Dyadic International Inc. (NASDAQ:DYAI) announced a development and commercialization partnership with Iowa-based Proliant Health and Biologicals to sell animal-free recombinant albumin products produced by C1. The deal includes a $1.5 million upfront payment, part of which will be used to support Dyadic's technology transfer, scale up and commercialization responsibilities.

The global albumin market size was $6.4 billion in 2023 growing at a mid-single digit rate. Proliant is a dominant player in the albumin market and has a facility in New Zealand to source bovine blood product. The initial focus of the partnership will be on the production and commercialization of recombinant human serum albumin products with launch expected in 1H:25.

Recombinant Serum Albumin Applications

Recombinant serum albumin has several important uses in medicine and biotechnology. It is used as a stabilizer and carrier for drugs, particularly biologics, a supplement to cell culture media providing nutrients and growth factors, a plasma expander for patients with severe blood loss, a stabilizer for vaccine formulations, in protein purification, diagnostic tests, cryopreservation, and medical device coatings. In many cases, recombinant albumin is more attractive than animal-based product because it has fewer contaminants and no animal-borne viruses that may be present in naturally derived product. Supply of recombinant albumin is more reliable, avoids ethical issues related to animal use, is preferred by regulatory agencies and customers and is more sustainable than animal-derived product.

C1-produced recombinant albumin offers the additional advantage of being less expensive to produce compared to other expression systems. The cost of producing recombinant serum albumin using C1 versus other popular expression systems would be from 25 to 30% lower. First product sales could be in 1H:25 as the Dyadic and Proliant teams must complete the technology transfer, scale up and commercialization activities. The deal between the two companies will provide an undisclosed share of Proliant's profits to Dyadic, which we estimate could be from 10 – 15% of total C1 derived recombinant albumin revenues.

Proliant Health & Biologicals Overview

Proliant Health & Biologicals is a private manufacturer of proteins that serves companies in the microbiological, life sciences, biopharmaceutical and veterinary sciences around the world. The company has two production plants that host its closed-loop manufacturing process with one located in Boone, Iowa and the other in Feilding, New Zealand. The facilities produce product according to FDA cGMP standards. The New Zealand facility provides bovine blood product for processing in Iowa and subsequent global distribution. Proliant provides products in the Diagnostics, Cell Culture and Nutrition space. This includes bovine serum albumin, bovine gamma globulin, purified proteins, and digestive and gut health products.

Partnership Analysis

Dyadic makes a bold move into the animal-free recombinant albumin space with this partnership announcement. The deal, which offers a small upfront to cover the costs of technology transfer and scale up, should set up the partners to have first sales of recombinant human albumin in C1 by 1H:25. The arrangement offers many benefits to the production of recombinant serum albumin including faster production, fewer contaminants compared with animal derived product and lower cost. Combined with Proliant, which has a deep bench of customers, we think that Dyadic and its C1-derived product can make headway into the space. The superior product can potentially take share from other animal-sourced and recombinant albumin and possibly expand the market as the lower cost product will support development of new uses.

Financials

For the full year 2023, Dyadic reported annual revenue of $2.9 million and a net loss of $6.8 million. Operating cash flow was -$6.7 million and free cash flow was also -$6.7 million. In the first quarter of 2024, revenue decreased to $335,000 compared to $934,000 in the same period a year ago due to the winding down of several large research collaborations. Cost of research and development revenue also decreased to $144,000 from $727,000. R&D expenses for Q1 2024 decreased 35.5% to $523,000 from $811,000 as the company wound down its Phase 1 clinical trial for the DYAI-100 COVID-19 vaccine candidate. General and administrative expenses increased 20.9% to $1.8 million from $1.5 million, driven by higher business development, investor relations, audit and management incentive costs. The company reported a net loss of $2.0 million, or $0.07 per share, in Q1 2024 compared to a net loss of $956,000, or $0.03 per share, in the prior year period.

Liquidity

On March 8, 2024, Dyadic issued $6 million of 8% senior secured convertible notes due 2027 in a private placement. The notes have a conversion price of $1.79 per share and were purchased by insiders including the CEO and a 5% shareholder. As of March 31, 2024, the company had $12.1 million in cash and investment securities, up from $7.3 million at the end of 2023. Management believes the new financing will support near-term revenue growth and accelerate commercialization efforts in both pharmaceutical and non-pharmaceutical applications.

Recent Developments

Human Health Sector

In the human health sector, Dyadic reported positive results from the Phase 1 clinical trial of its DYAI-100 COVID-19 vaccine candidate, meeting the primary endpoint of safety and tolerability while also generating a strong immune response. This has led to over 12 new funded vaccine and antibody projects with industry partners, including 5 with two top 10 pharmaceutical companies. Dyadic is also collaborating with the Israel Institute for Biological Research and Rabian BV in the Netherlands on infectious disease solutions leveraging the C1 platform.

On the therapeutic protein front, Dyadic published preclinical data in Nature Communications showing that a C1-produced COVID-19 monoclonal antibody demonstrated broad neutralization and protection against Omicron and earlier variants in animal studies. A non-human primate challenge study also indicated high levels of protection against the Delta variant, validating the safety and efficacy of C1-produced antibodies.

Animal Health Sector

In the animal health sector, Dyadic is focused on zoonotic diseases with the potential for spillover, such as the H5N1 avian influenza virus. Preclinical testing of a C1-produced, adjuvanted H5N1 ferritin nanoparticle vaccine candidate has shown promising results, potentially enabling rapid, large-scale and low-cost manufacturing of up to 300 million doses.

Alternative Proteins Segment

Turning to the alternative proteins segment, Dyadic is making progress on several fronts. The company has completed initial analysis and obtained Certificates of Analysis for its recombinant human and bovine albumin, demonstrating comparability to commercial reference standards. This has led to a term sheet with a global albumin manufacturer and distributor to license and commercialize Dyadic's recombinant albumin, with potential first sales within 12 months.

Dyadic is also advancing its portfolio of recombinant non-animal dairy products, including alpha-lactalbumin, beta-lactoglobulin and lactoferrin, targeting the rapidly growing $26 billion animal-free dairy market. The company's 2023 agreement to develop and commercialize non-animal dairy enzymes using the Dapibus platform has already generated upfront payments and is expected to yield success fees in 1H:2024.

Beyond dairy, Dyadic is developing several bioindustrial enzymes for applications in nutrition, biogas, biofuels and biorefining. One enzyme for the biofuel industry is currently being tested by potential customers through a partnership with Fermbox.

Outlook

With the $6 million convertible note financing completed in Q1 2024 and recent leadership changes, including the appointment of Patrick Lucy as Board Chairman and Joe Hazelton as Chief Operating Officer, Dyadic is well-positioned to execute on its strategic objectives and drive near-term revenue growth across its human health, animal health and alternative proteins initiatives. The company's unique microbial protein production platforms, C1 and Dapibus, continue to attract significant interest from industry, academia and government partners, validating their potential to enable the rapid, low-cost development and manufacture of a diverse array of biologic products.