PDS Biotechnology Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The company is a clinical-stage immunotherapy developer with no approved products and no commercial revenue. Financial statements are unaudited.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $6.45 million | $4.35 million | $20.30 million | $13.28 million |
| General and administrative expense | $4.07 million | $2.93 million | $12.34 million | $9.58 million |
| Net loss | $10.85 million | $7.42 million | $32.04 million | $21.72 million |
| Net loss per share, basic and diluted | $0.35 | $0.26 | $1.04 | $0.76 |
| Net cash used in operating activities | Not separately stated | Not separately stated | $25.18 million | $18.18 million |
At September 30, cash and cash equivalents were $54.25 million, down from $73.82 million at December 31, 2022. Current assets were $56.84 million and current liabilities $9.15 million. Accumulated deficit was $133.60 million. The company reported no revenue, so operating margins are not meaningful.
Debt consisted principally of a venture loan with a carrying value of $23.41 million, net of debt discount. The original $25 million funded loans carry floating interest at prime plus 5.75% (subject to a 4% floor); principal amortization is scheduled to begin October 2024. Nine-month interest expense was $3.03 million.
Changes versus prior comparable periods
- Q3 operating expenses increased 45% year over year; nine-month operating expenses increased 43%. Management attributed the R&D increase mainly to clinical trials, personnel, and manufacturing, and the G&A increase mainly to personnel and investor-relations costs.
- Nine-month net loss widened by $10.33 million. Net cash used in operations rose by $7.00 million.
- Financing activities provided $5.61 million in the first nine months of 2023, mainly from net ATM stock sales, compared with $24.58 million in 2022, mainly from the venture loan.
- The company sold 736,037 shares through its ATM program in the first nine months of 2023 for net proceeds reported as approximately $5.6 million. Shares outstanding were 31,007,763 at quarter-end.
Outlook, developments, and risks
- Going concern: Management concluded substantial doubt exists about the company’s ability to continue as a going concern for at least 12 months after the financial statements were issued. Continued operations depend on additional funding, collaborations, strategic alliances, or licensing; no financing is assured. Failure to obtain sufficient capital could force reductions or delays to development programs or cessation of operations.
- Development outlook: The company expected R&D spending to increase as it advances clinical programs. After quarter-end, it said it planned to initiate the VERSATILE-003 Phase 3 trial in Q1 2024, subject to evaluation of FDA and potential-partner feedback. The filing does not provide a quantified cash-runway estimate.
- Clinical-stage uncertainty: The filing discusses encouraging interim and early clinical findings, including VERSATILE-002 and an NCI-led combination study. These are not proof of efficacy; the cited comparisons to historical outcomes are not controlled head-to-head comparisons. Clinical, regulatory, manufacturing, and commercialization outcomes remain uncertain.
- License obligations: Under its Merck KGaA license for PDS01ADC, the company may owe up to $11 million in development and first-commercial-sale milestones, up to $105 million tied to sales thresholds, and royalties of 10% of specified net sales, subject to contractual terms and potential reductions.
- Other items: Management reported a vendor dispute as a principal reason for increased accounts payable and said it was working to resolve it. No material pending legal proceedings were reported. The company received approximately $1.4 million from selling New Jersey tax benefits in 2023; deferred tax assets remain subject to a full valuation allowance.
Important facts for investors to verify
- Financing needs and available cash: the filing concludes substantial doubt exists, and future capital availability is uncertain.
- Clinical trial status, FDA requirements, and the timing and funding of the proposed VERSATILE-003 Phase 3 program; distinguish interim results from controlled evidence.
- Debt terms and servicing costs, including the floating rate, 2024 start of principal amortization, and expired availability of the two uncommitted loan tranches.
- The vendor dispute and its potential effect on payables, cash payments, or operations.
- A numerical inconsistency in the filing: the risk-factor discussion says operating cash use for the nine months ended September 30, 2023 was $18.2 million, while the cash-flow statement and MD&A report $25.18 million for 2023 and $18.18 million for 2022. The latter figures are consistent with the presented financial statements.