Dyadic International, Inc. — Q1 2021 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2021. Dyadic is a biotechnology platform company developing its C1 gene-expression technology for human and animal biopharmaceutical applications. It had no pharmaceutical products approved for sale; reported revenue was from research collaborations and grants.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Research and development revenue | $460,520 | $315,372; up 46% |
| Cost of research revenue; gross profit and margin | $390,762; $69,758; 15.1% | $278,182; $37,190; 11.8% |
| Research and development expense | $1.81 million | $755,453; up about 139% |
| General and administrative expense | $1.55 million | $1.65 million; down 6% |
| Operating loss | $3.32 million | $2.38 million |
| Net loss; loss per share | $3.29 million; $0.12 | $2.21 million; $0.08 |
| Cash used in operating activities | $1.91 million | $2.00 million |
| Cash and cash equivalents at period end | $13.06 million | $20.64 million at Dec. 31, 2020 |
| Short-term investment securities at period end | $14.18 million | $8.46 million at Dec. 31, 2020 |
| Current assets; current liabilities | $27.99 million; $2.59 million | $29.78 million; $1.63 million at Dec. 31, 2020 |
Cash plus short-term investment securities totaled approximately $27.23 million at March 31, 2021, versus $29.09 million at year-end. The company reported no debt on the balance sheet. Investing activities used $5.78 million, primarily reflecting purchases net of maturities of investment securities; financing provided $115,800 from option exercises. The current ratio was approximately 10.8x, calculated from reported current assets and liabilities.
Material changes and management commentary
- Revenue increased as active research collaborations rose to eight from five in the prior-year quarter.
- R&D expense increased primarily due to $882,000 of DYAI-100 COVID-19 vaccine development costs and $159,000 in additional costs for other internal research projects.
- Management said the animal GLP toxicology study for DYAI-100 began in late April 2021, cGMP production had begun, and a first-in-human Phase 1 trial was expected to begin by year-end 2021. The filing also describes this as an anticipated second-half 2021 start.
- Management believes cash, cash equivalents, investment-grade securities, and operating cash flow will meet liquidity needs for at least 12 months. It may seek equity or other financing if needed and may self-fund some or all of a Phase 1 trial.
Outlook, risks, contingencies, and unusual items
- Clinical, commercial, and regulatory outcomes remain uncertain. Risks include the ability to generate sufficient C1 platform data, advance candidates through preclinical and clinical studies, secure collaborations and funding, and achieve industry and regulatory adoption. COVID-19-related disruption and broader economic effects could also affect operations and research.
- Research-service spending was concentrated: three contract research organizations accounted for 98.1% of research services purchased in Q1 and 89.8% of accounts payable at March 31. The loss of a key CRO could adversely affect operations.
- Revenue came from eight customers; six customers outside the U.S. accounted for 76.7% of Q1 revenue. Customer dependence and international exposure are relevant risks.
- The company disclosed no litigation it believes would have a material adverse effect and reported no change to the risk factors in its 2020 Form 10-K. It also stated there were no material subsequent events requiring disclosure.
- An at-the-market offering facility permits up to $50 million of share sales, but no shares had been sold under it as of the filing. Potential issuance could dilute shareholders.
- Net loss widened as R&D spending rose; interest income fell to $25,670 from $168,383, primarily due to lower investment balances and interest rates. No income tax provision was recorded, and deferred tax assets remained fully reserved.
Important facts for investors to verify
- Progress and timing of DYAI-100 toxicology, cGMP production, regulatory submissions, and the planned Phase 1 trial.
- Whether research collaborations expand into durable revenue, licensing, milestone, or royalty income; no sublicense milestone or royalty revenue had been recognized to date.
- Cash burn and liquidity runway relative to planned clinical and research spending, including any use of the $50 million ATM facility.
- Dependence on a small number of CROs and customers, and whether collaboration funding offsets the rising R&D expense.
- Execution and funding of other disclosed programs, including COVID-19 variant work, animal-health projects, and human-health collaborations.