PDS Biotechnology(PDSB) - 2021 Q4 - Annual Report

PART I Item 1. Business PDS Biotechnology is a clinical-stage immunotherapy company developing T-cell activating platforms, Versamune and Infectimune, for oncology and infectious diseases Company Overview PDS Biotechnology develops molecularly targeted immunotherapies using Versamune and Infectimune platforms for various cancers and infectious diseases - PDS Biotechnology is a clinical-stage immunotherapy company developing molecularly targeted immunotherapies[18] - Proprietary T-cell activating platforms include Versamune® for oncology and Infectimune™ for infectious disease[18] - Platforms induce large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells; Infectimune also promotes disease-specific neutralizing antibodies[18] - Developing targeted product candidates for HPV-associated cancers, melanoma, colorectal, lung, breast, prostate cancers, COVID-19, and universal influenza[18] Immunotherapy Overview Immunotherapy leverages the immune system to fight disease, and Versamune aims to overcome current limitations by stimulating potent T-cell responses and memory - Immunotherapy is a treatment that uses the person's own immune system to fight disease by recognizing, attacking, and eliminating cancer and neutralizing infectious agents[20] - Challenges to effective immunotherapy include the inability to generate adequate quantities of high-quality killer (CD8+) T-cells, minimize systemic toxicities, overcome immune tolerance, and generate immunological memory[23] - An ideal cancer immunotherapy should stimulate both tumor-specific killer and helper T-cells, activate and expand large numbers of T-cells, alter the tumor microenvironment, generate immune memory, and optimize safety and tolerability[25] - The Versamune platform possesses these attributes, inducing potent anti-tumor responses in preclinical studies[26] Versamune Products Versamune is a non-viral T-cell activating platform that enhances immune responses, expands killer T-cells, and induces immune memory with a favorable safety profile PDS0101: Human Papillomavirus (HPV)-Related Cancers PDS0101, a Versamune-based immunotherapy for HPV-related cancers, has shown promising preclinical and Phase 1/2a clinical results, inducing T-cell responses and tumor regression - PDS0101 is the lead Versamune-based immunotherapy, combining Versamune with HPV16 viral proteins for HPV-related cancers[53] - Preclinical studies showed complete regression of tumors after a single subcutaneous injection[53] - Phase 1/2a clinical data confirmed induction of high levels of active HPV-specific CD8+ killer T-cells and clinical regression of cervical lesions, with patients remaining disease-free for 2 years[53] - PDS0101 is being studied in multiple Phase 2 clinical studies in various HPV-related cancers in collaboration with NCI, Merck, MD Anderson Cancer Center, and Mayo Clinic[53] PDS0102: T-cell receptor gamma Alternate Reading frame Protein (TARP)-Related Cancers PDS0102 targets TARP-associated cancers like prostate and breast, demonstrating enhanced TARP-specific killer T-cell responses in preclinical studies - PDS0102 targets TARP-associated cancers, including acute myeloid leukemia (AML), prostate, and breast cancers[54] - Approximately 90% of prostate cancers and 50% of breast cancers overexpress the TARP tumor antigen[54] - Preclinical studies showed a dramatically enhanced TARP-specific killer T-cell response when TARP antigens were combined with Versamune[54] - PDS licensed patent rights for TARP from the National Cancer Institute (NCI) in November 2021[54] PDS0103: Mucin-1 (MUC1)-Related Cancers PDS0103 targets MUC1-associated cancers, showing enhanced MUC1-specific killer T-cell responses in preclinical studies - PDS0103 is a Versamune-based therapy targeting MUC1-associated cancers, such as ovarian, breast, colorectal, and lung cancers[55] - MUC1 is highly expressed in multiple solid tumor types and associated with drug resistance and poor disease prognosis[55] - Preclinical studies demonstrated a dramatically enhanced MUC1-specific killer T-cell response when novel antigens were combined with Versamune[55] Infectimune Products Infectimune is a cationic platform for infectious disease vaccines, designed to induce rapid, long-lasting neutralizing antibodies and T-cell responses for sustained protection PDS0201: Tuberculosis PDS0201 combines Versamune with M. tuberculosis antigens for TB prevention, showing promising T-cell induction in preclinical development - PDS0201 combines the Versamune platform with Mycobacterium tuberculosis antigens for tuberculosis (TB) prevention[58] - Preliminary evaluations demonstrated highly promising TB-specific T-cell induction in vivo[95] - Currently in preclinical development, with testing in Brazil delayed due to COVID-19 research restrictions[95] PDS0202: Universal influenza vaccine PDS0202 is a universal influenza vaccine candidate combining Infectimune with COBRA antigens, showing significant protection in preclinical work - PDS0202 is a universal influenza vaccine candidate combining Infectimune with Computationally Optimized Broadly Reactive Antigen (COBRA) antigens[59] - Preclinical work is complete, showing significant hemagglutinin inhibition (HAI) titer levels (28x to 62x) and protection against the flu virus[90][93] - PDS entered into a nonexclusive license agreement for COBRA antigens with the University of Georgia in Q4 2021[59] - The company is seeking nondilutive financing to fund the next steps in development[94] PDS0203: SARS-CoV-2 vaccine PDS0203 is an Infectimune-based COVID-19 vaccine candidate, demonstrating strong neutralizing antibodies and T-cell responses in preclinical studies - PDS0203 is an Infectimune-based COVID-19 vaccine candidate, a subunit vaccine utilizing a SARS-CoV-2 recombinant spike protein[60][80] - Preclinical studies demonstrated strong neutralizing antibodies, virus-specific polyfunctional CD8+ and CD4+ T-cells, and long-term memory T-cell responses[80][84] - Observed a 30-45-fold increase in COVID-19 specific T-cells and a 20-25-fold increase in neutralizing antibodies compared to the vaccine without Versamune[84] - Development and clinical trials are being conducted in Brazil by collaborator Farmacore, with a commitment of up to US$60 million in funding from the Brazilian government[60][82] - The agreement with Farmacore was extended for six months to May 31, 2022, due to delays in manufacturing and scale-up processes[83] Versamune Development Strategy Versamune's clinical strategy focuses on combination immunotherapies to enhance clinical benefit and mitigate toxicity for unmet medical needs VERSATILE-002: PDS0101 + KEYTRUDA® The VERSATILE-002 Phase 2 trial evaluates PDS0101 with KEYTRUDA® for HPV16-positive head and neck cancer, showing preliminary safety and efficacy - The VERSATILE-002 Phase 2 clinical trial evaluates PDS0101 in combination with Merck's KEYTRUDA® for first-line treatment of recurrent or metastatic HPV16-positive head and neck cancer[64] - Preliminary safety data showed the combination is likely safe and well-tolerated without evidence of enhanced or significant toxicity in the first 18 CPI-naïve patients[66] - The CPI-naïve arm achieved its preliminary efficacy milestone (at least four objective responses in the first 17 patients) and is proceeding to full enrollment[66][367] National Cancer Institute: PDS0101+ M9241 +Bintrafusp Alfa An NCI-led Phase 2 trial of PDS0101 with M9241 and Bintrafusp Alfa for HPV-associated cancers shows promising objective response rates and increased median survival - An NCI-led Phase 2 clinical trial evaluates PDS0101 with NHS-IL12 (M9241) and Bintrafusp Alfa (M7824) for advanced/refractory HPV-associated cancers[68] - Interim data (ASCO 2021) showed objective response rates of 83% (5/6) in CPI-naïve patients and 42% (5/12) in CPI-refractory HPV16-positive patients[70][370] - As of December 31, 2021, the median survival of all patients (3:1 CPI refractory to naïve) increased to 12 months and was progressing, significantly higher than historical averages (7-11 months for CPI naïve, 3-4 months for CPI refractory)[70][372] - Preclinical data suggested synergistic anti-tumor activity of the triple combination, and PDS0101 did not appear to compound toxicities in clinical trials[69][371] MD Anderson Cancer Center (IMMUNOCERV): PDS0101+ Chemoradiotherapy The IMMUNOCERV Phase 2 trial investigates PDS0101 with chemo-radiotherapy for locally advanced cervical cancer, with preliminary data expected in 2022 - The IMMUNOCERV Phase 2 clinical trial at MD Anderson Cancer Center investigates PDS0101 in combination with standard-of-care chemo-radiotherapy (CRT) for locally advanced cervical cancer[71][373] - The trial aims to evaluate the rate of regression in patients with primary tumors ≥5cm, complete metabolic response by PET-CT, and >90% tumor volume reduction by MRI[373] - Preliminary data from this trial is expected in 2022[373] - Enrollment rate in this trial has been negatively impacted by the COVID-19 pandemic[71] Mayo Clinic: PDS0101 Monotherapy and in combination with KEYTRUDA® Mayo Clinic is evaluating PDS0101 alone or with KEYTRUDA® for HPV-associated oropharyngeal cancer at high risk of recurrence - An Investigator-Initiated Trial (MC200710) at Mayo Clinic is evaluating PDS0101 alone or in combination with KEYTRUDA® for HPV-associated oropharyngeal cancer (HPV(+)OPSCC) at high risk of recurrence[72][374] - Treatment is administered as neoadjuvant therapy before patients proceed to transoral robotic surgery (TORS) with curative intent[73][374] - The trial will explore whether PDS0101, with or without checkpoint inhibition, increases HPV-specific anti-tumor responses, tumor shrinkage, pathologic regression, and decreases in circulating tumor DNA (ctDNA)[73][374] Infectimune Development Strategy Infectimune's strategy focuses on developing effective, long-lasting vaccines for infectious diseases by inducing strong T-cell and antibody responses - The Infectimune platform technology aims to improve treatment and preventive options in infectious diseases through strong induction of CD8+ and CD4+ T-cells as well as antibodies[79] - The COVID-19 pandemic has highlighted Infectimune's potential for developing more effective and longer-lasting protective vaccines[79] - Current vaccine approaches predominantly focus on antibody responses, but Infectimune aims for more durable and broad protection by inducing T-cell responses in addition to antibodies[79] Leadership PDS Biotechnology is led by an experienced team of executives and directors, supported by a Scientific Advisory Board with expertise in drug development - The company is led by a team of executives and directors with significant experience in drug discovery, development, and commercialization[98] - Key leadership includes CEO Frank Bedu-Addo, CSO Gregory Conn, CMO Lauren V. Wood, and CFO Matthew Hill[98] - Supported by scientific leaders in vaccine development and oncology, including Dr. Lisa Rohan (Chair of the Scientific Advisory Board), Dr. Einstein, Professor Leaf Huang, and Dr. Olivera Finn[99] Facilities & Manufacturing and Commercial scale up PDS Biotechnology relies on third-party CMOs for manufacturing product candidates and conducts R&D at Princeton Innovation Center BioLabs - PDS Biotechnology relies on third-party contract manufacturing organizations (CMOs) for producing product candidates for preclinical research and clinical studies[100] - The company does not own or operate cGMP compliant manufacturing facilities and has no plans to develop its own manufacturing operations in the foreseeable future[100][102] - Product candidates are manufactured using a readily scalable, fill-finish process[100] - Research and development activities are located at the Princeton Innovation Center BioLabs[101] Regulatory Pathway PDS Biotechnology pursues BLA for PDS0101 and plans IND submissions for PDS0102 and PDS0103 to advance product candidates through regulatory pathways - PDS0101 is in ongoing Phase 2 clinical trials, with the next step being a registrational Phase 2/3 clinical trial to seek marketing authorization[104][105] - The company anticipates seeking marketing authorization from the FDA for its product candidates through the Biologics License Application (BLA) pathway[105] - For preclinical product candidates PDS0102 and PDS0103, plans are to progress to an IND submission in 2022 or early 2023 for first-in-human trials[106] - Initial feedback from the FDA on the clinical trial design for the PDS0103 program has been received[106] Intellectual Property PDS Biotechnology protects its intellectual property through patents, applications, and trade secrets for its platforms, licensing key antigens for product development PATENTS PDS maintains a multi-layered patent strategy for its Versamune platform, holding numerous U.S. and foreign patents and pending applications - PDS seeks to maintain high barriers to entry using a multi-layered approach to patents, patent applications, know-how, and trade secrets related to the Versamune platform[107] - As of December 31, 2021, PDS holds 6 U.S. patents (expiring 2028-2033) and 16 pending U.S. patent applications (expiring 2033-2037)[108] - As of March 1, 2022, PDS holds 70 issued foreign patents and 38 pending or published foreign patent applications (expiring 2031-2037 or later)[108] - The USPTO recently allowed an application for the HPV 16 immunotherapy, which will run until October 2037[108] Licensed Patents PDS holds exclusive licenses for key components like (R)-DOTAP and antigens (TARP, MUC1, COBRA) crucial for its Versamune and Infectimune platforms - PDS has an exclusive worldwide license from Merck & Cie for (R)-DOTAP, its crystal forms, manufacturing methods, and pharmaceutical compositions, which are significant to Versamune and Infectimune platforms[109] - Licensed T-cell receptor gamma alternate reading frame protein (TARP) from NCI for PDS0102, targeting prostate, breast cancers, and Acute Myeloid Leukemia[110] - Licensed Mucin-1 (MUC1) novel highly immunogenic agonist epitopes from NCI for PDS0103, targeting ovarian, breast, colorectal, and lung cancers[110] - Entered a non-exclusive agreement to license COBRA universal influenza antigens from the University of Georgia Research Foundation for PDS0202[111] Trade Secrets and Other Proprietary Information PDS relies on trade secrets for proprietary know-how, protected by confidentiality agreements, but faces risks of independent discovery or unauthorized disclosure - PDS relies on trade secrets to protect proprietary know-how and technological advances, especially where patent protection is not appropriate or obtainable[112] - Trade secret protection depends on confidentiality agreements with employees, consultants, and collaborators to prevent disclosure of proprietary information[112] - There is a risk that others may independently discover trade secrets or that they may be disclosed in violation of agreements, impairing the company's competitive position[112] Material License Agreements and Research and Development Agreements PDS has various license and R&D agreements with NIH, Merck Eprova, NCI, MSD, Farmacore, and University of Georgia for product development and clinical trials - Patent License Agreements with NIH grant PDS nonexclusive licenses for cancer vaccine development, with associated royalties and milestone payments[113][114][115] - DOTAP Chloride Enantiomer License Agreement with Merck Eprova AG provides an exclusive license for R-enantiomer and S-enantiomer of DOTAP Chloride for worldwide commercialization[116] - Cooperative Research and Development Agreements (CRADAs) with NCI involve research and development activities for Versamune immunotherapeutic technology, including PDS0101 and PDS0103, with PDS providing annual funding[117][118][125][126] - Clinical Trial Collaboration and Supply Agreement with MSD International GmbH (Merck) for a Phase 2 trial evaluating PDS0101 with KEYTRUDA® for HPV16-positive head and neck cancer[122][123] - License and Collaboration Agreement with Farmacore Biotechnology for PDS0203 (COVID-19 vaccine) in Latin America, with Farmacore leading regulatory and clinical trial efforts[128] - Option to License with the University of Georgia Research Foundation for COBRA universal influenza antigens[129] COVID-19 Impact on Business and Operations The COVID-19 pandemic has negatively impacted PDS Biotechnology's liquidity and operations, causing clinical trial delays and posing ongoing challenges - The COVID-19 pandemic has negatively affected the company's liquidity and operations, causing delays in clinical trial enrollment and initiation[130] - Clinical trial sites have implemented measures to ensure patient and staff safety and trial integrity, but the pandemic has impacted enrollment pace[130] - COVID-19 related travel and other restrictions may impact on-site monitoring, audits, and inspections, and lead to shortages of site personnel and equipment[130] - The full impact of the COVID-19 pandemic is unknown and rapidly evolving, with potential for continued economic and supply chain disruptions[130] Competition PDS Biotechnology faces intense competition from major pharmaceutical and biotech companies, requiring superior efficacy, safety, and convenience for product success - The biotechnology and pharmaceutical industries are characterized by intense competition to develop new technologies and proprietary products[131] - Competitors include major pharmaceutical companies (Jansen Pharmaceuticals, Sanofi-Aventis, GlaxoSmithKline plc, Merck, Pfizer) and development-stage biotechnology companies (Inovio, Advaxis, Moderna, BioNTech)[131] - Competition is based on efficacy, safety, convenience of administration, price, availability of therapeutics, and regulatory approval[133] - Competitors may obtain FDA or other regulatory approval more rapidly, establishing a strong market position before PDS can enter[133] Government Regulation and Product Approval PDS Biotechnology's product candidates are subject to extensive, lengthy, and expensive regulatory processes for development, approval, and post-market compliance in the U.S. and abroad U.S. Product Development Process The U.S. product development process involves preclinical testing, IND submission, multi-phase clinical trials, BLA submission, and FDA approval, which is lengthy and uncertain - The FDA regulates biological drug products under the Federal Food, Drug and Cosmetic Act (FDCA) and the Public Health Service Act (PHSA)[135] - The process involves preclinical testing (GLP), submission of an Investigational New Drug (IND) application, and adequate human clinical studies (GCP) in three phases (Phase 1, 2, 3)[136][137] - Marketing approval requires submission of a Biologics License Application (BLA), satisfactory completion of FDA inspections of manufacturing facilities (cGMP), and FDA review and approval[136] - The approval process is lengthy, expensive, and uncertain; FDA may delay, limit, or deny approval based on data interpretation or manufacturing deficiencies[143][145][148] - Post-approval requirements include ongoing regulation, record-keeping, adverse event reporting, cGMP compliance, and restrictions on promotion and advertising[152] Regulatory Exclusivities Applicable to Biologics and Related Matters Biologics benefit from regulatory exclusivities like 4-year data and 12-year market exclusivity, plus potential orphan drug and pediatric extensions - The Biologics Price Competition and Innovation Act (BPCIA) provides reference biologics with 4 years of exclusivity (FDA prohibited from accepting biosimilar applications) and 12 years of market exclusivity (FDA prohibited from approving biosimilar applications) after first licensure[156] - Orphan Drug Exclusivity grants 12 years of market exclusivity for biological products indicated for rare diseases (fewer than 200,000 individuals in the U.S.)[158] - Pediatric Exclusivity adds six months of exclusivity to the end of the latest-expiring form of exclusivity for complying with FDA's Written Request for pediatric studies[159] - Patent Term Extensions of up to five years may be available to cover an FDA-approved product for patent term lost during regulatory review[160] Other U.S. Healthcare Laws and Compliance Requirements PDS is subject to federal and state healthcare laws, including anti-fraud, anti-kickback, and privacy regulations, with non-compliance carrying severe penalties - PDS's activities are subject to various federal and state healthcare laws, including anti-fraud and abuse provisions (Anti-Kickback Statute, False Claims Act, HIPAA)[161] - The federal Anti-Kickback Statute prohibits offering or receiving remuneration to induce purchases reimbursable under federal healthcare programs; violations can result in significant criminal fines and exclusion from Medicare/Medicaid[162][163] - The federal False Claims Act prohibits presenting false claims to the government, with civil and criminal penalties, and allows private individuals to bring 'qui tam' actions[166] - HIPAA and the HITECH Act impose privacy and security standards for individually identifiable health information, with significant penalties for non-compliance[168][170] - The Federal Physician Payments Sunshine Act requires reporting of payments to physicians and teaching hospitals, with penalties for non-compliance[172] - Non-compliance with these laws can lead to civil, criminal, and administrative penalties, damages, fines, exclusion from government programs, and reputational harm[175] Coverage, Pricing and Reimbursement Product sales depend on adequate coverage and reimbursement from third-party payors, facing challenges from price controls and healthcare reforms - Sales of approved products depend on adequate coverage and reimbursement from third-party payors (federal, state, private)[177] - Third-party payors increasingly challenge product prices, medical necessity, and cost-effectiveness, potentially limiting coverage or setting inadequate reimbursement rates[177] - International markets have varying price controls and reimbursement schemes, often leading to lower prices than in the United States[178] - U.S. healthcare reforms (e.g., ACA) and legislative interest in drug pricing could result in additional downward pressure on product prices and harm profitability[180][182][183] Foreign Regulation Marketing products internationally requires compliance with diverse foreign regulations, including data protection laws like GDPR, with significant penalties for non-compliance - Marketing products outside the U.S. requires compliance with numerous and varying regulatory requirements of other countries regarding quality, safety, efficacy, and marketing authorization[184] - Approval processes vary between countries and can be longer than in the U.S.; approval in one country does not ensure approval in another[184] - Foreign data protection laws, such as the EU General Data Protection Regulation (GDPR), impose significant compliance obligations, strict rules on data transfer, and large penalties (up to €20 million or 4% of annual global revenues) for non-compliance[185] Employees and Human Capital Management PDS Biotechnology employs 22 skilled individuals, leverages external experts, and focuses on talent retention through competitive compensation and benefits - As of December 31, 2021, the company had 22 highly skilled employees, many holding advanced degrees[187] - The management team possesses considerable experience in drug development, research, manufacturing, clinical development, and regulatory matters[186] - The company's virtual operating strategy involves collaborating with scientific and clinical experts[186] - PDS provides market salaries, bonuses, opportunities for equity ownership, development programs, and a robust employment package to attract and retain talent[187] - Proactive health and safety measures have been implemented throughout the COVID-19 pandemic to protect employees[188] Environmental Regulations PDS Biotechnology is compliant with environmental laws, anticipating no material impact on its capital expenditures, earnings, or competitive position - The company believes it is compliant in all material respects with applicable environmental laws[189] - Compliance with environmental regulations is not anticipated to have a material effect on capital expenditures, earnings, or competitive position[189] Item 1A. Risk Factors PDS Biotechnology faces significant risks including financial losses, dependence on product development, capital needs, clinical trial uncertainties, third-party reliance, and regulatory and intellectual property challenges Risk Factors Summary The company faces risks from financial losses, dependence on early-stage products, capital requirements, clinical trial uncertainties, competition, and regulatory non-compliance - The company has incurred significant losses since inception and expects to continue incurring losses, potentially never achieving profitability[193] - Success is dependent on early-stage Versamune and Infectimune products, which require regulatory approval and successful commercialization[193] - Additional capital is required to fund operations, and failure to obtain financing may delay or prevent product development and commercialization[193] - Clinical trials are expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes, with potential for delays in enrollment and completion[193] - The company faces significant competition from other biotechnology and pharmaceutical companies[193] - Reliance on third parties for manufacturing, sales, marketing, and distribution capabilities poses risks[193] - Business operations could be adversely affected by health epidemics (e.g., COVID-19) and system failures or cyberattacks[196] - Inability to obtain and maintain patent protection or involvement in intellectual property lawsuits could harm the business[196] - Failure to comply with federal and state healthcare regulatory laws could lead to criminal prosecution and substantial civil penalties[196] Risks Related to Our Business, Financial Position and Capital Requirements Risks include limited operating history, significant losses, need for additional capital, potential dilution, talent retention challenges, and vulnerabilities to misconduct or system failures - The company has a limited operating history and has never generated any product revenue, making predictions about future success or viability difficult[194][195] - The company has incurred significant losses since inception, with an accumulated deficit of $60.7 million as of December 31, 2021, and expects to continue incurring substantial losses[198][199] - Substantial additional capital is required to fund operations and complete product development; failure to obtain financing may lead to delays or termination of programs[203] - Raising additional funds by issuing equity securities may cause substantial dilution to existing stockholders, while debt financing may impose restrictive covenants[207] - Future success depends on the ability to retain executive officers and attract, retain, and motivate qualified scientific, clinical, and operational personnel[209][210] - The company's employees, contractors, and partners may engage in misconduct or improper activities, including noncompliance with regulatory standards, which could adversely affect results of operations[217] - System failures or cyberattacks could lead to information theft, data corruption, operational disruption, and financial loss, potentially delaying regulatory approval efforts[218][219] - Failure to maintain an effective system of internal control over financial reporting could adversely affect investor confidence and the value of common stock[223] Risks Related to Clinical Development, Regulatory Approval and Commercialization Clinical development risks include high costs, uncertain outcomes, enrollment delays, potential adverse effects, market acceptance challenges, and regulatory non-compliance penalties - Clinical trials are very expensive, time-consuming, difficult to design and implement, and involve an uncertain outcome; failure to demonstrate safety and efficacy will prevent commercialization[227] - Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process, which can be made more difficult by various factors, including the COVID-19 pandemic[232] - Success in preclinical testing and early clinical trials does not ensure success in later-stage clinical trials, and results are often susceptible to multiple interpretations[229][256] - PDS0101 may cause adverse effects or have other properties that could delay or prevent regulatory approval or limit the scope of any approved label or market acceptance[243][244] - Even if regulatory approval is obtained, PDS0101 may fail to achieve market acceptance by physicians, patients, and third-party payors, which is necessary for commercial success[262] - The company's limited resources may lead to pursuing particular product candidates or indications and failing to capitalize on potentially more profitable opportunities[264] - Failure to comply with federal and state healthcare regulatory laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA) could result in criminal prosecution, substantial civil penalties, and exclusion from government programs[265][275] - Product liability lawsuits against the company could result in substantial liabilities, decreased demand, and harm to reputation[279] - If the company is unable to establish sales, marketing, and distribution capabilities, either independently or through collaborations, it may not successfully commercialize PDS0101[280] - Commercializing products outside the United States involves additional risks related to international operations, including differing regulatory requirements, intellectual property protection, and economic instability[282] - Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the difficulty and cost of obtaining marketing approval and commercializing products, affecting prices and profitability[284][287] Risks Related to Our Dependence on Third Parties The company's reliance on third parties for manufacturing, clinical trials, and commercialization creates risks related to performance, quality, and operational disruptions - The company has no manufacturing, sales, marketing, or distribution capability and must rely on third parties for these activities, creating dependency risks[288] - Reliance on third-party contract manufacturing organizations (CMOs) for product supply creates risks if they are unreliable or fail to meet quality standards or deadlines[288] - The company relies on Contract Research Organizations (CROs) and clinical trial sites to conduct trials, with limited influence over their performance, potentially leading to delays or unreliable data[289][292] - Establishing and managing strategic collaborations for research, development, marketing, and commercialization is difficult and time-consuming, and collaborators may not commit sufficient resources[294][295][298] - Failure of third parties to meet their contractual, regulatory, and other obligations could materially affect the company's business[299] - Health epidemics, pandemics (e.g., COVID-19), or outbreaks of infectious diseases could adversely affect third-party operations, clinical trial sites, and business operations[300][303] Risks Related to Our Intellectual Property Intellectual property risks include challenges in obtaining and maintaining patent protection, potential litigation, changes in patent law, and trade secret misappropriation - The company's success depends on obtaining and maintaining patent protection for its Versamune and Infectimune platforms and products; the patent prosecution process is expensive, time-consuming, and uncertain[308] - Issued patents may be challenged for validity, enforceability, or scope, potentially leading to narrowing, invalidation, or unenforceability of patent rights[309][312] - Involvement in lawsuits to protect or enforce patents, or defend against infringement claims, can be expensive, time-consuming, and unsuccessful, diverting management attention[313][314] - Changes in patent law in the United States and other jurisdictions could diminish the value of patents and impair the ability to protect products[317][318] - Inability to protect intellectual property rights throughout the world, particularly in countries with weaker laws, could allow competitors to use technologies and impair business[319] - Reliance on third parties requires sharing trade secrets, increasing the possibility of discovery, misappropriation, or unauthorized disclosure by competitors[321] General Market Risk Factors Market risks include stock price volatility, potential future share sales, control by principal stockholders, lack of dividends, anti-takeover provisions, and tax attribute limitations - The market price of the company's common stock is expected to be volatile, influenced by clinical trial outcomes, regulatory approvals, competition, financial performance, and general market conditions[323] - Future sales of shares by existing stockholders could cause the stock price to decline[329] - Principal stockholders and management own a significant percentage (approximately 4.7% as of December 31, 2021) and can exert substantial control over matters subject to stockholder approval[330] - The company does not anticipate paying any cash dividends in the foreseeable future, intending to retain earnings for business development[328] - Anti-takeover provisions under Delaware law and exclusive forum clauses in corporate documents could make an acquisition more difficult and limit stockholders' ability to bring claims in their forum of choice[337][338][341] - The company is required to meet Nasdaq Capital Market's continued listing requirements; failure to do so could result in delisting, negatively affecting stock price and capital raising ability[327] - Pre-merger U.S. net operating loss carryforwards and certain other tax attributes are subject to limitations due to an ownership change under Section 382 of the Code[332][333] - The effective tax rate may increase in the future due to changes in tax legislation or interpretations, adversely affecting financial condition and results of operations[334][336] Item 1B. Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[344] Item 2. Properties PDS Biotechnology leases research facilities at Princeton Innovation Center BioLabs and a corporate office in Florham Park, NJ, which are suitable for its needs - The company maintains a month-to-month lease for its research facilities at the Princeton Innovation Center BioLabs[345] - Corporate and executive office is located at 25B Vreeland Road, Suite 300, Florham Park, NJ, under a sublease agreement effective March 5, 2020, for approximately 40 months with an option to renew[346] - The company believes its current facilities are suitable and adequate to meet its current needs[348] Item 3. Legal Proceedings PDS Biotechnology is defending against a former CFO's arbitration claim for wrongful termination and previously saw a class action dismissed - A putative class action and shareholder derivative complaint by David R. Rosener was voluntarily dismissed after stockholders ratified the 2014 Equity Incentive Plan[549][550] - The former Chief Financial Officer, Seth Van Voorhees, filed a Demand for Arbitration alleging wrongful termination and seeking no less than $3,000,000 in damages[551] - The company denies all alleged wrongful conduct in the arbitration matter and is vigorously defending it[551] - Management does not believe any pending legal matter will have a material adverse effect on its financial position, results of operations, or cash flows[552] Item 4. Mine Safety Disclosures This item is not applicable to PDS Biotechnology Corporation - Not applicable[350] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities PDSB common stock is listed on Nasdaq, with 44 stockholders of record, no cash dividends paid, and no issuer equity purchases - Common stock is listed on the Nasdaq Capital Market under the symbol 'PDSB'[351] - As of March 25, 2022, there were 44 stockholders of record[352] - The company has never declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future[353] - The company did not purchase any of its registered equity securities during the period covered by this Annual Report[355] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews PDS Biotechnology's financial condition, operations, clinical updates, accounting policies, liquidity, and capital resources, highlighting ongoing losses Introduction to PDS Biotechnology Corporation PDS Biotechnology is a clinical-stage immunotherapy company developing Versamune and Infectimune platforms, with PDS0101 in Phase 2 trials and significant accumulated losses PDS0101 Clinical Trial Updates PDS0101 trials (VERSATILE-002, NCI-led, IMMUNOCERV, Mayo Clinic) show promising safety and efficacy in HPV-associated cancers - VERSATILE-002 Phase 2 trial (PDS0101 + KEYTRUDA® for HPV16-positive head and neck cancer) showed preliminary safety and met its preliminary efficacy milestone for the CPI-naïve arm, allowing full enrollment[366][367] - NCI-led Phase 2 trial (PDS0101 + M9241 + Bintrafusp Alfa for advanced HPV-associated cancers) reported objective response rates of 83% in CPI-naïve and 42% in CPI-refractory patients, with median survival increasing to 12 months (progressing) as of Dec 31, 2021[369][370][372] - PDS0101 did not appear to compound the toxicities of the other immunotherapies in the NCI-led trial[371] - IMMUNOCERV Phase 2 trial (PDS0101 + Chemo-Radiotherapy for locally advanced cervical cancer) is actively recruiting, with preliminary data expected in 2022[373] - Mayo Clinic initiated an Investigator-Initiated Trial (MC200710) for PDS0101 monotherapy or in combination with KEYTRUDA® for HPV-associated oropharyngeal cancer as neoadjuvant treatment[374] Other Versamune -Based Products in Development PDS0102, PDS0103, and PDS0104 are Versamune-based products in preclinical development targeting various cancers, with IND submissions planned - PDS0102 (Versamune + TARP antigens) targets AML, prostate, and breast cancers; preclinical work showed dramatically enhanced TARP-specific CD8+ killer T-cell response. PDS licensed TARP antigens from NCI in November 2021 and is seeking financing for human trials[375] - PDS0103 (Versamune + MUC1 antigens) targets ovarian, breast, colorectal, and lung cancers; preclinical studies demonstrated powerful MUC1-specific CD8+ killer T-cells. A pre-IND meeting with the FDA was held in Q1 2022, with IND submission planned for Q3/Q4 2022 and human trials by end of 2022[376] - PDS0104 (Versamune + TRP-2 and melanoma antigens) showed unique and significant anti-tumor activity as monotherapy and strong anti-tumor synergy in combination with checkpoint inhibitors in preclinical melanoma models. Preclinical development is ongoing[378] Infectious Diseases PDS0202 (universal influenza) and PDS0203 (COVID-19) are Infectimune-based vaccines in development, aiming for broad and long-term protection - PDS0202 (universal influenza vaccine) combines Infectimune with COBRA antigens, leveraging Versamune's ability to induce high levels of flu-specific neutralizing antibodies, CD4 helper and CD8 killer T-cells, and long-acting memory T-cells[379] - PDS0203 (COVID-19 vaccine) is being developed by Farmacore in Brazil, designed to provide long-term and broad protection against SARS-CoV-2 and its mutations by generating both antibodies and T-cell responses[380] - The Farmacore development program for PDS0203 was delayed in Q4 2021, and the agreement was extended to May 31, 2022, to allow time for manufacturing and scale-up[383] - The company has never been profitable and incurred net losses of $16.9 million in 2021 and $14.8 million in 2020, with an accumulated deficit of $60.7 million as of December 31, 2021[385] - As of December 31, 2021, the company had $65.2 million in cash and cash equivalents[386] Selected Financial Operations Overview PDS Biotechnology has no product revenue, expects R&D payments, and anticipates significant increases in R&D and G&A expenses as candidates advance Research and Development Expenses R&D expenses, including personnel, licensing, and clinical costs, are recognized as incurred and are expected to increase significantly with clinical trial progression - Research and development expenses include employee-related expenses, licensing fees, costs of acquiring/manufacturing clinical trial materials, and fees for consultants and research entities[389] - Costs for development activities are recognized based on progress to completion of specific tasks (e.g., patient enrollment, clinical site activations)[389] - R&D expenses are expected to increase significantly over the next several years as I-O candidates advance through clinical trials and towards regulatory approval and commercial launch[390] | | Year Ended December 31, (in thousands) | | :--- | :--- | | PDS projects | $6,173 | | Clinical consulting | $732 | | Salaries and other costs | $4,349 | | Total | $11,254 | Critical Accounting Policies Key accounting policies involve significant estimates for income taxes, accrued clinical expenses, and stock-based compensation, impacting financial statement preparation - The preparation of financial statements requires management to make estimates and assumptions, with the most significant relating to the fair value of securities underlying stock-based compensation[395] - Deferred tax assets are primarily comprised of federal and state net operating losses (NOLs) and tax credit carryforwards, with a full valuation allowance recorded against net deferred tax assets ($30.5 million at Dec 31, 2021) due to uncertainty of realization[396][543] - Accrued clinical expenses are estimated based on the progress to completion of specific tasks and actual costs incurred by vendors[397] - Stock-based compensation fair value is estimated using the Black-Scholes option-pricing model, requiring assumptions for expected stock-price volatility, option term, risk-free interest rate, and dividend yield[398] Results of Operations PDS Biotechnology reported a net loss of $16.9 million in 2021, a 14% increase from 2020, driven by higher R&D and G&A expenses, partially offset by tax benefits Comparison of the Years Ended December 31, 2021 and 2020 This section compares financial performance for 2021 and 2020, detailing changes in operating expenses, interest income, tax benefits, and net loss | | Year Ended December 31, 2021 (in thousands) | Year Ended December 31, 2020 (in thousands) | Increase (Decrease) (in thousands) | Increase (Decrease) (%) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :--------------------------------- | :---------------------- | | Research and development expenses | $11,254 | $7,924 | $3,330 | 42% | | General and administrative expenses | $10,185 | $6,978 | $3,207 | 46% | | Total operating expenses | $21,439 | $14,902 | $6,537 | 44% | | Loss from operations | $(21,439) | $(14,902) | $(6,537) | 44% | | Interest income, net | $4 | $55 | $(51) | -93% | | Benefit from income taxes | $4,516 | $0 | $4,516 | 100% | | Net loss and comprehensive loss | $(16,918) | $(14,847) | $(2,071) | 14% | Research and Development Expenses R&D expenses increased by $3.4 million (42%) in 2021, primarily due to higher regulatory, clinical, and personnel costs - Research and development expenses increased by $3.4 million (42%) to $11.3 million in 2021 from $7.9 million in 2020[401] - The increase was primarily due to higher regulatory and clinical costs ($2.6 million), non-cash stock-based compensation ($1.1 million), and personnel costs ($0.4 million)[401] - This increase was partially offset by a decrease in manufacturing and facility costs of $0.7 million[401] General and Administrative Expenses G&A expenses increased by $3.2 million (46%) in 2021, mainly due to higher personnel, stock-based compensation, and facilities costs - General and administrative expenses increased by $3.2 million (46%) to $10.2 million in 2021 from $7.0 million in 2020[402] - The increase was mainly attributable to higher personnel costs ($1.0 million), non-cash stock-based compensation ($2.5 million), and facilities costs ($0.1 million)[402] - This was partially offset by a decrease in professional fees of $0.4 million[402] Benefit from Income Taxes A $4.5 million income tax benefit in 2021, from selling New Jersey tax benefits, partially offset the net loss - An income tax benefit of $4.5 million was recognized for the year ended December 31, 2021[403] - This benefit resulted from the net sale of New Jersey tax benefits through the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss program[403] - The transaction reduced the reported net loss for 2021 by approximately $2.1 million compared to 2020, which had no similar tax benefit[403] Liquidity and Capital Resources PDS Biotechnology held $65.2 million in cash as of December 31, 2021, funded by equity offerings, and anticipates needing additional capital for future development Cash flows Net cash used in operating activities decreased in 2021, while net cash provided by financing activities increased due to common stock issuances | | Year Ended December 31, (in thousands) | | :-------------------------------- | :------------------------------------- | | Net cash used in operating activities | $(12,486) | | Net cash provided by financing activities | $48,889 | | Net increase in cash and cash equivalents | $36,403 | - Net cash used in operating activities decreased to $12.5 million in 2021 from $13.1 million in 2020, primarily due to the $4.5 million NOL sale[414] - Net cash provided by financing activities increased to $48.9 million in 2021 from $29.8 million in 2020, primarily due to proceeds from common stock issuances[415] Operating Capital Requirements The company anticipates continued losses and increasing operating expenses, requiring substantial additional funding for future development and commercialization - The company anticipates continued losses and increasing operating expenses as it develops and seeks regulatory approvals for product candidates and prepares for commercialization[416] - Future funding requirements are highly uncertain and depend on factors such as the timing and costs of clinical trials, regulatory approvals, intellectual property protection, and commercialization efforts[419] - The company expects to need substantial additional funding beyond its existing cash and cash equivalents[416] - Plans to fund operations through equity and/or debt financings, government funding programs, and selective partnerships, with risks of dilution or restrictive covenants[411][513] Off-Balance Sheet Arrangements The company did not have any material off-balance sheet arrangements during the reported periods - The company did not have any material off-balance sheet arrangements during the periods presented[423] Item 8. Financial Statements and Supplementary Data Financial statements required by this item are appended to the report, with an index in Item 15 - The financial statements required by this Item 8 are appended to this report[427] - An index of those financial statements is found in Item 15[427] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants regarding accounting and financial disclosure - There were no changes in and disagreements with accountants on accounting and financial disclosure[428] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes Limitations of Internal Control System Internal control systems provide reasonable, not absolute, assurance against misstatements or fraud due to inherent limitations - Internal control systems, due to inherent limitations, can only provide reasonable, not absolute, assurance that misstatements or fraud will be prevented or detected[429] Evaluation of Disclosure Controls and Procedures Management, including the CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective as of December 31, 2021 - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of December 31, 2021[432] - Based on the evaluation, disclosure controls and procedures were concluded to be effective at the reasonable assurance level[432] Management's Report on Internal Control over Financial Reporting Management is responsible for internal control over financial reporting and assessed it as effective based on the COSO 2013 framework as of December 31, 2021 - Management is responsible for establishing and maintaining adequate internal control over financial reporting[435] - Based on an assessment using the COSO 2013 framework, management determined that internal control over financial reporting was effective as of December 31, 2021[435] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred in the most recent fiscal quarter - There has been no change in internal control over financial reporting in the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[436] Smaller Reporting Company As a smaller reporting company, PDS Biotechnology can rely on exemptions from certain disclosure requirements, such as simplified financial statements - As of January 1, 2021, the company is no longer an 'emerging growth company' but remains a 'smaller reporting company'[425] - As a smaller reporting company, it is permitted to rely on exemptions from certain disclosure requirements, such as providing only two years of audited financial statements and simplified executive compensation disclosures[425][431] - The company expects to continue to take advantage of some or all of the available exemptions[426] Item 9B. Other Information This item is not applicable to PDS Biotechnology Corporation - Not applicable[437] PART III Item 10. Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's 2022 Annual Meeting of Stockholders Proxy Statement - Information required by this Item is incorporated by reference to the Proxy Statement[441] Item 11. Executive Compensation Information for this item is incorporated by reference from the company's 2022 Annual Meeting of Stockholders Proxy Statement - Information required by this Item is incorporated by reference to the Proxy Statement[442] Item 12. Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's 2022 Annual Meeting of Stockholders Proxy Statement - Information required by this Item is incorporated by reference to the Proxy Statement[443] Item 13. Certain Relationships and Related Transactions and Director Independence Information for this item is incorporated by reference from the company's 2022 Annual Meeting of Stockholders Proxy Statement - Information required by this Item is incorporated by reference to the Proxy Statement[444] [Item 14. Principal Accountant Fees and Ser