Dyadic International's CEO Discusses Q4 2013 Results - Earnings Call Transcript

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 |  About: Dyadic International, Inc. (DYAI)
by: SA Transcripts

Dyadic International, Inc. (OTCQX:DYAI) Q4 2013 Earnings Conference Call March 13, 2014 5:00 PM ET

Operator

Good afternoon, ladies and gentlemen, and thank you for holding. Welcome to Dyadic International’s Year End 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. My name is Danielle, and I will be your conference coordinator today.

As a reminder, please note that today’s call is being recorded. At this time, I would like to introduce your host for today’s call, Michael Faby, Dyadic’s Chief Financial Officer.

Michael Faby

Thank you, Danielle. Good afternoon. And thank you for joining today’s conference call to discuss Dyadic’s financial and operating results for the year ended December 31, 2013, which we’ve reported on the press release issued earlier this afternoon. The press release and Dyadic’s year end financial statements have been posted to both the Dyadic and OTC Markets websites.

I’m joined today by Dyadic’s Chairman, President and Chief Executive Officer, Mark Emalfarb and our Executive Vice President and Chief Operating Officer, Danai Brooks. On today’s call Mark and Danai will cover operating highlights, business development and corporate strategy, and I will review our financial results in a bit more detail. We will then give you an opportunity to ask questions. Each caller will be allowed one question and one follow-up question in order to provide all callers an opportunity to participate. If the time permits, the operator will allow additional questions from those who have already spoken.

Before we begin, we would like to remind you that certain statements made in this conference call maybe forward-looking statements, which involve risks and uncertainties that could cause Dyadic’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Some of the factors that could cause actual results to be materially different are detailed under risk factor discussion in Dyadic’s filings with the OTC markets groups including Dyadic’s initial information and disclosure statement filed on March 11, 2014. Dyadic expressly disclaims any intent or obligation to update or revise any forward-looking statements except as required by law.

I will now turn the call over to our Chairman, President and CEO, Mark Emalfarb.

Mark A. Emalfarb

Thank you, Mike, and I want to thank all of you for joining us on today’s call. Dyadic has made significant progress in 2013 by further growing our business both in terms of growing product revenues, improving operations, new product development processes and in licensing and in further developing our C1 technology.

In April, we signed a broad license deal with BASF. On the same day BASF announced the C1 license with Dyadic. They also cut a deal with Direvo, a gene engineering firm and acquired Henkel’s detergent enzyme business.

Later in the year, BASF bought Verenium in their gene discovery platform. A rich source of genes, they may use Dyadic C1 technology to develop and produce many of its future BASF products. BASF is clearly making a strong push into the traditional industrial enzyme space.

We are excited that BASF has chosen our C1 technology platform to help grow its various business units. Additionally, we believe BASF will spend significant resources to continue to make C1 growth more productive and capable of producing a wider variety of enzymes for their business at lower cost.

As we highlighted previously, Dyadic is receiving and expect to continue to receive funded R&D projects and potential milestone payments from BASF in 2014 and beyond. The first new C1 based BASF products are several years away.

Also in April, Dyadic hired a new Chief Operating Officer, Danai Brooks, will add significant operational and industry experience to our management team. During the past year, Danai has initiated a number of important initiatives within the Company in R&D and a new product development for an industrial enzyme business. Additionally, Danai has been very active in our licensing efforts with potential third parties in a variety of areas including the area of cellulosic sugars, industrial enzyme and pharmaceutical. We’re continuing to buildout a management team during 2014 in the areas of finance, sales and R&D.

We recently hired an executive search firm to assist us, I am looking for a CFO, with a skill set that matches the changing needs for fully reporting company. We appreciate the dedication, royalty and professionalism that Mike has and continue to give Dyadic and we hope that he will stay on and work with us in a new role. During the second half of 2013, Dyadic began the expansion of our Netherlands R&D facility, which was completed last month.

In the expansion, we opened a fermentation optimization lab, significantly expanded our floor space and hired new scientist. This additional capability has allowed us to take on six additional interesting and potentially commercially useful projects over the past few months, which Danai will provide more detail later in today’s call.

2013 also marked an important growth here for our industrial enzyme business. Sales of our proprietary enzyme products were up 25%year-over-year mainly driven by our animal feed and brewing business. We had several important developments in our enzyme business last year including the addition of two major customers and additional feed registrations for one of our European animal feed customers.

Earlier this week Dyadic began trading on the OTCQX Exchange. This segment of the OTC marketplace preserve for leading U.S. companies to meet financial standards, provide timely news and disclosures to investors. Our team worked very hard in this achievement and demonstrates our commitment to providing our shareholders access to a leading trading platform. Our admission to the OTCQX is just a next step to Dyadic once again becoming an SEC reporting company trading on registered national exchange.

We continue to evaluate the timing of our uplifting opportunities. We believe this step shows our commitment to full transparency providing our shareholders greater liquidity and access to one of the most trusted and more reliable trading platforms available today.

In biofuels, Abengoa our licensee since May 2009 is expected to shortly open the new commercial scale biomass ethanol, biorefinery located in Hugoton, Kansas in 2014.

Abengoa is currently the European market leader in corn based ethanol productions, and it’s the seventh largest corn based ethanol producer in North America. The construction of this first of the kind, commercial scale biorefinery will allow them to utilize their proprietary technology including enzyme developed and manufactured is in Dyadic C1 technology to produce renewable liquid fuels, from the years most abundant organic feedstock sources, plant fibers or cellulosic biomass.

The new biorefinery refilled a 100% biomass to produced 25 million gallons of ethanol derived from nearly 350,000 tonnes of biomass annually and generate 18 megawatts of electricity.

Codexis our other royalty licensee has informed us that they are no longer pursuing their advanced biofuel programs. Despite this we would like to congratulate Codexis on their advancement and achievement in application in the C1 platform technology in creating CodeXyme. There CodeXyme product is generally recognized and considered by the industry to be equal to or better than other leading products in the market.

Dyadic and Codexis are continuing to discuss potential collaboration opportunities in this space. At this point Codexis will not continue its efforts in the biofuels, we’re also do not expect that all of our C1 licenses will be successful in commercializing technology.

Despite in this case, successfully creating very powerful C1 based enzymes at lower costs. In fact one of the reasons we pursue non-exclusive license is to de-risk ourselves against the inability for third party to achieve commercial success, which is impacted by manufacturers unrelated to the C1 technology.

For a long time the industry has said its second generation biofuels are just over the horizon. This year we can now say that silos of biofuels are here today. In addition to Abengoa’s new advanced biofuel plant two other major facilities are opening in 2014. the POET-DSM Project Liberty the 25 million gallon biofuel joint venture in Iowa and DuPont’s 30 million gallon projects, which is also Iowa.

Looking at the overall market landscape we feel good about the quality and position of our CMAX product line and our biofuel partners. We are in various stages of active dialog with a number of potential advanced biofuel producers around the world. While the renewable fuel standard is in question in the U.S. many companies are pushing forward domestically.

In addition, we have increased the focus on biofuel programs abroad, specifically in China, Brazil and Southeast Asia. While the timelines we are planning these projects are long in many of these international projects are several years away. We feel that Dyadic will continue to bring on new biofuel customers over time.

Let me now turn the call over to our COO, Danai Brooks, to discuss the business development and operations.

Danai E. Brooks

Thank you, Mark, and good afternoon, everyone. I’m going to spend some time updating you on our R&D operations and business development initiatives. Over the past several months we have put significant effort towards expanding our internal research and development capabilities and resources.

We completed a significant expansion of our lab in the Netherlands and closed our facility in North Carolina. We have also nearly completed preparations to launch our next-generation pulp and paper and textile product line, the FibreZyme G4 series. Business development dialogue remains active and our projects with BASF and others are pushing forward.

In addition, we’ve begun six new funded R&D projects, including four public-private partnerships Opti Biotic [ph], BakeZyme, MIRACLES and AlgaePARC. One academic project was the Technical University of Munich and one project was a leading pharmaceutical company.

Opti Biotic is a EU funded project and the developing biocatalyst for the green projection of antioxidants used in cosmetics. Currently antioxidants are produced chemically, but by using enzymes instead of chemicals the production of these compounds can be done in an environmentally friendly and potentially more cost effective way. The project is scheduled to last for 48 months.

The BakeZyme project seeks to develop a more peer and widely applicable enzyme product for the baking industry to improve dough and bread structures. Currently most enzyme products in the market contain unwanted side activities, which can negatively impact bread quality.

With our C1 technology it is possible to produce dedicated and relatively pure enzymes and the new enzyme product will give improved dough and bread quality and increased bioavailability of health components that are naturally present in flour. The project is scheduled to last for 30 months.

Dyadic is involved in two projects focused algae; the EU funded project, MIRACLES and the Dutch funded project, AlgaePARC Biorefinery. Microalgae, our promising feedstock for sustainable supply of commodities and specialties for both food and non-food products, the project will develop dedicated enzyme products to enable and/or improve the extraction of valuable compounds such as fatty acids and proteins from algae. Both projects are scheduled to last for four years. Additional information on these four public private partnerships will be communicated over the next several weeks. Our program with the Technical University of Munich is targeted toward over-expressing [indiscernible]. We expect that project to last approximately six months.

Finally, we’ve begun our second healthcare related research project to develop a therapeutic protein using C1 platform technology. Using C1 has the potential to lower production cost and help minimize several bottlenecks for pharmaceutical development by offering direct, linear scaling from a lab to commercial manufacturing. Let me stress that this is an extremely early stage exploratory project for that.

Moving on to our existing research products. Our BASF research project is moving along well. The Dyadic R&D team has reported promising results in this program and we expect this may lead to another millstone payment in 2014. We continue to collaborate closely with BASF and their use of C1 technology and we’re optimistic that we will find additional opportunities to broaden our relationship with BASF in the future.

With regards to Sanofi, as we previously reported, we have expressed and purified the proteins of interest and together with Sanofi, we’re analyzing recent such results to determine what the possible next steps might be to continue work on this complex project.

Our leading animal feed partner continues to move closer towards registration of the C1 based project that we developed together. However, few technical hurdles still need to be resolved before moving forward. Together, we’ve developed a very effective, cost efficient product and we believe it will have a major impact in the market when it launches in a few years.

With regards to internal project development, we are now pushing forward two products into new stage gate. our CMAX biofuel and bio-based chemical product in the next generation animal feed enzyme. We are particularly excited about the animal feed enzyme, because it’s our strongest existing product market and the sales – and a very strong sales infrastructure. We are currently in evaluation of three additional product – project proposals that we may approve this year. We believe our improved new product development process is working well.

On business development matters, we continue to have active dialogue with a number of industrial enzyme partners, particularly in the U.S., Western Europe, China and Japan. Interest in the C1, as a production system for enzymes and other proteins remain high and we continue to see benefits from the credibility of having BASF, Abengoa and others’ licensees.

As Mark mentioned earlier, lots of discussions remain robust with a focus on China, Brazil and Southeast Asia. We believe we’ve made a big push into the pharmaceutical market and engaging with some of the largest drug companies in the world and educating them about the C1 expression system. We attended the JPMorgan Healthcare conference this year and are speaking with the right people in Senior Management of our potential partners. Although, it is very early stage, we are also encouraged about our new therapeutic protein project.

In addition, to our R&D and licensing activities, we are now beginning to refocus more heavily on our propitiatory industrial enzyme business. Dyadic is manufactured and sold enzymes in a wide variety of industrial markets, including animal feed, pulp and paper, food and beverage and textiles since 1994.

We have a global business infrastructure with a variety of customer types in 35 countries, which will be critical as we roll out new C1 based products in our pipeline. We put together a five-year plan for our industrial enzyme business to achieve highways of growth from existing products as well as new products.

Our goal is we kind of talk to provider of industrial enzymes in broader markets through continued optimization and cost reductions and manufacturing, registrations of projects in large geographies, diversification of sales to include higher margin, fast-growing end market, discovery and development of novel enzyme products for new applications and the addition of sales technical steps to support our marketing activities.

The first step of this plan will be the new product line for pulp and paper and textiles FiberZyme G4 series, which is launching in this coming month. G4 is a nice addition to our portfolio and it provides further evidence of the capabilities of developing high yielding and one stringent using Dyadic C1 platform technology.

FiberZyme G4 represents the next generation of C1 based products utilizing the C1 white strain. The C1 white strain produces significantly large background protein providing a clean host for expression of enzymes and another protein from genes, which allows for more efficient, industrial scale production of highly targeted enzymes and other proteins at greater purity levels and commercially up.

The white strain complements the high cellular C1 strain used to make C1 biofuel products. And this is what allows Dyadic to effectively produce target industrial enzymes and potentially antibodies vaccines and other therapeutic proteins for the pharmaceutical industry.

I’ll now turn the call over to our CFO, Mike Faby to discuss the 2014 financial results. Mike?

Michael J. Faby

Thank you Danai. Before reviewing the year-end financial results, I'd like to refer you again to our press release and financial statements which are posted on the Dyadic and OTC Markets websites. I will begin with a review of the income statement. Total revenue increased 10% for the year ended December 31, 2013 to $17.1 million as compared to $15.6 million for the entire year.

Net product related revenue increased 25% to $9.8 million for 2013 as compared to $7.8 million for 2012. In addition to sales growth our product related business has an increasingly global footprint with 47% of our sales in Europe, 35% in North America and 17% in Asia. License fee revenue for the year increased by $500,000 due to the licensing agreement Dyadic entered into with BASF in the second quarter of 2013.

The agreement called for BASF to pay an aggregate $6.0 million upfront as compared to a $5.5 million upfront license fee that Abengoa paid for an expansion of their non-exclusive C1 license in 2012.

Research and development revenue for the year decreased 42% to $1.3 million compared to $2.3 million for 2012. The decrease was the result of delays in the start of certain external research and development projects, and the reallocation of research and development resources from externally funded projects to new product development initiatives. These initiatives are internally funded, and are expected to accelerate the continued enhancement and improvements to our C1 Platform Technology.

For 2013 cost of good sold was approximately $9.1 million, or 82% of total revenue excluding license fees, as compared to approximately $7.6 million, or 75.4% of total revenue excluding license fees, for last year, an increase of approximately $1.5 million. We have excluded license fee revenue from the percentages above because license fee does not have cost attributed to them to provide financial reporting purposes.

This increase in cost of good sold was primarily the result of the shift from higher margin research and development revenue to industrial enzyme product sales. In addition, product related margins decreased in 2013 by approximately 5% due to increased manufacturing cost, raw material cost and product mix. However, we have made progress with our manufacturing operations over the past several months lowering raw material cost, increase yields and productivity, which we expect to positively impact margins in 2014.

Gross profit remains relatively flat year-over-year at approximately $8.0 million for both 2013 and 2012. The growth in gross profits in our license fees and product related revenues were offset by margins lost and the decrease in research and development revenue.

Total operating expenses for the year increased 17% to $7.5 million compared to $6.4 million in 2012. The increase was due primarily to increased costs associated with litigation against our former outside legal counsel and related events of approximately $1.5 million, partially offset by the recovery of a doubtful account receivable of $300,000 that was previously fully reserved.

The increased litigation costs were anticipated and are expected to be significantly lower in 2014 as preparation for trial starts to wind down in anticipation of the trial itself. The professional liability lawsuit is expected to continue through 2014 and possibly into 2015.

Non-cost of goods research and development expenses increased $145,000 to $1.1 million for the year ended 2013, up 16% as we continued with our accelerated new product development program to further enhance our proprietary C1 Platform Technology and to bring new C1 based products to market. Research and development expenses are expected to further increase in 2014.

Billing and marketing expenses for the year were $944,000 which was up 35% over 2012 as we hired additional sales staff and invested more resources into developing additional distribution channels for our proprietary products. Since our Dutch Research subsidiary operates in mostly euros, fluctuations in the exchange rate between the US dollar and euro impact our results.

During 2013 we had a net gain from exchange rate swings between the dollar and the euro of $83,000 as the US dollar strengthened against the euro. As you know, we are a very cost conscious company and we are always looking for ways to work more efficiently while holding our operating expenses in check. We implemented a variety of cost rationalizations in operations, information technology and external advisors during the course of 2013 and expect to continue those efforts going forward.

Based on the factors discussed above, the net loss for the year-ended December 31, 2013 was $428,000 or $0.01 per basic and fully diluted shares as compared to a net income of $1.3 million or four cents per basic and fully diluted shares for the year ended December 31, 2012.

Pro forma for the nonrecurring expense associated with litigation against our former outside legal counsel and other related events, we had a positive net income of $1.3 million or $0.04 per basic and fully diluted share for 2013 as compared to a pro forma net income of $1 million or $0.03 per basic and fully diluted share for 2012.

Now let me turn to the balance sheet and a few other items of financial interest. At December 31, 2012 cash and cash equivalents totaled $8.9 million as compared to $4 million at December 31, 2012. The increase was largely due to dialects receipt of the BASF license fee and receipt of the remaining $3.5 million due under the Abengoa license expansion.

In 2012 we increased our cash balance by $298,000. Total convertible debt as of December 31, 2012 and 2013 were $6.8 million and $7 million. In January 2013, $182,000 of the debt was converted to common stock. In October 2013 we extended the maturity dates of all of our outstanding debt to January 1st 2015.

We have a right to prepay $6.8 million of the debt at any time after March 31, 2014 without penalty with 30 days written notice. The remaining $1.4 million of note payable to stockholder is non-convertible and is not subject to the prepayment provision. These extensions give us additional working capital flexibility to manage the business going forward.

Because of the growth in our product revenues, account receivable was up 50% to $1.7 million while inventories remain around $2.8 million as of December 31, 2013. Generally receivables are collected in 45 days to 60 days inventory balances generally run from $2.5 million to $3 million and were replenished into fourth quarter of 2013.

Now I would like to turn the call back to our operator to take your questions. Danielle?

Question-and-Answer Session

Operator

(Operator Instructions) And we will take our first question from Joe Levatino [ph].

Unidentified Analyst

Yes, my question is about this trial, this case against your previous legal council. Is this thing, is there a real business benefit to pursuing this thing, it’s seems to me that perhaps just thinking of valuable time?

Michael J. Faby

Yes, I mean obviously one can say that you either should or shouldn’t pursue something, but we’re pursuing damages in excess of $200 million. And we think that’s infact….

Unidentified Analyst

I am sorry. Did I hear $200 million?

Michael J. Faby

In excess of $200 million and our lawyers are on a contingency, and they fully believe in the case ask do we. And we think that there is a good possibility we recover a significant amount of money. So, we look at it as a business….

Unidentified Analyst

Okay, well, it sounds good. Okay, thank you.

Operator

We’ll go next to Joe Probst [ph].

Unidentified Analyst

Yes, hello quick question for Mark or anyone else. So I guess related to the startup down in Kansas, we haven’t grown – do you have a Dyadic representative staff there – on site there at this time.

Mark A. Emalfarb

No, we do not have a representative on-site there. It’s not something that is necessary. Abengoa has been producing enzymes with C1 for several years now or…

Unidentified Analyst

Okay. So as if some would point that in my part does that – have you gotten any feedback how close they are already going to at least say a 50% operating mode there?

Mark A. Emalfarb

Well, in fact I spoke to them today, because I knew was get out that question.

Unidentified Analyst

Okay.

Mark A. Emalfarb

And basically they have already initiated starting up the plant, and they extract in Q2 to start producing their first cellulosic ethanol, which would include that point using C1 enzyme. So, they are very close to getting up and running on a basis that will include our enzymes. And I am sure by the end of the year that we run again significant portion of what they’re doing, but that depends on how well it goes and those scale up and things go I can tell you with 50% or not, but the good news is sometime in Q2 they will be producing sales to ethanol using Dyadic C1 enzymes that what we’ve been told.

Unidentified Analyst

Okay. I hope sooner or greater they’re linear as it could be physiologically it would be a big plus for the stack going to the back through full listing status as well and gaining more credibility. Thanks a lot Mark. Good luck.

Mark A. Emalfarb

Thank you.

Unidentified Analyst

Thank you.

Operator

(Operator Instructions) We’ll go next to Richard Deutsch.

Richard Deutsch – Ladenburg Thalmann

Thank you. Yeah, there is a lot of things I usually can ask exploring all the great things about the company, but I wanted to come to something that I believe is really been holding the stock down quite a bit below where the value seems to indicate with other issues. And I really applaud very much your looking for a talent in your management that you mentioned in terms of hiring search firm, but the thing that I think would be very helpful also that’s well within your preview is to improve your corporate governance. Mark you are the founder, major shareholder, CEO, Chairman of the Board and President. Your broad, friends and business associates that you hand pick. And this isn’t other company now and it’s growing on a worldwide basis and your science is basically unchallenged, your licenses are extraordinarily impressive, the commercialization for your license fees after several years of development are progressing to actual execution levels right now, that you’ve spoken about.

But you and I have spoken about this in the past. But I wanted to know, from you publically what your commitment is to improving the corporate governance by bringing in some top notch well connected board of directors members that could help you strategize and connect and move this company forward and I would like to hear, what your thoughts are on this.

Mark A. Emalfarb

First of all I would like to thank you for the complements because the existing board, the people, and in fact achieving all those wonderful things you just sited we’ve done. So I think the board has done a great job. I comment them. We are actively looking for alternative board members either to add to the board that we have currently or to replace one or more of the board members. And I’ve told you this in the past and told the public that, and that’s where we’re at right now.

And we in fact have had discussions with several potential board members and some have fallen to the crack that’s effecting once you come on board. But the company would not allow him, because they are actively involved in spaces like pharmaceutical industries and some of the major companies in this country or in the world for that matter and they wanted to join the board but unfortunately they’ve lost this all. But there would be a conflict of interest in that case we’re pursuing therapeutic proteins, vaccines and antibodies in that space.

So we are looking and we are talking to people, and we are evaluating whether we will hire a headhunter or use the same headhunter on other one, but that position is well, for those positions.

Richard Deutsch – Ladenburg Thalmann

Okay, thank you.

Operator

I’m showing no further questions at this time. And I will now turn the call back to Mr. Emalfarb for closing comments.

Mark A. Emalfarb

All right. I want to thank all of you for being shareholders. I guess there is another question.

Operator

We again have a follow-up from Joe Levatino.

Unidentified Analyst

Yes, I want to follow-up briefly on what the last gentleman’s point. When he delineated Mark your list of titles are and I’m a retailer investor, I’ve been invested in our company for a number of years. I watched this thing closely and I come to certain conclusions. And I came to the conclusion that this gentleman is so verbalized very well and that has to do with management.

And I think, what you said very well is that this is a public company with a worldwide presence and developing the significant footprint. And I just have the feeling that the management of the company is closely held and it doesn’t seem to me to be acting like a public company with a worldwide footprint, that’s my point. I don’t know if it’s a question here, but if you want to address it, I’d appreciate it?

Mark A. Emalfarb

Well, I mean we do have a worldwide footprint, so apparently we are acting that way. We have a Poland research and development facility, we have license fees all over the globe and Abengoa which is in same St Louis and in Spain, we’re working this Sanofi, Baxter and a French company. We are working with BASF, the largest chemical company in earth. So I think we have a global footprint. I think we are acting as a global company. We have customers in 35 countries around the world. I think Mike pointed out a third of that business is in Europe, basically a little more a third of it is in the U.S. 17% or 20% within Asia. So I think we are actually are global, we are acting as a global company. I think that the customers that we do business with appreciate the way that they are treated and respected and collaborated with.

And I think, that we are working towards getting at least to begin on a thing, we just got into OTCQX, but took a lot of time and effort to get done, but we diligently worked on that. We are working towards becoming a fully reporting company, which is moving towards the direction that you and other people have asked about. So all within the fact that we haven’t put on other Board members that we haven’t find the right people for the right set, which we are working on which I just mentioned and we want the right people to do the right things for the right reasons, because for the long-term, I want to grow this business and we were severely set back and we had put to this company on a solid foundation and footing which until we got down with BASF and they haven’t do expansion last in 2012 and BASF in last May, we didn’t have the capabilities or the resources to do the things we are starting to do not.

So we don’t want to put our shareholders our employees, our collaborators at risk, so we thought it was more important to actually build the business, build the foundation and now we are moving forward and doing the things you are asking us to do which we would have done in fact we had the resources in the past.

Danai E. Brooks

It’s Danai, just want to add to the role of markets since I am COO and Chairman of the company. He is running a company, another company for 35 years, he is highly respected in the industry, he has built the company and a technology platform to where it is today, he works with his management team and delegates to them, he have a lot of inputs and how they run the business. It’s definitely not a one man show in terms of how this business is run. He listens to his Board through, he is very active in the operations of this company and Mark is really the heart and soul and brain of Dyadic. There is no reason why he should not be the CEO and the Chairman of the Board, it shouldn’t be a question.

Operator

And Joe, do you have anything further?

Unidentified Analyst

No I wasn’t questioning the Mark’s qualification or his right or whatever to be your Chairman and CEO. I think he is a remarkable leader and persistent beyond belief. It’s just that as I have been watching his progress, it just seems to me that there is a spark that will ignite from some place and I’m just wondering where that going to come from?

Mark A. Emalfarb

So I think there is a couple of more question, if you would like to ask us.

Operator

We’ll go to John McMillin.

Unidentified Analyst

Alright, Mark, John, here; two quick questions, which market do you think you will have the biggest growth potential and then on a site question secondly, I’m very new to the story, can you comment maybe just briefly on your patent portfolio?

Mark A. Emalfarb

Yes, so the good thing about our technology is the platform and Dyadic move across almost every market there is out there today form drugs to vaccines the antibodies and the pharmaceutical space to feed, the food, the textiles, the pulp and paper, to detergents, to biofuels and industrial enzyme space, cosmetics, nutraceutical. But to your question is, there is no bigger opportunity out there that we’re seeing converting biomass into sugar to replace oil, is big as it gets. And I must tell you that I don’t think we get the credit for the fact that Abengoa is going probably the premier company on this planet. It’s involved in turning biomass into sugar and they spend $400 million to demonstrate a 10 year $1 billion investment that they’ve made to do just that. And unlike, Novozymes can pay in $150 million again [indiscernible]. Abengoa paid us to get embed with our technology and they’ve demonstrated and improving and reported showing the slide performances in cost reductions that technology is actually delivered on its promise and we’re very excited about team one and whereas can we go.

And we are very excited about having them with the partner and we didn’t have to dilute our shareholders by spending $100 million to do that so. I think we wish to give this board a lot of different credits for the reasons that what we’ve done methodically and that’s just one example. So that’s the biggest opportunity because if you can make sugar out of biomass in large volumes affordably that’s an incredible opportunity, that $1 trillion market. potential or for $10 billion of enzyme that could be sold into that market.

And I have seen our patent portfolio, we had broad patents in a variety of countries all over the world, we saved some of those off, because we filed too many patents in too many places. We continue to find new patents, we got a bunch of new patents last year issued. We’re expecting to get more this year, but it’s really more important to cell line, the C1 cell line is a living cell that can’t be duplicated. You have to go through and spend tens if not hundreds and millions of dollars to attempt, try to reproduce what we’ve created here and that other people have spent even more money to do the things that it can do and then in that sales of sugar field it’s richer in it’s genomic capabilities, it’s proven to be successfully developed by both Codexis and Abengoa, people that have tested their enzymes as well as ours, realized the performance of the product and the cost structure is going down.

And as we’re getting closer to reality in terms of first commercial plants we’re coming online to see that we’ve reported not only Abengoa, but you have the power plant and you have through pipeline in America. And in Brazil they’re getting rate of launch more plants. And in China they’re talking about building cellulosic plants. So this thing in measurement in turn into an incredible opportunity that all of us are like to be part of down the road.

Danai E. Brooks

Just want to add one or two things real quick. So I know you’re new to the story, I think the way to think about our end market is biofuels, we have three in big buckets, one is biofuels, one is industrial enzymes which represent is getting into and you can look at other companies like DSM, Novozymes DuPont and enzymes that cover those traditional industrial enzyme markets and then the third end market being pharmaceutical. These three markets have very, very different characteristics to them and we’re approaching them in different ways. But and for example biofuels, until the plants could double or triple our pro forma net income. So that’s a huge opportunity for company our size, industrial enzymes I think we have a plan in place to significantly grow that. In pharmaceutical it’s early stage. We’re trying to provide a new technology, but if this works this could be a massive thing for Dyadic. So I think you have to breakdown the company into those three end markets and analyze them separately as you’re considering it as an investment.

Mark A. Emalfarb

We will take one more question because we have actually done same questions a while ago.

Operator

Well, we’ll hear from Steve Emerson.

Unidentified Analyst

Well, first of all congratulations on your excellent progress, but perhaps I missed some of the several key, I have been waiting for the slide that will show a timeline or possible timeline company objectives as to virtually all well recorded biotechs and in light of this request, I didn’t quite understand the subtle piece of the Sanofi status, have they started to bring the possible production in-house to Sanofi? And on a realistic timeframe, when do you think the possible timing of they are making a decision about licensing?

Mark A. Emalfarb

Let me tackle this. I’ll address the Sanofi item first. We have expressed a protein and clarified it and that Sanofi has not have been able to do in any other expression system. We’ve really broken new ground here using a fungal expression system and direct development. And we’ve done a lot of analysis on test results and we believe we have about four, there they have not internalized this or began manufacturing or anything along those lines, this is a long process to go through the FDA approval et cetera to bring something like this to market.

That said, I think we’re making a lot of progress. There is a lot of debate about, which is the right path forward, but everybody involved, very excited about the project and I think we should expect that this is a complicated project has a lot of potential, but I don’t think we can make assertions on when we’ll have next big milestone because this is science and this is cutting-edge. So it may be successful or may not.

Unidentified Analyst

So, is there any few state in our contract with Sanofi or are there any deadline dates or anything at all other than they are paying you research money?

Mark A. Emalfarb

I think in terms of date, we then move forward into clinical trials that’s going to be an important day to look out for, but again that’s not something that we can address in terms of timeline right now.

Unidentified Analyst

Okay. Along the same kind of thought which is to try to get some dates that are meaningful, do we know when the feed enzyme, what approximate time frame it will be submitted to the European authorities and approximately how long that typically takes?

Mark A. Emalfarb

Just in terms of timeline the only thing we know a full priority is have got a starting plan that’s going to go online very soon, and lot of the other projects, including animal feed project is the multiyear project. so you’re not going to see those in the market this year or next year, see their longer-term project. I think I get some very specific timelines in terms of the new R&D projects that [indiscernible] and that characteristic of a lot of new product development.

Unidentified Analyst

Okay. thank you very much. Yes.

Michael J. Faby

I guess one other quick thing, I mean there’s other opportunities in licensing, not necessarily, producing new products that are going to – that are potentially near-term as well. So we have to disaggregate I think bringing new products to market, and also having success in milestones and things like that for new licensing agreement that we’re all working at.

Mark A. Emalfarb

Anyway, to close off, I want to thank all of you for being shareholders and supporters of Dyadic, and for participating in today’s conference call. We look forward to reporting our further progress you – during our first quarter call, in early May. I also want to remind you that our Annual Shareholders Meeting will be held in late June. we will further update you on what is happening.

Operator

And this concludes our program for today. You may all disconnect.

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