Dyadic International, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020. Dyadic is a biotechnology platform company 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 performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $416,361 | $454,507 | $1,256,004 | $1,247,908 |
| Research revenue costs | $266,929 | $384,803 | $1,169,351 | $1,034,934 |
| Contract-loss provision | $112,433 | — | $187,388 | — |
| Operating loss | $(2,576,308) | $(1,943,411) | $(7,756,839) | $(7,346,245) |
| Net loss | $(2,499,499) | $(1,698,384) | $(7,365,060) | $(6,569,434) |
| Loss per share, basic and diluted | $(0.09) | $(0.06) | $(0.27) | $(0.24) |
Margins: After research revenue costs and contract-loss provisions, the remaining contribution was approximately $37,000 (8.9% of revenue) in Q3 and negative $101,000 (about -8.0%) for the first nine months. These figures precede the company’s other operating expenses.
Cash flow: Net cash used in operations was $5.3 million for the first nine months, versus $4.4 million in 2019. Investing activities provided $22.1 million, primarily from maturities of investment securities; financing activities provided $0.2 million from option exercises. Cash and cash equivalents increased by $17.0 million.
Liquidity and capital structure: At September 30, cash and cash equivalents were $21.9 million and short-term investments were $8.5 million; total current assets were $31.7 million and current liabilities were $1.8 million. Total assets were $31.7 million, stockholders’ equity was $30.0 million, and the filing reports no debt. Management said existing cash and investments should fund operations for at least 12 months. The company received an approximately $0.5 million AMT refund in July 2020.
Changes from comparable periods
- Q3 revenue declined about 8% year over year, while nine-month revenue was broadly flat. The company attributed nine-month activity to 12 ongoing collaborations, compared with eight a year earlier.
- Net loss widened by approximately $0.8 million in Q3 and $0.8 million for the nine-month period. Higher R&D and general and administrative costs, contract-loss provisions, and lower interest income contributed.
- R&D expense increased to $986,000 in Q3 and $2.9 million for nine months, principally reflecting COVID-19-related and other internal research. Related-party R&D expense fell to zero after BDI projects completed in 2019.
- Q3 G&A expense rose 55.6% to $1.6 million, including higher stock-based compensation, legal and SEC registration expenses, incentives, and insurance. Nine-month G&A increased 9.6% to $4.8 million.
- Interest income decreased to $77,000 in Q3 and $392,000 for nine months, mainly because investment yields declined.
Outlook, developments, and risks
- Management provided no revenue or earnings guidance. It expects ongoing cash needs for operations, research, business development, and public-company costs; it may fund some or all of a Phase I clinical trial, but gave no commitment or budget for one.
- The filing describes multiple funded or ongoing research collaborations, including work with global pharmaceutical and animal-health companies. It also reports COVID-19 vaccine and antibody research, including preclinical studies and encouraging preliminary results. These are development-stage efforts, not approved products or evidence of commercial success.
- After quarter-end, the company reported new collaborations and an expanded research collaboration, both dated November 12, 2020. It also described an October technology agreement with Epygen Biotech, subject to the partner obtaining funding.
- An at-the-market offering program permits sales of up to $50 million of common stock, with a 3% sales commission. No shares had been sold under the program as of the filing, and management said it had no immediate plans to use it for near-term funding. Future sales could dilute shareholders.
- COVID-19 could disrupt employees, business development, CRO availability, and research timelines; management said the financial impact could not be reliably estimated. The company also noted that C1 has not yet been used to produce a biologic that entered clinical trials and that product performance, regulatory approval, funding, and market acceptance are uncertain.
- Customer and vendor concentration is material: one CRO represented 96.2% of research services purchased in the first nine months, and about 74.4% of accounts payable at quarter-end. Foreign customers accounted for 48.5% of nine-month revenue.
- The $187,000 nine-month contract-loss provision reflects estimated losses on one collaboration. Estimates of contract costs and revenue affect both provisions and revenue recognition. The company reported no litigation believed to be materially adverse and no material subsequent events requiring financial-statement adjustment.
Important facts for investors to verify
- Progress, funding, and milestones for collaborations, including whether preliminary COVID-19 findings translate into reproducible preclinical results, clinical trials, or commercial agreements.
- Cash burn and runway relative to management’s at-least-12-month liquidity assessment, particularly as research spending and collaboration obligations evolve.
- Any future ATM share sales, resulting dilution, and the number of shares outstanding; 27,482,157 shares were outstanding on November 11, 2020.
- Whether customer concentration and reliance on a dominant CRO change, and whether contract-loss estimates or project cost assumptions require revision.
- Potential future sublicense, milestone, and royalty income: the filing states that no milestone or royalty revenue had yet been recognized from sublicensing arrangements.