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Biotech / Medical : Dyadic

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From: Paul Lee5/7/2011 3:49:38 PM
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The Best Growth Stock to Hold Forever (OTC: DYAI)
Money — By Editor on November 18, 2010 6:12 pm

The Best Growth Stock to Hold Forever
If I had to pick a stock that offered indefinite growth potential, I’d bet big on a fungus.

My choice for “The Best Growth Stock to Hold Forever” is a biotech pioneer called Dyadic International (OTC: DYAI). Most people have never heard of this little Florida-based gem, but in the coming years, I think it will rise to prominence as one of the nation’s leading bio-industrial concern, supplying several key sectors of the economy with vital tools to carry out a host of manufacturing tasks.

This maker of specialty enzymes has this lock on the future because it owns a special fungus called C-1. In the hands of genetic engineers — Dyadic CEO Mark Emalfarb calls them “gene jockeys,” C-1 can be programmed to generate vast quantities of enzymes.

One of the key areas that will be effected is the pharmaceutical industry. Many of today’s leading drugs are the result not simply of a certain chemical formula — made by mixing those chemicals together and stamping out pills — but of certain biological processes. That is, the medicine you take, one way or another, is the result of a process involving living things.

To accomplish this, drug manufacturing relies on a technology that, frankly, tends to weird some people out. In fact, I had one Game-Changing Stocks reader send me an email in which he vowed to never again take a drug manufactured this way. The manufacturing process centers on a technology known as CHO.

Now, when I first heard of CHO, I figured it must stand for carbon, hydrogen and oxygen — the building blocks of life, right? Wrong. That’s chemistry-oriented thinking. CHO stands for Chinese Hamster Ovary. Laboratory technicians begin their drug manufacturing process with these cells and introduce other agents to obtain — that is, to organically grow — a certain substance. It could be your blood pressure medication, your treatment for asthma, Parkinson’s, cancer or a host of other maladies. Biotech drugs are a big business — and they are all manufactured the same way.

The process has some drawbacks. For one, it is time-consuming, because the manufacturing process must be proven at different sizes. In other words, just because CHO yields X results for Quantity Y, the output for Quantity Z might be totally different. Each phase of this testing takes weeks in the lab as the eggs cells undertake the necessary biological steps. And while every manufacturer in the world relies on this process, which offers other limitations, every manufacturer is always on the lookout for something different.

That’s why Dyadic partnered with an expert in the drug manufacturing space and launched a new venture called EnGen Bio. Its aim is to deliver enzyme-based manufacturing processes to Big Pharma to reduce their costs, improve purity and decrease production time. Given the proper enzymes, which act as catalysts, what takes weeks in the incubator takes only hours in the test tube. It’s also scalable, yields far purer results — there aren’t any hamster egg byproducts to clean out, and it can be done with less water and at lower temperature, which both deliver substantial additional cost savings.

Think about it: Potentially hundreds of drugs — billions of prescriptions a year — could be made using Dyadic’s enzymes. Several deals are in the works to test the technology. Big Pharma is clearly interested, and as time passes and the concept is continually proven possible, successful and efficient, Dyadic stands to earn significant royalties.

That’s just one area where these enzymes can be used.

Ready for another? Let’s run your car to the filling station.

Once we get there, you’ll likely see a sticker on the pump that notes as much as 10% of the gasoline you pump could be ethanol — pure grain alcohol derived from corn.

That sticker won’t be there much longer. A new EPA rule changes how much ethanol can go into your tank — it’s not less, it’s more. The ceiling was 10%. Now it’s 15%. This means the feds just increased the market for ethanol by +50%.

Now a lot of folks are all sorts of upset out this. Greens in particular like to have a wall-eyed fit over the new ethanol blending rules, which they think will lead to more plants being planted and more land being cultivated for row crops.

That's not right. That's not what the law says, anyway.

You see, federal law passed way back in the Bush years sets a production schedule for biofuels, of which traditional corn-based ethanol is one. Biodiesel is another. A third is a special type of ethanol, derived not by boiling the starch off corn and distilling it into white lightning -- which is all ethanol is -- this type of ethanol is made from the sugar in plants, which can be fermented into ethanol.

This type of biofuel, called cellulosic ethanol because it uses plant sugar or "cellulose," can be made from any plant, be it leftover corn stover, wheat straw, grass, even algae. Anything made from plants that grow contains cellulose that can be turned into fuel. There's even a company that's collecting used office paper from Congress and turning it into biofuel -- probably the only useful thing lawmakers have generated in recent memory!

The upside is that these plants can be grown anywhere. In many cases, the biomass being used for cellulosic ethanol will simply be the leftover plant matter from traditional crops. In other cases, special grasses might be planted. These not only can be planted just about anywhere, but they don't need as much water, bug killer or fertilizer as corn does.

Corn hits a ceiling for biofuel production in 2015, when 15 billion gallons of ethanol can be used. But during the same time, and extending through to 2022, cellulosic ethanol production will grow from only a few million gallons today to 16 billion gallons in 2022.

The thing is, the energy to be harvested from plant sugar can't be reached in a cost-effective manner without enzymes. So just as Dyadic likely will be receiving a part of your bill at the pharmacy, it also likely will be getting paid every time you fill up with petro. After all, without the proper mix of enzymes, all that agricultural waste and grass and scrap wood and paper will just be trash.

These two applications are indicative of Dyadic's remarkable potential. But there are others. Emalfarb, in fact, has trademarked the catchphrase "Dyadic Inside." In the near future, you're likely to see this label at the pharmacy, at the gas station and even when you pop the top on an ice-cold brewski or bottle of vino -- Dyadic's enzymes are already used in their production.

Action to Take --> Forever is a long time, but I'm confident that as time passes, these markets for Dyadic's products will develop and new markets will emerge, and this little company will collect a royalty on more things than we can count. Because of this, Dyadic is my pick for the "Best Growth Stock to Hold Forever."

--Andy Obermueller

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