PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended October 31, 2020; filed December 11, 2020. The company is a pre-revenue biotechnology developer focused on Cell-in-a-Box cellular therapies for cancer and diabetes.
Financial performance and position
| Metric | Three months ended Oct. 31, 2020 | Six months ended Oct. 31, 2020 | Prior-year comparable period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $949,515 | $1,831,191 | $1,067,122; $2,201,197 |
| Net loss | $950,192 | $1,834,136 | $1,067,122; $2,201,197 |
| Loss per share, basic and diluted | $0.00 loss per share, as reported | $0.00 loss per share, as reported | $0.00 loss per share, as reported |
| Cash used in operating activities | $1,801,453 | $1,346,765 |
- Quarterly operating expenses fell $117,607 year over year; six-month expenses fell $370,006. Lower general and administrative costs, particularly consulting and travel, more than offset higher research and development costs.
- R&D expense was $151,314 for the quarter and $421,888 for six months, versus $17,940 and $90,270, respectively, in the prior-year periods. No gross margin is applicable because the company reported no revenue.
- At October 31, cash was $3,717,404, current assets $3,812,367, current liabilities $643,650, and working capital approximately $3.17 million. Total assets were $8,941,359 and total liabilities $664,740.
- Total PPP loan balance was $75,200, bearing 1% interest; forgiveness was not assured. The filing reports no other material debt.
- Six-month financing cash inflow was $4,624,171, primarily from common-stock sales; operating cash outflow exceeded the prior-year period by $454,688. Cash increased $2,822,543 during the six months.
Material changes and capital
- Common shares outstanding rose from 1.639 billion at April 30 to 2.335 billion at October 31. The company sold approximately 693 million shares during the six months, raising approximately $4.7 million net. This represents substantial dilution.
- The company also had 69.2 million outstanding options and 82.3 million warrants at October 31; these were excluded from diluted EPS as anti-dilutive.
- It ceased using its Form S-3 to raise capital after August 13, 2020, when it no longer met eligibility requirements. Management said available cash and potential future equity sales or offerings were expected to fund operations through December 31, 2021.
Outlook, risks, and unusual items
- FDA clinical hold: The FDA placed the planned Phase 2b LAPC trial on hold on October 1 and detailed requirements on October 30. Requests include additional preclinical and safety studies, manufacturing and product-release data, stability and compatibility work, and product comparability information. The company had not estimated the cost or time to complete the work and said both could be significant. There is no assurance the hold will be lifted.
- Until the FDA permits the LAPC trial to proceed, the company said it would spend no further resources on its cannabinoid cancer, malignant-ascites, and diabetes programs, except related Melligen-cell work at the University of Technology, Sydney.
- COVID-19 had, in management’s view, no material operational impact as of the report date, but could delay FDA responses, studies, trial commencement and enrollment, and affect trial data or third parties.
- Going concern: The company reported an accumulated deficit of $105.7 million, recurring losses and no biotechnology-sector revenue. The filing states these conditions raise substantial doubt about its ability to continue as a going concern; management’s funding plans were its basis for concluding the doubt was alleviated.
- After quarter-end, on November 19, the company terminated its Hai Kang COVID-19 diagnostic-kit license, citing delayed FDA Emergency Use Authorization and concerns about kit efficacy. It said it would no longer pursue the venture.
- Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses involving contract/control documentation, segregation of CFO duties, and IT controls and documentation. Management was evaluating remediation.
- The company reported no material pending legal proceedings. It disclosed related-party services and purchases, including approximately $74,000 of products and services from SG Austria subsidiaries during the six months.
Most important facts for investors to verify
- Progress, timing, cost and funding plan for satisfying FDA clinical-hold requirements—and whether the hold is lifted.
- Cash burn and actual runway relative to management’s December 31, 2021 estimate, especially given the loss of S-3 eligibility and ongoing financing needs.
- Potential dilution from future share sales, outstanding options and warrants, and any financing terms.
- Whether internal-control weaknesses are remediated and whether subsequent filings report any control or financial-statement issues.
- Execution and timing risks from COVID-19, third-party study capacity, and the company’s decision to pause several development programs.