Dyadic International, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Dyadic is a biotechnology platform company developing its C1 gene-expression technology for biopharmaceutical applications. It reported one operating segment and no approved pharmaceutical products; revenue was from research collaborations and grants. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.94 million | $0.52 million | $1.40 million | $0.84 million |
| Research revenue costs | $0.83 million | $0.62 million | $1.22 million | $0.90 million |
| Gross profit / margin on research revenue | $0.11 million / 11.5% | $(0.10) million / (19.1)% | $0.18 million / 12.7% | $(0.06) million / (7.5)% |
| Research and development expense | $2.21 million | $1.12 million | $4.02 million | $1.87 million |
| Operating loss | $(3.87) million | $(2.80) million | $(7.19) million | $(5.18) million |
| Net loss | $(3.85) million | $(2.65) million | $(7.14) million | $(4.87) million |
| Basic and diluted loss per share | $(0.14) | $(0.10) | $(0.26) | $(0.18) |
- R&D expense rose substantially, principally due to DYAI-100 COVID-19 vaccine development and Phase 1 preparation costs: $1.51 million in Q2 and $2.39 million in the first half.
- At June 30, cash and cash equivalents were $14.0 million and short-term investments were $11.6 million; including interest receivable, these totaled about $25.8 million. Total current assets were $26.2 million versus current liabilities of $3.3 million. The company reported no debt.
- Cash used in operating activities was $4.31 million for the first half, versus $3.90 million a year earlier. Cash and cash equivalents declined $6.62 million, partly reflecting net purchases of investment securities. Proceeds from option exercises were $0.99 million.
- Stockholders’ equity was $23.2 million, down from $28.4 million at December 31, 2020. The company had 28.08 million common shares outstanding at June 30; options outstanding totaled 4.80 million.
Changes and management commentary
- Revenue increased year over year as the number of active research collaborations grew to 11 in Q2 from 9, and to 13 for the first half from 10. Reported revenue remained small relative to operating expenses.
- Management attributed higher losses mainly to increased internal R&D spending, while lower interest rates and reduced investment balances reduced interest income. No contract-loss provision was recorded in 2021, compared with $75,000 in the comparable 2020 periods.
- Management said cash and investment-grade securities should fund operational and liquidity needs for at least 12 months. It also stated that the company was self-funding DYAI-100 development and cGMP manufacturing at the filing date.
Outlook, developments and risks
- At filing, management expected DYAI-100 to advance toward a Phase 1 human study in the second half of 2021. An interim toxicology analysis had indicated preliminary safety; final results were expected by October 2021, and cGMP production was in process. These were expectations, not completed outcomes.
- After quarter-end, Dyadic signed a July 21 technology-transfer and licensing agreement with South Africa’s Rubic Consortium, which offered a potential funding pathway for a C1-produced COVID-19 vaccine through Phase II and III trials.
- On August 10, Dyadic signed a binding term sheet with Sorrento Therapeutics, not a definitive license agreement. Proposed consideration included $10 million upfront ($5 million cash and $5 million in Sorrento shares), up to $4 million in eligible development-cost reimbursements, potential milestone payments of up to $33 million, and royalties. Sorrento would assume future development costs after the license closes. These amounts were contingent and were not Q2 revenue or cash receipts.
- After quarter-end, Dyadic agreed to sell its BDI Holdings and VLPbio equity interests; the filing reports approximately €1.3 million net proceeds and says the gain would be recorded in Q3 2021. Dyadic retained the ability to engage BDI for research through June 2025.
- Key risks include clinical and regulatory uncertainty, reliance on external collaborators and CROs, customer concentration, intellectual-property and licensing dependencies, and COVID-19-related operational disruption. Two CROs represented 95.8% of Q2 research services purchased; two CROs represented 90.5% of accounts payable at June 30. Foreign customers generated 85.1% of Q2 revenue.
- The company reported no material litigation, no changes to the risk factors in its 2020 Form 10-K, and effective disclosure controls. It had an unused at-the-market facility authorizing up to $50 million of stock sales; no sales had occurred under it as of the filing.
Investor verification priorities
- Confirm whether the Sorrento term sheet became a definitive agreement, whether its upfront payment and stock consideration were received, and what conditions govern milestones, reimbursements, and royalties.
- Check DYAI-100 toxicology, cGMP manufacturing, clinical-trial timing, and subsequent regulatory or collaboration updates against the stated expectations.
- Track operating cash burn, investment maturities, and any financing or ATM share issuance; management’s 12-month liquidity assessment depends on assumptions and execution.
- Assess whether expanding research collaborations can produce enough recurring revenue to offset R&D and administrative expenses, and monitor CRO/customer concentration.