PDS Biotechnology(PDSB) - 2021 Q2 - Quarterly Report

Part I — Financial Information Financial Statements (Unaudited) The company reported a net loss of $3.6 million for the six months ended June 30, 2021, a significant improvement from the $6.9 million loss in the same period of 2020, primarily due to a $4.5 million income tax benefit from the sale of New Jersey Net Operating Losses (NOLs) Total assets increased substantially to $77.4 million from $30.9 million at year-end 2020, driven by a significant increase in cash and cash equivalents from financing activities Stockholders' equity also saw strong growth to $73.0 million Condensed Consolidated Balance Sheets As of June 30, 2021, total assets were $77.4 million, a significant increase from $30.9 million at December 31, 2020 This growth was primarily driven by a rise in cash and cash equivalents to $74.7 million from $28.8 million following successful financing activities Total liabilities remained relatively stable at $4.4 million, while total stockholders' equity grew substantially to $73.0 million from $27.1 million | | June 30, 2021 (unaudited) | December 31, 2020 | |:---|:---:|:---:| | Assets | | | | Cash and cash equivalents | $ 74,749,201 | $ 28,839,565 | | Total current assets | $ 76,934,390 | $ 30,337,230 | | Total assets | $ 77,390,726 | $ 30,890,379 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $ 4,002,818 | $ 3,270,450 | | Total Liabilities | $ 4,398,132 | $ 3,760,803 | | Total stockholders' equity | $ 72,992,594 | $ 27,129,576 | | Total liabilities and stockholders' equity | $ 77,390,726 | $ 30,890,379 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended June 30, 2021, the company reported a net loss of $0.6 million, a significant reduction from a $2.9 million loss in Q2 2020 For the six-month period, the net loss was $3.6 million, down from $6.9 million year-over-year This improvement was largely due to a one-time $4.5 million income tax benefit in 2021 Operating expenses increased, with R&D expenses nearly doubling to $2.8 million in Q2 2021 from $1.4 million in Q2 2020, reflecting increased clinical trial activity | | Three Months Ended June 30, | Six Months Ended June 30, | |:---|:---:|:---:|:---:|:---:| | | 2021 | 2020 | 2021 | 2020 | | Research and development expenses | $ 2,764,195 | $ 1,414,225 | $ 4,177,252 | $ 3,385,904 | | General and administrative expenses | $ 2,341,828 | $ 1,521,736 | $ 3,978,044 | $ 3,581,884 | | Total operating expenses | $ 5,106,023 | $ 2,935,961 | $ 8,155,296 | $ 6,967,788 | | Loss from operations | $ (5,106,023) | $ (2,935,961) | $ (8,155,296) | $ (6,967,788) | | Benefit for income taxes | $ 4,516,488 | $ – | $ 4,516,488 | $ – | | Net loss and comprehensive loss | $ (588,931) | $ (2,929,344) | $ (3,637,549) | $ (6,914,752) | | Net loss per share, basic and diluted | $ (0.03) | $ (0.19) | $ (0.16) | $ (0.54) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased significantly to $73.0 million as of June 30, 2021, from $27.1 million at the end of 2020 This substantial growth was primarily driven by the issuance of common stock, which generated net proceeds of $48.5 million during the first six months of 2021 The increase was partially offset by the net loss of $3.6 million for the same period - Total stockholders' equity grew from $27.1 million at the end of 2020 to $73.0 million as of June 30, 2021[17] - The increase was primarily due to $48.5 million in net proceeds from the issuance of common stock, partially offset by a $3.6 million net loss[17] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2021, net cash used in operating activities was $2.9 million, a significant decrease from $7.3 million in the prior-year period, largely due to a $4.5 million NOL sale Net cash provided by financing activities was $48.8 million, primarily from a public offering of common stock This resulted in a net increase in cash of $45.9 million, boosting the end-of-period cash and cash equivalents balance to $74.7 million | | Six Months Ended June 30, | |:---|:---:|:---:| | | 2021 | 2020 | | Net cash used in operating activities | $ (2,855,966) | $ (7,267,705) | | Net cash provided by financing activities | $ 48,765,601 | $ 12,040,461 | | Net increase in cash and cash equivalents | $ 45,909,635 | $ 4,772,756 | | Cash and cash equivalents at end of period | $ 74,749,200 | $ 16,934,495 | Notes to Condensed Consolidated Financial Statements The notes detail the company's operations as a clinical-stage immunotherapy company, highlighting the impact of COVID-19 on clinical trial timelines Key financial events include raising approximately $48.5 million net from a public offering in June 2021 and receiving a $4.5 million tax benefit from selling New Jersey NOLs in May 2021 The company faces a shareholder lawsuit filed in July 2021 concerning its equity incentive plan Management asserts that its cash balance of $74.7 million is sufficient to fund operations for at least the next 12 months - The company is a clinical-stage immunotherapy company developing cancer and infectious disease treatments based on its proprietary Versamune® T-cell activating platform[23] - The COVID-19 pandemic has caused delays in clinical trial enrollment for PDS0101, though all three studies have been initiated[25] - In June 2021, the company completed a public offering, raising net proceeds of approximately $48.5 million[46] - In May 2021, the company sold New Jersey NOL carryforwards, resulting in a $4.5 million income tax benefit[45][68] - A shareholder lawsuit was filed on July 23, 2021, challenging the approval of the Restated 2014 Equity Incentive Plan and subsequent option grants[73] - Based on available cash of $74.7 million, management believes there are sufficient funds for at least 12 months of operations from the report's filing date[40][48] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's clinical-stage pipeline, centered on the Versamune® platform and its lead candidate, PDS0101, which is in multiple Phase 2 trials It details the results of operations, showing increased R&D and G&A expenses driven by advancing clinical programs and higher personnel costs The discussion on liquidity highlights successful capital raises, including a $48.5 million net offering in June 2021 and a $4.5 million NOL sale Management believes this provides sufficient capital for at least the next 12 months The impact of COVID-19 on trial enrollment is also noted as a continuing challenge - The company's lead candidate, PDS0101, is being evaluated in three Phase 2 clinical trials for HPV-associated cancers, including in combination with Merck's KEYTRUDA®[84][88][92] - Interim data from an NCI-led trial of PDS0101 in a triple combination therapy showed high objective response rates in both checkpoint inhibitor naïve (83%) and refractory (42%) patients[89][90] - As of June 30, 2021, the company had $74.7 million in cash and cash equivalents, which is deemed sufficient to fund operations for at least the next 12 months[103][124] Company Overview PDS is a clinical-stage immunotherapy company developing treatments for cancer and infectious diseases using its proprietary Versamune® T-cell activating platform The lead product, PDS0101, is in three Phase 2 trials for HPV-associated cancers, including combinations with KEYTRUDA® and other agents Interim data from a trial with the NCI showed high objective response rates The pipeline also includes candidates for prostate, breast, and colorectal cancers (PDS0102, PDS0103), melanoma (PDS0104), and infectious diseases like influenza (PDS0202) and COVID-19 (PDS0203) - The VERSATILE-002 Phase 2 trial is evaluating PDS0101 with KEYTRUDA® for first-line treatment of HPV16-positive head and neck cancer Preliminary data is expected between Q4 2021 and Q1 2022[84][87] - An NCI-led Phase 2 trial of PDS0101 in combination with Bintrafusp alfa and NHS-IL12 showed an 83% objective response rate in CPI naïve patients and 42% in CPI refractory patients in interim data presented at ASCO 2021[88][89][90] - A Phase 2 trial with MD Anderson is evaluating PDS0101 with chemo-radiotherapy in locally advanced cervical cancer, with preliminary data expected in H1 2022[92] - The pipeline includes PDS0102 (prostate/breast cancer), PDS0103 (MUC1-associated cancers), PDS0104 (melanoma), and infectious disease vaccines for influenza (PDS0202) and COVID-19 (PDS0203)[93][94][95] Results of Operations For Q2 2021, R&D expenses increased 95% year-over-year to $2.8 million, driven by higher clinical study and manufacturing costs G&A expenses rose 54% to $2.3 million due to increased personnel and professional fees For the first six months of 2021, R&D expenses grew 23% to $4.2 million, and G&A expenses increased 11% to $4.0 million A significant $4.5 million income tax benefit from an NOL sale substantially reduced the net loss for both the quarter and six-month period compared to the prior year | | Three Months Ended June 30, | Increase (Decrease) | |:---|:---:|:---:|:---:| | | 2021 | 2020 | % | | Research and development expenses | $ 2,764,000 | $ 1,414,000 | 95% | | General and administrative expenses | $ 2,342,000 | $ 1,522,000 | 54% | | Net loss and comprehensive loss | $ (589,000) | $ (2,929,000) | (80)% | | | Six Months Ended June 30, | Increase (Decrease) | |:---|:---:|:---:|:---:| | | 2021 | 2020 | % | | Research and development expenses | $ 4,177,000 | $ 3,386,000 | 23% | | General and administrative expenses | $ 3,978,000 | $ 3,582,000 | 11% | | Net loss and comprehensive loss | $ (3,638,000) | $ (6,915,000) | (47)% | - The increase in R&D expenses for Q2 2021 was primarily due to a $1.0 million increase in clinical studies and $0.1 million in manufacturing costs[110] - A $4.5 million income tax benefit was recognized from the sale of New Jersey Net Operating Losses (NOLs), significantly reducing the net loss[112][116] Liquidity and Capital Resources As of June 30, 2021, the company had a strong liquidity position with $74.7 million in cash and cash equivalents This was achieved through several financing activities, most notably a public offering in June 2021 that raised net proceeds of $48.5 million and a $4.5 million sale of NOLs in May 2021 Net cash used in operating activities for the first six months of 2021 was $2.9 million Management believes the existing cash reserves are sufficient to fund operations for at least the next 12 months - In June 2021, the company sold 6,088,235 shares of common stock, receiving net proceeds of approximately $48.5 million[121] - In May 2021, the company received approximately $4.5 million from the sale of New Jersey NOLs[122] - As of June 30, 2021, the company had $74.7 million in cash and cash equivalents[123] - Management believes existing cash will be sufficient to satisfy operating needs for at least one year from the filing date[124] | Cash Flows (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |:---|:---:|:---:| | Net cash used in operating activities | $ (2,856) | $ (7,268) | | Net cash provided by financing activities | $ 48,766 | $ 12,040 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate sensitivity related to its $74.7 million in cash and cash equivalents These funds are held in a non-interest-bearing operating account and an institutional U.S. Treasury money market fund Due to the short-term nature and low-risk profile of these investments, management does not believe a 100 basis point change in interest rates would materially affect their fair market value - The company's primary market risk is interest rate sensitivity on its $74.7 million in cash and cash equivalents[147] - Due to the short-term, low-risk nature of investments (U.S. Treasury money market fund), a significant change in interest rates is not expected to have a material impact[147] Controls and Procedures Management, including the CEO and CFO, conducted an evaluation of the company's disclosure controls and procedures as of June 30, 2021 They concluded that these controls are effective Furthermore, no changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Management concluded that disclosure controls and procedures were effective as of the end of the quarter covered by the report[148] - No material changes to internal control over financial reporting were identified during the quarter[149] Part II — Other Information Legal Proceedings On July 23, 2021, a purported stockholder filed a class action and derivative lawsuit against PDS, its directors, and certain executive officers The complaint challenges the shareholder approval of the 2014 Equity Incentive Plan and subsequent stock option grants, alleging breach of fiduciary duties and corporate waste The company intends to defend the action vigorously but cannot estimate the costs or predict the outcome at this early stage - A shareholder derivative and class action lawsuit was filed on July 23, 2021, against the company, its directors, and certain officers[151] - The lawsuit contests the approval of the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan and subsequent stock option grants[151] - The company intends to defend the action vigorously but is currently unable to estimate costs or predict the outcome[151] Risk Factors The company states there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 It advises investors to carefully consider those risks, which could materially harm the business and cause the stock price to decline - There have been no material changes from the risk factors previously reported in the Annual Report on Form 10-K for the year ended December 31, 2020[153] Other Required Disclosures The company reports no unregistered sales of equity securities during the period Additionally, there were no defaults upon senior securities, no mine safety disclosures to report, and no other material information to disclose under Item 5 Item 6 provides an index of the exhibits filed with the report - There were no unregistered sales of the Company's equity securities during the six months ended June 30, 2021 (Item 2)[154] - The company reported no defaults upon senior securities (Item 3), no mine safety disclosures (Item 4), and no other information (Item 5)[155][156][157] - Item 6 lists the exhibits filed with the 10-Q report[158][160]