Hello, everyone, and thank you for joining us during the Lytham Partners 2024 Investor Select Conference. My name is Joe Diaz, Managing Partner at Lytham Partners. For this Fireside Chat, we welcome Dyadic Inc., which trades on the Nasdaq under the ticker DYAI. Joining us from the company are Mark Emalfarb, Chief Executive Officer, and Joe Hazelton, Chief Business Officer, to give us an overview of the company. Before we jump into the discussion, I want to remind everyone that management is available for one-on-one meetings throughout the conference. If you have not already signed up and would like to schedule a one-on-one, please visit lythampartners.com/select2024. From there, you can click on the Investor Registration button to make your one-on-one selections. Mark, Joe, thank you for joining us today. We greatly appreciate your time.
Thank you.
Thank you, Joe.
Can we begin by just giving us a brief overview of Dyadic for all those in the audience that don't really know the name yet?
Sure. Dyadic was founded in 1979, and over the last four decades, we've developed and commercialized a novel and proprietary microbial platforms to produce recombinant proteins and enzymes for pharmaceutical and non-pharmaceutical applications. After the sale of our industrial biotechnology business to DuPont in 2015 for $75 million, we reengineered our microbial platforms to produce biologic pharmaceutical projects or products such as vaccines and antibodies for human and animal life science markets. In addition, our focus has expanded to include the production of recombinant products for the alternative food protein and diagnostics through cGMP grade, and nutritional health products for potential use in research, diagnostics, and cell culture media to enable the commercial efforts in non-animal source research products and non-animal food products, such as vegan cheese and other dairy products, cultured meat, as well as other animal-free applications.
Mm-hmm. There appears to be a growing demand for proteins throughout all types of industry. Who needs or who uses these proteins?
Well, proteins are needed and used by virtually everybody on the planet, whether it's to feed, fuel, or heal humankind. We spent 25 years feeding and fueling humankind, and over the last five, six, seven years, we've reengineered our C1 protein production platform to be used for pharmaceutical benefits, to bring access and affordability and health equity to a global patient population. So the company's current business strategy is to accelerate licensing, joint ventures, mergers, and acquisition opportunities for our microbial platforms and recombinant products across the verticals of human health, animal health, and alternative proteins. So we've evolved from mass producing low-cost recombinant enzymes for industrial purposes, to the efficient and cost-effective production of large quantities of vaccines, antigens, antibodies, and other pharmaceutical-grade products.
To enhance their revenue opportunities, the company's recent focus has been on recombinant pharmaceutical and alternative protein products, and further validate our microbial platforms that do not require or may not require the time, expense, clinical and regulatory hurdles that come along with human pharmaceutical applications. One example of this focus is the agreement we signed recently, or at the end of 2023, with an enzyme manufacturing company to develop an animal-free dairy enzyme for use in cheese and other dairy products, and included an upfront licensing fee, milestones, and royalties.
Is there, by any chance, a shortage of these proteins? Or if so, why? Or are they just readily available, and also, are they exotic in any way?
Well, I think we have both commodity enzyme potential products, like casein for vegan cheese, but also there's a shortage of things like lactoferrin and transferrin, and a whole bunch of other things that actually have not been developed recombinantly. They're made and purified from natural sources, and they are very limited and very expensive for many of these applications. So we'll get into some of the subjects later, where we're talking about, for example, recombinant human albumin that's made both for bovine and human albumin, and that's now brought from blood, and there's a whole bunch of reasons, and I'd say exciting opportunities ahead of us there. It's over a $5 billion market opportunity, and Joe's going to talk about that, I think, or I will later on.
Why don't we just get into that right now? What is the size of the market, Joe, as you see, for your protein products?
So, well, our current focus, as Mark said, is on the commercialization of a recombinant serum albumin, and that's for use in diagnostics, cell culture media, nutritional applications, but we have attention to future high-value markets for recombinant human albumin, such as excipient use, and that's used in vaccine stabilization, cell therapy processing, protein and peptide formulation. We recently completed our phase I study that demonstrated the safety of a C1-produced protein in human beings, and we're prioritizing the recombinant vaccine capabilities, such as the current research project that we have with a top five pharmaceutical company, for the development of infectious disease antigens in a very large market disease.
We also, to potentially capitalize on the rise of mRNA vaccines due to COVID and other pandemic threats, we're working with a French biotechnology company, it's bYoRNA, combining their novel eukaryotic bioRNA platform with our industrial proven C1 protein production platform. The aim of the project is to provide a more cost-efficient and productive platform for manufacture large quantities of lower cost, mRNA, and that'll enable broader access to mRNA vaccines and drugs for the global population. But another exciting project we're working on with a biotechnology company is to develop C1 cells to produce hyaluronidase. Hyaluronidase is an extremely large market, and there's actually companies built around hyaluronidase as an entity, but it's an enzyme that breaks down hyaluronic acid, and it's used to increase the absorption of drugs into tissue. In addition, it's also used to manufacture pharmaceutical products, it...
It has increasing popularity of hyaluronic acid filler and other cosmetic applications. So it's not just one pharmaceutical application. A lot of our pipeline has applications across a growing number of market segments. Just one other in addition to the ones I just highlighted, we do have a number of human and animal health collaborations and projects for the development of pharmaceutical vaccines, monoclonal antibodies, along with partnerships and projects for recombinant protein enzymes for human food applications.
And just to add, Joe, just to add to Joe's, you know, sort of summary there, HALO, H-A-L-O, is a public company that's created over a $4 billion market opportunity on hyaluronidase and hyaluronic acid just alone. So we see that as a huge opportunity, and we're currently working on trying to develop that enzyme using our C1 technology platform in collaboration with a large biotech company.
With regards to Dyadic as a standalone company, what does your company bring to the table that's innovative or revolutionary? How does Dyadic differentiate itself from its peers?
Well, I mean, first and foremost, we spent over three decades developing our microbial production platforms, which have the potential to rapidly large-scale, cost-effective production of recombinant antigens, antibodies for pandemic and other biological threats, and for therapeutic drugs for infectious and other diseases, including oncology, arthritis, Alzheimer's, dementia, diabetes. We can do things more efficiently at smaller scale and larger quantities, lower cost. We can turn the saying of health equity to reality, and we're bringing the power of industrial biotech, things we've used with companies like Shell Oil, BASF, Amoco Bio Energy, and DuPont, at up to 500,000 liters scale. So we've been producing large volume for low-cost proteins for decades, at much lower costs and larger volumes than the pharmaceutical industry. So we think we're gonna transform biomanufacturing.
We believe we can do what Elon Musk has done in the car industry to biomanufacturing, and actually make healthcare accessible and affordable to a global population. And I'll give you just a small example, but a critical example. During the pandemic, during Delta, the Delta wave and the variant, in the United States alone, we couldn't keep up with monoclonal antibody production. The existing technologies are too slow, are too inefficient, and too high cost for the U.S. population. That was a 1% deadly disease. If you have things like Disease X, which was discussed in Davos last week, things like pandemic flu, Ebola, Nipah, if those things emerge, those are 30% deadly. So we need to transform biomanufacturing, and we believe at Dyadic, our C1 technology platform is poised and on the path to do that.
We've demonstrated human safety, as Joe pointed out, for a vaccine candidate, now showing for the first time ever, a filamentous fungal protein of industrial scale, mass-produced at low... large volume, low cost, safely and tolerability studies, showing that you can make recombinant protein antigens for vaccines in a more efficient, faster way. We're 300 times more efficient than insect cells. We've demonstrated that in the Zoonosis Anticipation Preparedness Initiative in Europe, and companies like Sanofi and Novavax are using that type of technology. So this isn't something that's marginally better. This is light years ahead in terms of speed, yield, productivity, and cost, which can actually allow health equity to be achieved on a global basis.
But to add onto that, Mark, beyond health equity, Joe, we also can transform the alternative protein industry, by reducing the cost of cell culture media components and other products to commercially viable price points that allow the non-animal lab-grown meat segment, non-animal cheese, vegan cheese, and other dairy products in the nutritional health segments, to expand their broader commercialization through use of our proprietary technology to lower the cost of these recombinant proteins.
So Joe, who do you come up with competition-wise, in the business? Who, who are your main competitors?
I think, obviously there, there's competition everywhere, whether it's from naturally derived sources like, you know, cows and, and other, other forms, but obviously any, you know, enzyme manufacturing companies that have their own platforms. But as we've seen in today's market, most of these can't run with the efficiency and productivity to make these recombinant proteins at high enough levels and low enough prices to enable commercialization in some of these industries like, you know, lab-grown meat. That's been trying to get off the ground for quite a few years now, and unfortunately, the cell culture media costs are so high, they're not able to do so.
So while we do have competition from other cell lines and other companies that have those cell lines, our distinct advantage is that we've been doing this in the industrial space for many years, and now using it to bring that knowledge and expertise to areas that really need it and reduce those costs where they're using pharmaceutical-grade components. Now, we can make those same components, just at much more cost-effective and larger quantities.
... and Joe, there's a couple other, I think, benefits that we've had. You know, over the six, seven years we've been transforming from industrial biotech to pharmaceutical-grade products, we've had to knock out some of the genes that express proteases that would chew down proteins. We've knocked out 14 genes or 15 genes of those, so you have to do that in a way that doesn't damage the cell and prevent the cell from making things, and a lot of the products that Joe's talking about are very sensitive to protease degradation. So that's a huge advantage versus somebody taking an existing system where they haven't put the time and the money and the effort in to do that.
In addition, for things like breast milk components from dairy components, the glycosylation structure and the human glycan structure, we've spent the last six years reengineering these cells to produce human glycan forms or structures, which allow you to use our technology versus others that don't have that benefit and haven't spent the time and energy and the millions of dollars to modify the way these proteins come out. So there's a lot of advantages in terms of, in addition to speed, yield, productivity, it's qualitative, stability. And maybe Joe, I don't know if you have any more thoughts about that, but I think that's sets us apart from 98% of the people out in the world.
Well, I think the other thing is that we also have our own platforms to not only produce products for our customers, but also to produce our own for licensing or even self-commercialization. So we're not dependent on a single product's success, whether it's in pharmaceuticals or alternative proteins, 'cause we have the platform that we can develop and commercialize across multiple industries and segments simultaneously using our microbial platforms, and I think that's also sets us apart.
So tell us about these platforms, the C1 platform, the Dapibus. What markets are being selected for both of those platforms? Where are you going with those platforms?
Yeah, Joe, maybe you can pick that up.
Well, again, the current focus for the company is to engage on products that don't require human clinical trials for commercialization, 'cause that, to us, is the quickest path to revenue. So we're focusing on things like recombinant human albumin, and recombinant bovine albumin, transferrin, things that currently today are at such high prices, that we believe we can make more effectively, efficiently, and cost effectively. We believe that's gonna drive revenue in the short term. For the C1 platform, that's diagnostic materials, reagent materials, up to all the way through cGMP and excipient grade materials. On the Dapibus side, our focus has been on alternative food proteins that are currently either aren't made recombinantly or aren't made recombinantly at price points that enable commercialization.
So that's really the current direction, but we're focusing in those two areas, and we've already seen the fruits of that labor. And, you know, we've already announced that we have a partnership with a top five pharmaceutical company for the development of an infectious disease vaccine, but we also have brought in a licensing deal for a non-animal dairy enzyme. So we're starting to see the fruits of those labor, and it's accelerating in terms of the number of research projects that we have going on, both internally and externally.
You mentioned. I'm sorry. Go ahead, Mark, please.
Well, just to give you an idea of the magnitude of some of these opportunities, you know, as Joe's mentioned, so recombinant human albumin, there's a company called Albumedix that was purchased by Sartorius in 2022 for GBP 418 million, or roughly more than $500 million. Well, we think that our technology, the Dapibus platform and the C1 platform, depending on whether it's gonna be for human use or non-human use, is going to be able to make those products at a higher yield and a lower cost, with the quality attributes that are needed to be successful in that business. And we're working now on doing that, and we've actually had tremendous results in terms of yield, productivity, and so far on the qualities when we've been doing the analytics.
I don't know, Joe, if you have anything you want to add there or...?
No, I think you captured it.
All right.
Joe, you mentioned earlier a partnership in France. I think you also have some in South Africa, Bangladesh, perhaps. What's your business strategy to expand internationally, let's say, in markets like India, China? Do they even make sense?
They do. We are focused on the EU, China, India, among other countries, for potential opportunities to expand our partnerships beyond just emerging countries. The ones you mentioned, obviously, are emerging countries that will benefit from lower cost production systems or pharmaceuticals. But in China, we're evaluating the use of agents to help us navigate, you know, this large and difficult market to penetrate. In the EU, as you mentioned, you know, we've obtained an agreement with bYoRNA to produce mRNA materials, but we've also have a memorandum of understanding with the Fondazione Biotecnopolo di Siena in Italy, and it's headed by one of the leading vaccine experts in the world, Dr. Rino Rappuoli, and they're gonna be focused on the development of vaccines and antibodies for infectious disease use.
So we're using our recombinant albumin products also to initiate discussions with vaccine manufacturers and product suppliers, not only in the U.S., but the E.U., India, and China. And to your point, in addition to those major markets, we're also penetrating some secondary markets, such as Israel, and we had a prior collaboration with the Israel Institute for Biological Research, the IIBR. We did that in 2018. We further expanded that in 2020 at the start of the pandemic, where we worked together, developing preclinical data, which was leveraged in our successful phase I study that Mark had mentioned earlier today.
We also recently entered into a term sheet, which we expect will turn into a commercial agreement with the IIBR for the development and commercialization of products based on our proprietary C1 cell lines, and we can, which will be used to modify and express gene sequences that IIBR provides us. So we are focusing, you know, heavily obviously in the U.S., but expanding into the EU, India, and China, and these other large markets, 'cause we believe that our platforms have a significant role to play there.
In addition, just to give it a little more color, some of those partnerships are not just licensing the technology, they're in on the commercialization and sharing in the opportunity to license out the actual molecules produced from our technology in conjunction with, you know, the Biotecnopolo di Siena, with Rino Rappuoli, with the Israeli government, the IIBR. So we're moving up the food chain, so to speak, but doing it with other people's money and leveraging our technology. And in the US, it's not just about emerging countries, as Joe pointed out, or the EU.
We have three monoclonal antibodies under development right now in conjunction with one of the U.S. government's supply chain customers, and another one with a small biotech company that we hope that we're gonna get good expression, they'll neutralize and bind identical to CHO, as we've seen in the non-human primate study that was successfully done in Germany and in Europe, you know, with the COVID-19 antibody.
So in addition to putting an antigen in human beings that was safe and tolerable and both at the high and low dose showed efficacy, we also started and ran with the European scientist from the ZAPI program a monoclonal antibody that demonstrated safety, tolerability, no antibody-dependent enhancement, and performed similar to or virtually identical to CHO, but that can be reduced in large volumes at lower cost and actually address, you know, a pandemic of a much more magnitude than a COVID-19 for world supply. So there's a lot going on, and I think as we mentioned, I think earlier on within today, Massachusetts General were working on an influenza program that was funded by the DOD. I think they're funded about $5.5 million, and we're providing the influenza antigen in that program.
So there's a variety of things happening at the same time, but what people don't understand at Dyadic, we're not doing 29 different things. We're taking DNA from our customers, making protein, making stable cell lines, producing the protein, giving the customer back the protein to evaluate, for them to look forward to, does it meet the quality? Does it meet the yield? Does it meet the cost projections? And if so, they can move it into animal studies, preclinical studies, and move it forward into clinical trials to bring these products to market, that we can share in the benefit of that, either with upfront access fees, milestones, and royalties, or some other form of joint ventures like we have with the Israelis and the Italians, but we can actually share in a bigger chunk of that opportunity. And we're doing that as well...
Maybe, Joe, you can talk about how we're handling the Rubic situation, Rubic One Health in South Africa, and what that means to us as well.
Well, well, to your point, Mark, the success of the phase I study has allowed us to expand the partnership with Rubic. Earlier this year, we signed an expansion to include not just COVID vaccines, but many infectious disease vaccines and monoclonal antibodies for human pharmaceutical development. But in addition, in Africa and beyond, animal health continues to be one of the foremost, you know, obviously, with the bird flu, continues to be one of the forefront market drivers in that segment, and we've expanded the agreement with Rubic to include animal health proteins and enzymes, or proteins and antibodies for vaccines and therapeutics in the animal health segment. So obviously, we're continuing to expand the pipeline and expand the partnership opportunities, not just in emerging countries, but beyond.
Seeing the expansion of Rubic will enable us to have greater commercialization potential across more disease states and more therapeutic areas.
Given all the opportunities that you have before you, that you're working on, where do you see the greatest revenue opportunities going forward here for the next, let's say, 24 months?
Go ahead, Joe, maybe you know that.
So the greatest opportunities that we're going to have are in recombinant products that don't require human clinical trials for commercialization. Recombinant human albumin is our current priority because it has many off-takes in many different market segments, whether diagnostics or all the way through excipient use. Current recombinant products are more costly in the serum-derived or naturally derived albumins, and that is preventing rapid growth in the recombinant albumin market. Our platforms can enable commercialization across these different grades of products more readily than other production methods due to our low-cost media and high production levels. We believe we can accelerate the recombinant albumin growth in multiple applications, such as diagnostic and research-grade products, for use in testing and product development.
Recombinant human albumin for excipient grade, and that just means that the recombinant albumin is present in the end product for human applications, in things like vaccine stabilization or cell and gene processing applications. These are more expensive than serum-derived excipient products, but also it, the recombinant products can potentially provide more safety, sustainability, and regulatory advantages if they were cost-effective. We believe that the C1 platform can produce large quantities of cost-effective recombinant human albumins, thereby increasing the quantity and reducing the cost for excipient use, making displacement of the serum, albumin derived from natural sources more acceptable and more accessible to the market, similar to what Albumedix has done, you know, with the purchase by Sartorius in 2022.
We believe we can build a platform similar to that, and obviously in a cost-effective way that makes it applicable to a broader segment of the market.
... and, in addition, Joe, I think with, you know, on the pharmaceutical side, if you look at our history on the industrial side, which we're bringing back to life, as Joe pointed out, we already have the dairy enzyme collaboration that we talked about, I think it was October or November last year. It brought on upfront cash payment, milestones, and royalties. We expect to hit another milestone in the next few months on that as well. But the benefit of the industrial business and the model, where we generated over $110 million between non-exclusive license agreements with Shell, BASF, Codexis, AbbVie, and then the $75 million payment from DuPont. With the pharmaceutical industry, we're looking for similar deals, like with the top five pharma.
When they test drive the car, in this case, we take their gene, we make the protein, we give it to them, they look at it. If they like it, and they want to move it forward, at some stage, we expect them to expand and you know, the opportunity of collaboration to add more targets than just this one particular target. And so we're in those discussions with them and others that hopefully bring in upfront cash payments of more substantial amounts than we got from the industrial sector. So cash upfront, milestones, and royalties, and the beautiful thing here is, as they move more and more of these products through regulatory, it establishes greater and greater value for the platform based on the money that they're spending. 80% of all the research that we're doing today is funded by third parties.
So all of that said, what are the primary challenges that Dyadic faces? And what are those potential challenges, and how do you expect to move forward to address those things and move forward?
Again, maybe I'll have Joe start with that one.
Yeah, I mean, the two primary challenges we have, obviously, being a small company, we lack the working capital to accelerate product licensing and commercialization opportunities in diagnostic and food-grade products. Additionally, we still need to continue to validate and develop our microbial platforms to improve quality, productivity, and reduce costs in the pharmaceutical and non-pharmaceutical markets. We're trying to address these by increasing the amount of non products that don't require human development or human clinical trials and regulatory reviews for approval in the diagnostic space, or Mark has pointed out, in the industrial space, in the alternative protein segment, 'cause these are quicker to commercialize and quicker to bring to market.
So we're using our limited, you know, capital and human resources to develop these and accelerate those, 'cause obviously, we've shown last year that we have the ability to generate upfront cash and milestones and royalties from those types of deals. Again, they're a much shorter commercialization cycle for us. So that's what we're trying to do to address, but those are the two primary issues that I see.
What, what is your sense of, of how the company is going to evolve here in the next two to three years? What, what is this company going to look like, let's say, in 2026?
Well, I think the company is gonna look similar to what we're doing today. Again, as I mentioned, we're not doing 29 different things. We're taking gene sequences or amino acids from people, whether it's non-animal proteins, pharmaceuticals, vaccines, antibodies. We're just gonna solve the world's shortage of proteins or the cost advantages or the, let's say, the limitations that many of these products have is yield and cost and volume. And again, we've been running on the industrial side, up to 500,000 liters using glucose as a media. So we can't scale any larger, we don't need to. We're actually scaling down in the pharmaceutical industry 20- or 50-fold. Smaller footprints, lower costs, larger volumes, greater access, so those are the opportunities there.
But we're gonna probably end up spinning off some of these opportunities and building different businesses because it's a platform that can do hundreds, if not thousands of different things and address half a dozen or a dozen, dozen different industries. If you look at animal health, you've got two breaks right there. You've got companion animals, like dogs and cats, could be antibodies, things like Zoetis, or you've got farm animals, where you've got cattle, pigs, chickens, lambs, whatever you want. So they're, they're really two distinct areas. So that could be spun off as animal health for farm animals, animal health for companion animals, or some of these big companies, the conglomerates of the top four, like the Merck, the Boehringer, the Elanco, and the Zoetis.
Many of them have both, so they may, they may want both areas, or some may just want one of those. And then you've got on the human side, for the pharmaceutical industry, you've got antibodies, which is $400 billion worth of products and growing. We can do it faster, we can make more for less, we can do it quicker with a smaller footprint. So as we evolve from a regulatory standpoint, you may spin those out. It could be oncology, it could be Alzheimer's, it could be diabetes separately or all monoclonal antibodies. And then you've got recombinant protein antigens or vaccines, and that we've already demonstrated now. We're light years ahead in terms of speed, yield, cost, and access, and so that could go separately.
And again, it might go for infectious disease as a separate entity versus oncology or some other uses for vaccines, which are growing and expanding. As you know, there's vaccines out there for shingles, HPV. Those are multi-billion dollar opportunities. And so as we progress and things move towards 2026 and get more regulatory things into the clinic, hopefully spent by other people's money, leveraging our platform, we may take a shot on goal and spin off an infectious disease company or a company to work on dementia. Who knows? We've got people coming to us with all kinds of molecules for all kinds of human benefits, with huge market potential that we can take a chunk of, like we...
potentially with the Israeli government and like we're doing with the Italians, where they can take it through phase two and then partner it out, and we don't just get a license fee, we get part of that as a joint effort. So, and then, of course, on the pharma... on the non-pharma side, I mean, Joe could tell you multiple different ways that those things can be spun out into different companies as well. Kind of what Maxygen did for years, where they ended up with five different companies, and some of those are worth more than the parent.
To Mark's point, the biggest shift in our evolution, now that we've built the technologies, now that they're able to be commercialized, is the shift from the R&D and research and development projects to actual commercialization products. Our evolution is about increasing the amount of product opportunities that we have in the pipeline. By doing that, we're gonna be able to more effectively implement what Mark's discussing. Recombinant albumin can be an entirely spun-out joint venture on its own. Transferrin, same thing. Hyaluronidase, same thing. We're trying to build the portfolio of product offerings to increase the amount of higher dollar volume exits that we can have for the company, and it starts with putting more products into the system, and that's what we're doing today.
Well, guys, we're gonna have to leave it at that. Really a fascinating story. Great opportunities ahead of you. We certainly thank you, and we appreciate the overview. Again, greatly appreciated. Before we wrap it up here, a quick reminder to our audience. To anyone that has not already signed up for a one-on-one meeting with Dyadic, please, excuse me, please visit the Lytham