Filing summary
Issuer identity alert: The supplied filing is for Edge Therapeutics, Inc., not PDS Biotechnology Corp. The summary below describes the filing as provided; verify the issuer and filing before relying on it.
Business context and reporting period
Edge Therapeutics is a clinical-stage biotechnology company developing hospital-based therapies using its Precisa platform. This unaudited Form 10-Q covers the quarter ended March 31, 2017, with operating results compared with the quarter ended March 31, 2016. The company reported no commercial product revenue and said it did not expect near-term product sales.
Its lead candidate, EG-1962, was in the Phase 3 NEWTON 2 study for aneurysmal subarachnoid hemorrhage (aSAH). EG-1964, for chronic subdural hematoma, was in formulation development.
Financial results and position
| Metric | Q1 2017 | Q1 2016 or prior date |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $7.59 million | $5.35 million |
| General and administrative expense | $4.20 million | $3.69 million |
| Total operating expenses | $11.79 million | $9.03 million |
| Net loss | $12.17 million | $9.17 million |
| Basic and diluted loss per share | $0.42 | $0.32 |
| Net cash used in operating activities | $10.77 million | $9.07 million |
| Cash and cash equivalents | $95.59 million at March 31, 2017 | $106.40 million at December 31, 2016 |
| Total debt carrying amount | $15.09 million | Not stated in the filing text as a comparable total |
The company had total assets of $99.90 million, current liabilities of $6.75 million, and stockholders’ equity of $78.65 million at March 31, 2017. The filing does not provide a meaningful revenue margin because there was no product revenue. Interest expense was $475,141, partly offset by $96,259 of interest income.
Material changes versus the prior comparable period
- Net loss increased by $3.00 million, or 33%; total operating expenses increased by 31%.
- R&D expense rose 42%, primarily due to higher clinical-trial costs and increased R&D personnel and departmental costs.
- G&A expense rose 14%, primarily due to personnel and employee separation costs.
- Operating cash use increased by $1.70 million. Cash declined $10.81 million from year-end 2016 to March 31, 2017.
- Interest expense increased; management attributed the change in net interest expense primarily to loan interest, partly offset by higher interest earned on cash.
Outlook, risks, and unusual items
- Management estimated that available cash at March 31, 2017 would fund anticipated needs through the expected late-2018 full data readout of NEWTON 2. This is a forward-looking estimate and may change with trial requirements, costs, or other factors.
- Management expected R&D spending and operating losses to continue increasing. The company said future financing may be needed and could require delaying or scaling back development, or entering collaborations on less favorable terms.
- Management expected NEWTON 2 interim analysis results in early 2018; depending on those results, full study results were expected in late 2018. The filing identified potential changes to the clinical program, including possible FDA requests for another Phase 3 trial or changes to trial design, as factors affecting capital needs.
- The company had a $15.0 million Hercules loan at an effective interest rate of 9.15%. Interest-only payments were due through March 1, 2018, followed by 24 monthly principal-and-interest payments; the loan is secured by substantially all assets other than intellectual property, which is subject to a negative pledge. A further $5 million tranche was available at the company’s option through June 15, 2017, subject to the agreement.
- Under its Evonik license, the company could owe up to $14.75 million in development, regulatory, and sales milestones, in addition to mid-single-digit royalties on certain net sales. Timing and likelihood of future milestones were not specified.
- After quarter-end, the company completed a registered direct offering on April 21, 2017, selling 1.8 million shares at $10 per share for $17.4 million net proceeds. It planned to use proceeds for EG-1962 pre-commercial activities, portfolio expansion, and general corporate purposes.
- The filing reported no material litigation, no material changes to previously disclosed risk factors, and no material change in internal control over financial reporting. It also disclosed an ongoing IRS audit of the 2015 tax year and said no material adjustment was expected.
Important facts for investors to verify
- Confirm that this Edge Therapeutics filing is the intended document; the request names PDS Biotechnology Corp.
- Verify the clinical-trial timeline and any subsequent changes to NEWTON 2, including interim and final results and regulatory requirements.
- Assess cash burn, financing needs, and the assumptions supporting management’s estimate of funding through the late-2018 readout.
- Review Hercules loan terms, collateral and covenants, the optional tranche deadline, and future debt and milestone payments.
- Confirm the closing and use of proceeds of the April 2017 offering and its resulting share-count impact.