PDS Biotechnology Corporation — Q1 2023 Form 10-Q
Business context and period. Clinical-stage immunotherapy company developing cancer and infectious-disease candidates. This unaudited report covers the three months ended March 31, 2023; the company had no approved products and no commercial product revenue.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No commercial product revenue | No commercial product revenue |
| Research and development expense | $5.84 million | $5.16 million, up 13% |
| General and administrative expense | $3.58 million | $3.32 million, up 8% |
| Total operating expenses | $9.42 million | $8.48 million, up 11% |
| Operating loss | $9.42 million | $8.48 million |
| Net loss | $9.66 million | $8.47 million, loss increased 14% |
| Basic and diluted loss per share | $0.32 | $0.32 |
| Net cash used in operating activities | $13.19 million | $6.37 million |
Gross margin and product margins are not applicable because the company reported no product revenue. R&D growth primarily reflected higher clinical-study, personnel and professional costs, partly offset by lower manufacturing costs. Higher personnel expense also contributed to G&A growth. Net interest expense was $0.24 million, including $0.97 million interest expense partly offset by $0.73 million interest income.
Cash and cash equivalents were $65.20 million at quarter-end, down from $73.82 million at December 31, 2022. Total liabilities were $27.44 million, including a $23.14 million venture-loan balance, net of debt discount. The loan carries a floating rate of prime plus 5.75%, is secured by company assets except intellectual property, and includes customary covenants. Cash provided by financing was $4.57 million, from at-the-market (ATM) stock sales. The company sold 553,293 shares under the ATM for net proceeds of $4.59 million.
Material changes and outlook
- Operating cash use more than doubled year over year. Management attributed the increase chiefly to working-capital timing, including a $6.46 million reduction in accrued expenses, as well as the higher net loss; noncash stock compensation also increased.
- Management estimated available cash would fund operations and R&D programs into the third quarter of 2024. The company expects continued losses and said R&D spending is expected to increase as programs advance. It plans to seek further equity and/or debt financing and may pursue government funding or selective partnerships; additional financing is not assured and equity issuance may dilute shareholders.
- For PDS0101 plus pembrolizumab in VERSATILE-002, enrollment in the ICI-naïve arm’s second stage was nearly complete; the ICI-refractory arm’s first-stage enrollment was complete, with follow-up pending for a futility analysis. The company expected to file an amended IND for the planned Phase 3 program in Q3 2023.
- The company licensed PDS0301 (M9241) from Merck KGaA in January 2023. Agreement obligations include up to $11 million in development and first-commercial-sale milestones, up to $105 million tied to aggregate sales milestones, and a 10% royalty on specified net sales, subject to contractual terms and reductions.
- Management said PDS0103’s IND timing could be affected by resource allocation to PDS0101. The filing also described trial results as preliminary or interim in several programs; these are not established comparative evidence of efficacy.
Risks, contingencies and other notable items
The company has an accumulated deficit of $111.22 million and depends on successful clinical and regulatory development and access to capital. Management’s runway estimate depends on projections that may prove inaccurate; insufficient financing could force delays, reductions or termination of development programs. The existing loan has variable-rate interest, repayment obligations and restrictive covenants; two additional $5 million loan tranches were uncommitted and subject to lender discretion and conditions. An April 2023 sale of New Jersey tax benefits generated approximately $1.4 million after quarter-end. No material pending legal proceedings or material changes to previously reported risk factors were disclosed.
Important facts for investors to verify
- Whether cash burn, clinical spending and financing availability remain consistent with the stated runway into Q3 2024.
- Progress and timing of the PDS0101 Phase 3 program, the anticipated Q3 2023 amended IND filing, and the VERSATILE-002 refractory-arm futility analysis.
- Clinical data maturity, patient numbers, follow-up, safety findings and the limitations of historical or non-comparative benchmarks cited for combination trials.
- ATM issuance capacity and dilution, and whether any additional debt tranches or other financing are obtained and on what terms.
- Potential milestone, royalty and other costs under the PDS0301 license, and the effect of program prioritization on PDS0103 and other pipeline candidates.