Good morning. My name is Scott Henry, healthcare analyst at ROTH MKM Partners. Thank you for joining this fireside chat. This will be webcast. Our focus company is Dyadic International, ticker DYAI. Approximately $50 million market cap company. Participating from the company is Mark Emalfarb, Chief Executive Officer. Let's get started. Mark, thank you for coming to the conference. Could you take a couple minutes, and I think you've got some slides, to just tell us about Dyadic? After that, we'll open it up for discussion. We have about 25 minutes for this event.
Great. Hi, Scott. Good to see you again. All right, that's much better. Anyway, it's great to see you again, Scott. First of all, just to make it clear, we do not have money with Silicon Valley Bank, so that's a good thing for us, and we wish everyone the best. Anyways, Dyadic is a biotech company that has a very interesting history, but our future is even brighter. We've developed a way to make proteins, and we can turn virtually any gene into a protein at very large scale at very low cost. We just started our first phase I in human data trial, and that's really not about a COVID-19 booster vaccine. That's what we're going into trial with.
Just as Moderna and Pfizer took their mRNA platforms for the first time into humans, this is the first time we've put a protein produced from our C1 platform into a human being, and proving safety in that Phase I trial is going to hopefully open up the doors to hundreds if not thousands of drugs over the next decade to be produced and mass-produced at a low cost and affordable for healthcare on a global basis. Safe harbor forward-looking statement here. Basically, again, you know, it's proteins for world health. It's not just proteins for vaccines, drugs, therapeutics. We're also making proteins to help feed and fuel the world, things like for culture and meat, and we'll get into that as we move forward. The technology is a proprietary and patented microbial platforms.
We've developed two different platforms, one the C1 platform for pharmaceuticals and one Dapibus for the non-pharmaceutical proteins, which we'll get into later on. We actually have a strong cash position. We had $14.2 million on Q3 2022. We took in another $1.27 million in the first quarter of 2023. We'll be reporting our K sometime later this month. The technology, as you can see from the slide here, was developed over three decades.
This has been a long journey, an arduous journey of really some incredible opportunities, basically, if you think about December 31, 2015, we brought in $75 million in cash from DuPont and left the industrial biotech business and started to focus on really turning DNA genes into antigens, antibodies, and therapeutic proteins to really just do what Elon Musk did in the car industry, is just transform the biomanufacturing so that people can get affordable access to healthcare on a global basis. This slide here, if you look at it, slide six, goes into the advantages. You can see all the green lights over there on the right with C1, and it really provides us with 100% of the universe. Some of these other technologies are very limited.
They're inefficient, they're slow, they're expensive. They also can only, in some cases like insect cells or baculovirus cells, which are what are used by Sanofi and Novavax for their vaccine platform, can only reach a certain part of the population. They have viruses going out. We can just do it quicker, faster, and cheaper in larger volumes at lower cost. That comes from our industrial background, where we scaled up to 500,000 L, made a lot of protein quick and cheap, and we've leveraged that now into the human pharmaceutical industry. This just kind of gives you the idea of the technologies, and you know, Dr. Jean-Christophe Varenne, who at the time was with Boehringer Ingelheim, one of the top pharmaceutical company, he puts it very clearly here. We far exceeded the expectations.
We were 300-fold more productive than the second place cell line in the program that we ran in Europe. Scott, maybe we take a pause, and you got some questions here.
Yeah, and one of the first things I like to talk about is every company that we invite here for a fireside chat is for a reason, and one of the reasons we selected Dyadic is because it's such a big market opportunity. Protein manufacturing is just a significant high demand opportunity. It reminds me about two years ago, I went to a conference in Boston, and you pop into these breakout rooms, and maybe there's six or seven people there, and I went to visit a Dyadic, had a breakout room, and this room was packed. You know, 50 people from you... The badges, every large pharma cap, large pharma company was there. There's high demand, high interest, so there's that big market opportunity for investors.
That's one of the main reasons we brought Dyadic here today. I guess to get started, Mark, could you talk about, you know, who you make these products for, your three customer segments, human health, animal health, and alternative protein? How should we think about those?
I think if you think about just take a step back, you know, we worked on the industrial space with Shell Oil, BASF, Abengoa Bioenergy, and DuPont. That generated over $110 million in cash between non-exclusive license deals and the acquisition in the industrial business. We were working with the largest companies in their space, okay? Now let's fast-forward and let's go towards, you know, here I want to skip back there, but alternative proteins and animal health and human health. If we go to human health first, we're already working with Janssen, J&J. Janssen's funding the research. They paid us an upfront fee. There's milestones of seven figures and potential nine-figure payments per protein on the back end of that.
If we just take each segment and think about who are we working with, why are they working with us, why are the big companies putting their feet in the water, and hopefully they start swimming deeply and expand their access and affordability to healthcare globally. That's human health. On animal health, we're working already publicly disclosed with Phibro. Actually, I think they're here at the conference from what I saw. They're one of the top 10 animal health companies, and they, again, they have licensed the technology for a certain indication, and they're expanding the research and development to bring more broad access and potentially to license this platform with an upfront cash payment and milestones and royalties for animal health. Then if you go to alternative proteins, we're working with one of the largest food companies.
In this particular case, that food company is working on issues related to non-animal proteins. As you know, the vegan cheese and things like that, you can look it up on our 8-K and who they are. We're not really public. We own with very large company, over $1.5 billion in sales, and they're not publicly traded. If you think about it, we're doing the same thing, non-exclusive deals with upfront cash, milestones, and royalties, as well as our own pipeline. The very largest, most successful companies in each one of those space, and we're talking to dozens of other companies in each one of these space. In human health, top 10, top four pharmaceutical companies, we're actually doing things for companion animal health as well as human health there. Maybe that kinda brings you to where the future looks.
That was really helpful, I do wanna flush one item out, is you do have three customer segments. You did have a fourth, the industrial. Could you just reiterate what you monetized that industrial segment for? I just think it's helpful for investors to think about, "Hey, they took one of their segments, they monetized it for this amount, and where is the current market cap?
Right.
We can think about that.
Here on slide number eight at the bottom, it talks about DuPont. In the case of prior to monetizing it, we actually brought in over $30 million in non-dilutive cash through non-exclusive license deals, as I mentioned, with Shell Oil, BASF, and Abengoa, and then DuPont paid us $75 million. To the point of monetizing things, if you look here, Merck paid $400 million to GlycoFi for what I would call is a much lower productive, less valuable ultimate goal platform. Sanofi paid $750 million for the privilege to use an insect cell that were 300x more productive. J&J paid $2.4 billion for a platform that I believe our platform ultimately will show that it's more powerful, more productive, more robust, and more versatile.
Ligand paid to Pfenex $516 million, and that was for access to only 20% of the protein possibilities. If you remember back on the slide I had showed you earlier that we can hit 100% of those possibilities, and by the way, the blue ones are much more valuable. Hopefully that gives you an idea and answers that particular question you had asked.
It does, and particularly when you compare it to the market cap, you know, of like $50 million, there's significant upside potential here. Shifting to human health, how important is the recent safety data on the COVID vaccine trials, and how should we think about that relative to the validation that provides for the platforms?
I think it's for the human pharmaceutical applications, it's everything. This is safety data for the first time of a protein produced from our platform in a human being. We've been in chickens, cattle, lambs, mice, so we now are in human beings. Once you show the safety for a platform in a Phase I trial, it demonstrates the safety of other proteins that can be produced. It's not about the efficacy, it's about the safety, and it's not about COVID-19 booster, albeit that may turn into a long, long-lasting product like the flu. It's really about the platform safety validation that it could be used then now going forward for things like hepatitis, shingles, HPV. These are multi-billion dollar markets, and most of the world doesn't have access to that.
We can make it affordable and accessible and generate a lot of income, and then we can leverage that data, bring it back into the U.S. and Europe, and go to the high-value markets.
Do you think, you know, getting that human safety data, does that expedite the monetization of partnering with larger pharma companies now that they've seen it's been in humans, they're more comfortable signing up and doing transactions around that technology?
Definitely. I mean, we have the inbound. It's already starting based on the fact that we already dosed all the patients who are 30-plus days or more into the first dosing of the patients, and we're already seeing inbound increasing. The accelerated adoption, not only from big pharma, but from government agencies, from the NIH to BARDA to the FDA, we're in discussions with all of them. 'Cause what we all have to realize is, you know, COVID was the first of the recent pandemics. There's another one gonna come sometime. We don't know when it is. We gotta be prepared. It might be the bird flu, and the bird flu, if you realize, is 50% deadly. If we're not prepared for that, we got a major problem, and guess what? We at Dyadic are already starting to work on bird flu H5N1 vaccine candidates.
We're looking into having discussions about antibodies, 'cause it's one thing about preventing it's another thing about treating it. Dyadic's technology can use proteins. Not only can we produce them for vaccines, but we can also produce monoclonal antibodies for treatments.
Okay, great. On human health, rounding out that segment, what are the upcoming inflection points and catalysts that we should be focused on as investors?
One is the continuing update on the Phase I trial and the safety data. Two is announcements with, I would say, big pharma, small biotech, potential government agencies of expanded deals and license agreements. Those are the things we did before with, you know, for example, Shell Oil, we got $10 million between Codexis and Shell upfront, and we got $15 million combined in the relationship with Abengoa. We got $6 million upfront for the next access fee from BASF, $2 million in funding, $1 million-dollar milestones. We expect to get exponentially more from human health on these deals. Stay tuned. We're working on all those with big pharma, small biotechs, government agencies, et cetera.
Okay. great. Shifting to animal health, as micro-cap investors, one of the key things is validating companies, and finding partnerships that can give us confidence that the technology is viewed strongly in the industry.
Mm-hmm.
Can you talk about your current partnerships, specifically phibro?
Sure. Remember, in animal health, we spent five years before the pandemic funded by the European Union in the Zoonosis Anticipation and Preparedness Initiative. In there, we had already treated cattle and lambs, mice, and had successful not only safety, efficacy, and protection. Phibro is one of the top 10 animal health companies. They're funding R&D. They took a license already on one specific disease. They're in poultry and other animals, and they're funding additional platforms and disease states. We're in discussions with some of the top four, potentially even already working in companion animals with one or more of those as well. Animal health is divided into farm animals, which are basically poultry, cattle, pigs, and then also companion animals, and, you know, companies like Zoetis in the companion animal space, you know, dogs and cats.
We're on both sides of the equation working on that right now.
Okay. Within animal health, what is your revenue model and what is your timeline to revenues?
Our revenue model, again, there is access fees, upfront cash, milestones, and royalties. You know, it's just leveraging the deal we have now with phibro, expanding it, moving into additional disease states, bringing in one or more of the top four animal health companies, which are Elanco, Merck, Zoetis, and Boehringer Ingelheim. We've actually worked with all of those companies and are working with one or more of them, and some of them are actually reaching back in now that they've seen even the phase I data in humans. It's stimulating even more interest even in animal health as well.
Okay, great. Finally, I just wanted to shift over to the alternative protein segment. Your filings, filing suggests a partnership with Leprino Foods, which again, we're always looking for validation of companies that just increase our confidence in the technology. Could you talk about your partnerships in that sector?
Well, you know, as you mentioned on the food side of the business, we're already working with a multi-billion dollar or $1.5 billion company on an alternative protein to in the cheese industry. I'm not really gonna give them the name. I guess you saw the 8-K, so you brought it up. Anyways, the point here is I'm showing you this slide. One of the opportunities, which is a massive opportunity, if you look at here, it addresses animal health, human health, and alternative proteins. It's recombinant human and bovine serum albumin. It's a $5 billion or $6.8 billion marketplace, and this is just ripe for disruption. They can't make enough of this product. It's needed in all these different areas you can see here in pharmaceuticals. It's used in drug formulation. It's therapeutics.
It's used for cell culture, to your point, for cultured meat. One of the problems with the cultured meat space, it's a huge opportunity to grow meat from either cattle cells, chicken cells, fish cells, the media cost is prohibitive, it's gonna restrict them from actually commercializing any significant quantities unless they bring the cost of those media components down. That's contains proteins like serum albumin. Our platform, the Dapibus platform, we've proven in the past in the industrial space with the Shells and the BASF and the Ponce that we can scale, massive scale, large scale production, low cost. We're working on now this particular product, and very soon we expect to get our initial results.
It's looking very good, we're going to be at the Food Tech Conference coming up in San Francisco this Thursday and Friday and meeting with dozens of food companies for their needs because there's all kinds of needs for alternative foods that we can address with this technology.
Is your media cost different than the competition?
Well, first of all, the competition today is mostly made and purified from cattle. It's for example, bovine or recombinant human albumin, it's small. What makes the difference is our technology is much more productive. We expect to be able to drive the costs down dramatically, higher yield, lower cost, and scalability. We've already scaled up to 500,000 L on the industrial side. We can scale it, we can produce large volumes at low cost.
Okay. Among everything we've talked about today so far, Mark, what would you view as your most underappreciated asset? What could investors really benefit from understanding better?
I think what you have to realize is it seems like we're doing too many things with not enough people, but we're not. We're really doing the same thing. People have to realize all we're really doing at Dyadic is we've spent 30 years developing a prolific, hyper-productive, robust, versatile cell line that can be genetically engineered and programmed to make virtually any protein. We're taking sequences of genes, amino acids, whether it's for a vaccine or a drug, or for an animal vaccine or human health, or for an alternative protein or an enzyme. We're just taking sequences, putting them into this hyper-productive cell line, whether it's a C1 cell line or the Dapibus, and then we're scaling that up with our partners to produce large volumes at low cost. We're actually doing almost the opposite of what pharma and biotech does.
Biotech usually takes things and goes in a test tube and then tries to scale. It's called fail to scale. We scaled to 500,000 L. We're scaling down for the pharmaceutical industry, and for the food industry, we've already been at large scale. Our media costs are low, our volumes we can scale that are enormous, and obviously, we can program whatever the large or small customer or our own pipeline we wanna make. The key here is targeting which proteins the world needs in sufficient quantities at affordable cost and how to address that market together with our partnerships and/or on our own in our own pipeline. Our management team here, which I show this slide, is very seasoned. I mean, Ronen Tchelet, our CSO, worked at Codexis on the Shell program.
Shell spent roughly $400 million on their biofuel efforts. We got the advantage of all that technology and updates on our technology and the C1 technology, and we're applying that to what we're doing now. Joe Hazelton comes from Novartis, has a great background in the pharmaceutical industry. He's leading our alternative protein charge. Of course, our board members, we have people from Pfizer, two of them, Merck, and Pfenex, which is one of the companies that we talked about earlier, that service 20% of the world's gene pool, and he got paid $507 million.
Why did South Africa want to do the COVID trial?
South Africa wanted to do a COVID trial first because obviously COVID was a major problem all over the world. What we're doing in South Africa with the Rubic One Health is we're actually bringing to emerging companies, as you can see here, emerging countries, sorry, with the platform, and it's going to allow them to work on obviously not just COVID-19, but things like malaria, HIV, for oncology. The African continent and South Africa, the population can't afford access and affordability of these types of drugs, and so they need help. What we're doing in Africa and also in India and in discussions with other countries around the world is we're embedding our technology so that God forbid, in one, the next pandemic comes, they can actually produce their own products at affordable prices.
Our technology is also more robust in terms of distribution, doesn't need - 20, - 80. Our vaccine's actually been shown to be stable already for up to 18 months in the drug substance. We're really enabling them to bring healthcare and health equity to their population, which before now is really just a buzzword in America and Europe. We talk about it, but we're making sure it's going to happen. That's what we're doing there.
Okay, we're just about out of time. Mark, could you talk about your cash balance and the burn rate and how we should think about that as far as duration?
Well, I think as I mentioned, we had $14.2 million on Q3 2020. We brought in another $1.2 million at the beginning of the year in January, I think Q1 of 2023. Our clinical trial cost last year elevated our expenses to abnormal levels, which were roughly gonna be we estimate around $8 million burn. Now we've reduced that burn for 2023 and going into 2024 'cause we don't need to develop our platform for recombinant protein vaccines. We've done it. It works, it's versatile, it's programmable, it's scalable. We just need to use it and adopt it. 80% of all the R&D projects that we have going on are funded by our customers, whether it be Janssen or others or phibro. Those are being funded or the food company as well.
We're receiving 80% of the money funding. We have a flexible burn rate. We can stop doing all our internal R&D if we had to, but quite frankly, right now we have plenty of money to carry on the projects we're working on and to leverage the technology. Then we expect to get over, like we did with Abengoa , BASF, and DuPont, these upfront access fees in the multimillions of dollars so that then could take us, you know, two years, three years, five years, depending on the money that comes in from those access fees. That's our expectation that we don't need to raise capital. We have enough money now to get through 2024, and if we get in one license fee, it could take us to 2028 or 2030.
This is a question for you. $30 million in price tag, low burn rate, immense opportunities with so many different directions. What does Dyadic need to do to make people understand the opportunity?
Well, I think a lot of times you have to just keep doing what you're doing. I mean, when I look at microcaps, I mean, I could see 20 presentations a week, what makes companies stand out is when they move from being a PowerPoint presentation to a real company. That's usually validation, which can come from partnerships, it can come from significant investment. So you just wanna keep validating the company. You wanna keep adding names that people know spend a lot of money in this sector to invest. When they choose to invest it with you, that's a check mark in that category. I think you just keep adding names, keep validating it, and you just work through.
I mean, in a market like this, there's only so much you can do, but you can prepare yourself to emerge stronger on the other end. That's how I think of it.
Well, Scott, you know what? That phase I trial is going to help us emerge a lot stronger, a lot quicker to accelerate everything that we've been working on. I want to thank you for having us and thank the audience for coming.
Yep. Thank you very much. Look forward to it.
All right. Thanks.