PharmaCyte Biotech, Inc. — Form 10-Q
Reporting period: Three and nine months ended January 31, 2021 (fiscal 2021 third quarter). Unaudited consolidated financial statements. PharmaCyte is a pre-revenue biotechnology company developing Cell-in-a-Box® cellular therapies, including a planned Phase 2b trial for locally advanced pancreatic cancer (LAPC).
Financial performance and liquidity
| Metric | Three months ended Jan. 31, 2021 | Nine months ended Jan. 31, 2021 | Prior-year comparison |
|---|---|---|---|
| Revenue | $0 | $0 | $0 for both comparable 2020 periods |
| Operating expenses | $756,847 | $2,588,038 | $875,308 and $3,076,505, respectively |
| Net loss | $757,096 | $2,591,232 | $875,308 and $3,076,505, respectively |
| Operating cash used | — | $2,390,586 | $1,698,981 used |
- Gross profit and operating margins are not meaningful because the company reported no revenue.
- Cash was $3.091 million at January 31, 2021, versus $894,861 at April 30, 2020. Working capital was approximately $2.492 million at January 31, 2021; the MD&A compares this with negative $810,000 at January 31, 2020.
- Financing provided $4.586 million net cash during the nine-month period, principally from common-stock sales; investing cash flow was zero. Cash increased by $2.196 million to $3.091 million.
- Total liabilities were $648,700, including a $75,200 PPP loan (of which $66,753 was current). The company intends to seek PPP forgiveness but cannot assure it will be forgiven.
- Accumulated deficit was $106.449 million. Common shares outstanding increased from 1.639 billion at April 30, 2020 to 2.341 billion at January 31, 2021. The filing reports 2.385 billion outstanding as of March 12, 2021.
Changes versus prior comparable periods
- Nine-month operating expenses fell $488,467, mainly because general and administrative costs decreased $696,333; R&D increased $392,410, partially offsetting the reduction. Quarterly operating expenses declined $118,461.
- R&D expense rose to $595,976 for nine months from $203,566 a year earlier, reflecting increased development activity. Net loss improved to $2.591 million from $3.077 million.
- Operating cash use increased to $2.391 million from $1.699 million despite the lower reported net loss. Common-stock financing increased to $4.699 million gross of the other financing cash-flow items, from $1.334 million net proceeds reported in the prior-year cash-flow statement.
- The company sold approximately 693 million common shares during the nine months, compared with approximately 137 million in the prior-year period. It ceased using its Form S-3 after August 13, 2020 because it no longer met eligibility requirements.
Outlook, risks and notable items
- FDA clinical hold: The FDA placed the LAPC IND on hold on October 1, 2020 and outlined required additional studies and information, including preclinical safety work, product stability and manufacturing details, device compatibility, genetic sequencing and a pig study. The company had no further FDA communication reported after October 2020. It had completed a nine-month product stability study and begun or designed other requested testing, but had not determined the total time or cost to respond; it said both would be significant.
- Pipeline priorities: The company said it was not spending further resources on its cannabis-related, malignant-ascites or diabetes programs until the LAPC clinical hold is resolved. It terminated its COVID-19 diagnostic-kit license on November 19, 2020.
- Going concern: The filing says recurring losses, an accumulated deficit and the need for substantial additional capital raise substantial doubt about the company’s ability to continue as a going concern. Management believes cash on hand and potential future equity financing can fund operations through March 31, 2022; this depends on financing that is not assured, particularly after loss of S-3 eligibility.
- COVID-19: Management said pandemic effects had not been material to operations as of the report date, but delays in FDA-response work were possible. The pandemic could delay a future trial, impede enrollment and compromise trial data.
- Controls: Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses involving contract review and documentation, segregation of CFO duties, and IT controls and documentation. Management described remediation work as ongoing.
- Related parties and commitments: The company reported purchases of approximately $183,500 from subsidiaries of SG Austria in the nine-month period and consulting costs of approximately $65,000 to a company owned by two individuals involved in its scientific activities. It estimated service-agreement costs of approximately $437,000, including approximately $310,000 related-party portion.
- Subsequent event: On March 1, 2021, cashless exercise of 26 warrants resulted in issuance of 43,715,269 unregistered common shares.
- No material pending legal proceedings were reported. The filing gives no revenue guidance or specific clinical-trial start date.
Important facts for investors to verify
- Progress, cost and timing of completing FDA-requested work, and whether the FDA lifts the IND clinical hold.
- Available financing and cash runway, including the feasibility of raising capital after S-3 ineligibility and the assumptions behind the March 31, 2022 runway estimate.
- Actual operating cash burn relative to cash, and the effect of continued losses on funding needs.
- Share-count changes, future equity issuance, and potential dilution from outstanding options and warrants; the filing reported 127.9 million options and warrants excluded from diluted loss per share.
- Status of material-weakness remediation and any subsequent changes to internal controls.
- Terms and outcomes of the PPP forgiveness application and the costs and related-party components of clinical-hold service agreements.