PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended January 31, 2024; filed March 18, 2024. The financial statements are unaudited. PharmaCyte is a development-stage biotechnology company with no product revenue, developing Cell-in-a-Box-based therapies.
Financial results and liquidity
| Metric | Three months ended January 31, 2024 | Nine months ended January 31, 2024 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.87 million | $5.35 million |
| Net loss | $0.62 million | $1.01 million |
| Net loss attributable to common stockholders | $5.62 million | $14.70 million |
| Basic and diluted loss per share | $0.65 | $1.47 |
| Net cash used in operating activities | $1.82 million for nine months |
- For the nine-month period, operating expenses decreased $0.20 million year over year, while net loss improved from $4.19 million. Net loss attributable to common stockholders rose from $4.19 million, principally reflecting Series B preferred dividends and accretion.
- Cash and cash equivalents were $61.21 million at January 31, 2024, down from $68.04 million at April 30, 2023. Total current assets were $61.51 million and current liabilities $7.54 million. The filing’s MD&A gives a working-capital figure that does not clearly reconcile to those balance-sheet amounts.
- Cash used in investing activities was $5.00 million, for the Femasys investment. Financing cash flow was a net use of $0.01 million: $33.65 million of preferred-stock proceeds were largely offset by common-stock repurchases and preferred-stock redemptions.
- No conventional borrowings are reported. The balance sheet includes $6.28 million of accrued preferred-stock redemptions and dividends, an $11.49 million warrant liability, and a $3.43 million derivative liability. Series B preferred stock had a $23.77 million liquidation preference.
Material developments and unusual items
- In May 2023, the company issued $35 million stated value of Series B preferred stock and warrants in a private placement, receiving $33.65 million net of transaction costs. The preferred stock carries a 4% annual dividend, compounded monthly, and scheduled cash-or-stock installment redemptions. The company paid approximately $6.64 million for the first three installments and recorded $6.28 million for the fourth and fifth installments as a current liability at January 31.
- Noncash preferred-stock accretion of $12.00 million and preferred dividends of $1.69 million contributed to the nine-month loss attributable to common stockholders. Fair-value changes in warrants and embedded derivatives also affected reported earnings.
- During the nine months, the company repurchased 8.34 million common shares for approximately $27.29 million, including excise tax and related amounts. At January 31, treasury stock totaled 13.15 million shares at a cost of $40.85 million.
- In November 2023, PharmaCyte invested $5 million in Femasys convertible notes and warrants. At January 31, the note and warrant asset were recorded at $2.01 million and $2.71 million, respectively, using Level 3 fair-value estimates. PharmaCyte’s interim CEO joined Femasys’ board.
Outlook, risks, and contingencies
- The FDA clinical hold on the company’s planned locally advanced pancreatic cancer trial remains in place. The filing describes several requested studies and documentation items; although multiple studies were completed, additional work remained. A two-pig pilot study was complete and under evaluation before a planned 90-pig study.
- The Board and Business Review Committee are reviewing the company’s programs and relationship with SG Austria. Spending on development activities has been curtailed pending that review. The company says licensed patents have expired and relevant technology know-how resides with SG Austria; an acceptable new operating framework is not assured. Programs could be delayed or discontinued.
- Management stated that cash on hand was expected to fund operating expenses for at least 12 months following issuance of the financial statements. Further financing may be needed, and the filing cautions that capital may not be available on acceptable terms or at all.
- H.C. Wainwright sued over an alleged placement-agent tail fee, seeking at least $1.95 million, warrants for 656,250 shares, and legal fees. PharmaCyte disputes the claim, intends to defend it, and says any potential loss is not reasonably estimable.
- Management concluded disclosure controls were ineffective as of January 31, 2024 because of a material weakness: insufficient accounting personnel with appropriate U.S. GAAP and SEC reporting expertise. The filing reports no material changes in internal control during the nine-month period.
Key facts for investors to verify
- Progress on the FDA’s remaining clinical-hold requirements, the 90-pig study, and the timing and feasibility of an IND resubmission.
- Outcome of the Board’s review and whether PharmaCyte can secure a workable relationship with SG Austria, which controls key manufacturing know-how.
- Cash runway and future obligations under preferred-stock redemption terms, including whether future installments are paid in cash or shares.
- Terms, fair-value assumptions, and potential dilution associated with the Series B preferred stock, warrants, derivative liability, and Femasys investment.
- Resolution and potential financial exposure in the Wainwright litigation, and remediation of the disclosed internal-control material weakness.