Dyadic International Inc (DYAI)

[Paullee]

DYAI -
We are reiterating our Outperform rating and $11 price target.
Progress and Efforts Continues to Validate C1 Platform
Ahu Demir, Ph.D., Biotechnology Research Analyst
Fundamental Analysis RatingOutperform
Refer to the end of the Report for Analyst Certification and Disclosures
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D). This report is provided on Channelchek for informational purposes only and should not be used to make investment decisions. B/D is not an investment advisor and as such, offers no advice or recommendation to buy or sell any securities. Consult an investment advisor who has a fiduciary responsibility to manage your assets in your best interest and who can help determine investment suitability for you. Refer to Disclosures & Disclaimers for more detail.
February 26, 2020 - ANALYST SUMMARY
Listen To The Analyst
https://noblelinx.com/calls/dyai20200226.htm
Dyadic is progressing towards generating human-like glycosylation by C1 platform. Dyadic 's research partner VTT Technical Research Centre of Finland made further progress in glycoengineering by expressing another human-like glycan (G2). The company currently generated two (G0 and G2) of the four targeted mammalian glycans (Exhibit 1).
Glycosylation is key in bioproduction. Glycosylation refers to adding a carbohydrate to a protein. Majority of biologics (over 50%) are glycosylated including antibodies and cytokines. Glycans have marked effects on therapeutic efficacy, immunogenicity, protein stability, moderation of half-life of proteins. Therefore, glycoengineering is crucial in drug development. On the way to validate C1 technology in bioproduction, glycoengineering to produce human-like proteins is a major milestone for Dyadic. The recent news shows further advancement to achieve this goal.
The Israel Institute for Biological Research (IIBR) may fight the coronavirus using C1 technology. The company also announced a partnership expansion with the IIBR (a governmental research institute established to provide the State of Israel with scientific response to chemical and biological threats). The current partnership will explore the C1 platform's potential to express gene sequences and targets developed by IIBR into both an rVaccine candidate and monoclonal antibodies (mAbs) that may help combat COVID-19 virus (Coronavirus) outbreak.
Reiterating Outperform rating. We think the recent progress in glycoengineering, and expansion of collaboration to combat coronovirus are positive developments and bring Dyadic a step closer to proving C1 expression system's value in the biologics market. We believe Dyadic's stock price is poised to move higher upon additional data and collaborations in 2020. We are reiterating our Outperform rating and $11 price target.

Investment Appraisal
Dyadic announced two news this week. First, the company's research partner VTT Technical Research Centre of Finland (VTT, a third-party contract research organization) presented data at the 15th European Conference on Fungal Genetics (ECFG15) demonstrating that its C1 strain has been glyco-engineered to achieve a core human like G2 glycan level over 76% on Host Cell Proteins (HCP). In late November, VTT showed expression of building block of human-like glycoproteins (G0 glycoform) at 94% rate relative to other proteins. The expression of G0 glycan structure was the first step to generate human-like proteins; the next steps include obtaining G2, G0F and G2F. Based on the latest data presentation, one more step was achieved and two of four targeted mammalian glycan structures were obtained, progressing towards generating human-line glycoproteins (Exhibit 1). The G2 glycan was expressed at 76% rate, in addition to over 10% of G1 glycan forms and some residual G0 and Man3 (Exhibit 2). The relative expression rates are promising, the company is currently continuing efforts to produce high proportions of human-like glycoforms such as G0, G2, G0F, and G2F.
Exhibit 1. Glycan Structure in C1 platform

Source: Company SEC filings
Exhibit 2. G2 glycans expression by C1 technology

Source: Company SEC filings
The second news was on the expansion of partnership with the Israel Institute for Biological Research (IIBR). The existing partnership was established in Q3 2018 to advance C1 expression platform for the development and manufacture of recombinant vaccines and neutralizing agents comprising targeted antigens and monoclonal antibodies (biologics), to combat emerging diseases and threats. The expansion of collaboration will direct efforts to use C1 technology to express gene sequences and targets developed by IIBR into both an rVaccine candidate and monoclonal antibodies (mAbs) that may help combat the outbreak of the COVID-19 virus (Coronavirus).
Our view. We think both news reports are positive. The glycoengineering brings C1 technology's potential in biologics market a step closer to validation, while the collaboration in coronavirus may expand the market potential in viral vaccines and prospects for C1 to be successful bioproduction. We see potential upside to the valuation upon more data and partnerships and think this is a good entry point for the investors. We are reiterating our Outperform rating and $11 price target.