Introduction

Dyadic International, Inc. (NASDAQ: DYAI) is a global biotechnology company that has developed pioneering microbial expression platforms, enabling the large-scale and cost-effective production of proteins for a wide range of applications. Leveraging its proprietary C1 and Dapibus technologies, Dyadic is strategically positioning itself to capitalize on the growing demand for innovative solutions across the alternative proteins, animal health, and human health sectors.

Company History and Strategic Pivot

Dyadic's rich history dates back over two decades, during which the company has established itself as a leader in industrial enzyme production. In 2015, Dyadic made a pivotal decision to sell its industrial technology business to Danisco USA, the industrial biosciences business of DuPont. As part of this deal, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal pharmaceutical applications. This strategic pivot has since positioned the company to address the evolving needs of global industries, from food and nutrition to human and animal therapeutics.

Challenges and Progress

Following the DuPont transaction, Dyadic faced several challenges as it had to rebuild its capabilities and expertise in the human and animal health markets, which were new areas of focus. The company also had to navigate the complex regulatory landscape and establish partnerships with pharmaceutical companies to leverage its C1 platform for the development and production of various biologic products. Despite these hurdles, Dyadic has made significant progress in diversifying its business, developing the Dapibus thermophilic filamentous fungal-based microbial protein production platform for non-pharmaceutical applications such as food, nutrition, and wellness.

Financials and Liquidity

The company's financial performance has showcased its ability to execute on its diversified growth strategy. For the fiscal year 2023, Dyadic reported annual revenue of $2.90 million and a net loss of $6.80 million, with a robust cash position of $6.52 million as of December 31, 2023. The company's operating cash flow (OCF) and free cash flow (FCF) for 2023 were both -$6.73 million.

In the most recent quarter (Q3 2024), Dyadic demonstrated significant improvement in its financial performance. Revenue increased to $1.96 million, up from $397,000 in Q3 2023, driven by $1 million in license revenue from the Proliant agreement and a $425,000 success fee from the Inzyme agreement. The net loss for Q3 2024 decreased to $203,000, compared to $1.61 million in Q3 2023, largely due to the increase in revenue. Operating cash flow and free cash flow for Q3 2024 both improved to -$201,000, compared to -$1.72 million in Q3 2023.

Dyadic's liquidity position remains strong, with $5.92 million in cash and cash equivalents and $4.00 million in short-term investment securities as of September 30, 2024. The company's debt-to-equity ratio stands at 0.40, with a current ratio and quick ratio both at 5.14. In March 2024, Dyadic raised $6.00 million through the issuance of senior secured convertible promissory notes, which are expected to support its near-term revenue growth and commercialization efforts. The notes mature in 2027, and the company received $5.82 million in net proceeds.

The company expects its total cash burn for 2024 to decrease significantly to approximately $4.7 million, reflecting improved operational efficiency and strategic focus on revenue-generating collaborations.

Innovative Microbial Platforms

One of Dyadic's key strengths lies in its innovative microbial platforms, which have garnered significant interest from industry partners and collaborators. The C1 platform, in particular, has proven its versatility in producing a wide range of complex molecules, including enzymes, antibodies, and vaccine antigens. This platform's ability to rapidly develop and manufacture high-quality proteins has positioned Dyadic as a preferred partner for both human and animal health applications.

The C1-cell protein production platform is being used for the development and production of biologic products including enzymes and other proteins for human and animal health applications. Some examples of products that have the potential to be produced from the C1-cells are protein antigens, ferritin nanoparticles, virus-like particles (VLPs), monoclonal antibodies (mAbs), BiTri-specific antibodies, Fab antibody fragments, Fc-fusion proteins, and other therapeutic enzymes and proteins.

Alternative Proteins Market

In the alternative proteins market, Dyadic's Dapibus platform has enabled the company to make substantial progress in the development and commercialization of recombinant proteins, such as human serum albumin, transferrin, and alpha-lactalbumin. These products address the growing demand for animal-free, cost-effective alternatives in fields like cell culture media, diagnostics, and nutritional supplements.

Dyadic's recent partnership with Proliant Health and Biologicals, a leading supplier of purified proteins, exemplifies the company's ability to leverage its technological advantage and tap into lucrative market opportunities. During the third quarter of 2024, Dyadic announced a development and commercialization partnership with Proliant for the commercialization of recombinant human serum albumin products using Dyadic's filamentous fungal microbial platforms. Dyadic received an initial payment of $500,000 in July 2024 and a second payment of $500,000 in September 2024 for completing the transfer of a production strain. The company expects to receive a final payment of $500,000 upon meeting a certain productivity threshold. Dyadic will also receive a share of profits received by Proliant from the sale of animal-free recombinant albumin products.

In September 2023, Dyadic's subsidiary signed a development and exclusive license agreement with Inzymes ApS, a Denmark corporation, to develop and commercialize certain non-animal dairy enzymes using Dyadic's Dapibus platform. In October 2024, the agreement was amended, and Inzymes provided an upfront payment of $600,000 to fund a research collaboration to develop a basket of dairy enzymes. Dyadic is also eligible to receive success fees upon the achievement of certain target yields, milestone payments upon first commercial sale of each product, and royalties.

Animal Health and Human Health Sectors

Dyadic's diversified approach extends to the animal health and human health sectors as well. In animal health, the company has collaborated with partners like Phibro Animal Health to develop innovative vaccines, including a C1-produced avian influenza (H5) ferritin nanoparticle antigen that has garnered significant interest due to the ongoing global bird flu outbreak. Similarly, in human health, Dyadic has established partnerships with top pharmaceutical companies and leading biotechnology firms to advance the development of vaccines and therapeutics targeting infectious diseases, such as COVID-19, Mpox (monkeypox), and respiratory syncytial virus (RSV).

The company is involved in multiple funded research collaborations with animal and human pharmaceutical companies to leverage the C1-cell protein production platform for the development of innovative vaccines, drugs, biosimilars, and biobetters. For the nine months ended September 30, 2024, the company's research and development revenue was $1.25 million, down from $2.08 million in the same period in 2023, due to the winding down of several large research collaborations.

Strategic Focus and Value Creation

Dyadic's strategic focus on near-term revenue generation through its alternative proteins business, coupled with its commitment to building long-term value through its human and animal health pipelines, underscores the company's balanced approach to value creation. As Dyadic continues to execute on its multifaceted strategy, it remains well-positioned to capitalize on the evolving needs of global industries and deliver sustainable growth for its shareholders.

The company operates in one business segment - biotechnology, focusing on developing innovative microbial platforms to address the growing demand for global protein bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health, as well as other biologic products for non-pharmaceutical applications.

Dyadic generates revenue from both domestic and international customers. For the most recent quarter (Q3 2024), 4 out of 11 customers were located outside the US, accounting for 28.1% of revenue. For the first 9 months of 2024, 8 out of 16 customers were located outside the US, accounting for 31.9% of revenue.

The recombinant proteins and enzymes market that Dyadic operates in is expected to grow at a CAGR of 12.5% from 2023 to 2030, reaching over $4.7 billion by 2030. The animal-free dairy products market that Dyadic is targeting is valued at over $26 billion as of 2022, indicating significant growth potential for the company's alternative protein business.

Conclusion

In conclusion, Dyadic International's unique blend of technological innovation, diverse market exposure, and strategic partnerships positions the company as a compelling investment opportunity in the dynamic biotechnology landscape. With a strong foundation in place and a clear vision for the future, Dyadic is poised to drive meaningful impact across a wide range of industries, ultimately unlocking significant value for its stakeholders. The company's improved financial performance, strategic collaborations, and focus on high-growth markets in alternative proteins and biopharmaceuticals demonstrate its potential for long-term success in the evolving biotechnology sector.