PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three months ended July 31, 2020; unaudited. The filing is for the quarter ended July 31, rather than a calendar-quarter period. PharmaCyte is a pre-revenue biotechnology company developing cellular therapies using its Cell-in-a-Box technology.
Financial position and results
| Metric | Three months ended July 31, 2020 | Comparable period / prior balance |
|---|---|---|
| Revenue | $0 | $0 in 2019 |
| Operating expenses | $881,676 | $1,134,075 in 2019 |
| Net loss | $883,944 | $1,134,075 in 2019 |
| Operating cash used | $551,002 | $763,140 in 2019 |
| Cash, July 31 | $2,166,596 | $894,861 at April 30, 2020 |
| Current assets / current liabilities | $2,303,133 / $1,153,148 | Working capital: approximately $1.15 million |
| Total liabilities | $1,186,850 | Includes $75,200 PPP loan |
There was no revenue, so a meaningful gross margin is not reported. Investing cash flow was zero. Financing provided $1,820,060, primarily from common-stock sales; cash increased by $1,271,735. At August 31, cash was approximately $4.537 million, according to management.
Changes versus the prior comparable period
- Operating expenses fell $252,399. General and administrative costs declined $304,400 and compensation expense declined $174,224; these reductions were partly offset by a $198,244 increase in R&D and a $31,599 increase in legal and professional costs.
- R&D expense rose to $270,574 from $72,330, while net loss narrowed to $883,944 from $1,134,075.
- Operating cash use declined to $551,002 from $763,140. Cash was higher, supported by equity financing.
- Common shares outstanding rose from 1.639 billion at April 30 to 1.875 billion at July 31. The company issued approximately 234 million shares in the quarter and received approximately $1.857 million net proceeds.
Business outlook, risks and notable items
- The company submitted an IND to the FDA on September 1 for a planned Phase 2b trial in locally advanced pancreatic cancer (LAPC). FDA sent an information request on September 4, and the company responded September 11. The FDA could require more information, impose a clinical hold, or require a different trial phase or further preclinical work; trial timing and authorization are uncertain.
- Management reported that COVID-19 had not materially affected operations as of the filing, but warned that it could delay trial preparation, enrollment, treatment and follow-up, potentially affecting development and data integrity.
- Development spending on the cannabis, malignant-ascites and diabetes programs was paused pending FDA permission to commence the LAPC trial, although work on Melligen cells at the University of Technology, Sydney, continued. The company also licensed COVID-19 diagnostic-kit technology; regulatory approval, commercialization and reimbursement are uncertain.
- The filing states that accumulated losses and ongoing funding needs raise substantial doubt about the company’s ability to continue as a going concern. Management believed available cash and anticipated financing would fund operations through September 30, 2021. The company raised approximately $2.8 million net in block trades from August 1 through August 12, but ceased using its S-3 after it no longer met eligibility requirements on August 13.
- At July 31, approximately $1.887 million of cash was uninsured. The company intends to seek forgiveness of its $75,200 PPP loan but cannot assure forgiveness.
- Disclosure controls and internal controls over financial reporting were deemed ineffective due to material weaknesses involving contract preparation and review, segregation of CFO duties, and IT controls/documentation. Management said remediation work was ongoing.
- No material pending legal proceedings were reported. No formal financial guidance was provided.
Important facts for investors to verify
- FDA’s response to the IND and information request, and whether a clinical hold or additional preclinical work is required.
- Cash runway and financing access after S-3 ineligibility, including subsequent share issuance, fees and warrant dilution. The filing reports 2,333,810,405 common shares outstanding as of September 11.
- Progress and costs of the LAPC trial and whether COVID-19 affects its timing, enrollment or data quality.
- Plans and funding for paused development programs and the commercial and regulatory status of the licensed diagnostic kits.
- Progress in remediating the disclosed control weaknesses, and whether the PPP loan is forgiven.