PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three months ended July 31, 2022, the company’s fiscal first quarter. The filing was signed September 14, 2022. Financial statements are unaudited.
Business context and financial results
PharmaCyte is a development-stage biotechnology company pursuing cellular therapies for cancer, diabetes, and malignant ascites using its Cell-in-a-Box technology. It reported no revenue in either the quarter ended July 31, 2022 or the comparable 2021 quarter.
- Operating expenses: $1.681 million, up $657,257 (about 64%) from $1.023 million. Legal and professional expense rose substantially; management attributed approximately $578,000 of legal expense to contested proxy matters.
- Research and development: $159,273, versus $143,613 a year earlier.
- Net loss: $1.545 million, versus $1.025 million. Interest income of $139,502 partly offset operating costs. Reported basic and diluted loss per share was $0.07 versus $0.64; weighted-average shares were 20.829 million versus 1.591 million.
- Cash flow: Operating cash use was $1.084 million, compared with $1.241 million. Investing cash flow was zero. Financing cash use was $2.090 million, principally the share repurchase. Cash decreased by $3.173 million during the quarter.
- Liquidity and liabilities: Cash and cash equivalents were $82.228 million at July 31, compared with $85.401 million at April 30, 2022. Current assets were $82.256 million and current liabilities $1.089 million; reported working capital was approximately $81.2 million. Total liabilities were $1.089 million. The filing reports no material debt balance.
- Equity activity: The company repurchased 851,981 shares in July for $2.091 million, at an average $2.4341 per share, under a program authorized for up to $10 million. Approximately $7.909 million remained available at quarter-end. At July 31, 20.750 million common shares were outstanding.
Changes versus the prior comparable period
Operating expenses and net loss increased, primarily due to higher legal and professional costs, including proxy-related expenses, as well as increases in compensation and R&D. Operating cash use was lower year over year, while cash on hand was much higher than at July 31, 2021, following substantial equity financing in August 2021. The large change in weighted-average shares also affects year-over-year per-share comparisons.
Outlook, developments, and principal risks
- FDA clinical hold: The FDA placed the investigational new drug application for the planned LAPC trial on clinical hold in 2020. The company reported progress on requested studies and documentation, including completion of product stability studies and a two-pig pilot study; it was evaluating preliminary pig-study data before a planned 90-pig study. The hold had not been lifted, and no trial start date or financial guidance was provided.
- Board review and program spending: After quarter-end, on August 15, 2022, a cooperation agreement with Iroquois Master Fund and affiliates led to a reconstituted board and a Business Review Committee. The board curtailed spending on development programs pending its review. It was considering a new framework with SG Austria; if an acceptable arrangement is not reached, the company may reconsider programs dependent on SG Austria, including LAPC, diabetes, and malignant ascites.
- Technology and partner dependence: The company disclosed that all licensed patents had expired and that know-how for Cell-in-a-Box resides solely with SG Austria. It also noted potential misalignment of incentives and said it was unaware of an available substitute manufacturer. These matters could delay or terminate development.
- Other risks and contingencies: COVID-19, supply-chain interruptions, manufacturing delays, and dependence on contractors could further delay studies and regulatory responses. The filing describes approximately $373,000 of service agreements related to the clinical hold, including approximately $291,000 with related parties; these agreements were under review. The company also reported a 100% valuation allowance against deferred tax assets and said an August 2021 ownership change limited some tax-loss carryforwards.
- Controls: Management concluded certain disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting. No material changes to internal controls were reported during the quarter.
Key facts for investors to verify
- Whether the FDA clinical hold is lifted, and the status, results, and timing of the remaining requested studies, especially the 90-pig study.
- What the board’s review concludes, whether a new agreement with SG Austria is reached, and how curtailed spending affects program timelines or continuation.
- Cash burn and liquidity as development spending changes, and the company’s use of remaining share-repurchase authorization.
- The status of material weaknesses in financial reporting controls and any remediation disclosed in subsequent filings.
- The practical effect of expired patents, partner-held know-how, manufacturing dependence, and the restricted tax-loss carryforwards.