PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended October 31, 2022 (fiscal second quarter and first half). The company is a pre-revenue biotechnology developer of Cell-in-a-Box-based therapies, including CypCaps for locally advanced, inoperable pancreatic cancer (LAPC), as well as programs for malignant ascites and diabetes.
Financial results and position
- Revenue: $0 for both the quarter and six-month period, unchanged from the comparable 2021 periods.
- Quarterly results: Operating expenses were $2.319 million, up from $1.005 million; net loss was $1.881 million versus $0.980 million. Loss per share was $0.09 versus $0.06.
- Six-month results: Operating expenses were $3.999 million, up from $2.028 million; net loss was $3.426 million versus $2.005 million. Loss per share improved to $0.17 from $0.21, reflecting a larger weighted-average share count.
- Expense drivers: Six-month research and development expense rose 21% to $337,269; compensation rose 36% to $728,138; and combined general, legal and professional expense increased 155% to $2.779 million. Legal and professional expense was a significant contributor to the increase.
- Cash flow: Six-month operating cash use was $2.964 million, compared with $2.627 million a year earlier. There were no investing cash flows. Financing used $5.475 million, principally for share repurchases; cash declined by $8.438 million from April 30.
- Liquidity and debt: At October 31, cash and cash equivalents were $76.963 million, current assets $77.219 million, current liabilities $1.311 million, and working capital approximately $76 million. Total liabilities were $1.311 million; the filing reports no debt balance. Management said existing cash was expected to fund operating expenses for at least 12 months after issuance of the financial statements, while noting future capital needs and financing uncertainty.
- Other metrics: Interest income was $439,171 for the quarter and $578,673 for six months, up substantially year over year as interest rates increased. No operating margin is meaningful because the company had no revenue.
Material changes and notable items
- The FDA clinical hold on the company’s LAPC investigational new drug application remains in place. The FDA requires additional manufacturing, stability, genetic, device-compatibility, biocompatibility and nonclinical information before lifting the hold.
- The company reported completing product stability studies and certain genetic analyses; eight of ten requested biocompatibility studies were complete. A two-pig pilot study was complete and preliminary data was under evaluation; the planned 90-pig study had not begun.
- In August 2022, a cooperation agreement with Iroquois Master Fund and affiliates led to a reconstituted board and a Business Review Committee. The board curtailed program spending pending its review of strategy and the company’s relationship with SG Austria.
- The company said licensed patents covering Cell-in-a-Box have expired and relevant know-how resides with SG Austria. It may seek a new relationship framework; if unsuccessful, it will reevaluate programs dependent on SG Austria, potentially including LAPC, diabetes and malignant ascites.
- The board authorized a repurchase program of up to $10 million. Through October 31, the company repurchased 2,075,134 shares for $5.476 million. In December, it repurchased a further 800,362 shares for approximately $2.217 million. The company reported 18,726,582 common shares outstanding as of December 14, 2022.
- There were significant leadership changes: the CEO and president resigned in October; Joshua Silverman became interim CEO, president and board chair in November. Two executives’ departures and the board reconstitution add management-transition risk.
- Disclosure controls and procedures were deemed ineffective as of December 12, 2022, due to material weaknesses in internal control over financial reporting.
Outlook, risks and contingencies
- No revenue, earnings or clinical-trial start guidance was provided. The company’s near-term development progress depends on resolving the FDA hold, completing required studies and deciding its future arrangements with SG Austria.
- Management warned that the board’s spending pause, Austrianova production and supply-chain issues, and COVID-related disruptions could delay preclinical work and development. The company relies on Austrianova for manufacturing and certain development activities and reported no known substitute manufacturer.
- Other material risks include the possibility that the FDA will not lift the hold or accept prior clinical data, uncertainty of product development and regulatory approval, limited intellectual-property protection after patent expiry, and potential difficulty raising additional capital.
- Warrants and options that could result in approximately 9.93 million additional shares were excluded from diluted loss per share as anti-dilutive. The company had no pending material legal proceedings and reported no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether and when the FDA clinical hold is lifted, and the status, results and funding of the remaining FDA-requested studies, particularly the 90-pig study.
- Whether the company and SG Austria reach an acceptable new framework, and what the review means for each development program and spending plans.
- Cash burn, actual runway and future financing needs; management’s 12-month runway statement is an estimate, not a guarantee.
- Repurchase-program activity and share-count changes after October 31, including the December repurchases, alongside potential dilution from outstanding warrants and options.
- Remediation of the reported material weaknesses and the effect of leadership turnover on controls and execution.