Dyadic International, Inc. (DYAI) Earnings Call Transcript

Good evening and welcome to Dyadic International's Q3 2026 conference call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 12, 2026. And now I'd like to turn the call over to Ms. Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Thank you. Good evening and welcome everyone to Dyadic's third quarter 2026 conference call. I hope you have had the opportunity to review Dyadic's press release announcing financial results for the quarter ended September 30, 2026. The access are released under the Investor Relations section of the company's website at dyadic.com. Before we begin, I want to let you know that due to a Microsoft Outlook issue that has impacted many organizations, including Dyadic, we have not yet filed our quarterly report on Form 10-Q for the quarter ended September 30, 2026. We expect to file the Form 10-Q as soon as the system is back online and within the SEC filing deadline. The financial results we will discuss today are those in our press release, and they will be reflected in the Form 10-Q. On today's call, our President and Chief Operating Officer, Joseph Hazelton, will review our Q3 '26 business and corporate highlights and provide a commentary on the strategic direction of the company. Our CEO, Mark Emalfarb, will provide an update on our biopharmaceutical program, and I will follow with a review of our financial results in more detail, after which we will hold a brief question and answer session. At this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties and other factors that could cause actual results, performance, scientific or otherwise, or achievements to be materially different from those expected or implied by these forward-looking statements. Dyadic expressly disclaims any duty to provide updates to its forward-looking statements, whether because of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Dyadic's reports filed with the SEC. It is now my pleasure to pass the call to our President and COO, Joseph Hazelton.

Thanks, Ping, and thank you, everyone, for joining us today. Over the past several quarters, we've discussed Dyadic's transition from primarily developing protein production technologies toward building commercial businesses around our C1 and Dapibus platforms. During the third quarter, we continued making progress in that transition through initial direct product sales, broader distribution, additional partner-to-partner collaboration, commercialized products, and advancing discussions with companies interested in our technologies and protein production portfolio. While these developments are encouraging, I want to put them in perspective. Our direct commercial sales remain modest, and customer qualification and adoption are taking longer than we originally anticipated. While we still have work ahead of us to establish meaningful and recurring product revenue, however, we are beginning to demonstrate that our protein production platforms can support commercial products through multiple business models, including direct sales, distribution, licensing, and partner-led commercialization. And importantly, we believe our decades of commercial experience put us in a stronger position to pursue larger strategic opportunities. Now, let's walk through some of the developments during the quarter and explain how they connect to our broader strategy. Starting with life sciences, during the third quarter, Dyadic recorded its first direct commercial protein product sales, primarily involving recombinant transferrin and DNase I. These sales are not yet financially material, but they further demonstrate that we can develop and commercialize recombinant enzymes and proteins, validating the potential of our proprietary fungal expression systems and complementing the products already being commercialized through our partners. Our immediate priority is to convert initial purchases and ongoing customer evaluations into repeat business. We continue to see increased sampling requests and customer evaluations, particularly for human and bovine transferrin across research, cell culture, and cultured meat applications. Transferrin remains an important commercial focus because of its role in cell culture media and the potential demand for consistent animal-free alternatives. As we've discussed previously, improvements in production yields and manufacturing economics are important to making these products competitive. The qualification process takes time for higher value segments like cell culture media. Customers need to establish that a replacement protein performs consistently in their specific applications, meets their quality requirements, and can be supplied reliably at acceptable economics. We're supporting those evaluations and working to expand our customer base, but we recognize that the conversion from sampling to recurring purchases has been slower than anticipated. Alongside our direct sales efforts, we continue to expand our commercial reach through third-party distribution. IBT Bioservices has now launched an initial portfolio of six Dyadic-produced research-use-only recombinant protein products through its distribution network. This relationship provides access to an established customer base without requiring Dyadic to build a substantial direct sales organization. We're also evaluating additional products for distribution and pursuing opportunities with other distributors and commercial partners. Our objective remains to build a capital-efficient commercial model that leverages established channels and partners. Another important part of our strategy is working with established companies that can take products developed using our platforms into their respective markets. ProLiant Health and Biologicals continues to expand its commercial activities around AlbuFreeDx, its recombinant human serum albumin produced using Dyadic's C1 platform. ProLiant has been presenting performance and analytical data supporting applications in diagnostic assays and protein stabilization, and has outlined plans to introduce additional products targeting cell culture media and cell and gene therapy applications. These activities provide an opportunity to expand the number of commercial applications for animal-free albumin with potential future revenue participation for Dyadic under our commercial arrangements. In food and nutrition, our partner Inzymes has now commercialized its second chymosin product using our Dapibus platform. In November, Inzymes informed us that its first commercial sale of Dapibus-produced camel chymosin occurred in October. As a result, we expect to receive a $225,000 contractual payment and recognize the associated revenue during the fourth quarter. This follows the earlier commercialization of bovine chymosin and further demonstrates the ability to develop and commercialize different products using the Dapibus production system. What is particularly relevant about Inzymes is that these are established commercial organizations bringing products produced with Dyadic's technologies to market. Although the revenue contribution to Dyadic remains at an early stage, these relationships provide evidence of commercial applicability that can be valuable when evaluating broader licensing, supply, and strategic partnership opportunities. Also in our food and nutrition business, alpha-lactalbumin remains one of our highest priority development and commercial opportunities. We continue to advance our collaboration with BrigBio to develop and scale Dapibus-produced bovine alpha-lactalbumin, an animal-free dairy protein with potential applications in nutritional products. Recently, we announced an expanded strategic collaboration with BrigBio and Strive Nutrition, bringing together complementary capabilities across the entire value chain, from Dyadic's Dapibus protein production platform and strain optimization expertise to manufacturing scale-up, commercialization, and integration into finished consumer products. Importantly, this collaboration aligns protein development and manufacturing capabilities with Strive Nutrition, the intended end customer, which plans to integrate our precision-fermented animal-free alpha-lactalbumin into its next-generation nutritional products. We believe this integrated approach provides a more direct pathway toward commercial scale production, market adoption, and potential recurring revenue opportunities. Our technical focus remains on improving production yields, protein quality, and manufacturing economics to support competitive commercial scale production. While we're encouraged by the progress, further optimization, application testing, regulatory work, and scale-up remain necessary before commercial production can be established. We're also continuing discussions with additional global companies regarding potential licensing, development, and commercial arrangements involving alpha-lactalbumin and other animal-free proteins in our portfolio. These discussions are particularly relevant because the larger food and nutrition markets require manufacturing capacity, capital investment, regulatory expertise, and established commercial distribution. Our strategy is to work with companies that already possess these capabilities rather than attempting to build the entire commercial infrastructure ourselves. Beyond bovine alpha-lactalbumin, we have developed production strains for human alpha-lactalbumin and human lactoferrin and are actively exploring licensing and strategic partnership opportunities for these products. We've also initiated development of recombinant bovine lactoferrin, further expanding our portfolio of animal-free nutritional proteins. In addition, we continue to advance other dairy proteins and enzymes through internal development programs and external collaborations, broadening the range of potential applications and commercial opportunities for our platforms. We believe this expanding portfolio, combined with growing interest from potential commercial partners, positions Dyadic to pursue broader strategic relationships across the food and nutrition market. In our bioindustrial segment, we continue to expand applications for our Dapibus platform across industrial enzymes and biomass processing. Our partner, FermBox Bio, has launched Enterizyme, a Dapibus-produced enzyme product targeting biomass processing applications. We're also developing additional enzymes for use across biofuels, food and feed, and textile and paper processing markets. We are seeing increased interest in Enterizyme and other industrial enzyme solutions, particularly in the biofuels and ethanol markets, where volatility in energy markets is contributing to renewed interest in alternative fuels and improved production economics. This has translated into a significant increase in sampling activity and discussions with potential customers and strategic partners. We believe our ability to develop customized enzyme solutions combined with the manufacturing efficiency and scalability of Dapibus creates opportunities to address the evolving needs of these industries. As with our other commercial businesses, our focus is on working with partners that bring established manufacturing capabilities, industry expertise, and customer relationships to accelerate commercialization while limiting the capital that we would otherwise need to invest independently. When we look across our businesses, we believe the progress we have made in commercializing products both directly and through our partners is strengthening the strategic value of our C1 and Dapibus platforms. We now have several examples of our technology supporting commercial products and generating revenue through different business models. ProLiant has commercialized recombinant human albumin using C1. Inzymes has commercialized two chymosin products using Dapibus. And Enterizyme has entered the industrial market. These relationships demonstrate our ability to develop products that can be commercialized through established partners. More recently, our collaboration with BrigBio and Strive Nutrition brings together the key elements of the commercial value chain for Dapibus-produced alpha-lactalbumin, from strain development and manufacturing scale-up through to Strive, the intended end customer. This vertically integrated partnership provides a defined pathway toward potential commercial supply subject to successful development, scale-up, and product qualification. Together with our initial direct protein sales and expanding distribution network, we believe these developments provide meaningful progress in commercial validation of our platforms across life sciences, food and nutrition, and bioindustrial markets. While commercial revenues are modest, we believe this growing track record helps us reduce the technical and commercial uncertainties that prospective strategic partners must evaluate, placing Dyadic in a stronger position to pursue larger opportunities. This is increasingly where we intend to focus our efforts. Rather than independently funding the development and commercialization of every product, we believe greater value can be created by partnering with companies that have the capital, manufacturing infrastructure, and commercial capabilities to bring our technologies and products to market at scale. Accordingly, we're placing greater emphasis on larger strategic partnerships, licensing, and supply arrangements, and other potential transactions involving our platforms, products, and commercial programs. We continue to evaluate all options to maximize the value of our platforms and assets, including financing alternatives, strategic partnerships, and other opportunities to strengthen our balance sheet, accelerate commercialization, and support long-term shareholder value. Our objective is to build on the commercial foundation we've established and translate that progress into larger opportunities that can deliver meaningful financial and strategic value for Dyadic and its shareholders. With that, I'll now turn the call over to Mark to discuss our biopharmaceutical programs and the continuing development of our C1 platform. Mark?

Thank you, Joe. The biopharmaceutical development, validation, and strategic operations and opportunities, as Joe discussed, are growing commercial activities to demonstrate the broad applicability of our C1 and Dapibus protein production platforms. In biopharmaceuticals, we continued to build on this foundation by generating technical and preclinical data involving complex proteins, including monoclonal antibodies and vaccine antigens. Our biopharmaceutical strategy remains focused on externally funded development programs and strategic collaborations rather than independently financing costly clinical development programs. By working with established research institutions, foundations, and industry partners, we aim to demonstrate C1's advantages in development speed, productivity, protein quality, scalability, and manufacturing economics, while advancing its potential adoption by pharmaceutical and biotech companies. Let me highlight four important areas of progress. The first is the Gates Foundation program's advance to animal studies. Under our approximately $3.1 million Gates-funded program, C1 achieved productivity yields of approximately 12.1 grams per liter for our RSV monoclonal antibody, RSM01, and 13.2 grams per liter for malaria monoclonal antibody, MAMO1, in seven-day fermentations. Importantly, both C1-produced antibodies demonstrated approximately 90% human N-like glycan structures, supporting C1's ability to produce complex monoclonal antibodies with human-relevant glycosylation profiles. Independent evaluations by Duke University and IQVIA also demonstrated binding and neutralization activity comparable to their CHO-produced counterparts in the respective assays performed. Following the quarter end in October 2026, the Gates Medical Research Institute initiated preclinical animal studies funded directly by the Gates organization, comparing the pharmacokinetics of C1-produced RSV and malaria antibodies with their respective GMP CHO-produced counterparts. Results are anticipated in the first quarter of 2027. These studies represent an important next step beyond laboratory testing towards potential clinical development. Together, the high production yields, human-like glycosylation profiles, and comparable biological functionality support C1's potential to manufacture complex monoclonal antibodies more efficiently and economically than traditional mammalian cell production platforms. Second, we've completed a rapid vaccine antigen development project, reducing timelines from months to approximately 15 days. Through the $4.5 million Coalition for Epidemic Preparedness Innovations-funded program with Fondazione Biotecnopoli di Siena, Dyadic developed a rapid C1 production workflow that reduced their previous development timeline from several months to approximately 15 days, from plasmid to CTAG-purified recombinant protein. We initially demonstrated this with our DYA100 SARS-CoV-2 antigen. This progress was put to test during the Bundibugyo Ebola outbreak when we produced and purified two Scripps Research-designed antigens in approximately 15 days and delivered them to FBS for preclinical studies. These achievements build on encouraging results across multiple preclinical vaccine programs and our completed Phase 1 DYA100 clinical trial, which demonstrated safety, tolerability, and both humoral and cellular immune responses. Together, they support C1's potential to accelerate vaccine development and improve responsiveness to emerging infectious disease threats. Third, we have further advanced our monoclonal antibody development and validation. Building on previously published research in Nature Communications demonstrating the protective efficacy of a C1-produced SARS-CoV-2 monoclonal antibody in nonhuman primates, we achieved another important milestone with Bundibugyo Ebola. We've demonstrated a rapid development process, progressing from plasmid to a clonal production strain and Protein A-purified Bundibugyo Ebola monoclonal antibody in approximately seven weeks. Together with our Gates-funded RSV and malaria antibody results, these achievements provide further evidence of C1's ability to rapidly produce biologically functional monoclonal antibodies at high yields, supporting its potential as an alternative to traditional mammalian cell manufacturing. Finally, we're continuing to advance through C1 third-party-funded collaborations involving CEPI, FBS, Scripps Research, the Gates Foundation, NIAID, NIH-supported researchers, and others. Through our collaboration with FBS, C1 is also being evaluated within the EUR 170 million vaccines hub initiative, with funding awarded at the consortium level rather than directly to Dyadic. These relationships provide valuable opportunities to further evaluate C1 alongside leading vaccine and biological developers, strengthening its scientific and manufacturing validation, and supporting potential commercial adoption. As Joe noted, the commercial value of our protein production platforms does not depend on Dyadic independently developing, advancing, or manufacturing every product. This is particularly important in biopharmaceuticals where clinical development and commercialization can require substantial capital and specialized infrastructure. Instead, our objective is to leverage the technical results and independent validation generated through these externally funded programs to pursue licensing arrangements, funded development programs, technology access agreements, and broader strategic relationships with pharmaceutical and biotechnology companies. We believe our demonstrated ability to rapidly produce complex vaccine antigens and monoclonal antibodies at high yields while maintaining biological functionality can make C1 an attractive option for organizations seeking faster, more scalable, and potentially lower-cost alternatives to conventional manufacturing technologies. While additional validation and development remains necessary, the ongoing animal studies, rapid development milestones, and expanding collaborations continue to strengthen the technical foundation and potential strategic value of C1. Ultimately, our goal is to translate these capabilities into commercial partnerships that can accelerate the development and manufacture of biologic medicines, strengthen pandemic preparedness, reduce healthcare costs, and expand access to vaccines and therapeutics worldwide. Together with the commercial progress Joe outlined, we believe these developments position Dyadic to pursue additional opportunities to monetize our technology platforms, production capabilities, and manufacturing know-how. With that, I'll turn the call back to Ping for the financial review.

Thank you, Mark. I will now go over our key financial results for the third quarter of 2026 in more detail. You can find additional information in our earnings press release and Form 10-Q, which we expect to file as soon as the system is back online within the SEC filing deadline. Total revenue for the three months ended September 30, 2026, was approximately $449,000 compared to approximately $1,165,000 for the third quarter of 2025. The decrease of 61% was driven by a $538,000 decline in grant revenue, reflecting lower activity under the Gates Foundation and CEPI grants, and a $188,000 decline in research and development revenue as several collaboration projects were completed in the prior year period. Revenue for the quarter included approximately $162,000 of research and development revenue, $276,000 of grant revenue, and $10,000 of license fee revenue. For the first nine months of 2026, total revenue was $2.5 million, exceptionally flat compared to the same period in 2025. Total cost of revenue for the quarter was approximately $375,000, a decrease of 63% compared to approximately $1,024,000 for the prior period in 2025. The decrease was primarily related to lower activity levels associated with our grant-funded programs. Internal research and development expenses decreased 25% year-over-year to approximately $430,000 compared to approximately $572,000 in the third quarter of 2025. The decrease reflects a $199,000 reduction in third-party contract research services as we continue to advance programs through externally funded collaborations and maintain disciplined internal R&D spending. For the first nine months, internal research and development expenses were approximately $1.2 million, down 27% from approximately $1.7 million a year ago. General and administrative expenses were approximately $1.45 million compared to approximately $1.48 million in the third quarter of 2025. General and administrative expenses for the nine months increased by $31,000 to approximately $4.9 million compared to approximately $4.8 million in the prior year period, representing an increase of 0.6% year-over-year. Loss from operations for the quarter was approximately $1.8 million compared to approximately $1.9 million in the prior year period. Total other income, net, was approximately $455,000, which includes a non-cash net gain of approximately $530,000 from the change in fair value of the warrant liability related to the warrants we issued in our August offering, net of issuance costs allocated to those warrants. This gain is non-cash and it will fluctuate with our share price in future quarters. Net loss for the quarter was approximately $1.4 million, or $0.04 per share, compared to approximately $2 million, or $0.06 per share, for the third quarter of 2025. For the nine months, net loss was approximately $5.4 million, or $0.15 per share, compared to $5.8 million, or $0.18 per share, for the first nine months of 2025. Turning to our balance sheet and cash, we ended the third quarter with approximately $6 million in cash, cash equivalents, restricted cash, and investment-grade securities, including accrued interest, compared to approximately $8.6 million at year-end. During the quarter, we completed a registered direct offering with a concurrent private placement of warrants, which generated gross proceeds of $2.9 million. On cash usage, net cash used in operating activities was approximately $5.3 million for the first nine months, or approximately $590,000 per month. This figure includes costs of the Gates-funded program, which are paid from restricted cash. We expect our cash usage to continue at a similar level, although it will vary from quarter to quarter depending on the timing of research and development activities, grant funding, and commercial activities. As we mentioned on the call, we have been actively evaluating financing alternatives and other opportunities to strengthen our balance sheet. At the same time, we remain focused on disciplined cash management, expanding commercial revenues, and leveraging third-party funding and strategic collaborations to support development activities. As Joe discussed, we recorded our first direct commercial product sales in the third quarter, and our partners continued to expand the commercialization of products built on our platforms. In addition, following quarter-end, Inzymes confirmed their first commercial sale of our second chymosin product. While these activities are still at an early stage, our objective remains to build recurring product and partnership revenues while carefully managing our operating expenses and capital requirements. With that, I will now ask the operator to begin our Q&A session. Each caller will be allowed one question and one follow-up question to provide all callers with an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. I will now ask the operator to begin our Q&A session, after which Joseph Hazelton will provide closing remarks. Operator?

Thank you. [Operator Instructions] One moment, please, while we poll for questions. Your first question comes from Matthew Hewitt with Craig-Hallum Capital Group. Please state your question.

Hello, and thank you for taking the questions. This is Tollef Kohrman for Matthew Hewitt. Circling back to your opening remarks, could you please describe why adoption is progressing slower than initially expected? Thank you.

I can take that one. So the adoption is a little bit slower because they're incorporating it into their workflows. So when you're doing cell culture media, let's just say for mammalian cell lines, when you substitute a product like transferrin or even an albumin, you need to ensure that that works in process before you would transition into your commercial cell line. So that is taking a little bit longer because there are a little more regulatory hurdles for them to overcome. The research products, though, are picking up because those don't require the same level, let's just say, of regulatory oversight or regulatory scrutiny that some of the products that are used to make human therapeutics are. So while these are not human therapeutic products, they're not actually going into a human being, when you're using it for cell culture media or cell and gene therapy, they're actually being used to produce a human therapeutic. So they do need to evaluate those products to ensure that they meet the quality metrics and perform exactly like the transferrin they're using today, so they don't end up obviously with issues. So that's what's causing the slow—or at least taking a little bit longer time than we had anticipated for them to complete these and obviously incorporate them into workflows.

Awesome. Great. And then could you speak to anything about, necessarily just commentary from customers working with your platforms, how they believe it could progress and their initial thoughts with that? Thank you.

I think in cell culture, the actual feedback is very good. So far, the products have been working in cell culture applications. We've received good feedback and even data from some of the customers demonstrating in certain models, whether it's cultured meat or whether it is mammalian cell lines or even HEK lines, that transferrin is working. So the feedback has been good, that our products are performing as they should, which is obviously what we hope. And ProLiant has actually put out some very good data on the recombinant human albumin that they're producing using our technology that's actually performing better than serum-derived albumin that you get from human blood. So I think the feedback is good and I think we're obviously moving in the right direction.

Thank you. [Operator Instructions] Your next question comes from Alan Stone with Williams Resource Group. Please state your question.

Yes, hi Joe and hi Mark. This is for you, Joe. In terms of the release that we just came out with a day or so ago with the two entities in which you've got a partnership of sorts going, obviously, I don't know and I'm not sure what you can offer in terms of the sharing arrangements and the revenue that will come out of that partnership. But it looks like the next step is one single product that you mentioned. That product at a level of around 200 metric tons a year, it looks like, between a $10 to $16 million business by itself. So if you can give some more color in that area as to how that triumvirate works and how we can add additional products to that area, that would increase the market opportunity higher than the $10 to $16 million range.

It's a great question, Alan, and absolutely. I obviously can't give guidance on what the financials will look like on it. However, you're exactly right. This is one product and one end customer. What is, I guess, different with this partnership than previous ones is Strive Nutrition is the end customer. They've got products in the U.S. market at places like Walmart, CVS—that's where you'll see their products, their free milk products—and we're essentially, we've now vertically integrated the partnership to include the end customer. So as all of these products, or at least in Strive's case, they're starting to move towards animal-free or obviously these higher value proteins for their nutritional products, there are things like lactoferrin or even human alpha-lactalbumin, potentially casein someday. So as you think about alpha-lactalbumin and I also talked about lactoferrin, those are the follow-on products. And remember, Strive is one customer and they're an absolutely wonderful partner, going to be testing some of the protein that we're currently producing in application to see how it performs in their products. And then obviously, the goal is that they'll use it in their commercial products over time. So our goal obviously is to expand that to other potential commercial partners. So it wouldn't just be one order of 200 metric tons, that's just for Strive. That's just what they want to use. It could be another 200, 300, 400 metric tons to somebody else. So that's how those systems or those markets grow based on the number of customers you're able to achieve or are able to attain over time, and then the number of products that they're putting into the different formulations. So depending on whether they're working on, let's say, early life infant nutrition or healthy aging, those type of products, those all have different amounts of different proteins, whether it's alpha-lactalbumin, lactoferrin, caseins, beta-lactoglobulin. It all depends on the products they're looking to make, and again, it differs between customer, but this is just one customer and obviously a great partner to start the process off with.