PDS Biotechnology Corporation — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. PDS is a clinical-stage immunotherapy company developing cancer and infectious-disease candidates using its Versamune platform. It had no approved products or commercial revenue. Comparisons with 2019 require caution because the March 2019 reverse merger made Private PDS the accounting acquirer; prior-period figures reflect Private PDS, and the 2019 results include a merger-related bargain-purchase gain.
Financial results and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.41 million | $1.89 million | $3.39 million | $2.92 million |
| General and administrative expense | $1.52 million | $2.38 million | $3.58 million | $6.29 million |
| Total operating expense | $2.94 million | $4.27 million | $6.97 million | $9.21 million |
| Net income (loss) | $(2.93) million | $(3.89) million | $(6.91) million | $2.93 million |
| Basic loss per share | $(0.19) | $(0.75) | $(0.54) | $0.66 |
There are no meaningful revenue or profit margins to report because the company has no product sales and is operating at a loss. Six-month 2019 net income included a $11.94 million bargain-purchase gain from the reverse merger; 2020 had no such gain. The six-month 2020 operating loss narrowed year over year, while R&D expense increased and G&A expense decreased. Management attributed the Q2 R&D decline partly to lower manufacturing, regulatory and clinical-study costs; the six-month R&D increase primarily reflected personnel and preclinical spending. Comparisons are also affected by the merger and associated expense changes.
Cash and cash equivalents were $16.93 million at June 30, 2020, versus $12.16 million at December 31, 2019. Total assets were $20.09 million and stockholders’ equity was $17.01 million. Current liabilities were $2.53 million. The company reported no material borrowings; lease liabilities totaled $0.66 million ($0.11 million current and $0.55 million long-term). Six-month operating cash use was $7.27 million, compared with $8.23 million in 2019. Financing provided $12.04 million, principally from the February share offering; cash increased by $4.77 million during the period. The company had 15.36 million shares outstanding at June 30.
In February 2020, PDS sold 10.0 million shares for net proceeds of approximately $11.9 million. Subsequent to quarter-end, it sold 6.9 million shares under a shelf registration for net proceeds of approximately $17.1 million. About $81 million of shelf securities remained available for future issuance, subject to the registration statement and offering terms.
Business developments, outlook and risks
- Clinical programs: PDS0101 is its lead HPV cancer immunotherapy. The first patient was dosed in June in an NCI-led Phase 2 study combining PDS0101 with NHS-IL12 and M7824. A planned PDS0101/KEYTRUDA Phase 2 trial was on hold, and two of three planned PDS0101 trials had been delayed because of COVID-19 disruptions to U.S. cancer-trial operations. The company also anticipated a PDS0101 study with MD Anderson, but timing remained uncertain.
- Other pipeline: PDS expanded its NCI collaboration to include PDS0103, a MUC-1 cancer candidate in late preclinical development. It was advancing PDS0203, a COVID-19 vaccine candidate, and PDS0202, a universal influenza candidate supported by an NIAID program. A Farmacore collaboration covers tuberculosis development and a separate COVID-19 vaccine program, with initial support for the latter from the Brazilian government. Reported vaccine findings were preclinical, not evidence of clinical efficacy.
- Outlook and funding: Management expected continued losses and anticipated significantly higher R&D spending as programs advance. It believed available resources would fund operations for at least 12 months from the report, and cited the later August financing in its outlook; however, it cautioned that resources may prove insufficient and further financing may be needed. Additional equity could dilute shareholders; debt could add repayment obligations and restrictive covenants. The Aspire Capital facility had not been used as of June 30, and management described its availability as uncertain.
- COVID-19: The pandemic had delayed trials and reduced spending on the PDS0101/KEYTRUDA study, contributing to lower operating cash use. Further trial enrollment, site, vendor, manufacturing and regulatory delays, as well as liquidity and market impacts, remained possible. The company said the pandemic’s future financial effects could not be reasonably estimated.
- Controls and contingencies: Management concluded internal control over financial reporting was ineffective at June 30 because a previously reported material weakness remained unremediated. It related to finance and accounting expertise, risk assessment, information and communication, and controls over complex transactions. No material legal proceedings or material non-cancelable purchase commitments were reported. The filing identifies executive severance obligations under employment agreements and a remaining restructuring reserve of $126,862.
Investor facts to verify
- Cash runway assumptions, projected cash burn and the status of any government funding or partnership proceeds.
- Current clinical-trial timelines, including COVID-related delays, trial enrollment and the status of the KEYTRUDA and MD Anderson studies.
- Net proceeds, share count and dilution from the August 2020 offering, plus any future shelf or Aspire facility issuance.
- Whether the material weakness is remediated and whether subsequent filings report effective financial controls.
- Progress and clinical validation of vaccine candidates; the filing’s COVID-19 and other vaccine results were preclinical.