PharmaCyte Biotech, Inc. — FY2024 Form 10-K
Reporting period: Fiscal year ended April 30, 2024; comparisons are with the year ended April 30, 2023. The filing was signed August 13, 2024. This is an annual report, not a report for calendar-year 2023 Q4.
Business context
PharmaCyte is a development-stage biotechnology company focused on Cell-in-a-Box encapsulated-cell cancer therapies, primarily for locally advanced, inoperable pancreatic cancer (LAPC). It has no approved products and generated no revenue in either year. During FY2024, the company stopped pursuing diabetes research. The board has curtailed development spending while reviewing its programs and relationship with SG Austria, the source of the technology’s know-how and the company’s sole product manufacturer.
Key financial metrics
| Metric | FY2024 / April 30, 2024 | FY2023 / April 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses and operating loss | $8.52 million | $6.46 million |
| Net income (loss) | $0.33 million income | $(4.32) million loss |
| Net loss attributable to common stockholders | $(17.24) million | $(4.32) million |
| Basic and diluted loss per common share | $(1.80) | $(0.22) |
| Cash and cash equivalents | $50.18 million | $68.04 million |
| Working capital | Approximately $43.0 million | Approximately $67.6 million |
| Total assets | $59.90 million | $73.28 million |
| Total liabilities | $20.39 million | $0.59 million |
| Cash used in operating activities | $2.15 million | $3.79 million |
FY2024 operating expenses rose about 32%, with higher compensation, director fees, general and administrative costs, and a $2.0 million impairment of the diabetes license; R&D expense fell 13% to $0.41 million. The company also wrote its $1.57 million SG Austria investment down to zero. FY2024 reported net income included $8.85 million of other income, substantially affected by interest and changes in fair value of financial instruments. After $2.52 million of preferred dividends and $15.05 million of preferred-stock accretion, the result attributable to common stockholders was a loss. Accordingly, the reported net income does not reflect operating profitability.
Cash declined by $17.86 million. Operating cash use was $2.15 million; investing cash use was $5.0 million for Femasys securities. Financing cash use was $10.71 million, reflecting common-stock repurchases and preferred-stock redemptions, partly offset by preferred-stock proceeds. FY2024 cash repurchases/redemptions included significant tender-offer and repurchase activity. The filing says existing cash is expected to fund operating expenses for at least 12 months following issuance of the financial statements, while noting that future capital needs and access to financing remain uncertain.
The balance sheet does not report conventional borrowings. It does report $10.78 million of warrant liability, $2.18 million of derivative liability, and $6.30 million of accrued Series B preferred-stock redemption and dividends; the preferred stock is presented separately from liabilities. The company held $2.76 million of Femasys convertible notes and a $5.15 million Femasys warrant asset at year-end. Management reported approximately $6.91 million of uninsured bank deposits.
Material changes and developments
- Cash fell from $68.04 million to $50.18 million and working capital from approximately $67.6 million to $43.0 million, principally reflecting repurchases, preferred redemptions, and operating spending.
- In May 2023, the company issued Series B preferred stock and warrants in a private placement. The preferred stock has installment-redemption terms, dividends, and potential cash-redemption premiums; $6.30 million was accrued as current at year-end. The filing also describes deferred installments scheduled for settlement in November 2024.
- In November 2023, PharmaCyte invested $5.0 million in Femasys convertible notes and warrants. FY2024 fair-value movements contributed materially to reported other income.
- The company repurchased 8.83 million shares during FY2024, including shares accepted in a tender offer, and held 13.63 million shares in treasury at year-end. The filing reports 8.04 million common shares outstanding at April 30, 2024.
- The Cell-in-a-Box foundational licensed patents have expired, and the company says the relevant know-how resides solely with SG Austria. The board is reviewing the relationship and potential new framework.
Outlook, risks, contingencies and unusual items
- FDA clinical hold: The LAPC IND has been on clinical hold since October 2020. The company reports completion of product stability and genetic-stability work and eight of ten requested biocompatibility studies, but several delivery-system compatibility and testing items remained underway, and data were still being provided to the FDA. The hold had not been lifted; there is no assurance the FDA will permit the trial to proceed.
- Development and manufacturing: Spending is curtailed pending board and Scientific Committee review. Austrianova is the sole manufacturer and the company cites supply delays and possible liquidity issues at that supplier. The company has two full-time employees and relies heavily on consultants and third parties.
- Capital and dilution: The company expects continuing losses and may need additional financing. As of August 8, 2024, it disclosed 18.57 million shares issuable under warrants, 3.77 million shares reserved for Series B conversion, and 0.93 million under options, subject to applicable terms and limitations.
- Legal contingency: H.C. Wainwright alleges breach of contract and seeks at least $1.95 million, warrants for 656,250 shares, and legal fees. PharmaCyte is defending the case and says a loss was not reasonably probable at the time of filing.
- Controls and audit: Management identified material weaknesses in segregation of CFO duties and management review controls, and concluded internal controls over financial reporting and disclosure controls were ineffective at April 30, 2024. The company plans to hire additional finance personnel. The financial-statement audit opinion was unqualified; the auditor did not opine on internal-control effectiveness.
- Unusual accounting: FY2024 results include noncash impairment and fair-value gains and losses involving preferred-stock derivatives, warrants, and Femasys securities. The auditor identified fair-value measurement of Level 3 instruments as a critical audit matter. The company changed auditors in November 2023, from Armanino to Marcum.
- Subsequent event: In May 2024, after fiscal year-end, PharmaCyte paid $7.0 million for TNF Pharmaceuticals preferred shares and warrants. The transaction includes a 10% annual dividend on the preferred shares and further potential equity exposure; its terms and related-party context warrant review.
No specific revenue, earnings, or clinical-development guidance is provided. Management states that cash on hand is expected to cover operating expenses for at least 12 months after the financial statements were issued, but also emphasizes financing, regulatory, supplier, and program risks.
Most important facts for investors to verify
- Current FDA status: which requested studies and submissions remain outstanding, and whether the clinical hold has changed since the filing.
- Board decisions on the SG Austria relationship, technology access and manufacturing alternatives, given expired foundational patents and reliance on SG Austria’s know-how.
- Cash runway and cash obligations, especially Series B installment redemptions, dividends, premiums, and any need for additional financing.
- Valuation assumptions and subsequent performance of the Femasys and TNF securities, which contributed to non-operating results and involve material fair-value uncertainty.
- Status and potential exposure of the Wainwright lawsuit, remediation of the disclosed control weaknesses, and potential dilution from outstanding warrants, options, and preferred shares.