PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended January 31, 2022 (the company’s fiscal 2022 third quarter), compared with the same periods in 2021. The filing was signed March 15, 2022. The request metadata’s “2021 Q3” label does not match the period stated in the filing.
Business context
PharmaCyte is a pre-revenue biotechnology company developing Cell-in-a-Box live-cell encapsulation therapies, including CypCaps for locally advanced, inoperable pancreatic cancer (LAPC), as well as programs for other cancers and diabetes. Its planned Phase 2b LAPC trial cannot begin while the FDA clinical hold remains in place. The company is not currently spending further resources on its Cannabis Program pending progress in LAPC.
Financial results and liquidity
| Metric | Three months ended Jan. 31, 2022 | Nine months ended Jan. 31, 2022 | Comparison with 2021 |
|---|---|---|---|
| Revenue | $0 | $0 | No revenue in either comparable period |
| Operating expenses | $856,119 | $2,884,313 | Up $99,272 and $296,275, respectively |
| Net loss | $811,290 | $2,816,454 | Prior-year losses were $757,096 and $2,591,232 |
| Loss per share, basic and diluted | $0.04 | $0.21 | Prior-year reported losses per share were $0.49 and $1.84 |
| Operating cash used | Not separately stated | $2,925,479 | Prior-year nine-month use was $2,390,586 |
With no revenue, gross margin and operating margin are not meaningful. Interest income was $45,459 for the quarter and $71,078 for the nine-month period, compared with none in the prior-year periods; it reduced reported net loss. Cash and cash equivalents were $86.64 million at January 31, 2022, versus $2.20 million at April 30, 2021. Current assets were $86.81 million and current liabilities $612,976, implying working capital of approximately $86.20 million. Total liabilities were $612,976; the balance sheet reports no debt at period-end.
Financing provided $87.36 million of cash in the nine months, principally from equity and warrant-related transactions. Cash increased by $84.44 million to $86.64 million. The filing does not give a specific cash-runway estimate. Approximately $36.36 million of cash was uninsured at January 31, 2022. Stockholders’ equity was $91.33 million, and 20,720,204 common shares were outstanding at period-end; 20,721,047 were outstanding as of March 15, 2022.
Material changes and notable items
- Two August 2021 offerings and related warrant activity substantially increased liquidity. The company reported approximately $86.2 million of investor funding during the nine months. The financings involved substantial potential dilution: 10,773,315 warrants were outstanding at January 31, 2022, in addition to options and other equity awards.
- A 1-for-1,500 reverse stock split took effect July 12, 2021, and the common stock began trading on Nasdaq in August 2021. Reported share counts and per-share amounts reflect the split.
- Operating cash use rose to $2.93 million for the nine months from $2.39 million a year earlier. Research and development expense was $436,872, versus $595,976; legal and professional expense and general and administrative expense increased.
- The MD&A’s expense explanations do not fully reconcile to the financial statements: it describes R&D as increasing by $93,022 for the quarter and $205,031 for nine months, while the statements show decreases of $16,049 and $159,104, respectively. Investors should consult the filed statements and seek clarification.
Outlook, risks and contingencies
- The FDA clinical hold, imposed in October 2020, remains the key development constraint. FDA requests include additional genetic stability, product and cell-bank stability, manufacturing and release information, delivery-device compatibility, biocompatibility work, and a large-animal study. The company reports that 18-month product stability testing was completed, six of eight biocompatibility studies were completed, and several other studies and documentation efforts were underway. No date for lifting the hold or starting the trial is provided.
- Management said COVID-19 had not materially affected operations to date, but acknowledged possible delays in FDA-response work and future trial start-up, enrollment, patient participation, and data integrity.
- Related-party exposure includes services and products purchased from companies associated with SG Austria and consulting services from Vin-de-Bona. The company also disclosed service agreements estimated at $281,000 over the next 12 months, approximately $215,000 of which is related-party work.
- Disclosure controls and procedures were deemed ineffective as of January 31, 2022, due to material weaknesses in internal control over financial reporting; no material changes to those controls were reported during the quarter.
- Subsequent to quarter-end, director Thomas Yuen died. The company reported temporary noncompliance with Nasdaq’s independent-board-majority requirement and said it intended to fill the vacancy within the applicable cure period. Nasdaq’s stated deadline depends on the timing of the next annual meeting, with February 13, 2023 as the outside date.
- The company reported no material pending litigation. It has no commercial revenue and depends on successful development, regulatory progress, and continued execution of its preclinical program.
Most important facts for investors to verify
- Current FDA clinical-hold status, completion of outstanding studies and documentation, and any timeline for an IND amendment or trial launch.
- Cash burn, planned R&D spending, and management’s updated estimate of funding needs and runway.
- Potential dilution from outstanding warrants, pre-funded warrants, options, and any future financing.
- Resolution of the MD&A versus financial-statement R&D expense discrepancies.
- Remediation of the disclosed material weaknesses and restoration of Nasdaq board-independence compliance.
- Progress and costs of related-party work, including the estimated $215,000 related-party portion of service agreements.