PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended January 31, 2023. Although the request identifies 2022 Q3, this filing covers PharmaCyte’s fiscal third quarter of 2023. Financial statements are unaudited.
Business context
PharmaCyte is a pre-revenue biotechnology company developing Cell-in-a-Box cellular therapies, including CypCaps for locally advanced, inoperable pancreatic cancer (LAPC), as well as programs for malignant ascites and diabetes. Its LAPC investigational new drug application remains on FDA clinical hold.
Financial results and liquidity
| Metric | Three months ended Jan. 31, 2023 | Nine months ended Jan. 31, 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $1.553 million | $5.552 million | $0.856 million / $2.884 million |
| Net loss | $0.764 million | $4.190 million | $0.811 million / $2.816 million |
| Basic and diluted loss per share | $0.04 | $0.21 | $0.04 / $0.21 |
| Net cash used in operations | $3.505 million for nine months | $2.925 million |
Quarterly operating expenses rose 81% year over year; nine-month expenses rose 92%. The nine-month increase reflected higher compensation, director fees, and legal and professional costs, partly offset by lower R&D and general and administrative costs. Quarterly director fees rose to $796,000 from $85,000. Nine-month legal and professional expense was $2.454 million versus $601,000. Higher interest income ($1.215 million for nine months versus $71,000) partly offset operating losses; quarterly net loss consequently improved slightly year over year. Operating margins are not meaningful because the company reported no revenue.
At January 31, 2023, cash and cash equivalents were $72.640 million, total current assets $72.821 million, current liabilities $0.828 million, and working capital approximately $71.993 million. Total assets were $77.951 million and stockholders’ equity $77.123 million. The company reported no long-term debt; total liabilities were $0.828 million. Cash declined $12.760 million from April 30, 2022, including $3.505 million used in operations and $9.254 million spent repurchasing shares. No investing cash flows were reported.
Material changes and other items
- The Board curtailed spending on development programs pending a Business Review Committee review and a reassessment of the company’s relationship with SG Austria and its subsidiaries. Management said this has delayed work to address the FDA hold.
- The company repurchased 3,393,060 shares for $9.254 million during the nine months. Subsequent to quarter-end, it repurchased another 765,633 shares for approximately $2.294 million.
- At January 31, 2023, 9,890,847 warrants and 281,936 options were outstanding. Potentially dilutive securities were excluded from diluted loss per share as anti-dilutive.
- Subsequent to quarter-end, the company increased authorized common shares from 33,333,334 to 133,333,334, effective March 14, 2023.
Outlook, risks, and contingencies
- Management stated that cash on hand was expected to fund operating expenses for at least 12 months after issuance of the financial statements, but noted that future capital needs are difficult to forecast and additional financing may be difficult or unavailable on acceptable terms.
- The FDA hold requires additional manufacturing, product, safety, and preclinical information. The company reported completing some requested studies, but several activities remained underway; the two-pig pilot study was complete and a larger 90-pig study was planned. No assurance was given that the FDA will lift the hold.
- The company’s licensed patents have expired, and key technology know-how resides with SG Austria. The company depends on SG Austria for manufacturing and certain development work and said it may reconsider programs dependent on that relationship if it cannot establish an acceptable new framework.
- The filing reports material weaknesses in internal control over financial reporting and concludes that certain disclosure controls and procedures were not effective. It also cites significant management changes, including an interim CEO and departures of senior executives.
- COVID-19, supply-chain constraints, regulatory uncertainty, potential trial delays, and the company’s ability to raise capital are identified risks. No specific revenue or earnings guidance is provided.
Important facts for investors to verify
- Whether and when the FDA hold is lifted, including completion and results of the remaining studies and documentation.
- Progress on the SG Austria relationship review, the availability of manufacturing know-how, and the impact of curtailed spending on development timelines.
- Actual cash burn and runway relative to management’s stated 12-month expectation, including cash spent on further share repurchases.
- Plans to remediate the disclosed internal-control material weaknesses and the effects of management turnover.
- Potential dilution from outstanding warrants, options, and the increased authorized share count.