Executive Summary / Key Takeaways

• Dyadic is executing a strategic pivot, prioritizing near-term revenue generation through the commercialization of high-value recombinant proteins and enzymes in non-pharmaceutical markets (Life Sciences, Food/Nutrition, Bio-Industrial) using its Dapibus platform, while continuing to build long-term value in human/animal health via its C1 platform supported by non-dilutive funding.
• Recent financial results reflect this shift, with Q1 2025 revenue increasing to $393,572 driven by new grant revenue, and FY 2024 revenue increasing to $3.495 million due to license and milestone payments from non-pharma partnerships like Proliant and Inzymes.
• Key commercial launches are anticipated in 2025, including recombinant human serum albumin (RHSA) in Q3 2025 with Proliant and a recombinant dairy enzyme by year-end 2025 with a collaborator, expected to drive recurring revenue streams.
• The company's proprietary C1 and Dapibus platforms offer quantifiable advantages in speed, yield, and cost efficiency compared to traditional production systems, forming a core competitive moat, particularly relevant for addressing the growing demand for affordable biologics and animal-free proteins.
• With $7.35 million in cash and short-term investments as of March 31, 2025, and expectations of sufficient liquidity for at least the next 12 months, Dyadic is focused on executing its commercialization strategy, though future capital raises may be necessary and could be dilutive.

Setting the Scene: A Biotech Platform's Evolution

Dyadic International, Inc. is a biotechnology platform company with a history rooted in leveraging microbial organisms for protein production. For over two decades, the company developed and licensed its proprietary C1 gene expression platform, based on the Thermothelomyces heterothallica fungus, for large-scale industrial enzyme production. A pivotal moment arrived approximately nine years ago with the sale of its industrial business to DuPont (DD), which redirected Dyadic's focus towards human and animal pharmaceutical applications, retaining co-exclusive rights to the C1 platform for these higher-value markets.

Recognizing the lengthy and costly development cycles inherent in pharmaceuticals, Dyadic has recently refined its strategy. While maintaining its commitment to the long-term potential of biopharmaceuticals, often supported by non-dilutive funding, the company is now aggressively pursuing near-term revenue opportunities by expanding into functional recombinant non-animal derived proteins and enzymes for research, nutrition, and industrial markets. This strategic pivot is powered by both the refined C1 platform and the newly launched Dapibus Protein Production Platform, designed to accelerate commercialization in these less regulated sectors. The core investment narrative for Dyadic today centers on its ability to translate its powerful microbial expression technology into tangible, recurring revenue streams from diverse commercial products, while simultaneously advancing its platform for future high-value pharmaceutical applications.

Technological Foundation and Differentiation

At the heart of Dyadic's strategy are its two microbial protein production platforms: C1 and Dapibus. The C1 platform, honed over decades, is based on a filamentous fungal cell line known for its ability to secrete large quantities of proteins. Its historical success in industrial applications demonstrated its inherent advantages in scalability and cost-effectiveness. For pharmaceutical applications, C1 has undergone significant refinement over the past five years, including genetic modifications to remove proteases and other background proteins, as well as glycoengineering efforts, aimed at producing stable, properly folded, and functional therapeutic proteins.

The tangible benefits of the C1 platform are becoming increasingly quantifiable. Management highlights its speed, noting the ability to create stable cell lines within approximately 21 days. Productivity can be impressive, as demonstrated by achieving 4.5 grams per liter of Mpox ferritin nanoparticle vaccine antigen in just seven days in collaboration with ViroVax. Compared to traditional mammalian cell systems like Chinese Hamster Ovary (CHO) cells, C1 is touted as being faster, quicker, and cheaper, particularly in upstream fermentation. Furthermore, in the downstream process, C1 offers advantages by not requiring viral clearance steps common with mammalian cells, potentially speeding up release and reducing costs. Validation for human use was achieved with the successful completion of a Phase 1 clinical trial for a C1-produced vaccine antigen in 2024, demonstrating its safety and ability to induce an immune response.

The Dapibus platform leverages the core strengths and learnings from C1 but is specifically geared towards the accelerated development and commercialization of proteins and enzymes for non-pharmaceutical markets. This platform is designed to capitalize on the reduced developmental costs, shorter timelines, and fewer regulatory hurdles in these sectors.

For investors, the "so what" of this technological differentiation is significant. These platforms represent Dyadic's core competitive moat. The ability to produce high yields of proteins rapidly and at a potentially lower cost provides a distinct advantage in markets demanding affordability and scalability, from low-cost biologics for global health initiatives to cost-sensitive alternative protein markets like cultured meat or industrial enzymes. This technological edge underpins the company's strategy to disrupt established markets and capture new opportunities.

Competitive Landscape and Positioning

Dyadic operates within a competitive landscape that includes large, diversified biotechnology companies, specialized enzyme engineering firms, and established biopharmaceutical players. Direct competitors in protein production platforms and enzyme engineering include companies like Novozymes A/S (NVZMY) and Codexis, Inc. (CDXS). Larger biopharmaceutical companies like Amgen Inc. (AMGN) and life sciences tools providers like Thermo Fisher Scientific Inc. (TMO) also represent competitive forces, either through their own production capabilities, market presence, or complementary technologies.

Compared to Novozymes, a leader in industrial enzymes, Dyadic's C1 platform offers potentially higher protein yields and lower production costs per unit, positioning it for cost leadership, particularly in emerging or price-sensitive markets. While Novozymes boasts a vast market scale and established distribution, Dyadic's niche focus on biologics and its claimed faster development timelines (e.g., for vaccines) could give it an edge in specific segments.

Against Codexis, which specializes in enzyme engineering, Dyadic's C1 technology emphasizes faster processing speeds and lower manufacturing costs. While Codexis' technology may offer high yield, Dyadic's focus on scalable, low-cost production provides a different value proposition, particularly relevant for high-volume applications.

Compared to large biopharma like Amgen, Dyadic is significantly smaller in scale and financial strength. Amgen's established portfolio and deep R&D pipeline are formidable. However, Dyadic's C1 platform's claimed advantages in cost efficiency and potentially faster development could make it an attractive partner for companies seeking to produce biologics more affordably or rapidly, especially for markets where current production costs are prohibitive.

Thermo Fisher Scientific, a leader in life sciences tools, offers broad solutions that complement bioproduction. While not a direct platform competitor in the same vein, their market presence and tools influence the overall bioprocessing landscape. Dyadic's strength lies in its specialized, cost-optimized production platform itself, rather than providing tools for others to produce.

Indirect competitors, such as firms developing mRNA vaccines or gene-editing technologies, offer alternative approaches that could impact the demand for recombinant protein production in certain areas. While mRNA offers speed advantages for vaccine development, it currently faces challenges related to scalability and cold chain requirements, areas where Dyadic's platform could offer a competitive alternative.

Dyadic's strategic positioning is that of a cost-focused disruptor, particularly in markets where high production costs limit accessibility or profitability. Its competitive advantages lie in the quantifiable efficiencies of its C1 and Dapibus platforms (speed, yield, cost, lack of viral clearance). However, its smaller scale and dependence on partnerships for market access and downstream processing are vulnerabilities. The company strategically leverages collaborations (like Proliant, Inzymes, Fermbox, CDMOs) to overcome these limitations, partnering with companies that possess market reach and manufacturing expertise, thereby mitigating some of the risks associated with its size. Customer and supplier dynamics are managed through these partnerships, ensuring access to necessary resources and end markets.

Strategic Execution and Near-Term Commercialization

Dyadic's refined strategy is clearly focused on driving near-term revenue through product commercialization and licensing in non-pharmaceutical sectors. This pivot is already yielding tangible results. In FY 2024, total revenue increased to $3.495 million, up from $2.899 million in 2023, significantly driven by $1.9 million in milestone and license payments from new partnerships. Q1 2025 saw total revenue of $393,572, an increase from $334,617 in Q1 2024, bolstered by new grant revenue.

The Alternative Proteins segment is central to this near-term focus, targeting Life Sciences, Food & Nutrition, and Bio-Industrial markets.

• Life Sciences: This is highlighted as the highest-value, highest-margin segment. A key initiative is the partnership with Proliant Health & Biologics for recombinant human serum albumin (RHSA). Dyadic received $1 million in license revenue in Q3 2024 and anticipates a third milestone payment related to productivity improvements in Q2 2025. The first product launch for RHSA is expected in Q3 2025, with recurring revenue anticipated from profit sharing on commercial sales. Dyadic is also developing a portfolio of DNA/RNA manipulation enzymes, including DNase1 RNase-free, which has demonstrated analytical comparability to reference standards. Sampling is underway, and the company is partnering with an EU-based CDMO for manufacturing validation and initial research-grade production, aiming for commercial availability. Other enzymes like RNase Inhibitors and T7 RNA Polymerase are in development, with results expected by year-end 2025, targeting the multi-billion dollar nucleic acid tools market. Recombinant transferrin and fibroblast growth factors (FGFs) for cell culture media are also priorities, with sampling for FGFs expected in Q2 2025 and human lactoferrin sampling anticipated in late 2025.
• Food & Nutrition: Dyadic is active in the animal-free dairy market. The partnership for recombinant dairy enzymes with Inzymes has progressed, yielding a $600,000 upfront payment and a $425,000 success fee in Q3 2024 for achieving target yields. Scale-up is ongoing, with a commercial launch for the first enzyme expected by year-end 2025. Recombinant alpha-lactalbumin is also a focus, with ongoing sampling and negotiations, targeting research-grade and food applications.
• Bio-Industrial: Collaboration with Fermbox Bio has led to the development of EN3ZYME, a cellulosic enzyme cocktail. Fermbox received a large purchase order in Q1 2025, with deliveries expected soon, which will generate revenue for Dyadic through a profit-split arrangement. Dyadic is also developing enzyme cocktails for the pulp and paper and biogas industries, aiming for commercialization within the next 12 months.

Mid- to Long-Term Value Creation

While the focus is on near-term revenue, Dyadic continues to build long-term value in human and animal health using the C1 platform. This is largely supported by non-dilutive funding, allowing Dyadic to advance its platform's capabilities and validation without solely relying on its own capital. Recent significant grants include a $3.09 million award from the Gates Foundation (Nov 2024) for developing low-cost monoclonal antibodies targeting RSV and malaria, with funding expected through 2026. A $4.5 million grant from CEPI (Mar 2025) via Fondazione Biotecnopolo di Siena (FBS) will advance C1 for recombinant protein vaccine development, with Dyadic eligible for up to $2.4 million as a subcontractor. An additional $2.6 million CEPI grant to UVAXBIO (Mar 2025) will support MERS vaccine development using the C1 platform.

These collaborations, including over 15 fully funded human health vaccine and antibody projects initiated since early 2024 (including two with top 10 pharmaceutical companies), serve as crucial validation points for the C1 platform's ability to produce diverse and complex molecules (e.g., HPV, HIV, RSV, malaria, Mpox antigens, monoclonal antibodies) and demonstrate its potential for speed and cost reduction in regulated markets. The ongoing work on an H5 Avian Influenza vaccine candidate with ViroVax, showing promising preclinical results, highlights the platform's relevance in addressing current global health threats. In animal health, the partnership with Phibro Animal Health (PAHC) continues to advance, with expectations of clinical studies for animal health vaccines by the end of 2025 through the South Africa partner, Rubicon.

These initiatives, while having longer timelines to potential commercial revenue, are critical for establishing the C1 platform's credibility and paving the way for future licensing agreements or partnerships in the high-value pharmaceutical sector. Management views these as essential for long-term value creation.

Financial Performance and Liquidity

Dyadic's financial performance reflects its stage of development and the recent strategic pivot. For the three months ended March 31, 2025, total revenue was $393,572, compared to $334,617 for the same period in 2024. This increase was primarily driven by the recognition of grant revenue ($210,472) from the Gates Foundation and CEPI, which was absent in Q1 2024. Research and development revenue decreased due to a lower number of collaborations (four in Q1 2025 vs. nine in Q1 2024). Costs of revenue increased to $297,658 from $143,955, mainly due to costs associated with the new grant revenue.

Operating expenses saw a decrease in Q1 2025. Research and development expenses were $494,979, down from $522,723 in Q1 2024, attributed to fewer internal research projects. General and administrative expenses decreased by 10.8% to $1.60 million from $1.79 million, reflecting reduced spending in areas like business development, investor relations, and management incentives.

The loss from operations decreased slightly to $2.00 million in Q1 2025 from $2.13 million in Q1 2024. However, the net loss increased to $2.03 million ($0.07 per share) from $2.01 million ($0.07 per share) in the prior year period. This was largely due to a decrease in other income/expenses, net, which shifted from an income of $115,962 in Q1 2024 to an expense of $25,104 in Q1 2025. This change was primarily driven by increased interest expense related to the Convertible Notes and the absence of the gain on sale of Alphazyme recognized in 2024.

For the full year 2024, revenue increased to $3.495 million from $2.899 million in 2023, boosted by license and milestone payments from Proliant and Inzymes. R&D expenses decreased significantly to $2.044 million from $3.297 million in 2023, primarily due to the completion of the Phase 1 clinical trial. G&A expenses increased to $6.135 million from $5.817 million. The net loss for FY 2024 improved to $5.809 million ($0.20 per share) compared to $6.795 million ($0.24 per share) in 2023.

As of March 31, 2025, Dyadic held $5.06 million in cash and cash equivalents and $2.28 million in short-term investment securities, totaling $7.35 million including accrued interest. This compares to $9.27 million as of December 31, 2024. The company expects this liquidity position to be sufficient for at least the next twelve months from the May 14, 2025 filing date. Net cash used in operating activities was $1.95 million in Q1 2025, compared to $1.11 million in Q1 2024. Investing activities provided $0.48 million in Q1 2025, a shift from using $0.65 million in Q1 2024, primarily due to higher proceeds from investment maturities. Financing activities provided $24,249 in Q1 2025 (stock option exercises), significantly less than the $5.82 million provided in Q1 2024 from the issuance of Convertible Notes.

The $6.00 million in 8% Senior Secured Convertible Promissory Notes issued in March 2024 (net proceeds $5.82M) provide working capital. The conversion price was amended to $1.40 per share, and the redemption date was pushed to December 1, 2026. $910,000 of these notes were converted in 2024. These notes add interest expense ($89,243 in Q1 2025, plus related party interest).

While the company expects its current resources to last for the next year, it anticipates continued losses and negative operating cash flows as development continues. The ability to raise additional capital through future offerings, collaborations, or debt remains crucial for financing further development and commercialization efforts, and such activities could be dilutive to existing shareholders. The cash burn for the second half of 2024 was projected at approximately $3 million, contributing to a total expected burn of around $4.7 million for the full year 2024. Grant funding initiatives are expected to contribute to revenue growth in 2025, helping to offset operating expenses.

Risks and Challenges

Investing in Dyadic carries significant risks, typical of a development-stage biotechnology company. The company has a history of net losses and expects to continue incurring losses and negative operating cash flows in the near term. Its ability to achieve profitability and positive cash flow depends on the successful development, regulatory approval (for pharmaceuticals), and commercialization of its technologies and products, or successful sublicensing agreements. There is no guarantee that its strategic or financing opportunities will materialize on favorable terms, if at all, and future capital raises could dilute existing shareholders.

Dependence on a limited number of customers and contract research organizations (CROs) is also a risk; the loss of a significant partner could adversely affect operations. The estimates used in financial reporting, particularly for revenue recognition on collaborations and stock-based compensation, involve significant judgment and could differ from actual results. Litigation risks, though currently deemed immaterial, are inherent in the business.

The long development timelines and stringent regulatory requirements for human and animal pharmaceutical products remain a challenge, which the company is attempting to mitigate by focusing on nearer-term non-pharmaceutical opportunities. While the Dapibus platform aims to accelerate commercialization in these areas, market acceptance and competitive pressures could still impact success. The competitive landscape is intense, and larger, better-funded competitors could pose a threat.

Conclusion

Dyadic International is at a critical juncture, actively transitioning from a primarily platform-development company to one focused on generating tangible revenue through product commercialization. The strategic pivot to leverage both its advanced C1 and accelerated Dapibus platforms for high-value non-pharmaceutical markets is a direct response to the lengthy timelines in biopharmaceuticals and is beginning to yield results in the form of license fees and anticipated recurring revenue from product sales in 2025.

The company's core competitive strength lies in the quantifiable advantages of its microbial expression technology – speed, high yield, cost efficiency, and versatility – which position it as a potential disruptor in various protein production markets. While challenges remain, including a history of losses, the need for future capital, and intense competition, the execution of key partnerships and the anticipated commercial launches in the near term provide concrete milestones for investors to monitor. The continued validation of the C1 platform through non-dilutive grants further strengthens its long-term potential in human and animal health. The investment thesis hinges on Dyadic's ability to successfully translate its technological prowess into sustained commercial success across its targeted markets, demonstrating a clear path to profitability and value creation.