Dyadic International, Inc.

Good evening and welcome to Diatics International's second quarter 2021 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 call is being recorded today, August 12, 2021. I'd now like to turn the call over to Ms. Ping Rawson, Diatics Chief Financial Officer. Please go ahead.

Thank you. Good evening and welcome everyone to Dyadic International's second quarter 2021 financial results conference call. I hope you've had an opportunity to review Dyadic's press release announcing financial results for the second quarter ended June 30, 2021, and the recent company highlights. You may access our release and Form 10-Q under the Investors section of the company's website at dyadic.com. On today's call, our president and CEO, Mark Emelfarb, will give a review of our business and corporate accomplishments for the second quarter of 2021, 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'll then hold a brief Q&A session. Our senior management team, Matthew Jones and Rona Shalette, will join Mark and I for the Q&A. 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. DIADX expressly disclaims any duty to provide updates to its forward-looking statements, whether as a result of new information, future events, or otherwise. Participants are directed to the risk factors set forth in DIADX reports filed with the SEC. It is now my pleasure to pass the call to our CEO, Mark Unifar. Mark?

Thank you, Ping. Welcome, everyone, and thank you for joining us as we move into the back half of Fiscal 2021. We continue to make significant progress in our science and across our corporate and strategic development goals of delivering the benefits of Dyadic's C1 protein production platform to life science, biologics, and vaccine production space. Since the sale of Dyadic's industrial biotech business to DuPont for $75 million in 2015, we have focused our efforts on using synthetic biology to re-engineer our versatile, industrially proven C1 protein production platform to address biologic vaccine and drug production in the animal and human health markets. Our research and development continues to advance. including having manufactured a C1-produced protein under CGMP manufacturing conditions. Demonstrating that C1 proteins can be manufactured in a CGMP facility, coupled with the successful completion of an interim toxicology study, puts us a step closer in advancing our DYI-100 COVID-19 vaccine candidate towards a Phase I human clinical trial. Since March, we entered into four collaborations, including the recently announced binding term sheet with Sorrento Therapeutics, a NASDAQ-listed clinical stage antibody-centric biopharmaceutical company developing new treatments for COVID-19, cancer, and pain. The Sorrento license agreement, when executed, will mark a significant milestone in our corporate development efforts. as we will have begun to monetize our COVID-19 development efforts through licensing our C1 technology for the development and commercialization of vaccines, therapeutic antibodies, protein diagnostics solely for coronaviruses, including DYAI-100, Diatics' lead COVID-19 vaccine candidate, to a drug development partner that has the resources and the expertise to advance coronavirus vaccines, therapeutics, and diagnostics, both clinically and commercially. Due to confidentiality agreements, we are often unable to publicly announce certain ongoing collaborations. Over the past six months, as noted by Sorrento's chairman and CEO, Dr. Henry Gee, Sorrento carried out several promising preclinical animal studies using the C1-produced RBD antigen. and Dyadic's lead COVID-19 vaccine candidate, DYAI-100. Sorrento extensively studied Dyadic's lead COVID-19 vaccine, which utilizes the SARS-CoV-2 spike protein receptor binding domain, RBD antigen, in vitro and in vivo, for its induction of high titer neutralization activities in vaccinated animals against the SARS-CoV-2 virus and its major variants of concern. The goal, or their goal, is to manufacture a COVID-19 vaccine that will provide protection across the variants of concern, including Delta. And in addition, apply to C1 protein production platform broadly across their current and future coronavirus programs. Our mutual goal, as highlighted in yesterday's press release, is to continue to work together to develop and commercialize a protein-based COVID-19 vaccine that can be rapidly manufactured in very large quantities in Sorrento's existing CGMP and other CGMP facilities and stored and transported at either room temperature or two to eight degrees in order to increase access and affordability to underserved populations globally. Sorrento reported that a multivalent COVID-19 vaccine is under development using the SARS-CoV-2 RBDs for the variants of concern, such as Delta, Alpha, Beta, Gamma, and Lambda, and is being designed to cover all known and emerging variants of concern. This is a significant event for Dyadic. Having achieved our goal of creating a pathway that addresses the COVID-19 production and commercialization, and distribution gap for mass-scale immunizations across the globe quickly and efficiently. The Sorrento license fills the gap for the remaining potential COVID-19 immunization production and distribution across all other territories, not already covered by Diatics' existing agreements with Meditox, Syngene, and the Rubic Consortium. The Sorrento license agreement, when executed, will grant Sorrento exclusive rights for human health and non-excluder rights for animal health in their territory to utilize dyadic C1 technology for the development and commercialization of vaccines, therapeutic antibodies, protein therapeutics, and diagnostics solely for coronaviruses, including DYAI-100, dyadic's lead COVID-19 vaccine candidate, and will include upfront payments of $10 million in cash and stock up to $4 million in reimbursements for DYAI 100's preclinical and clinical development milestones and development costs incurred by Dyadic, up to $33 million of potential milestone payments for the successful developments of vaccines, therapeutics in humans and animals, as well as additional royalty payments based on net sales. All future development costs related to this license will be incurred by Sorrento. The following is a brief overview of our other strategic T1 COVID-19 collaborations that could potentially reach upwards of an additional 3.7 billion people. The Rubik Consortium. This collaboration with South Africa's Rubik Consortium is intended to reduce Africa's dependence on foreign vaccine suppliers. Africa represents 14% of the world's population. However, remarkably less than one-tenth of 1% of the world's vaccines are produced there. Rubric intends to develop novel vaccines and in addition to a COVID-19 vaccine using RC1 technology. They also intend to build manufacturing capacity in South Africa to manufacture vaccines for distribution in Africa to improve both access and affordability. Less than 2% of Africans are currently vaccinated against COVID-19 and the potential need for boosters may further push back COVID-19 vaccine availability and affordability on the African continent, which is estimated at 1.3 billion people. Syngene. International. This collaboration is with an integrated research development and manufacturing services company in India to develop a COVID-19 vaccine candidate using Dyadic's proprietary C1 cell protein production platform. In just a few short weeks of receiving the C1 cell line used to develop and produce a DYAI-100 vaccine candidate, Syngin has already successfully demonstrated their capability to adopt and produce the Seaman Express SARS-CoV-2 RBD antigen at high levels. The population of the Indian subcontinent is estimated at 1.7 billion people. Meditox. This is a co-development program with South Korea's Meditox to enable COVID-19 vaccines and or boosters which will immunize people against two or more of the current and future COVID-19 variants. For example, tetravalent or possibly even quadrivalent COVID-19 vaccines. Meditox has begun engineering CM1 cells to express COVID-19 variants of concern antigens. Meditox's territory covers the Republic of Korea and multiple Southeast Asian countries. The population of Korea and the countries covered under this collaboration is estimated to be over 700 million people. We believe that this is just the beginning of a new phase in dietetics transformation. As you know, the C1 production platform is the culmination of more than 20 years of ongoing research, development, evolution, and ultimately cross-application of proven industrial scale enzyme and protein production in broad-ranging industries. such as enzyme manufacturing used in the production of renewable biofuels. Our technology was used to manufacture and sell Diatics' own enzyme products in more than 30 countries. And our C1 technology was licensed for industrial uses non-exclusively to Codexis and Shell, BASF, and Abengoa until our industrial biotech business was sold to DuPont in 2015. These non-exclusive license fees generated more than $110 million in non-dilutive revenue for the company. Currently, we see our healthcare opportunities in animal and human health markets as much larger and potentially far more valuable. We've done it before, and we are laser-focused on doing it again. Across these industries, dyadic development advances have transformed the scalability, production, efficiency, as well as manufacturing footprint needed for those industries to reliably produce enzymes and proteins at industrial scale. It has been our goal to disrupt the biomanufacturing of biologics for use in the animal and human pharmaceutical markets. We are proud to say that in five years, Diatics has pivoted the utility of the C1 platform to transform the biologic and vaccine production process in life sciences. To be frank, what we're trying to accomplish is a massive undertaking, and we remain very enthusiastic by the progress that we have made in such a short time, as well as what we believe we can achieve in the future. The license agreement with Sorrento, once executed, further validates Dyadic's business model and is in the first licensing agreement, which includes a cash upfront payment for the development of a vaccine intended for human or animal health. We are creating multiple shots on goals for our technology to be recognized for its utility, and application in healthcare, especially when vaccine access across the globe is terribly unequal from one population to the next. We now have agreements that serve as a framework for the potential to support vaccine development of COVID-19 and other vaccines and production for up to 100% of the world's population. While we truly believe that the versatility and benefits of our C1 platform technology go beyond the COVID-19 program. In tackling the current world problem, we continue to validate the utility of dyadic C1 expression systems. To talk about our DYA100 COVID vaccine candidate, the C1 technology platform has the potential to rapidly develop new, highly productive cell lines to produce the SARS-CoV-2 RVD receptor binding domain variant antigens. Our goal is to demonstrate The recombinant protein vaccines of all types produced from C1 cells can be manufactured rapidly under CGMP conditions in large amounts using standard microbial bioreactors at low cost, which can gain regulatory approval by showing safety and efficacy for their use in humans. This data is anticipated to further accelerate the adoption of use of our C1 production platform broadly to support rapid development and manufacturing of future vaccines, drugs, including vaccines for pandemics. We and our collaborators continue to advance DYAI 100 towards initiation of a phase one clinical study. An interim analysis of toxicology study conducted by INVIGO has demonstrated preliminary safety. Final toxicology results are expected by October 2021. CGMP production is in progress, and once completed, we expect it to put us a step closer in advancing our DYAI-100 COVID-19 vaccine candidate towards a Phase I human clinical trial. Later this month, we anticipate meeting for a second time with the Paul Ehrlich Institute, PEI, a German federal agency medical regulatory body and research institution for vaccines and biomedicines to discuss the regulatory requirements, yet again, that will be needed for switching between different COVID-19 variant antigens following the initial phase one study. The C1 technology platform has the potential to rapidly develop new, highly productive C1 cell lines, producing receptor binding domain variant antigens. Our goal here is to ensure that the regulatory approval process can support such rapid development. Part of the understanding with Sorrento is that they will share phase one data with us to fulfill our previous contract commitments, such as with Rubik. We will also share clinical data with Sorrento whenever possible under the terms and conditions allowed under our contracts with our other collaborators. Once the Sorrento license agreement is executed, this is expected to allow us to greatly reduce our expenses related to our ongoing efforts to advance our DYAI-100 vaccine candidate towards a Phase I clinical trial. Once we have validated that the C1-produced proteins are safe in humans, we will then have the potential to accelerate C1's adoption and use for several biologic drug and vaccine opportunities. On July 27, 2021, the company sold its equity interest in BDI Holdings and VLP Bio, realizing 1.3 million euros in cash and approximately a 30% return on investment. The related gain will be recorded in the third quarter of 2021. However, just as importantly, BDI remains a valuable resource to perform contract research for us in the future as needed. In regards to the ZAPI Zoonosis Anticipation Preparedness Initiative, a peer-reviewed study, the development of a modular vaccine platform for multimeric antigen display using an orthobunovirus model, demonstrated the successful use of Diatics' patented and proprietary C1 protein production platform to facilitate a fast, coordinated, and practical response to new infectious diseases as soon as they emerge. This was published in the peer-reviewed journal, Vaccines. Through ZAPI, we have validated that the C1-produced antigens can be used to develop vaccines that are safe, effective, and protective in animals, such as cattle and sheep. As mentioned in our Q1 conference call, we are continuing to work with a global animal health company that is continuing to conduct poultry animal trials using C1-produced antigens. They continue to report that the C1 express antigens show promising efficacy in their initial animal study. They have additional animal trials ongoing, and we've begun a fully funded phase two portion of this project to work on further increasing productivity of one or more of these antigens. Based on the encouraging results to date, we've begun initial discussions on how to expand our collaboration to develop a number of additional antigens for farm animals. Last but not least, there are several ongoing fully funded research projects with C1 is being used to explore the expression of a number of different proteins, including antibodies and bispecifics with registrational potential in oncology, autoimmune disease, and COVID-19. We anticipate that we'll be able to share with you additional details related to one or more of these C1 human health programs before the end of the year. Suffice it to say, we are very pleased with the company's scientific progress and our operational and corporate progress as we move into the back half of fiscal 2021 and as we look forward to 2022 and beyond. And with this, I will turn the call over to Ping for a financial update.