Dyadic International, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023; filed November 8, 2023. Unaudited financial statements.
Business context
Dyadic is a development-stage biotechnology company building its C1 microbial protein-production platform for pharmaceutical applications and its Dapibus platform for non-pharmaceutical uses such as food and nutrition. Revenue principally comes from funded research collaborations and licensing; the company has no products approved for sale.
Financial highlights
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $397,000 | $880,000 | $2.212 million | $2.187 million |
| Research and development revenue | $353,000 | $835,000 | $2.080 million | $1.984 million |
| Operating loss | $(1.720) million | $(1.863) million | $(6.061) million | $(7.926) million |
| Net loss | $(1.614) million | $(1.809) million | $(4.724) million | $(7.589) million |
| Net loss per share | $(0.06) | $(0.06) | $(0.16) | $(0.27) |
| Operating cash used | Not separately presented | Not separately presented | $5.803 million | $6.402 million |
- Q3 research and development revenue fell year over year as projects wound down or were paused following a major contract research organization laboratory relocation. Nine-month revenue was slightly higher.
- Q3 cost of research and development revenue was $106,000 versus $603,000, lifting reported revenue less these costs to about $291,000 from $277,000. For the nine-month periods, those amounts were approximately $587,000 versus $768,000. These are revenue less direct costs, not company-wide profit.
- Research and development expense was $716,000 in Q3 and $2.444 million for nine months, down from $744,000 and $3.917 million, respectively, primarily as DYAI-100 trial dosing was completed.
- General and administrative expense was $1.282 million in Q3 and $4.165 million for nine months, down 7.3% and 12.4%, respectively, year over year.
- Interest income increased to $106,000 for Q3 and $320,000 for nine months, mainly reflecting higher yields. Nine-month other income included a $1.018 million gain on the Alphazyme equity sale; the prior-year period included a $250,000 settlement payment.
Liquidity, cash flow and capital
- At September 30, cash and cash equivalents were $7.403 million and short-term investment securities were $773,000, totaling approximately $8.176 million. Current assets were $9.088 million and current liabilities $1.457 million.
- Nine-month operating cash use was $5.803 million. Investing activities provided $7.416 million, including $8.373 million of investment maturities and $1.294 million of Alphazyme sale proceeds; financing activities provided no cash. Cash increased by $1.609 million from year-end 2022.
- Total liabilities were $1.603 million; the filing reports no borrowings or other debt. Liabilities included accounts payable, accrued expenses, deferred license revenue and operating lease obligations.
- Management expects available cash, investments and operating cash flows to meet requirements for at least 12 months from issuance of the financial statements, while cautioning that assumptions or plans may change. The company expects ongoing losses and negative operating cash flows and may seek additional capital; financing may be unavailable or dilutive.
Material developments, outlook and risks
- DYAI-100: Phase 1 dosing was completed in February 2023. The final patient visit occurred in September, data lock was achieved November 1, and top-line results were expected in December 2023. The filing reports no major vaccine-related safety concerns reviewed by the safety board and no serious adverse events or adverse events of special interest to date. The company did not plan Phase 2/3 trials without partner or collaborator funding.
- Janssen: On October 2, 2023, Janssen notified Dyadic it would wind down the collaboration effective December 31, 2023. The company recognized $132,000 of Janssen license revenue in the first nine months of 2023 and had $220,589 of deferred license revenue at quarter-end.
- Inzymes: A September development and exclusive license agreement covers non-animal dairy enzymes using Dapibus. Dyadic recorded about $67,000 of related R&D revenue through September and received a $600,000 upfront payment in October, after quarter-end. Further success fees, milestones and royalties are possible.
- Other collaborations: The initial one-year funding commitment under the Global Food Ingredient Company project was completed; the parties were considering whether to proceed to a next phase. The filing also describes new research collaborations and preclinical findings, which remain development-stage efforts.
- Concentration and execution risks: Four customers accounted for 84.1% of Q3 R&D revenue. Three CROs accounted for 93.4% of Q3 research services purchased. The filing warns that loss of significant customers or CROs could adversely affect operations.
- The company sold its Alphazyme equity interest during the first nine months, recognizing a gain; potential future sales-based payments, milestones and royalties remain possible but none had been recognized by September 30. The company ended its at-the-market offering agreement in August without sales under the program.
- No material litigation or changes to previously disclosed risk factors were reported. Management concluded disclosure controls were effective and reported no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether DYAI-100 Phase 1 results were reported as expected and what they show regarding safety and immunogenicity.
- The financial and pipeline impact of Janssen’s planned collaboration wind-down, including any replacement or new funded programs.
- How the October Inzymes upfront payment is recognized and whether the collaboration generates follow-on funding, milestones or royalties.
- Whether the Global Food Ingredient Company project advances and whether alternative funding is secured.
- Quarterly cash burn, customer and CRO concentration, and the assumptions supporting management’s stated 12-month liquidity outlook.
- Whether future capital raising becomes necessary and its potential dilution to shareholders.