Dyadic International said today it will sell its industrial technology business to DuPont’s Industrial Biosciences business for $75 million cash, in a deal that will reposition the seller exclusively into a biopharmaceutical business.
Dyadic said it will sell 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. C1 is a fungal expression system intended for gene discovery, expression, and the production of enzymes and other proteins.
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 use the C1 technology for development and production of pharmaceutical products, for which it will make royalty payments to Dyadic upon commercialization, Dyadic said.
“This transaction is an exceptional opportunity to unlock value and provide Dyadic operational flexibility to further develop our pharmaceutical business,” Dyadic founder and CEO Mark Emalfarb said in a statement. “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.”
Dyadic said it has long believed that the pharmaceutical field offers one of the most attractive opportunities for applying its C1 technology.
“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,” the company stated. “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 said it expects to generate the resources to focus on and accelerate further development of C1 in biopharmaceuticals by combining a portion of the proceeds from the deal with additional industry and government funding the company plans to pursue.
C1 may also create attractive licensing opportunities through cost-cutting or “operational efficiencies” and reduced requirements for licensee capital spending, Dyadic added.
Dyadic said it intends to continue its existing programs with Sanofi Pasteur—a collaboration launched in 2011—as well as its involvement within the EU-funded Zoonoses Anticipation and Preparedness Initiative (ZAPI) program.
On October 7, Dyadic said data generated by Sanofi Pasteur indicated that a C1 produced antigen generated an equal or better immune response in mice than the industry standard antigen. “We expect to further develop our capabilities and establish our C1 technology as a competitive manufacturing platform for use in producing novel, and low cost vaccines, biosimilars and other biologics,” Dyadic stated at the time.
The company said it also 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.
Under the agreement, $8 million of the purchase price will be held in an escrow account for 18 months to ensure Dyadic’s obligations on indemnity claims and working capital adjustments.
Dyadic said it expects to use approximately $66 million of its net operating loss carryovers to substantially offset the gain realized from this transaction.
Concurrently with the signing of the agreement, stockholders owning approximately 26.4% of Dyadic’s outstanding shares, including stockholders affiliated with Emalfarb, have agreed to vote the shares controlled by them in favor of the transaction, subject to certain limitations.
Completion of the transaction is expected by the end of 2015, subject to approval by a majority of Dyadic’s stockholders and customary closing conditions, the seller added.
Dyadic said it intends to use a minimum $15 million of the transaction proceeds to begin a stock repurchase program. Timing and details of the program have not yet been determined.
Total proceeds will depend on several factors, including the amount management determines will be required to fund its ongoing pharmaceutical business, the amount of debt required to be paid off in connection with the deal, transaction expenses, the amount needed to satisfy retained and contingent liabilities, and the outcome of an ongoing professional services liability lawsuit against law firms Greenberg, Traurig, LLP, Greenberg Traurig, P.A. and Bilzin, Sumberg Baena Price and Axelrod, LLP.