PDS Biotechnology Corp quarterly report, Q2 FY2023

PDS Biotechnology Corporation — Q2 2023 Form 10-Q

Reporting period: Three and six months ended June 30, 2023. Financial statements are unaudited. PDS is a clinical-stage immunotherapy company with no approved products and no commercial product revenue; it is developing cancer and infectious-disease candidates using its Versamune, Versamune plus PDS0301, and Infectimune platforms.

Financial results and liquidity

MetricQ2 2023Q2 2022Six months 2023Six months 2022
RevenueNone reportedNone reportedNone reportedNone reported
Research and development$8.0 million$3.8 million$13.8 million$8.9 million
General and administrative$4.7 million$3.3 million$8.3 million$6.6 million
Total operating expenses$12.7 million$7.1 million$22.1 million$15.6 million
Net loss$11.5 million$5.8 million$21.2 million$14.3 million
Basic and diluted loss per share$0.37$0.20$0.69$0.50

Operating margins are not meaningful because the company reported no revenue. Q2 net loss includes a $1.4 million income tax benefit, associated with New Jersey tax-benefit sales; interest expense also increased following the venture loan.

  • Cash and cash equivalents: $60.6 million at June 30, 2023, down from $73.8 million at December 31, 2022.
  • Cash flow: $18.0 million used in operating activities during the first half, versus $12.3 million in the prior-year period. Financing provided $4.8 million, primarily from at-the-market stock sales. Cash declined by $13.2 million.
  • Balance sheet: Total assets were $63.8 million; total liabilities $31.3 million; stockholders’ equity $32.4 million. Accumulated deficit was $122.8 million.
  • Debt: Note payable, net of debt discount, was $23.3 million. The loan bears floating interest at prime plus 5.75% (subject to a 4% minimum), with monthly interest payments; principal amortization is scheduled to begin October 2024. The loan is secured by company assets, excluding intellectual property, and includes financial and operating restrictions.

Changes versus prior comparable periods

  • Q2 operating expenses rose 79% year over year, and net loss nearly doubled. For the first half, operating expenses rose 42% and net loss increased by $6.9 million.
  • Management attributed higher R&D costs mainly to clinical trials, manufacturing, and personnel. Higher G&A reflected personnel, stock-based compensation, and professional fees.
  • Interest income increased, but loan interest expense more than offset it. First-half interest expense was $2.0 million; there was no reported interest expense in the first half of 2022.
  • First-half operating cash use increased by $5.7 million year over year. Stock-based compensation was $4.2 million, versus $2.5 million in the prior-year period.

Outlook, developments, and risks

  • Management said cash on hand was expected to fund operations and R&D for 12 months following the filing. The company expects continuing losses and anticipates R&D spending will increase as trials advance. It expects to need additional capital; equity financing may dilute shareholders, while debt may add service costs and restrictive covenants.
  • Management planned to initiate a Phase 3 trial of PDS0101 with pembrolizumab in Q4 2023, following completion of enrollment in the VERSATILE-002 ICI-naive arm and submission of an amended IND. These are forward-looking plans, not reported outcomes.
  • The company reported interim VERSATILE-002 results, including a 41.2% confirmed and unconfirmed response rate among 34 patients in the ICI-naive cohort and a 10.4-month median progression-free survival. The filing notes these results are from a clinical study and are not a controlled comparison with approved therapies.
  • The January 2023 exclusive PDS0301 license from Merck KGaA carries up to $11 million in development and first-commercial-sale milestones, up to $105 million in sales milestones, and a 10% royalty on specified net sales, subject to stated terms and potential reductions.
  • Two additional $5 million loan tranches were uncommitted and required lender agreement and satisfaction of conditions. The stated option period was through July 31, 2023; the parties were discussing an extension, with no assurance it would be extended.
  • Key risks include clinical and regulatory uncertainty, ability to raise capital, potential delays or reductions in development programs, competition, and intellectual-property risks. The company reported no material pending legal proceedings and no material changes to previously disclosed risk factors.
  • The filing reports no material non-cancelable purchase commitments, no off-balance-sheet arrangements, and effective disclosure controls and procedures.

Investor verification points

  • Verify cash runway assumptions, expected trial spending, and whether additional financing is needed on terms acceptable to shareholders.
  • Track the timing and regulatory status of the planned PDS0101 Phase 3 trial and assess the maturity, size, and limitations of reported clinical data.
  • Confirm the availability and terms of any extension or funding of the uncommitted loan tranches, and monitor the variable-rate debt and covenant obligations.
  • Reconcile the filing’s inconsistent first-half ATM share-sale figures: the financial-statement note reports 596,462 shares, while MD&A reports 576,462; both cite approximately $4.8 million in net proceeds.
  • Review the PDS0301 license milestones, royalties, and future cash implications as development progresses.