PharmaCyte Biotech, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended October 31, 2017 (unaudited), the second quarter and first half of fiscal 2018. PharmaCyte is a clinical-stage biotechnology company developing Cell-in-a-Box® cellular therapies for cancer and diabetes; it reported no revenue.
Financial performance and liquidity
| Metric | Three months ended Oct. 31, 2017 | Six months ended Oct. 31, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses / operating loss | $1.814 million | $3.503 million | $0.974 million / $2.006 million |
| Net loss | $1.814 million | $3.503 million | $0.975 million / $2.007 million |
| Basic and diluted loss per share | $0.00, rounded | $0.00, rounded | $0.00, rounded |
| Operating cash used | Not presented by quarter | $2.532 million | $1.613 million |
For the six-month period, R&D expense rose to $943,000 from $429,000; total operating expenses increased about 75%. Management attributed the expense increase chiefly to R&D, consulting and travel, compensation, director fees, and legal and professional costs. No meaningful revenue or profit margins are available because the company had no sales and incurred losses.
At October 31, cash was $2.682 million, down from $3.464 million at April 30, 2017. Current assets were $2.786 million and current liabilities $567,000, implying working capital of about $2.219 million. Total liabilities were $567,000, all current accounts payable and accrued expenses; the balance sheet reports no borrowings. Six-month financing cash flow was $1.751 million, primarily from common-stock sales; cash declined by $782,000. Management said available cash and anticipated equity financing would fund operations through December 31, 2018, while acknowledging continued dependence on outside capital.
Material changes and business developments
- Losses and operating cash use increased year over year as the company expanded development and corporate spending.
- Shares outstanding rose to 973.2 million from 905.3 million at April 30, 2017. The company sold about 62.4 million shares during the six months for net proceeds of approximately $1.75 million. Options and warrants totaling 139.3 million shares were excluded from diluted EPS as anti-dilutive.
- The company was preparing an FDA Investigational New Drug application for a proposed trial in locally advanced pancreatic cancer and said it expected to submit the application the following year. Trial commencement remains subject to FDA clearance.
- An August 2017 binding term sheet with SG Austria and Austrianova proposed eliminating specified milestone payments, broadening the diabetes license, and changing royalties. It also proposed payments of $150,000 per month for six months after execution of amendments. Those amendments were not finalized by October 31, 2017.
Outlook, risks, contingencies and unusual items
- No revenue or earnings guidance was provided. Management expects continued operating losses and substantial capital needs; equity financing may be dilutive, and failure to raise funds could force the company to modify, delay, or abandon plans.
- Key execution risks include FDA approval and timing, preclinical and clinical outcomes, product safety and efficacy, manufacturing readiness, and reliance on third parties. The company’s therapies remain in development.
- Potential license royalties and milestone payments depend on future product or sublicense revenue and development milestones. The office lease carries approximately $60,654 in remaining minimum payments. The Melligen diabetes-cell license includes royalties, patent costs, and clinical-development milestones.
- Related-party purchases from Austrianova subsidiaries were approximately $642,000 for the six months. The company also holds a 14.5% investment in SG Austria.
- Management identified material weaknesses in internal controls, including communication, control documentation, segregation of CFO duties, and IT controls; disclosure controls and internal control over financial reporting were deemed ineffective. Remediation was ongoing.
- The company reported no material pending legal proceedings and no material changes to the risk factors in its prior annual report. It also disclosed uninsured bank balances of approximately $2.432 million at October 31, 2017.
Important facts for investors to verify
- Whether the company filed its IND and obtained FDA clearance, and the resulting timing and cost of the pancreatic-cancer trial.
- Actual cash burn, subsequent equity financing, dilution, and whether management’s stated funding runway was achieved.
- Whether the proposed license amendments were executed, including the six-month payment commitment and revised royalty terms.
- Progress and independent evidence for preclinical results, manufacturing readiness, and the company’s other development programs.
- Whether the disclosed internal-control weaknesses were remediated and whether later filings report any accounting or reporting issues.