Earnings Call Transcript - DYAI Q1 2026

Operator, Operator

Good evening, and welcome to Dyadic International's Q1 2026 Conference Call. As a reminder, this conference call is being recorded today, May 13, 2026. I would now like to turn the call over to Ms. Ping Rawson, Dyadic's Chief Financial Officer. Please go ahead.

Ping Rawson, CFO

Thank you, operator. Good evening, and welcome, everyone, to Dyadic's First Quarter 2026 Conference Call. I hope you have had the opportunity to review Dyadic's press releases announcing financial results for the quarter ended March 31, 2026. 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 Chief Operating Officer, Joe Hazelton, will review our Q1 2026 business and corporate highlights and provide commentary on the strategic direction of the business. Our CEO, Mark Emalfarb, will provide an update on our biopharmaceutical products, and I will follow with a review of our financial results in more detail, after which we will 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 President and COO, Joe Hazelton. Joe?

Joseph Hazelton, President and COO

Thanks, Ping, and thank you, everyone, for joining us today. As we recently held our full year 2025 earnings call, today, we want to build on the updates we provided in March by focusing on the continued operational and commercial progress we're making across the business and why we believe Dyadic is increasingly well positioned for the future. Over the last several years, we have worked to transform Dyadic from a platform technology company into a commercially focused biotechnology company capable of generating recurring revenues from products, partnerships, licensing opportunities and strategic collaborations. While we're still in the early stages of that transition, we believe the progress made during 2025 and into 2026 demonstrates that the business today is materially different than it was even a year ago. Importantly, products enabled by our microbial production platforms are now entering commercial channels. We have products launched, products being shipped, products being sampled by customers and products beginning to generate revenues through direct sales, OEM distribution, milestone payments, profit-sharing arrangements and strategic partnerships. For investors, the key point is that Dyadic is building multiple potential paths to revenue creation rather than relying on a single product or market opportunity. A strong example is Proliant Health & Biologics' commercial launch of Albufree Dx recombinant human albumin produced using Dyadic's platform technology. Dyadic is eligible to receive a share of the profits from product sales. We believe the significance of this launch extends beyond the economics themselves. It demonstrates that the established industry participants are willing to commercialize products produced using our technology platform and bring them into commercial channels. Similarly, Inzymes has now commercialized recombinant non-animal bovine chymosin after successfully achieving developmental milestones. This is another important validation point for our technology and commercialization models. As additional partners bring products to market, we believe awareness and interest in our platforms will continue to increase. Since these launches and partnership announcements, we've seen growing inbound interest from potential partners, distributors and customers evaluating our technology for additional proteins and enzymes across life sciences, food and nutrition and industrial applications. Our strategy is centered around leveraging our proprietary C1 and Dapibus microbial production platforms to produce animal-free proteins and enzymes for large and growing global markets where scalability, manufacturing economics, supply chain reliability and sustainability matter. We believe our technology is particularly well suited for these markets because the many products we target require stable manufacturing, competitive economics and consistent quality. Traditional production systems can be expensive, difficult to scale or dependent on animal-derived inputs. Our platforms are designed to address those challenges while enabling partners and customers to move toward more sustainable and animal-free solutions. In life sciences, we are focused on recombinant proteins and enzymes used in cell culture media, diagnostics, molecular biology and bioprocessing applications. These are attractive markets because many products are consumables that generate recurring demand once qualified into customer workflows. For example, recombinant transferrin is used in serum-free and animal-free cell culture media and supports cell growth and viability. Demand for transferrin can scale alongside growth in cultivated meat, biologics manufacturing and advanced cell culture applications. During the quarter, we continued to expand customer engagement around recombinant bovine transferrin and received initial purchase orders within the cultivated meat segment. While still early, we believe this is an important indicator of market adoption. These markets typically develop through a progression of evaluation, sampling, qualification, initial purchasing and ultimately repeat ordering as customer production scales. We also continue to advance recombinant growth factors and additional cell culture components designed to support broader transition towards animal-free media systems. Another important milestone was our OEM distribution agreement with IBT Bioservices. Through this relationship, IBT will commercialize Dyadic recombinant products, including DNase-1 and transferrin through its established global distribution channels. We believe this is strategically important because it expands market reach while allowing Dyadic to remain capital efficient. DNase-1 represents another example of how we intend to commercialize products across multiple channels. Together with Fermbox Bio, we commercially launched recombinant animal origin-free DNase-1 earlier this year, and DNase-1 is broadly used in molecular biology, diagnostics and bioprocessing workflows. In Food and Nutrition, we remain focused on large global markets where animal-free proteins may provide functional sustainability and supply chain advantages. Our agreement with BRIG BIO for development of recombinant bovine alpha-lactalbumin is an example of this strategy. Alpha-lactalbumin is a key whey protein with applications in infant nutrition, medical nutrition and functional food products. Under the agreement, development work is underway, including product optimization and application testing with customer sampling currently expected to begin in mid-2026. We're also continuing development activities for recombinant human lactoferrin, another high-value functional protein with applications across nutrition and wellness markets. Importantly, we're prioritizing opportunities where our platforms can address markets that are both large and recurring. We believe this creates the potential for long-term value creation as customers increasingly seek scalable, animal-free and cost-effective production alternatives. In bioindustrial markets, our partnership with Fermbox Bio continues to advance manufacturing scale-up and commercialization activities across multiple products. Fermbox provides an efficient pathway to manufacturing capacity and commercial scale without requiring Dyadic to build significant internal infrastructure. Their EN3ZYME product produced using our Dapibus technology previously fulfilled its first large-scale commercial order and continues expanded sampling activity into additional geographic markets, including Asia Pacific. Across all these initiatives, our commercial strategy remains disciplined and focused. We're emphasizing larger strategic partnerships, leveraging established commercial channels where possible, expanding direct product opportunities selectively and maintaining careful expense management while we continue building the business. We also recognize that investors remain focused on financial performance and stock price, and we understand that Dyadic is still viewed by many as a company in transition. However, we believe the operational progress we made over the last year meaningfully differentiates the business today from where it has been historically. Importantly, this evolution also represents a return to Dyadic's roots. Prior to focusing on biotechnology platform development, Dyadic successfully developed, manufactured and commercialized industrial enzymes globally. Today, we're leveraging the technologies and intellectual property developed over the past decades to build a product-driven business focused on recombinant proteins and enzymes across life sciences, food and nutrition and industrial markets. We now have products commercially launched, product shipments underway, initial purchase orders, established distribution relationships, manufacturing partners and multiple opportunities to build recurring product revenues through direct sales, licensing milestones and strategic collaborations. While we recognize that investors ultimately want to see sustained revenue growth and broader commercial adoption, we believe the underlying foundation of the business continues to strengthen. We now have multiple products commercialized or entering commercial channels, a growing partner network, increasing manufacturing capabilities, expanding geographic reach and a broader set of opportunities to generate future revenues. We believe where Dyadic is heading today is significantly stronger than where the company has been historically, and we remain focused on executing that transition responsibly, efficiently and methodically. With that, I'm going to turn the call over to Mark to discuss our biopharmaceutical programs and broader strategic implications for our technology platform. Mark?

Mark Emalfarb, CEO

Thank you, Joe. While Dyadic's primary commercial focus remains on non-pharmaceutical markets, our biopharmaceutical activities continue to play an important strategic role by validating the capabilities of the C1 platform, generating non-dilutive funding and creating potential future licensing and partnership opportunities. Our approach in biopharma remains disciplined, capital efficient and partner-driven. Rather than independently funding large clinical development programs, we are collaborating with government agencies, global health organizations, academic institutions and industry partners that recognize the potential advantages of flexible and scalable biologic manufacturing technologies. Through collaborations with organizations, including the Gates Foundation and CEPI in collaboration with Fondazione Biotecnopolo di Siena, we continue advancing programs involving monoclonal antibodies and recombinant vaccine antigens while generating additional data, supporting the scalability, flexibility and manufacturing advantages of the C1 platform. Our Gates Foundation supported collaboration funded under an approximately $3 million grant program continues advancing low-cost monoclonal antibodies targeting RSV and malaria with ongoing studies demonstrating comparability between certain C1 produced monoclonal antibodies and CHO-derived antibodies, the current industry standard. We also continue advancing activities under the CEPI supported collaboration through Fondazione Biotecnopolo di Siena, where Dyadic is eligible to receive up to approximately $2.4 million to support recombinant vaccine development, scale up, supporting future manufacturing capabilities and speed to market. Importantly, these programs continue generating data supporting the ability of the C1 platform to rapidly develop and scale complex recombinant proteins, including monoclonal antibodies and vaccine antigens. Beyond these programs, we remain engaged across a broader portfolio of government-supported and partner-funded initiatives involving respiratory viruses, malaria, MERS, rabies and as evidenced by recent events, additional emerging infectious disease applications. Importantly, these collaborations continue expanding the body of data supporting the versatility of the C1 platform across multiple protein classes and therapeutic targets, while also positioning Dyadic for potential future licensing opportunities, milestone payments, royalties, technology access agreements, strategic partnerships and manufacturing relationships. At the same time, we are beginning to see meaningful commercialization progress across our non-pharmaceutical businesses through product launches, initial customer orders, commercial shipments, manufacturing partnerships, distribution relationships and expanding business development activities involving recombinant animal-free proteins and enzymes. We believe these commercial activities not only create potential revenue opportunities, but help validate the scalability and broader applicability of our underlying production platforms. Taken together, we believe Dyadic is continuing to build a diversified opportunity set that combines near-term commercial product opportunities with longer-term strategic platform value. With that, I'll turn the call back over to Ping to review the financial results for the quarter.

Ping Rawson, CFO

Thank you, Mark. I will now go over our key financial results for the first quarter of 2026 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 3 months ended March 31, 2026, was approximately $1.1 million, representing an increase of 182% compared to approximately $394,000 for the first quarter of 2025. The increase was driven by higher research and development revenue of $220,000, including the Proliant Agreement, ongoing grant revenues of $277,000 funded by CEPI and the Gates Foundation as well as milestone revenue of $200,000 recognized under the Inzymes Agreement. Total cost of revenue for the quarter was approximately $792,000 compared to approximately $298,000 for the first quarter of 2025. The increase was primarily related to higher activity levels associated with our research and development and grant funded programs, particularly under the CEPI and the Gates Foundation initiatives. Internal research and development expenses decreased modestly to approximately 4% year-over-year to approximately $476,000, primarily reflecting a slight reduction in the number of active internal research and commercial initiatives during the quarter. G&A expenses increased by $159,000 or 10% year-over-year to approximately $1.8 million. The increase was primarily driven by higher legal and accounting expenses of $221,000 and rebranding and business development activities, partially offset by lower share-based compensation expenses of $110,000 and reduced insurance costs. Loss from operations improved by approximately 5% year-over-year to approximately $1.9 million compared to approximately $2 million in the prior year period. The improvement was mainly driven by the significant increase in revenue and lower research and development expenses, partially offset by higher costs associated with revenue-generating activities and increased G&A expenses. Net loss for the quarter was approximately $1.95 million or $0.05 per share compared to approximately $2.03 million or $0.07 per share for the same period a year ago. We ended the first quarter of 2026 with approximately $6.6 million in cash, cash equivalents, restricted cash and investment-grade securities. Looking ahead through the remainder of 2026, we expect to see growth in product revenues across our Life Sciences and Food and Nutrition business, supported by recent product launches, expanding commercial activities and growing customer engagement. We remain focused on building recurring revenue opportunities while maintaining disciplined cash management and keeping operating expenses generally in line with 2025 levels. As we discussed on our year-end call in March, we continue to believe our existing cash resources will provide cash runway into Q2 2027. We will also continue to evaluate strategic partnerships and capital markets opportunities to further strengthen our balance sheet and support long-term growth. 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 ask the operator to begin our Q&A session, after which Joe Hazelton will provide closing remarks. Operator?

Operator, Operator

The first question comes from the line of Matt Hewitt with Craig-Hallum Capital Group.

Matthew Hewitt, Analyst (Craig-Hallum Capital Group)

Congratulations on your progress. Maybe first up on the recombinant bovine transferrin that you've sent initial customer orders out now. How should we be thinking about that ramp, not just this year, but over the next couple of years? Do you anticipate a nice steady growth in that? Or is it going to be fits and starts at least here out of the gate?

Joseph Hazelton, President and COO

Actually, it's a great question, Matt, and thanks for asking. I anticipate it's going to be steady, but I don't think it will be hockey-stick level growth. What we're seeing is the initial pilot scales are starting to grow, which obviously are small kilogram orders. As we move into actual commercial production, and as cultivated meat products receive regulatory approvals, that's when you'll see the volume start to significantly increase because the amounts needed will grow. But each individual product needs to be approved, similar to how things work in the biopharmaceutical side. If a specific product gets approved for a specific cell line, then another cell line or product would require its own approval. So as these grow, I think it will be sustained growth, but not an immediate explosive ramp. The bigger market is also that it's not just cultured meat. Bovine transferrin is also used in serum-free cell culture applications and diagnostics as well as other bioprocessing and biomanufacturing workflows. So we'll start to see an increase in research use in that category as well. We're also looking at IBT launching this product, so we'll start to see revenues coming from other channels.

Matthew Hewitt, Analyst (Craig-Hallum Capital Group)

Got it. Super helpful. And then maybe a follow-up question for Mark. I think you may have hinted at this a little bit in your prepared remarks. During COVID, there was a lot of commentary about how C1 could help accelerate and expand the opportunity for COVID vaccines. And obviously, there's been a lot of headlines over the past couple of weeks regarding the Hantavirus. I'm curious if that presents a similar type opportunity and whether you think that C1 could help with potential vaccines or therapeutics for that virus as well.

Mark Emalfarb, CEO

Yes, Matt, thanks. It's a good question. I know we could help. We've developed the technology further since COVID. During COVID, we were faster, quicker and cheaper than, for example, insect cell technologies used by some companies. In the CEPI program, this is important because third-party funding from CEPI, the Gates Foundation and others supports advancing the technology; it's faster and better today in terms of the ability to get to production quickly and produce more with higher quality complex proteins. In the CEPI program with Rino Rappuoli and the Fondazione Biotecnopolo di Siena, we've demonstrated that from a codon-optimized plasmid within under three weeks we can have stable cell lines, run fermentations and reach initial stages of purification of high-yield, high-quality proteins that match binding and neutralization for antibodies and neutralization for vaccine antigens. I think it's important to focus on monoclonal antibodies as well as vaccines. In a high-fatality disease scenario, antibodies can be critical because vaccines can be too late for immediate treatment. We can produce antibody proteins much faster in larger volumes and more affordably without some of the constraints of other systems. This funding is critical not only for Dyadic, but for broader public health preparedness.

Joseph Hazelton, President and COO

And I would add, Matt, that we are in a different place than during COVID. We now have first-in-human data. Between COVID and today, we completed a Phase I study that demonstrated a C1-produced protein was safe for human use. We also have nonhuman primate studies completed with some monoclonal antibodies. So when you look at derisking the platform for human therapeutics, in a pandemic situation, we're in a much stronger position. While no one hopes for a pandemic, should one occur, we are better positioned for funding opportunities and partnerships in that context. We'll continue to focus in that area.

Operator, Operator

The next question comes from the line of John Vandermosten with Zacks.

John Vandermosten, Analyst (Zacks)

I'd like to dig into the relationship with Intralink. Joe, I recall you were heading to Asia to talk to some prospects they identified. Can you tell us how that's been going with them? Have you made any movement with any of the people they connected you with?

Joseph Hazelton, President and COO

Absolutely, John, and great question. Yes, we've expanded our agreement, as noted in the press release, to include Europe now. Essentially, they expand our business development footprint very cost efficiently. They generate initial customer development and engagement, after which Mark and I step in as things progress. We've had significant initial success in Japan with customer engagement. We're identifying product opportunities and have shipped samples to some customers. Intralink gives us added horsepower that we don't have internally while we focus on many other priorities. They're well entrenched in Asia Pacific and have a strong team in the EU as well. With that support kicking off, I anticipate increased sampling activity and hopefully increased product purchases as we move forward. They also help identify distributors that are ready for these products and focus on the same application areas we target, like cell culture media and molecular biology workflows. They help us focus our efforts and support business development in those regions.

John Vandermosten, Analyst (Zacks)

Okay. And another line item in the press release was about the IBT arrangement. What are the next steps after the distribution channel receives the inventory?

Joseph Hazelton, President and COO

After the distribution channel receives inventory, IBT will distribute product through its global distribution network and its sales teams will engage individual customers—academic institutions, hospitals and research organizations. The product actually shipped this week: DNase-1 and transferrin. We will have other products they will place into channels as well, such as recombinant alpha-lactalbumin, human alpha-lactalbumin for cell culture applications and human transferrin. We started with DNase-1 and bovine transferrin because those are ready to go. Right now, we are selling research-use products, and IBT's sales teams will focus on getting those into the market. In short, IBT provides a sales force and global reach to get our products into customer hands.

Operator, Operator

The next question will come again from the line of John Vandermosten with Zacks.

John Vandermosten, Analyst (Zacks)

Ping, now that we're coming up on midyear, what's your best guess on cash burn?

Ping Rawson, CFO

John, good question. As you saw from the press release at the end of March, we have $6.6 million in cash, cash equivalents, restricted cash and investment-grade securities. We expect to have the same level of cash burn as previous years; last year we were less than $5.7 million. We expect the same level, if not less, which means we will have enough cash runway into next year at this time. We will also continue to evaluate strategic partnerships and capital markets opportunities to further strengthen our balance sheet and support long-term growth.

Joseph Hazelton, President and COO

Operator, are there any further questions?

Operator, Operator

No. There are no further questions. Actually, there is a question from Luis Garcia, who is a private investor.

Luis Garcia, Private Investor

Okay. Just a couple of questions here. I noticed that Codexis has been doing a lot of things. Do we have anything still connected with them where we might get some royalties from products that they produce? Or do they use C1 in anything they produce? Also, have we already received some royalties from Fermbox and things we've done, or is that still in the pipeline? And one more: Phibro has been using our products and doing research. Is there a timeframe where we might start getting something on their end?

Mark Emalfarb, CEO

We don't have anything that's publicly reportable with Codexis from the past. If you recall, we sold that business to DuPont for $75 million, so there's nothing ongoing in that regard. There have been discussions in recent months about potential mutual benefits, but nothing reportable today.

Joseph Hazelton, President and COO

Regarding Fermbox, royalties are currently in the pipeline. We expect to see them in 2026. Our focus right now is on growing the products, but we do anticipate initial revenues from the bioindustrial products in 2026. As for Phibro, they have invested a lot of time and effort into bringing a poultry vaccine to market. My anticipation is they will be in clinical trials this year, which could lead to an approval in the next 12 to 24 months, depending on regulatory timelines and where they choose to launch first. We will have milestones associated with the regulatory approval process, and I do think there could be news flow in 2026 and more likely in 2027 regarding Phibro.

Mark Emalfarb, CEO

To add color, the technology has been successful on our side in terms of yield and performance for the Phibro program. As Joe said, we expect milestones and potentially an expansion of their license to other vaccines that weren't included initially.

Joseph Hazelton, President and COO

It takes time to bring a new product to market in that space. We signed the deal in 2018, and seven years later they're moving into clinical phases. It's right on time, but slower than we'd like, which is one reason we shifted toward non-pharmaceutical products to accelerate revenue generation.

Operator, Operator

The next question comes from the line of Glenn Primack with Luca Investment Group.

Glenn Primack, Analyst / Investor (Luca Investment Group)

I'm guessing you don't have a lot of spare time for playing golf. It's quite amazing how much you've accomplished. I have to imagine Mark's phone has been busy with Hantavirus interest, and Joe, trade journals are noting whey shortages and demand for proteins. With that said, Ping, do you think you will need to add headcount come 2027 as you continue to ramp?

Joseph Hazelton, President and COO

Glenn, great question. Any additions to headcount will be judicious and driven by product sales. As products scale, we'll need additional operational support for product shipments and manufacturing. That takes time—labeling, logistics and compliance all require resources. We won't add people immediately; hires will be revenue-dependent. As sales grow, we'll identify which parts of the company need more support and add headcount accordingly. Our immediate focus is getting more product into the market so revenues can drive necessary internal investment.

Mark Emalfarb, CEO

We recently engaged Intralink to pursue the European market because they've done a great job in Japan. We have experience with their sales team and believe using their capabilities is a faster way to get to market without hiring a large internal sales team. For cell culture media, DNase-1, RNA enzymes, cultured meat and cell and gene therapy products—transferrin, albumin with Proliant—this approach gives us faster reach into those markets as we expand.

Glenn Primack, Analyst / Investor (Luca Investment Group)

Got it. The margins look very strong. I hope you get some rest this weekend, and I hope to see you at the Biotech show in San Diego in June.

Joseph Hazelton, President and COO

You certainly will. We'll be there, Glenn.

Operator, Operator

The next question comes from the line of Tony Bowers with Intro-act.

Tony Bowers, Analyst (Intro-act)

Joe, nice progress. Could you reflect on the nutritional market and the potential for cultured meat demand for your ingredients versus the non-animal dairy market? Cultured meat seems more acute, but non-animal dairy also has conceptual demand. With agricultural inputs going up, that could help both.

Joseph Hazelton, President and COO

Tony, great question. Demand is more acute in cultured meat because companies realize they must drastically reduce production costs to compete. Non-animal dairy faces a different challenge because it's competing directly with milk-derived products and requires scale to be cost-competitive. Both segments need lower costs but in slightly different ways. Cultured meat demand is urgent as companies move through pilot phases and seek regulatory approvals; upon approval, cost reduction becomes critical to expand beyond high-end uses. Non-animal dairy will continue to pick up, but it's all about scale—we saw scarcity in that segment previously, and we can help fill that gap by scaling production strains up to needed levels. The nearer-term revenue opportunity for us is likely cultured meat as we ramp and scale into non-animal dairy over time.

Tony Bowers, Analyst (Intro-act)

Which geographies do you think will have the least regulatory hurdles on the meat side?

Joseph Hazelton, President and COO

I think the U.S. will probably have the least regulatory hurdles, at least from our standpoint, because we have a GRAS-certified organism from 2009 and use self-affirmed GRAS pathways for these products. Inzymes filed their self-affirmed GRAS this year and are already commercializing bovine chymosin. We'll use the same process for alpha-lactalbumin. The EU has historically been more cautious, but regulatory stances can change. Given protein demand and interest in cleaner nutrition, I don't see significant short-term regulatory changes that would prevent commercialization.

Mark Emalfarb, CEO

To add, some large companies have their own GRAS approvals in both the EU and U.S. on microbial technology platforms. With the situation affecting supply chains and energy, interest in turning biomass into sugars, renewable fuels and chemicals is returning, and that aligns with our positioning and the work with Fermbox. Our technology depth is suited to turning biomass into sugar, and we're re-entering related markets with Fermbox as global conditions evolve.

Operator, Operator

There are no further questions at this time. I will now turn the call back over to Dyadic's President and COO, Joe Hazelton, for closing remarks.

Joseph Hazelton, President and COO

Thank you. As we close, I want to emphasize what we believe is most important. Dyadic today is no longer simply developing technology platforms. We are increasingly commercializing products, supporting customers, expanding partnerships and building recurring revenue opportunities across multiple markets. We're seeing growing interest in our technologies, increasing commercial activity across our partner network and encouraging early signs of market adoption as products move from development into commercial channels. While we still have important execution work ahead, we believe the progress achieved over the past year has significantly strengthened the business and positioned us for continued operational and commercial advancement. Our focus is now straightforward: continue scaling product sales, expand strategic partnerships and distribution channels, support customer adoption and maintain the disciplined operating approach that has allowed us to extend our runway while continuing to build the business responsibly. We remain confident about the opportunities ahead and appreciate the continued support of our shareholders, partners and employees as we continue executing our strategy. Thank you, and we look forward to updating you on our continued progress.

Operator, Operator

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