Dyadic International, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Dyadic is a biotechnology platform company focused on developing its C1 gene-expression technology for biopharmaceutical applications. It had no pharmaceutical products approved for sale; reported revenue was from research collaborations and grants.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Research and development revenue | $315,372 | $402,527; down 21.7% |
| Cost of revenue | $278,182 | $327,903 |
| Gross profit / margin | $37,190 / 11.8% | $74,624 / 18.5% |
| Operating loss | $2.383 million | $2.441 million |
| Net loss | $2.214 million | $2.175 million |
| Net loss per share | $0.08 | $0.08 |
| Net cash used in operating activities | $1.996 million | $1.410 million |
At March 31, cash and cash equivalents were $4.697 million and investment securities were $29.106 million, for $33.803 million combined, excluding $227,146 of interest receivable. Total current assets were $32.819 million and current liabilities were $1.136 million. Stockholders’ equity was $34.252 million. The filing reports no debt. Management said available cash and investments should fund operations for at least 12 months.
Changes and operating developments
- Revenue fell as the company had five ongoing research collaborations, versus six a year earlier. One customer, Serum Institute of India, contributed approximately $75,000 of Q1 revenue.
- Research and development expense rose to $755,453 from $692,370, principally due to accelerated glycoengineering work at VTT. Related-party R&D expense declined to zero from $389,473 after BDI work was completed in 2019.
- General and administrative expense increased 15.8% to $1.653 million. Interest income declined 37.1% to $168,383, primarily reflecting lower yields.
- Operating cash use increased year over year. Investing activities provided $1.698 million, largely from net maturities of investment securities; option exercises provided $175,000.
- Management reported C1 research progress in human-like glycan engineering and protease reduction, new or expanded animal-health research programs, a research license with WuXi Biologics, and an influenza vaccine feasibility study with the University of Oslo.
Outlook, risks and contingencies
- COVID-19: Most employees were working remotely. Management could not estimate the pandemic’s effect on results, liquidity, or operations; research delays, CRO disruption, travel restrictions, and broader economic impacts were identified as risks. Dyadic was pursuing vaccine and antibody opportunities with IIBR, Ufovax, and EU ZAPI-affiliated scientists, but emphasized that funding, technical success, regulatory approval, and commercialization were uncertain. Its C1 platform had not yet produced a biologic product that entered clinical trials.
- Funding and runway: The company expects continued operating losses and depends on research collaborations, grants, and potential sublicensing. It may seek equity or other financing if existing resources prove insufficient; availability and terms are not assured.
- Research commitments: The VTT contract runs through June 2022, with stated commitments of €2.52 million plus a later €690,000 expansion and a March 2020 €700,000 expansion; VTT may also receive a success bonus up to €450,000. Dyadic may terminate on 90 days’ notice.
- Concentration: One CRO accounted for approximately 100% of research services purchased in Q1 2020, and about 91.2% of accounts payable at quarter-end was owed to that CRO. Customer concentration also exposes revenue and receivables to loss or delayed payment from key customers.
- Tax and legal matters: Dyadic had received about $0.5 million of an expected AMT refund and anticipated the remaining portion in 2020 under the CARES Act. The IRS was examining the 2016 federal tax return; no assessment had been reported. The company disclosed no litigation it believed would materially adversely affect its financial condition or results.
- The filing provides no quantitative revenue or earnings guidance. Management’s stated outlook was that current cash and investments would cover at least the next 12 months.
Key facts investors should verify
- Whether collaboration revenue and funded research expand enough to offset ongoing operating losses and cash use.
- Actual cash burn and investment balances in subsequent filings, and whether management’s 12-month runway assessment remains valid.
- Progress, funding, technical results, and any clinical or regulatory milestones for C1 and the COVID-19-related opportunities.
- VTT spending and deliverables, CRO concentration, and potential changes to research commitments.
- Receipt of the remaining AMT refund and the outcome of the IRS examination.