Business Overview and History

Dyadic International, Inc. (NASDAQ:DYAI) is a global biotechnology company that has developed innovative microbial expression platforms to address the growing demand for protein bioproduction across a wide range of industries. With its proprietary C1 and Dapibus platforms, Dyadic has positioned itself as a leader in the efficient, large-scale manufacture of proteins for use in human and animal health, as well as non-pharmaceutical applications such as food, nutrition, and industrial uses.

Dyadic International, Inc. is a global biotechnology company based in Jupiter, Florida, with operations in the United States and a satellite office in the Netherlands. The company was founded in 1994 and has since developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins. This technology is based on the Thermothelomyces heterothallica fungus, which the company named C1.

In 2015, Dyadic made a strategic pivot when it sold its industrial technology business to Danisco USA, the industrial biosciences business of DuPont. As part of this transaction, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal pharmaceutical applications, while DuPont obtained certain rights to utilize the technology in the pharmaceutical sector. This shift in focus has enabled Dyadic to dedicate its resources towards developing innovative solutions for the biopharmaceutical industry and emerging alternative protein markets.

Throughout its history, Dyadic has faced various challenges and achieved significant milestones. In 2021, the company entered into a research, license, and collaboration agreement with Janssen Biotech, Inc., one of the Janssen Pharmaceutical Companies of Johnson & Johnson, for the manufacture of therapeutic protein candidates using its C1-cell protein production platform. However, in 2023, Janssen provided written notice to Dyadic that it had decided to wind down the collaboration.

Despite this setback, Dyadic has continued to make progress in other areas. In 2019, the company entered into a sub-licensing agreement with Alphazyme, LLC, which was subsequently amended. Under the amended agreement, Dyadic sold its equity interest in Alphazyme, LLC in 2023 and continued to have the potential to receive additional payments based on the future sales of Alphazyme's existing products. Additionally, in 2021, the company adopted a new 2021 Equity Incentive Award Plan to serve as a successor to its 2011 Equity Incentive Plan, demonstrating its commitment to attracting and retaining talented employees.

Financial Performance and Ratios

As Dyadic has transitioned its business model, the company's financial performance has reflected the investments required to advance its therapeutic pipelines and commercial partnerships. For the fiscal year 2023, Dyadic reported total revenue of $2.90 million and a net loss of $6.80 million. The company's cash and investment-grade securities position stood at $7.26 million as of December 31, 2023.

For the third quarter of 2024, Dyadic reported revenue of $1.96 million, a significant increase from $397,000 in the same period of 2023. This growth was primarily driven by $1 million in license revenue from the Proliant agreement and a $425,000 success fee from the Inzyme agreement. The company's net loss for Q3 2024 decreased to $203,000, or $0.01 per share, compared to a net loss of $1.61 million, or $0.06 per share, in Q3 2023.

Dyadic operates globally, with 28.1% of Q3 2024 revenue coming from customers outside the United States, primarily in Europe. This geographic diversity demonstrates the company's ability to market its technologies and products internationally.

Liquidity

Dyadic's balance sheet has remained relatively stable, with a current ratio of 5.14 and a quick ratio of 5.14 as of September 30, 2024. The company's debt-to-equity ratio of 0.40 indicates a manageable level of leverage, providing financial flexibility to fund ongoing operations and development initiatives. As of September 30, 2024, Dyadic had cash and cash equivalents of $5.92 million and short-term investment securities of $4.00 million, providing sufficient liquidity to support its ongoing operations and research and development activities.

Strategic Positioning in Alternative Proteins

One of Dyadic's key areas of focus is the alternative protein market, where its Dapibus platform has enabled the development of a robust pipeline of recombinant products. In 2024, the company entered into a development and commercialization partnership with Proliant Health and Biologicals to produce and sell animal-free recombinant albumin products. This agreement included an initial $1 million milestone payment to Dyadic, with the potential for additional success-based payments.

Dyadic has also made significant progress in expanding its portfolio of research-grade recombinant proteins, such as DNASE-1, transferrin, and alpha-lactalbumin. These products are designed to address the growing demand for high-quality, cost-effective alternatives to animal-derived materials in the life sciences, food, and nutrition sectors. The company plans to begin sampling and pre-orders for these alternative protein products in early 2025.

The global albumin market, which is a key focus area for Dyadic's alternative protein efforts, was valued at $6.4 billion in 2023 and is growing at a mid-single digit rate. This market trend supports the potential for significant revenue growth in Dyadic's alternative protein segment.

Leveraging the C1 Platform in Biopharmaceuticals

Alongside its alternative protein initiatives, Dyadic continues to leverage its C1 platform to advance its biopharmaceutical pipeline. The company has established several collaborations with leading pharmaceutical and biotechnology companies to develop innovative vaccines and therapeutics targeting a range of infectious diseases, including COVID-19, avian influenza, and Mpox (monkeypox).

In a notable partnership, Dyadic collaborated with ViroVax LLC to develop a C1-produced ferritin nanoparticle vaccine candidate for Mpox. This effort has yielded promising results, with the companies achieving a production yield of 4.5 grams per liter in just seven days, positioning the vaccine for potential preclinical studies in the fourth quarter of 2024.

Dyadic has also received a $3 million grant from the Bill & Melinda Gates Foundation to fund the development of cost-effective monoclonal antibodies targeting respiratory syncytial virus (RSV) and malaria, further demonstrating the versatility and potential impact of the C1 platform.

In the human and animal health segments, Dyadic has initiated over 15 fully funded vaccine and antibody projects, including partnerships with two top 10 pharmaceutical companies. The company is also developing an adjuvanted avian influenza (bird flu) vaccine in collaboration with ViroVax, which has shown promising results in animal studies.

Navigating Challenges and Opportunities

As Dyadic continues to execute on its strategic priorities, the company has faced challenges inherent to the biotechnology industry, such as the lengthy timelines and regulatory hurdles associated with biopharmaceutical development. However, the company's diversified approach, encompassing both alternative proteins and therapeutic applications, has positioned it to navigate these obstacles and capitalize on emerging opportunities.

The COVID-19 pandemic, for instance, has heightened the demand for rapid, scalable, and cost-effective protein production platforms, playing to Dyadic's strengths. The company's ability to quickly respond to the Mpox outbreak, as well as the ongoing threat of avian influenza, underscores the versatility and relevance of its technologies.

Looking Ahead

Dyadic enters 2025 poised to generate its first product revenues, primarily from the commercialization of recombinant albumin and other alternative protein offerings. The company's partnerships, such as the agreement with Proliant, are expected to drive near-term growth, while its biopharmaceutical collaborations hold significant potential for long-term value creation.

With a strengthened balance sheet, following the $6 million convertible note offering in 2024, Dyadic is well-positioned to continue investing in the development and commercialization of its innovative microbial platforms. The company expects its total cash burn for 2024 to decrease significantly to approximately $4.7 million, down from previous levels, reflecting improved operational efficiency and strategic focus.

As the company navigates the evolving landscape of protein bioproduction, investors will closely monitor Dyadic's ability to execute on its strategic initiatives and capitalize on the diverse opportunities within its target markets. The company's progress in both alternative proteins and biopharmaceuticals, coupled with its improved financial performance and outlook, suggests a promising trajectory for future growth and value creation.

Conclusion

Dyadic International has transformed itself into a versatile biotechnology company, leveraging its proprietary C1 and Dapibus platforms to address the growing demand for efficient, large-scale protein production. By strategically positioning itself in both alternative protein and biopharmaceutical markets, the company has established a diversified business model that holds significant promise for the future. As Dyadic continues to forge strategic partnerships, advance its product pipeline, and improve its financial performance, it is well-positioned to emerge as a leader in the global protein bioproduction landscape.