Good evening and welcome to the Dyadic International First Quarter 2025 Financial Results Conference Call. Currently, all participants are in a listen-only mode. Following management's prepared remarks, there will be a brief question-and-answer session. As a reminder, this call is being recorded today, May 14, 2025. I would now 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 International's Q1 2025 conference call. I hope you have had an opportunity to review Dyadic's press release announcing financial results for the fiscal year ended March 31, 2025. You may access our release and Form 10-Q under the Investors section of the company's website at dyadic.com. On today's call, our President and CEO, Mark Emalfarb; and our Chief Operating Officer, Joe Hazelton, will give a review of our Q1 2025 business and corporate highlights and provide commentary on the strategic direction of the business. I will follow with a review of our financial results in more detail. We'll then hold a brief Q&A 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 Dyadic's actual results, performance, scientific or otherwise, or achievements to be materially different from those expressed 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 CEO, Mark Emalfarb. Mark?

Thank you, Ping. Welcome, everyone, and thank you for joining Dyadic's Q1 2025 conference call. In Q1 2025, Dyadic continued its transformation by focusing on commercializing high-value, high-demand recombinant enzymes and proteins using our proprietary C1 and Dapibus microbial expression platforms for the development of functional recombinant solutions and proprietary production strains to manufacture large quantities of precision-engineered proteins and enzymes for use in life science, nutrition, and industrial applications. We are leaning into our core strengths aimed at driving sustainable growth in non-pharmaceutical sectors with strong demand and clear market opportunities to target pressing market needs. While we maintain strategic partnerships in vaccine and therapeutic developments such as with the Coalition for Epidemic Preparedness, CEPI, the Gates Foundation, and Fondazione Biotecnopolo di Siena, FBS. The core of our growth strategy is now centered on products in the high-value life sciences, bioactives, ingredients, and industrial markets such as cell culture, media, nucleic, and other enzyme markets that can drive recurring revenue. As we move forward, Dyadic remains deeply committed to delivering sustainable value to our shareholders and partners. With a growing pipeline, a strong network of collaborators, and platforms built for efficiency and scalability, we are well-positioned to lead in the global production of enzymes, alternative proteins, and biopharmaceuticals, meeting the demands of today and shaping the solutions of tomorrow. I will now turn the call over to Joe Hazelton, our Chief Operating Officer, who will provide you with an update on our Q1 progress towards exploiting commercialization opportunities. Joe?

Thank you, Mark. We are increasingly focused on building a strong portfolio of commercial-ready non-pharmaceutical products across the life sciences, bioactives, ingredients, and industrial sectors, areas where our expression platforms offer significant advantages in speed, scalability, and cost efficiency. In these segments, we're developing and advancing a diverse range of high-value recombinant proteins, enzymes, and bioactive ingredients that are well aligned with growing global demand for sustainable animal-free solutions. Our top commercialization priority lies in the cell culture media space, a market valued at over $6.1 billion globally and growing at a robust 13% compound annual growth rate. Within this segment, through our collaboration with Proliant Health & Biologicals, we expect the launch of recombinant human serum albumin in Q3 2025. This product is designed to replace animal-derived components in key markets such as diagnostics, medical device coatings, gene therapy products, and chemically defined cell culture media. We also anticipate achieving a third milestone payment related to productivity improvements in Q2. In parallel, we're advancing our recombinant transferrin, which has demonstrated comparable cell growth performance to reference standards in preliminary studies. Sampling programs are active and we are engaged in early-stage partnership discussions. Additionally, we are developing fibroblast growth factors, or FGFs, a critical class of proteins for regenerative medicine and cell-based manufacturing. Our recombinant FGF products have shown promising bioactivity in cell proliferation assays and we plan to begin sampling in Q2 2025 to accelerate partner engagement. In the area of DNA and RNA manipulation tools, we are making notable strides to address growing market demand. Our recombinant DNase1 RNase-free enzyme is a key reagent in gene therapy, biopharma production, and molecular diagnostics. To bring this product to market, we're working closely with a European Contract Development and Manufacturing Organization, or CDMO, to validate our production process and initiate the manufacture of research-grade material. Beyond DNase1, we've developed and validated several additional enzyme prototypes, including RNase inhibitors and T7 RNA Polymerase. These are part of our broader strategy to expand into the nucleic acid tools market which is projected to exceed $4 billion globally by 2028. These products are undergoing continued development and optimization with performance results expected by year-end. Turning to nutrition, in the animal-free dairy products market, valued at approximately $26.5 billion in 2023, our work in non-animal dairy proteins continues to gain momentum, offering both functional and nutritional advantages across multiple sectors. Alpha-lactalbumin, a key whey protein, is currently undergoing detailed characterization and is being sampled for applications in research, biochemical analysis, and ultimately food-grade nutritional products. We're seeing increased partner interest in this animal-free alternative as demand rises across the specialized nutrition markets like infant formula, medical nutrition, and wellness products. In parallel, we're advancing human lactoferrin, a multifunctional protein with potential applications in nutrition, research, and pharmaceutical markets, particularly as a functional bioactive, antimicrobial, anti-inflammatory or immune supportive agent. We're currently advancing optimization to ensure high-yield, scalable production and accelerating characterization efforts to further refine the product. Looking ahead, we anticipate initiating sampling efforts with prospective partners and customers in late 2025. Also, within the animal-free dairy space, scale-up is ongoing for the first recombinant dairy enzyme in partnership with our collaborator with a commercial launch expected by year-end. Additional dairy enzyme candidates are progressing under the 2023 license agreement we signed to develop and commercialize non-animal-derived enzyme solutions for dairy processing. In industrial applications, we've made significant progress with enzyme systems that enhance process efficiency. EN3ZYME, a product developed by using our Dapibus expression platform under license to Fermbox Bio and launched in 2024 as a sustainable solution to convert pre-treated agricultural residues into fermentable sugars far more effectively and cost-effectively. Building on that momentum, Fermbox received a large follow-on purchase order in Q1 2025 and production is now underway with deliveries expected in the coming months. This marks an important step forward in driving commercial traction in the bioindustrial market. In parallel, we've developed and are currently testing an enzyme cocktail targeting the approximately $400 million global enzyme market for pulp and paper applications, as well as a candidate cocktail for the biogas industry where demand continues to grow for cost-effective, sustainable processing technologies. While our primary focus is on non-pharmaceutical product commercialization, we continue to strengthen and validate our C1 expression platform through a series of high-impact, fully funded collaborative programs. We believe these initiatives can serve as important proof points for the scalability, speed, and cost efficiency of our microbial production technologies. One such initiative is the $4.5 million grant from the Coalition for Epidemic Preparedness Innovations, or CEPI, awarded to Fondazione Biotecnopolo di Siena, where Dyadic is a subcontractor eligible to receive up to $2.4 million. The grant supports the development of recombinant vaccines against emerging infectious diseases using the C1 platform, potentially enabling more rapid cost-effective pandemic response. Also, we are executing a $3 million program funded by the Gates Foundation to produce low-cost monoclonal antibodies for malaria and respiratory syncytial virus, or RSV. This disease continues to place a heavy burden on global health, particularly in low and middle-income countries where effective antibody-based treatments have been cost prohibitive. In addition, Dyadic has been selected to participate in the European Vaccines Hub for Pandemic Readiness, or EVH, a new EUR 100 million initiative funded by the European Union. This collaborative initiative is designed to build centralized vaccine R&D and manufacturing capacity, and Dyadic's C1 technology will be evaluated among other cutting-edge solutions. This not only highlights the growing recognition of our microbial expression systems but also underscores the growing demand for scalable non-mammalian production platforms in pandemic preparedness efforts. Our technology is also further explored through the CEPI-Uvax collaboration which includes a $2.6 million grant to support the development of a MERS vaccine candidate. At the same time, this program is evaluating the C1 expression system's potential to reduce manufacturing costs and accelerate vaccine production timelines. Beyond human health, we're also demonstrating the flexibility of the C1 platform in growing the animal health sector. Our collaborations with Phibro Animal Health and ViroVax, LLC and others focus on further development of ferritin nanoparticle-based vaccines and other vaccines targeting infectious diseases such as avian influenza or bird flu and other livestock pathogens. The H5 ferritin nanoparticle vaccine candidate produced using our C1 platform in partnership with ViroVax, LLC is being evaluated in poultry. Early trials show the generation of neutralizing antibody responses, supporting the potential for vaccine and diagnostic use. These programs expand how C1 can be used and highlight its strong potential to reduce bioproduction costs in a variety of veterinary applications. These advancements in our life science, bioactive ingredients, and industrial segments reinforce the versatility and scalability of our C1 and Dapibus platforms across diverse market segments. As we continue to translate scientific innovation into commercial opportunities, it's equally important to maintain a strong financial foundation to support our growth. With that, I'll now turn the call over to our Chief Financial Officer, Ping Rawson, who will walk through our first quarter 2025 financial results. Ping?

Thank you, Joe. I will now go over our key financial results for the quarter ended March 31, 2025, in more detail. You can find additional information in our earnings press release and Form 10-Q which we filed earlier today. Total revenue for the quarter ended March 31, 2025 increased to approximately $394,000 compared to $335,000 for the same period one year ago. The increase is driven by the rise in grant revenue of approximately $210,000 from the Gates Foundation and CEPI in 2025, whereas there was no grant revenue for the three months ended March 31, 2024. The cost of research and development revenue for the quarter ended March 31, 2025 decreased to approximately $126,000 compared to $144,000 for the same period a year ago, a reduction attributed to the declining number of collaborations in 2025. The cost of grant revenue for the quarter ended March 31, 2025 was approximately $171,000 compared to $0 for the same period a year ago. Research and development expenses for the quarter ended March 31, 2025 dropped to $495,000 compared to $523,000 for the same period a year ago, reflecting a decrease in ongoing internal research projects. General and administrative expenses for the quarter ended March 31, 2025 decreased by 10.8% to $1,596,000 compared to $1,789,000 for the same period a year ago. This decrease was driven by reductions in business development and investor relations expenses of $97,000, management incentives of $78,000, and accounting and legal expenses of $41,000, which were partially offset by other increases of $34,000. The loss from operations for the quarter ended March 31, 2025 was reduced to $2,002,000 compared to $2,126,000 for the same period a year ago. The net loss for the quarter ended March 31, 2025 was $2,028,000 or $0.07 per share compared to $2,010,000 or $0.07 per share for the same period a year ago. As of March 31, 2025, we have cash and investment-grade securities of $7.4 million compared to $9.4 million as of December 31, 2024. We continue to strengthen our balance sheet to support our near-term revenue growth and accelerate our strategic objectives of commercialization opportunities for pharmaceutical and non-pharmaceutical applications. With that, I will now ask the operator to begin our Q&A session. I will now ask the operator to begin our Q&A session, after which Mark Emalfarb, our CEO, will provide closing remarks.

Our first question is from John Vandermosten with Zacks.

So congratulations on the Fermbox deal there. That's nice to see that. Can you tell me how the royalty arrangement works with them and how you might recognize some benefit from that contract that they got?

Joe, do you want to go ahead and answer that?

Go ahead, Mark, and then I can fill in.

Yes. So basically, we have a joint venture collaboration with Fermbox, a multitude of different product opportunities, including this one that we're talking about here today. And the profit split is going to be split between the two companies. And we're not getting into the exact details here but it's a fairly large profit split for both of us. So, as it ramps up and lowers its cost of goods and starts delivering these enzymes for this application, we expect that to be quite a large application and we'll fill you in on future quarters on that. I don't know, Joe, is there anything you want to add to that?

Yes. I think the only thing I would add to that is that the revenue sharing is immediate. It's not going to be, I guess, delayed. So, as the sales start to roll in, we'll start to see some revenue coming in from those.

Okay. And I also want to follow up on the albumin arrangement and see if you could comment on the progress here. And then, also if there had been any advanced orders placed by customers for that product through Proliant?

No advanced orders at the current time. They're not actually taking them until the samples have gone out. That's expected within the second quarter here that sampling will begin so that the orders can start being fulfilled and taken in the third quarter. So hopefully, in the second quarter, we'll start to see some of those but we're still getting in the final phases of scaling up and fill and finish. But everything right now is looking positive and we're keeping our fingers crossed and keeping the foot on the gas to make sure that this gets to market as quickly as possible.

Our next question is from Rick Williams with Williams Resource Group.

John asked a similar question regarding Fermbox, but there might be one aspect you haven't addressed, Joe. This is for you. From what I understand, they have won a bid they submitted, although I'm not certain who it was with; I believe it might have been the government. This is what we're discussing, as it could lead to some revenue for us once they begin deliveries. Is there any chance for them to pursue additional contracts with the government or others where we would also have a fifty percent stake?

Dick, thanks for the question. I can't get into exactly the specifics on the order itself but you're absolutely correct. It's not a one and done from a bid standpoint. We're evaluating not only options from a government standpoint but also in the private sector as well. So we're hoping that this continues to grow as we start to see this getting onto the market but definitely not going to be limited to just government.

Our next question is from Paul Rosenbaum with SWR.

Hi Joe, I have a question for you. I've been around for a long time and I own a significant number of shares in this company. From what I heard on this call today, you have a large commercial order and plan to focus on the non-pharmaceutical commercial area. When will either you or Mark begin to allocate less funding from the $4.6 million in research and the $3 million from the Gates Foundation? I’ve been involved for a long time, and there's no revenue coming from there. It's exciting that revenue is expected from the protein area, but when does the Board decide to reduce spending in one area and increase it in the area where revenue is forthcoming? This is not intended as criticism; it's merely an observation on my part. Given my long-term relationship with this company, I believe I am entitled to voice this concern.

Go ahead, Joe.

Yes, I appreciate the question. You certainly have the right to share your opinion, and we welcome it. The key point is that we are currently reprioritizing our resources and focus towards the non-pharmaceutical sector, aiming for revenue generation through commercialization-ready products like albumin and non-animal dairy enzymes. We're not neglecting human health; we've advanced it as far as we can as a company, and now we need to depend on our partners and collaborations to push it further. In the upcoming weeks, months, and years, our emphasis will be on product development rather than platform development. Any necessary platform development will align with the products we are advancing. The toolbox that Mark and the team have built over the past decade has enabled us to do this, and now we just need to allocate resources and focus appropriately in those areas. It's a valid question, and we are indeed moving in that direction.

Our next question is from John Vandermosten with Zacks.

Great. Looking at your non-dairy applications portfolio, what product of those three has the best margins? And then, how does this compare with the reagent proteins in terms of attractive margins?

It's great to note that among our current pipeline, lactoferrin likely has the highest margin potential due to its relatively small concentration in milk products. However, I believe that alpha-lactalbumin has the largest market potential overall, both in terms of volume and margins, because it represents a larger market segment. Although producing it can be more challenging in some systems, we are fortunate that our development is progressing well, supported by a highly productive strain. Initial testing has shown that our product is on par with existing research-grade alpha-lactalbumin available in the market, and we are also conducting application testing in food products, with positive initial results. Therefore, I am cautiously optimistic that we won't need to do extensive additional work, allowing us to progress toward commercialization more swiftly and ramp up production. I understand your concerns regarding some market segments being quite narrow, like the dairy enzyme segment with tighter margins. However, when we delve into specialized medical nutrition and infant formula products, we see higher-value segments that we aim to pursue. I believe alpha-lactalbumin offers the most significant and quickest potential. Though some companies have attempted to develop lactoferrin over the years with limited success, our focus isn't on launching those products ourselves but rather on advancing the products we are developing. Apologies for any confusion.

Okay. No, great detail on that. That's great information.

Our next question is from Tony Bowers.

A couple of different questions. You gave a statistic on the number of paid collaborators dropping from 9 to 4. Is that partly because of the pivot? Is there any color on why folks have dropped out, what results there were? Are they satisfied with the collaboration but just aren't going ahead? It's obviously a very weird environment right now in life sciences. That's the first question. The second is, tariffs are pretty topical right now. Is there any quantifiable tariff problems for you guys with the initiatives you've got going?

You want to answer that first? Or you want me to do that?

Yes, absolutely. You might be better suited to address the tariffs, so let's tackle that first. Currently, we don't perceive a significant issue, but we actually see potential opportunities. When considering onshoring, especially in biologics and manufacturing, that could be a promising area for us. We're looking to enhance our manufacturing capabilities in the U.S. while we already have a solid presence internationally. As for some of the other markets or collaborators that have withdrawn, it's primarily due to our strategic shift. We are concentrating on licensing agreements and product partnerships instead of collaborations that demand extensive use of our resources and possible investments. Our goal is to ensure that our efforts are solely aimed at bringing products to market, whether independently or alongside partners. We're actively engaged in numerous discussions with many term sheets being exchanged, so we anticipate a quick escalation in this area. While I can't share much detail, this shift marks a significant change in our strategy away from pursuing long-term collaborations that can take up to 12 years to yield a product. We aim to develop and market products similar to what we do with Proliant within a timeframe of 12 to 18 months.

And the Fermbox initiative is a return to your old roots. Is it similar to ethanol as an end product?

Yes. You're absolutely right. That is exactly how you would think of it.

Like renewable biofuel. And the thing with Fermbox, it's not just a one-off, as Joe pointed out earlier. We're in discussions with them and on their own for additional partners and collaborators that would like to build multiple plants based on the success of this first customer. So we've been testing different substrates with those enzymes to see how well they get digested and turned into glucose sugars for renewable chemicals and fuels. So it's not a one-off but we think it's a reproducible, consistent growth area for us and for Fermbox, as well as other products, as Joe pointed out earlier, for the pulp and paper and biogas and other things that we're looking at developing. And your question about tariffs and how that would affect us, I think we want to make it clear that the albumin is being produced here in America. So it's not going to affect at all Proliant. So that's a domestic production. And we have other things, the enzymes actually with our dairy enzyme company. It's going to be launching a dairy enzyme that's produced here in America as well. So both of those are being scaled up here in the U.S. So that's a good thing. And then, as Joe pointed out, on biomanufacturing, as you saw, I think the other day, where there's an executive order to reduce the cost of drugs which include biologics which are the most expensive. There's pressure on the pharmaceutical industry that hopefully will be looking for more efficient ways to produce their products so they can maintain their margins as they're getting squeezed on the other side.

That's great. And if I missed it, sorry. Did Ping forecast the burn rate going ahead?

No, she did not.

Okay. Any aspirations...

We're aiming to achieve significant revenue from license agreements, including upfront milestones, similar to what we realized in the third quarter with contributions from Proliant and our dairy milestone. We plan to generate revenue from albumin sales through Proliant, as well as from launching products like transferrin and DNase1, whether independently or in collaboration with various partners we are currently in discussions with. Joe, would you like to add anything?

No. I think probably the decrease in the number of collaborators, too, is due to the fact that we need to take these products further in order to maximize the potential. You look at albumin, just taking Albumedix as an example, the company sold for $500 million but they worked on it for 20 years. Obviously, we don't want to have those types of products. It takes a little too long. But in this segment, we really do need to take these a little further. And if we're going to have more upfront monies and longer or shorter-term revenue projections, we'll need to have these products validated, have production methods at least somewhat up and running and have the protein characterized and the correct assays done because that's what drives the value. If we partner these too early, we're just kind of shooting ourselves in the foot. And that's why we're taking a little bit more time to make sure that we have all the necessary information to extract as much value in our partnerships or in our sales as possible.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to Mark Emalfarb for any closing remarks.

I'd love to thank all of you for joining us today and for your support over the years. In closing, Q1 2025 marked a pivotal step forward in Dyadic's evolution from a development-stage biotech company to a product-driven revenue-generating enterprise. By focusing our efforts on the development of functional recombinant solutions and proprietary production strains to manufacture large quantities of precision-engineered proteins and enzymes for use in life science, nutrition, and industrial applications, we are positioning ourselves and our partners to meet the growing global demand for scalable and affordable animal-free precision-engineered proteins and enzymes. With commercial launches on the near horizon, a robust pipeline backed by non-dilutive funding, and a powerful technology platform, both for C1 and Dapibus, validated across multiple sectors, we believe Dyadic is well on its way to unlocking meaningful long-term value for our shareholders. We appreciate your continued support and look forward to updating you on our progress in the months ahead.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.