Dyadic International, Inc. (NASDAQ: DYAI) — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023, compared with FY2022. This annual filing does not provide standalone fourth-quarter results.
Business context
Dyadic is an early-stage biotechnology platform company developing microbial protein-production technologies: C1 for pharmaceutical applications and Dapibus for food, nutrition and other non-pharmaceutical uses. It has no products approved for sale; revenue is primarily from research collaborations and licensing. The company relies substantially on third-party research organizations and collaborators.
Financial performance and liquidity
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Total revenue | $2.90 million | $2.93 million |
| Research and development revenue | $2.55 million | $2.68 million |
| License revenue | $353,000 | $247,000 |
| Costs of research and development revenue | $1.98 million | $2.12 million |
| Research and development expense | $3.30 million | $4.50 million |
| General and administrative expense | $5.82 million | $6.42 million |
| Operating loss | $8.23 million | $10.17 million |
| Net loss | $6.80 million | $9.74 million |
| Net loss per share, basic and diluted | $0.24 | $0.34 |
| Cash and cash equivalents | $6.52 million | $5.79 million |
| Short-term investment securities | $748,000 | $6.85 million |
| Net cash used in operating activities | $6.73 million | $8.08 million |
Revenue less reported costs of research and development revenue was approximately $923,000; the filing does not present a conventional company-wide gross margin. Net loss improved by $2.94 million, mainly as R&D and G&A expenses declined and the company recorded a gain on the Alphazyme sale. The $1.02 million gain and $417,000 of interest income were significant components of other income. Cash flows from investing activities were $7.45 million provided in 2023, primarily reflecting investment maturities and Alphazyme sale proceeds. No cash was provided by financing activities in 2023. The balance sheet reported no borrowings at year-end; it did report $2.34 million of total liabilities and $5.88 million of stockholders’ equity.
Material changes and notable developments
- Research and development expense fell about $1.20 million, principally as activity on the DYAI-100 Phase 1 trial wound down. G&A expense fell about $605,000.
- Dyadic received approximately $1.3 million from selling its Alphazyme equity interest and retains potential contractual milestone, royalty and other payment rights.
- Janssen notified Dyadic that it would wind down its collaboration effective December 31, 2023. Dyadic recognized approximately $873,000 in Janssen license and R&D revenue in 2023.
- The Inzymes Dapibus development and exclusive-license agreement provided a $600,000 upfront payment in October 2023. The agreement also provides for potential yield-based success fees, milestones and royalties.
- After year-end, Dyadic issued $6.0 million principal amount of 8% senior secured convertible notes, with approximately $5.85 million net proceeds. The notes mature in 2027, are convertible at an initial $1.79 per share, and are secured by a first-priority lien on substantially all assets of the company and its subsidiary. Purchasers include family members and trusts related to the CEO.
Outlook, risks and other matters
Management expects existing cash, investments, operating cash flows and the note proceeds to fund operations and liquidity needs for at least 12 months from the financial-statement issuance date. This assessment depends on assumptions that may prove incorrect; the company expects continued operating losses and negative operating cash flows and may need additional capital. Management says Phase 2/3 trials of DYAI-100 will not proceed unless third-party funding is secured.
Dyadic reported successful top-line Phase 1 results for DYAI-100: the study met its primary safety and tolerability endpoint at both dose levels and elicited immune responses. The vaccine is not approved, and early-stage results do not establish later-stage efficacy. The filing describes several subsequent collaboration and development announcements in 2024; some arrangements remain subject to further funding or binding agreements.
Key risks include inability to commercialize or obtain regulatory acceptance for C1 or Dapibus; reliance on a small number of collaborators and CROs; loss or reduction of partner research funding; need for additional capital; competition from better-resourced companies; and intellectual-property, GMO-acceptance, regulatory, cybersecurity and foreign-currency risks. Two customers represented 45.2% of FY2023 R&D revenue. Three CROs represented 96.0% of research services purchased.
The company reported no material litigation. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal controls because Dyadic is a smaller reporting company. The financial statements received unqualified audit opinions, with no critical audit matters reported.
Important facts for investors to verify
- Review the full cash runway assumptions and the note’s covenants, redemption provisions, conversion limits, collateral and related-party terms.
- Track replacement funding and revenue after Janssen’s collaboration ended, and the status and economics of other research and licensing agreements.
- Confirm the next development decisions, funding requirements and regulatory path for DYAI-100; Phase 1 results are not proof of efficacy or approval prospects.
- Monitor customer and CRO concentration, operating cash burn, and whether cash generation increasingly depends on one-time asset sales or collaboration payments.
- Assess dilution and governance implications: 28,974,105 common shares were outstanding as of March 27, 2024, and the notes may convert into common shares.