Dyadic International, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results. Dyadic is a biotechnology company developing C1 and Dapibus microbial protein-production platforms; it has no products approved for sale.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Research and development revenue | $934,000 | $534,000; up 75% |
| License revenue | $44,000 | $115,000 |
| Total revenue | $978,000 | $648,000; up 51% |
| Direct costs of R&D revenue | $727,000 | $405,000 |
| Operating loss | $2.05 million | $2.74 million |
| Net loss | $956,000; $0.03 per share | $2.49 million; $0.09 per share |
| Operating cash used | $2.19 million | $2.85 million |
- R&D revenue less its direct costs was approximately $207,000, a 22% contribution margin, versus approximately $129,000, or 24%, a year earlier. This is not the company’s overall operating margin.
- Q1 2023 other income included a $989,000 gain on the sale of the Alphazyme interest; interest income was $105,000 versus $3,000 a year earlier. The one-time gain materially reduced the reported net loss.
- At March 31, cash and cash equivalents were $6.37 million and short-term investments were $5.36 million, totaling $11.74 million. Current assets were $12.81 million and current liabilities $1.88 million. Total liabilities were $2.01 million; the filing reports no borrowings or debt.
- Cash increased by $580,000 during the quarter, including $2.77 million of net investing cash inflow, principally from the Alphazyme sale. Operating activities used $2.19 million; there was no financing cash flow.
- Accumulated deficit was $74.44 million. Stockholders’ equity was $10.80 million. Shares outstanding were 28.81 million at March 31 and May 9, 2023.
Material changes and business developments
- Compared with Q1 2022, revenue rose, primarily because of higher activity on ongoing research collaborations. R&D expense fell to $811,000 from $1.34 million, chiefly as CRO and consultant work and DYAI-100 manufacturing activity wound down. General and administrative expense declined 10.6% to $1.48 million.
- In January, Dyadic sold its Alphazyme equity interest for approximately $1.27 million in cash. Its sublicensing agreement remains in effect, and the company may receive additional sales-based payments, milestones or royalties; none had been recognized by March 31.
- Dyadic completed dosing in the DYAI-100 Phase 1 trial in February 2023. Six-month follow-up was ongoing; a full study report was expected in the second half of 2023. The company said it did not expect significant additional capital to complete Phase 1 in 2023, but does not plan Phase 2/3 trials without partner or collaborator funding.
Outlook, risks and contingencies
- Management expects cash, investments and operating cash flows to cover operating, business and other liquidity needs for at least 12 months from issuance of the financial statements. This estimate depends on assumptions that may change. The company expects continued operating losses and negative operating cash flows while developing its platforms.
- If additional funding is needed, Dyadic may seek equity offerings, collaborations or other financing; availability and terms are uncertain, and equity financing could dilute shareholders. The existing $50 million at-the-market program had not been used as of the filing.
- Key risks include uncertain R&D and clinical results, regulatory and commercialization challenges, securing collaborations and funding, reliance on significant customers and CROs, and protection of intellectual property. Three customers generated 67% of Q1 revenue; three CROs accounted for 95% of research services purchased.
- Subsequent developments included an expanded Rubic One Health license announced in April and a Fermbox co-development and marketing agreement signed in May. These were post-quarter events, not Q1 revenue. The filing provides no clear quantified revenue forecast or profitability guidance.
- Management reported no litigation believed to be materially adverse and no changes to the risk factors disclosed in the 2022 Form 10-K. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether DYAI-100 follow-up results support further development, and whether partners will fund any Phase 2/3 work.
- How quickly operating cash use continues relative to the stated 12-month liquidity outlook, including the timing and liquidity of held-to-maturity investments.
- Whether collaboration revenue can grow and customer concentration decline; confirm milestones, commercialization fees and royalties are contingent and not guaranteed.
- The sustainability of reported loss improvement: Q1 net loss benefited from a non-recurring Alphazyme sale gain.
- Potential dilution from outstanding options and other equity awards: 5.42 million options and 163,044 unvested restricted stock units were reported at March 31, 2023.