10-Q: Dyadic International Reports Q3 2024 Results: Strategic Partnerships and Licensing Deals Drive Revenue Growth

Sentiment:

Quarterly Report 12 November 2024 4:10 PM

📋All filings for Dyadic International INC

Dyadic International's strategic focus on licensing and collaboration agreements fuels revenue growth in the third quarter of 2024, despite ongoing investments in research and development.

Capital raiseOn March 8, 2024, the company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 in a private placement.The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Companys outstanding common stock, (collectively, the Purchasers).The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, were $5,824,000.The company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes.The Convertible Notes are senior, secured obligations of Dyadic and its affiliates, and interest is payable quarterly in cash on the principal amount equal to 8% per annum.The Convertible Notes will mature on March 8, 2027 (the Maturity Date), unless earlier converted, repurchased, or redeemed in accordance with the terms of the Convertible Notes.The Convertible Notes can be converted into shares of Dyadics Class A common stock (the Common Stock), at the option of the holders of the Convertible Notes (the Noteholders) at any time prior to the Maturity Date.On October 4, 2024, the company entered into an amendment (the Amendment) to the Convertible Notes.Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Companys common stock is $1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the 26, 29 and 32-month anniversaries of the original issue date of the Convertible Notes.As of September 30, 2024, $600,000 of the Convertible Notes were converted in to 335,195 shares of Common Stock.

Better than expectedThe company recognized $1.0 million in licensing revenue from Proliant.The company recognized $425,000 in success fees from Inzyme.Research and development revenue increased by $180,000 compared to the same period a year ago.Net loss decreased to $203,000 compared to $1.614 million for the same period a year ago.

Summary

Dyadic International, Inc., a global biotechnology company, reported its financial results for the third quarter ended September 30, 2024.
The company focuses on developing and commercializing its microbial protein production platforms, C1 and Dapibus, for human and animal health, as well as non-pharmaceutical applications.
In Q3 2024, Dyadic saw increased research and development revenue due to a growing number of collaborations, totaling eleven compared to seven in the same period last year.
License revenue for Q3 2024 was $1.425 million, primarily from a $1.0 million licensing fee from the Proliant agreement and a $425,000 success fee payment from the Inzyme agreement.
The company reported a net loss of $203,000 for Q3 2024, a significant improvement from a net loss of $1.614 million in Q3 2023.
This improvement is attributed to the licensing revenue from Proliant and Inzyme, along with increased research and development revenue.
Dyadic's net loss for the nine months ended September 30, 2024, was $4.258 million, compared to $4.724 million for the same period in 2023.
The company issued $6.0 million in Senior Secured Convertible Promissory Notes in March 2024 to support near-term revenue growth and accelerate commercialization opportunities.
As of September 30, 2024, Dyadic had $5.9 million in cash and cash equivalents and $4.0 million in investment-grade securities.
The company believes its existing cash, investments, and operating cash flows will be sufficient to meet its operational needs for at least the next twelve months.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the revenue generated from licensing agreements and the progress made in collaborations. However, the company's ongoing net loss and reliance on a few key partners slightly temper the overall sentiment.

Positives

Strategic partnerships with Proliant and Inzyme are generating significant license revenue.
The company is making progress in developing and sampling alternative proteins like recombinant alpha-lactalbumin and transferrin.
Collaborations in animal health with Phibro/Abic are expanding.
In human health, collaborations with top pharmaceutical companies and a leading biotech are advancing.
The company has a strong cash position and expects to meet operational needs for the next twelve months.
The company has successfully expressed an antibody targeting digestive health and antigens for HIV, HPV, RSV, and other respiratory viruses.
Third party collaborator(s) reported data demonstrating all three infectious disease mAbs expressed from C1-cells showed virtual identical neutralizing and binding activity to traditionally produced CHO mAbs.

Negatives

The company continues to experience net losses due to ongoing investments in research and development.
Research and development expenses decreased in Q3 2024 due to the winding down of the Phase 1 clinical trial for the DYAI-100 COVID-19 vaccine candidate.
General and administrative expenses increased in the nine months ended September 30, 2024, compared to the same period in 2023.
The company is reliant on a limited number of customers and contract research organizations (CROs).
Several large research collaborations were wound down in 2023, leading to a decrease in research and development revenue for the nine months ended September 30, 2024.

Risks

The company has a history of net losses and may continue to incur losses as it invests in research and development.
Market and regulatory acceptance of Dyadic's microbial protein production platforms is uncertain.
The company faces competition from alternative technologies.
Clinical trials may not yield positive results.
Dyadic is dependent on third parties for research and development, manufacturing, and commercialization.
The company may need to raise additional capital in the future, which could be dilutive to existing shareholders.
Government regulations and environmental, social, and governance issues could impact the company's operations.
Intellectual property risks could affect the company's ability to protect its technology.

Future Outlook

Dyadic expects its existing cash and cash equivalents, cash raised from the Convertible Notes, investments in debt securities, and operating cash flows to be sufficient to meet its operational, business, and other liquidity requirements for at least the next twelve months. The company is focused on commercializing its C1 and Dapibus platforms and advancing its collaborations in both pharmaceutical and non-pharmaceutical applications.

Management Comments

This private placement funding is expected to support our near-term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non -pharmaceutical applications.

Industry Context

Dyadic's focus on developing microbial protein production platforms aligns with the growing demand for alternative protein sources in both the pharmaceutical and food industries. The company's partnerships and licensing agreements demonstrate the increasing interest in using microbial platforms for the production of biologics and other proteins.

Comparison to Industry Standards

Compared to traditional Chinese Hamster Ovary (CHO) cell lines used in biopharmaceutical manufacturing, Dyadic's C1 platform offers potential advantages in terms of production speed, yield, and cost.
For example, third-party collaborators have reported that infectious disease monoclonal antibodies (mAbs) expressed from C1-cells showed virtually identical neutralizing and binding activity to traditionally produced CHO mAbs.
In the alternative protein space, Dyadic's Dapibus platform competes with other microbial expression systems, such as those offered by Perfect Day and The EVERY Company, which use precision fermentation to produce animal-free dairy proteins.
Dyadic's partnership with Proliant for recombinant albumin production is similar to collaborations between other biotech companies and protein suppliers, such as the partnership between Geltor and ADM for the production of animal-free collagen.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Operating Officer		Joseph Hazelton	September 4, 2024

Legal Proceedings

The company is not currently involved in any litigation that it believes could have a materially adverse effect in our financial condition or results of operations.
From time to time, the company is subject to legal proceedings, asserted claims and investigations in the ordinary course of business, including commercial claims, employment and other matters, which management considers immaterial, individually and in the aggregate.

Related Party Transactions

The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Companys outstanding common stock.
As of September 30, 2024, convertible notes payable to related parties were $1.4 million.
For the nine months ended September 30, 2024, $600,000 of the Convertible Notes held by related parties were converted into 335,195 shares of the Companys common stock.

Stakeholder Impact

Shareholders: The company's ongoing net loss may negatively impact shareholder value in the short term. However, the long-term potential of Dyadic's technology and partnerships could create value for shareholders.
Employees: The company's continued investment in research and development suggests a commitment to growth and innovation, which could benefit employees.
Customers: Dyadic's collaborations and licensing agreements could lead to the development of new and improved products for customers in the pharmaceutical and food industries.
Suppliers: The company's reliance on a limited number of CROs could create risks for these suppliers if Dyadic's business were to decline.
Creditors: The issuance of Convertible Notes increases the company's debt obligations, which could impact its ability to meet future financial obligations.

Next Steps

Dyadic will continue to advance its collaborations with Proliant, Inzyme, Phibro/Abic, and other partners in the pharmaceutical and non-pharmaceutical sectors.
The company will focus on commercializing its C1 and Dapibus platforms, including the anticipated launch of the first recombinant human serum albumin product with Proliant in the first half of 2025.
Dyadic will continue sampling efforts for its alternative protein products, such as recombinant alpha-lactalbumin and transferrin.
The company will seek additional grant funding opportunities for its human health programs.
Preclinical studies for Mpox vaccine candidate developed in collaboration with ViroVax LLC are scheduled to begin in Q4 2024.
The company is currently in dialog with manufacturing organizations to produce a research grade DNASE-1 product with anticipation of taking pre-orders by the first quarter of 2025.
Current application testing for recombinant bovine transferrin is ongoing for use in cell culture media for the cultured meat industry, with results expected in the fourth quarter.
The company will provide samples of recombinant lactoferrin to several interested parties.

Key Dates

Date	Description
December 31, 2015	Date of the DuPont Transaction, where Dyadic sold its industrial technology business to Danisco USA.
December 16, 2021	Date of the Research, License, and Collaboration Agreement with Janssen Biotech, Inc.
May 10, 2022	Date of the Joint Development Agreement (JDA) with a Global Food Ingredient Company (GFIC).
September 18, 2023	Date of the Development and Exclusive License Agreement with Inzymes ApS.
October 2, 2023	Date Janssen provided written notice to wind down the collaboration, with an effective end date of December 31, 2023.
January 2, 2024	Date of annual share-based compensation awards granted, including stock options and RSUs.
January 31, 2024	Date of the Third Amendment to the commission contract with VTT Technical Research Centre of Finland Ltd.
March 8, 2024	Date of issuance of $6.0 million of 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027.
March 13, 2024	Date of grant of 212,709 RSUs to executives and key personnel in lieu of cash bonuses.
April 11, 2024	Date of one-time share-based compensation awards granted, including stock options.
June 27, 2024	Date of the License and Development Agreement with Proliant Biologicals, LLC.
September 4, 2024	Date the COO adopted a Rule 10b5-1 trading arrangement.
September 23, 2024	Date of one-time award of 25,000 stock options granted to a consultant.
October 4, 2024	Date of the amendment to the Convertible Notes, setting the conversion price at $1.40 per share.
November 11, 2024	Number of shares outstanding of the registrants Common Stock.
November 12, 2024	Date the consolidated financial statements were available to be issued.
March 8, 2027	Maturity date of the Convertible Notes.

Keywords

biotechnology, protein production, C1 platform, Dapibus platform, licensing, collaboration, pharmaceutical, animal health, non-pharmaceutical, recombinant albumin, enzymes, vaccines, antibodies, research and development, clinical trials, commercialization

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