PDS Biotechnology Corporation (NASDAQ:PDSB) Q1 2020 Results Earnings Conference Call May 13, 2020 8:00 AM ET Company Participants Alexander Lobo - Investor Relations, The Ruth Group Frank Bedu-Addo - Chief Executive Officer Lauren Wood - Chief Medical Officer Conference Call Participants Name - Company Name Operator Greetings. Welcome to PDS Biotechnology's first quarter 2020 financial results. At this time, all participants are in listen-only mode. The brief question-and-answer session will follow the form ...

```markdown [Part I — Financial Information](index=3&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2020 report a net loss of **$4.0 million** and increased cash to **$21.0 million** from a public offering [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,037,806 | $12,161,739 | | Total current assets | $23,917,184 | $14,470,201 | | **Total assets** | **$23,934,333** | **$14,491,252** | | **Liabilities & Equity** | | | | Total current liabilities | $4,046,781 | $2,793,545 | | **Total liabilities** | **$4,046,781** | **$2,793,545** | | **Total stockholders' equity** | **$19,887,552** | **$11,697,707** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Research and development expenses | $1,971,679 | $1,030,003 | | General and administrative expenses | $2,060,148 | $3,905,877 | | Loss from operations | $(4,031,827) | $(4,935,880) | | Gain on bargain purchase | – | $11,729,882 | | **Net (loss) income** | **$(3,985,408)** | **$6,816,698** | | Net (loss) income per share, basic | $(0.39) | $1.82 | | Net (loss) income per share, diluted | $(0.39) | $1.47 | - The significant net income in Q1 2019 was primarily due to an **$11.7 million** gain on a bargain purchase related to the reverse merger[12](index=12&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20(Deficit)) - Total stockholders' equity increased from **$11.7 million** at year-end 2019 to **$19.9 million** at March 31, 2020[15](index=15&type=chunk) - The increase in equity was primarily driven by the issuance of **10,000,000 shares** of common stock, which provided net proceeds of **$11.97 million**, offset by a net loss of **$4.0 million** for the quarter[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summary of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,164,394) | $(3,367,362) | | Net cash provided by investing activities | – | $29,106,512 | | Net cash provided by financing activities | $12,040,461 | $750,000 | | **Net increase in cash** | **$8,876,067** | **$26,489,150** | | **Cash at end of period** | **$21,037,806** | **$26,592,845** | - Cash provided by financing activities in Q1 2020 was primarily from **$12.0 million** in net proceeds from the issuance of common stock[18](index=18&type=chunk) - Cash provided by investing activities in Q1 2019 was due to **$29.1 million** in cash received from the reverse merger transaction[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's clinical-stage immunotherapy operations, COVID-19 impact, and liquidity, confirming sufficient cash for at least 12 months - The company is a clinical-stage immunotherapy company focused on its **Versamune® T-cell activating technology platform** for cancer and infectious diseases, including COVID-19[20](index=20&type=chunk) - In February 2020, the company completed a public offering, selling **10,000,000 shares** for gross proceeds of approximately **$13 million** (**$11.9 million** net)[50](index=50&type=chunk) - The company believes its cash of **$21.0 million** as of March 31, 2020, is sufficient to fund operations for at least **12 months** from the report date[52](index=52&type=chunk) - The March 2019 reverse merger with Edge Therapeutics was treated as a reverse acquisition, with Private PDS as the accounting acquirer. An intangible IPR&D asset of **$2.97 million** acquired in the merger was fully impaired in December 2019[23](index=23&type=chunk)[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting the Versamune® platform, collaborations, COVID-19 vaccine, and liquidity, with increased R&D and decreased G&A - The company is developing **PDS0101** for HPV-related cancers and is in collaboration with Merck to combine it with **KEYTRUDA®** in a **Phase II trial**[92](index=92&type=chunk) - A Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) was expanded in April 2020 to include clinical and pre-clinical development of **PDS0103** for MUC1-associated cancers[93](index=93&type=chunk) - The company is advancing a COVID-19 vaccine candidate, **PDS0203**, and has initiated pre-clinical testing[96](index=96&type=chunk) Operating Expense Comparison (in thousands) | Expense Category | Q1 2020 | Q1 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,972 | $1,030 | $942 | 91% | | General and administrative | $2,060 | $3,906 | $(1,846) | (47)% | - The company raised **$11.9 million** in net proceeds from a public offering in February 2020 and had **$21.0 million** in cash and cash equivalents as of March 31, 2020[113](index=113&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its **$21.0 million** cash and cash equivalents, with no material effect expected from a 100 basis point interest rate change - The company's primary market risk exposure is interest rate sensitivity on its **$21.0 million** of cash and cash equivalents[133](index=133&type=chunk) - Investments are held in low-risk instruments, and management believes a **1% (100 basis point)** change in interest rates would not have a material effect on the fair market value of its cash equivalents[133](index=133&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were not effective as of March 31, 2020, due to unremediated material weaknesses, mainly a lack of U.S. GAAP expertise - Management concluded that disclosure controls and procedures (DCPs) were **not effective** as of March 31, 2020[135](index=135&type=chunk) - Material weaknesses were identified in **four components of internal control**: Control Environment, Risk Assessment, Control Activities, and Information & Communication[135](index=135&type=chunk) - The core issue was a **lack of adequate finance and accounting personnel** with the **U.S. GAAP technical expertise** to handle complex transactions, such as the reverse merger[136](index=136&type=chunk)[138](index=138&type=chunk) - Remediation efforts are underway but were **not complete** as of the quarter-end, and the material weaknesses remained **unremediated**[140](index=140&type=chunk)[141](index=141&type=chunk) [Part II — Other Information](index=28&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company and its subsidiaries are not currently party to any material pending legal proceedings - The company is **not currently a party** to any **material pending legal proceedings**[145](index=145&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, including a history of losses, need for capital, growth challenges, material internal control weaknesses, and COVID-19 pandemic impacts - The company has a history of **significant losses**, with an accumulated deficit of **$32.9 million** as of March 31, 2020, and may **never achieve profitability**[148](index=148&type=chunk)[149](index=149&type=chunk) - The business will require **additional capital** to fund operations, and failure to obtain it could force **delays or discontinuation** of development programs[150](index=150&type=chunk) - The COVID-19 pandemic has **adversely affected** business operations and clinical trial timelines, including the **postponement of the Phase 2 VERSATILE-002 trial**, and is expected to continue to do so[163](index=163&type=chunk)[164](index=164&type=chunk) - **Material weaknesses** in internal control over financial reporting have been identified and are **under remediation**; failure to remediate could lead to **misstatements and loss of investor confidence**[154](index=154&type=chunk)[156](index=156&type=chunk) - Executive officers and directors beneficially own approximately **17.8%** of the company's common stock, representing a **significant concentration of ownership**[161](index=161&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of its equity securities during the three months ended March 31, 2020 - There were **no unregistered sales** of the Company's equity securities during the three months ended March 31, 2020[169](index=169&type=chunk) [Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[170](index=170&type=chunk) [Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[171](index=171&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The company reports no other information to disclose for this period - None[172](index=172&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including a sublease agreement and principal officer certifications - A list of exhibits filed with the report is provided, including **certifications by principal officers** and **XBRL data files**[173](index=173&type=chunk)[176](index=176&type=chunk) ```

PART I [Business Overview](index=4&type=section&id=Item%201%20Business) PDS Biotechnology Corporation is a clinical-stage biopharmaceutical company developing next-generation cancer immunotherapies using its proprietary Versamune® platform, with lead product PDS0101 showing promising early clinical results and planned Phase II studies - PDS Biotechnology is a clinical-stage biopharmaceutical company leveraging its proprietary Versamune® platform to develop multifunctional cancer immunotherapies[14](index=14&type=chunk) - The lead product PDS0101 (Versamune®+HPV antigen) demonstrated strong HPV-specific CD8+ T-cell induction in Phase I clinical trials, with complete regression of pre-cancerous lesions in **6 out of 10** evaluable patients within **1-3 months** post-treatment, and no recurrence over a **2-year** follow-up period[15](index=15&type=chunk)[17](index=17&type=chunk)[56](index=56&type=chunk)[59](index=59&type=chunk) - The Versamune® platform is designed to stimulate both killer and helper T-cell responses and modify the tumor microenvironment, making it an ideal complement to checkpoint inhibitors to enhance their efficacy[14](index=14&type=chunk)[18](index=18&type=chunk) PDS0101 Clinical Development Plan (Initiating H1 2020) | PDS Biotech Product | Indication | Partner | Combination Product | Study Size | | :--- | :--- | :--- | :--- | :--- | | PDS0101 (HPV16) | First-line Recurrent/Metastatic Head and Neck Cancer | Merck & Co. | KEYTRUDA® (Standard of Care) | 96 Subjects, 20 US Sites | | PDS0101 (HPV16) | Advanced HPV-Associated Malignancies | NCI | EMD Serono's M7824 and NHS-IL12 | 29 Subjects, 1 US Site (NCI) | | PDS0101 (HPV16) | Advanced, Locally Advanced Cervical Cancer (Stage IIb-IVa) | Leading Cancer Research Institution | Chemoradiation (Standard of Care) | 35 Subjects, 1 US Site | Versamune® Pipeline (Preclinical Stage) | Product | Indication | Partner | Combination Therapy | Status | | :--- | :--- | :--- | :--- | :--- | | PDS0102 (TARP) | Prostate and Breast Cancer | No Industry Partner | Checkpoint Inhibitor | Preclinical Studies Ongoing | | PDS0103 (MUC-1) | Ovarian, Colorectal, Lung, Breast Cancer | No Industry Partner | Checkpoint Inhibitor | Preclinical Studies Ongoing | | PDS0104 (Melanoma) | Melanoma | No Industry Partner | Checkpoint Inhibitor | Preclinical Studies Ongoing | - The company has not generated any product revenue since its inception in **2005**, with operating capital primarily sourced from common stock issuance[26](index=26&type=chunk) [Company Overview](index=4&type=section&id=Company%20Overview) PDS Biotechnology is a clinical-stage biopharmaceutical company leveraging its proprietary Versamune® platform to develop multifunctional cancer immunotherapies - PDS Biotechnology is a clinical-stage biopharmaceutical company leveraging its proprietary Versamune® platform to develop multifunctional cancer immunotherapies[14](index=14&type=chunk) - The lead product PDS0101 (Versamune®+HPV antigen) demonstrated strong HPV-specific CD8+ T-cell induction in Phase I clinical trials, with complete regression of pre-cancerous lesions in **6 out of 10** evaluable patients within **1-3 months** post-treatment, and no recurrence over a **2-year** follow-up period[15](index=15&type=chunk)[17](index=17&type=chunk)[56](index=56&type=chunk)[59](index=59&type=chunk) - The company was incorporated as Edge Therapeutics, Inc. on **January 22, 2009**, and completed a reverse merger with Private PDS on **March 15, 2019**, subsequently changing its name to PDS Biotechnology Corporation[24](index=24&type=chunk)[25](index=25&type=chunk) - The company has not generated any product revenue since its inception in **2005**, with operating capital primarily sourced from common stock issuance[26](index=26&type=chunk) [Commercial Strategy](index=5&type=section&id=Commercial%20Strategy) The company's mission is to develop effective and safe immuno-oncology products across a broad range of cancer types using the Versamune® platform - The company's mission is to develop effective and safe immuno-oncology products covering a broad range of cancer types using the Versamune® platform[29](index=29&type=chunk) - Rapidly advance the lead product PDS0101 into three proof-of-concept Phase II clinical studies[36](index=36&type=chunk) - Build a Versamune®-based immuno-oncology product pipeline through continued development of PDS0102, PDS0103, and PDS0104 programs[36](index=36&type=chunk) - Commercialize proprietary products through partnerships or by establishing targeted sales teams in the US, Canada, and Europe[36](index=36&type=chunk) - Maintain high barriers to entry for product candidates and markets through patents and proprietary technology[36](index=36&type=chunk) [Cancer Immunotherapy](index=6&type=section&id=Cancer%20Immunotherapy) There is a significant unmet need in cancer immunotherapy to safely induce sufficient numbers of highly active CD8+ T-cells and modify the tumor microenvironment - There is a significant unmet need in cancer immunotherapy to safely induce sufficient numbers of highly active CD8+ T-cells in vivo and modify the tumor microenvironment to limit its immune tolerance[33](index=33&type=chunk) - Company data indicate that the Versamune® platform effectively promotes both key immunotherapeutic properties, leading to potent antigen-specific CD8+ T-cell induction and lesion regression[33](index=33&type=chunk) - Induce high levels of tumor-infiltrating CD8+ T-cells in vivo[37](index=37&type=chunk) - Further modify the tumor microenvironment by activating complementary immune mechanisms[37](index=37&type=chunk) - Provide viable clinical application without significantly increasing combination toxicity compared to single components[37](index=37&type=chunk) [Limitations of Current Immunotherapies](index=7&type=section&id=Limitations%20of%20Current%20Immunotherapies) Current immunotherapies face limitations including inefficient antigen uptake, insufficient T-cell activation, and high manufacturing complexity and cost - Inefficient antigen uptake by dendritic cells[40](index=40&type=chunk) - Insufficient antigen cross-presentation and killer (CD8+) T-cell priming[41](index=41&type=chunk) - Inadequate immune activation, lacking necessary chemokine and cytokine induction[42](index=42&type=chunk) - Difficulty overcoming immunosuppressive mechanisms within tumors[43](index=43&type=chunk) - Most commercially available immunotherapy formulations have high complexity and cost of manufacturing[44](index=44&type=chunk) - Versamune® has demonstrated the ability to promote dendritic cell antigen uptake, present antigens via MHC Class I and II pathways, activate Type I interferon signaling, and modify the tumor microenvironment, while its synthetic lipid nanoparticle manufacturing process is simpler and less costly[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [Versamune® Platform - Mechanism of Action (MOA)](index=8&type=section&id=Versamune%C2%AE%20Platform%20-%20Mechanism%20of%20Action%20%28MOA%29) The Versamune® platform utilizes synthetic positively charged lipid nanoparticles to promote efficient dendritic cell antigen uptake and activate Type I interferon signaling - The Versamune® platform is based on synthetic positively charged (cationic) lipids that spontaneously form nanoparticles in aqueous media, sized for efficient dendritic cell uptake[46](index=46&type=chunk) - Nanoparticle design and composition mimic viruses, promoting dendritic cell uptake, allowing antigens to enter the cytoplasm for presentation via MHC Class I and II pathways, priming CD8+ killer T-cells and CD4+ helper T-cells[48](index=48&type=chunk) - Cationic lipid structure specifically activates the Type I interferon (IFN-1) signaling pathway, inducing cytokines and chemokines necessary for CD8+ T-cell activation and proliferation, with localized induction limiting toxicity[52](index=52&type=chunk) - PDS0101 combines Versamune® technology with proprietary HPV 16 antigens, aiming to treat advanced HPV-associated cancers, which affect approximately **43,000** patients diagnosed annually in the US[49](index=49&type=chunk)[50](index=50&type=chunk) - PDS0101's Phase I clinical trial (**12** subjects) confirmed potent HPV-specific killer T-cell (CD8+) induction with no dose-limiting toxicities observed, and complete regression of pre-cancerous lesions in **6 out of 10** evaluable patients within **1-3 months**[54](index=54&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - PDS0101's Phase II clinical studies will focus on combination with other therapies like checkpoint inhibitors, immunocytokines, and chemoradiation to address unmet medical needs, with all studies expected to launch in the **first half of 2020**[61](index=61&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk) [Other Development Programs](index=11&type=section&id=Other%20Development%20Programs) The company is expanding its Versamune® pipeline with PDS0102, PDS0103, and PDS0104 targeting various cancers like prostate, breast, colorectal, ovarian, lung, and melanoma - **PDS0102 (TARP-Expressing Cancers)**: Targets prostate and breast cancer, successfully formulated, with clinical study initiation pending; the prostate cancer market is projected to grow to **$13.6 billion** by **2021**[68](index=68&type=chunk)[69](index=69&type=chunk) - **PDS0103 (MUC-1 Expressing Cancers)**: Targets colorectal, breast, ovarian, and lung cancer, based on a novel NCI-licensed MUC-1 agonist antigen; the colorectal cancer market is projected to reach **$11 billion** by **2025**, breast cancer **$18.2 billion** by **2023**, and NSCLC **$12.2 billion** by **2025**[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - **PDS0104 (TRP2-Expressing Cancers)**: Targets melanoma, with preclinical studies showing its ability to overcome immunosuppression, inhibit tumor growth, and demonstrate strong synergy with checkpoint inhibitors; melanoma is the **seventh most common cancer** in the US[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) [A Summary of the Current State-of-the-art](index=12&type=section&id=A%20Summary%20of%20the%20Current%20State-of-the-art) Existing immunotherapies like dendritic cell vaccines, CAR T-cells, and checkpoint inhibitors have limitations in efficacy, safety, and cost for solid tumors - **Dendritic Cell Vaccines (e.g., Provenge®)**: Do not require in vivo antigen targeting, but ex vivo antigen uptake and processing are suboptimal, and they do not address immunosuppressive environments or provide immune activation[79](index=79&type=chunk) - **CAR T-cell Immunotherapies (e.g., Kymriah®, Yescarta®)**: Overcome in vivo antigen processing needs and show promise in blood cancers, but are ineffective against solid tumor immunosuppression, can cause severe side effects (cytokine release syndrome), and are costly with complex manufacturing[80](index=80&type=chunk)[81](index=81&type=chunk) - **Other Methods (Live Vectors, Antibodies, Electroporation)**: Can stimulate T-cells and antibodies but often fail to effectively activate necessary immune mechanisms or counteract immunosuppression, leading to suboptimal responses[82](index=82&type=chunk) - **Checkpoint Inhibitors (e.g., Yervoy®, Keytruda®, Opdivo®)**: Make cancer cells visible to T-cells by blocking immune checkpoints, but can trigger autoimmune diseases and are effective only in a minority of patients[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - **Adjuvant-based Cancer Vaccines**: Generally well-tolerated, but adjuvants can induce high cytokine levels, leading to severe side effects (cytokine storm)[86](index=86&type=chunk)[88](index=88&type=chunk) [Combination Immunotherapy](index=13&type=section&id=Combination%20Immunotherapy) Combination immunotherapy is a leading area of cancer research, with Versamune® positioned as an ideal complement to checkpoint inhibitors due to its T-cell induction and safety profile - Combination immunotherapy represents the latest frontier in cancer research, with over **one thousand** such clinical studies currently underway, the vast majority involving checkpoint inhibitors[90](index=90&type=chunk) - Nivolumab combined with ipilimumab (a checkpoint inhibitor combination) is approved for metastatic melanoma, showing extended survival but with increased toxicity, as nearly **60%** of patients experienced severe side effects[91](index=91&type=chunk)[92](index=92&type=chunk) - PDS believes Versamune® is an ideal complement to checkpoint inhibitors due to its ability to promote potent CD8+ T-cell induction, modify the tumor microenvironment, and demonstrate a favorable safety profile[93](index=93&type=chunk) - Preclinical studies show that Versamune® combined with Trp2 (PDS0104 prototype) and anti-PD1 treatment exhibited synergistic effects in a B16F10 melanoma model, significantly inhibiting tumor growth and extending survival[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) [Versamune® Mechanisms of Action (MOA) - Detailed Studies](index=14&type=section&id=Versamune%C2%AE%20Mechanisms%20of%20Action%20%28MOA%29%20-%20Detailed%20Studies) Detailed studies confirm Versamune®'s ability to enhance antigen uptake, presentation, immune activation, and T-cell quality, while modifying the tumor microenvironment - **Antigen Uptake**: Versamune®'s positive charge and nanoparticle size facilitate efficient dendritic cell antigen uptake, with in vivo studies showing **80%** of draining lymph node dendritic cells taking up Versamune® within **4 hours**, and very low systemic bioavailability (**5-6%**)[103](index=103&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk)[110](index=110&type=chunk) - **Antigen Presentation**: Versamune® significantly enhances antigen cross-presentation to killer T-cells (CD8+), reducing the required peptide amount by **100-fold** in vitro, and promotes in vivo proliferation of both CD8+ and CD4+ T-cells[112](index=112&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk] - **Immune Activation**: Versamune® specifically activates the Type I interferon signaling pathway, inducing the production of cytokines and chemokines (e.g., CCL2) within lymph nodes, promoting T-cell activation and proliferation while limiting inflammation to the lymph nodes to minimize systemic toxicity[124](index=124&type=chunk)[125](index=125&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) - **Quality of Induced T-cells**: Versamune®-formulated antigen-specific CD8+ T-cells are superior in both quantity and quality compared to other adjuvants, producing a higher proportion of multifunctional T-cells (e.g., IFN-γ, TNF-α, IL-2) with approximately **10-fold** greater potency[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk] - **Modifying the Tumor Microenvironment to Overcome Immunosuppression**: Versamune® effectively alters the ratio of effector T-cells to immunosuppressive T-cells within tumors, promoting tumor regression; in TC-1 and B16F10 tumor models, Versamune® demonstrated potent anti-tumor efficacy, achieving complete regression of large tumors even with a single injection[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[156](index=156&type=chunk)[158](index=158&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Leadership](index=24&type=section&id=Leadership) The company is led by experienced executives and directors in drug discovery, development, and commercialization, supported by scientific experts in vaccine development and oncology - The company is led by executives and directors with extensive experience in drug discovery, development, and commercialization, supported by scientific experts in vaccine development and oncology[170](index=170&type=chunk)[171](index=171&type=chunk) [Research and Development Strategy](index=24&type=section&id=Research%20and%20Development%20Strategy) PDS focuses on a low-risk clinical development path through collaborations with oncology and immunology experts, minimizing development and clinical study expenses - PDS focuses on a low-risk path for clinical development and proof-of-concept by collaborating with experts in tumor biology, immunology, and immuno-oncology, thereby reducing development and clinical study expenses[172](index=172&type=chunk) - The R&D process includes extensive preclinical studies, toxicology studies, and Phase I human clinical studies to confirm safety and T-cell induction efficacy[173](index=173&type=chunk) - Based on successful Phase I clinical studies, the company has established clinical supply agreements and collaborations with leaders in immuno-oncology, including NIH/NCI and Merck & Company, Inc[174](index=174&type=chunk) [Facilities & Manufacturing and Commercial Scale Up](index=24&type=section&id=Facilities%20%26%20Manufacturing%20and%20Commercial%20Scale%20Up) Versamune® products are manufactured using an easily scalable fill-finish process by third-party CMOs, with R&D activities at BioLabs and animal testing outsourced - Products from the Versamune® development platform are manufactured using an easily scalable fill-finish process, and the company does not own or operate cGMP manufacturing facilities, relying on third-party Contract Manufacturing Organizations (CMOs) for preclinical and clinical study materials[175](index=175&type=chunk) - R&D activities are conducted at Princeton Innovation Center BioLabs, with animal toxicology and efficacy testing performed through third-party contracts and collaborations to maximize flexibility and minimize operating costs[177](index=177&type=chunk) [Regulatory Pathway](index=25&type=section&id=Regulatory%20Pathway) The next step for PDS0101 is Phase II clinical trials, with protocols submitted to the FDA and a Biologics License Application (BLA) pathway anticipated for market approval - The next step for PDS0101 is Phase II clinical trials, with relevant study protocols already submitted to the FDA[179](index=179&type=chunk) - The company plans to submit Chemistry, Manufacturing, and Controls (CMC) amendments related to PDS0101 Phase II studies to the FDA in the **first half of 2020**, to comply with eCTD format requirements and submit cGMP materials[179](index=179&type=chunk) - The company expects to seek marketing approval for its product candidates through the Biologics License Application (BLA) pathway under Section 351(a) of the Public Health Service Act (PHSA)[181](index=181&type=chunk) [Intellectual Property](index=25&type=section&id=Intellectual%20Property) PDS protects its proprietary technology through a portfolio of US and foreign patents, exclusive licenses, and reliance on trade secrets and confidentiality agreements - **Patents**: As of **December 31, 2019**, PDS holds **4** granted US patents (expiring **2025-2033**) and **6** pending US patent applications (expiring **2033-2037**), along with **22** granted foreign patents and **33** pending foreign patent applications (expiring **2031-2034** or later)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk] - **Licensed Patents**: Holds a worldwide exclusive license from Merck & Cie for the Versamune® core component (R)-DOTAP, and a US government license for MUC-1 antigens for future cationic lipid immunotherapies[184](index=184&type=chunk)[186](index=186&type=chunk) - **Trade Secrets**: Relies on trade secrets and confidentiality agreements to protect proprietary technology and advancements, acknowledging the risk of discovery or misuse by competitors[187](index=187&type=chunk)[188](index=188&type=chunk) [Material License Agreements and Research and Development Agreements](index=26&type=section&id=Material%20License%20Agreements%20and%20Research%20and%20Development%20Agreements) The company has various agreements, including non-exclusive and exclusive licenses, and collaborative R&D agreements with NIH, Merck, and other institutions for product development - **NIH Patent License Agreement**: A non-exclusive license for developing therapeutic cancer vaccines combining Versamune® technology for ovarian, breast, colon, and lung cancers, including upfront, annual minimum, sales royalty, and milestone payments[189](index=189&type=chunk) - **Merck Eprova AG DOTAP Chloride Enantiomers License Agreement**: An exclusive license for the worldwide commercialization of (R)-DOTAP and (S)-DOTAP chloride enantiomers to induce immune responses[190](index=190&type=chunk) - **NCI Cooperative Research and Development Agreement (Prostate Cancer)**: A **five-year** agreement (effective **February 2016**) with NCI to develop Versamune® platform-based immunotherapies for prostate cancer, with PDS providing **$0.5 million to $1 million** annually[191](index=191&type=chunk)[193](index=193&type=chunk) - **University of Kentucky Research Foundation (UKRF) Cost Reimbursement Agreement**: An annual agreement (renewed **July 2019**) for testing preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, and melanoma antigens[194](index=194&type=chunk) - **MSD International GmbH (Merck) Clinical Trial Collaboration and Supply Agreement**: Collaboration for a Phase II clinical study of PDS0101 combined with Keytruda® for recurrent/metastatic head and neck cancer, revised in **October 2019** for first-line treatment[195](index=195&type=chunk)[196](index=196&type=chunk) - **NCI Cooperative Research and Development Agreement (Advanced HPV-Associated Cancers)**: A **five-year** agreement (effective **April 2019**) with NCI for a Phase II clinical study of PDS0101 combined with M7824 and NHS-IL12 for advanced HPV-associated cancers, with PDS providing **$110,000** annually[197](index=197&type=chunk)[198](index=198&type=chunk) - **Farmacore Biotechnology Amended and Restated Material Transfer Agreement**: Signed in **December 2019**, for developing novel tuberculosis immunotherapies based on Farmacore tuberculosis antigens and Versamune®[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk] [Competition](index=28&type=section&id=Competition) The biotechnology and pharmaceutical industries are highly competitive, with PDS facing rivals from various entities developing new immunotherapies and advanced technologies - The biotechnology and pharmaceutical industries are highly competitive, with the company facing competition from biotechnology and pharmaceutical companies, academic institutions, government agencies, and research organizations[203](index=203&type=chunk) - The company anticipates increased competition as new immunotherapies enter the market and advanced technologies emerge, with products competing on factors such as efficacy, safety, convenience, price, and reimbursement[204](index=204&type=chunk) - Key clinical-stage competitors for HPV therapeutic products include Advaxis, Transgene, ISA Pharmaceuticals, and Inovio[206](index=206&type=chunk) - Other relevant product development competitors include Etubics, Vaccibody, Admedus, Cel-Sci, Neo-ImmuneTech, Kite Pharma, Immune Design, Dynavax, Bavarian Nordic, Seattle Genetics, and Selecta Biosciences[206](index=206&type=chunk) [Government Regulation and Product Approval](index=29&type=section&id=Government%20Regulation%20and%20Product%20Approval) Product development and commercialization in the US are subject to extensive and complex government regulations, including clinical trials, FDA approval, and post-market requirements - **US Product Development Process**: Involves preclinical testing (GLP), IND submission, human clinical trials (GCP, IRB approval) typically in Phases I, II, and III, potentially requiring Phase IV post-market studies, and manufacturing compliant with cGMP[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk] - **US Review and Approval Process**: Requires BLA submission with PDUFA fees, thorough FDA review potentially involving advisory committees, possible REMS requirements, and pre-approval inspections of manufacturing facilities and clinical trial sites; approval may be delayed, limited, or denied[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk] - **Post-Approval Requirements**: Approved products remain subject to ongoing FDA regulation, including record-keeping, adverse event reporting, safety and efficacy information updates, product sampling and distribution, promotional and advertising compliance (prohibiting off-label promotion), cGMP compliance, and DSCSA traceability requirements[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk] - **Biologics Regulatory Exclusivity**: The BPCIA provides **4 years** of data exclusivity and **12 years** of market exclusivity for reference biologics; Orphan Drug designation offers **12 years** of market exclusivity, tax credits, and BLA user fee waivers; pediatric exclusivity can extend existing exclusivity by **6 months**; patent term extensions can be up to **5 years**[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk] - **Other US Healthcare Laws and Compliance Requirements**: Subject to federal and state anti-fraud and abuse provisions (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), data privacy and security regulations (e.g., GDPR, CCPA), the federal Physician Payment Sunshine Act, and state laws; violations can lead to criminal prosecution, substantial fines, and exclusion from government programs[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk] - **Coverage, Pricing, and Reimbursement**: Post-market product sales depend on coverage and reimbursement levels from third-party payers (federal and state healthcare programs, private managed care providers); reimbursement uncertainty can lead to pricing pressure and limited market access[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk] - **US Healthcare Reform**: The ACA has multi-faceted impacts on the pharmaceutical industry, including Medicaid drug rebate programs, 340B drug pricing programs, Medicare Part D discounts, annual manufacturer fees, and the Sunshine Act; ongoing healthcare reform and drug pricing legislation may further depress product prices and affect company profitability[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk] [Foreign Regulation](index=38&type=section&id=Foreign%20Regulation) Selling products outside the US requires compliance with numerous and diverse regulatory requirements regarding quality, safety, and efficacy in each country and jurisdiction, and FDA approval does not guarantee foreign approval - Selling products outside the US requires compliance with numerous and diverse regulatory requirements regarding quality, safety, and efficacy in each country and jurisdiction, and FDA approval does not guarantee foreign approval[263](index=263&type=chunk) - The EU GDPR (General Data Protection Regulation) imposes strict compliance obligations on the collection and use of personal health data, including cross-border data transfer rules, with violations potentially incurring fines of up to **€20 million** or **4% of global annual revenue**[264](index=264&type=chunk) [Employees](index=38&type=section&id=Employees) The company's management team possesses extensive experience in drug development, manufacturing, and regulatory affairs, supported by a semi-virtual operating strategy and expert collaborations - The company's management team possesses extensive experience in drug development research, manufacturing, clinical development, and regulatory affairs, employing a semi-virtual operating strategy and collaborating with scientific and clinical experts in cancer immunology, tumor immunology, and gynecologic oncology[265](index=265&type=chunk) [Legal Proceedings](index=38&type=section&id=Legal%20Proceedings) The company may encounter various legal proceedings and claims in its ordinary course of business, but currently faces no material adverse litigation - The company may face various legal proceedings and claims in its ordinary course of business, but currently has no legal proceedings that would materially adversely affect its operations or financial condition[266](index=266&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A%20Risk%20Factors) The company faces multiple risks including limited operating history, continuous losses, reliance on PDS0101, need for additional capital, and uncertainties in clinical development, regulatory approval, and commercialization - The company has a limited operating history and has not generated product revenue, leading to uncertainty regarding future success and profitability[269](index=269&type=chunk)[270](index=270&type=chunk) - The company has incurred continuous losses since inception and expects to continue generating significant losses, potentially never achieving or maintaining profitability[271](index=271&type=chunk)[272](index=272&type=chunk) - The company is highly dependent on the success of PDS0101, which is still in early clinical development and may not receive regulatory approval or achieve successful commercialization[275](index=275&type=chunk)[277](index=277&type=chunk) - The company requires substantial additional capital to fund operations, and failure to obtain necessary financing may force delays, reductions, or cancellations of development programs[280](index=280&type=chunk)[281](index=281&type=chunk) - Clinical trials are costly, time-consuming, and have uncertain outcomes; failure to demonstrate safety and efficacy will prevent commercialization of PDS0101[283](index=283&type=chunk)[285](index=285&type=chunk) - The company faces intense competition from other biotechnology and pharmaceutical companies, and failure to compete effectively will impact operating results[291](index=291&type=chunk)[293](index=293&type=chunk] - PDS0101 may cause adverse reactions or other characteristics that could delay or prevent its regulatory approval or limit its market acceptance[294](index=294&type=chunk)[295](index=295&type=chunk] - The company relies on third parties for clinical trials and some R&D, and poor performance by these third parties could harm the company's business[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk] - The company's intellectual property protection (patents, trade secrets) is uncertain, and it may face infringement lawsuits or risks to patent value[302](index=302&type=chunk)[305](index=305&type=chunk] - The COVID-19 pandemic may adversely affect the company's operations, clinical trials, and supply chain[308](index=308&type=chunk)[310](index=310&type=chunk] - US healthcare laws and regulatory requirements (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) are complex and evolving, with non-compliance potentially leading to severe penalties[313](index=313&type=chunk)[314](index=314&type=chunk] - The company's stock price is expected to be volatile and may decline due to various factors, including clinical trial results, competition, and market sentiment[316](index=316&type=chunk)[317](index=317&type=chunk] - The company has identified material weaknesses in internal control over financial reporting, which if not effectively remediated, could lead to material misstatements in financial statements and harm investor confidence[320](index=320&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk)[400](index=400&type=chunk)[401](index=401&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk)[423](index=423&type=chunk)[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk] [Unresolved Staff Comments](index=62&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments for this reporting period - No unresolved staff comments[427](index=427&type=chunk) [Properties](index=62&type=section&id=Item%202%20Properties) The company terminated its previous office lease in August 2019, maintains R&D facilities at BioLabs, and entered a new office sublease in Florham Park, New Jersey, in March 2020 - The company terminated its original office space lease agreement in Berkeley Heights, New Jersey, on **August 31, 2019**[428](index=428&type=chunk) - The company maintains month-to-month leased R&D facilities at Princeton Innovation Center BioLabs[428](index=428&type=chunk) - The company entered into a new office space sublease agreement in Florham Park, New Jersey, on **March 10, 2020**, for approximately **40 months**, with an option to extend until **October 31, 2027**[429](index=429&type=chunk) [Legal Proceedings](index=62&type=section&id=Item%203%20Legal%20Proceedings) The company is subject to claims, legal proceedings, and disputes that arise in the ordinary course of its business - The company is subject to claims, legal proceedings, and disputes that arise from time to time in its ordinary course of business[430](index=430&type=chunk) [Mine Safety Disclosures](index=62&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[431](index=431&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuers%20Purchases%20of%20Equity%20Securities) The company's common stock is listed on Nasdaq Capital Market under "PDSB", with 52 shareholders of record as of March 9, 2020, and no equity securities purchased during the period - The company's common stock is listed on the Nasdaq Capital Market under the trading symbol **"PDSB"**[434](index=434&type=chunk) - As of **March 9, 2020**, the company had **52** shareholders of record[435](index=435&type=chunk) - The company did not purchase any registered equity securities during this reporting period[436](index=436&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%207%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses PDS Biotechnology's financial condition and operating results, highlighting its clinical-stage focus, positive PDS0101 trial results, lack of product revenue, accumulated deficit of **$28.9 million** as of December 31, 2019, and liquidity plans - PDS Biotechnology is a clinical-stage biopharmaceutical company focused on developing cancer immunotherapies based on the Versamune® platform, aiming to stimulate high levels of antigen-specific killer T-cell responses[439](index=439&type=chunk)[440](index=440&type=chunk) - PDS0101's Phase I clinical trial results were encouraging, confirming potent HPV-specific CD8+ T-cell induction and observing complete regression of pre-cancerous lesions in **6 out of 10** evaluable patients[442](index=442&type=chunk) - The company has not generated any product revenue and has incurred net losses every year since its inception, with an accumulated deficit of **$28.9 million** as of **December 31, 2019**[447](index=447&type=chunk)[453](index=453&type=chunk) Comparison of Operating Results for 2019 and 2018 (in thousand dollars) | Metric | 2019 | 2018 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Research and Development Expenses | $6,100 | $831 | $5,269 | 634% | | General and Administrative Expenses | $10,982 | $2,788 | $8,194 | 294% | | IPR&D Impairment Expense | $2,974 | $0 | $2,974 | 100% | | Lease Termination and Disposal Costs | $979 | $0 | $979 | 100% | | Depreciation and Amortization | $0 | $27 | $(27) | 100% | | **Total Operating Expenses** | **$21,035** | **$3,646** | **$17,389** | **477%** | | Operating Loss | $(21,035) | $(3,646) | $(17,389) | 100% | | Bargain Purchase Gain | $13,335 | $0 | $13,335 | 100% | | Loss on Debt Extinguishment | $0 | $(185) | $185 | 100% | | Interest (Expense), Net | $320 | $(5) | $325 | 100% | | Loss Before Income Taxes | $(7,380) | $(3,836) | $(3,544) | 100% | | Income Tax (Benefit) | $(382) | $0 | $(382) | 92% | | **Net Loss and Comprehensive Loss** | **$(6,998)** | **$(3,836)** | **$(3,162)** | **82%** | Summary of Cash Flows for 2019 and 2018 (in thousand dollars) | Cash Flow Type | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(18,073) | $(1,569) | | Net Cash Provided by Investing Activities | $29,381 | $0 | | Net Cash Provided by Financing Activities | $750 | $1,497 | | **Net Increase (Decrease) in Cash** | **$12,058** | **$(72)** | | Cash and Cash Equivalents at End of Period | $12,161,739 | $103,695 | - As of **December 31, 2019**, the company held **$12.2 million** in cash and cash equivalents; a public offering completed in **February 2020** raised an additional **$11.9 million** in net proceeds, expected to support company operations and R&D programs for at least **12 months**[454](index=454&type=chunk)[493](index=493&type=chunk)[495](index=495&type=chunk) - The company has identified material weaknesses in internal control over financial reporting, including issues in the control environment, risk assessment, information and communication, and control activities, and is actively implementing remediation plans[523](index=523&type=chunk)[524](index=524&type=chunk)[525](index=525&type=chunk)[526](index=526&type=chunk)[528](index=528&type=chunk] [Company Overview and Business Update](index=64&type=section&id=Company%20Overview%20and%20Business%20Update) PDS Biotechnology is a clinical-stage biopharmaceutical company leveraging its proprietary Versamune® platform to develop multifunctional cancer immunotherapies, with encouraging Phase I PDS0101 results and planned Phase II studies - PDS Biotechnology is a clinical-stage biopharmaceutical company leveraging its proprietary Versamune® platform to develop multifunctional cancer immunotherapies, aiming to stimulate high levels of antigen-specific killer T-cell responses[439](index=439&type=chunk)[440](index=440&type=chunk) - PDS0101's Phase I clinical trial results were encouraging, confirming potent HPV-specific CD8+ T-cell induction and observing complete regression of pre-cancerous lesions in **6 out of 10** evaluable patients[442](index=442&type=chunk)[451](index=451&type=chunk) - The company has adjusted its clinical strategy to combine PDS0101 with checkpoint inhibitors and standard of care to address unmet medical needs, with three Phase II clinical studies expected to launch in the **first half of 2020**[444](index=444&type=chunk)[445](index=445&type=chunk)[451](index=451&type=chunk) - The company has not generated any product revenue and has incurred net losses every year since its inception; as of **December 31, 2019**, the accumulated deficit was **$28.9 million**, with cash and cash equivalents totaling **$12.2 million**[447](index=447&type=chunk)[453](index=453&type=chunk)[454](index=454&type=chunk) [Corporate Information](index=66&type=section&id=Corporate%20Information) The company completed a reverse merger with Private PDS on March 15, 2019, and was renamed PDS Biotechnology Corporation, with Private PDS as the accounting acquirer - The company completed a reverse merger with Private PDS on **March 15, 2019**, and was renamed PDS Biotechnology Corporation, with Private PDS considered the accounting acquirer and its historical financial statements becoming those of the combined company[457](index=457&type=chunk)[458](index=458&type=chunk) [Financial Operations Overview](index=66&type=section&id=Financial%20Operations%20Overview) The company has no product revenue, with future income expected from R&D payments and licensing, while incurring significant R&D, G&A, and other operating expenses - **Revenue**: The company has not generated any revenue from commercial product sales, with future revenue potentially derived from R&D payments, license fees, and milestone payments[459](index=459&type=chunk) - **Research and Development Expenses**: Include employee-related costs, license fees, clinical trial material costs, and consulting fees; in **2019**, an IPR&D asset impairment of **$2.974 million** was recognized related to Edge's NEWTON 2 trial[460](index=460&type=chunk)[461](index=461&type=chunk) - **General and Administrative Expenses**: Primarily include salaries and related benefits for executive, finance, legal, business development, and support functions, as well as travel, audit, tax, and legal professional fees[463](index=463&type=chunk)[464](index=464&type=chunk) - **Lease Termination and Disposal Costs**: Include **$0.7 million** in lease termination fees and **$0.3 million** in office furniture disposal fees[466](index=466&type=chunk) - **Other Income**: Primarily consists of interest income generated from cash and cash equivalents[467](index=467&type=chunk)[468](index=468&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=67&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Key accounting policies involve acquisitions, asset impairment, income taxes, accrued clinical expenses, and equity compensation, all requiring significant management judgment and estimates - **Acquisitions**: Accounted for using the acquisition method, measuring acquired assets and liabilities at fair value, including the fair value of IPR&D; fair value estimates rely on complex judgments about future events and uncertainties[473](index=473&type=chunk)[474](index=474&type=chunk) - **Asset Impairment**: All long-lived assets are reviewed for impairment indicators throughout the year, and indefinite-lived intangible assets are tested annually for impairment; an impairment charge is recorded when fair value is below carrying value[475](index=475&type=chunk)[476](index=476&type=chunk) - **Income Taxes**: Deferred income tax assets and liabilities are recognized using the balance sheet method; deferred tax assets are reduced by a valuation allowance if their realization is not probable; as of **December 31, 2019**, the company had approximately **$79.1 million** in federal net operating loss (NOL) carryforwards and **$0.7 million** in federal R&D tax credit carryforwards, potentially subject to limitations under Section 382 of the Internal Revenue Code[477](index=477&type=chunk)[479](index=479&type=chunk) - **Accrued Clinical Expenses**: Estimated by reviewing contracts, communicating with personnel, and assessing the level of services performed and associated costs based on available information[480](index=480&type=chunk) - **Equity Compensation**: Fair value of equity option awards for employees, directors, and non-employees is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the service period; ASU 2018-07 was adopted on **January 1, 2019**[481](index=481&type=chunk)[482](index=482&type=chunk) [Results of Operations - Comparison of the Years Ended December 31, 2019 and 2018](index=69&type=section&id=Results%20of%20Operations%20-%20Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202019%20and%202018) Operating expenses significantly increased in 2019 compared to 2018, driven by higher R&D and G&A costs, partially offset by a bargain purchase gain from the merger Comparison of Operating Results for 2019 and 2018 (in thousand dollars) | Metric | 2019 | 2018 | Change | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Research and Development Expenses | $6,100 | $831 | $5,269 | 634% | | General and Administrative Expenses | $10,982 | $2,788 | $8,194 | 294% | | IPR&D Impairment Expense | $2,974 | $0 | $2,974 | 100% | | Lease Termination and Disposal Costs | $979 | $0 | $979 | 100% | | Depreciation and Amortization | $0 | $27 | $(27) | 100% | | **Total Operating Expenses** | **$21,035** | **$3,646** | **$17,389** | **477%** | | Operating Loss | $(21,035) | $(3,646) | $(17,389) | 100% | | Bargain Purchase Gain | $13,335 | $0 | $13,335 | 100% | | Loss on Debt Extinguishment | $0 | $(185) | $185 | 100% | | Interest (Expense), Net | $320 | $(5) | $325 | 100% | | Loss Before Income Taxes | $(7,380) | $(3,836) | $(3,544) | 100% | | Income Tax (Benefit) | $(382) | $0 | $(382) | 92% | | **Net Loss and Comprehensive Loss** | **$(6,998)** | **$(3,836)** | **$(3,162)** | **82%** | - Research and development expenses increased by **$5.3 million**, primarily due to higher clinical study and internal R&D personnel costs[484](index=484&type=chunk) - General and administrative expenses increased by **$8.2 million**, mainly due to higher personnel costs, non-cash equity compensation, D&O insurance premiums, and legal fees[486](index=486&type=chunk)[487](index=487&type=chunk] - An IPR&D impairment expense of **$2.974 million** and lease termination and disposal costs of **$0.979 million** were recognized in **2019**[488](index=488&type=chunk)[489](index=489&type=chunk] - A bargain purchase gain of **$13.3 million** resulted from the merger in **2019**[490](index=490&type=chunk) - Net interest income of **$0.3 million** in **2019** was primarily from interest earned on cash and cash equivalents[491](index=491&type=chunk) [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2019, the company had **$12.2 million** in cash, supplemented by a **$11.9 million** public offering in February 2020, expected to fund operations for at least 12 months - As of **December 31, 2019**, the company had **$12.2 million** in cash and cash equivalents, primarily from **$29.1 million** in cash acquired from Edge in the merger[492](index=492&type=chunk) - In **February 2020**, the company raised approximately **$11.9 million** in net proceeds through a public offering[493](index=493&type=chunk)[498](index=498&type=chunk] - The company expects its existing cash resources, including proceeds from the **February 2020** offering, to be sufficient to support operations and R&D programs for at least **12 months**[495](index=495&type=chunk) - The company plans to meet future operating and capital requirements through equity and/or debt financings, government grant programs, and selective collaborations[496](index=496&type=chunk) - In **July 2019**, the company entered into a common stock purchase agreement with Aspire Capital to sell up to **$20 million** of common stock over **30 months**, but no shares had been sold as of **December 31, 2019**, other than commitment shares[497](index=497&type=chunk) [Cash flows](index=71&type=section&id=Cash%20flows) Operating cash outflows significantly increased in 2019 due to higher R&D and G&A expenses, while investment activities provided substantial cash from the merger Summary of Cash Flows for 2019 and 2018 (in thousand dollars) | Cash Flow Type | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(18,073) | $(1,569) | | Net Cash Provided by Investing Activities | $29,381 | $0 | | Net Cash Provided by Financing Activities | $750 | $1,497 | | **Net Increase (Decrease) in Cash** | **$12,058** | **$(72)** | | Cash and Cash Equivalents at End of Period | $12,161,739 | $103,695 | - Net cash used in operating activities increased by **$16.5 million** in **2019**, primarily due to higher R&D costs, general and administrative expenses, and payments for merger-related liabilities[501](index=501&type=chunk) - Net cash provided by investing activities was **$29.4 million** in **2019**, primarily from cash acquired in the merger[502](index=502&type=chunk) - Net cash provided by financing activities was **$0.8 million** in **2019**, primarily from common stock issuance[503](index=503&type=chunk) [Operating Capital Requirements](index=71&type=section&id=Operating%20Capital%20Requirements) The company anticipates continued losses and requires substantial additional funding to support ongoing operations, R&D, and commercialization efforts - The company has not generated product revenue, anticipates continued losses, and will require substantial additional capital to support ongoing operations, R&D, and commercialization[504](index=504&type=chunk) - The initiation, progress, timing, costs, and results of planned clinical trials[506](index=506&type=chunk) - The outcome, timing, and cost of meeting regulatory requirements of the FDA and other regulatory agencies[506](index=506&type=chunk) - The costs of filing, prosecuting, defending, and enforcing patent claims[506](index=506&type=chunk) - The effect of competitive technologies and market developments[506](index=506&type=chunk) - The costs of establishing sales, marketing, and distribution capabilities[506](index=506&type=chunk) - The initiation, progress, timing, and results of commercialization efforts[506](index=506&type=chunk) [Contractual Obligations and Commitments](index=72&type=section&id=Contractual%20Obligations%20and%20Commitments) The company's contractual obligations primarily consist of milestone payments, with no significant non-cancelable purchase commitments as of December 31, 2019 Contractual Obligations as of December 31, 2019 (in thousand dollars) | Contractual Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Milestone Payments | $550 | $110 | $220 | $220 | $0 | - The company has no significant non-cancelable purchase commitments[511](index=511&type=chunk) [JOBS Act](index=72&type=section&id=JOBS%20Act) As an "emerging growth company," PDS has opted out of the extended transition period for new accounting standards but intends to rely on other JOBS Act exemptions - As an "emerging growth company," the company has irrevocably elected not to take advantage of the extended transition period provided by the JOBS Act for complying with new or revised accounting standards and will adopt new standards on the same timeline as other public companies[512](index=512&type=chunk) - The company intends to rely on other exemptions in the JOBS Act, such as not providing an auditor attestation report on internal control over financial reporting as required by Section 404(b) of the Sarbanes-Oxley Act[513](index=513&type=chunk) [Off-balance Sheet Arrangements](index=72&type=section&id=Off-balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements during the reporting period and currently has none - The company had no off-balance sheet arrangements during the reporting period and currently has none[514](index=514&type=chunk) [Financial Statements and Supplementary Data](index=73&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) This report includes the company's financial statements and supplementary data as of December 31, 2019, with specific indexing provided in Item 15 - This report includes the company's financial statements and supplementary data as of **December 31, 2019**, with specific indexing provided in Item 15[516](index=516&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=73&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in accountants or disagreements with accountants on accounting and financial disclosure during this reporting period - No changes in accountants or disagreements with accountants on accounting and financial disclosure[517](index=517&type=chunk) [Controls and Procedures](index=73&type=section&id=Item%209A%20Controls%20and%20Procedures) As of December 31, 2019, the company's disclosure controls and procedures were deemed ineffective due to identified material weaknesses in internal control over financial reporting - As of **December 31, 2019**, the company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[518](index=518&type=chunk) - Management assessed that as of **December 31, 2019**, the company's internal controls had material weaknesses in four areas: control environment, risk assessment, information and communication, and control activities[521](index=521&type=chunk)[523](index=523&type=chunk)[524](index=524&type=chunk)[525](index=525&type=chunk)[526](index=526&type=chunk] - These material weaknesses led to non-material error corrections in the consolidated financial statements and their notes for **2018** and **2019**[523](index=523&type=chunk) - Supplement existing accounting resources and engage external consultants to assist with technical accounting activities[528](index=528&type=chunk) - Plan to hire staff with technical accounting expertise and public company experience, including a Chief Financial Officer, as needed[528](index=528&type=chunk) - Strengthen review controls, including those for timely identification, capture, and processing of financial information for financial accounting and reporting[528](index=528&type=chunk) - Develop and implement a comprehensive and continuous risk assessment process to identify and evaluate risks of material misstatement and ensure financial reporting processes and related internal controls are appropriately designed and implemented[528](index=528&type=chunk) [Other Information](index=74&type=section&id=Item%209B%20Other%20Information) Not applicable - Not applicable[532](index=532&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=75&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's proxy statement - The information required for this item is incorporated by reference into this annual report from the proxy statement[536](index=536&type=chunk) [Executive Compensation](index=75&type=section&id=Item%2011%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's proxy statement - The information required for this item is incorporated by reference into this annual report from the proxy statement[537](index=537&type=chunk) [Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=75&type=section&id=Item%2012%20Securities%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's proxy statement - The information required for this item is incorporated by reference into this annual report from the proxy statement[538](index=538&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=75&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's proxy statement - The information required for this item is incorporated by reference into this annual report from the proxy statement[539](index=539&type=chunk) [Principal Accountant Fees and Services](index=75&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's proxy statement - The information required for this item is incorporated by reference into this annual report from the proxy statement[540](index=540&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=75&type=section&id=Item%2015%20Exhibits%20and%20Financial%20Statement%20Schedules) This report includes the required financial statements and exhibits, with financial statement schedules omitted as they are inapplicable, unnecessary, or the information is presented elsewhere - This report contains the required financial statements and exhibits[541](index=541&type=chunk) - All financial statement schedules have been omitted because they are inapplicable, not required, or the information is presented in the financial statements or their notes[542](index=542&type=chunk) [Form 10-K Summary](index=75&type=section&id=Item%2016%20Form%2010-K%20Summary) This report does not contain a Form 10-K summary - No Form 10-K summary[543](index=543&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to_____________ Commission file number 001-37568 PDS Biotechnology Corporation (Exact name of registrant as specified in its charter) Delaware 26-4231384 (Sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____________to_____________ Commission file number 001-37568 PDS Biotechnology Corporation (Exact name of registrant as specified in its charter) Delaware 26-4231384 (800) 208 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Address of principal executive offices) (800) 208-3343 (Registrant's telephone number) Edge Therapeutics, Inc. For the transition period from____________to_____________ Commission file number 001-37568 P ...

PART I [ITEM 1. Business](index=4&type=section&id=Item%201%20Business) Edge Therapeutics discontinued its lead drug EG-1962, now pursuing a merger with PDS Biotechnology to pivot to cancer immunotherapy - Edge Therapeutics, a clinical-stage biotechnology company, discontinued its lead product candidate, **EG-1962**, after a Phase 3 study (NEWTON 2) showed a low probability of achieving its primary endpoint[14](index=14&type=chunk)[15](index=15&type=chunk)[189](index=189&type=chunk) - The company entered into a Merger Agreement with **PDS Biotechnology Corporation** on November 23, 2018; if completed, Edge's business will transition to PDS's cancer immunotherapy focus[12](index=12&type=chunk)[24](index=24&type=chunk)[191](index=191&type=chunk) - If the merger with PDS is not completed, Edge will reconsider strategic alternatives, which include pursuing another strategic transaction or dissolving and liquidating its assets[13](index=13&type=chunk)[18](index=18&type=chunk)[74](index=74&type=chunk) - Edge has ceased all research and development on **EG-1962** and its other product candidates and has reduced its workforce to preserve cash resources[23](index=23&type=chunk)[71](index=71&type=chunk)[192](index=192&type=chunk) - The company holds wholly-owned U.S. and international patents related to **EG-1962**, a microparticulate formulation of nimodipine, with some patents co-owned with Evonik Industries[25](index=25&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) - Edge has no current plans to manufacture **EG-1962** or other products and has ceased work under existing manufacturing and supply agreements[35](index=35&type=chunk)[36](index=36&type=chunk) - The drug development process in the U.S. involves extensive regulation by the **FDA**, including preclinical tests, IND application, clinical trials, NDA submission, and manufacturing facility inspections[39](index=39&type=chunk)[42](index=42&type=chunk) - As of December 31, 2018, Edge had **10** full-time employees[45](index=45&type=chunk) [ITEM 1A. Risk Factors](index=10&type=section&id=Item%201A%20Risk%20Factors) Edge's stock faces risks from merger failure, capital needs, dilution, regulatory unpredictability, and IP challenges - The Exchange Ratio for the merger with PDS is not adjustable based on Edge's market price, meaning PDS stockholders could receive a different value than negotiated if Edge's stock price changes[51](index=51&type=chunk) - Failure to complete the merger could result in Edge paying a **$1.75 million** termination fee to PDS and incurring approximately **$3.5 million** in merger-related expenses, even if the merger is not completed[52](index=52&type=chunk)[55](index=55&type=chunk)[86](index=86&type=chunk) - The combined company will likely need to raise additional capital, which could dilute existing stockholders' ownership or impose restrictive covenants through debt financing[57](index=57&type=chunk) - Certain Edge and PDS executive officers and directors have interests in the merger that differ from stockholders, including continued service, severance benefits, and accelerated stock options[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - If the merger is not completed, Edge may be unable to find an alternative transaction or reestablish an operating business, potentially leading to dissolution and liquidation of assets, with uncertain returns for stockholders[70](index=70&type=chunk)[74](index=74&type=chunk) - Failure to obtain stockholder approval for a reverse stock split may lead to delisting from Nasdaq[75](index=75&type=chunk) - The issuance of Edge common stock to PDS stockholders will substantially dilute the voting power of current Edge stockholders, with Edge securityholders expected to own approximately **30%** of the combined company[77](index=77&type=chunk) - Edge has ceased all R&D activities for **EG-1962** and other product candidates, and any future resumption would face unpredictable and lengthy regulatory approval processes[83](index=83&type=chunk)[86](index=86&type=chunk) - The pharmaceutical industry is highly competitive and subject to rapid technological change, posing risks that Edge's technologies could become obsolete[99](index=99&type=chunk) - Edge relies on patents, trade secrets, and confidentiality agreements, but intellectual property protection is uncertain, expensive, and subject to challenges and potential infringement[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[114](index=114&type=chunk) - Edge has incurred significant losses since inception (**$40.9 million** in 2018, **$50.9 million** in 2017) and expects to continue incurring losses, requiring additional capital that may dilute stockholders or restrict operations[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[130](index=130&type=chunk) - Edge's common stock trading market has been limited and illiquid, and failure to meet Nasdaq listing requirements (e.g., audit committee, minimum bid price) could lead to delisting[131](index=131&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The combined company's stock price is expected to be volatile due to factors like clinical trial results, regulatory approvals, competition, and general market conditions[156](index=156&type=chunk)[163](index=163&type=chunk) - The merger will result in an ownership change under Section 382 of the Code for Edge, limiting the use of pre-merger U.S. net operating loss carryforwards[166](index=166&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - No unresolved staff comments[170](index=170&type=chunk) [ITEM 2. Properties](index=36&type=section&id=Item%202%20Properties) Edge's Berkeley Heights, NJ headquarters (**20,410 sq ft**, lease ends Nov 2021) is deemed adequate for near-term needs - Corporate headquarters: **20,410 sq ft** office space in Berkeley Heights, NJ[171](index=171&type=chunk) - Lease term: Ends **November 2021**[171](index=171&type=chunk) - Adequacy: Existing facilities are believed to be adequate for near-term needs[171](index=171&type=chunk) [ITEM 3. Legal Proceedings](index=36&type=section&id=Item%203%20Legal%20Proceedings) Edge faces merger-related lawsuits alleging material omissions, deemed meritless, following a prior securities class action dismissal - A securities class action complaint (Sanfilippo v. Edge Therapeutics, Inc.) filed in April 2018, alleging misleading statements regarding **EG-1962**, was voluntarily dismissed without prejudice on **February 14, 2019**[173](index=173&type=chunk)[473](index=473&type=chunk) - Edge and its Board are defendants in four lawsuits (Condon, Franchi, Prince, Foldenauer Actions) filed in January 2019, alleging material omissions in the Form S-4 registration statement related to the proposed merger[174](index=174&type=chunk)[474](index=474&type=chunk) - Plaintiffs in these merger-related lawsuits seek injunctive relief, rescissory damages, and attorneys' fees and expenses[175](index=175&type=chunk)[475](index=475&type=chunk) - Edge believes the merger-related litigation is without merit and has been rendered moot by subsequent disclosures[176](index=176&type=chunk)[476](index=476&type=chunk) [ITEM 4. Mine Safety Disclosures](index=36&type=section&id=Item%204%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to Edge Therapeutics, Inc - Not applicable[177](index=177&type=chunk) PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities](index=37&type=section&id=Item%205%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuers%20Purchases%20of%20Equity%20Securities) Edge's common stock (IPO **$11.00** in 2015, **$0.39** by Feb 2019) saw no equity purchases; **$17.4 million** from a 2017 offering was invested in short-term assets - Edge's common stock (EDGE) began trading on Nasdaq Global Market on **October 1, 2015**, at an IPO price of **$11.00** per share[180](index=180&type=chunk) - As of **February 14, 2019**, the closing price for common stock was **$0.39**[181](index=181&type=chunk) Common Stock High and Low Sales Prices | Year Ended December 31, 2018 | High | Low | | :--------------------------- | :--- | :-- | | Fourth Quarter | $1.09 | $0.31 | | Third Quarter | $1.10 | $0.70 | | Second Quarter | $1.28 | $0.87 | | First Quarter | $17.47 | $1.18 | | Year Ended December 31, 2017 | High | Low | | Fourth Quarter | $11.16 | $9.07 | | Third Quarter | $11.51 | $9.20 | | Second Quarter | $10.72 | $8.81 | | First Quarter | $12.99 | $7.62 | - As of **February 14, 2019**, there were **36** stockholders of record[183](index=183&type=chunk) - The company did not purchase any of its registered equity securities during the period[184](index=184&type=chunk) - Net proceeds of **$17.4 million** from a registered direct common stock offering on **April 21, 2017**, were invested in short-term, investment-grade cash equivalents[185](index=185&type=chunk)[227](index=227&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2018) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)) | | :----------------------------------------------- | :---------------------------------------------------------------------------------------- | :---------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 7,238,787 | 5.41 | 136,228 | | Equity compensation plans not approved by security holders | 315,003 | 8.35 | - | | Total | 7,553,787 | 5.68 | 136,228 | [ITEM 6. Selected Financial Data](index=37&type=section&id=Item%206%20Selected%20Financial%20Data) As a smaller reporting company, Edge Therapeutics is not required to provide selected financial data disclosures - Edge Therapeutics is a smaller reporting company and is not required to report selected financial data disclosures[187](index=187&type=chunk) [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Edge discontinued EG-1962, pursuing a PDS merger; reported net losses of **$40.9 million** (2018) and **$50.9 million** (2017), with **$34.6 million** cash - Edge Therapeutics is a clinical-stage biotechnology company that has discontinued its lead product candidate **EG-1962** and is exploring strategic alternatives, including a merger with **PDS Biotechnology Corporation**[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) Net Loss and Accumulated Deficit | Metric | 2018 (in millions) | 2017 (in millions) | | :----------------- | :----------------- | :----------------- | | Net Loss | $(40.9) | $(50.9) | | Accumulated Deficit (as of Dec 31) | $(192.8) | $(151.9) | - The company has never been profitable and has ceased all R&D on **EG-1962** and other product candidates, with future operations highly dependent on the PDS merger[192](index=192&type=chunk) - As of **December 31, 2018**, the company had **$34.6 million** in cash and cash equivalents[194](index=194&type=chunk)[225](index=225&type=chunk) - The company has not generated any revenue from commercial product sales and does not expect to in the near future[195](index=195&type=chunk) Research and Development Expenses (in thousands) | Category | 2018 | 2017 | Change ($) | Change (%) | | :------------------------ | :------ | :------ | :--------- | :--------- | | EG-1962 product candidate | $9,504 | $22,075 | $(12,571) | (57)% | | EG-1964 product candidate | $5 | $640 | $(635) | (99)% | | Pipeline | $188 | $371 | $(183) | (49)% | | Internal Operating Expenses | $6,372 | $11,226 | $(4,854) | (43)% | | **Total** | **$16,069** | **$34,312** | **$(18,243)** | **(53)%** | - The decrease in R&D expenses is primarily due to the discontinuance of clinical studies for **EG-1962** and a reduction in force[199](index=199&type=chunk)[218](index=218&type=chunk) General and Administrative Expenses (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :------------------------------ | :------ | :------ | :--------- | :--------- | | General and administrative expenses | $14,291 | $17,655 | $(3,364) | (19)% | - The decrease in G&A expenses was due to reductions in personnel costs, facilities, travel, marketing, and legal/professional fees[219](index=219&type=chunk) Restructuring Expenses and Impairment Charges (in thousands) | Expense Category | 2018 | 2017 | Change ($) | Change (%) | | :------------------ | :----- | :--- | :--------- | :--------- | | Restructuring expenses | $9,914 | $0 | $9,914 | 100% | | Impairment charges | $2,823 | $0 | $2,823 | 100% | - Restructuring expenses in 2018 included **$4.4 million** for severance, **$2.3 million** for financial advisory fees, **$1.4 million** for legal fees, and **$1.8 million** for retention compensation[220](index=220&type=chunk) - Impairment charges in 2018 reflect the write-down of machinery and equipment no longer needed after ceasing **EG-1962** R&D[221](index=221&type=chunk)[441](index=441&type=chunk) Interest Income (Expense), Net (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :------------------------- | :----- | :----- | :--------- | :--------- | | Interest income (expense), net | $(553) | $(1,479) | $926 | (63)% | - The decrease in net interest expense was due to reduced interest expense from paying off a loan in **June 2018**, partially offset by increased interest income from cash and cash equivalents[223](index=223&type=chunk) Benefit for Income Taxes (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :---------------------- | :----- | :----- | :--------- | :--------- | | Benefit for income taxes | $2,782 | $2,586 | $196 | 8% | - The increase in tax benefit was due to selling additional New Jersey Net Operating Losses in 2018[224](index=224&type=chunk) - Total cash and cash equivalents decreased by **$53.5 million** from **$88.1 million** in 2017 to **$34.6 million** in 2018, primarily due to debt repayment and funding operations[225](index=225&type=chunk) - The company repaid its **$20.0 million** Hercules loan in full in **June 2018**, including **$0.9 million** in back-end fees and **$0.1 million** in accrued interest[233](index=233&type=chunk)[484](index=484&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(33,153) | $(40,697) | | Net cash used in investing activities | $0 | $(188) | | Net cash (used in) provided by financing activities | $(20,269) | $22,554 | | Net decrease in cash | $(53,422) | $(18,331) | - Net cash used in operating activities decreased by **$7.5 million** in 2018 due to reduced operating activities[236](index=236&type=chunk) - Net cash used in financing activities in 2018 was primarily due to **$21.0 million** in debt repayment and fees, offset by **$0.7 million** from stock option exercises[238](index=238&type=chunk) - The company believes its existing cash and cash equivalents are sufficient for at least the next **12 months**, but this forecast is subject to risks and uncertainties[240](index=240&type=chunk)[241](index=241&type=chunk) Contractual Obligations (as of December 31, 2018, in thousands) | Obligation Category | Total | Less than One Year | 1-3 Years | 3-5 Years | More than 5 Years | | :---------------------- | :------- | :----------------- | :-------- | :-------- | :---------------- | | Operating lease obligations | $1,739 | $605 | $1,134 | $0 | $0 | | **Total** | **$1,739** | **$605** | **$1,134** | **$0** | **$0** | - The company has no material non-cancelable purchase commitments[245](index=245&type=chunk) - Milestone and royalty payments under license agreements (Evonik, Oakwood) are unlikely unless R&D activities for **EG-1962** resume[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Edge has irrevocably elected not to use the extended transition period for complying with new or revised accounting standards under the **JOBS Act**[249](index=249&type=chunk) - The company does not have any off-balance sheet arrangements[251](index=251&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=49&type=section&id=Item%208%20Financial%20Statements%20and%20Supplementary%20Data) The financial statements and supplementary data are appended to this report, with an index found in Item 15 - Financial statements and supplementary data are appended to the report, with an index in **Item 15**[253](index=253&type=chunk) [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=49&type=section&id=Item%209%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[254](index=254&type=chunk) [ITEM 9A. Controls and Procedures](index=49&type=section&id=Item%209A%20Controls%20and%20Procedures) Edge's management concluded disclosure controls and internal control over financial reporting were effective as of **December 31, 2018**, exempt from external attestation - Disclosure controls and procedures were effective as of **December 31, 2018**[255](index=255&type=chunk) - Management assessed and concluded that internal control over financial reporting was effective as of **December 31, 2018**, using the **COSO 2013 Framework**[258](index=258&type=chunk) - As an 'emerging growth company,' Edge is exempt from the independent registered public accounting firm's attestation report on internal control over financial reporting[259](index=259&type=chunk) - No significant changes to internal control over financial reporting occurred during the period[260](index=260&type=chunk) [ITEM 9B. Other Information](index=49&type=section&id=Item%209B%20Other%20Information) No other information is required to be reported under this item - Not applicable[261](index=261&type=chunk) PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=50&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Edge's Board, led by Dr. Sol Barer, oversees risk; CEO is Brian A. Leuthner; Audit Committee is non-compliant with Nasdaq rules Board of Directors (as of December 31, 2018) | Name | Age | Director Since | | :------------------------ | :-- | :------------- | | **Class A (Term expiring 2019)** | | | | Rose Crane | 59 | 2017 | | Liam Ratcliffe, M.D., Ph.D. | 55 | 2016 | | Robert Spiegel, M.D. | 69 | 2013 | | **Class B (Term expiring 2020)** | | | | Isaac Blech | 69 | 2013 | | James Loughlin | 75 | 2011 | | R. Loch Macdonald, M.D., Ph.D. | 57 | 2009 | | **Class C (Term expiring 2021)** | | | | Sol Barer, Ph.D. | 71 | 2011 | | Brian A. Leuthner | 54 | 2009 | - Dr. Sol Barer serves as Chairman of the Board, and Mr. Isaac Blech as Vice Chairman, separating the Chairman and CEO roles to enhance Board independence[290](index=290&type=chunk) - All directors, except Brian A. Leuthner (President & CEO) and R. Loch Macdonald (former Chief Scientific Officer), are deemed independent under Nasdaq listing standards[289](index=289&type=chunk) - The Board performs risk oversight directly and through its Audit, Compensation, and Nominating and Corporate Governance Committees[291](index=291&type=chunk) Executive Officers (as of December 31, 2018) | Name | Age | Position | | :---------------------- | :-- | :------------------------------------- | | Brian A. Leuthner | 54 | President, Chief Executive Officer and Director | | Andrew Saik | 49 | Chief Financial Officer | | W. Bradford Middlekauff | 57 | Senior Vice President, General Counsel and Secretary | - The Audit Committee currently consists of **two** members (Mr. Loughlin and Dr. Spiegel), which is not in compliance with Nasdaq's audit committee requirements. The company has until **June 19, 2019**, to regain compliance[296](index=296&type=chunk)[298](index=298&type=chunk) - The Nominating and Corporate Governance Committee considers diversity of business experience, background, talents, and perspectives when recommending board candidates, though it does not have a formal diversity policy[308](index=308&type=chunk) [ITEM 11. Executive Compensation](index=59&type=section&id=Item%2011%20Executive%20Compensation) Edge's 2018 executive compensation included significant option awards and retention pay, with enhanced severance benefits upon change in control Summary Compensation Table (2017-2018) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards (1) ($) | Restricted Stock Units ($) | All Other Compensation (2) ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :-------------------- | :------------------------- | :----------------------------- | :-------- | | Brian A. Leuthner, CEO | 2018 | 530,000 | 318,000 | 3,356,300 | 143,846 | 10,800 | 4,358,946 | | | 2017 | 500,000 | 255,000 | 1,761,831 | - | 10,800 | 2,527,631 | | R. Loch Macdonald, M.D., Ph.D., CSO (3) | 2018 | 150,750 | - | 11,578 | 8,510 | 272,179 | 443,017 | | | 2017 | 402,000 | 153,765 | 724,493 | - | 10,800 | 1,291,059 | | Herbert J. Faleck, CMO (4) | 2018 | 416,000 | 187,200 | 646,945 | 50,918 | 10,800 | 1,311,863 | | | 2017 | 400,000 | 153,000 | 724,493 | - | 10,800 | 1,288,293 | | Andrew Saik, CFO | 2018 | 370,000 | 166,500 | 660,490 | 70,632 | - | 1,267,622 | | | 2017 | 61,667 | - | 1,594,402 | - | - | 1,656,069 | | W. Bradford Middlekauff, SVP, General Counsel and Secretary | 2018 | 347,700 | 156,470 | 791,426 | 42,351 | 10,800 | 1,348,747 | | | 2017 | 328,000 | 97,580 | 345,782 | - | 10,800 | 782,162 | - Named executive officers were not entitled to cash bonus compensation for 2018, but received retention arrangements including stock options, RSUs, and cash compensation[319](index=319&type=chunk)[365](index=365&type=chunk) - Equity awards generally vest over **four years**, with a 'double trigger' vesting approach (requiring both a change in control and a qualifying termination) for options granted in **March 2017** and later[320](index=320&type=chunk)[321](index=321&type=chunk)[333](index=333&type=chunk) Potential Payments Upon Termination Without Cause or Resignation for Good Reason (No Change in Control, as of Dec 31, 2018) | Name | Cash Payment ($) | Other ($) (COBRA) | Accelerated Equity Vesting ($) | Total ($) | | :---------------------- | :--------------- | :---------------- | :----------------------------- | :-------- | | Brian A. Leuthner | 795,000 | 38,105 | - | 833,105 | | Herbert J. Faleck, D.O. | 416,000 | 25,403 | - | 441,403 | | Andrew Saik | 370,000 | 25,403 | - | 395,403 | | W. Bradford Middlekauff | 347,700 | 25,403 | - | 373,103 | Potential Payments Upon Termination Without Cause or Resignation for Good Reason (With Change in Control, as of Dec 31, 2018) | Name | Cash Payment ($) | Accelerated Equity Vesting (1) ($) | Other (2) ($) (COBRA) | Total ($) | | :---------------------- | :--------------- | :--------------------------------- | :-------------------- | :-------- | | Brian A. Leuthner | 1,510,500 | 4,041,238 | 38,105 | 5,589,843 | | Herbert J. Faleck, D.O. | 416,000 | 1,770,053 | 25,403 | 2,211,456 | | Andrew Saik | 370,000 | 1,662,394 | 25,403 | 2,057,797 | | W. Bradford Middlekauff | 347,700 | 1,036,037 | 25,403 | 1,409,140 | Non-Employee Director Compensation (Year Ended December 31, 2018) | Name | Fees Earned or Paid in Cash ($) | Option Awards (1) ($) | Total ($) | | :------------------------ | :------------------------------ | :-------------------- | :-------- | | Sol Barer, Ph.D. | 92,500 | 40,175 | 132,675 | | Isaac Blech | 41,750 | 20,088 | 61,838 | | Kurt Conti (2) | 21,500 | - | 21,500 | | Rose Crane | 51,750 | 20,088 | 71,838 | | James I. Healy, M.D., Ph.D. (3) | 21,500 | - | 21,500 | | James Loughlin | 54,250 | 20,088 | 74,338 | | Liam Ratcliffe, M.D., Ph.D. | 44,500 | 20,088 | 64,588 | | Robert Spiegel, M.D. | 69,250 | 20,088 | 89,338 | - Non-employee directors receive annual cash retainers (**$40,000** base, plus additional for committee roles) and equity grants (new directors: **30,000** options; continuing directors: **15,000** options; Chairman: **30,000** options)[344](index=344&type=chunk)[345](index=345&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=68&type=section&id=Item%2012%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of **December 31, 2018**, Edge had **31,449,989** shares outstanding; beneficial owners and management held approximately **24.69%** of voting stock - As of **December 31, 2018**, there were **31,449,989** shares of Edge common stock outstanding[350](index=350&type=chunk) Beneficial Ownership (as of December 31, 2018) | Name of Beneficial Owner | Shares | % | | :--------------------------------------------- | :---------- | :--- | | **Greater than 5% Stockholders:** | | | | Sofinnova Venture Partners IX, L.P. (1) | 2,852,711 | 9.07 | | Entities affiliated with New Leaf Ventures III, L.P. (2) | 2,379,668 | 7.57 | | **Named Executive Officers and Directors:** | | | | Sol Barer, Ph.D. (3) | 1,318,911 | 4.19 | | Isaac Blech (4) | 798,950 | 2.54 | | Brian Leuthner (5) | 1,622,719 | 5.16 | | Rosemary Crane (6) | 9,900 | 0.03 | | James Loughlin (7) | 115,564 | 0.37 | | R. Loch Macdonald, M.D., Ph.D. (8) | 1,165,194 | 3.70 | | Liam Ratcliffe, M.D., Ph.D. (2) | 2,379,668 | 7.57 | | Robert Spiegel, M.D., FACP (9) | 129,329 | 0.41 | | W. Bradford Middlekauff (10) | 145,406 | 0.46 | | Andrew Saik (11) | 79,172 | 0.25 | | All current executive officers and directors as a group (10 persons) | 7,764,816 | 24.69| - Executive officers, directors, and **5%** beneficial owners, along with their affiliates, collectively owned approximately **41%** of Edge's outstanding voting stock as of **December 31, 2018**, allowing them significant control over stockholder-approved matters[143](index=143&type=chunk)[352](index=352&type=chunk) [ITEM 13. Certain Relationships and Related Transactions and Director Independence](index=69&type=section&id=Item%2013%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Edge has indemnification and employment agreements, implemented 2018 retention arrangements, and its Audit Committee reviews related-party transactions exceeding **$120,000** - Edge has indemnification agreements with its executive officers and directors, providing indemnification against expenses from their service to the fullest extent permitted by Delaware law[356](index=356&type=chunk)[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) - Employment agreements with named executive officers detail base salary, bonus opportunities, and severance benefits upon termination, with enhanced benefits in connection with a change in control[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - In 2018, Edge approved retention arrangements for executive officers, including stock options, RSUs, and cash compensation, to be paid upon termination (other than for cause), consummation of a strategic transaction, or the one-year anniversary of the grant date[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) - Edge's Audit Committee reviews and approves all related-party transactions exceeding **$120,000**, ensuring they are in the company's best interests and managing potential conflicts of interest[368](index=368&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=71&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20and%20Services) Edge paid KPMG LLP **$456.45 thousand** (2018) and **$510.65 thousand** (2017) for audit, audit-related, and tax services, all pre-approved by the Audit Committee Aggregate Fees Billed by KPMG LLP (in thousands) | Fee Category | 2018 | 2017 | | :---------------- | :----- | :----- | | Audit fees | $398 | $398 | | Audit-related fees | $58.45 | $15 | | Tax fees | $0 | $97.65 | | All Other Fees | $0 | $0 | | **Total** | **$456.45** | **$510.65** | - All KPMG LLP services and fees for 2018 and 2017 were pre-approved by the Audit Committee[374](index=374&type=chunk)[375](index=375&type=chunk) PART IV [ITEM 15. Exhibits, Financial Statement Schedules](index=73&type=section&id=Item%2015%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements filed as part of the report, including the Report of Independent Registered Public Accounting Firm, Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Changes in Stockholders' Equity (Deficit), Statements of Cash Flows, and Notes to Consolidated Financial Statements - The report includes audited financial statements: Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Convertible Preferred Stock and Changes in Stockholders' Equity (Deficit), and Statements of Cash Flows[378](index=378&type=chunk) - All financial statement schedules are omitted as not applicable or redundant[378](index=378&type=chunk) - An Exhibit Index details various documents filed, such as merger agreements, organizational documents, warrants, and employment agreements[379](index=379&type=chunk)[382](index=382&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk) [ITEM 16. Form 10-K Summary](index=73&type=section&id=Item%2016%20Form%2010-K%20Summary) No Form 10-K Summary is provided - None[380](index=380&type=chunk) [Signatures](index=78&type=section&id=Signatures) The Form 10-K is signed by Edge Therapeutics' CEO, CFO, and Board members, dated **February 21, 2019** - The Form 10-K is signed by Brian A. Leuthner (President and CEO), Andrew Saik (CFO), and all Board members, dated **February 21, 2019**[388](index=388&type=chunk)[389](index=389&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=79&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on Edge Therapeutics' **2018** and **2017** financial statements, confirming **U.S. GAAP** fair presentation, exempt from internal control audit - KPMG LLP issued an unqualified opinion on Edge Therapeutics' financial statements for **2018** and **2017**, confirming fair presentation in accordance with **U.S. GAAP**[390](index=390&type=chunk) - The audit was conducted under **PCAOB** standards, but an audit of internal control over financial reporting was not performed, consistent with the company's status as an emerging growth company[392](index=392&type=chunk) [Balance Sheets](index=80&type=section&id=Balance%20Sheets) Edge's balance sheet as of **December 31, 2018**, shows decreased total assets and equity, with cash and cash equivalents declining from **$88.1 million** to **$34.6 million** Balance Sheet Summary (in thousands) | Metric | December 31, 2018 | December 31, 2017 | | :--------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $34,645 | $88,068 | | Total current assets | $35,651 | $89,054 | | Property and equipment, net | $427 | $3,424 | | Total assets | $36,221 | $92,621 | | Accounts payable | $399 | $4,369 | | Accrued expenses | $419 | $5,422 | | Restructuring reserve | $5,563 | $0 | | Short term debt | $0 | $3,075 | | Total current liabilities | $6,382 | $12,867 | | Long term debt | $0 | $17,383 | | Total stockholders' equity | $29,839 | $62,371 | | Accumulated deficit | $(192,816) | $(151,948) | - Cash and cash equivalents decreased by **$53.4 million (60.6%)** from **$88.1 million** in 2017 to **$34.6 million** in 2018[396](index=396&type=chunk) - Total assets decreased by **$56.4 million (60.9%)** from **$92.6 million** in 2017 to **$36.2 million** in 2018[396](index=396&type=chunk) - Total liabilities decreased significantly from **$30.2 million** in 2017 to **$6.4 million** in 2018, primarily due to the repayment of long-term debt[396](index=396&type=chunk) - Accumulated deficit increased by **$40.9 million (26.9%)** from **$151.9 million** in 2017 to **$192.8 million** in 2018[396](index=396&type=chunk) [Statements of Operations and Comprehensive Loss](index=81&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) Edge reported a net loss of **$40.9 million** (2018), an improvement from **$50.9 million** (2017), driven by reduced R&D and G&A expenses Statements of Operations and Comprehensive Loss (in thousands) | Metric | 2018 | 2017 | Change ($) | Change (%) | | :-------------------------------- | :---------- | :---------- | :---------- | :--------- | | Research and development expenses | $16,069 | $34,312 | $(18,243) | (53)% | | General and administrative expenses | $14,291 | $17,655 | $(3,364) | (19)% | | Restructuring expenses | $9,914 | $0 | $9,914 | 100% | | Impairment charges | $2,823 | $0 | $2,823 | 100% | | Total operating expenses | $43,097 | $51,967 | $(8,870) | (17)% | | Loss from operations | $(43,097) | $(51,967) | $8,870 | (17)% | | Interest income | $872 | $701 | $171 | 24% | | Interest expense | $(1,425) | $(2,180) | $755 | (35)% | | Loss before income taxes | $(43,650) | $(53,446) | $9,796 | (18)% | | Benefit for income taxes | $2,782 | $2,586 | $196 | 8% | | Net loss and comprehensive loss | $(40,868) | $(50,860) | $9,992 | (20)% | | Loss per share (basic and diluted) | $(1.31) | $(1.67) | $0.36 | (21.6)% | | Weighted average common shares outstanding | 31,242,176 | 30,393,952 | 848,224 | 2.8% | - Net loss decreased by **$9.99 million (20%)** from **$50.86 million** in 2017 to **$40.87 million** in 2018[399](index=399&type=chunk) - Total operating expenses decreased by **$8.87 million (17%)** due to significant reductions in R&D and G&A expenses, despite new restructuring and impairment charges[399](index=399&type=chunk) [Statements of Changes in Stockholders' Equity (Deficit)](index=82&type=section&id=Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) Edge's total stockholders' equity decreased from **$62.4 million** (2017) to **$29.8 million** (2018), primarily due to a **$40.9 million** net loss Statements of Changes in Stockholders' Equity (Deficit) (in thousands) | Metric | December 31, 2018 | December 31, 2017 | | :--------------------------------------- | :---------------- | :---------------- | | Common Stock (Shares) | 31,449,989 | 30,869,205 | | Common Stock (Amount) | $10,591 | $10,400 | | Additional Paid-in Capital | $222,644,982 | $214,309,370 | | Accumulated Deficit | $(192,816,365) | $(151,948,359) | | Total Stockholders' Equity | $29,839,208 | $62,371,411 | | Stock based compensation expense | $7,469,441 | $6,182,841 | | Issuance of common stock from exercise of stock options | $721,195 | $118,188 | | Issuance of common stock from 401K match | $145,167 | $217,536 | | Net loss | $(40,868,006) | $(50,859,803) | - Total stockholders' equity decreased by **$32.5 million (52.2%)** from **$62.4 million** in 2017 to **$29.8 million** in 2018[402](index=402&type=chunk) - Additional paid-in capital increased by **$8.3 million** in 2018, primarily due to stock-based compensation expense and common stock issuances[402](index=402&type=chunk) [Statements of Cash Flows](index=83&type=section&id=Statements%20of%20Cash%20Flows) Edge experienced a net cash decrease of **$53.4 million** in 2018, primarily from **$33.2 million** in operating and **$20.3 million** in financing activities Statements of Cash Flows (in thousands) | Cash Flow Activity | 2018 | 2017 | | :--------------------------------- | :-------- | :-------- | | Net cash used in operating activities | $(33,153) | $(40,697) | | Net cash used in investing activities | $0 | $(188) | | Net cash (used in) provided by financing activities | $(20,269) | $22,554 | | Net decrease in cash | $(53,422) | $(18,331) | | Cash and cash equivalents at beginning of period | $88,068 | $106,399 | | Cash and cash equivalents at end of period | $34,646 | $88,068 | - Net cash used in operating activities decreased by **$7.5 million (18.4%)** from **$40.7 million** in 2017 to **$33.2 million** in 2018[405](index=405&type=chunk) - Net cash used in financing activities was **$20.3 million** in 2018, a significant change from **$22.6 million** provided in 2017, primarily due to debt repayment[405](index=405&type=chunk) - The company paid **$1.05 million** in interest in 2018, down from **$1.64 million** in 2017[405](index=405&type=chunk) [Notes to Consolidated Financial Statements](index=84&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail Edge's discontinuation of EG-1962, pending PDS merger, ongoing net losses, and financial position, including restructuring, tax, and legal matters - Edge Therapeutics discontinued the NEWTON 2 study for **EG-1962** and is exploring strategic alternatives, including a merger with **PDS Biotechnology**, which will become the company's primary business if completed[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk) - The company recorded a restructuring charge of **$6.3 million** in Q2 2018, including severance benefits and financial advisor fees, with a restructuring reserve of **$5.56 million** as of **December 31, 2018**[411](index=411&type=chunk)[412](index=412&type=chunk) - The company has ceased all further R&D activities for **EG-1962** and suspended research for other product candidates, implementing cost reductions and workforce restructuring[418](index=418&type=chunk)[423](index=423&type=chunk) - Patent costs are expensed as incurred and classified as general and administrative expenses; patent prosecution activities have been substantially scaled back[425](index=425&type=chunk) - Stock-based compensation expense was **$7.47 million** in 2018, up from **$6.18 million** in 2017, with a weighted average volatility of **86.33%** and risk-free interest rate of **2.23%** for options granted in 2018[448](index=448&type=chunk) Potentially Dilutive Securities Excluded from EPS Calculation (as of December 31) | Security Type | 2018 | 2017 | | :-------------------------------- | :-------- | :-------- | | Stock options to purchase Common Stock | 7,043,825 | 6,462,795 | | Unvested Restricted Stock Units | 509,962 | - | | Warrants to purchase Common Stock | 78,596 | 374,653 | | **Total** | **7,632,383** | **6,837,448** | - The company recorded a full equipment impairment charge of **$2.82 million** in 2018 for manufacturing equipment associated with **EG-1962**, deemed unlikely for future use[441](index=441&type=chunk) Accrued Expenses (in thousands) | Category | December 31, 2018 | December 31, 2017 | | :------------------------------ | :---------------- | :---------------- | | Accrued research and development costs | $76.6 | $2,857.0 | | Accrued professional fees | $69.1 | $267.6 | | Accrued compensation | $27.4 | $1,886.6 | | Accrued other | $213.1 | $385.9 | | Deferred rent | $33.0 | $25.0 | | **Total** | **$419.1** | **$5,422.2** | - As of **December 31, 2018**, **78,596** warrants were exercisable, down from **374,653** in 2017[443](index=443&type=chunk) - Federal NOL carryforwards were **$101.5 million** (expiring 2029-2037, with **$27.1 million** from 2018 having an indefinite carryforward period). Federal R&D credits were **$2.4 million** and orphan drug credit **$24.4 million**[456](index=456&type=chunk) - The company sold **$31.7 million** of New Jersey NOLs and **$131,214** of R&D credits for **$2.82 million** in 2018, and **$26.1 million** of NJ NOLs and **$424,466** of R&D credits for **$2.59 million** in 2017[457](index=457&type=chunk) - The **Tax Cuts and Jobs Act** reduced deferred tax assets by **$13.6 million**, offset by changes to the valuation allowance; no additional effect was determined in 2018[459](index=459&type=chunk) - Operating lease obligations total **$1.74 million**, with **$0.6 million** due in less than one year[482](index=482&type=chunk) - The company repaid its **$20.0 million** Hercules loan in **June 2018**, including **$0.9 million** in back-end fees and **$0.1 million** in accrued interest, resulting in no outstanding debt as of **December 31, 2018**[484](index=484&type=chunk)[485](index=485&type=chunk)