NASDAQ:DYAI
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3Q:24 Operational & Financial Results
Dyadic International Inc. (NASDAQ: DYAI) released third quarter 2024 operational and financial results in a press release on August 13, 2024, filed its Form 10-Q with the SEC and held a conference call with investors. Since the last quarterly update, Dyadic participated in several industry events around the globe where it updated stakeholders on the progress achieved for the C1 and Dapibus microbial platforms and identified several recombinant proteins of interest. The company has obtained a Certificate of Analysis for three recombinant products which it plans to commercialize: DNAse-1, transferrin and bovine alpha-lactalbumin.
Dyadic has reiterated its objective of targeting the alternative protein, animal health and human health markets. In alignment with this objective, the company signed a deal in June with Proliant Health and Biologicals which completed the third $500,000 payment related to preparing for commercialization of animal-free recombinant albumin products using C1. The product is ready for launch and Dyadic may see a profit share contribution in 1H:25.
Dyadic also received a milestone of $425,000 from Inzymes, a food and dairy producer, for achieving a target yield for dairy enzymes using Dapibus. It received another $107,500 from other research and development revenue that, when added to the $1.0 million received from the two Proliant milestone payments, brought total revenues to $2.0 million, the highest quarterly level of revenues achieved in the last eight years.
Highlights include:
- Development and commercialization partnership with Proliant – June 2024
- Joint Development Agreement with Top 10 global dairy company – August 2024
- Attendance at Bioprocess International – September 2024
- All $1.5 million of Proliant upfront and milestone payments received – 3Q:24
- Completion of development and Certificate of Analysis issued for DNAse-1 – 3Q:24
- Internal project initiated to develop DNA/RNA polymerases, DNA ligase & RNAse inhibitors – 3Q:24
Financial results for the quarter ending September 30, 2024, compared to the same prior year period:
- Revenues were $2.0 million, up 393% from $0.4 million. $1.0 million is related to the Proliant licensing revenue related to the transfer of a production strain and after meeting productivity thresholds for C1 production and another $425,000 is related to a milestone from Inzymes;
- Research and development expenses totaled $856,000, up 4% from $822,000. The increase was attributable to a higher number of collaborations which increased to 11 from seven in the prior year partially offset by the absence of expenses related to the DYAI-100 clinical trial;
- General and administrative expenses were $1.3 million, rising a mere 1%. The change was attributable to higher business development and investor relations expenses offset by decreases in management incentives and accounting and legal expenses
- Interest income was $127,000 vs $106,000. Interest expense was recognized for the convertible debt totaling $128,000 compared to $0 in the prior year;
- Net loss amounted to ($203,000) compared to ($1.6) million. On a per share basis, net loss was ($0.01) vs. ($0.15).
As of September 30, 2024, cash, equivalents and short-term securities totaled $9.9 million compared to $7.3 million at the end of 2023. Cash burn for the first nine months was ($3.3) million compared with ($3.8) million for the comparable 2023 period. Financing cash flows were $5.8 million reflecting the net proceeds from the $6.0 million convertible note issuance in the first quarter. Cash burn guidance for 2024 is ($4.7) million.
Top 10 Dairy JDA
Dyadic announced a joint development agreement (JDA) with a top 10 global dairy company for the development of non-animal alpha-lactalbumin in August. Alpha-lactalbumin is a whey protein found in milk that has several functions and uses. It is an important element in the production of lactose in mammary glands and is an essential component of human and other mammalian milk. The protein is used in nutritional supplements such as protein powders and supplements, especially for athletes. It is valued for its high tryptophan content, an essential amino acid.
Dyadic has recognized the opportunity in animal-free dairy products and the benefits of recombinant production which sidesteps high costs and purification issues that are associated with traditional methods. While the recombinant alpha-lactalbumin market is less than 10% of the broader estimated $700 million dollar market size, it is growing due to the many features that recombinant protein production offers over animal-sourced manufacturing.
Proliant Health and Biologicals Partnership
In June, Dyadic 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 initial payments of up to $1.5 million, part of which will be used to support Dyadic’s technology transfer, scale up and commercialization responsibilities. According to the data collection firm Global Market Research Matrix, 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 with launch expected in 1H:25. We expect terminal profitability to be achieved quickly as assets are already in place. As of the end of the third quarter, Dyadic has received $1.5 million from Proliant in upfront and pre-commercialization milestones.
Recombinant serum albumin has several important uses in medicine and biotechnology. Below we enumerate several but not all of the key areas where it is used:
- Stabilizer and carrier for drugs, particularly biologics;
- Supplement to cell culture media providing nutrients and growth factors;
- Plasma expander for patients with severe blood loss;
- Stabilizer for vaccine formulations;
- Protein purification;
- Diagnostic tests;
- Cryopreservation;
- Medical device coatings for stents and tubing to improve biocompatibility.
Source: Shutterstock Image 2024282582
Development of Recombinant Proteins
Dyadic has been working for some time developing a number of recombinant proteins such as DNAse1, bovine transferrin, and alpha-lactalbumin. The C1 and Dapibus expression systems are able to produce much higher yields of these proteins compared to CHO cells and from animal sources. Dyadic has identified three markets that it can pursue with its own resources. With three Certificates of Analysis in hand and an International Organization for Standardization (ISO) certified Contract Development and Manufacturing Organization (CDMO), Dyadic can produce these research grade materials for sale with only a minimal need for capital. There are numerous hurdles to jump through before sales can take place, but we feel that this opportunity for Dyadic is substantial and may create a strong base to build from for further internal protein production.
Summary
With its highest quarterly revenues in over eight years, Dyadic is well-positioned to generate revenues from the sale of products next year. We do not want to be overly optimistic as we had originally felt this day would have been sooner. However, Dyadic has a credible partner that appears to be on the cusp of product sales into a space with fewer regulatory hurdles. We think it is wise for Dyadic to also focus on producing small-batch, high value, commodity products internally, where it has a distinct cost advantage in order to diversify its opportunities. This is by no means a done deal, but we expect to have further clarity on both the Proliant arrangement and DNAse-1 pre-orders after the turn of the year. In the meantime, Dyadic maintains a strong balance sheet, with minimal cash burn. While the company enumerated numerous active projects in its 3Q:24 press release, our main focus remains on Proliant and DNAse-1. We maintain our valuation of $9 per share.
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