Business context and reporting period
Dyadic International, Inc. is a biotechnology company developing fungal-based protein production platforms, principally C1 for pharmaceutical applications and Dapibus for food, nutrition and wellness. It had no approved products for sale; revenue came from research collaborations, grants and licensing. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022, compared with the same 2021 periods.
Financial and operating results
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $880,000 | $693,000 | $2,187,000 | $2,091,000 |
| Operating loss | $(1,863,000) | $(3,324,000) | $(7,926,000) | $(10,512,000) |
| Net loss | $(1,809,000) | $(1,715,000) | $(7,589,000) | $(8,856,000) |
| Net loss per share | $(0.06) | $(0.06) | $(0.27) | $(0.32) |
| Operating cash used | Not separately presented for the quarter | $(6,402,000) | $(8,642,000) |
- Q3 revenue increased about 27%, with research and development (R&D) revenue of $835,000 and license revenue of $44,000. Nine-month revenue rose about 5%; R&D revenue declined about 5% to $1,984,000 while license revenue was $203,000.
- Q3 R&D expense fell to $744,000 from $1,902,000; nine-month R&D expense declined to $3,917,000 from $5,919,000. Management attributed the decreases mainly to winding down CRO, quality and regulatory consulting activity and lower cGMP manufacturing costs.
- Q3 net loss increased year over year despite a narrower operating loss, largely because Q3 2021 included a $1.606 million gain from the sale of BDI investments. For the nine-month period, 2022 net loss included $250,000 of settlement income from termination of a proposed license and collaboration term sheet; 2021 included the $1.606 million BDI gain.
- Cash, cash equivalents and short-term investment securities totaled $14.201 million at September 30, 2022, versus $20.260 million at December 31, 2021. Current assets were $14.928 million and current liabilities $2.387 million. Total liabilities were $2.607 million; the filing reports no interest-bearing debt.
- Nine-month investing cash outflow was $2.987 million, principally reflecting purchases and maturities of investment securities; financing cash inflow was $402,000, principally from stock-option exercises. No cash-flow figure for the quarter alone is presented.
- R&D revenue less the associated cost of R&D revenue was $233,000 in Q3 2022 versus $300,000 in Q3 2021; the filing does not present a separate gross-margin measure. The company reported no income-tax provision and maintained a full valuation allowance against deferred tax assets.
Changes, outlook, risks and notable items
- Management said existing cash and investment-grade securities should fund operations and other liquidity needs for at least 12 months. Dyadic was self-funding DYAI-100 development and manufacturing toward a Phase 1 trial and cautioned that funding beyond Phase 1, if successful, is not assured.
- On October 27, 2022, after quarter-end, South Africa’s health-products regulator approved the clinical trial application for a Phase 1 DYAI-100 COVID-19 RBD booster trial. The filing said enrollment was planned for later in 2022; trial initiation and results remained uncertain.
- A May 2022 joint development agreement with a global food ingredient company provides approximately $4.1 million of research funding over two years, plus conditional success fees, a low-eight-figure commercialization fee and low-single-digit royalties if applicable. These contingent payments are not assured.
- Other collaboration opportunities include Janssen, Phibro/Abic and research partners. Management described preclinical protein and antibody findings as promising, but these are not approved products or established commercial revenue.
- Revenue and margin timing depend partly on estimated costs to complete research obligations. Most research services purchased were concentrated among three CROs; customer and collaborator concentration, execution, regulatory and development risks are material considerations. COVID-19 disruptions and broader economic conditions could also affect operations, though management said there had been no material timeline impact to date.
- The company had an at-the-market equity program authorizing up to $50 million in offerings, with a 3% sales commission, but reported no sales under it as of the filing. Future use could dilute shareholders. No material litigation was reported, and the company said its risk factors were unchanged from its 2021 Form 10-K.
Key facts for investors to verify
- Whether DYAI-100’s Phase 1 trial began, its safety and immunogenicity results, and the funding required to advance it.
- Cash burn and investment balances relative to management’s stated minimum 12-month liquidity outlook.
- Progress, funding receipts and milestone eligibility under the global food ingredient, Janssen and other collaboration agreements; distinguish recognized revenue from contingent future fees and royalties.
- Whether reduced R&D spending reflects planned timing and completion of work or affects development progress, and whether CRO concentration changes.
- Any subsequent ATM issuance, resulting dilution, and the outstanding share and option count.