UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2022
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________ to _____________
Commission file number 001-37568
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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(Address of principal executive offices)
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(
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(Registrant’s telephone number)
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(Former name, former address and former fiscal year, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large
accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Smaller Reporting Company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
The number of shares of the registrant’s Common Stock, par value $0.00033 per share, outstanding as of November 7, 2022 was 28,508,688 .
PDS BIOTECHNOLOGY CORPORATION
FORM 10-Q FOR THE QUARTER ENDED September 30, 2022
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Page
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Part I — Financial Information
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Item 1.
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Financial Statements (Unaudited):
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3
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4
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5
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6
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7
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Item 2.
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17
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Item 3.
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30
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Item 4.
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30
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31
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Item 1.
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31
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Item 1A.
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31
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Item 2.
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34
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Item 3.
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34
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Item 4.
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34
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Item 5.
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34
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Item 6.
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34
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35
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36
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PART 1.
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FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
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September 30, 2022
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December 31, 2021
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ASSETS
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(unaudited)
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Current assets:
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Cash and cash equivalents
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$
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$
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Prepaid expenses and other
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Total current assets
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Property and equipment, net
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Financing lease right-to-use assets
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Operating lease right-to-use asset
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Total assets
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$
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$
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses
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Financing lease obligation-short term
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Operating lease obligation-short term
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Total current liabilities
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Noncurrent liabilities:
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Note payable, net of debt discount
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Financing lease obligation-long term
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Operating lease obligation-long term
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Total liabilities:
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$
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$
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STOCKHOLDERS’ EQUITY
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Common stock, $
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Additional paid-in capital
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Accumulated deficit
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(
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(
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)
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Total stockholders’ equity
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Total liabilities and stockholders’ equity
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$
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$
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See accompanying notes to the condensed consolidated financial statements.
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(Unaudited)
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Three Months Ended September 30,
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Nine Months Ended September 30,
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2022
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2021
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2022
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2021
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Operating expenses:
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Research and development expenses
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$
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$
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$
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$
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General and administrative expenses
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Total operating expenses
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Loss from operations
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(
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(
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(
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(
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Interest (expenses) income, net:
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Interest (expense) income, net
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(
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(
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| Loss before income taxes | ( |
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(
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(
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(
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| Benefit for income taxes | ||||||||||||||||
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Net loss and comprehensive loss
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(
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(
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(
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(
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Per share information:
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Net loss per share, basic and diluted
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$
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(
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$
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(
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$
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(
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$
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(
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Weighted average common shares outstanding, basic, and diluted
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See accompanying notes to the condensed consolidated financial statements.
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(Unaudited)
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Common Stock
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Shares
Issued
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Amount
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Additional
Paid-in
Capital
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Accumulated
Deficit
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Total
Equity
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January 1, 2021
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$
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$
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$
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(
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$
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Stock - based compensation expense
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–
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Issuance of common stock from 401K match
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Net loss
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–
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(
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(
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Balance - March 31, 2021
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(
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Stock based compensation expense
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–
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Issuance of common stock from 401K match
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(
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Issuance of common stock, from exercise of stock options
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Issuances of common stock, net of issuance costs
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Net loss
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–
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(
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(
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Balance - June 30, 2021
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$
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$
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$
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(
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$
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Stock based compensation expense
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– | |||||||||||||||||||
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Issuance of common stock, from exercise of stock options
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Net loss
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– | ( |
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Balance - September 30, 2021
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$ | $ | $ | ( |
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Common Stock
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Shares
Issued
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Amount
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Additional
Paid-in
Capital
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Accumulated
Deficit
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Total
Equity
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January 1, 2022
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$
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$
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$
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(
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$
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Stock based compensation expense
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–
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Issuances of common stock, from exercise of stock options
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Net loss
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–
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(
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(
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Balance - March 31, 2022
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(
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Stock based compensation expense
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–
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Issuances of common stock, from exercise of stock options
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Net loss
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–
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(
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(
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Balance - June 30, 2022
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$
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$
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$
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(
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$
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Stock based compensation expense
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– | |||||||||||||||||||
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Issuance of warrants
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– | |||||||||||||||||||
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Net loss
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– | ( |
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Balance - September 30, 2022
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$ | $ | $ | ( |
) | $ | ||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
(Unaudited)
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Nine Months Ended September 30,
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2022
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2021
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Cash flows from operating activities:
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Net loss
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$
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(
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$
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(
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Adjustments to reconcile net loss to net cash used in operating activities:
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Stock-based compensation expense
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Stock-based 401K company common match
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Amortization of debt discount
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Depreciation expense
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Operating lease expense
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Finance lease amortization expense
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Changes in assets and liabilities:
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Prepaid expenses and other assets
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(
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)
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(
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Finance lease right-to-use asset
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( |
) | ||||||
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Accounts payable
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Accrued expenses
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Finance lease liabilities
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Operating lease liabilities
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(
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(
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Net cash used in operating activities
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(
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(
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Cash flows from financing activities:
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Proceeds from issuance of note payable
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Payment for debt issuance costs
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( |
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Proceeds from exercise of stock options
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Proceeds from issuance of common stock, net of issuance costs
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Net cash provided by financing activities
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Net increase in cash and cash equivalents
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Cash and cash equivalents at beginning of period
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| Cash and cash equivalents at end of period | ||||||||
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Supplemental information of cash and non-cash transactions:
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Cash paid for interest
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$
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$
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Fair value of warrants issued in connection with debt
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$ |
$ |
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See accompanying notes to the condensed consolidated financial statements.
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Note 1 – Nature of Operations
PDS Biotechnology Corporation, a Delaware corporation, including its subsidiary collectively (the “Company” or “PDS Biotech”), is a clinical-stage immunotherapy company developing a growing pipeline of targeted cancer
and infectious disease immunotherapies based on the Company’s proprietary Versamune® and Infectimune™ T cell activating technology platforms. The Company’s Versamune based products have demonstrated the potential to overcome the
limitations of current immunotherapies by inducing, in vivo, large quantities of high-quality, potent polyfunctional CD4+ helper and CD8+ killer T cells. The Company has developed multiple therapies, based on combinations of Versamune and
disease-specific antigens, designed to train the immune system to recognize diseased cells and effectively attack and destroy them. The Company continues to advance its pipeline of candidates to address a wide range of cancers including
HPV-positive cancers (anal, cervical, head and neck, penile, vaginal, vulvar) and breast, colon, lung, prostate and ovarian cancers. The Company’s Infectimune -based vaccines have demonstrated the potential to induce, not only robust and
durable neutralizing antibody response, but also powerful T cell responses including long-lasting memory T cell responses. The Company’s infectious disease candidates are of potential interest for use in COVID-19 and universal influenza
vaccines.
From
the Company’s inception, it has devoted substantially all of its efforts to drug development, business planning, engaging regulatory, manufacturing and other technical consultants, acquiring operating assets, planning and executing clinical
trials and raising capital.
In
December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30,
2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The full impact of the COVID-19 pandemic continues to evolve. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and
operations. The FDA issued and since updated guidance to assist sponsors in assuring the safety of trial participants, maintaining compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity. Clinical trial sites have
implemented institution-specific measures securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. COVID-19 related travel and other restrictions may also impact the potential for
on-site monitoring visiting and audits and inspections of Company personnel, third parties, and regulators. There may be shortages of site personnel and equipment necessary for the timely completion of clinical trials. PDS Biotech is providing
support to address these challenges, but these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical trials.
Although
there is uncertainty related to the anticipated impact of the COVID-19 pandemic on the Company’s future results, management believes the current cash reserves, leave the Company well-positioned to manage the business through this crisis as it
continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and continuing and the financial impacts associated with the COVID-19 pandemic are still uncertain.
Note 2 – Summary of Significant Accounting
Policies
| (A) |
Unaudited interim financial statements:
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The interim balance
sheet at September 30, 2022, the statements of operations and comprehensive loss and changes in stockholders’ equity and cash flows for the three and nine months ended September 30, 2022 and 2021 are unaudited. The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, in accordance with the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain
footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements
and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of its financial information. The results of operations for the three and nine months ended
September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The balance sheet as of December 31, 2021 included herein was derived from
the audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto as of and for the year
ended December 31, 2021, filed by the Company with the SEC in its Annual Report on Form 10-K on March 31, 2022.
| (B) |
Use of estimates:
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The preparation of condensed consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses at the date of the consolidated financial statements
and during the reporting periods, and to disclose contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates. The most significant estimate relates to the fair value
of securities underlying stock-based compensation.
| (C) |
Significant risks and uncertainties:
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The Company’s operations are subject to a number of factors
that may affect its operating results and financial condition. Such factors include, but are not limited to: the clinical and regulatory development of its products, the Company’s ability to preserve its cash resources, the Company’s review of
strategic alternatives, the Company’s ability to add product candidates to its pipeline, the Company’s intellectual property, the ability to efficiently and effectively conduct its clinical trials, competition from products manufactured and
sold or being developed by other companies, the price of, and demand for, Company products if approved for sale, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, the
Company’s ability to raise capital, and the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the COVID-19 pandemic and its variants.
The Company currently has no commercially approved
products. As such, there can be no assurance that the Company’s future research and development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to
regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an environment of rapid change and is dependent upon the continued services of its employees and consultants
and obtaining and protecting its intellectual property.
| (D) |
Cash equivalents and concentration of cash balance:
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The Company considers all highly liquid securities with a
maturity weighted average of less than three months to be cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits.
| (E) |
Research and development:
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Costs incurred in connection with research and development
activities are expensed as incurred. These costs include licensing fees to use certain technology in the Company’s research and development projects as well as fees paid to consultants and entities that perform certain research and testing on
behalf of the Company.
Costs for certain development activities, such as clinical
trials, are recognized based on an evaluation of the progress to completion of specific tasks using data, such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for
these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred.
| (F) |
Patent costs:
|
The Company expenses patent costs as incurred and
classifies such costs as general and administrative expenses in the accompanying statements of operations and comprehensive loss.
| (G) |
Stock-based compensation:
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The Company accounts for its stock-based compensation in
accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, directors and non-employees to be recognized as expense in the consolidated statements of operations and
comprehensive loss based on their grant date fair values. In order to determine the fair value of stock options on the date of grant, the Company uses the Black-Scholes option-pricing model. Inherent in this model are assumptions related to
expected stock-price volatility, option term, risk-free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions that are based on factual data derived from public sources, the
expected stock-price volatility and option term assumptions require a greater level of judgment. The Company expenses the fair value of its stock-based compensation awards to employees and directors on a straight-line basis over the requisite
service period, which is generally the vesting period. The Company recognizes forfeitures as they occur.
| (H) |
Net loss per common share:
|
Basic and diluted net loss per common share is determined
by dividing net loss attributable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the common shares underlying the stock options and warrants have been excluded from the
calculation because their effect would be anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per common share is the same.
The potentially dilutive securities excluded from the
determination of diluted loss per share as their effect is antidilutive, are as follows:
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As of September 30,
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2022
|
2021
|
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Stock options to purchase Common Stock
|
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|
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Warrants to purchase Common Stock
|
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|
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Total
|
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|
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Note 3 – Liquidity
As of September 30, 2022, the Company had $71.6
million of cash and cash equivalents. The Company’s primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays
these expenses, as reflected in the change to the Company’s outstanding accounts payable and accrued expenses.
In July 2020, the Company filed a shelf registration statement, or the 2020 Shelf Registration
Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which the Company refers to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. The 2020 Registration Statement was terminated upon
effectiveness of the 2022 Registration Statement (as discussed below).
In August 2020, the Company sold 6,900,000
shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which
includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public
offering price, minus underwriting discounts and commissions. The Company received gross proceeds of approximately $19.0 million
and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses.
In May 2021, the Company received approximately $4.5 million from the net sale of tax benefits through 2019 to an unrelated, profitable New Jersey corporation pursuant the Company’s participation
in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss (NOL) program for State Fiscal Year 2020.
In June 2021, the Company completed an underwritten public offering in which it sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to
the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option
to purchase additional shares at the public offering price, minus underwriting discounts and commissions. The Company received gross proceeds of approximately $51.7 million and net proceeds of approximately $48.5 million, after deducting underwriting
discounts and offering expenses.
In April 2022, the Company received approximately $1.2 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant the Company’s participation in the New Jersey Technology Business Tax
Certificate Transfer NOL program for State Fiscal Year 2021.
In August 2022, the Company filed a shelf registration statement, or the 2022 Shelf Registration Statement, with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities, and units, which the Company
refers to collectively as the Shelf Securities, up to an aggregate amount of $150 million, $50 million of which covers the offer, issuance and sale by the Company of its common stock under the Sales Agreement (as discussed below). The
2022 Shelf Registration Statement was declared effective on September 2, 2022.
In August 2022, the Company entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley Securities, Inc. and BTIG, LLC, each an Agent and collectively the Agents, with respect to an at-the-market offering
program under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million, or the Placement Shares, through or to the Agents, as sales agents or principals. Upon delivery of a placement notice and subject to the terms and
conditions of the Sales Agreement, the Agents may sell the Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended, including, without
limitation, sales made through The Nasdaq Capital Market or on any other existing trading market for the Company’s common stock. The Agents will use commercially reasonable efforts to sell the Placement Shares from time to time, based upon
the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay the Agents a commission equal to three percent (3 %) of the gross sales proceeds of any Placement Shares sold through the Agents under the Sales Agreement, and the Company has also provided the
Agents with customary indemnification and contribution rights. The Company is not obligated to make any sales of its common stock under the Sales Agreement. The offering of Placement Shares pursuant to the Sales Agreement will terminate upon
the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms. During the quarter ended September 30, 2022, the Company did no t sell any shares of common stock pursuant to the Sales Agreement.
In August 2022, the Company entered into a venture loan and security agreement, or the Loan and Security Agreement, with Horizon Technology Finance Corporation, as lender and collateral agent for itself and the other lenders. The
Loan and Security Agreement provides for the following 6 separate and independent term loans: (a) a term loan in the amount of $7,500,000 , or Loan A, (b) a term loan in the amount of $10,000,000 , or Loan B, (c) a term loan in the amount of $3,750,000 , or Loan C, (d) a term loan
in the amount of $3,750,000 , or Loan D, (e) a term loan in the amount of $5,000,000 , or Loan E, and (f) a term loan in the amount of $5,000,000 ,
or Loan F, (with each of Loan A, Loan B, Loan C, Loan D, Loan E, and Loan F, individually a Loan and, collectively, the Loans). Loan A, Loan B, Loan C, and Loan D were delivered to the Company on August 24, 2022. Loan E and Loan F are
uncommitted Loans that may be advanced by the lenders upon their discretion prior to July 31, 2023 upon the satisfaction of certain conditions. The Company may only use the proceeds of the Loans for working capital or general corporate
purposes. Each Loan matures on the 48 -month anniversary following the applicable funding date unless accelerated pursuant to
certain events of default. The principal balance of each Loan bears a floating interest. The interest rate is calculated initially and, thereafter, each calendar month as the sum of (a) the per annum rate of interest from time to time
published in The Wall Street Journal as contemplated by the Loan and Security Agreement, or any successor publication thereto, as the “prime rate” then in effect, plus (b) 5.75 %; provided that, in the event such rate of interest is less than 4.00 %,
such rate shall be deemed to be 4.00 % for purposes of calculating the interest rate. Interest is payable on a monthly basis
based on each Loan principal amount outstanding the preceding month. The Company, at its option upon at least ten (10 ) business
days’ written notice to the lenders, may prepay all (and not less than all) of the outstanding Loan by simultaneously paying to each lender an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the
Loans; plus (ii) an amount equal to (A) if such Loan is prepaid on or before the Loan Amortization Date (as defined in the Loan and Security Agreement) applicable to such Loan, 3 % of the then outstanding principal balance of such Loan, (B) if such Loan is prepaid after the Loan Amortization Date applicable to such Loan, but on or before the
date that is 12 months after such Loan Amortization Date, 2 % of the then outstanding principal balance of such Loan, or (C) if
such Loan is prepaid more than 12 months after the Loan Amortization Date but prior to the stated maturity date applicable to such Loan, 1 %
of the then outstanding principal balance of such Loan; plus (iii) the outstanding principal balance of such Loan; plus (iv) all other sums, if any, that shall have become due and payable thereunder. No prepayment premium will be applied to any outstanding balance of any Loan paid on the stated maturity date.
The Loan and Security Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on intellectual property, guaranties, mergers and
consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes.
The Company’s primary
uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change in its outstanding
accounts payable and accrued expenses.
The Company evaluated
whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the filing of this Quarterly Report on Form 10-Q. The Company’s
budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies. Based on its available cash resources and cash flow projections as of the date the consolidated financial statements were
available for issuance, management believes there are sufficient funds to continue operations and research and development programs for at least one year after the date of this Quarterly Report on Form 10-Q.
The Company plans to
continue to fund its operations and capital funding needs through equity and/or debt financings. However, the Company cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on
terms favorable to the Company or its existing stockholders. The Company may also enter into government funding programs and consider selectively partnering for clinical development and commercialization. The sale of additional equity would
result in additional dilution to the Company’s stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict its
operations. If the Company is unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate its product development or future commercialization efforts or grant rights
to develop and market immunotherapies that the Company would otherwise prefer to develop and market itself. Any of these actions could harm its business, results of operations and prospects. Failure to obtain adequate financing also may
adversely affect the Company’s ability to operate as a going concern.
Note 4 – Fair Value of Financial Instruments
There were no
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
|
Total
|
Quoted Prices in
Active Markets
(Level 1)
|
Quoted Prices in
Inactive Markets
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
|||||||||||||
|
As of September 30, 2022: (unaudited)
|
||||||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
As of December
31, 2021
|
||||||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The carrying value of the Loan and Security Agreement approximated its fair value at
September 30, 2022 due to its variable rate.
Note 5 – Leases
Operating Lease:
Effective March 5, 2020, the Company entered into a
sublease for approximately 11,200 square feet of office space located at 25B Vreeland Road, Suite 300, Florham Park, NJ. The
sublease commenced on May 1, 2020 and will continue for a term of forty (40 ) months with an option to renew through October 31, 2027.
As of September 30, 2022 there are eleven (11 ) months remaining in the lease term. Upon inception of the lease, the Company
recognized approximately $0.7 9.15 %. Throughout the period described above the Company has maintained, and
continues to maintain, a month-to-month lease for its research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton NJ, 08540.
Supplemental cash flow information related to operating
leases is as follows:
|
As of September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash paid for operating lease liabilities
|
$
|
|
$
|
|
||||
Maturity of the Company’s operating lease liability is as
follows:
|
Year ended December 31,
|
||||
|
2022 (remaining three months)
|
$
|
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026 and after
|
|
|||
|
Total future minimum lease payments
|
|
|||
|
Less imputed interest
|
(
|
)
|
||
|
$
|
|
|||
Financing Lease:
The Company has financed certain
laboratory equipment as follows:
|
As of September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash paid for finance lease liabilities
|
$
|
|
$
|
|
||||
|
Year ended December 31,
|
||||
|
2022 (remaining three months)
|
$
|
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026 and after
|
|
|||
|
Total future minimum lease payments
|
|
|||
|
Less imputed interest
|
(
|
)
|
||
|
Remaining lease liability
|
$
|
|
||
The Company entered into three
financing leases for laboratory equipment with a total cost of $306,487 with to four-year terms and a capitalized interest rate of
9.15 %. Each of the lease agreements include a bargain purchase option to acquire the equipment at the end of the lease term. The
aggregate monthly payments are approximately $12 ,000.
Note 6 – Accrued Expenses
Accrued expenses and other liabilities consist of the
following:
|
As of
September 30, 2022
|
As of
December 31, 2021
|
|||||||
|
Accrued research and development
|
$
|
|
$
|
|
||||
|
Accrued professional fees
|
|
|
||||||
|
Accrued compensation
|
|
|
||||||
|
Accrued interest on debt
|
||||||||
| Accrued rent | ||||||||
|
Total
|
$
|
|
$
|
|
||||
Note 7 – Stock-Based Compensation
The Company has three equity compensation plans: the 2009 Stock Option Plan, 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan (the “Plans”).
In 2014, the Company’s stockholders approved the 2014
Equity Incentive Plan pursuant to which the Company may grant up to 91,367 shares as ISOs, NQs and restricted stock units
(“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015 and each January 1 thereafter and prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity
Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4 % of the number of shares of Common Stock
outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. In March 2019, the Plan was amended and restated which removed the annual increase component and was
limited to 826,292 shares.
As previously disclosed, on December 8, 2020, the Board of
Directors of the Company adopted, subject to stockholder approval, the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Inventive Plan (the “Restated Plan”), which would amend and restate the Amended and Restated PDS
Biotechnology Corporation 2014 Equity Incentive Plan (the “Current Plan”). At the annual meeting of stockholders on June 17, 2021 the stockholders voted to approve the Restated Plan at the Annual Meeting. The Restated Plan is identical to
the Current Plan in all material respects, except as follows: (a) the number of shares of Common Stock authorized for issuance under the Restated Plan will increase from 826,292 shares to 3,339,243 shares, plus the total number of shares
that remained available for issuance, that are not covered by outstanding awards issued under the Current Plan, immediately prior to December 8, 2020; and (b) the Restated Plan will terminate on December 7, 2030, unless earlier terminated.
As of September 30, 2022, there were 1,303,113 shares available for grant under the Restated Plan.
In 2018, the Company’s stockholders approved the 2018
Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares as (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Preferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards.
Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or
such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four-year
period. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as
no further awards may be granted and all awards granted under the Plans are no longer outstanding.
On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-qualified stock options. The Inducement Plan was
recommended for approval by the Compensation Committee of the Board and subsequently approved and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.
On December 8, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for
issuance under the Inducement Plan from 200,000 shares to 500,000 shares. On May 17, 2022, the Company further amended the Inducement Plan solely to increase the total number of shares of Common Stock
reserved for issuance under the Inducement Plan from 500,000 shares to 1,100,000 shares. The 2019 Inducement Plan is administered by the Compensation Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules,
non-qualified stock options under the 2019 Inducement Plan may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or following a bona fide period of
non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is
an inducement material to his or her entering into employment with the Company or such subsidiary. As of September 30, 2022, there were 285,215
shares available for grant under the 2019 Inducement Plan.
The Company’s stock-based compensation expense related to stock options was recognized in operating expense as follows:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
(unaudited)
|
(unaudited)
|
|||||||||||||||
|
Stock-Based Compensation
|
||||||||||||||||
|
Research and development
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
General and administrative
|
|
|
|
|
|
|||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The fair value of options granted during the three and nine months ended September 30, 2022 and 2021 was estimated using the
Black-Scholes option valuation model utilizing the following assumptions. There was 87,000 and 1,526,005 of options granted during the three and nine month periods ended September 30, 2022, respectively.
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Weighted
Average
|
Weighted
Average
|
Weighted
Average
|
Weighted
Average
|
|||||||||||||
|
(unaudited)
|
(unaudited)
|
|||||||||||||||
|
Volatility
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
|
Risk-Free Interest Rate
|
|
%
|
|
%
|
|
%
|
|
%
|
||||||||
|
Expected Term in Years
|
|
|
|
|
||||||||||||
|
Dividend Rate
|
|
|
|
|
||||||||||||
|
Fair Value of Option on Grant Date
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The following table summarizes the number of options outstanding and the weighted average exercise price:
|
Number
of Shares
|
Weighted
Average
Exercise Price
|
Weighted Average
Remaining
Contractual
Life in Years
|
Aggregate
Intrinsic Value
|
|||||||||||||
|
Options outstanding at December 31, 2021
|
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
|
|
|
|
|||||||||||
|
Exercised
|
(
|
)
|
|
|
|
|||||||||||
|
Forfeited and expired
|
(
|
)
|
|
|
|
|||||||||||
|
Options outstanding at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
|
Vested and expected to vest at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
At September 30, 2022 there was approximately $13,426,873 of unamortized stock option compensation expense, which is expected to be recognized over a remaining average vesting period of 3 years.
Note 8 – Income Taxes
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred
income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards.
The Company expects to have a loss for 2022 and there will be no current income tax expense. Additionally, there was a full
valuation allowance against the net deferred tax assets as of September 30, 2022 and December 31, 2021. As such, the Company recorded no
income tax benefit due to realization uncertainties.
The Company’s U.S. statutory rate is 21
Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of September 30, 2022,
there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception and
as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. The Company did
no no
In accordance with the State
of New Jersey’s Technology Business Tax Certificate Program, which allows certain high technology and biotechnology companies to sell unused NOL carryforwards to other New Jersey-based corporate taxpayers, the Company sold New Jersey NOL
carryforwards, resulting in the recognition of $1.2 and $4.5 million of income tax benefit, net of transaction costs in the nine months ended September 30, 2022 and 2021, respectively.
Note 9 – Commitments and Contingencies
Employment Matters
The Company has entered into employment agreements with each of its executive officers. The employment agreements generally provide for, among other things, salary, bonus and severance payments. The
employment agreements generally provide for between 12 months and 24 months of severance benefits to be paid to an executive (as well as certain potential bonus,
COBRA and equity award benefits), subject to the effectiveness of a general release of claims, if the executive terminates his or her employment for good reason or if the Company terminates the executive’s employment without cause. Such
severance payments may be provided 90 days prior to and for as long as 24 months following the effective date of a change in control. The continued provision of severance benefits is conditioned
on each executive’s compliance with the terms of the Company’s confidentiality and invention and assignment agreement as well as his or her release of claims.
Rent
For month-to-month arrangements not impacted by the adoption of ASC 842, rent for the three and nine months ended September 30, 2022 was $55,500 and $166,500 respectively, compared to the three and nine months ended September 2021 of $52,000 and $130,493 .
Legal Proceedings
On or about December 27, 2021, Seth Van Voorhees, the former Chief Financial Officer of the Company, filed a Demand for Arbitration against the
Company with the American Arbitration Association, asserting that he was wrongfully terminated. In his demand, Dr. Van Voorhees contends that his alleged damages are expected to be no less than $3,000,000 , plus interest, arbitration costs, attorneys’ fees and punitive damages. In July 2022, the Company and Dr. Van Voorhees entered into a confidential settlement
agreement which includes the customary dismissal of action, full release of claims with no admission of liability. There were no material changes to the Company’s accrued liabilities in connection with this matter.
While there can be no assurances as to the ultimate outcome of any legal proceeding or other loss contingency involving the
Company, management does not believe any pending matter will be resolved in a manner that would have a material adverse effect on its financial position, results of operations or cash flows. The Company may be involved, from time to time, in
additional legal proceedings and claims arising in the ordinary course of its business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance.
Note 10 – Venture Loan and Security Agreement
In August 2022, the Company entered into a Venture Loan and Security Agreement (the “Loan and Security Agreement”) with Horizon
Technology Finance Corporation, as a lender and collateral agent for itself and the other Lenders (in such capacity, the “Collateral Agent”), and the other persons party thereto from time to time as lenders (“Lenders”).
Term loan Amounts. The Loan and Security Agreement provides for the following six (6 ) separate and independent term loans: (a) a term loan in the amount of $7,500,000
(“Loan A”), (b) a term loan in the amount of $10,000,000 (“Loan B”), (c) a term loan in the amount of $3,750,000 (“Loan C”), (d) a term loan in the amount of $3,750,000
(“Loan D”), (e) a term loan in the amount of $5,000,000 (“Loan E”), and (f) a term loan in the amount of $5,000,000 (“Loan F”) (with each of Loan A, Loan B, Loan C, Loan D, Loan E, and Loan F, individually a “Loan” and, collectively, the “Loans”). Loan A, Loan B, Loan C, and Loan D were
delivered to the Company on August 24, 2022. Loan E and Loan F are uncommitted Loans that may be advanced by the Lenders upon their discretion prior to July 31, 2023 upon the satisfaction by the Company of certain agreed upon conditions
precedents. The Company may only use the proceeds of the Loans for working capital or general corporate purposes.
Maturity. Each Loan matures on the 48
month anniversary following the applicable date on which a Loan is made to or on account of the Company under the Loan and Security Agreement (the “Maturity Date”) unless accelerated pursuant to agreed upon events of default. All amounts outstanding under each
Loan will be due and payable upon the earlier of the Maturity Date or the acceleration of the loans and commitments upon an event of default.
Interest Rate. The principal balance of each Loan bears a floating interest. The interest rate is calculated initially and, thereafter, each calendar month as the sum of (a) the per annum rate of interest from time to time published in The Wall
Street Journal as contemplated by the Loan and Security Agreement, or any successor publication thereto, as the “prime rate” then in effect, plus (b) 5.75 %;
provided that, in the event such rate of interest is less than 4.00 %, such rate shall be deemed to be 4.00 % for purposes of calculating the interest rate. Interest is payable on a monthly basis based on each Loan principal amount outstanding the
preceding month.
Amortization. Each Loan shall commence amortization upon the date set forth on the promissory note executed in connection with the respective Loan, upon which the Company is required to commence making equal payments of principal plus accrued interest on the outstanding
principal amount of the respect Loan (the “Loan Amortization Date”), and continuing thereafter on the first business day of each calendar month through the Maturity Date.
Prepayment Premium. The Company
may, at its option upon at least ten (10 ) business days’ written notice to the Lenders, prepay all (and not less than all) of
the outstanding Loan by simultaneously paying to each Lender an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Loans; plus (ii) an amount equal to (A) if such Loan is prepaid on or before the
Loan Amortization Date applicable to such Loan, three percent (3 %) of the then outstanding principal balance of such Loan, (B) if such Loan is prepaid after the Loan Amortization Date applicable to such Loan, but on or before the date that is twelve
(12) months after such Loan Amortization Date, two percent (2 %) of the then outstanding principal balance of such Loan, or (C) if such Loan is prepaid more than twelve (12) months after the Loan Amortization Date but prior to the stated Maturity
Date applicable to such Loan, one percent (1 %) of the then outstanding principal balance of such Loan; plus (iii) the outstanding principal balance of such Loan; plus (iv) all other sums, if any, that shall have become due and payable hereunder. No prepayment premium will be
applied to any outstanding balance of any Loan paid on the stated Maturity Date.
Security. The Company’s obligations are secured by a security interest in all of the assets of the Company, subject to limited exceptions and excluding the Company’s intellectual property.
Covenants; Representations and Warranties; Other Provisions. The Loan and Security Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens, including on
intellectual property, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes.
Default Provisions. The Loan and Security Agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches or defaults in the performance of covenants, insolvency, and
bankruptcy by and/or of the Company.
Warrant and Debt Discount. In
connection with the Loan and Security Agreement, the Company issued Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP warrants to purchase an aggregate total of 381,625 shares of the Company’s common stock at an initial exercise price of $3.6685
per share. Each warrant is classified as equity and is exercisable at any time for a period beginning on the date of grant and ending on the earlier of (A) 10 years from the date of grant, and (B) the closing of (A) (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the Company’s property or business, or (ii) its merger
into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company), or any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50 % of the voting power of the Company is disposed of, in each case, for cash or for marketable securities meeting certain requirements as
described in the applicable warrants. The key assumptions used in Black-Scholes option pricing model were (i) expected term of 10 years, (ii) a risk-free rate of 3.11 %, (iii) expected volatility of 93.8 %, (iv) and no estimated dividend yield. In addition, the Company incurred third party and lender fees of $449,329 . These proceeds were allocated
on a basis that approximates the relative fair value method. The fair value of the warrant and fees incurred were recorded as a debt discount and are being recognized as interest expense over the life of the loan and Security Agreement using
the effective interest method. The unamortized debt discount was $3,027,847 as of September 30, 2022. The Company recognized interest expense of $374,286 72,722
Note 11 – Retirement Plan
The
Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. The 401(k) employer contributions were $31,515 and $119,232 for the three
and
nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021 of $25,803
and $71,214 respectively.
Note 12– Subsequent Events
Subsequent events have been evaluated through the date these financial statements were issued.
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim
condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited financial statements and notes
thereto of the Company as of and for the year ended December 31, 2021 on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 31, 2022.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements (including within the meaning of Section 21E of the United States Securities
Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the Company and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events,
results of operations or financial condition, or otherwise, based on current beliefs of the Company’s management, as well as assumptions made by, and information currently available to, management. Forward-looking statements generally include
statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend,”
“forecast,” “guidance”, “outlook” and other similar expressions among others. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual
results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation:
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the Company’s ability to protect its intellectual property rights;
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the Company’s anticipated capital requirements, including the Company’s anticipated cash runway and the Company’s current expectations regarding its plans for future equity financings;
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the Company’s dependence on additional financing to fund its operations and complete the development and commercialization of its product candidates, and the risks that raising such additional capital may restrict
the Company’s operations or require the Company to relinquish rights to the Company’s technologies or product candidates;
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the Company’s limited operating history in the Company’s current line of business, which makes it difficult to evaluate the Company’s prospects, the Company’s business plan or the likelihood of the Company’s
successful implementation of such business plan;
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the timing for the Company or its partners to initiate the planned clinical trials for PDS0101, PDS0103, PDS0203 and other Versamune and
Infectimune based products and the future success of such trials;
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the successful implementation of the Company’s research and development programs and collaborations, including any collaboration studies concerning PDS0101, PDS0203 and other Versamune and Infectimune based
products and the Company’s interpretation of the results and findings of such programs and collaborations and whether such results are sufficient to support the future success of the Company’s product candidates;
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the success, timing and cost of the Company’s ongoing clinical trials and anticipated clinical trials for the Company’s current product candidates, including statements regarding the timing of initiation, pace of
enrollment and completion of the trials (including our ability to fully fund our disclosed clinical trials, which assumes no material changes to our currently projected expenses), futility analyses, presentations at conferences and data
reported in an abstract, and receipt of interim results (including, without limitation, any preclinical results or data), which are not necessarily indicative of the final results of the Company’s ongoing clinical trials;
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expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our product candidates;
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any Company statements about its understanding of product candidates’ mechanisms of action and interpretation of preclinical and early clinical results from its clinical development programs and any collaboration
studies; the acceptance by the market of the Company’s product candidates, if approved;
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the timing of and the Company’s ability to obtain and maintain U.S. Food and Drug Administration or other regulatory authority approval of, or other action with respect to, the Company’s product candidates; and
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other factors, including legislative, regulatory, political and economic developments not within the Company’s control, including unforeseen circumstances or other disruptions to normal business operations arising
from or related to COVID-19 and those listed under Part II, Item 1A. Risk Factors.
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Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given
these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, whether as a result of new
information, future events or otherwise.
In this Quarterly Report, unless otherwise stated or the context otherwise indicates, references to “PDS Biotech,” “the Company,” “we,” “us,” “our” and similar references refer to
PDS Biotechnology Corporation, a Delaware corporation.
Company Overview
We are a clinical-stage immunotherapy company developing a growing pipeline of targeted cancer and infectious disease immunotherapies based on our proprietary Versamune® and Infectimune™ T cell activating technology platforms. Our Versamune based products have demonstrated the potential to overcome the limitations of current
immunotherapies by inducing, in vivo, large quantities of high-quality, potent polyfunctional CD4+ helper and CD8+ killer T cells. We have developed multiple therapies, based on combinations of Versamune
and disease-specific antigens, designed to train the immune system to recognize diseased cells and effectively attack and destroy them. We continue to advance our pipeline of candidates to address a wide range of cancers including HPV-positive
cancers (anal, cervical, head and neck, penile, vaginal, vulvar) and breast, colon, lung prostate and ovarian cancers. Our Infectimune -based vaccines have demonstrated the potential to induce, not only robust and durable neutralizing antibody
response, but also powerful T cell responses including long-lasting memory T cell responses. Our infectious disease candidates are of potential interest for use in universal influenza vaccines.
In May 2022, we announced that two abstracts had been presented at the 2022 American Society of Clinical Oncology Annual Meeting: Abstract number 6041, PDS0101 a novel type 1
interferon and CD8+ T cell activating immunotherapy in combination with pembrolizumab in subjects with recurrent/metastatic HPV16-positive squamous cell carcinoma (HNSCC) and Abstract number 2518, Phase II evaluation of the combination of
PDS0101, M9241, and bintrafusp alfa with HPV16+ malignancies. Also in May 2022, we announced expansion of our VERSATILE-002 clinical trial into Europe and in June 2022, we announced the U.S. Food and Drug Administration (the “FDA”) had granted
Fast Track designation to our lead candidate PDS010 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab). The FDA’s Fast Track designation is designed to aid in the development and to expedite the review of drug candidate
applications that would potentially treat serious or life-threatening conditions. In order to receive Fast Track designation, a product must also demonstrate the potential to address an unmet medical need. Treatments granted this designation are
given the opportunity to have more frequent meetings with the FDA throughout the entire dug development and review process, with the goal of moving promising new drugs more rapidly through the process. It also provides the opportunity to submit
sections of a New Drug Application (the “NDA”) on a rolling basis, where the FDA may review portions of the NDA as they are received instead of waiting for the entire NDA submission. In addition, Fast Track designated products are eligible for
priority review at the time of NDA or Biologics License Application submission.
In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41st
American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine.
In November 2022, we announced the presentation of data from two Phase 2 clinical trials at the 37th
Annual Meeting for the Society of Immunotherapy of Cancer (SITC): Abstract number 674, IMMUNOCERV, an ongoing Phase 2 trial combining PDS0101, an HPV-specific T cell immunotherapy, with chemotherapy and radiation for treatment of locally advanced
cervical cancers and abstract number 695, Immune correlates associated with clinical benefit in patients with checkpoint refractory HPV-associated malignancies treated with triple combination immunotherapy.
Our current pipeline of Versamune based targeted immunotherapies and Infectimune based therapies focuses on the use of selected disease-associated antigens that have been
demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases.
VERSATILE-002: PDS0101 + KEYTRUDA®
In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) which is the FDA-approved standard of care for first-line treatment of recurrent/ metastatic head and neck cancer commenced and is actively recruiting patients. The
clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.
In this PDS Biotech-sponsored trial patients whose cancer has returned or spread following initial treatment will be treated with the combination of PDS0101 and KEYTRUDA® to evaluate if the addition of PDS0101 might
improve the efficacy reported in published studies of KEYTRUDA® alone. Patients in the trial will receive a total of 5 cycles of combination therapy in the context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression. The primary endpoint of VERSATILE-002 is the objective response rate
– or ORR – at six months following initiation of treatment. There are two cohorts in the trial. Cohort 1 is for patients who have yet to be treated with a checkpoint inhibitor (CPI naïve) and cohort 2 which consists of patients who have failed
checkpoint inhibitor therapy (CPI refractory).
In February 2022, we announced we had achieved the preliminary efficacy milestone of at least four or more objective responses of the first 17 patients in the CPI naïve arm which now allows that arm to proceed to full
enrollment. We also announced detailed preliminary safety data which showed that the combination is well tolerated without evidence of enhanced or significant toxicity in the first 18 patients in the CPI naïve arm. We continue to enroll patients in
the first stage of the CPI refractory arm.
In May 2022, we announced additional preliminary efficacy and safety data from this trial at the ASCO Annual Meeting. The abstract provided preliminary data on 19 patients (safety) with available imaging data for 17 of
the 19 patients (efficacy). Highlights from the abstract were as follows:
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Response rates thus far* (tumor shrinkage greater than 30%) seen in 7/17 (41.2%) patients in comparison to the published results of approximately 19% for approved checkpoint inhibitors, used as monotherapy for
recurrent or metastatic head and neck cancer, with 2 of the 7 having complete responses (CR)
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Stable disease (SD) was reported in 6/17 (35.3%) patients, with 4 of the 6 (67%) experiencing tumor shrinkage of less than 30%
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Clinical efficacy (ORR* + SD) was seen in 13/17 (76.5%) patients
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Progressive/ongoing disease was reported in 4/17 (23.5%) patients
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Patients had received a median of 4/5 doses of PDS0101 (range 1-5) and 9/35 doses of KEYTRUDA® (range 1-18)
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There were no treatment-related adverse events greater than or equal to Grade 3 (N=19)
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No patients required dose interruption or reduction on the combination treatment
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No patients discontinued the combination treatment
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At 9 months of follow up (median not yet achieved):
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Progression free survival (PFS) rate was 55.2%
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Overall survival (OS) rate was 87.2%
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no control or comparative studies have been conducted between checkpoint inhibitors and PDS0101
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In May 2022, we announced the expansion of this trial into Europe and in June 2022, as described above, we received Fast Track designation for PDS0101 in combination with pembrolizumab.
In August 2022, we announced our independent Data Monitoring Committee (DMC) met and evaluated data from 43 patients and noted there were no Grade 3 or greater treatment-related adverse events attributed to the
combination. The DMC recommended continuing the trial with no modifications.
In October 2022, we announced an end-of-phase 2 meeting with the FDA for PDS0101 in combination with KEYTRUDA®. We are currently
evaluating the guidance on the key elements of the clinical program that will support the submission of a Biologics License Application for PDS0101.
National Cancer Institute: PDS0101+ M9241 +Bintrafusp Alfa
In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement (CRADA), in NCI, led Phase 2 clinical trial evaluating PDS0101 with
NHS-IL12 (M9241), and M7824 (Bintrafusp alfa), both of which are owned by EMD Serono (Merck KGaA) in patients with advanced/refractory HPV-positive cancers who have failed prior treatment. In February 2021, we announced that the NCI’s Phase 2
clinical trial of PDS0101 for the treatment of advanced/refractory HPV-positive cancers had achieved its preliminary objective response target in patients naïve to checkpoint inhibitors which allowed for full enrollment of approximately 20
patients in this group. In addition, based on promising results in the CPI naïve arm, the trial was amended to allow enrollment of a separate cohort of checkpoint inhibitor-refractory patients for assessment of safety and activity of the triple
combination. Preliminary efficacy assessment of the triple combination in this added group of 20 checkpoint inhibitor refractory patients is ongoing.
Preclinical study results arising from this CRADA were published in the Journal for ImmunoTherapy of Cancer, Immunomodulation to enhance the
efficacy of an HPV therapeutic vaccine (Journal for ImmunoTherapy of Cancer 2020;8:e000612. doi:10.1136/ jitc-2020-000612), indicating that PDS0101 generated both HPV-specific T cells and an
associated antitumor response when used as a monotherapy. When PDS0101 was combined with two other novel clinical-stage anti-cancer agents, Bintrafusp Alfa and M9241, the preclinical data suggested that all three therapeutic agents worked
synergistically to provide superior tumor T cell responses and subsequent tumor regression when compared to any of the agents alone or the 2-component combinations. If the published preclinical data demonstrating powerful activity of the triple
combination is successfully confirmed in the ongoing Phase 2 trial, this triple combination could form the basis of a unique platform providing improved cancer treatments across multiple cancers.
In June 2021, at the American Society of Clinical Oncology (ASCO) conference the NCI announced interim data in this trial which included, data in both CPI naïve and refractory
patients. In the CPI naïve group 83% (5/6) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease. 100% of the CPI naïve patients were alive at a median duration of 8 months. In the
CPI refractory group 42% (5/12) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease. 10/12 (83%) of CPI refractory patients were alive at a median duration of 8 months. An update
provided in January 2022 showed as of December 31, 2021, that >40 subjects had been recruited into the trial and 30 HPV16-positive patients had been evaluated. The median survival of all patients (3:1 CPI refractor to naïve) was 12 months and
progressing. The historical survival of CPI naïve and CPI refractory advanced HPV-positive cancers when treated with CPI are 7-11 months and 3-4 months, respectively.
In June 2022, at the 2022 ASCO Annual Meeting, we provided an update to the preliminary data presented at the 2021 meeting. This included data from 30 patients and highlights were
as follows:
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Objective response (OR = >30% tumor reduction) was seen in 88% (7/8) of patients with checkpoint-naive disease; 4/7 (57%) patients’ responses are ongoing (median 17 months).
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With checkpoint refractory patients: M9241 dosing appears to affect response rates, with 5/8 (63%) patients receiving M9241 at 16.8 mcg/kg achieving an OR compared to 1/14 (7%) patients who received M9241 at 8
mcg/kg achieving an OR; 4/6 (67%) patients’ responses are ongoing (median 12 months).
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Tumor reduction was seen in 45% (10/22) of patients with checkpoint-refractory disease, including patients receiving high or low dose M9241.
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In checkpoint refractory patients treated with high or low dose M9241, survival outcomes were similar (p=0.96 by Kaplan Meier analysis). At a median of 12 months of follow up 17/22 (77%) of patients were alive.
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In checkpoint naïve patients 6/8 (75%) were alive at median 17 months of follow up.
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Similar OR and survival were seen across all types of HPV16-positive cancers.
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Preliminary safety data: 13/30 (43%) of patients experienced Grade 3 treatment-related adverse events (AEs), and 2/30 patients (7%) experienced Grade 4 AEs. There were no grade 5 treatment-related AEs.
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The study results to date strongly suggest, in agreement with the published preclinical studies, that all 3 drugs contribute to the clinical outcomes.
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In September 2022, we announced, in agreement with the NCI, that the CPI refractory patients had been selected as the preferred treatment group in the on-going PDS0101-based
triple combination therapy in advanced HPV-positive cancers and the trial was closed to further enrollment given the CPI refractory arm has been fully recruited. We and the NCI hope to meet with the FDA in the coming months to discuss the
registrational path forward for the combination therapy as a potential third-line treatment for CPI refractory HPV-positive cancers.
In October 2022, we announced expanded interim data as follows:
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Survival data: 66% (19/29) of HPV16-positive CPI refractory patients in the cohort were alive at a median follow up of 16 months
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Safety profile: 48% (24/50) patients experienced Grade 3 treatment-related adverse events (AEs), and 4% (2/50) patients experienced Grade 4 AEs. There were no Grade 3 treatment-related AEs.
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HPV16-positive CPI naïve patients: 75% (6/8) were alive at a median follow up of 25 months and 38% (3/8) of responders had a complete response.
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MD Anderson Cancer Center (IMMUNOCERV): PDS0101+ Chemoradiotherapy
In October 2020, a third PDS0101 Phase 2 clinical study was initiated with The University of Texas MD Anderson Cancer Center and is actively recruiting patients. This clinical
trial is investigating the safety and anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer.
PDS Biotech believes that Versamune’s strong T cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication. The enrollment rate in this trial has been negatively impacted by
the COVID-19 pandemic and enrollment is on-going.
In November 2022, we announced data from this trial was included in a poster presentation being presented at the 2022 SITC Annual Meeting which included the following:
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9 of the 17 patients have now completed a Day 170 post-treatment Positron Emission Tomography, Computed Tomography (PET CT) scan to assess the status of the cancer. This includes 78% (7/9) of treated patients with
advanced cervical cancer (FIGO stage III or IV).
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100% (9/9) of patients treated with the combination of PDS0101 and CRT had an objective response.
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89% (8/9) of patients treated with the combination of PDS0101 and CRT demonstrated a complete response (CR) on Day 170 by PET CT. One patient who received 3 of the 5 scheduled doses of PDS0101 showed signs of
residual disease. One patient who had a CR died from an event unrelated to either their underlying disease or treatment.
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1-year disease-free survival and 1-year overall survival of 89% (8/9) in patients treated with the combination of PDS0101 and CRT
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As previously reported, data confirm PDS0101 treatment activates HPV16-specific CD8+ T cells. This increase was not seen in patients who did not receive PDS0101. The increase in HPV16-specific T cells generated
by the treatment is positively correlated with tumor cell death, suggesting cytotoxic CD8+ T cells are important mediators of antigen-specific immunity.
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The data affirm that PDS0101 activates Type 1 interferon pathway in humans, mimicking the mechanism previously demonstrated in preclinical studies in animal models
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Toxicity of PDS0101 remains limited to low-grade local injection site reactions.
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Mayo Clinic: PDS0101 Monotherapy and in combination with KEYTRUDA
In February 2022 we announced the initiation of an Investigator-Initiated Trial (ITT), MC200710, for PDS0101 alone or in combination with the checkpoint
inhibitor, KEYTRUDA®, in patients with HPV-positive oropharyngeal cancer (HPV(+)OPSCC) at high risk of recurrence. The trial is being led by Drs. David Routman,
Katharine Price, Kathryn Van Abel, and Ashish Chintakuntlawar of Mayo Clinic, a nationally and internationally recognized center of excellence for the treatment of head and neck cancers. We believe that this upcoming trial not only broadens our
addressable patient population of those affected by the increasing incidence of HPV(+)OPSCC, but also allows us to better understand the activity of PDS0101 alone or in combination with KEYTRUDA® in earlier stages of disease. This trial is currently open for enrollment.
In this trial treatment will be administered before patients proceed to transoral robotic surgery (TORS) with curative intent. Treatment in this setting is referred to as neoadjuvant treatment.
PDS0101 has been shown to induce CD8+ killer T cells that target and kill HPV-positive cancers, either alone or in combination with checkpoint inhibitors in preclinical studies, and in combination in clinical studies of patients with advanced
recurrent/metastatic HPV-positive cancers. This trial will explore whether PDS0101 with or without checkpoint inhibition may increase HPV-specific anti-tumor responses, potentially resulting in tumor shrinkage, pathologic regression, and decreases
in circulating tumor DNA (ctDNA).
Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept phase 2 trials. It is also designed to
demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in
multiple indications. After initial commercial approval, our strategy of combining PDS0101 with standard of care also positions us for rapid market penetration and expansion.
Other Versamune® -Based Products in Development:
PDS0102
PDS0102 is an investigational immunotherapy utilizing tumor-associated and immunologically active T cell receptor gamma alternate reading framed protein (TARP) from the NCI.
PDS0102 is designed to treat TARP-positive cancers including, acute myeloid leukemia (AML), prostate and breast cancer. In our preclinical work, the administration of PDS0102, the Versamuine+TARP antigen combination led to the induction of large
numbers of polyfunctional tumor targeted killer T cells. In addition, the TARP tumor antigen alone has already been studied at the NCI in men with prostate cancer and been shown to be safe, immunogenic with slowing tumor growth rates
(NCT00972309). We are evaluating the next steps in the clinical development of PDS0102 and are seeking nondilutive funding to progress to human trials.
PDS0103
In April 2020, the above mentioned, PDS Biotech-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103. PDS0103 is an investigational
immunotherapy owned by us and designed to treat cancers associated with the mucin-1, or MUC-1, oncogenic protein. These include cancers such as ovarian, breast, colorectal and lung cancers. PDS0103 combines Versamune with novel highly
immunogenic agonist epitopes of MUC-1 developed by the NCI and licensed by PDS. PDS0103 is currently in late preclinical development.
MUC1 is highly expressed in several types of cancer and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian
cancers, for which PDS0103 is being developed. Expression of MUC-1 is often associated with poor disease prognosis, due in part to drug resistance. In preclinical studies, and similarly to PDS0101, PDS0103 demonstrated the ability to generate
powerful MUC1-specific CD8 killer T cells. In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103 and prepared to submit our IND package in the first half of 2023. However, the actual submission date may potentially be
impacted by the outcome of our meetings with the FDA on the timing of a pivotal trial for PDS0101. Our primary goal is commercialization of PDS0101, and allocation of resources to implement an earlier than planned start of a registrational trial
may delay PDS0103 initiation.
Infectimune Development Strategy
We believe that the key differentiating attributes of the Infectimune platform technology are strong induction of CD8+ and CD4+ T cells as well as antibodies which can be
leveraged to improve treatment and preventive options in several infectious disease indications. In January 2022 we announced preclinical data on our universal flu program sponsored by the National Institute of Allergy and Infectious Disease
(NIAID) demonstrating the potential of the Infectimune technology with computationally designed influenza proteins developed by the laboratory of Dr. Ted Ross at the University of Georgia to generate broadly protective anti-influenza immune
responses across multiple strains of influenza. This data as well as our COVID-19 data has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more broadly effective and longer
lasting protective vaccines. Current preventive and prophylactic vaccine approaches and technologies predominantly focus on creating strong induction of antibody responses. However, the induction of T cell responses, in addition to antibody
responses, provides more durable and broad protection against infectious diseases.
Based on the promising data recently announced with the universal seasonal flu vaccine and the current focus of the NIAID in developing more effective flu vaccines, we have
decided to opportunistically focus our near-term infectious disease activities to align with the interests of the NIAID Collaborative Influenza Vaccine Innovation Centers (CIVICs) program. This will involve development of a universal seasonal
flu vaccine and the potential development of a universal pandemic influenza vaccine based on similar computationally designed antigens as have shown promise with Infectimune.
In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41st
American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine. We are evaluating the next steps in the clinical development and funding for PDS0202.
Our current pipeline of Versamune and Infectimune based therapies is as follows:
We have never been profitable and have incurred net losses in each year since inception. Our net losses were $21.7 million, and $10.6 million for the nine months ended September 30,
2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $82.4 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general
and administrative costs associated with these operations.
As of September 30, 2022, we had $71.6 million in cash and cash equivalents.
Our future funding requirements will depend on many factors, including the following:
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the timing and costs of our planned clinical trials;
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the timing and costs of our planned preclinical studies of our Versamune® platform;
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the outcome, timing and costs of seeking regulatory approvals;
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the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
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the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other
intellectual property rights; and
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the extent to which we license or acquire other products and technologies.
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SELECTED FINANCIAL OPERATIONS OVERVIEW
Revenue
We have not generated any revenues from commercial product sales and do not expect to generate any such revenue in the near future. We may generate revenue in the future from a
combination of research and development payments, license fees and other upfront payments or milestone payments.
Research and Development Expenses
Research and development expenses include employee-related expenses, licensing fees to use certain technology in our research and development projects, costs of acquiring,
developing and manufacturing clinical trial materials, as well as fees paid to consultants and various entities that perform certain research and testing on our behalf. Costs for certain development activities, such as clinical trials, are
recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are
based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued expenses. Costs incurred in connection with research and
development activities are expensed as incurred.
We expect that our research and development expenses will increase significantly over the next several years as we advance our Versamune based immuno-oncology or Infectimune based
infectious disease candidates into and through clinical trials, pursue regulatory approval of our investigational candidates and prepare for a possible commercial launch, all of which will also require a significant investment in contract and
internal manufacturing and inventory related costs.
The process of conducting human clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval. The
probability of successful commercialization of our drug candidates may be affected by numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are unable to
determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
Results of Operations
The following table summarizes the results of our operations for the three months ended September 30, 2022 and 2021:
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Three Months Ended
September 30,
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Increase
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|||||||||||||||
|
2022
|
2021
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$ Amount
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%
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|||||||||||||
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(in thousands)
|
||||||||||||||||
|
Operating expenses:
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||||||||||||||||
|
Research and development expenses
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$
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4,353
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$
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3,688
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$
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665
|
18
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%
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||||||||
|
General and administrative expenses
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2,926
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3,274
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(348
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)
|
(11
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)%
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||||||||||
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Total operating expenses
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7,279
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6,962
|
317
|
5
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%
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|||||||||||
|
Loss from operations
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(7,279
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)
|
(6,962
|
)
|
(317
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)
|
5
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%
|
||||||||
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Interest income (expense), net
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(145
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)
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1
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(146
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)
|
(14,600
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)%
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|||||||||
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Net loss and comprehensive loss
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$
|
(7,424
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)
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$
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(6,961
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)
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$
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(463
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)
|
7
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%
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|||||
Research and Development Expenses
Research and development (R&D) expenses increased to $4.4 million for the three months ended September 30, 2022 from $3.7 million for the three months ended September 30, 2021.
The increase of $0.7 million in 2022 was primarily attributable to an increase of $0.2 million in clinical study and research costs, $0.3 million in personnel costs and $0.4 million in manufacturing services partially offset by a decrease of $0.2
million in professional fees and facilities.
General and Administrative Expenses
General and administrative expenses decreased to $2.9 million for the three months ended September 30, 2022 from $3.3 million for the three months ended September 30, 2021. The
decrease of $0.4 million is primarily attributable to a decrease of $0.5 million in personnel, a decrease of $0.1 million in facilities offset by an increase of $0.2 million in professional fees.
Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes the results of our operations for the nine months ended September 30, 2022 and 2021:
|
Nine Months Ended
September 30,
|
Increase (Decrease)
|
|||||||||||||||
|
2022
|
2021
|
$ Amount
|
%
|
|||||||||||||
|
(in thousands)
|
||||||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development expenses
|
$
|
13,276
|
$
|
7,865
|
$
|
5,411
|
69
|
%
|
||||||||
|
General and administrative expenses
|
9,575
|
7,252
|
2,323
|
32
|
%
|
|||||||||||
|
Total operating expenses
|
22,851
|
15,117
|
7,734
|
51
|
%
|
|||||||||||
|
Loss from operations
|
(22,851
|
)
|
(15,117
|
)
|
(7,734
|
)
|
51
|
%
|
||||||||
|
Interest income (expense), net
|
(65
|
)
|
3
|
(68
|
)
|
(2,267
|
)%
|
|||||||||
|
Benefit from income taxes
|
1,199
|
4,516
|
(3,317
|
)
|
(73
|
)%
|
||||||||||
|
Net loss and comprehensive loss
|
$
|
(21,717
|
)
|
$
|
(10,598
|
)
|
$
|
(11,119
|
)
|
105
|
%
|
|||||
Research and Development Expenses
Research and development (R&D) expenses increased to $13.3 million for the nine months ended September 30, 2022 from $7.9 million for the same period in 2021. The increase of $5.4 million was
primarily attributable to an increase in personnel costs of $1.8 million of which $0.5 million was non-cash stock compensation, clinical studies of $1.5 million, manufacturing and quality of $1.9 million, and research and consumables $0.2 million.
General and Administrative Expenses
General and administrative expenses increased to $9.6 million for the nine months ended September 30, 2022 from $7.3 million for the same period in 2021. The $2.3 million increase
was primarily attributable to an increase in personnel costs of $1.2 million of which $0.8 million was non-cash stock compensation, and professional and legal costs of $1.1 million.
Benefit from Income Taxes
Income tax benefit was $1.2 million for the nine months ended September 30, 2022 and $4.5 million for the nine months Ended September 30, 2021. A decrease of $3.3 million was due to
a smaller portion of the accumulated Net Operating Losses (NOL) through 2020 available for sale.
Liquidity and Capital Resources
In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights,
debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. The 2020 Registration Statement was
terminated upon effectiveness of the 2022 Registration Statement (as discussed below).
In August 2020, we sold 6,900,000 shares of our common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000
shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million and net proceeds of
approximately $17.1 million, after deducting underwriting discounts and offering expenses.
In May 2021, we received approximately $4.5 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant our participation in the New Jersey
Technology Business Tax Certificate Transfer Net Operating Loss (NOL) program for State Fiscal Year 2020.
In June 2021, we sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares
issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of
approximately $48.5 million, after deducting underwriting discounts and offering expenses.
In April 2022, we received approximately $1.2 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant our participation in the New
Jersey Technology Business Tax Certificate Transfer NOL program for State Fiscal Year 2020.
In August 2022, we filed a shelf registration statement, or the 2022 Shelf Registration Statement, with the SEC for the issuance of common stock, preferred stock, warrants, rights,
debt securities, and units, which the Company refers to collectively as the Shelf Securities, up to an aggregate amount of $150 million, $50 million of which covers the offer, issuance and sale by the Company of its common stock under the Sales
Agreement (as discussed below). The 2022 Shelf Registration Statement was declared effective on September 2, 2022.
In August 2022, we entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley Securities, Inc. and BTIG, LLC, each an Agent and collectively the
Agents, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $50.0 million, or the Placement Shares,
through or to the Agents, as sales agents or principals. Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, the Agents may sell the Placement Shares by any method permitted by law deemed to be an
“at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended, including, without limitation, sales made through The Nasdaq Capital Market or on any other existing trading market for our common stock. The Agents will use
commercially reasonable efforts to sell the Placement Shares from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay the Agents a commission
equal to three percent (3%) of the gross sales proceeds of any Placement Shares sold through the Agents under the Sales Agreement, and also has provided the Agents with customary indemnification and contribution rights. We are not obligated to make
any sales of our common stock under the Sales Agreement. The offering of Placement Shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of
the Sales Agreement in accordance with its terms. During the quarter ended September 30, 2022, we did not sell any shares of our common stock pursuant to the Sales Agreement.
In August 2022, we entered into a venture loan and security agreement, or the Loan and Security Agreement, with Horizon Technology Finance Corporation, as lender and collateral
agent for itself and the other lenders. The Loan and Security Agreement provides for the following 6 separate and independent term loans: (a) a term loan in the amount of $7,500,000, or Loan A, (b) a term loan in the amount of $10,000,000, or
Loan B, (c) a term loan in the amount of $3,750,000, or Loan C, (d) a term loan in the amount of $3,750,000, or Loan D, (e) a term loan in the amount of $5,000,000, or Loan E, and (f) a term loan in the amount of $5,000,000, or Loan F, (with each
of Loan A, Loan B, Loan C, Loan D, Loan E, and Loan F, individually a Loan and, collectively, the Loans). Loan A, Loan B, Loan C, and Loan D were delivered to us on August 24, 2022. Loan E and Loan F are uncommitted Loans that may be advanced
by the lenders upon their discretion prior to July 31, 2023 upon the satisfaction of certain agreed upon conditions precedent. We may only use the proceeds of the Loans for working capital or general corporate purposes. Each Loan matures on the
48-month anniversary following the applicable funding date unless accelerated pursuant to agreed upon events of default. The principal balance of each Loan bears a floating interest. The interest rate is calculated initially and, thereafter,
each calendar month as the sum of (a) the per annum rate of interest from time to time published in The Wall Street Journal as contemplated by the Loan and Security Agreement, or any successor publication thereto, as the “prime rate” then in
effect, plus (b) 5.75%; provided that, in the event such rate of interest is less than 4.00%, such rate shall be deemed to be 4.00% for purposes of calculating the interest rate.
Interest is payable on a monthly basis based on each Loan principal amount outstanding the preceding month. We, at our option upon at least ten (10) business days’ written notice
to the lenders, may prepay all (and not less than all) of the outstanding Loan by simultaneously paying to each lender an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Loans; plus (ii) an amount
equal to (A) if such Loan is prepaid on or before the Loan Amortization Date (as defined in the Loan and Security Agreement) applicable to such Loan, 3% of the then outstanding principal balance of such Loan, (B) if such Loan is prepaid after the
Loan Amortization Date applicable to such Loan, but on or before the date that is 12 months after such Loan Amortization Date, 2% of the then outstanding principal balance of such Loan, or (C) if such Loan is prepaid more than 12 months after the
Loan Amortization Date but prior to the stated maturity date applicable to such Loan, 1% of the then outstanding principal balance of such Loan; plus (iii) the outstanding principal balance of such Loan; plus (iv) all other sums, if any, that shall have become due and payable thereunder. No prepayment premium will be applied to any outstanding balance of any Loan paid on the stated maturity date.
As of September 30, 2022, we had $71.6 million in cash and cash equivalents. Our primary uses of cash are to fund operating expenses, primarily research and development
expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year
after the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and our current plans, which are subject to change, management believes that our existing cash and cash equivalents as of September 30, 2022 will be sufficient to
satisfy our operating cash needs for at least one year after the filing of this Quarterly Report on Form 10-Q.
We plan to continue to fund our operations and capital funding needs through equity and/or debt financings. However, we cannot be certain that additional financing will be available
when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders. We may also enter into government funding programs and consider selectively partnering for clinical development and
commercialization. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and
financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future
commercialization efforts or grant rights to develop and market immunotherapies that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects.
Cash Flows
The following table shows a summary of our cash flows for each of the periods indicated (in thousands):
|
Nine Months Ended September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Net cash used in operating activities
|
$
|
(18,181
|
)
|
$
|
(7,985
|
)
|
||
|
Net cash provided by financing activities
|
24,581
|
48,889
|
||||||
|
Net increase in cash and cash equivalents
|
$
|
6,400
|
$
|
40,904
|
||||
Net Cash Used in Operating Activities
Net cash used in operating activities was $18.2 million and $8.0 million for the nine months ended September 30, 2022 and 2021, respectively. The increase in net cash used in operating activities of $10.2 million was primarily due to an increase
in net loss of $11.1 million, an increase in prepaid expenses of $1.1 million, and an increase in finance right to use asset of $0.3 million, offset by an increase in stock compensation of $1.4 million, an increase in amortization of debt discount
of $0.1 million, and an increase in accounts payable of $0.7 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the receipt of net proceeds of $24.6 million due to a note payable.
Operating Capital Requirements
To date, we have not generated any product revenue. We do not know when, or if, we will generate any product revenue and we do not expect to generate significant product revenue
unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue
the development of, and seek regulatory approvals for, our tablet vaccine candidates, and begin to commercialize any approved vaccine candidates. We are subject to all of the risks incident to the development of new products, and may encounter
unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect to incur additional costs associated with operating as a public company and anticipate that we will need substantial additional
funding in connection with our continuing operations.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year
after the filing of this Quarterly Report. Our budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies. We believe that our existing cash and cash equivalents as of September 30, 2022
are sufficient to continue operations and research and development programs for at least one year after the date of this Quarterly Report. Until we can generate significant cash from our operations, we expect to continue to fund our operations with
available financial resources. These financial resources may not be adequate to sustain our operations.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we
expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding
requirements will depend on many factors, including, but not limited to:
| ● |
the initiation, progress, timing, costs and results of our planned clinical trials;
|
| ● |
the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, on our business operations, financial condition, results of operations and cash flows;
|