Alternative Proteins And Global Collaborations Will Open New Markets

Key Takeaways

• Strategic focus on commercializing non-clinical products and partnerships with global leaders could significantly boost revenue and advance the biopharmaceutical pipeline.
  
• Dual-track strategy in biotech, focusing on high-demand applications and partnerships, is aimed at enhancing margins and capturing market share in expanding markets.
  
• Reliance on strategic collaborations and regulatory approvals presents risks to Dyadic's revenue growth, compounded by high R&D costs and ongoing financial losses.

Catalysts

A biotechnology platform company, develops, produces, and sells enzymes and other proteins in the United States and internationally.

• Dyadic’s strategic focus on near-term product commercialization, particularly in alternative proteins that do not require clinical trials, is expected to significantly boost revenue through high-value products like recombinant human albumin and transferrin.
  
• The company's partnerships with global leaders such as CEPI, the Gates Foundation, and others in vaccine development are anticipated to advance Dyadic’s biopharmaceutical pipeline, which could improve long-term revenue growth as these initiatives convert to commercialization.
  
• Dyadic's dual-track strategy, targeting both mid
• and long-term opportunities in human and animal health while prioritizing non-pharmaceutical products, is designed to improve net margins by tapping into high-demand, higher-margin biotech applications.
  
• The collaboration with Proliant Health on recombinant human serum albumin and the expected commercial launch in early 2025 is projected to enhance earnings, delivering a substantial revenue stream with established distribution channels.
  
• Dyadic’s development of non-animal dairy proteins and partnerships in sustainable enzyme production positions the company to capture significant market share and drive revenue in expanding global markets such as biofuels and biorefineries, further enhancing scalability and financial performance.

Dyadic International Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Dyadic International's revenue will grow by 23.6% annually over the next 3 years.
• Analysts are not forecasting that Dyadic International will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Dyadic International's profit margin will increase from -166.2% to the average US Biotechs industry of 15.9% in 3 years.
• If Dyadic International's profit margin were to converge on the industry average, you could expect earnings to reach $1.0 million (and earnings per share of $0.03) by about May 2028, up from $-5.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 278.2x on those 2028 earnings, up from -6.4x today. This future PE is greater than the current PE for the US Biotechs industry at 20.4x.
• Analysts expect the number of shares outstanding to grow by 2.92% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.65%, as per the Simply Wall St company report.

Dyadic International Future Earnings Per Share Growth

Risks

• Dyadic's non-pharmaceutical products, such as RHSA and recombinant transferrin, have potential market competition risks, which may affect revenue growth in these segments due to the need for extensive product validation and qualification processes.
  
• The alternative protein and biopharmaceutical pipeline rely on strategic collaborations and grants (e.g., from CEPI and Gates Foundation), exposing the company to risks if such funding or partnerships don't materialize, potentially impacting the expected revenue and operational margins.
  
• The emphasis on developing high-value recombinant proteins and enzymes, while promising, involves significant R&D costs, as shown by reduced budgets for certain projects; if development does not translate into successful commercialization, this could affect net margins and cause continued net losses.
  
• Dependence on regulatory approvals for commercialization, especially in markets like the EU and U.S. for food and pharmaceutical products, presents a risk of delays or failures, which could impact earnings and revenue timing.
  
• The past financial performance shows ongoing net losses and operational cash burn, with only modest increases in cash reserves; failure to accelerate revenue generation from its new product lines might strain financial resources and affect investor confidence.

Valuation

• The analysts have a consensus price target of $7.5 for Dyadic International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $9.0, and the most bearish reporting a price target of just $6.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.6 million, earnings will come to $1.0 million, and it would be trading on a PE ratio of 278.2x, assuming you use a discount rate of 6.6%.
• Given the current share price of $1.23, the analyst price target of $7.5 is 83.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.