Dyadic International, Inc. (DYAI)

Yep, I caved and added at the 7 mark. Let her ride.

Someone over at Stocktwits yesterday asked my opinion on what I thought a fair buyout price for DYAI would be. I have been wondering the same thing for a while now, but can never come up with a good answer due to so many moving parts and factors associated with this area.

Despite some digging yesterday, I am sad to report that I can't tell you with 100% certainty how much DYAI will be bought for  However, I did get a better idea of what we're looking at here in terms of C1's place in the space and their potential valuation. Please feel free to punch holes in this, add to this, or ask any questions you may have.

There are several rodent-human derived cell line platforms used for protein expression. The most common ones are HepG2, HeLa, 3T3, BHK, and CHO. CHO is the infamous Chinese Hamster Ovary derived cell line and 70% of all recombinant protein therapeutics are produced using this platform.

DYAI's C1 platform is superior to any of the above mentioned platforms in several ways. I won't get into the details of the science here, but overall C1 is more robust, more cost-efficient, and more scalable than the current standard.

Ideally, C1 would make these other platforms obsolete and replace them. Including CHO. I'm not saying that will happen immediately, or ever. But I do think C1 will make a big splash in this space (otherwise I wouldn't own the stock), and these numbers give some perspective of what we're talking about here:

In 2007, the annual global sales of CHO-derived biologics was $30B.

By 2013, the global sales for the top 11 blockbuster biologics produced using CHO-derived lines totaled $57.16B.

According to the most recent report I could find, from Dec. 2018 by Research and Markets, 7 of the 10 top blockbuster drugs in 2017 were biologics - Humira ($18.4 billion), Rituxan ($9.2 billion), Enbrel ($7.9 billion), and Herceptin ($7.4 billion), to name a few. 

While CHO is a platform no one owns it. CHO lines being used today are all derived from a single hamster ovary harvested back in 1957. The patents (The "Axel patents") expired in 2000. Now CROs, CMOs, CDMOs can make their own genetically modified lines, patent them, and license them out individually. Incidentally the royalties drawn from the Axel patents by the time they expired totaled $790M.

To have a ballpark price for the entire C1 platform (buyout price), you'd have to have an idea of what pharmas are going to pay to license it - which is what they'd do if Dyadi goes the CDMO route. Being the superior product to CHO and other recombinant protein therapeutics, I think this would be extremely lucrative. How lucrative? It's tough to say. We've seen recently where WuXi Biologics inked a licensing deal to use their lines (CHO) to develop a vaccine for a global company worth $3B over 20 years.

Dyadic has over 100 NDAs. How many will come to fruition? How much will Serum (who just signed a deal with Dyadic) cough up once they confirm C1 outperforms the current standard? $3B over 20 years? More/less? What would BMY pay to license C1 if they decide to use it to produce Opdivo (which is estimated to exceed $8B in global sales in 2023)? We'll have a better idea of this once Dyadic completes a deal where we can see an agreement with actual numbers.

So then what is the value of the entire platform? At this point I have no idea, lol. Whoever potentially buys them out is going to have a licensing empire for years and years to come. Surely that's worth billions, imo. The other day in an interview the CEO referenced Pfizer buying out Array (gene therapy company) for $10.6B (62% premium). Was he giving us a clue? While I think big pharma would pay a nice premium for C1, there is no way they will pay a 10,000% premium. In 2006, Merck acquired Glyco-Fi for $400M for their human glyco platform. The board advised the sale because it would be a huge return for investors, but the street seems to think it was a low ball price. Even so, this platform is also inferior to C1.

So here is my conclusion. I think a sale of the company is inevitable. The goal for now is to make some huge licensing deals so that when the time comes to complete a buyout, the market value will already be much much higher than now. Ultimately it will depend on how far Mark (CEO) wants to take it, and what he is happy selling at. One thing I am very confident at is that he will not sell too low. He's spent his entire life basically developing this IP. He's not going to give it away cheap. At this current point in time, my wag for a future sale price is somewhere between $1-3B. And this is being extremely conservative.

OK, let me hear it... 

Some links:

pdfs.semanticscholar.org/5f96/12ce9170571f296b75246e80cb671bbb886c.pdf
www.researchandmarkets.com/research/bqfxmf/global_biologics?w=5
biomanufacturing.org/uploads/files/547998065159985597-cho-history.pdf
www.prnewswire.com/news-releases/wuxi-biologics-signed-letter-of-intent-for-long-term-vaccine-manufacturing-contract-300853568.html
www.businesswire.com/news/home/20060509005636/en/Merck-Acquire-GlycoFi-Acquisition-Enhances-Merck-Capabilities
www.prnewswire.com/news-releases/pfizer-to-acquire-array-biopharma-300869356.html

I’m totally trying to add here. I keep moving down my orders as I think it may continue to trickle down. This is the consolidation that I figured we’d see. No surprise and a good buying opportunity imo.

Went ahead and pulled the trigger on my largest tranche yet.....new avg. is 5.54 I'm done for a while..hehe.....would've liked to got them yesterday but oh well. Note to self; sold out of MRO to bolster this position. GLTA

I liked this answer on the last call when Mark was asked about when he expects big pharma to switch to C1 as a replacement for what they use now:

"Only if they're going to make a bio better, for example, it could be three to five years, probably in that timeframe. If they're going to start with a new drug, it's going to take even longer. But I think you have to recognize that probably in some of the big pharma cases for us to hit a payday, the payday comes from up front access fees in cash in that particular case, or it could be multiple non-exclusive licenses from multiple people that way, milestone payments as they move the drugs to preclinical Phase 1, Phase 2, Phase 3. Or it could be like GlycoFi where Merck paid $400 plus million dollars because they wanted to take the technology and bring it in house and control it."

Always need a good bean counter, but honest.

PR about being added to the Russell Micro-cap Index

finance.yahoo.com/news/dyadic-joins-russell-microcap-r-124000364.html

Nice. I added more again yesterday and am also in the sit and wait mode now. I could add one more chunk if the price dips lower, but not much. Averaged at $5.80 now. 

Based on the volume today (more or less daily average) I doubt today's drop was tied to any kind of forthcoming bad news. Fundamentals haven't changed. The biggest risk would be if they for some reason decided to drop the human-glyco project (they won't). Even if they did, C1 in its current form is still far superior to the current industry standard. Someone probably just decided they didn't want to hold and wait around for news. Or Ronen is continuing to sell. If this heads into the $4s I will try and load up.