PDS Biotechnology Corporation — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. The filing was signed November 14, 2022. PDS Biotechnology is a clinical-stage immunotherapy company developing cancer and infectious-disease candidates using its Versamune and Infectimune platforms. It has no commercially approved products and has generated no commercial product revenue.
Financial results and liquidity
| Metric | Three months ended Sept. 30, 2022 | Nine months ended Sept. 30, 2022 |
|---|---|---|
| Revenue | No commercial product revenue | No commercial product revenue |
| Research and development expense | $4.35 million | $13.28 million |
| General and administrative expense | $2.93 million | $9.58 million |
| Total operating expense | $7.28 million | $22.85 million |
| Net loss | $7.42 million | $21.72 million |
| Net loss per share, basic and diluted | $0.26 | $0.76 |
| Net cash used in operating activities | Not separately stated | $18.18 million |
Gross or operating margins are not meaningful because the company reported no revenue. For the nine-month period, the company recorded a $1.20 million income-tax benefit, compared with $4.52 million in 2021, from New Jersey tax-benefit sales; it reported no tax benefit for Q3 2022.
- Cash and cash equivalents: $71.64 million at September 30, 2022, up from $65.24 million at December 31, 2021.
- Cash flows: $24.58 million provided by financing activities, primarily from $25 million of venture-loan proceeds; the nine-month net increase in cash was $6.40 million.
- Debt: $25 million of term loans were funded in August; the balance-sheet carrying value was $22.91 million net of debt discount. The loans bear a floating rate of prime plus 5.75%, subject to a 4% minimum, and mature 48 months after funding. Two additional $5 million tranches are uncommitted and at lender discretion.
- Liquidity: Current assets were $74.41 million and current liabilities $4.84 million. Management said available cash was expected to fund operations and R&D for at least one year after the report date. The filing also says further financing will be needed to support longer-term development and commercialization.
Material changes versus the prior comparable period
- Q3 operating expenses rose 5% year over year and net loss increased 7%. R&D expense increased 18%, primarily due to clinical study, personnel and manufacturing costs; G&A expense decreased 11%.
- For the first nine months, operating expenses rose 51%: R&D increased 69% and G&A increased 32%. Management attributed the R&D increase mainly to personnel, clinical studies, manufacturing and quality costs, and the G&A increase mainly to personnel and professional and legal costs.
- Nine-month net loss more than doubled, to $21.72 million from $10.60 million, reflecting higher operating costs and a smaller income-tax benefit.
- Operating cash use increased to $18.18 million from $7.98 million. Cash nevertheless rose, largely because of the new debt financing. Unlike 2021, the 2022 period had no public-equity offering proceeds reported in financing cash flows.
Outlook, developments and risks
- Management expects R&D spending to increase as candidates advance through clinical development and regulatory work. The company expects continued losses and does not anticipate significant product revenue unless and until a candidate is approved and commercialized.
- The company established a $150 million shelf registration in 2022, including a $50 million at-the-market equity program; it reported no sales under the program through September 30. Equity issuance may dilute shareholders. Debt carries interest, covenants and repayment obligations.
- The Horizon loan is secured by company assets, excluding intellectual property, and contains covenants restricting certain transactions and additional indebtedness. A default could accelerate repayment and permit enforcement against collateral.
- Clinical and regulatory outcomes remain uncertain. COVID-19, site capacity and staffing may slow trial enrollment and operations. The filing also identifies capital-market disruption, inflation, geopolitical instability, competition, intellectual-property matters and dependence on future financing as risks.
- Clinical updates described in the filing are preliminary and largely from non-randomized, non-controlled studies; the company cautions that interim results may not predict final results. FDA Fast Track designation for PDS0101 plus pembrolizumab is not approval. The VERSATILE-002 trial continued enrollment; the company reported preliminary responses in 7 of 17 evaluable patients and no treatment-related adverse events of Grade 3 or higher in the cited 19-patient safety set.
- The former CFO’s arbitration claim was settled confidentially in July 2022, with customary releases and no admission of liability; the company reported no material change to accrued liabilities in connection with it.
Most important facts for investors to verify
- Cash runway assumptions and the timing, cost and funding plan for pivotal development of PDS0101 and other programs.
- Loan terms in the executed agreement, including amortization dates, floating-rate exposure, covenants, collateral and the availability conditions for the uncommitted tranches.
- Whether and when the company uses its $50 million ATM facility, and the resulting share dilution; also monitor outstanding options and warrants.
- Full clinical-study datasets, trial enrollment and follow-up, safety findings, and FDA feedback on development and registrational pathways; do not treat preliminary response rates as comparative evidence of efficacy.
- The filing’s October 2022 NCI-study update contains an apparent internal inconsistency: it reports Grade 3 treatment-related adverse events in 48% of patients, then states there were no Grade 3 treatment-related events. Verify the underlying disclosure.