Dyadic International Inc (DYAI) 2020 Q1 法說會逐字稿

Good evening, ladies and gentlemen, and thank you for holding. Welcome to Dyadic International's First Quarter 2020 Financial Results Conference Call. (Operator Instructions) My name is Hector, and I will be your conference coordinator today. As a reminder, please note that this call is being recorded.

At this point, I would like to turn the call over to Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Thank you, Hector. Good evening, everyone, and welcome to our first quarter 2020 earnings call. A press release with Dyadic International's first quarter 2020 financial results was issued earlier today. The press release on Form 8-K and Dyadic's quarterly report on Form 10-Q have been posted to the SEC and Dyadic's website.

On today's call, our President and CEO, Mark Emalfarb, will give a review of the business and corporate accomplishments for our first quarter of 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'll then provide you with an opportunity to ask questions. Matthew Jones and Ronen Tchelet will join Mark and I to answer your questions.

At this time, I would like to inform you that certain commentary made in this conference call 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 would like to turn the call over to Mark. Mark?

Thank you, Ping. Welcome, everyone, and thank you for joining us in our 2020 first quarter conference call. I hope that everyone is staying safe and healthy during this challenging time amid the COVID-19 pandemic. We have taken all necessary steps to ensure the safety of our staff, and for the most part, they are all telecommuting. I'm pleased to report that COVID-19 has not had a significant impact on our company. In fact, to date, the pandemic has provided us with additional opportunities. Tonight, I'll focus my comments on several areas. I will discuss the progress we are making regarding our ongoing partnerships, as well as some new collaborations and other potential collaborations. I will also discuss several notable scientific achievements during the quarter. Finally, I will update you on our initiatives related to the seasonal flu.

All of our efforts are increasingly aligned with global health care trends and the industry challenges being faced. During the quarter, we increased the potential range of commercial opportunities for Dyadic in several areas. In late February, we announced an expansion of our collaboration with the Israel Institute for Biological Research, IIBR, to support their efforts to combat the coronavirus. We have already received certain gene sequences from the IIBR, and have successfully constructed C1 cell lines expressing potential SARS-CoV-2 vaccine candidates. Assuming the IIBR determines one of the C1-expressed SARS-CoV-2 antigens effectively elicit COVID-19 neutralizing antibodies, we anticipate the IIBR will quickly start animal trials.

A second COVID-19 vaccine opportunity is being pursued in collaboration with scientists from Erasmus Medical Center, Utrecht University and the University of Veterinary Medicine, Hannover, TiHo, with whom Dyadic previously worked with on the EU ZAPI project. I'm happy to share with you that we have developed a potential COVID-19 vaccine candidate, which based on preliminary results has demonstrated successful engineering of C1 to express high levels of a potential SARS-CoV-2 vaccine candidate. This consortium has submitted proposals for funding to pharmaceutical organizations and government agencies. Dyadic is a co-lead of this program and is working with the group to develop a COVID-19 vaccine candidate, which we can express at high levels, a stable protein in C1. The group is now working to determine productivity with preliminary results due in late May.

We also initiated collaboration with Ufovax, a Scripps Research spinout, which provided Dyadic with certain gene sequences, including potential SARS-CoV-2 and HIV vaccine candidates, to begin protein expression from C1. Ufovax, in conjunction with Dyadic, has also submitted proposals for funding SARS-CoV-2 program to pharmaceutical organizations and governmental agencies.

On the animal health side, we are actively working with 3 of the top 4 global animal health companies by revenue and in discussions with several others. Recently, the company announced that it expanded a third collaboration with 1 of these 3, and final work proposal is being expanded and reviewed right now as well. In addition, the first 2 projects have been expanded with additional funding and have entered the second phase of development. One of these collaborators has expanded our initial agreement to enter in the second phase of our first 2 projects in addition to signing on a third. Animal health for both companion animals and farm animals is a large and growing addressable market and we are gaining increasing traction here.

On the human health side, we currently have active programs with 2 top 10 human pharmaceutical companies and are in various stages of discussions with other top 10 and top 25 pharmaceutical and biotech companies, and anticipating signing 1 or more of these collaborations in the second or third quarter. We entered into a non-exclusive research collaboration with WuXi Biologics, one of the global top 10 CDMOs, which provides development and manufacturing services to pharmaceutical and biotechnology companies globally.

While these types of agreements don't generate immediate revenue, there are several potential benefits to Dyadic. We are aligned with a globally recognized industry leader with significant presence in China, Singapore, Europe and the U.S., which provides development and manufacturing services to leading pharma and biotech companies. WuXi will invest its own resources to evaluate our C1 technology for research for their customers. Ultimately, we see this as an intermediate step to potentially larger license deals and other collaborative revenue. WuXi as a CGMP manufacturer is an important conduit as they can manufacture biologic, vaccines and drugs potentially produced with C1 in the biotech and pharmaceutical companies.

In 2019, we signed a research and commercialization collaboration with the Serum Institute of India, one of the largest global vaccine producers. To date, we have received more than half of the 12 proteins under the serum agreement. And based on our initial success to date, we are moving into a second phase with them for 6 proteins.

Regarding our collaboration with Sanofi-Aventis, we have completed the feasibility study in which we demonstrated we could express all 7 of the therapeutic and vaccine proteins, with more than half at or exceeding the production levels initially set by Sanofi. We have been speaking with them on a regular basis, discussing the breadth and scope of what we've produced, including blinded data showing antibodies and vaccines produced in other studies, and are awaiting their decision.

The substantial progress we are making is further reinforced by the several notable scientific accomplishments during the first quarter. Specifically, we have accelerated our self-funded glycoengineering initiatives with excellent success developing a diverse library of C1 strains and in part a human-like glycosylation with greater purity and stability. In February, we presented data at the 15th European Conference on Fungal Genetics where we highlighted a reduction in the extracellular protease background by 50x in C1. Importantly, these results demonstrate that we've made the C1 cell line more efficient and stable leading to higher expression levels at lower cost. We continue to refine these strains, making them more robust, glycan homogeneous and stable, and are working closely with our collaborators to pick the best strains to match their objectives.

For Dyadic, making a stable protein is a one-step process similar to [CHO]. As a result, we have a shorter cell line development time. Through this research, we can produce more specific and more refined classes and types of stable proteins faster and for less cost. As a result of these scientific advances, we are receiving increased levels of interest from the pharmaceutical industry.

We recently entered into a new feasibility study with a highly regarded group of flu experts at the University of Oslo regarding an influenza vaccine. The company has begun expression of a targeted influenza virus antigen protein provided by Oslo University. The annual season flu affects millions of people globally each year and causes hundreds of thousands of deaths. A flu vaccination is either not accessible or affordable in many other parts of the world. Our efforts in this area further support our vision of creating more efficient and commercially cost-effective health care solutions for society globally.

As you may recall, we worked with Sanofi Pasteur in the past on seasonal flu program with excellent results. Sanofi's data essentially showed that the C1 expressed HA/New Caledonia was tested in mice rather safe and was at least as immunogenic at the back of the virus recombinant HA. In fact, preliminary data from the Sanofi mice study leads us to believe C1 has the potential to produce far greater quantities of lower cost, potentially more effective seasonal flu vaccines.

This thesis is further supported from the animal trial data reported by ZAPI related to the SBV antigen produced from C1, which also showed excellent safety and efficacy in mice and cattle. As previously reported, the SBV antigen produced from C1 was more stable and have produced 17x initial target level set by ZAPI and significantly higher levels than the SBV antigen produced from baculovirus. We believe that these 2 data points, along with the expression data we are seeing in our COVID-19 programs and other vaccine research program with ZAPI and from our third-party animal health collaborations, that it is possible C1 maybe help to address certain shortcomings in seasonal flu and other vaccine production.

In regards to metabolites, we completed a funded first phase research project, which was funded by a third party, where we developed a C1 strain to produce a certain primary metabolite for which we recently filed a patent application. We are currently in discussions about the next phase of this project, which will include strain optimization and a manufacturing agreement to determine if the C1 strain could match the productivity and be cost effective versus chemical-synthesized products now in the market. Additionally, we continue to self-fund a secondary metabolite project and are exploring the market opportunity for certain secondary metabolite products that may be produced from C1 for a variety of applications.

Underpinning all these achievements is a highly opportunistic and disciplined approach to our business development efforts in further building our pipeline. With our approach, Dyadic shareholders are getting many shots on goal in a cost-efficient manner with partners who are well-established, top tier and have a global presence.

With that, I will now turn the call over to Ping for a financial review.

Thank you, Mark. Before I discuss our first quarter 2020 results, I'd like to provide you with a few key financial takeaways from the quarter. Dyadic's financial position remains solid with approximately $34 million in cash and investment-grade securities and no debt. Second, as our pipeline of opportunities has gotten larger and more diverse, so have our sources of funding. We added 2 new fully funded research collaborations in the quarter, and now have ongoing projects with 12 collaborators, and several of them have more than 1 project in different phases. As a result, we believe that we are well positioned to execute on our growth strategy and further build out our presence in addressable markets that we are focused on.

I will now discuss our operating results in greater detail. From a liquidity standpoint, we ended the first quarter with cash and cash equivalents of approximately $4.7 million at the end of the first quarter compared to $4.8 million at December 31, 2019. The current value of short-term and long-term investment-grade securities, including accrued interest at March 31, 2020, was approximately $29.3 million compared to $21.2 million at December 31, 2019.

From an operations perspective, research and development revenue for the first quarter was $315,000, compared to $403,000 in the first quarter of 2019. We reported $278,000 for the cost of research and development revenue in the first quarter 2020 compared to $328,000 in the same period a year ago. The decreases in revenue and cost of research and development revenue reflects 5 ongoing research collaborations in the first quarter of 2020 compared to 6 research collaborations for the first quarter of 2019.

Dyadic's interest income was approximately $168,000 in first quarter 2020 compared to $267,000 for the same period a year ago, with the year-over-year decrease reflecting a lower interest rate and yield on the company's investment-grade securities.

Research and development expenses for the 3 months ended March 31, 2020, increased to approximately $755,000 compared to $692,000 for the same period a year ago. The increase primarily reflects additional expenses associated with the cost of an accelerated glycoengineering program conducted at VTT. Accelerating our glycoengineering effort is our strategic growth priority. Dyadic did not have any research and development expenses-related party for the first quarter of 2020 compared to approximately $389,000 for the same period a year ago. The decrease was due to the completion of our research service agreement with BDI in June 2019.

We reported G&A expenses of approximately $1,653,000 in first quarter of 2020 compared to $1,428,000 for the same period a year ago. The increase in G&A primarily reflects increases in insurance and other outside service costs of $101,000, noncash share-based compensation expenses of $97,000, business development and investor relations cost of $70,000 and other increases of $54,000, offset by reductions in executive compensation costs and accrued incentives of $74,000 and legal expenses of $23,000.

Year-over-year, our net loss was relatively similar. Net loss for the 3 months ended March 31, 2020, was approximately $2,214,000 or $0.08 per share compared to $2,175,000 or $0.08 per share for the same period a year ago. The $93,000 increase in net loss year-over-year was primarily due to an increase in G&A expenses, lower interest income and fewer ongoing research collaborations, offset by the reduction in total R&D expenses due to the completion of research service agreements with BDI.

With that, I will turn the call over to our operator for Q&A. Hector?

(Operator Instructions) Your first question comes from the line of Luke Smith with Chapin Davis.

Mark, I wanted to ask about these new developments in the ZAPI program. You mentioned proposals. Can you elaborate on what this might become?

Yes. So as you know, we've worked in the ZAPI program for over 5 years since 2015 for zoonotic diseases from animals and humans. In that program, we've successfully now made the SBV antigen, which we reported was 17x the initial target goal that they actually asked us to hit, which was 1,780 milligrams per liter versus the 100 milligrams. And we mentioned it also in the past that we made 35x more in the baculovirus insect cell, which is being used for FluBlok by Sanofi and coronavirus vaccines, and also Novavax and others. And interesting enough, the people from ZAPI have recently reported that they overstated the baculovirus yields. And now that shows that we had 300x more productivity in C1 for that SBV antigen.

We've also seen recently in the ZAPI program that they have an RV, Rift Valley, antigen as well, and we now have completely expressed that very stably at high levels, and we're now assessing what that level is. And then along with the receptor-binding domain of the SARS-CoV-2 spike protein for coronavirus, we've now made basically 3 very high-yielding stable vaccines using the cell line. And this would not be possible if we did not knock out those proteases that we've been working on, and we now have a 14x protease strain that we've knocked out 14 different protease genes. And the cell continues to perform at higher and higher levels, because when you make a protein, you've got to keep it stable. So you can make high levels. But if it chews it up, it has no value. So if it's not for the time and money and energy spent by the VTT scientists and Ronen and our staff, we wouldn't have this capability today to help make potentially billions of doses of vaccines in the coronavirus combat of the pandemic and other vaccines.

So we're very excited about, not only the platform and its ability and it's delivering on its promise. And this is why people have to realize when we talk about scientific achievement in advance, they relate to commercial opportunities. And in this particular case, you're talking about, in all those cases, magnitude times more productivity than the competitors. And we can make then high doses, for example, potentially in the coronavirus. We've looked out if you use 20 units per gram as a dose, and we only had a 75% recovery rate. We can use a small, little 200-liter fermenter and make potentially 10 million doses of that antigen in 5 days in a fermenter. Or if we used a 2,000-liter fermenter, which is still quite small when you think we used to operate at 150,000 and 500,000 liters, can make 100 million doses of a vaccine candidate or the antigen in 5 days in the fermenter. Or if you used a 20,000-liter fermenter, you can potentially make 1 billion antigen doses in a fermenter in 5 days.

So I think that you've got to realize when we advance science and technology, that's the power of what we have to offer. It is higher productivity, lower cost, greater stability and deliver on things that other people really can't. And that's what led us to, in addition to successfully developing a receptor-binding domain SARS-CoV-2 candidate for the Israeli Institute of Biological Research, which, by the way, we've now shipped them certain C1 cell lines for them to test, grow up. If they get the neutralization activity we talked about, then we would expect them to go into animals very quickly, and then ultimately, hopefully, into people, do Phase I, Phase II, and that would be a huge win for Dyadic as well as the world.

And in addition to the Israelis, we took on that challenge on our own, because it really -- having this incredible technology and this platform, we made a receptor-binding domain vaccine candidate for our cells with the Europeans in the ZAPI program. And within the next 2 or 3 weeks, we'll get a read on the data and the expression level. But based on the preliminary data, it looks very, very exciting. So hopefully, that will help you get a good grip on the power that we have created here over the last several years, transitioning from industrial biotech to pharma. And the money we're spending on improving this platform, not just on the protease side, and we can talk about the glycoengineering side as well a little later in this conversation.

Our next question comes from the line of John Vandermosten with Zacks Investment Research.

Let me start out with a question on the coronavirus and how maybe it's affected operations. I heard you say earlier, Mark, that you hadn't seen much of an impact there. And I've heard that pretty widely, but I've also seen other commentary more broadly that it has affected in some ways. Obviously, being preclinical it's a little bit more helpful than actually having patients in the clinic. But can you comment on that and how that might affect things in areas outside of the coronavirus?

Well, currently, it really hasn't slowed things down really one iota. There's a few people, I would say, one of our clients that we did a collaboration with, is waiting for us to deliver them an antibody that we produced, and we haven't been able to deliver to them. It's not that it slowed us down. They shut their lab down. And so they're not ready to accept what we have made. So that would slow that down. But that's the only really effect that we've seen so far to date.

But as we mentioned earlier, it's brought a lot of opportunity for us because of the ability for us to be able to produce large volumes of vaccines and antibodies quicker, cheaper and faster than we think anybody else can do. So we'll see how the rest of the world sort of addresses this issue and how we all start, I guess, trying to bring the economy back. But our goal here is to really help speed the development, lower the cost and provide much greater doses of potential biologics than anyone else and trying to partner and continuing to find new partners. And we're in discussions with new partners right now in addition to what we've talked about.

Has the coronavirus impact increased the amount of conversations that you've had? I mean I know a lot of conferences have been canceled and a lot of networking has slowed down, but have you seen an opposite effect due to the concern over the volumes that are needed in vaccines and treatments?

Well, I think it depends on the party. I mean there's people that we know that are using their own platforms, and there's a lot of people that don't have the platform. Like the Israeli government, they needed our help and they had experience working with us. If you remember, they produced an enzyme for -- to help defend against Sarin gas and VX gas, and we successfully produced higher levels using C1. So they knew the power of C1. The ZAPI guys, they knew the power of C1 from the SBV antigen.

You saw that, in fact, as we mentioned, 300-fold better than the baculovirus expression system that was used in ZAPI. That baculovirus system really isn't that efficient compared to what we have. But some people use what they know, and other people are willing to take new technologies on and try to advance them. I think, stay tuned, we hope to. I think somebody had actually wrote up an article that sort of the pandemic changed everything for C1 or Dyadic because people are willing now to take more risk, and to really look at things that really have the power and the technology and the speed and the productivity that the world really needs to bring biologics to humankind. We're seeing that sort of opening up with the FDA, with BARDA, with HHS, with the pharmaceutical companies, with biotech companies, with animal health, with human health.

So I think it's just a matter of time. And I think you've got to remember, I think people should focus on the endgame here. The end game here is, if you think back, there was a company in Holland, Crucell, J&J bought them for $2 billion. That was on a per C6 cell line for vaccines, not for antibodies, it was for vaccines. GlycoFi got bought by Merck for $420 million. So the goal here is, as we've been doing, is we're making the cell line produce things more stably by knocking proteases out, glycoengineering it to go after the mAb world. So for human and animal health and the vaccines, I think we're prime time and ready to go, and some of the people are recognizing that. And we're making great progress with the glycoengineering in C1. So we're heading in that direction as well. And that's both animal and human health.

So I think we have very broad applications that are very valuable, and we're going to unlock that value at the right time, at the right place with the right partners. And we're starting to see some of the partners that came in early, in one case, tested the technology. They didn't find a home for it. They liked what they saw. And now we're in negotiations with them coming back to maybe even a bigger opportunity. So -- and then, of course, we're all waiting to see what our friends at Sanofi want to decide based on the, I think, excellent results we showed them.

In addition to what we did in the project for them, we've showed them other things like they have now under the confidentiality agreement that these people get to see, they see the receptor-binding domain initial readouts in the protein yields. And there's a lot of things like that. The RV we have now with the ZAPI, which is now the third vaccine that we've made at extremely high levels, very stably, which we wouldn't have been able to do when we started this journey into pharma with the protease still in the T1 cell. It didn't matter in the enzyme business as much. But in pharma, that's critical, and we've reduced that activity by approximately 50-fold from our beginning strains to today.

Okay. And also a question on the deliverables or milestones in that second phase, the animal health project that was mentioned in the release. Can you point out any of those to us?

Well, I can't give you the terms and conditions of those things, but as we pointed out, we have one of these guys that now came up that play, not once, not twice, but 3x. And now we're moving into the second phase on 1 or 2 of those programs, and 1 of them got further even expanded beyond that. So this is one of the top 4 animal health companies, and let's hope that leads into some kind of license, whether nonexclusive, product exclusive or who knows what it might lead into, partnership, collaboration.

So we're actually getting results and people are seeing the results and they're coming back, and they're coming back for more. And not in all cases, because in some cases, people are just test-driving a car and they like what they see. And just like this one I talked about, they left 1.5 years, 2 years ago, and now they're back because now they found a use for it. So let's see how it all pans up. We're excited about what we see, both from the data and the collaborations, the partnerships, the expanded partnerships and people coming back in the door.

Our next question comes from the line of Jason Kolbert with Dawson James.

I just want to ask a couple of questions. I understand everything you just said, Mark. But I think what's critical for me and for investors is to understand what the probability of success is that the C1 platform gets specified into a vaccine. It's a very unique time given the need for COVID and the ability of, not just the U.S. government, but governments around the world, to spend capital. And my concern is when I look at some of the vaccine approaches that I think are viable, which is not just a plasmid-based RNA sequence, but really a whole virus sequence, it's going to require an expression platform like C1.

My problem is that if you are not already specified very early in on the process, J&J is clearly making progress, then C1 misses that boat. Now, it's early days to say that anybody has missed anything, but we know there are a couple of front runners. The Oxford program, the J&J program, I don't believe the Moderna program is out in the lead. What I want to know from you is where is IIBR? Where is ZAPI? Where is the India Serum Institute? Of the existing partners, who is out there in a lead where they're willing to commit to using the C1 platform early enough in the vaccine expression development so that it could become part of a novel coronavirus vaccine? Or I really should say China Wuhan virus vaccine.

Well, I think let's start with the IIBR. As I mentioned, we have now delivered them C1 cell lines expressing potential SARS-CoV-2 vaccine candidates. And so now they're going to grow them up in the IIBR in Israel. They're there. They're in their hands. They're going to test the protein against an illicit COVID-19-neutralizing antibodies. And if they see that it neutralizes the antibodies as they expect, then we anticipate that they would jump quickly into animal trials. So we are early on there. In fact, from our understanding, the other expression system that they were using produced such de minimis amount, that if we show this response of the neutralizing of the antibodies, then we'll be in the lead. And so we think that that's a great opportunity for us, and we think they're -- and they have the motivation and the incentive and the capital to move that forward.

Well, but Mark, my point is that -- Mark, excuse me, I want to interrupt. My point is that J&J and Moderna and others, Oxford, very soon are in man. So what I'm trying to understand is if Israel gets there in a year, I don't know that that becomes viable. So I'm trying to understand, among partners and the people you are talking to, who -- what do you think -- do you think IIBR is the most promising candidate?

Well, I think that they are further along in with what we're doing with C1, but there's other candidates have started with other things and we're talking to about -- and they're starting to recognize that they have limitations in productivity. But they're testing the candidates out, and they seem to be willing to actually take a couple of steps back and run in parallel with us. We'll see.

Well, you and I both know that Sanofi -- you've demonstrated viability to Sanofi. And we know that Sanofi is committing a lot of time and resources, along with the collaboration with Regeneron to this. So are they working with you closely on the C1 platform on the early efforts that they're working towards?

No. We're not working with Sanofi on the coronavirus. We already made that clear. They're using the FluBlok baculovirus program for their recombinant approach, which we believe is certainly viable but nowhere near as productive as we can offer them.

Yes, but my point is that they are familiar -- Mark, my point is that they are familiar with your platform and technology, and they are working on COVID, even if they are not working on it with you. So why not make sure that they're -- whatever they're doing in COVID is going to leverage the C1 platform, no?

Well, of course, we tried to make sure of that. We've shared with them certain data that they should be salivating at the mouth to take advantage of. But I can't control what Sanofi decides to do in a particular case. If Sanofi will decide to do something else...

Okay. Can I just change -- Mark, let me just change gears with you then. When we look outside of COVID, what are the other most exciting areas where you're in talks? And is it in biotech? Is it in industrial chemicals? Where might we see the next monetization partnership event? Can you just give me an industry idea of where you see the most promising talks going?

Well, we have human health and we have animal health, both. We're dealing with top 10 players in the pharmaceutical human side, and we're dealing with the top 3 of the top 4 players in the animal health side already. And we're in discussions with others. And as we mentioned, one of them is going ahead a third program.

Okay. And you think you're in a position to realize a monetization event with them this year?

We're in a position, of course, to realize that this year. I mean Sanofi is going to make a decision sometime in the next few months. And then, of course, the animal health company, not only 1 of them, there's 3 top 4 we're working with potentially can make decisions this year as well. And there's other things that we have going on. WuXi is another one.

Yes. I'm not so excited about WuXi, Mark.

Your next question comes from the line of Ahu Demir with NOBLE Capital.

Apologies if my questions are asked because I had to dial in a little late. So my first question is, what is the research agreement with Sanofi? Where is it at? When you suppose to have the meeting? And when is the decision supposed to be made on their front?

Yes, we just answered that question in the last conversation. But we're within a few months of Sanofi making the decision. We've had numerous conversations with them. Not only did we share data with them from their own programs, we shared data with them on other programs that we've had that we can -- we're able to do that blindly that show them different results. In addition to the exciting results we have with them, we've recently had more. So sometime this quarter or next we're going to expect an answer.

Okay. I see. And I guess, the big slowed down on the partnership front. What are the expectations going forward? I'm pretty sure you are in talks with many pharma and biotech. And how are the conversations? Do you think there will be more partnerships in the coming quarters?

Yes. We mentioned that there -- we expect more conversations and more partnerships this year. In this quarter, we expect to have at least 1 or 2 more.

Okay. And my last question...

Maybe even expand the ones we have, like we just did with the animal health company.

Okay. And the last question would be on the data front. When do you expect to have any data disclosures? Any meetings, virtual or not? When do we expect to see any type of data on the website?

Well, number one, we're expecting soon the paper from the ZAPI animal health. The data was very good. It showed excellent safety and efficacy. We obviously talked about the yield. We blew it through the roof, probably didn't hear, but actually ZAPI went back and recalibrated their expression from baculovirus, and instead of 30 to 50 milligrams per liter, they only got 6, and we got 1,780 milligrams, or 300x more, when we thought it was 35x more. They way underestimated based on the initial data. So data is coming all the time. We, in February, made a presentation at PEGS. So there's a lot of conferences coming up. Some are virtual. I don't know if any will actually be in person. But the data is coming irrespective of the conferences. We'll put it out when we have data that we feel is important.

And any of them would generate value that you expect as a catalyst and you know the time line? Can we get them...

They all generate value. I think you missed the whole first part of the conversation that if we didn't knock out...

Yes, I'm sorry -- a report of like company. Sorry, I dialed in a little late. Apologies on that.

Yes. Well, we already talked about the fact that by knocking out protease genes, and where the 14x protease has allowed us to make the SARS-CoV-2 protein for the IIBR, and in a collaboration already with the former ZAPI scientists, we expect it will do the same thing with the Ufovax, high levels of stable protein. We've done the same thing with the Rift Valley vaccine recently as well in ZAPI. We did it in the SBV in ZAPI earlier. So from a standpoint of a vaccine platform for animal and human health, the data is phenomenal. It's outstanding. So of course, it's creating value.

What do you think is leading to these animal health guys coming into the table and stepping in and recognizing things that they couldn't do before, not just about low cost, but about enablement. But taking things that they've tried to do that they failed because of productivity. They couldn't make it cheap enough to launch it. You need to make very low-cost vaccines for some of these things for chicken and pigs and cattle. So the glycoengineering, that's creating value.

I was hoping to highlighting the future ones, not the past ones, Mark. Like any other catalyst that's coming that you will have a data readout and that will generate value for you.

Well, we just talked about, we just made, which you probably missed, a vaccine candidate of our own and for the Israelis for the coronavirus. That's recent. So we think that's creating huge value, huge opportunity. It's another demonstration of the platform's power, stability and productivity. But yes, the glycoengineering. So there's a lot of things, partnerships, the Sanofi. The Sanofi is seeing data, that could create huge value. That the data and the value of the partnership is based on data. So of course there's more things. We're going to glycoengineer 2 more strains, make the ones we have even better, apply the low protease activity due to glycoengineering strains and match them up with productivity. And as we talked about earlier, which you missed, I guess, as well, Crucell sold their business to J&J for $2 billion once on a per C6 cell line for vaccines just on having that cell line. GlycoFi got $420 million from Merck. So we have multiple ways to sell the cell line if we want or license it or partner it. So yes, there's a lot of value we're creating, and it's coming in right now.

Your next question comes from the line of [David Schneider], private investor.

Your next question comes from the line of Robert Smith with Center Performance Investing.

So Mark, I'm just going to try and direct this from a different angle. So your quarter -- I think, during the quarter, we moved into the second phase of 2 of our initial projects with 1 of our animal health collaborators. So can you give me some color as to what was Phase I? What is Phase II? And how many phases are there?

Right. Well, maybe I can let Ronen answer that question since he's on the line and dealing with these people day-to-day. I think I can, but Ronen, do you want to answer those? Thank you.

Yes, sure. So yes, I'm sorry for the confusion because ultimately, people are using Phase I and II on their clinical trials, and we are using on the first level of development of the C1 cell lines. So what we call Phase I is the first stage when we express the protein of interest. And after that, when we analyze the productivity and the quality, then we both decide whether we go to Phase II. And in Phase II, usually, we either increase the productivity or we see some issue in the quality, we work on improving the quality. And I think usually, we have 2 phases.

And then what happens?

I think that's...

And then what happens?

So at that stage, we are...

Yes, I can jump in. What happens then is they look at it, and if they have a -- it becomes commercially viable then they can take it into either optimizing the fermentation process further to get yields higher, lower their cost and simultaneously start doing animal trials.

Okay. So before the animal trials, I mean is there a time line going from Phase II to Phase III?

What do you mean by time line? I mean once we're done with Phase II, theoretically, they can go right into an animal study.

Okay. So going -- so going from Phase I to Phase II?

Yes. Phase I typically takes from 4 to 6 months. Phase II then would take somewhere between, let's say, 3 to 4 months, maybe 5 months, and then they're off to the races if they like what they see and start doing animal studies.

Okay. And with respect to the Sanofi collaboration or whatever you might -- whatever you want to put on that. So what are the next steps? You say you have the work before them, you're expecting them to come back to you. What will they say to you?

Yes, I mean...

What are the possibilities of what they will say to you?

Well, first of all, just so you know, we spent a year taking 7 different genes and expressing those, and we expressed all of them, as I mentioned, and more than half of them met or exceeded the targets that they gave us as the expression target they wanted to see, okay? So in addition to the expression levels, the quality, the stability, the characteristics and a lot of the different things that we explained earlier in the conversation. And so a lot of those things were like in progress being done and developed. So they saw the data, that's done. They did their own analytics in the labs, characterized the proteins that we gave them. And in addition to the work that they funded, we had other programs going on that we funded or that we could use blindly to show them additional data.

For example, on this SARS-CoV-2 receptor binding domain that we made from the spike protein, they have seen that data. They recognize -- they and others recognize that we can make more of that quicker, faster and cheaper. They've either moved on with their own technology, feel more comfortable on those, but that data shows them for future products and projects what else we can do, the breadth and scope and the depth of what the platform can do, and it's getting bigger, broader and deeper. So we share other things with them besides what they just saw on their own. The glycoengineering; their strains weren't glycoengineered because it was too early, so we've now shown them some data from other products we've been able to show blindly. So what we expect from them is then to come back to us and hopefully either do an expanded R&D program, take the license for one of the products, potentially a license for the platform or the sky is the limit. We don't know. We're not part of their in-house discussions.

Yes, but -- well, but if you've shown on this data, how could they not move forward on something that's really current?

I don't know how they can or can't do things and what political decisions people make in big pharma. But...

Well, I mean it's down on the debate (multiple speakers)

You can look at the data and realize that we can make more, quicker, cheaper and more stable. I mean if you look at the ZAPI program versus that -- but what decisions do they make, they make for different reasons. I mean one of the things is we haven't been in man yet, one of the things we're hoping with the coronavirus is that C1 now has a drug potentially to get into man sooner and overcome the hurdle of, A, have you ever gone to a clinical trial with a protein in humans? We haven't done that yet. So from that standpoint, they might have thought, well, it's a safer bet to do something else, not that we expect a problem from the C1 system because it's grass, it's been through mice, cattle, other animal studies. It's very safe and effective. In fact, compared to E. coli, E. coli has endotoxins that they have to get rid of. We don't have those in the first place. Nothing to get rid of. [CHO] had viruses. We don't have any viruses.

Wouldn't you at least run a parallel effort?

Well, if it was me, I would do that. Yes, I would expect they would do it or they should do it.

All right. And then further one, you speak of primary and secondary metabolites. These are such broad categories. I mean can you narrow it down in any way when you use those terms?

It will become clearer when the patents become issued from the public, and you'll see what we're doing. As we mentioned before, we really aren't in the business of exposing our competitors to what we're doing. So...

And when do you think you'll have that patent news?

Well, I think we said the first one that we had will come out probably sometime this fall, probably August or September, because it will be the 18-month time frame when you filed your first provisional. The other one, we just filed. So that's -- if unless we talk about it, which we might, would be 18 months from virtually a few weeks ago.

I am showing no further questions at this time and will now turn the call back to Mr. Emalfarb for closing comments.

Thank you, Hector. Underpinning the many accomplishments we have discussed today is a highly collaborative and coordinated effort, both among our employees, our contract research organizations, our partners, and I want to thank them all for their extraordinary efforts during these difficult times. Our goal remains to cost-effectively enable the development and manufacture of biopharmaceuticals, thereby making medications more affordable and accessible globally to all. We believe that our industrially proven C1 gene expression platform, which is faster and more efficient than any of the other platforms, including baculovirus and [CHO], will help us achieve our goals, along with the efforts expanding a number of our partners' programs.

Thank everyone for dialing in today. We appreciate your ongoing support, and stay safe.