Dyadic International (OTCMKTS:DYAI) Has Big Potential

Dyadic International (OTCMKTS:DYAI) has gotten a lot of investors excited after selling its its Industrial Technology business to DuPont’s Industrial Biosciences business for $75 million in cash. DYAI will now be able to focus exclusively on its biopharmaceutical business.The deal has allowed DYAI to pay off all of its outstanding debt or convert that debt into shares. A total of $8.11 million in convertible debt was exchanged for 6.12 million shares of Dyadic’s common stock and 1.05 million warrants with a $1.48 per share strike price with a December 31, 2016 expiration date. A total of $0.56 million in cash and 0.10 million warrants with a $1.48 per share strike price with a December 31, 2016 expiration date was paid/issued to convertible debt holders who elected not to convert. In addition, the outstanding non-convertible note was paid off with $1.46 million in cash.A total of 6.12 million shares of Dyadic common stock was issued upon the closing of the transaction. This represents 17.9% of the shares of the Company’s outstanding common stock as of December 31, 2015. Dyadic intends to use a minimum of $15 million of the transaction proceeds to initiate a stock repurchase program.Under the terms of the deal, Dyadic sold to DuPont substantially all of its enzyme and technology assets, including its C1 platform, a technology for producing enzyme products used in a broad range of industries. DuPont has granted back to Dyadic co-exclusive rights to the C1 technology for use in human and animal pharmaceutical applications, with exclusive ability to enter into sub-license agreements in that field. DuPont will retain certain rights to utilize the C1 technology for development and production of pharmaceutical products, for which it will make royalty payments to Dyadic upon commercialization.This is quite a deal for a company with a market cap of less than $100 million. DYAI also benefits from not having to pay taxes on the deal due to its $66 million in net operating loss carryovers. Mark Emalfarb, Dyadic’s founder and CEO, said:

“This transaction is an exceptional opportunity to unlock value and provide Dyadic operational flexibility to further develop our pharmaceutical business. We will now focus our C1 technology exclusively on the pharmaceutical sector where we believe it has the potential to help develop and manufacture drugs and vaccines faster and more efficiently than existing production systems.”

The company and its board feel this is the right move for the company. Dyadic has long believed that the pharmaceutical field is one of the most attractive opportunities in which to apply the C1 technology. Dyadic believes that the C1 technology platform has potential to be a safe and efficient expression system that may help speed up the development and production of biologics at flexible commercial scales. In particular, as the aging population grows in developed and undeveloped countries, Dyadic believes C1 can help bring biologic drugs to market faster, in greater volumes and at lower cost to drug developers and manufacturers and, hopefully, to patients and the healthcare system.Dyadic also intends to continue its existing programs with Sanofi Pasteur and its involvement within the EU-funded ZAPI program. Dyadic plans to focus its research programs on the development and manufacturing of human and animal vaccines, monoclonal antibodies, biosimilars and/or biobetters, and other therapeutic proteins.Furthermore, DYAI is now in a much stronger position in regards to its ongoing professional services liability litigation against the law firms Greenberg, Traurig, LLP, Greenberg Traurig, P.A. and Bilzin, Sumberg Baena Price and Axelrod, LLP. Last July, DYAI reached a settlement in the litigation with another less significant defendant law firm on August 12, 2015 the company received full payment of $2,170,000 which is net of fees and expenses.

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The deal with DuPont really transformed DYAI. The company is now cash rich and poised to do big things with its biopharmaceutical business. In penny stock land where there are thousands of companies without cash, DYAI and its management team have just proven what they can accomplish. As a result, DYAI is an exciting story in small caps. Don't miss out on the latest updates from Insider Financial on DYAI. Sign up below!

Disclosure: We have no position in DYAI either long or short. We have not been compensated for this article.