PDS Biotechnology Corp. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. PDS is a clinical-stage immunotherapy company developing cancer therapies and infectious disease vaccines using its Versamune platform. It has no approved products and generated no product revenue. The 2019 comparison reflects Private PDS as accounting acquirer in the March 2019 reverse merger; period-to-period comparisons may not be meaningful.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / prior balance |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.97 million | $1.03 million |
| General and administrative expense | $2.06 million | $3.91 million |
| Total operating expenses / operating loss | $4.03 million / $(4.03) million | $4.94 million / $(4.94) million |
| Net income (loss) | $(3.99) million; $(0.39) per share | $6.82 million; $1.82 basic per share |
| Cash used in operating activities | $3.16 million | $3.37 million |
| Cash and cash equivalents | $21.04 million at March 31 | $12.16 million at December 31, 2019 |
| Current liabilities | $4.05 million | $2.79 million at December 31, 2019 |
There was no commercial revenue, so revenue margins are not applicable. Q1 2019 net income included an $11.73 million bargain-purchase gain from the merger; Q1 2020 had no such gain. The company reported no debt, and its balance sheet showed no non-current liabilities.
R&D expense rose 91%, primarily due to personnel, professional services, regulatory work, and clinical studies. G&A fell 47%, mainly reflecting lower personnel costs, partly offset by increased professional, facility, travel, insurance, and board expenses. The operating loss narrowed, but net results shifted from income to loss largely because the prior-year merger gain did not recur.
Financing activities provided $12.04 million, principally from a February public offering of 10 million shares that generated approximately $11.97 million net proceeds, plus warrant exercises. Shares outstanding increased from 5.28 million at December 31, 2019 to 15.35 million at March 31, 2020. The company used $3.16 million in operating cash; cash increased by $8.88 million during the quarter.
Outlook, risks, and notable items
- Management stated that March 31 cash and projected resources were expected to fund operations and R&D for at least 12 months from the report filing. It cautioned that estimates may prove inaccurate and that additional capital may be needed. Future financing could dilute shareholders or impose debt obligations; the Aspire Capital facility had not been used as of March 31.
- Management expects continued losses and increased R&D spending as programs advance. Revenue is not expected until a product is approved and commercialized, if ever.
- COVID-19 materially disrupted operations and clinical development. The planned Phase 2 VERSATILE-002 trial of PDS0101 was postponed; the filing also cites risks to enrollment, trial sites, vendors, manufacturing, regulatory timelines, productivity, and access to capital.
- Pipeline updates included continued development of PDS0101 combinations, preclinical work on COVID-19 vaccine candidate PDS0203, and an expanded NCI collaboration covering preclinical and clinical development of PDS0103. Timing and outcomes remain uncertain.
- Internal control over financial reporting was not effective at March 31 due to an unremediated material weakness involving finance and accounting expertise, risk assessment, information and communication, and related transaction controls. Remediation was ongoing.
- The company recorded no income tax benefit, citing a full valuation allowance. It expected no material cash benefit from the CARES Act. No material pending legal proceedings or material non-cancelable purchase commitments were reported.
Investor verification points
- Track cash burn, trial spending, and whether the stated 12-month runway remains supportable; confirm any subsequent financing or government funding.
- Verify timing and execution of the delayed PDS0101 Phase 2 trial and the status of other clinical and preclinical programs.
- Assess the continuing operational and financial effects of COVID-19, including trial enrollment and vendor or manufacturing capacity.
- Monitor share-count dilution, use of the Aspire Capital facility, and the terms of any new financing.
- Check whether the company remediates its disclosed material weakness and whether future filings report control improvements or accounting corrections.