Dyadic International, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Dyadic is a biotechnology platform company focused on 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.
Financial results
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Research and development revenue | $524,271 | $390,874 | $839,643 | $793,401 |
| Operating loss | $(2.80) million | $(2.96) million | $(5.18) million | $(5.40) million |
| Net loss | $(2.65) million | $(2.70) million | $(4.87) million | $(4.87) million |
| Loss per share, basic and diluted | $(0.10) | $(0.10) | $(0.18) | $(0.18) |
- Revenue increased 34% in Q2 and 6% for the first half. Management attributed the increases to more active collaborations: nine versus four in Q2, and ten versus seven in the first half.
- Costs of research revenue exceeded revenue by $100,000 in Q2 and $63,000 in the first half, before a $75,000 contract-loss provision recorded in both periods. The provision relates to one biopharmaceutical collaboration.
- First-half R&D expense was $1.87 million, up from $1.51 million, primarily reflecting additional internal research projects. General and administrative expense declined to $3.13 million from $3.30 million, while interest income fell to $315,000 from $533,000 due mainly to lower investment yields.
- Cash and cash equivalents were $11.78 million at June 30, 2020, versus $4.82 million at year-end 2019. Short-term investment securities were $20.05 million; total cash and short-term investments were approximately $31.83 million. Current liabilities were $1.64 million. The filing reports no debt.
- First-half operating cash use was $3.90 million, compared with $2.84 million in 2019. Investing activities provided $10.63 million, mainly from investment-security maturities net of purchases; option exercises provided $231,000.
Changes, outlook, and risks
- Management said existing cash, cash equivalents, and investments should fund operations for at least 12 months. It also noted that it may seek outside financing if needed and may fund some or all of a Phase I clinical trial; availability and terms of financing are uncertain.
- On August 13, 2020, after quarter-end, Dyadic entered into an at-the-market agreement permitting sales of up to $50 million of common stock at its discretion. No sales were required by the agreement; Jefferies’ commission is 3% of gross proceeds. Any sales could dilute existing shareholders.
- COVID-19 created uncertainty around operations and third-party research activity; most employees were working remotely. Dyadic described several COVID-19 vaccine and antibody research opportunities, including NIH-related work and a collaboration with Israel Institute for Biological Research. The company reported promising interim mouse-study antibody results communicated by that collaborator, but no clinical-stage C1-produced vaccine, antibody, or other biologic product.
- Management highlighted new funded collaborations and technical progress, including reported glycoengineering and protease-reduction results. These research developments do not assure product development, regulatory approval, commercialization, or future revenue.
- Key operating exposures include dependence on third-party research organizations: one CRO represented 98% of research services purchased in the first half, and approximately 92% of accounts payable at June 30 was owed to that CRO. Foreign customers represented 52.5% of first-half revenue.
- Dyadic recorded no royalty or milestone revenue from sublicensing agreements to date. Its Novovet opportunity had not advanced because Novovet had not raised the necessary capital. The filing reported no litigation believed likely to materially adversely affect the company.
Important facts for investors to verify
- Whether collaborations progress into funded follow-on work, sublicenses, milestones, or royalties, rather than remaining research-stage arrangements.
- Whether cash burn remains consistent with management’s stated 12-month runway, and whether the company uses the $50 million ATM program.
- Whether COVID-19 or other research projects face delays, and whether C1 technology demonstrates performance and safety sufficient for clinical development.
- Whether reliance on the dominant CRO and customer concentration changes, and how the contract-loss provision affects collaboration economics.