PDS Biotechnology Corporation — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. PDS is a clinical-stage immunotherapy company developing cancer treatments and infectious-disease vaccines using its Versamune platform. It has no approved products and has generated no product revenue. The 2019 comparison reflects Private PDS as accounting acquirer in the March 2019 reverse merger, so period comparisons may not be fully comparable.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $2.06 million | $1.83 million | $5.45 million | $4.75 million |
| General and administrative | $1.85 million | $3.07 million | $5.43 million | $9.36 million |
| Total operating expenses | $3.91 million | $5.85 million | $10.87 million | $15.05 million |
| Net loss | $3.91 million | $5.75 million | $10.82 million | $2.82 million |
Q3 loss per share was $0.21 versus $1.10; nine-month loss per share was $0.73 versus $0.60. Margins are not meaningful because the company reported no revenue. The nine-month net-loss comparison is heavily affected by a $11.94 million bargain-purchase gain recorded in 2019 in connection with the merger, with no comparable gain in 2020.
At September 30, 2020, cash and cash equivalents were $33.47 million, up from $12.16 million at December 31, 2019. Total assets were $34.45 million; current liabilities were $2.90 million. The filing reports operating lease obligations of $637,932 and no material debt balance. Net cash used in operations for the first nine months was $8.52 million, compared with $12.55 million in 2019. Financing provided $29.83 million, mainly from stock issuance; cash increased by $21.31 million. The company reported no material non-cancelable purchase commitments.
Material changes and financing
- Q3 R&D expense rose 12% year over year, primarily due to manufacturing/technical operations and clinical studies. Nine-month R&D increased 15%, reflecting higher personnel and study costs, partly offset by lower regulatory consulting.
- G&A declined 40% in Q3 and 42% for the nine-month period, principally due to lower personnel, insurance, facilities, professional and legal costs. The 2019 comparison also included $944,445 in lease-termination costs, absent in 2020.
- In February 2020, PDS raised approximately $11.9 million net from a 10-million-share offering. In August, it raised approximately $17.1 million net from a 6.9-million-share offering. Approximately $81 million remained available under its $100 million shelf registration at September 30. No shares had been sold under its Aspire Capital purchase agreement by that date.
- Shares issued and outstanding increased from 5.28 million at December 31, 2019 to 22.26 million at September 30, 2020, reflecting equity financing and other issuances.
Outlook, risks and unusual items
- Management said existing cash was expected to fund operations and R&D for at least 12 months from the filing date. PDS expects continuing losses and higher R&D spending as programs advance; further financing may be needed. Additional equity could dilute shareholders, while debt could impose repayment and covenant obligations.
- COVID-19 delayed two of three planned PDS0101 trials and slowed enrollment; management cautioned that trial, vendor, regulatory and operational disruptions could continue. The filing reports all three PDS0101 Phase 2 studies were in progress; the VERSATILE-002 study with Merck’s KEYTRUDA opened and began recruiting in November 2020, after quarter-end.
- The NCI-led PDS0101 combination study had completed recruitment for its first eight patients after meeting an initial safety benchmark. Management expected an initial efficacy assessment and decision on expansion in the first half of 2021. These were forward-looking statements, not results.
- PDS0203, its COVID-19 vaccine candidate, had encouraging preclinical immune-response data; PDS said it was working toward Phase 1 testing in Brazil. PDS0202 influenza and PDS0201 tuberculosis programs remained in development, with COVID-19-related delays noted for tuberculosis testing.
- A material weakness in internal control over financial reporting remained unremediated at September 30, 2020, involving control environment, risk assessment, control activities, and information and communication. The company cited prior immaterial financial-statement errors and said remediation was ongoing.
- The filing says no material legal proceedings were pending. The 2019 merger produced a bargain-purchase gain; the acquired EG-1962 IPR&D asset had been fully impaired in 2019 and did not generate a 2020 charge in the periods presented.
Key facts for investors to verify
- Whether cash burn, clinical-trial spending and enrollment progress remain consistent with management’s stated minimum 12-month liquidity outlook.
- Whether the PDS0101 studies and planned vaccine programs meet clinical, regulatory and manufacturing milestones despite COVID-19 disruption.
- Availability and terms of additional financing, including remaining shelf capacity, potential dilution, and the practical availability of the Aspire facility.
- Progress in remediating the disclosed material weakness and whether controls are subsequently judged effective.
- That the 2019 bargain-purchase gain and reverse-merger accounting are considered when interpreting year-over-year net-loss comparisons.