PharmaCyte Biotech, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended April 30, 2023; comparison is with the year ended April 30, 2022. The filing is an annual report, not a calendar-year 2022 or standalone Q4 report. PharmaCyte is a development-stage biotechnology company focused on cell-encapsulation therapies; it has no approved products or commercial revenue.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $6.46 million | $4.39 million |
| Operating loss | $6.46 million | $4.39 million |
| Other income, net | $2.14 million | $153,000 |
| Net loss | $4.32 million | $4.24 million |
| Basic and diluted loss per share | $0.22 | $0.27 |
| Net cash used in operating activities | $3.79 million | $4.12 million |
Cash and cash equivalents were $68.04 million at April 30, 2023, down from $85.40 million a year earlier. Working capital was approximately $67.6 million, versus $84.8 million. The company reported $586,581 in total liabilities, all current, and no debt shown on the balance sheet. Management said cash on hand was expected to fund operating expenses for at least 12 months after issuance of the financial statements.
FY2023 other income was primarily $1.94 million of interest income, plus a $152,976 net settlement of accounts payable, offset by other net expenses. Operating costs rose $2.06 million: director fees increased to $951,000 from $256,000, and legal and professional costs to $2.69 million from $809,000. R&D fell 32% to $469,000; compensation expense fell 20% to $1.23 million. The filing attributes the overall expense increase mainly to director, legal, professional and consulting costs.
Material changes and business developments
- The company repurchased 4,808,098 shares during FY2023 for $13.56 million, recorded as treasury stock. This was the principal driver of financing cash outflow; cash from operations also declined, while FY2022 financing cash flow had benefited from equity offerings.
- In August 2022, a cooperation agreement with Iroquois Master Fund and affiliates led to a reconstituted board and a business review. The board curtailed spending on development programs pending review of strategy and the company’s relationship with SG Austria and its subsidiaries.
- Management reported that licensed foundational Cell-in-a-Box patents had expired and that relevant know-how resides solely with SG Austria. The company is considering a new framework for that relationship; failure to reach an acceptable arrangement could lead it to reassess or discontinue programs dependent on SG Austria.
- The FDA clinical hold on the planned LAPC trial remained in effect. The company reported completing several requested studies, including product stability work and sequencing analyses, and completing a two-pig pilot study while evaluating preliminary data. A larger 90-pig study and other requested work remained outstanding or in progress; timing could be affected by supplier issues and spending constraints.
- R&D remains early-stage across LAPC, malignant ascites and diabetes. Cannabis-related development was not receiving further resources pending FDA clearance of the LAPC trial and validation of the technology in a clinical trial.
Outlook, risks and unusual items
- No financial guidance was provided. Management’s stated liquidity expectation is subject to substantial uncertainty, including its ability to raise capital and fund development.
- In May 2023, after year-end, the company raised $35 million gross by issuing Series B convertible preferred stock and warrants. The preferred shares carry a 4% annual dividend, may accrue at 15% during specified triggering events, and require monthly redemptions beginning November 2023. Redemption may be in cash or, subject to conditions and share limits, stock. The terms include potential dilution and cash-payment obligations.
- Also after year-end, the company completed a tender offer, purchasing 8,085,879 shares at $3.25 per share for approximately $26.28 million, excluding fees. This followed the FY2023 repurchases and materially affects post-year-end liquidity and share count.
- Key risks include FDA refusal or further delay in lifting the clinical hold; dependence on Austrianova as sole-source manufacturer and on related parties for services; supplier liquidity and supply-chain concerns; insufficient financing; clinical failure; expired core patents and reliance on trade secrets; and possible program delays or termination.
- The company had no revenues and an accumulated deficit of approximately $116.0 million. It reported a material weakness in internal control over financial reporting—insufficient segregation of the CFO’s duties—and concluded disclosure controls were ineffective. Management planned to hire additional finance support. The auditor gave an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- The company reported no material pending litigation. It had two full-time employees as of April 30, 2023, relying substantially on consultants for R&D.
Most important facts for investors to verify
- Whether the FDA clinical hold has been lifted, what remaining studies or documentation are required, and the current timeline and budget for the LAPC trial.
- Whether PharmaCyte and SG Austria reached a workable agreement, and how the expired patents and SG Austria’s control of key know-how affect the company’s rights and ability to continue development.
- Current cash, commitments and runway after the $35 million preferred financing, $26.28 million tender offer and other subsequent transactions; confirm the preferred redemption and dividend terms and any cash-settlement exposure.
- Current fully diluted share count, including Series B conversion shares, warrants, options and any shares issued through preferred-stock amortization. The filing reports materially different point-in-time share counts; reconcile them with subsequent issuances and repurchases.
- Progress in remediating the material weakness in financial controls and whether any additional weaknesses or reporting corrections have been identified.