BASF’s Enzyme-Research Overload Raises Prospects for Dyadic Work

Dyadic International Inc. wants to capitalize on BASF SE (BAS)’s burgeoning research needs into enzymes for catalysts, detergents and other products as the world’s biggest chemical maker has more projects than it can handle.

“In addition to the things they are doing on their own, they’ve basically told us that they have more things to do than they can even do with their own people,” Dyadic Chief Executive Officer Mark Emalfarb said on a conference call. “So they are looking for us to help them.”

For Jupiter, Florida-based Dyadic, conducting third-party research and development while continually developing its own technology is a balancing act, Emalfarb said. BASF paid a $6 million fee for a non-exclusive license to use Dyadic’s technology last year, and the project is already reaching milestones that were set for the end of 2014 and beyond, according to the CEO.

Dyadic has developed what it calls C1 technology, based on a fungus discovered in the early 1990s that can be used in diverse markets from second-generation biofuel to pharmaceuticals and animal feed. It’s poised to get a six-month extension to a research tie-up with drugmaker Sanofi. (SAN)

Emalfarb said Dyadic made a strong start to 2014, with first-quarter revenue growing 20 percent and gross profit almost doubling to $1 million.

BASF Facetime

Emalfarb said he met BASF in March and got the impression that they are embedding his company’s technology deeper into products across divisions.

It’s a further sign that the Ludwigshafen, Germany-based company is increasingly embracing enzymes, building on its $62 million acquisition of San Diego-based Verenium Corp. last year that added research and development capabilities. BASF also bought a detergent-enzyme business from Henkel AG, and CEO Kurt Bock said Feb. 25 that enzymes are a “strategic growth field.”

BASF has teamed up with Direvo Industrial Biotechnology GmbH to develop animal-nutrition enzymes. It’s looking to close the gap on market leaders DuPont Co. and Novozymes A/S (NZYMB) in the $3 billion industrial-enzyme market. Chemical companies make enzymes that are customized for client and industry needs to enhance the performance of products. Within detergents, enzymes enable washing powder to function at lower temperatures, saving energy.

Speedier Route

DuPont has taken a speedier route to expanding in enzymes, buying Denmark’s Danisco A/S for about $7.1 billion in 2011, as it moves away from the traditional chemicals and coatings that were the mainstay of the 212-year-old company.

Dyadic announced the appointment this month of Andre Klaassen, a former executive at DuPont’s enzyme business Genencor, as its sales director for Europe. That will help generate deeper relations with companies like BASF.

“I think that they see the potential, and want to realize it,” said Emalfarb. “You’re dealing with a major, major chemical company and they move like an oil tanker, a little slowly, but when that momentum goes, it goes.”

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Kim McLaughlin, Tom Lavell

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