in about 6 months, right? Then that is a big part of the equation. Is that correct?

Yes. That's why we're doing. It's a stepping stone to exploding the adoption and use of new platform. But even despite not having that data, more and more pharma companies, biotech companies, animal health companies, governmental agencies are still excited about C1 and are already funding research, expecting those results are going to be positive. We believe there is no reason that we know of that C1 won't be safe. In fact, probably the pedigree of the C1 cell line is far safer than E. coli, which is used to make drugs because there you have endotoxins that you have to remove, and we don't have those in the first place in C1. We don't have viruses like the CHO cells. We believe all the animal data, all the clinical data we've had so far preclinical, all the other data from the GRAS toxicity, plus pathogenic studies show us that we should be saving human beings and we intend on demonstrating that. And then, obviously, using that as an accelerating tool to expand the breadth and scope and depth of where we can apply this on human health, animal health, and for infectious disease; COVID and otherwise.

So in 6 months, we're going to have a...

Okay, Skip, I think we should let someone else, has some questions if there's anyone else...

Yeah, let me just finish up with this. So when we finish human to get through the first part to find out whether C1 is safe. At that point, you're thinking that that's when the big pharmaceuticals could come to you and say, hey, listen, we're ready to rock and roll with you, we'll put up the money and do whatever or go into a partnership or whatever. Is that when you're expecting some income? Is the question that I'm getting to?

Yeah. Also, we're expecting to go in even before that because some pharmaceutical companies are already in the door, as we mentioned, ones already heading potentially toward the later stage, not clinical trial, but in our development for potential late-stage preclinical for oncology and rheumatoid arthritis. Those could go to regulatory that could turn into a license agreement. We're also in discussions with a variety of other pharma companies and animal health companies that may jump in even before that. Some people have vision; they see the future and they want to get ahead of it. Some people want to wait; maybe it's too late.

And that's when the royalties could start, right?

Well, the upfront access cash like we saw on the industrial side; upfront cash payments, milestones and royalties.

You're still on the royalty part, right? You're not going to be funding this yourself to come up with a vaccine; you're going to be getting a partner after you get through the initial phase of human trials, is my point?

That's the point. And your point about $10 million or $12 million is not about the funding for the COVID Phase 1. That's total spending burn for the year. That's just part of it. And that's a small part of it. We're not burning a lot of money to do this trial. We're investing money that's going to accelerate the development and increase the shareholder value of the technology. So maybe we can get the next question, if there is someone there.

Yes. Thank you. Our next question is from Dick Williams from Williams Resource Group. Please proceed.

Hey, well, Mark, the next question, I've been patiently waiting for you.

I've been trying to get you on.

I have 2 kind of short questions. The one thing is in relation to the new vaccine, DYAI-100, and you've kind of sold all of the aspects and merits of why that is so terrific, and the C1 platform is so terrific? So, and getting some color on the filing, you're going to have to file an IND with the FDA, when you're finished doing the things that Ronan mentioned? At that juncture, are you going to file for breakthrough designation in this filing? You've already given all the answers that I was going to try to throw in as to why you should, would C1 and the fact that it's totally atypical towards of the other drugs and everything else develop. Number one, the platform, and everything that goes with it, and most especially throwing in another advantage that's very, very major, at least in today's day and age. That's to be able to scale up production at low cost to get this into the hands of billions of people worldwide. So combining that aspect of it, as well as all the things you brought to fore that have not been done by anybody else. Filing for an IND for drugs, this is the very first time we should qualify for breakthrough designation, have you given thought to that or reviewed?

Yeah, of course, we have. And, of course, we're going to take the quickest path forward. But Dyadic itself is not going to run Phase 2 and Phase 3 clinical trials; that will be a partner, or a partnership or collaboration like Medytox, where we're a co-developer. They're going to be doing the financing and moving it forward at their dime and/or financing they arrange for as well. We're going to share and commercialize profits of that product. If those products come to market, they can, we could decide to expand the Southeast Asian license if they take that at the time, and further opportunities. We could take that technology and bridge it and run it in other markets as well. So we have a lot of different angles. We're focused on getting the human trial up and proven. We're already working on the variants, so we can quickly slip those in and modify it to make a better vaccine with broader coverage.

Okay, last question. And in terms of where we are today in the marketplace, and obviously, for some reason we don't seem to get the same recognition and not from the financial community that we have gotten and are continuing to get in the medical community and scientific community. How are we doing in stepping up to additional analytical-type coverage, where the story will get broader reach into the financial markets? Any comments on that?

Yeah, Ping, do you want to comment about that first? Then I can follow-up, so it's not just me answering the questions.

Sure. I think it takes time and effort to get attention from the investment community. We are putting a lot of effort into that. We also engage different investor relations firms to help us again raise awareness. I think it also takes time and effort. You guys know that we are running very lean and efficient in terms of our management team. Just with all the business side ongoing, it takes a lot of time of Mark's time. Ronen and Matthew are usually on the road all the time. This year, we've had the benefit of working from home and holding those online virtual calls. But sometimes, it takes several calls for them to understand our business to really understand what C1 and what C1 can accomplish, just like a lot of long-term investors on the call. It takes a while for them to truly understand our business model, and the business strategy. We're working on that and we'll get there.

One of the things that's really exciting is we're seeing growing demand and interest from the analysts and the banks. The banks have always been excited. But the analysts now are digging in and starting to have conversations with us much deeper to think about whether they want to launch coverage or not, in addition to Zacks and Jason Kolbert, who we're thankful are doing coverage. But there are a variety of other analysts that are involved in this space that recognize the science and the technology, and the significant advances we've made on both, and the business development efforts, and the expanding partnerships and collaborations, like Medytox and others. So I would say stay tuned; we hope to get broader coverage by more analysts that have a deeper understanding of what we're doing. It can help us gain exposure on Wall Street. The exposure we need we're getting; the pandemic brought us to the forefront. It brought the problem to the forefront of bio-manufacturing. Every day, it seems like somebody is writing an article about one or more of these companies failing to meet the manufacturing quantities that they promised and the technologies that companies are using are failing. We believe that our technology is here to solve the problem.

Okay, Mark, thank you. Keep up the great work.

Thank you. Our next question is from Lee Alper from Hammock Investors. Please proceed.

Hi, Mark. Congratulations on the progress you've been making. But can we step back a little bit from COVID and talk about animal health?

Yes, I'd be happy to.

And so many other things like Sanofi? I mean, you've been telling us that we've been waiting for them to make a decision for quite a long time. I mean, what's going on with the program with them, and also with animal health people?

Well, again, yeah, so Sanofi we talked about before. They're trying to find some protein that fits exactly for C1. They're one of the Microsoft people that are having a difficult time switching to Apple. It isn't that they don't know we have a more powerful way to make proteins. They want to find one, virtually that they can make efficiently and effectively in their existing technologies and use that to pave the way. On the animal health side, if you have been watching or paying attention to the ZAPI data that they've generated for the SBV antigen, they not only showed the hyper-productivity but also the 300-fold higher productivity than the insect cells or baculovirus. They showed now safety, efficacy, and potency in sheep, cattle, and mice. They are also doing even further trials with that, more animal studies on both SBV and Rift Valley fever virus. We're also involved with some of the top animal health companies and some of those programs are moving forward as well. So I would say stay tuned, and hopefully, some of those will head into their own commercial animal trials, moving towards commercialization.

But what's it going to take to get one across the line and give you some money upfront and work a deal?

Well, I mean, we're working on that every day. I can tell you that we're busy every day with calls with some of them and existing research, new ones coming in, new discussions about potential licenses, with one or more of them. It’s a work in progress. What is it going to take? Certainly the data is there on the vaccine side. It's compelling. I think it probably, as I mentioned, we believe. I think if you talk to the scientists from ZAPI and other people firsthand at IIBR, we have the most productive way to make recombinant antigens. On the antibody side, it's still a cake being baked. We're making progress. We haven't achieved everything we wanted to do there. We've made a significant inroad in getting where we want to go. We've got high productivity on certain of those molecules. We've got stability on certain of those. We've done glycoengineering. Now, we're putting all those pieces back together. We have the tires, we have the engine and we have the chassis. We're building it, so that it all runs. When you put it in the race, it actually runs smoothly, efficiently, produces the protein you want with the right properties, the right quantities, and the right quality. That’s on the mAb side. So there's a variety of different uses and applications. We're primetime on recombinant vaccines, and we're being developed and put together all the pieces of the C1 mAb production system.

Thank you. Our next question is from Robert Smith from Center of Performance Investment. Please proceed.

Hi. Thank you, Mark. It's been a long time here. Thanks for standing by and accepting my call. So, Mark, I just want to circle back for a moment and look at the timeline for the clinical trial. So here we are at the end of March. At the end of Q1, you said you're going to go into the clinic in the second half of the year. So that's anywhere from July 1 to December 31. Can you give me an idea or color as to what's going to impact when you're going to enter the clinical trial in the second half?

Yeah, I think, Ronen mentioned earlier, we expect to start the toxicology study next month. We expect to start the clinical trial, Phase 1 clinical trial sometime at the end of August.

Okay, I didn't hear that.

That's a little more zeroed in for you.

Yeah, that's good. Thanks. That's what I was waiting for. Thanks for...

Look, we would have started the clinical trial last year if we had the data. But what we did, if you remember, we ran multiple animal studies all over the globe, with multiple parties, academics, pharmaceutical biotech companies, governmental agencies to get a good feel for the performance, the efficacy, the safety in animals. Then we put all that together and made a decision how to put what we think is a slam-dunk in terms of safety because the most important thing we got to prove first is the safety of a protein produced from C1 in human beings. That's the overriding factor of our clinical trial. In the meantime...

If we get in there by August 1, how long will the trial last?

I don't know how long it lasts, but we'll get a good readout, I'm sure by the end of the year on the safety, if not, right towards the first - 2022. But I think by the end of the year, we'll have a good readout on the safety, and hope we'll be able to report something to you there.

Great. Thanks again. Great. Good luck.

Thank you.

There are no further questions. I will now turn the call back over to Dyadic CEO, Mr. Emalfarb.

Thank you again to everyone for joining us in the call. We're pleased you could join us to hear our achievements over 2020 and what we started to achieve in 2021. We look forward to the continued advancement of our innovative C1 platform, the business development efforts maturing into bigger broader deals and keeping you updated on our progress along the way.

Yeah. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.