UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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
(State or other jurisdiction of incorporation or organization)
26-4231384
(IRS Employer Identification No.)
25B Vreeland Road, Suite 300, Florham Park, NJ 07932
(Address of principal executive offices)
(800) 208-3343
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.00033 per share
Trading symbol(s)
PDSB
Name of each exchange on which registered
Nasdaq Capital Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller Reporting Company ☒
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates (without admitting that any person whose shares are not
included in such calculation is an affiliate) of the registrant as of June 30, 2021, was $339,715,787 (based on the closing price for shares of the
registrant’s common stock as reported on the Nasdaq Capital Market on that date).
The number of shares of the registrant’s common stock, par value $0.00033 per share, outstanding as of March 25, 2022 was 28,448,612.
Documents Incorporated By Reference
Portions of registrant’s definitive proxy statement relating to registrant’s 2022 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the close of the registrant’s fiscal year ended December
31, 2021, are incorporated by reference in Part III of this Annual Report on Form 10-K. Except with respect to information specifically incorporated by
reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.
PDS BIOTECHNOLOGY CORPORATION
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2021
INDEX
PART I
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 5
Item 7
Item 8
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance
Executive Compensation
Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
PART IV
Item 15
Item 16
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
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Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements (including within the meaning of Section 21E of the
United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the
Company and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or
financial condition, or otherwise, based on current beliefs of the Company’s management, as well as assumptions made by, and information currently
available to, management. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future
events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,”
“intend,” “forecast,” “guidance”, “outlook” and other similar expressions among others. Forward-looking statements are based on current beliefs and
assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those
contained in any forward-looking statement as a result of various factors, including, without limitation:
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the Company’s ability to protect its intellectual property rights;
the Company’s anticipated capital requirements, including the Company’s anticipated cash runway and the Company’s current expectations
regarding its plans for future equity financings;
the Company’s dependence on additional financing to fund its operations and complete the development and commercialization of its product
candidates, and the risks that raising such additional capital may restrict the Company’s operations or require the Company to relinquish
rights to the Company’s technologies or product candidates;
the Company’s limited operating history in the Company’s current line of business, which makes it difficult to evaluate the Company’s
prospects, the Company’s business plan or the likelihood of the Company’s successful implementation of such business plan;
the timing for the Company or its partners to initiate the planned clinical trials for PDS0101, PDS0103, PDS0203 and other Versamune and
Infectimune based products and the future success of such trials;
the successful implementation of the Company’s research and development programs and collaborations, including any collaboration studies
concerning PDS0101, PDS0203 and other Versamune and Infectimune based products and the Company’s interpretation of the results and
findings of such programs and collaborations and whether such results are sufficient to support the future success of the Company’s product
candidates;
the success, timing and cost of the Company’s ongoing clinical trials and anticipated clinical trials for the Company’s current product
candidates, including statements regarding the timing of initiation, pace of enrollment and completion of the trials (including our ability to fully
fund our disclosed clinical trials, which assumes no material changes to our currently projected expenses), futility analyses, presentations at
conferences and data reported in an abstract, and receipt of interim results (including, without limitation, any preclinical results or data), which
are not necessarily indicative of the final results of the Company’s ongoing clinical trials;
expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our product
candidates;
any Company statements about its understanding of product candidates mechanisms of action and interpretation of preclinical and early
clinical results from its clinical development programs and any collaboration studies; the acceptance by the market of the Company’s product
candidates, if approved; the timing of and the Company’s ability to obtain and maintain U.S. Food and Drug Administration or other regulatory
authority approval of, or other action with respect to, the Company’s product candidates; and
other factors, including legislative, regulatory, political and economic developments not within the Company’s control, including unforeseen
circumstances or other disruptions to normal business operations arising from or related to COVID-19 and those listed under Part II, Item 1A.
Risk Factors.
Any forward-looking statements in this Annual Report reflect our current views with respect to future events or to our future financial performance
and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you
should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these
forward-looking statements for any reason, whether as a result of new information, future events or otherwise.
In this Annual Report, unless otherwise stated or the context otherwise indicates, references to “PDS,” “the Company,” “we,” “us,” “our” and similar
references refer to PDS Biotechnology Corporation, a Delaware corporation.
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PART I
Unless the context requires otherwise, references in this report to “PDS,” “Company,” “we,” “us,” and “our” and similar designations refer to PDS
Biotechnology Corporation and our subsidiary.
ITEM 1.
Business
Company Overview
We are a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted immunotherapies designed to overcome
the limitations of current immunotherapy and vaccine technologies. We own the proprietary T-cell activating platforms designed to train the immune
system to better attack and destroy disease; Versamune®, for treatments in oncology and Infectimune™, for treatments in infectious disease. When
paired with an antigen, which is a disease-related protein that is recognizable by the immune system, Versamune and Infectimune have both been shown
to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells, a specific sub-type of T-cell that is
more effective at killing infected or target cells. Infectimune is also designed to promote the induction of disease-specific neutralizing antibodies. Our
immuno-oncology product candidates are of potential interest for use as a component of combination product candidates (for example, in combination
with other leading technologies such as checkpoint inhibitors) to provide more effective treatments across a range of advanced and/or refractory cancers.
We are also evaluating our immunotherapies as monotherapies in early-stage disease for oncology. We are developing targeted product candidates to
treat several cancers including Human Papillomavirus (HPV) associated cancers, melanoma, colorectal, lung, breast and prostate cancers. Our infectious
disease candidates are of potential interest as vaccines to prevent COVID-19 and universal influenza.
Our current pipeline of Versamune-based targeted immunotherapies and Infectimune-based therapies focuses on the use of selected disease-
associated antigens that have been demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases. Our pipeline is
shown below:
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Immunotherapy Overview
Immunotherapy is a treatment that uses the person’s own immune to fight disease by recognizing, attacking and eliminating cancer and also
neutralizing infectious agents. Immunotherapies, specifically for cancer treatment, come in a variety of forms including, but not limited to, killer T-cell
stimulators, checkpoint inhibitors, CAR T-cell therapy and monoclonal antibodies.
Cancer remains a leading cause of morbidity and mortality despite improvements in treatment. The Versamune platform belongs to a class of
promising new treatments that have emerged from the convergence of the oncology and immunology fields. These novel therapies, that harness the
power of the immune system to fight cancer, are called immunotherapies. Cancer immunotherapies have significant potential to treat a broad range of
cancers, and several have been approved by the United States Food and Drug Administration (“FDA”). While progress has been made in developing new
anti-cancer immunotherapeutic technologies and products, significant challenges continue to limit their broad clinical effectiveness. We are developing
the Versamune based treatments with the goal of overcoming the limitations and safety concerns presented by other anti-cancer treatments. PDS
Biotechnology seeks to develop safe and effective therapies for cancer patients.
On a basic immunological level, there are considerable hurdles impeding the ability of immunotherapy to harness the body’s immune system.
Although approved checkpoint inhibitors have been demonstrated to be effective in a small percentage of patients. However, for those patients who
respond, the durability and duration of their responses can be significant. However, the reported rates of response for checkpoint inhibitors are only in the
range of 15-20%. Importantly, immune therapies, including checkpoint inhibitors, CAR-Ts and live-vector vaccines, present the potential for significant
systemic toxicities limiting their use both in the treatment of early-stage cancer or in combination with other approved anti-cancer treatments. In contrast
to the above described immunotherapies, we believe Versamune may have a unique combination of potency and safety therefore presenting a significant
commercial opportunity in both early and late-stage disease.
The challenges to effective immunotherapy
The inability to generate adequate quantities of high-quality killer (CD8+) T-cells, to minimize systemic toxicities, to overcome the immune
system’s tolerance of the cancer and to generate immunological memory, all limit the clinical effectiveness of immunotherapies. On a fundamental
biological or immunological level, one of the most significant challenges facing the industry is the development of simple and easy to administer therapies
that can effectively treat cancer with minimal side effects. Suboptimal activation of killer (CD8+) T-cells remains a key limitation of immunotherapies.
Potential hurdles exist at various stages of the immunological process, including poor uptake of the antigen by the dendritic cells as well as inadequate
processing and presentation of the tumor antigen into the correct immunological pathways.
Cancer Immunotherapy
Cancer immunotherapy is a form of cancer treatment that utilizes the power of the body’s own immune system to recognize, attack and eliminate
cancer. The ultimate goal of cancer immunotherapy is to improve patient quality of life and to extend patient life by slowing down the rate of spread of the
cancer, shrinkage of the tumors and in some cases eradication of the cancer. The body’s immune system is a complex, biological network designed to
defend against germs, other microscopic invaders, and cancer cells. Once the immune system recognizes an organism or cell as foreign or dangerous, it
begins a series of complex reactions to identify, target and eliminate them. This process of events is referred to as mounting an immune response. Cancer
immunotherapy takes advantage of the fact that most cancer cells express unique proteins, also called tumor antigens, not normally expressed by healthy
cells that can be recognized by the immune system as abnormal. Because the immune system is precise, for the most part, a resulting immune response
can target these dangerous cancer cells exclusively while sparing healthy cells. However, the challenge remains that cancer cells are able by various
mechanisms to evade the immune system’s surveillance, so the body becomes tolerant to them.
An ideal cancer immunotherapy should have the following attributes to maximize the opportunity for clinical effectiveness in patients. It should:
● Stimulate both tumor-specific killer and helper T-cells within the body
● Activate, arm and expand large numbers of T-cells that recognize the tumor
● Alter or de-camouflage the tumor microenvironment (TME) to make the cancer more visible or susceptible to attack by the immune system
● Generate immune memory, so that if the cancer cells return, the immune system can recognize and eliminate them
● Optimize safety and tolerability by limiting systemic inflammation and toxicity
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As stated in the June 2019 issue of The Journal of Immunology , a leading peer-reviewed journal in the field of immunology, our Versamune
platform possesses each of these attributes, inducing potent anti-tumor responses in preclinical studies. (Gandhapudi, et al., J. Immunology, June 2019;
Rumfield et al, J. Journal for ImmunoTherapy of Cancer, May 2020). We believe our Versamune technology platform is unique in its ability to successfully
encompass the mechanistic attributes required to induce a safe and effective anti-cancer immune response.
How does cancer immunotherapy work?
An important function of the body’s immune system is to scan for proteins not normally expressed in healthy tissue (antigens). Once an antigen
has been identified as foreign, abnormal or dangerous, the antigen is presented to T-cells, a type of white blood cell effective at eliminating cancer cells
and infectious agents (e.g. bacteria and viruses). The presentation of an antigen to T-cells is implemented primarily in the lymph nodes by specialized
antigen presenting cells known as dendritic cells which are programmed specially to identify foreign antigens, process them and to present them to T-cells.
Unique proteins on the surface of dendritic cells, known as major histocompatibility complex (MHC) molecules, bind to the foreign antigen and display
them on the cell surface for recognition by the appropriate T-cells. Then, once presented, a sub-population of T-cells known as the CD8+ or killer T-cells,
are primed and respond to the specific foreign antigen by attacking and killing the cells containing the abnormal protein. Other T-cell sub-populations,
such as CD4+ or helper T-cells, are also critical in regulating immune responses.
Cells communicate via chemical signaling. For an immune response to be triggered and to be effective, important immune signaling pathways
must be activated to enable the body to induce messenger proteins known as cytokines and chemokines. Some of these cytokines and chemokines serve
both to activate and expand T-cells and to arm the T-cells with the appropriate cancer-killing function.
An effective cancer immunotherapy must modulate these complex processes, enhancing activation and producing robust expansion of the
critically important high-quality, tumor-specific T-cell populations, most notably CD8+ killer cells. As will be reviewed in more detail in the section below,
the ability to promote the induction of therapeutic quantities of high-quality tumor-targeting CD8+ killer T-cells within a patient’s own body has been a
major limitation of cancer immunotherapy.
Production of adequate numbers of high-quality CD8+ killer T-cells alone, however, is insufficient to eradicate all cancer cells. One of the
difficulties in treating cancer, stems from the fact that cancer cells have the unique ability to evade the immune system; they camouflage themselves or
suppress T-cell attack by activating immune mechanisms that suppress the ability of T-cells to detect or attack them. They accomplish this in part by
increasing the population of immune suppressive cells, including cells known as regulatory T-cells (Treg) as well as other cell types, within the tumor
microenvironment. An effective immunotherapy must overcome the tumor’s immune suppressive mechanisms in order to successfully locate and attack
the cancer cells.
Finally, cancers can be difficult to cure because they may recur even after successful initial treatment due to micro-metastatic (hidden) tumors that
are not completely eradicated after treatment and that eventually expand. It is yet another task of the immune system to remain vigilant over a sustained
period to mitigate the risk of recurrence. Such vigilance may be mediated by memory T-cells which serve as the immune system’s long-term memory. To
be durable and effective over an extended period after treatment, and to minimize the likelihood of cancer recurrence, an immunotherapy should enhance
this immune function as well.
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Versamune Products
Versamune has shown the potential to overcome the challenges of immunotherapy
Versamune is a proprietary non-viral (synthetic) vector or T-cell activating platform designed to overcome the challenges of current
immunotherapy and improve the treatment outcomes of patients with cancer. Versamune-derived products are based on positively charged (cationic) and
immune activating lipids that form spherical nanoparticles in aqueous media. These lipids include the R-enantiomer of 1,2-dioleoyl-e-trimethyl-ammonium-
propane (R-DOTAP). Cationic lipids are positively charged molecules that have a water-soluble portion (head group) attached to a water insoluble tail.
The water-soluble portion of the molecule has a positive charge and the water-insoluble portion is made up of hydrocarbon (also called fatty acid) chains.
The nanoparticles, which are coated with a positive charge, are deliberately sized to mimic viruses, facilitating detection by the body’s immune system and
uptake by dendritic cells.
To treat a specific cancer, the unique or overexpressed antigen found on the surface of the cancer cells is manufactured, then mixed with the
Versamune nanoparticles to create a pharmaceutical product for simple subcutaneous injection.
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Versamune has the potential to promote dendritic cell update of antigens
One of the biggest challenges in developing a potent immunotherapy has been dendritic cell uptake. Versamune is designed specifically to be
taken up by dendritic cells in the skin. As noted, Versamune nanoparticles are sized comparably to viruses normally taken up as part of the natural
function of the dendritic cells, facilitating efficient uptake of the Versamune-based immunotherapy. Studies evaluating the uptake of Versamune
nanoparticles by dendritic cells and epithelial cells, found almost exclusive uptake by the dendritic cells. Four hours following a single subcutaneous
injection, about 80% of the dendritic cells in the draining lymph node were found to have taken up the Versamune-based immunotherapy.
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Versamune has the potential to promote efficient antigen processing and T-cell presentation
When dendritic cells take up Versamune nanoparticles they become activated, mature and begin recruiting additional dendritic cells. Once inside
the dendritic cell, the tumor-associated antigen is released and processed into the requisite small peptides (pieces of protein) in the cell compartment
known as the cytoplasm. An important potential advantage of Versamune is its ability to fuse with and destabilize endosomes in the cell, promoting
efficient entry of the antigen into the cell compartment where processing can take place. Processed antigen is turned into peptides that then present in
both the MHC class I and class II pathways. The MHC class I pathway is critical to programming CD8+ killer T-cells and the MHC class II pathway to
programming CD4+ helper T-cells to recognize tumor antigens. When Versamune-induced maturation occurs, the dendritic cells express costimulatory
molecules on their surface, which facilitate the highly efficient uptake and presentation of antigens to the T-cells. We believe this activity overcomes one of
the most significant limitations of current immunotherapy development – the efficient priming of critical CD8+ killer T-cells against tumor antigens.
Interestingly, Versamune has been demonstrated to promote presentation of antigens to CD4+ helper cells as well.
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Versamune has the potential to promote efficient activation and robust expansion of high quality polyfunctional CD8+ killer T-cells in Lymph
Nodes
Ultimately mature dendritic cells migrate into lymph nodes, small glands located throughout the body containing white blood cells including T-
cells, where much of the key immunological activity pertaining to the priming and expansion of T-cells takes place. In the lymph nodes the dendritic cells
present the tumor antigens to T-cells resulting in activation or priming of the T-cells to recognize the particular antigen expressed by the cancer.
Importantly, Versamune has also demonstrated the potential to upregulate type I interferon genes (type I IFN), which are responsible for critical
immunological processes. Upregulation of type I IFN induces an important immunological protein called CD69 that facilitates interactions between the
dendritic cell and T-cells in the lymph nodes.
Upregulation of type I IFN signaling also induces multiple immune messenger proteins called cytokines and chemokines that further signal T-cells
to infiltrate into the lymph nodes. Powerful activators of CD8+ killer T-cells, such as CCL2 and CXCL10 are documented to be induced by Versamune as
well. As the Versamune-induced production of chemokines appears to be restricted to the lymph nodes, the site of T-cell activation, it provides for both
superior activation and expansion of CD8+ killer T-cells. Localization of these immune messengers within the lymph nodes and their limited presence in
the blood circulation enhances the safety of the Versamune-based immunotherapies. Thus, through the versality of its mechanisms of action, as
understood to date, we believe that Versamune may safely promote the efficient and robust expansion in-vivo of large numbers of highly potent
(polyfunctional) CD8+ killer T-cells, both critical factors in developing a successful immunotherapy.
Versamune has the potential to overcome immune suppression
Regulatory T-cells (Treg) are a sub-population of white blood cells normally responsible for recognizing normal healthy cells and for preventing
autoimmune disease. In cancer however, they are utilized by the cancer cells to suppress immune detection. Versamune may contribute to significant
alteration of the tumor microenvironment by dramatically reducing the Treg to killer CD8+ T-cell ratio thus making the tumors more susceptible to
destruction by killer T-cells. Preclinical studies have demonstrated that lowering the Treg to CD8+ killer T-cell ratio with polyfunctional CD8+ killer and
CD4+ helper T-cells promotes effective tumor lysis and regression. Overcoming a tumor’s immune tolerance and minimizing its ability to evade detection
is a significant goal of a successful cancer immunotherapy that together with potent T-cell induction may translate to enhanced tumor elimination.
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In preclinical studies, Versamune (R-DOTAP) nanoparticles demonstrated a reduction in the Treg/CD8+ T-cell ratio
Results of Comparative Preclinical Testing of Versamune and Other Immunotherapies for the eradication of a Tumor
Using the tumor model, the Versamune based therapy was unique in its ability to reduce the tumor size and eventually completely regress the
tumors. The results from the Versamune based treatment are attributed to its ability to induce: (i) powerful activation of the critical immunological signaling
pathways, (ii) robust production of both CD8+ killer and CD4+ helper T-cells, and (iii) the degradation of the tumor’s protective immune suppression
mechanism.
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Versamune has the potential to induce Immune Memory
Memory T-cells allow the body to maintain tumor-recognizing and attacking T-cells for an extended period after treatment, with the ideal outcome
of reducing cancer recurrence. Preliminary studies demonstrated that Versamune protected mice that had experienced tumor regression against tumor
reestablishment even when the mice were reinjected with the same tumor cells. This sustained protection was evidence of immune memory: persistence
of antigen-specific T-cells to recognize tumor proteins associated with a particular cancer, as the animals were not protected against establishment of
different tumors. Evidence of the potential for Versamune-based immunotherapies to induce immune memory was also demonstrated in a phase 1 clinical
trial in humans.
Enhancing tumor-specific memory responses to monitor for tumor antigens and eradicate cancer cells well after initial treatment we believe
provides potential for significant durable clinical benefit by possibly reducing the incidence of tumor recurrence and improving survival of patients.
Today, many cancer immunotherapies produce serious systemic autoimmune effects due to blockage of existing regulatory mechanisms such as
the immune checkpoints as well as inflammatory toxicities due to the increased presence and spikes of cytokines in the blood circulation. We believe the
mechanism of action of Versamune as well as its design have the potential to contribute to the localization of cytokines in the lymph nodes and specific
targeting of CD8+ killer T-cells to antigens in tumor tissue. Therefore, the hypothesis is that Versamune-based therapies may exhibit an improved and
favorable safety profile compared to currently available treatments.
As noted, Versamune is injected subcutaneously (under the skin) and its mechanisms of action are localized primarily in the lymph nodes. Further
supporting these observations are data demonstrating that negligible levels of Versamune-induced cytokines were detected in the blood of mice. Very low
quantities of Versamune were detected in the blood or in any organ outside of the lymph nodes.
Additionally, Versamune is broken down (hydrolyzed) in the body into fatty acids and excreted, showing in these preliminary studies that it could
mitigate the potential for short- or long-term accumulation of the nanoparticles. These preclinical observations have been confirmed by early clinical data
documenting that this localized and highly specific cascade of immune activity was associated with an absence of significant systemic toxicity at all doses
tested. In a phase 1 clinical trial designed to evaluate safety, all patients had transient swelling and redness at the injection site due to initiation of the
immunological cascade at the injection site which cleared completely within 3-7 days and no dose-limiting toxicities or long-term safety concerns were
observed. Similarly, in our ongoing Phase 2 trials in combination with other treatments, no dose-limiting toxicities or long-term safety concerns were
attributed to PDS0101 since three of the four studies were initiated in 2020.
In choosing and designing a Versamune-based therapy for development, careful attention is paid to selecting specific, appropriate antigens
because, as described above, Versamune induces a strong T-cell response to the antigen. All of the antigens currently being evaluated in combination
with Versamune are present primarily in cancer cells which should therefore result in tumor-specific T-cell attack, thereby minimizing off-target toxicity and
potential destruction of healthy cells and tissue.
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Versamune’ s potential as a cancer immunotherapy platform
The unique ability of Versamune to modulate and enhance numerous critical steps required for an effective immune response and to be combined
with targeted specific antigens found on tumor cells, offers several exciting opportunities to treat a variety of cancers. Further, its diverse mechanisms of
action together with its favorable safety profile suggest therapeutic promise when used in combination with other treatment modalities or immunotherapies
such as checkpoint inhibitors as well as in the single-agent monotherapy setting.
PDS0101: Human Papillomavirus (HPV)-Related Cancers
Despite the successful introduction of HPV preventive vaccines, HPV-related cancers remain a significant component of the global cancer
burden. HPV infection occurs in both men and women and is associated with head and neck (oropharyngeal), cervical, anal, vaginal, vulvar and penile
cancers.
PDS0101 is our lead Versamune-based immunotherapy. PDS0101 combines Versamune with a mixture of short proteins (peptides) derived from
the cancer-causing HPV16 viral protein. HPV16 is the most pervasive and difficult to treat HPV amongst the 13 different high-risk, cancer-causing HPV
types. In a preclinical study in the most widely utilized animal HPV-cancer tumor model, PDS0101 uniquely induced complete regression of the tumors
after a single sub-cutaneous injection. These data prompted a phase 1 open-label, dose-escalation, proof of concept study of PDS0101 in women with
cervical intraepithelial neoplasia (CIN) infected with high-risk HPV types. The data demonstrated that PDS0101 was immunologically active at all three
doses studied, confirmed induction of high levels of active HPV-specific CD8+ killer T-cells, and was associated with clinical regression of the cervical
lesions that often occurred rapidly. These results suggest that PDS0101 activated the critical mechanisms in humans resulting in potent T-cells which
target and effectively kill human HPV-positive cancer cells. All patients who experienced regression remained disease-free over the 2-year retrospective
evaluation period, suggesting potential durability or memory of the immune response. The clinical data were presented at the 34th Annual Society for the
Immunotherapy of Cancer Conference in November 2019 (Wood, et al., 2019). Based on these encouraging preclinical and human data, PDS0101 is
being studied in multiple phase 2 clinical studies in various HPV-related cancers in collaboration with the NCI, Merck, MD Anderson Cancer Center and
Mayo Clinic. We are currently conducting 4 phase 2 clinical studies for PDS0101.
PDS0102: T-cell receptor gamma Alternate Reading frame Protein (TARP)-Related Cancers
The TARP antigen is strongly associated with prostate and breast cancers. In the U.S. 450,000 patients are projected to be diagnosed with
prostate or breast cancer this year. Approximately 90% of prostate cancers and 50% of breast cancers overexpress the TARP tumor antigen. In a human
clinical trial, the National Cancer Institute demonstrated that its proprietary TARP antigens were effectively recognized by the immune system in prostate
cancer patients with PSA biochemical recurrence leading to a notable reduction in tumor growth rate. In preclinical studies, a dramatically enhanced
TARP-specific killer T-cell response was observed when our designed TARP antigens were combined with Versamune. As discussed further below, in
November 2021, we entered into the NCI Patent License Agreement with the U.S. Department of Health and Human Services, as represented by the
National Cancer Institute, (“NCI”) of the National Institutes of Health (“NIH”). We obtained a nonexclusive worldwide license to the patent rights for NCI’s
T-cell receptor gamma alternate reading frame protein (“TARP”) to develop and commercialize TARP peptide-based therapies in combination with our
Versamune technology for the treatment of Acute Myeloid Leukemia, prostate and breast cancers. Preclinical development is ongoing.
PDS0103: Mucin-1 (MUC1)-Related Cancers
MUC1 is highly expressed in multiple solid tumor types and has been shown to be associated with drug resistance and poor disease prognosis.
We are developing PDS0103, a Versamune-based therapy in combination with novel, highly immunogenic, agonist epitopes of the MUC1 oncogenic C-
terminal region to treat ovarian, breast, colorectal and lung cancers. In preclinical studies, similar to PDS0102, a dramatically enhanced MUC1-specific
killer T-cell response was observed when the novel antigens were combined with Versamune. Preclinical development is ongoing.
Versamune has demonstrated immunological compatibility with a wide array of tumor and pathogenic antigens. While our current oncology
pipeline pairs Versamune with 4 different tumor antigens, to address over 10 cancer types, more than 75 tumor antigens have been identified and
reported. The versatility of the platform suggests that Versamune could work well with a wide range of identified tumor antigens and neoantigens. We are
exploring the expansion of our Versamune-based pipeline by pairing the technology with multiple tumor antigens to develop additional product candidates.
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Infectimune’ s potential as an infectious disease vaccine platform
PDS Biotechnology has developed a second cationic platform that is being applied to the development of infectious disease vaccines and this
specific formulation has been trademarked Infectimune. It has been formulated to activate the immune system to induce rapid and longer-lasting
neutralizing antibody responses for improved protection against infectious pathogens. It has the potential to induce T-cell responses including memory T-
cell responses to provide the immune system with long-term memory and potential sustained protection against infectious pathogens over an extended
period of time that may exceed traditional antibody-based protection. It could provide safe and effective vaccines that are well tolerated by healthy
individuals.
PDS0201: Tuberculosis
PDS0201 combines the utility of the Versamune platform with bacillus Mycobacterium tuberculosis (M. tuberculosis) antigens. Tuberculosis (TB)
is the leading cause of death from a single infectious agent and is caused by the bacillus Mycobacterium tuberculosis, which is spread when people who
are sick with TB expel bacteria into the air. About a quarter of the world’s population is infected with M. tuberculosis and thus at risk of developing TB
disease. It has been reported that a total of 1.5 million people died from TB in 2020. Worldwide, TB is one of the top 10 causes of death and the leading
cause from a single infectious agent (above HIV/AIDS). It is estimated that 10 million people fell ill with TB worldwide - 5.7 million men, 3.2 million women
and 1.1 million children. There were cases in all countries and age groups. Multidrug-resistant TB (MDR-TB) remains a public health crisis and a health
security threat. The World Health Organization (WHO) estimates that there were 484,000 new cases with resistance to rifampicin – the most effective first-
line drug, of which 78% had MDR-TB. WHO has identified TB as a global priority and is focused on eradication of the disease. The only licensed vaccine
for prevention of TB disease was developed almost 100 years ago. PDS0201 is currently in preclinical development.
PDS0202: Universal influenza vaccine
According to the World Health Organization, influenza causes 3 to 5 million cases and approximately 290,000 to 650,000 deaths each year. Due
to the existence of multiple strains of flu, a new seasonal flu vaccination is usually developed to provide protection against the strains predicted to be
prevalent in an upcoming flu season. As a result, the protective efficacy of the current vaccines varies widely from season to season. We are developing a
new generation of flu vaccines with the potential to provide long-lasting, and broad protection against multiple strains of the virus. We believe that the
successful development of a universal flu vaccine could eliminate the need to create a vaccine to protect against each year’s predicted variants. Our
Infectimune platform is combined with computationally optimized broadly reactive antigen (COBRA) to potentially provide longer lasting, more effective
response to the influenza vaccine. The preclinical work is complete, and we are working to obtain nondilutive financing to fund the next steps in
development. In the fourth quarter of 2021, we entered into the UGA Patent License Agreement with the University of Georgia which provides a
nonexclusive license to the patent rights for the University of Georgia’s COBRA antigens to develop and commercialize a universal influenza vaccine
worldwide. The UGA Patent License Agreement includes customary milestone payments and royalties. Preclinical work is ongoing .
PDS0203: SARS-CoV-2 vaccine
Our Infectimune platform based COVD-19 vaccine combines our nanoparticle technology with a SARS-CoV-2 recombinant protein derived from
the spike (S) protein. Notably, the protein in this fully synthetic vaccine includes conserved and non-mutating regions of the virus. The vaccine has
demonstrated strong potential in preclinical studies to efficiently promote the induction of killer (CD8+) and helper (CD4+) helper T-cells that recognize
and induce immune responses against such non-mutating regions of the virus. The protein also includes regions of the spike protein that result in the
induction of neutralizing antibodies. Development is being conducted in Brazil by our collaborator Farmacore, who is fully responsible for the development
program, and clinical trials will be conducted in Brazil following all necessary regulatory approvals. Farmacore is continuing to work on manufacturing and
scale up process for the antigen component of the vaccine.
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Versamune Development Strategy
The unique combination of high potency and excellent safety of the Versamune platform observed in preclinical studies was corroborated in the
successfully-completed 12-patient PDS0101 Phase 1/2a clinical trial. In September 2019, we reported retrospective clinical outcome data from this trial.
Despite most of the patients being infected with multiple HPV strains including or excluding HPV 16, regression was seen in 8 out of 10 patients, with
complete regression of pre-cancerous lesions documented in 6 out of 10 patients at their first post-treatment evaluation, which occurred within 1-3 months
of completing treatment. In addition, the fact that no disease recurrence occurred over the two-year evaluation period strongly suggested a robust and
durable therapeutic immune response due to the induction of T-cells by PDS0101 administration that were clinically active. As a result of this information
and the documentation in the trial of PDS0101’s ability to generate potent and biologically active CD8+ T-cells in-vivo, we focused our clinical strategy on
areas of more severe unmet medical need in which PDS0101 is combined with other immune-modulating agents, including checkpoint inhibitors and
standard of care e.g., chemoradiotherapy, to provide improved clinical benefit to patients.
We believe that rational design of combination immunotherapies using complementary agents that promote synergy with each other and reduce
the potential for compounded toxicity will substantially enhance the potential for combination therapies to deliver improved clinical benefit for cancer
patients. Versamune appears to activate an appropriate combination of immunological pathways to promote strong CD8+ T-cell induction while also
altering the tumor microenvironment to make tumors more susceptible to T-cell attack, which we believe makes it an ideal complement to checkpoint
inhibitors and other immune-modulating agents by enhancing their potency as part of combination therapies. In addition, the differences in mechanism of
action between Versamune and checkpoint inhibitors, as well as the initial demonstrated safety profile of Versamune, suggests that these combinations
may be potentially much better tolerated by patients than other combination therapies involving checkpoint inhibitors and other cancer treatments such as
immune-cytokines and chemotherapy.
VERSATILE-002: PDS0101 + KEYTRUDA ®
In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 in combination with Merck’s anti-PD-1
therapy, KEYTRUDA® (pembrolizumab) which is the FDA-approved standard of care for first-line treatment of recurrent/ metastatic head and neck cancer
opened and is actively recruiting patients. The clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in
patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.
In this PDS Biotech-sponsored trial, patients whose cancer has returned or spread following initial treatment, will be able to avoid chemotherapy
and take this combination of two immuno-therapy drugs. Enrolling patients with more functional immune systems that have not been compromised by
extensive chemotherapy may allow improved efficacy of the combination. Patients in the trial will receive a total of 5 cycles of combination therapy in the
context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression. The primary endpoint of VERSATILE-002 is
the objective response rate – or ORR – at six months following initiation of treatment. There are two cohorts in the trial. Cohort 1 is for patients that are
yet to be treated with a checkpoint inhibitor (CPI naïve) and cohort 2 which consists of patients that have failed checkpoint inhibitor therapy (CPI
refractory).
In the February 2022, we announced we had achieved the preliminary efficacy milestone of at least four or more objective responses of the first
17 patients in the CPI naïve arm which now allows that arm to proceed to full enrollment. We also announced detailed preliminary safety data which
showed that the combination is likely safe and well tolerated without evidence of enhanced or significant toxicity in the first 18 patients in the CPI naïve
arm. We continue to enroll patients in the first stage of the CPI refractory arm.
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National Cancer Institute: PDS0101+ M9241 +Bintrafusp Alfa
In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement (CRADA), in NCI, led Phase 2
clinical trial evaluating PDS0101 with NHS-IL12 (M9241), and M7824 (Bintrafusp Alfa), both of which are owned by EMD Serono (Merck KGaA) in patients
with advanced/refractory HPV-associated cancers who have failed prior treatment. In February 2021, we announced that the NCI’s Phase 2 clinical trial of
PDS0101 for the treatment of advanced/refractory HPV-associated cancers achieved its preliminary objective response target in patients naïve to
checkpoint inhibitors which allowed for full enrollment of approximately 20 patients in this group. In addition, based on promising results in the CPI naïve
arm, the trial was amended to allow enrollment of a separate cohort of checkpoint inhibitor-refractory patients for assessment of safety and activity of the
triple combination. Preliminary efficacy assessment of the triple combination in this added group of 20 checkpoint inhibitor refractory patients is ongoing.
The NCI recently achieved the intended enrollment objective of 30 patients in the CPI refractory arm of the trial. The trial has enrolled 45 patients and
enrollment in the trial will continue until the total enrollment of 56 patients is achieved.
Preclinical study results arising from this CRADA were recently published in the Journal for ImmunoTherapy of Cancer,
Immunomodulation to
enhance the efficacy of an HPV therapeutic vaccine (Journal for ImmunoTherapy of Cancer 2020;8:e000612. doi:10.1136/ jitc-2020-000612) , indicating
that PDS0101 generated both HPV-specific T-cells and an associated antitumor response when used as a monotherapy. When PDS0101 was combined
with two other novel clinical-stage anti-cancer agents, Bintrafusp Alfa and M9241, the preclinical data suggested that all three therapeutic agents worked
synergistically to provide superior tumor T-cell responses and subsequent tumor regression when compared to any of the agents alone or the 2-
component combinations. If the published preclinical data demonstrating powerful activity of the triple combination is successfully confirmed in the
ongoing Phase 2 trial, this triple combination could form the basis of a unique platform providing improved cancer treatments across multiple cancers.
In June 2021, at the American Society of Clinical Oncology (ASCO) conference the NCI announced interim data in this trial which included, data
in both CPI naïve and refractory patients. In the CPI naïve group 83% (5/6) of patients had an objective response, and 1 subject had achieved a complete
response with no evidence of disease. 100% of the CPI naïve patients were alive at a median duration of 8 months. In the CPI refractory group 42%
(5/12) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease. 10/12 (83%) of CPI refractory
patients were alive at a median duration of 8 months. An update provided in January 2022 showed as of December 31, 2021, that >40 subjects had been
recruited into the trial and 30 HPV16-positive patients had been evaluated. The median survival of all patients (3:1 CPI refractor to naïve) was 12 months
and progressing. The historical survival of CPI naïve and CPI refractory advanced HPV-associated cancers when treated with CPI are 7-11 months and
3-4 months respectively.
MD Anderson Cancer Center (IMMUNOCERV): PDS0101+ Chemoradiotherapy
In October 2020, a third PDS0101 Phase 2 clinical study was initiated with The University of Texas MD Anderson Cancer Center and is actively
recruiting patients. This clinical trial is investigating the safety and anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-
radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. PDS believes that
Versamune’s strong T-cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication.
Enrollment rate in this trial had been negatively impacted by the COVID-19 pandemic and enrollment is on-going.
Mayo Clinic: PDS0101 Monotherapy and in combination with KEYTRUDA ®
In February 2022 we announced the initiation of an Investigator-Initiated Trial (ITT), MC200710, for PDS0101 alone or in combination with the
checkpoint inhibitor, KEYTRUDA®, in patients with HPV-associated oropharyngeal cancer (HPV(+)OPSCC) at high risk of recurrence. The trial is being
led by Drs. David Routman, Katharine Price, Kathryn Van Abel, and Ashish Chintakuntlawar of Mayo Clinic, a nationally and internationally recognized
center of excellence for the treatment of head and neck cancers. We believe that this upcoming trial not only broadens our addressable patient population
of those affected by the increasing incidence of HPV(+)OPSCC, but also allows us to better understand the activity of PDS0101 alone or in combination
with KEYTRUDA® in earlier stages of disease. This trial is currently open for enrollment.
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In this trial treatment will be administered before patients proceed to transoral robotic surgery (TORS) with curative intent. Treatment in this
setting is referred to as neoadjuvant treatment. PDS0101 has been shown to induce killer T-cells that target and kill HPV-positive cancers, either alone or
in combination with checkpoint inhibitors in preclinical studies, and in combination in clinical studies of patients with advanced recurrent/metastatic HPV-
associated cancers. This trial will explore whether PDS0101 with or without checkpoint inhibition may increase HPV-specific anti-tumor responses,
potentially resulting in tumor shrinkage, pathologic regression, and decreases in circulating tumor DNA (ctDNA).
Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept
phase 2 trials. It is also designed to demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without
compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in multiple indications.
After initial commercial approval, our strategy of combining PDS0101 with standard of care also positions us for rapid market penetration and expansion.
Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept
phase 2 trials. It is also designed to demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without
compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in multiple indications.
PDS0102
PDS0102 is an investigational immunotherapy utilizing tumor-associated and immunologically active T-cell receptor gamma alternate reading
framed protein (TARP) from the NCI. PDS0102 is designed to treat TARP-associated cancers including, acute myeloid leukemia (AML), prostate and
breast cancer. In our preclinical work, the administration of PDS0102, the Versamuine+TARP antigen combination led to the induction of large numbers of
tumor targeted killer T-cells. In addition, the TARP tumor antigen alone has already been studied at the NCI in men with prostate cancer and been shown
to be safe, immunogenic with slowing tumor growth rates (NCT00972309). We are evaluating the next steps in the clinical development of PDS0102 and
are seeking nondilutive financings to move to human trials.
PDS0103
In April 2020, the above mentioned, PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of
PDS0103. PDS0103 is an investigational immunotherapy owned by us and designed to treat cancers associated with the mucin-1, or MUC-1, oncogenic
protein. These include cancers such as ovarian, breast, colorectal and lung cancers. PDS0103 combines Versamune with novel highly immunogenic
agonist epitopes of MUC-1 developed by the NCI and licensed by PDS. PDS0103 is currently in late preclinical development.
MUC1 is highly expressed in several types of cancer and has been shown to be associated with drug resistance and poor disease prognosis in
breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed. Expression of MUC-1 is often associated with poor disease
prognosis, due in part to drug resistance. In preclinical studies, and similarly to PDS0101, PDS0103 demonstrated the ability to generate powerful MUC1-
specific CD8 killer T-cells. In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103. We were satisfied with the responses and
believe we will submit our IND package in the third or fourth quarter of 2022 and will start human trials at the end of 2022.
Infectimune Development Strategy
We believe that the key differentiating attributes of the Infectimune platform technology, are strong induction of CD8+ and CD4+ T-cells as well as
antibodies, which can be leveraged to improve treatment and preventive options in several infectious disease indications. Specifically, the COVID-19
pandemic has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more effective and longer
lasting protective vaccines. Our expanded infectious diseases pipeline now covers three infectious pathogens and vaccines. Current preventive and
prophylactic vaccine approaches and technologies predominantly focus on creating strong induction of antibody responses. However, the induction of T-
cell responses, in addition to antibody responses, provides more durable and broad protection against infectious diseases.
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PDS0203: COVID-19
Farmacore is developing PDS0203 under a licensing agreement with PDS Biotechnology. PDS0203 is a second-generation Infectimune-based
COVID-19 vaccine candidate: a simple subunit vaccine that utilizes a recombinant protein derived from the Spike protein of SARS-CoV-2, as opposed to
an inactivated virus-based vaccine. Preclinical studies of PDS0203 have shown the induction of strong neutralizing antibodies, virus-specific
polyfunctional CD8+ (killer) and CD4+ (helper) T-cells, and long-term memory T-cell responses. Initial financial support for the program has been
provided by the Brazilian government for preclinical development.
On February 22, 2021, PDS Biotechnology and Farmacore announced that Blanver Farmoquímica e Farmacêutica S.A joined their efforts
(collectively the “Consortium”) to develop and commercialize a novel COVID-19 vaccine in Latin America. Under the terms of the agreement, São Paulo-
based Blanver will manufacture, promote, distribute, and commercialize the Infectimune-based COVID-19 vaccine in Latin America.
On March 11, 2021 we announced that the Consortium received a commitment from the Secretary for Research and Scientific Training of the
MCTI, Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of an Infectimune-based COVID-19.
The progression of the Farmacore development program was delayed in the fourth quarter of 2021. After a review of the program by PDS and
Farmacore, the agreement with Farmacore was extended for six months to May 31, 2022 to provide additional time to Farmacore to commence
manufacturing and scale up of drug product for use in clinical trials and any necessary process development work. PDS will continue to monitor
Farmacore’s progress with this program.
PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential
mutations, based on the understood potential of Infectimune to prime the immune system to generate both antibodies for near term protection and T-cell
responses for long term protection against pathogens. Preclinical data of studies performed at the University of Kentucky indicates that PDS0203 elicits
the induction of highly active and potent virus-specific CD8 killer and CD4 helper T-cells within 14 days of treatment. The study also showed induction of
the long-lasting virus-specific memory T-cells necessary for longer term protection. A 30-45-fold increase in COVID-19 specific T-cells was observed by
Day 14 when compared to the vaccine without Versamune. These preclinical studies also indicated induction of strong anti-SARS-CoV-2 neutralizing
antibodies within 14 days, with a 20-25-fold increase when compared to the vaccine without Versamune.
The peer-reviewed scientific publication “ A Newcastle Disease Virus (NDV) Expressing a Membrane-Anchored Spike as a Cost-Effective
Inactivated SARS-CoV-2 Vaccine” by Sun et al. Vaccines (2020, volume 8, issue 4, page 771 ) also provides strong rationale for clinical development of an
Infectimune-based COVID-19 vaccine to maximize the full breadth of immune responses induced against SARS-CoV-2. This research conducted at the
Mount Sinai Icahn School of Medicine, NY, indicated that there is powerful antibody induction by Versamune against SARS-CoV-2 at low antigen doses
suggesting potential for an effective antigen dose sparing COVID-19 vaccine. These data are based on preclinical studies combining our Infectimune
technology with an inactivated Newcastle disease virus (NDV)/SARS-CoV-2 vaccine (NDV vaccine) developed at Mount Sinai.
The preclinical study compared various treatment regimens in their ability to induce antibodies against SARS-CoV-2:
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the NDV vaccine alone at doses of 5µg, 10µg and 20µg,
the NDV vaccine in combination with Versamune at 0.2µg, 1µg and 5µg,
and the NDV vaccine in combination with Addavax, an adjuvant well-known for its ability to induce powerful antibody responses, at 0.2µg,
1µg and 5µg.
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As seen in Figure 3B of the publication, shown below, the NDV vaccine with R-DOTAP nanoparticles (Infectimune) yielded the strongest antibody
responses. Figure 3C, also shown below, highlighted Infectimune’s ability to induce the highest levels of neutralizing antibodies even at the lowest studied
antigen dose of 0.2µg. Challenge studies also indicated that the Infectimune-containing vaccine conferred protection against challenge with the SARS-
CoV-2 virus.
We understand this broader projected range of effective immunity to be a result of Infectimune’s activation of Type I interferons (IFNs) critical to
developing effective anti-viral immune responses, and also to promote presentation of the unique disease-associated protein or peptide to the appropriate
compartment of the dendritic cells of the immune system. As a result of this capability, Infectimune has indicated there is potential for enhanced
immunogenicity in the context of dose sparing of both flu and COVID-19 antigens through strong induction of neutralizing antibodies. Finally, in light of the
chemical composition of PDS0203 as a subunit vaccine, we believe manufacturing scale-up for global deployment may encounter fewer challenges than is
generally observed with more complex product candidates.
PDS0202; Universal Flu
Based on the key characteristics of Infectimune we are progressing development of PDS0202, a universal influenza vaccine candidate, which
combines Infectimune with novel Computationally Optimized Broadly Reactive (COBRA) influenza vaccine antigens designed by renowned influenza
expert Dr. Ted Ross and licensed from the University of Georgia. PDS0202 preclinical development was supported by an agreement with the National
Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation Centers, or CIVICs, program, with a goal of progressing into a
human clinical trial. Preclinical development studies were performed at three sites: our Princeton, NJ laboratories, The University of Kentucky School of
Medicine, and the CIVICs Center for Influenza Vaccine Research for High-Risk Populations. The data produced in the preclinical showed significant
levels of hemagglutinin inhibition (HAI) titer levels when utilizing PDS0202 as compared to COBRA antigens alone ranging from 28x to 62x on various
strains of the H1N1 influenza virus.
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The preclinical data also showed all animals in the control group when challenged by the flu virus became sick and died while all animals treated
with either a 3mcg (high dose) or .012mcg (low dose) of PDS0102 remained alive and healthy.
We are seeking nondilutive financing for the next stage of clinical development.
PDS0201: Tuberculosis
In December 2019, we entered into an Amended and Restated Material Transfer Agreement (MTA) with Farmacore to develop a novel
tuberculosis, or TB, immunotherapy based on a combination of Farmacore’s proprietary TB antigens with Infectimune. In preliminary evaluations, our
Infectimune-based TB product, PDS0201, demonstrated highly promising TB-specific T-cell induction in-vivo. Under the Farmacore MTA, we will
undertake product development and Farmacore will conduct in-vivo preclinical studies to evaluate product efficacy. Testing is to be performed in Brazil
although development was put on hold to prioritize PDS0203. The term of the agreement extends until the end of the initial product testing period. The
research plan has been delayed due to COVID-19 research restrictions in Brazil.
Since our inception we have devoted substantially all our resources to developing our Versamune and Infectimune platforms and our
Versamune and Infectimune -based products, advancing preclinical programs, conducting clinical trials, manufacturing PDS0101 for clinical trials, and
providing general and administrative support. We have funded our operations primarily from the issuance of common stock. We have not generated any
product revenue to date. We have never been profitable and have incurred net losses in each year since our inception.
Our future funding requirements will depend on many factors, including the following:
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the timing and costs of our planned clinical trials;
the timing and costs of our planned preclinical studies of our Versamune and Infectimune-based products;
the outcome, timing and costs of seeking regulatory approvals;
the impact of COVID-19 on our operations;
the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance,
defense and enforcement of any patents or patent applications or other intellectual property rights; and
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the extent to which we license or acquire other products and technologies.
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Leadership
We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. Our founder
and CEO Frank Bedu-Addo has been responsible for developing and launching products for KBI BioPharma Inc., Schering-Plough, Merck, Elan
Corporation, and the National Cancer Institute. Our other co-founder and Chief Scientific Officer, Dr. Gregory Conn has more than 35 years of drug-
development experience, including development of antiviral and anticancer drugs through to commercialization. Our Chief Medical Officer, Dr. Lauren V.
Wood has over 30 years of translational clinical research experience and held senior positions at the National Cancer Institute Center for Cancer
Research. Our Chief Financial Officer, Matthew Hill has over 25 years of experience in finance and held prior roles as Chief Financial Officer and in
operational leadership roles at several public life science companies.
We are supported by scientific leaders in the field of vaccine development and oncology. Dr. Lisa Rohan, one of our founders, is Chair of the
Scientific Advisory Board. She is a professor in the department of Pharmaceutical Sciences at the University of Pittsburgh where she also holds
appointments in the Department of Obstetrics, Gynecology and Reproductive Sciences in the School of Medicine and the Clinical Translational Science
Institute. Dr. Einstein, Professor and Chair in the Department of OB/ GYN & Women’s Heath at Rutgers University Medical School is an expert in HPV-
related pathogenesis, therapy and prevention of lower anogenital tract and gynecologic cancers. He is an active leader for management guidelines and
translating clinical study and translational data for the World Health Organization, American Cancer Society, Society of Gynecologic Oncology and the
American College of Obstetrics and Gynecology. Professor Leaf Huang, one of our founders, is a Distinguished Professor of Pharmaco-engineering and
Molecular Pharmaceutics at the Eshelman School of Pharmacy, University of North Carolina at Chapel Hill pioneered the liposome design and
manufacture of cationic lipid vector nanoparticles as a delivery system for cDNA, mRNA, siRNA, proteins and peptides for tumor growth inhibition and for
vaccines in treating cancer and infectious diseases. Dr. Olivera Finn is a Distinguished Professor of Immunology at the University of Pittsburgh School of
Medicine and she discovered the MUC1 antigen. Our Principal Investigator for the PDS0101 Head and Neck Trial with KEYTRUDA ® for first-line
treatment of recurrent/ metastatic Head and Neck Cancer is Dr. Jared Weiss, Associate Professor of Medicine, University of North Carolina Lineberger
Comprehensive Cancer Center, who is an expert in head and neck thoracic oncology with a focus on immunotherapeutic approaches for these diseases.
Facilities & Manufacturing and Commercial scale up
Product candidates using our Versamune and Infectimune development platforms are manufactured using a readily scalable, fill-finish process
with well-defined and reproducible operations. We do not own or operate cGMP compliant manufacturing facilities to produce any of our product
candidates and we do not have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on third-party contract
manufacturing organizations to produce the amounts of our product candidates necessary for our preclinical research and clinical studies. As part of the
manufacture and design process for our product candidates, we rely on internal, scientific and manufacturing know-how and trade secrets and the know-
how and trade secrets of third-party manufacturers. We currently employ internal resources to manage our manufacturing contractors.
Our research and development activities are located at the Princeton Innovation Center BioLabs, 303A College Road East, Princeton, NJ 08540,
which provides first-rate development facilities for biotech companies. All animal toxicology and efficacy testing are done via third party contracts and
collaborations to provide maximum flexibility and to minimize operational costs and overhead. This approach allows for independent validation of our data,
and we believe it has historically been a cost-efficient way to progress our development programs.
We do not intend to incur the costs of building, staffing and maintaining manufacturing facilities in the near term. The supply chain integrity was
not negatively impacted by COVID-19 thus far. Our management team has formulation, manufacturing and operations expertise, including past senior
executive management roles in contract drug development and manufacturing. Our management team plans to utilize its expertise and knowledge to
identify suitable alternative contract manufacturers who will be capable of efficiently manufacturing our products.
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Regulatory Pathway
For our lead product candidate, PDS0101, the next step in the product development process are our ongoing Phase 2 clinical trials. This process
is described further under “U.S. Product Development Process.” The final protocols for all phase 2 clinical trials were submitted to the FDA prior to trial
initiation and information for all three trials are on www.clinicaltrials.gov. To conform to the FDA electronic Common Technical Document format
requirement and submission of the CGMP material that will be used in the Phase 2 trials for PDS0101, we submitted a Chemistry, Manufacturing, and
Controls amendment to our Investigational New Drug application, related to PDS’s Phase 2 studies with PDS0101 to the FDA in 2020.
If Phase 2 clinical trials support further development, under standard FDA processes we would then need to complete a registrational Phase 2/3
clinical trial while continuing to gather other necessary application data and information for PDS0101 to seek marketing authorization.
We anticipate that we would seek marketing authorization from the FDA for our product candidates through the Biologics License Application
pathway, under Section 351(a) of the Public Health Service Act. This process and the requirements are described further under “U.S. Product
Development Process.”
For our earlier stage, preclinical product candidates PDS0102 and PDS0103, we plan to work to develop data with the goal of progressing to an
IND submission in 2022 or early 2023 and progressing clinical development to first-in-human trials with these products. We have engaged with the FDA
and received useful initial feedback on the clinical trial design for the PDS0103 program and this information will influence our strategy for regulatory
submissions and the protocol development.
Intellectual Property
PATENTS
We seek to maintain high barriers to entry around our product candidates and the markets in which they are utilized by using a multiple layered
approach to our patents, patent applications, and substantial know-how and trade secrets related to the Versamune platform. We strive to protect and
enhance the proprietary technology, inventions and improvements that are commercially important to its business, including seeking, maintaining, and
defending patent rights. We also rely on trade secrets relating to its platform and on know-how, continuing technological innovation to develop, strengthen
and maintain its proprietary position in the vaccine field. In addition, we rely on regulatory protection afforded through data exclusivity, market exclusivity
and patent term extensions where available. We also utilize trademark protection for our company name and we expect to do so for products and/or
services as they are marketed.
PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune
platform. As of December 31, 2021, PDS holds six (6) U.S. patents with granted claims directed to its platform technology and sixteen (16) pending U.S.
patent applications. These issued patents will expire in 2028, 2029, 2031 and 2033. Should the more recently submitted patent applications currently in
prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of March 1, 2022, PDS holds seventy
(70) issued foreign patents and thirty-eight (38) pending or published foreign patent applications. Most of our international issued patents are issued in
multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform
technology. These issued patents will expire in 2031-2037, or later if patent term extension applies. Most recently, the USPTO allowed an application for
our HPV 16 immunotherapy which when granted will run until October 2037.
Licensed Patents
We have an exclusive worldwide license from Merck & Cie to (R)-DOTAP and its crystal forms, manufacturing methods, and pharmaceutical
compositions using the compounds., which are owned by Merck Patent GmbH, for use in our immunotherapy compositions and immunotherapies. Merck
& Cie has informed us that it has rights to license these patent families through an intra-company agreement with Merck Patent GmbH. These licensed
patents are significant to Versamune and Infectimune platforms, as they are directed to the currently utilized Versamune ingredient.
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We have licensed patented antigens from the US government for use worldwide in our cationic lipid immunotherapies. We have licensed T-cell
receptor gamma alternate reading frame protein (“TARP”) from the National Cancer Institute (“NCI”) to develop and commercialize TARP peptide-based
therapies in combination with the Company’s Versamune technology and any other of the Company’s proprietary technologies for prostate and breast
cancers and Acute Myeloid Leukemia. These patents are directed to Immunogenic Peptides and Peptide Derivatives for The Treatment of Prostate and
Breast Cancer Treatment and Multi-Epitope TARP Peptide Vaccine and Uses Thereof. These antigens are incorporated in PDS0102 with Versamune.
We have licensed mucin-1 (“MUC1”) novel highly immunogenic agonist epitopes of MUC1 developed by the National Cancer Institute. MUC1is highly
expressed in multiple solid tumors and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and
ovarian cancers, for which PDS0103 is being developed. We have been granted patents and are pursuing additional patents that cover compositions and
methods of use of cationic lipid immunotherapies with each of the licensed technologies.
We entered into a non-exclusive agreement to license COBRA universal influenza antigens with the University of Georgia Research Foundation
to develop, manufacture and use COBRA antigens in a clinical trial for a universal influenza vaccine worldwide. These antigens are developed by Dr.
Ted Ross at the University of Georgia. We believe that the combination of these antigens with our proprietary Infectimune technology, representing
PDS0202, has the potential to induce a broad immune response as a universal flu vaccine, based on preclinical development studies performed to date.
Trade Secrets and Other Proprietary Information
In contrast to patent protection or regulatory exclusivities, trade secret protection is a form of intellectual property that does not require disclosure
of the subject information as part of the process, but instead depends on maintaining the subject information as strictly confidential. Companies may in
some circumstances rely on trade secrets to protect certain aspects of their proprietary know-how and technological advances, especially where they do
not believe patent protection is appropriate or obtainable. Trade secret protection depends in part on confidentiality agreements with employees,
consultants, outside scientific collaborators, sponsored researchers and other advisors that prohibit disclosure of designated proprietary information.
Trade secrets can be difficult to protect. Confidentiality agreements may not succeed in preventing a person or parties from disclosing confidential
information, and in that event the rights of the trade secret holder are subject to the viability of an adequate remedy at law, typically under state law
modeled on the Uniform Trade Secrets Protection Act, to stop, mitigate or compensate for the unauthorized disclosure of confidential information. Costly
and time-consuming litigation could be necessary to enforce and determine the scope of the proprietary rights. Finally, there is always at least some risk
that others may independently discover the trade secrets and proprietary information.
Material License Agreements and Research and Development Agreements
Patent License Agreements with National Institutes of Health.
Effective January 5, 2015, we entered into a Patent License Agreement (the “Patent License Agreement”) as Amended by First Amendment to
Patent License Agreement (“First Amendment”) of August 5, 2015, with an agency within the Department of Health and Human Services (“HHS”),
pursuant to which NIH granted PDS a nonexclusive license to certain patent rights for the development of a therapeutic cancer vaccine specifically in
combination with PDS’s proprietary Versamune technology for ovarian, breast, colon and lung cancers. The Patent License Agreement expires when the
last licensed patent expires if the Patent License Agreement is not terminated prior to that date. NIH may terminate the Patent License Agreement if PDS
is in default in the performance of any material obligation under the Patent License Agreement. PDS may unilaterally terminate the Patent License
Agreement in any country or territory upon sixty (60) days written notice.
Under the Patent License Agreement and First Amendment PDS agreed to pay NIH: (a) a noncreditable, nonrefundable royalty in the amount of
$30,000 upon execution of the Patent License Agreement; (b) a noncreditable, nonrefundable royalty in the amount of $60,000 upon execution of the First
Amendment to Patent License Agreement (c) a nonrefundable minimum annual royalty of $5,000; (d) earned royalties of two percent (2%) on net sales,
reducible by a half percent (0.5%) for any earned royalties PDS must pay to third parties; (e) benchmark royalties as follows: (i) $25,000 upon successful
completion of each Phase 2 Clinical Studies of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (ii) $50,000 upon
initiation of the first Phase 3 Clinical Trial of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (iii) $750,000 upon
the first commercial sale in the licensed territory utilizing and/or directed to licensed product(s) and/or licensed process(es) within the licensed patent
rights for breast, colon, lung or ovarian cancer; and (f) additional sublicensing royalties for each sublicense required to be approved by NIH of four percent
(4%) on the fair market value of any consideration received for granting such sublicense.
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Effective as November 5, 2021, we entered into a Patent License Agreement (the “NCI Patent License Agreement”) with the U.S. Department of
Health and Human Services, as represented by NCI of NIH. Pursuant to the NCI Patent License Agreement, the Company obtained a nonexclusive,
worldwide license to the patent rights for TARP to develop and commercialize TARP peptide-based therapies in combination with the Versamune
technology and any other of our proprietary technologies for prostate and breast cancers and Acute Myeloid Leukemia. The NCI Patent License
Agreement expires when the last licensed patent expires if the Patent License Agreement is not terminated prior to that date. NCI may terminate the
Patent License Agreement if we are in default in the performance of any material obligation under the Patent License Agreement. We may unilaterally
terminate the NCI Patent License Agreement in any country or territory upon sixty (60) days written notice. Under the NCI Patent License Agreement, we
agreed to pay NCI certain non-creditable, nonrefundable license issue royalties, unreimbursed patent expenses for the licensed patent rights, a
nonrefundable minimum annual royalty, earned royalties as a percentage of net sales and benchmark royalties.
DOTAP Chloride Enantiomer License Agreement with Merck Eprova AG.
Effective November 1, 2008, we entered into a DOTAP Chloride Enantiomer License (the “DOTAP License Agreement”) with Merck Eprova AG
(“EPRO”), pursuant to which we obtained an exclusive license from EPRO technology to undertake development of products relating to the R-enantiomer
and S-enantiomer of DOTAP Chloride for worldwide commercialization in a composition and method of inducing an immune response in a subject by
administering at least one cationic lipid with or without an antigen. The DOTAP License Agreement expires on a licensed product-by-licensed product and
country-by-country basis until the expiration of the obligation to pay royalties applicable to such licensed product in such country. We have the right to
unilaterally terminate the DOTAP License Agreement (in its entirety or on a licensed product-by-licensed product or country-by-country basis) at any time
for any reason upon prior written notice. We paid a one-time royalty of CHF 100,000 as a result of the reverse merger between PDS and Edge
Therapeutics, Inc.
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human
Services.
Effective February 2, 2016, we entered into a Cooperative Research and Development Agreement (the “ CRADA”) with the U.S. Department of
Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and
development activities as defined by the exhibited Research Plan. The principal goal of the CRADA is to determine whether our Versamune
immunotherapeutic technology will be effective for enhancing delivery of cancer vaccines or viral vaccines or other immunotherapies developed by the
Vaccine Branch, Center for Cancer Research, NCI, in mouse models and in human clinical studies. The CRADA provides for development, testing and
studies to be conducted in conjunction with the Vaccine Branch involving Versamune and Multi-epitope (ME) T cell receptor gamma alternate reading
frame protein peptide (TARP) to develop a treatment for prostate cancer using autologous dendritic cells and co- administered locally with ME TARP
peptides co-formulated with Versamune immunotherapeutic technology in a non-cellular vaccine platform.
The term of the CRADA is five (5) years, starting February 2, 2016. Pursuant to Appendix A, PDS agreed to provide up to $1,000,000 but no less
than $500,000 during the first year of the CRADA and up to $1,000,000 but no less than $750,000 per year for the remaining years of the CRADA for NCI
to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as well as to pay for supplies and
travel expenses and, upon consent of the parties, to acquire support for a postdoctoral research fellow to conduct additional preclinical studies. The
CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate the CRADA at any time by
providing sixty (60) days written notice. If we terminate prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, we must
supply enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally
terminated by us before its expiration, we must pay non-cancellable obligations for personnel for a period of six (6) months after the termination date or
until the expiration date of the CRADA, whichever is sooner. If we suspend development on the test article without the transfer of its active development
efforts, assets, and obligations to a third party within ninety (90) days of discontinuation, NCI may continue development. In such event, we must transfer
all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up
license regarding same.
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Cost Reimbursement Agreement with University of Kentucky Research Foundation - I. with University of Kentucky Research Foundation - I.
Effective November 1, 2015, we entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of
Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP,
MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was
renewed on July 1, 2021, for an anticipated cost of $404,502. The agreement terminates on June 30, 2022, unless extended by written mutual agreement
of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days
written notice.
Cost Reimbursement and Sponsored Agreement with University of Kentucky Research Foundation - II.
Effective November 1, 2015, we entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of
Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP,
MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was
renewed on July 1, 2021, for an anticipated cost of $13,998. The agreement terminates on June 30, 2022, unless extended by written mutual agreement
of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days
written notice.
Clinical Trial Collaboration and Supply Agreement with MSD International GmbH.
Effective May 19, 2017, we entered into a Clinical Trial Collaboration and Supply Agreement (the “CTCSA”) with MSD International GmbH
(“Merck”) pursuant to which we and Merck agreed to collaborate in a Phase 2 clinical trial to evaluate the safety, and preliminary efficacy of the
concomitant and/or sequenced administration of the combination of a Merck compound (i.e., pembrolizumab, a humanized anti-human PD-1 monoclonal
antibody) and our compound (i.e., PDS0101, a cationic lipid-based therapeutic vaccine combining HPV peptides) in treatment of patients with recurrent or
metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV 16) infection. The term of the CTCSA commenced on May 19, 2017 and
will continue until the earlier of (i) delivery of the final study report and (ii) Study Completion (i.e., upon database lock of the Study results), or until
terminated by either party. In the event the CTCSA is terminated by Merck upon a material breach by PDS, PDS must reimburse Merck for its direct
manufacturing costs, such as manufacturing fees, raw materials, direct labor, freight and duty, factory overhead costs and its indirect manufacturing costs,
such as allocations of indirect factory overhead and site support costs. This agreement was amended on October 28, 2019 to reflect the trial will be for
first in line treatment of disease.
On October 28, 2019, we entered into an amendment to the clinical trial collaboration agreement with Merck to evaluate the combination of our
lead Versamune-based immunotherapy, PDS0101, with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in a Phase II clinical trial. The
modification to the clinical trial design to evaluate PDS0101 in combination with KEYTRUDA® as first-line treatment comes as a result of Merck’s approval
by the FDA on June 10, 2019 for first line treatment of patients with metastatic or unresectable recurrent HNSCC using KEYTRUDA® in combination with
platinum and fluorouracil (FU) for all patients and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test.
The trial was initiated in November of 2020 to evaluate the efficacy and safety of the combination as a first-line treatment in patients with recurrent or
metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.
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Other Research and Development Agreements
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human
Services.
Effective April 22, 2019, PDS entered into a Cooperative Research and Development Agreement (the “ CRADA”) with the U.S. Department of
Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and
development activities as defined by the exhibited Research Plan. Under the agreement, PDS will collaborate with the NCI’s Genitourinary Malignancies
Branch (GMB) and Laboratory of Tumor Immunology and Biology (LTIB) with plans to conduct a Phase 2 clinical trial evaluating PDS0101 with novel
immune-modulating agents M7824 and NHS-IL12 being studied at NCI as part of a CRADA with EMD Serono (Merck KGaA). The phase 2 clinical trial
was initiated in June of 2020. The CRADA also involves preclinical evaluation of PDS0101 in combination with other therapeutic modalities upon the
mutual agreement of both parties. In April 2020, this agreement was amended to include PDS0103, in preclinical and clinical development for treatment of
ovarian, breast, colorectal and lung cancers.
The term of the CRADA is five (5) years, starting April 22, 2019. Pursuant to Appendix A, we agreed to provide $110,000 annually, the first
payment of which is to be made on the first anniversary the of the CRADA Effective date or upon the initiation of a Phase II clinical trial as the NIH Clinical
Center, whichever comes first for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research
activities, as well as to pay for supplies and travel expenses and infrastructure costs. The CRADA may be terminated by either party at any time by mutual
written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If we terminate prior to the
completion of all approved or active study protocol(s) pursuant to the CRADA, we must supply enough study test product to complete these study
protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, we must pay non-
cancellable obligations for personnel for a period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is
sooner. If we suspend development on the test article without the transfer of its active development efforts, assets, and obligations to a third party within
ninety (90) days of discontinuation, NCI may continue development. In such event, we must transfer all information necessary to enable NCI to contract
for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license regarding same.
Amended and Restated Material Transfer Agreement with Farmacore Biotechnology
On December 4, 2019, we entered into an Amended and Restated Material Transfer Agreement with Farmacore Biotechnology to develop a
novel tuberculosis (TB) immunotherapy based on Farmacore’s proprietary TB antigens and Versamune. A prior material transfer agreement under which
preliminary work commenced was Amended and Restated due to promising early preclinical results and to progress to the next development phase. We
will undertake product development and Farmacore will conduct preclinical studies to evaluate the efficacy of the product. The term of the agreement
extends until the end of the product testing period and may be terminated at any time by either party with 30 days’ notice. This research plan has been
delayed by the COVID-19 research restrictions in Brazil.
License and Collaboration Agreement with Farmacore Biotechnology
In June 2020, we announced a second collaboration with Farmacore to develop PDS0204, a vaccine to prevent COVID-19, combining
Versamune with Farmacore’s recombinant SARS-CoV-2 antigen. Based on the highly promising antibody and T-cell data generated with PDS0203, we
and Farmacore amended the agreement to prioritize the advancement of PDS0203 to human clinical trials. Farmacore will retain commercialization rights
i n Latin America and revenues from Latin American sales will be shared between us and Farmacore. Under the Agreement, Farmacore leads the
regulatory and clinical trial effort and we contribute scientific expertise and operational support. The Agreement term extends until the next phase of
development and may be terminated with 30 days’ notice. This Agreement has been extended through May 31, 2022.
Option to License with the University of Georgia Research Foundation of Georgia Research Foundation
On October 25, 2021, we entered into a non-exclusive agreement to license Computationally Optimized Broadly Reactive Antigen (COBRA) with
the University of Georgia Research Foundation. This agreement allows us to develop, manufacture and use COBRA antigens in a clinical trial for a
universal influenza vaccine worldwide. The term of the agreement extends twelve months after initiation of first Phase 1 clinical trial and may be
extended upon agreement of the parties. We may convert the option to a full agreement any time prior to the conclusion of the term.
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COVID-19 Impact on Business and Operations
In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China,
causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization
(WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency on January 31,
2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared
COVID-19 a pandemic and on March 13 the President declared a national emergency in response to the pandemic. The full impact of the COVID-19
pandemic is unknown and rapidly evolving. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and operations.
Since the pandemic began, variants of the disease have caused continuous waves of widespread transmission and illness, causing broad economic and
supply chain disruptions. The FDA issued and since updated guidance to assist sponsors in assuring the safety of trial participants, maintaining
compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity. Clinical trial sites have implemented institution-specific measures
securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. The evolving COVID-19 pandemic has
impacted the pace of enrollment in clinical trials in general and we may be negatively affected with our trials. COVID-19 related travel and other
restrictions may also impact the potential for on-site monitoring visiting and audits and inspections by us, third parties, and regulators. There may be
shortages of site personnel and equipment necessary for the timely completion of our trials. We are providing support to address these challenges, but
these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical trials.
Competition
The biotechnology and pharmaceutical industries are characterized by intense competition to develop new technologies and proprietary products.
We are aware of various established companies, including major pharmaceutical companies, broadly engaged in immunotherapies and vaccines in
research and development that may compete directly with the products we are developing including Jansen Pharmaceuticals (part of J&J), Sanofi-Aventis,
GlaxoSmithKline plc, Merck and Pfizer, among others. In addition, there are also many development-stage biotechnology companies in various
immunotherapy and vaccine development including, but not limited to Inovio, Advaxis, Kite Pharma, Hookipa, Moderna, ZIOPHARM Oncology, Heat
Biologics, Harpoon Therapeutics, Oncosec Medical, BioNTech, Osivax, Medicago, Vaxart, and Flugen. If one or more of these companies is successful in
developing their technologies, it could materially impact our business.
While we believe that the Versamune and Infectimune platforms provide us with competitive advantages, we face competition from many different
sources, including biotechnology and pharmaceutical companies, academic institutions, government agencies, as well as public and private research
institutions. Any products that we may commercialize will have to compete with existing products and therapies as well as new products and
immunotherapies that may become available in the future.
We anticipate that it will face intense and increasing competition as new immunotherapies enter the market and advanced technologies become
available. PDS expects any products that it develops and commercializes to compete based on, among other things, efficacy, safety, convenience of
administration and delivery, price, availability of therapeutics, the level of generic competition and the availability of reimbursement from government and
other third-party payors. PDS’s competitors may obtain FDA or other regulatory approval for their products more rapidly than it may obtain approval for its
products, which could result in our competitors establishing a strong market position before it is able to enter the market. In addition, our ability to compete
may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
Government Regulation and Product Approval
Federal, state and local government authorities in the United States and in other countries extensively regulate, among other things, the research,
development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-
approval monitoring and reporting, marketing and export and import of biological and pharmaceutical products such as those we are developing. Our
product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory
agency before they may be legally marketed in foreign countries. Generally, its activities in other countries will be subject to regulation that is similar in
nature and scope as that imposed in the United States. The process for obtaining regulatory marketing approvals and the subsequent compliance with
appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
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U.S. Product Development Process
In the United States, the FDA regulates biological drug products under the Federal Food, Drug and Cosmetic Act, or FDCA, and the Public
Health Service Act, or PHSA, and implementing regulations. Products are also subject to certain other federal, state and local statutes and regulations.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations
requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product
development process, approval process or post-approval, may subject an applicant to administrative or judicial action. FDA decisions or enforcement
actions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product
recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government
contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on PDS.
The process required by the FDA before a biological drug product may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests and animal studies according to good laboratory practice regulations, or GLP, and applicable
requirements for the humane use of laboratory animals or other applicable regulations;
submission to the FDA of an investigational new drug application, or an IND, which must become effective before human clinical studies may
begin;
performance of adequate and well-controlled human clinical studies according to the FDA’s regulations commonly referred to as good clinical
practice, or GCP, and any additional requirements for the protection of human research subjects and their health information, to establish the
safety and efficacy of the proposed biological product for its intended use;
submission to the FDA of a Biologics License Application, or BLA, for marketing approval that meets applicable requirements to ensure the
continued safety, purity, and potency/efficacy of the product that is the subject of the BLA based on results of nonclinical testing and clinical
studies (including among other things clinical data, chemistry, and manufacturing and controls (CMC) data);
satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess
compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength,
quality and purity;
pre-approval inspection by the FDA of the sponsor (or any third party service providers) relative to oversight of clinical studies, clinical trial
sites that generated the data in support of the BLA, and any manufacturing facilities; and
FDA review and approval, or licensure, of the BLA.
Before testing any product candidate in humans, the product enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical
studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of
the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The clinical study
sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature
and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The results of
preclinical studies and early clinical studies of product candidates with small patient populations may not be predictive of the results of later-stage clinical
studies or the results once the applicable clinical studies are completed. The IND automatically becomes effective 30 days after receipt by the FDA,
unless the FDA raises concerns or questions regarding the proposed clinical studies and places the study on a clinical hold within that 30-day time period.
In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose
clinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes
a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, PDS cannot be
sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate
such studies.
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Clinical trials involve the administration of the biological product candidate to volunteers or patients under the supervision of qualified
investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among
other things, the objectives of the clinical trial, dosing procedures, subject selection (for example, inclusion and exclusion criteria), and the parameters to
be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol
and any amendments to the protocol must be submitted to the FDA as part of the IND and require IRB approval. Clinical trials must be conducted and
monitored in accordance with the FDA law including GCP requirements, including the requirement that all research subjects provide informed consent.
Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the
clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks
to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and
content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until
completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for
severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the
initial human testing is often conducted in seriously ill subjects. These studies are designed to test the safety, dosage tolerance, absorption,
metabolism and pharmacologic actions of the investigational product in humans, the side effects associated with increasing doses, and, if
possible, to gain early evidence of effectiveness.
Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to
preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing
schedule. Multiple Phase 2 clinical studies may be conducted to obtain information prior to beginning larger and more expensive Phase 3
clinical studies.
Phase 3. Clinical studies, which must be adequate and well-controlled, are undertaken to further evaluate dosage, clinical efficacy, potency,
and safety in an expanded patient population generally at geographically dispersed clinical trial sites. These clinical studies are intended to
establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling.
Although these are the typical phases of progression, and characteristics of the phases of a clinical development program, certain expedited
programs allow for variations that could support a marketing application based on surrogate endpoints, intermediate clinical endpoints, or single-arm as
opposed to comparative or placebo-controlled studies (for example, FDA could rely on well-controlled Phase 2 studies for evidence of effectiveness under
certain circumstances).
Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical
studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-
up, or to gain other information about the product.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and
clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must
be promptly submitted to the FDA and the investigators of potential safety risks, from clinical trials or any other source, including for serious and
unexpected adverse events and serious and unexpected suspected adverse reactions, any findings from other studies suggesting a significant risk in
humans exposed to the drug, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important
increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND
safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of
any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but no later than within seven calendar days after the sponsor’s
initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The
FDA, the sponsor or its data safety monitoring board, or DSMB, may suspend or terminate a clinical trial at any time on various grounds, including a
finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial
at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with
unexpected serious harm to subjects.
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Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public
dissemination on their ClinicalTrials.gov website, and other jurisdictions have similar laws that may apply.
Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical
characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP
requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of
manufacturing controls for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other criteria, the sponsor must develop methods for testing the identity, strength, quality, potency
and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to
demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the
biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and
composition of the product, proposed labeling and other relevant information. The testing and approval processes require substantial time and effort and
there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant application fee. For
approved drugs, including BLA-licensed biological products, PDUFA also imposes an annual PDUFA program fee. The FDA adjusts the PDUFA user fees
on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed
by a small business. No user fees are assessed on BLAs for products designated as orphan drugs unless the application for the product also includes a
non-orphan indication.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the
agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may
request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to
review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA
reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and has an
acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety,
strength, quality, potency and purity. The FDA may refer an application to an advisory committee for review, evaluation and recommendation as to
whether the application should be approved, and applications for new molecular entities and original BLAs are generally discussed at advisory committee
meetings unless the FDA determines that this type of consultation is not needed under the circumstances. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product
approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the
biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA
without a REMS, if required.
Before approving a BLA, the FDA will typically inspect the facilities at which the product is manufactured. The FDA will not approve the product
unless it is satisfied that the manufacturing establishments and processes supporting the BLA meet the appropriate requirements and comply with the
applicable regulations (including cGMP requirements and adequate assurance for consistent commercial production of the product within required
specifications). Additionally, before approving a BLA, the FDA will typically conduct a pre-approval inspection of regulated participants in clinical trials (for
example, the sponsor, investigators responsible for specific sites, and CROs) to assure that the clinical trials were conducted in compliance with the IND
and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of
training, record keeping, production, and quality control.
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Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory
criteria for approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than PDS
interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all
of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major,
for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might
take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all
of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product.
Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose
restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any
approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase 4 clinical studies, designed to further assess a
biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been
commercialized.
In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA for a new indication, dosage form, dosage regimen, or route
of administration must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA
may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for
use in adults, or full or partial waivers from the pediatric data requirements.
Post-Approval Requirements
Any products for which PDS receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-
keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product
sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for
direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses
or consistent with the approved labeling, known as ‘off-label’ use, limitations on industry-sponsored scientific and educational activities, and requirements
for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, if the physicians deem to be
appropriate in their professional medical judgment, manufacturers may not market or promote such off-label uses. Recent court decisions have impacted
the FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations; however, there are still significant risks in this area
in part due to the potential False Claims Act exposure. Further, the FDA has not materially changed its position on off-label promotion following legal
setbacks on First Amendment grounds and the DOJ has consistently asserted in FCA briefings that “speech that serves as a conduit for violations of the
law is not constitutionally protected.”
In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to
ensure the long-term stability of the product. cGMP regulations require among other things, quality control and quality assurance as well as the
corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and
other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain
state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among
other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending
on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as
adding new indications and claims, are also subject to further FDA review and approval.
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The Drug Supply Chain Security Act, or DSCSA imposes obligations on manufacturers of prescription biopharmaceutical products for commercial
distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of
entities in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers, and dispensers). The DSCSA preempts
certain previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing Act, or PDMA. Trading partners within
the drug supply chain must now ensure certain product tracing requirements are met that they are doing business with other authorized trading partners;
and they are required to exchange transaction information, transaction history, and transaction statements. Product identifier information (an aspect of the
product tracing scheme) is also now required. The DSCSA requirements, development of standards, and the system for product tracing have been and
will continue to be phased in over a period of years, with the FDA indicating enforcement discretion on certain aspects due to the COVID-19 pandemic.
The distribution of product samples continues to be regulated under the PDMA, and some states also impose regulations on drug sample distribution.
The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product.
Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences,
including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with
doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s
approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management
measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change,
which could delay or prevent regulatory approval of its product candidates under development.
Regulatory Exclusivities Applicable to Biologics and Related Matters
Abbreviated Licensure Pathway for Biosimilars : The Biologics Price Competition and Innovation Act of 2009 (BPCIA) amended the PHSA to
create an abbreviated approval pathway for “biosimilar” biologics, that is, those shown to be highly similar to an already-FDA-licensed reference biologic.
The abbreviated approval process for biosimilars under the BPCIA is similar in concept to the Abbreviated New Drug Application (“ANDA”) for generic
small molecule drugs established by the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch-Waxman”) amendments to the FDCA.
As with Hatch-Waxman, the goal of the BPCIA was to increase access to lower-priced versions of drugs, while balancing the need to continue
incentivizing innovation in drug development. Biosimilarity is defined to mean that the proposed biologic is highly similar to the reference product
notwithstanding minor differences in clinically inactive components and that there are no clinically meaningful differences between the biological product
and the reference product in terms of the safety, purity and potency of the product. Further, a biosimilar may be determined to be “interchangeable” with
the reference product, in which case the biosimilar may be substituted for the reference product under state substitution laws, similar to the way generic
small molecule drugs are substituted. The higher standard of interchangeability requires a showing that the biosimilar is expected to produce the same
clinical result as the reference biologic in any given patient, and further that the risk to the patient in terms of safety, purity, and/or potency pf switching
between the biosimilar and the reference product is no more than using the reference product without switching.
Regulatory Exclusivities Applicable to Biologics Under the BPCIA : The BPCIA established certain regulatory exclusivities that provide reference
biologics with prescribed periods of time during which competing biosimilars or interchangeable biosimilars may not be approved or may not be
marketed. Once its BLA is approved (“date of first licensure) the reference biologic is entitled to a period of four years after its date of first licensure
during which time FDA is prohibited from accepting a marketing application that would seek approval of any products that are biosimilar to the branded
product. In addition, the reference biologic is entitled to a period of 12 years after its date of first licensure during which time FDA is prohibited from
approving marketing applications for any products that are biosimilar to the branded product. In addition, the first interchangeable biosimilar may be
entitled to a period of one year after its date of first licensure, or other periods keyed to the outcome of patent litigation if instituted, during which FDA is
prohibited from finding that any other biosimilars are interchangeable to the same reference biologic. The reference biologic may also be entitled to
regulatory exclusivity under other statutory provisions that apply to biologics and small molecule drugs.
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Orphan Drug Exclusivity: Under the Orphan Drug Act, the FDA may grant orphan drug designation to biological products indicated for a rare
disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the United States, or in the alternative there is no
reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will be recovered
from sales of the product. Orphan designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of
the biological product and its potential orphan use are disclosed publicly by the FDA. The first BLA sponsor to receive FDA approval for a particular
active moiety to treat a particular disease with FDA orphan drug designation is entitled to a period of 12 years after its date of first licensure during which
time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. There is an exception in certain
limited circumstances, such as for a showing of clinical superiority to the product with orphan drug exclusivity. A product is clinically superior if it is safer,
more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug or
biological product for the same disease or condition, or the same biological product for a different disease or condition. Other benefits of orphan drug
designation include tax credits for certain research and a waiver of the BLA user fee.
Pediatric Study Requirements and Pediatric Exclusivity : Under the Best Pharmaceuticals for Children Act (BPCA), a sponsor qualifies for
“pediatric exclusivity” if it complies with a Written Request (WR) issued by FDA for pediatric studies. The sponsor may apply to FDA to issue a WR.
Pediatric exclusivity operates by adding six months of exclusivity on to the end of the latest-expiring form of exclusivity and may apply to patent rights or to
FDA regulatory exclusivities. To qualify for pediatric exclusivity, at least one of those rights must still be currently in force at the time FDA approves the
pediatric studies.
Patent Term Extensions : Patents have a limited lifespan. In most countries, including the U.S., the standard expiration of a patent is 20 years
from the effective filing date. Various extensions of patent terms may be available in certain circumstances, for example where there are delays in
obtaining FDA regulatory approvals that result in a reduction of the period of time during which we could market a product under patent protection. In the
U.S., such possible extensions include those permitted under Hatch-Waxman, which permits a patent term extension of up to five years to cover an FDA-
approved product. The actual length of the extension will depend on the amount of patent term lost while the product was in clinical trials, and FDA must
agree with our calculation of the time lost in regulatory review.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, PDS’s activities are potentially subject to regulation, either directly or indirectly, by various federal, state and local authorities
in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of
Health and Human Services, for instance the Office of Inspector General (OIG), the U.S. Department of Justice (DOJ), and individual U.S. Attorney offices
within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud
and abuse provisions of the Social Security Act, the criminal provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the
federal Anti-Kickback Statute, the federal false claims laws, the physician payment transparency laws, and similar state laws, each as amended. The
compliance and enforcement landscape, and related risk, is informed by government enforcement precedent and settlement history, Advisory Opinions,
and Special Fraud Alerts. Our approach to compliance may evolve over time in light of these types of developments.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or
receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging
for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term
remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements
between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and
practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if
they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe
harbor, however, does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a
case-by-case basis based on a cumulative review of all of its facts and circumstances. PDS’s practices may not in all cases meet all of the criteria for
protection under a statutory exception or regulatory safe harbor. The lack of uniform court interpretation of the Anti-Kickback Statute combined with
emerging, novel enforcement theories, makes compliance with the law difficult. The potential safe harbors available are subject to change through
legislative and regulatory action, and we may decide to adjust our business practices or be subject to heightened scrutiny as a result. Violations of the
federal Anti-Kickback Statute can result in significant criminal fines, exclusion from participation in Medicare and Medicaid and follow-on civil litigation,
among other things, for both entities and individuals.
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Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a
person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition,
the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes
a per se false or fraudulent claim for purposes of the federal False Claims Act, as discussed below.
The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payers. Federal criminal law at 18 U.S.C. § 1001, among other sections, prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services.
The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or
caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as
claimed or is false or fraudulent.
The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false
claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement
material to a false or fraudulent claim to the federal government. The qui tam provisions of the False Claims Act and similar state laws allow a private
individual to bring civil actions on behalf of the federal or state government and to share in any monetary recovery. As a result of a modification made by
the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government,
whether directly or indirectly. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly
providing free product to customers with the expectation that the customers would bill federal programs for the product.
Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for
unapproved, and thus non-reimbursable, uses.
HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to
obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any
healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or
device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation.
Also, many states have enacted similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and
other state programs, or, in several states, apply regardless of the payor, even extending to self-pay items and services.
PDS may be subject to data privacy and security regulations by both the federal government and the states in which it conducts its business. We
are not a covered entity under HIPAA and have not functioned as a business associate under HIPAA that would cause the HIPAA Security Rule and
provisions of the Privacy Rule to apply directly to us as a business associate. To the extent that we ever function in a business associate capacity,
HIPAA, as amended by the HITECH Act, and its respective implementing regulations, including the final omnibus rule published on January 25, 2013,
imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Following enactment of the HITECH
Act, HIPAA’s privacy and security standards now directly apply to business associates of covered entities that receive or obtain protected health
information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees
and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in specified
circumstances, many of which differ from each other in significant ways, and may apply more broadly thus complicating compliance efforts (for example,
California recently enacted legislation — the California Consumer Privacy Act, or CCPA — which went into effect on January 1, 2020 and among other
things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of
certain disclosures of their information, and creates a private right of action with statutory damages for certain data breaches. The CCPA was recently
amended by the California Privacy Rights Act, or CPRA, expanding certain consumer rights such as the right to know. It remains unclear what, if any,
additional modifications will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential effects of
the CCPA and CPRA and implementing regulations are significant and may cause us to incur substantial costs and expenses to comply.
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Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade
Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or
affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a company’s data
security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its
business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger
safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule.
The FTC’s authority under Section 5 is concurrent with HIPAA’s jurisdiction and with any action taken under state law.
Additionally, the Federal Physician Payments Sunshine Act under the Affordable Care Act, and its implementing regulations, require that certain
manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program, with certain exceptions, report information related to certain payments or other transfers of value made or distributed to physicians
and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report
annually certain ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately, and
completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million
per year for “knowing failures”. In 2022 the Sunshine Act reporting will be extended to payments and transfers of value to physician assistants, nurse
practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). Certain states also
mandate implementation of compliance programs, impose restrictions on pharmaceutical manufacturer marketing practices and/or require the tracking
and reporting of gifts, compensation and other remuneration to healthcare providers and entities.
In order to distribute products commercially, PDS must also comply with state laws that require the registration of manufacturers and wholesale
distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if
such manufacturers or distributors have no place of business within the state. Several states have enacted legislation requiring pharmaceutical and
biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales,
marketing, pricing, clinical studies and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare
entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit
certain other sales and marketing practices. All of PDS’s activities are potentially subject to federal and state consumer protection and unfair competition
laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform,
especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of
interactions between pharmaceutical companies and providers and patients, which has led to a number of investigations, prosecutions, convictions and
settlements in the industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as responding to
possible investigations by government authorities, can be time- and resource-consuming and can divert management’s attention from the business, even
if investigators ultimately find that no violation has occurred.
If PDS operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental
regulations that apply to it, PDS may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties; damages; fines;
disgorgement; exclusion from participation in government programs, such as Medicare and Medicaid; injunctions; private “qui tam” actions brought by
individual whistleblowers in the name of the government, or refusal to allow it to enter into government contracts; contractual damages; reputational harm;
administrative burdens; diminished profits and future earnings; and the curtailment or restructuring of its operations; any of which could adversely affect
PDS’s ability to operate its business and its results of operations.
In addition to the laws discussed above, we may see more stringent state and federal privacy legislation in the future, as the increased cyber-
attacks during the COVID-19 pandemic have heightened attention to data privacy and security in the U.S. and other jurisdictions. We cannot predict
where new legislation might arise, the scope of such legislation, or the potential impact to our business and operations.
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Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which PDS obtains regulatory approval.
In the United States and markets in other countries, sales of any products for which PDS receives regulatory approval for commercial sale will depend, in
part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States,
third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process
for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for
establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved
list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly
challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to
questioning their safety and efficacy. PDS may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and
cost-effectiveness of its tablet product candidates, in addition to the costs required to obtain the FDA approvals. PDS’s product candidates may not be
considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement
rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage
for the product. Adequate third-party reimbursement may not be available to enable PDS to maintain price levels sufficient to realize an appropriate return
on its investment in product development.
Different pricing and reimbursement schemes exist in other countries. Some jurisdictions operate positive and negative list systems under which
products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may
require the completion of clinical studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other
countries allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs
has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-
border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which it receives regulatory approval for commercial sale may suffer if the government and third-
party payors fail to provide adequate coverage and reimbursement, or require onerous prior approvals or other restricted access. In addition, emphasis on
managed care in the United States has increased and PDS expects the pressure on healthcare pricing will continue to increase. Coverage policies and
third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for
which PDS receives regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
U.S. Healthcare Reform
In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive reforms affecting the
payment for, the availability of and reimbursement for healthcare services. There have been a number of federal and state proposals during the last few
years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical
products, government control and other changes to the healthcare system in the United States. PDS anticipates that current and future U.S. legislative
healthcare reforms may result in additional downward pressure on the price that PDS receives for any approved product, if covered, and could seriously
harm its business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from
private payors. The implementation of cost containment measures or other healthcare reforms may prevent PDS from being able to generate revenue,
attain profitability or commercialize its product candidates. In addition, it is possible that there will be further legislation or regulation that could harm its
business, financial condition and results of operations.
For example, the Affordable Care Act (ACA) which was signed into law in the United States in March 2010, was enacted to broaden access to
health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements
for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Since its
enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court
dismissed the most recent judicial challenge to ACA brought by several states without specifically ruling on the constitutionality of the Act. Prior to the
Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15,
2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental
agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid
demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health
insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to
challenge, repeal or replace the ACA will impact health care laws and regulations PDS’s business.
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There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, U.S.
federal prosecutors have issued subpoenas to pharmaceutical companies seeking information about pricing practices in connection with an investigation
into pricing practices being conducted by the U.S. Department of Justice. Several state attorneys general also have commenced drug pricing
investigations and filed lawsuits against pharmaceutical companies, and the U.S. Senate has publicly investigated a number of pharmaceutical companies
relating to price increases and pricing practices. Proposed legislation has been designed to, among other things, bring more transparency to drug pricing,
reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government
program reimbursement methodologies for drugs. Drug pricing is and will remain a key legislative issue in the coming year, although we do not know the
steps the Biden Administration will take with respect to drug pricing.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health
care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be
included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products or put pressure on
our product pricing. We expect that additional state healthcare reform measures will be adopted in the future, which could limit the amounts that state
governments will pay for healthcare products and services and result in additional pricing pressures. The boom in state laws targeting drug pricing is
unprecedented and the requirements are not uniform from state to state, creating additional compliance and commercialization challenges for
manufacturers. If PDS is able to obtain marketing approval for one or more of our products, our revenue and future profitability could be negatively
affected if these or other inquiries were to result in legislative or regulatory proposals that limit our ability to increase the prices of any products for which
we obtain marketing approval.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other
countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical studies, marketing authorization, commercial
sales and distribution of its products. Whether or not PDS obtains FDA approval for a product, it would need to obtain the necessary approvals by the
comparable foreign regulatory authorities before it can commence clinical studies or marketing of the product in foreign countries and jurisdictions.
Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union, the approval process
varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to
obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one
country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction
may negatively impact the regulatory process in others.
European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which
impose significant compliance obligations. Moreover, the collection and use of personal health data in the European Union, which was formerly governed
by the provisions of the European Union Data Protection Directive, was replaced with the European Union General Data Protection Regulation, or the
GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the
personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use
of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the
European Union to the United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines
of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The recent implementation of the GDPR has
increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put
in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business.
In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs
of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and
data protection in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and
standards may have on our business.
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Employees and Human Capital Management
Our management team possesses considerable experience in drug development research, manufacturing, clinical development and regulatory
matters. PDS’ virtual operating strategy of collaborating with scientific and clinical experts in cancer immunology, tumor immunology and gynecological
oncology provides additional considerable experience in immunotherapy development, clinical design and execution. We have no collective bargaining
agreements with our employees and we have not experienced any work stoppages.
As of December 31, 2021, we had 22 employees. Our employees are highly skilled, and many hold advanced degrees. We consider our
relationship with our employees to be good. Our future performance depends significantly upon the continued service of our key scientific, technical, and
senior management personnel and our continued ability to attract and retain highly skilled employees. We provide our employees with market salaries and
bonuses, opportunities for equity ownership, development programs that enable continued learning and growth and a robust employment package that
promotes well-being across all aspects of their lives. In addition to salaries, these programs include potential annual discretionary bonuses, stock awards,
a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and flexible work schedules,
among other benefits.
We have taken proactive, aggressive action throughout the COVID-19 pandemic to protect the health and safety of our employees. We expect to
continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business. We may
take further actions, in compliance with all appropriate government regulations, that we determine to be in the best interest of our employees.
Environmental Regulations
We believe we are compliant in all material respects with applicable environmental laws. Presently, we do not anticipate such compliance will
have a material effect on capital expenditures, earnings, or our competitive position with respect to any of our operations.
ITEM 1A. Risk Factors
The risks described below may not be the only ones relating to our company. Additional risks that we currently believe are immaterial may also
impair our business operations. Our business, financial conditions and future prospects and the trading price of our common stock could be harmed as a
result of any of these risks. Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K,
including our financial statements and related notes, and our other filings from time to time with the Securities and Exchange Commission or SEC.
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Risk Factors Summary
Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others,
the following principal risk factors that make an investment in our company speculative or risky. You are encouraged to carefully review our full discussion
of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below:
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We have incurred significant losses since our inception and expect to continue to incur significant losses for the foreseeable future
and may never achieve or maintain profitability.
We are dependent on the success of our Versamune and Infectimune products, which are still in early-stage clinical development,
and if our Versamune and Infectimune products do not receive regulatory approval or are not successfully commercialized, our
business may be harmed.
We have a limited operating history and have never generated any product revenue.
We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete
the development and commercialization of our Versamune and Infectimune Products.
Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and
licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations.
Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other
vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements, which could have an adverse effect on our results of operations.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately
report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a
result, the value of our common stock. Further, we continue to incur significant increased costs as a result of operating as a public
company, and our management is required to devote substantial time to compliance initiatives.
Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks.
Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing
and maintaining acceptable internal control over financial reporting, are costly and may increase substantially and, as a ® reporting
company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to
investors.
Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they
fail to demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to
commercialize PDS0101 and other Versamune and Infectimune based products.
Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult
or rendered impossible by multiple factors outside our control.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we
fail to compete effectively.
Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our
preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and efficacy of our
product candidates; early results and early understanding of product candidate potential may not be predictive of later success.
We have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such
activities.
If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, it
may not be successful in commercializing PDS0101 and other candidates, if approved.
If we obtain approval to commercialize PDS0101 and other candidates outside of the United States, a variety of risks associated with
international operations could harm our business.
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Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the difficulty and cost for us to
obtain marketing approval of and commercialize PDS0101 and other candidates and affect the prices we may obtain and our
profitability.
We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and
preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable
regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased
costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial
condition, results of operations and prospects.
Our stock price is expected to be volatile, and the market price of our common stock may drop in the future.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product
candidates or indications that may be more profitable or for which there is a greater likelihood of success.
If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our business could be adversely affected by the effects of health epidemics, pandemics, or outbreaks of infectious diseases,
including the recent COVID-19 pandemic and its variants, in regions where we or third parties on which we rely have significant
manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially
affect our operations, including at our headquarters in New Jersey, and at our clinical trial sites, as well as the business or
operations of our manufacturers, CROs or other third parties with whom we conduct business.
If we are unable to obtain and maintain patent protection for our Versamune and Infectimune platforms, PDS0101, or other products
or candidates or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in
our markets.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property
rights, or defend our products and methods against the property rights of others, which could be expensive, time consuming and
unsuccessful.
If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and
customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, fines,
disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm, and the
curtailment of our operations, any of which could harm our business.
Our effective tax rate may increase in the future, including as a result of tax legislation changes, which may have a material adverse
effect on our business, financial condition and results of operations.
Risks Related to Our Business, Financial Position and Capital Requirements
We have a limited operating history and have never generated any product revenue.
We are a clinical-stage biopharmaceutical company with a limited operating history. Our operations to date have been limited to organizing our
company and developing the Versamune platform and related immunotherapy product candidates that incorporate the technology of our Versamune
platform. We have not yet successfully completed a large-scale, pivotal clinical trial, obtained marketing approval, manufactured Versamune at
commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize our Versamune products.
Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of
successfully developing and commercializing immunotherapies.
Our ability to generate revenue and achieve and maintain profitability will depend upon our ability to successfully complete the development of our
Versamune-based oncology products PDS0101, PDS0102, PDS0103, or PDS0104, and Infectimune to treat infectious diseases and to obtain the
necessary regulatory approvals. We have never generated any product revenue and have no immunotherapy candidate in late-stage clinical development
or approved for commercial sale.
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Even if we receive regulatory approval for the sale of the Versamune and Infectimune Products, we do not know when we will begin to generate
revenue from PDS0101, if at all. Our ability to generate revenue depends on a number of factors, including our ability to:
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set an acceptable price for Versamune-based immunotherapy candidates, including the Versamune Products, and obtain coverage and
adequate reimbursement from third-party payors;
establish sales, marketing, manufacturing and distribution systems;
add operational, financial and management information systems and personnel, including personnel to support our clinical, manufacturing and
planned future clinical development and commercialization efforts and operations as a public company;
develop manufacturing capabilities for bulk materials and manufacture commercial quantities of PDS0101 and other Versamune Products at
acceptable cost levels;
achieve broad market acceptance of PDS0101 and other Versamune and Infectimune based-products in the medical community and with
third-party payors and consumers;
attract and retain an experienced management and advisory team;
launch commercial sales of PDS0101 and other Versamune and Infectimune based-products, whether alone or in collaboration with others;
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● maintain, expand and protect our intellectual property portfolio.
Because of the numerous risks and uncertainties associated with immunotherapy development and manufacturing, we are unable to predict the
timing or amount of increased development expenses, or when we will be able to achieve or maintain profitability, if at all. Our expenses could increase
beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or comparable non-U.S. regulatory authorities, to perform
studies or clinical trials in addition to those we currently anticipate. Even if PDS0101 is approved for commercial sale, we anticipate incurring significant
costs associated with the commercial launch of and the related commercial-scale manufacturing requirements for PDS0101 and other Versamune and
Infectimune products. If we cannot successfully execute on any of the factors listed above, our business may not succeed, and your investment will be
adversely affected.
We have incurred significant losses since our inception and expect to continue to incur significant losses for the foreseeable future and may
never achieve or maintain profitability.
We have never generated any product revenues and expect to continue to incur substantial and increasing losses as we continue to develop
PDS0101 and other Versamune and Infectimune-based products. PDS0101 has not been approved for marketing in the United States and may never
receive such approval. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to
generate revenue and achieve profitability is dependent on our ability to complete development, obtain necessary regulatory approvals, and have
PDS0101 manufactured and successfully marketed. We cannot assure you that we will be profitable even if we successfully commercialize PDS0101 or
other Versamune and Infectimune-based products. If we successfully obtain regulatory approval to market PDS0101, our revenues will be dependent, in
part, upon, the size of the markets in the territories for which regulatory approval is received, the number of competitors in such markets for the approved
indication, and the price at which we can offer PDS0101. If the indication approved by regulatory authorities is narrower than we expect, or the treatment
population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of PDS0101, even if
approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become and
remain profitable the market price of our common stock and our ability to raise capital and continue operations will be adversely affected.
We expect research and development expenses to increase significantly for PDS0101 and other Versamune and Infectimune-based products. In
addition, even if we obtain regulatory approval, significant sales and marketing expenses will be required to commercialize PDS0101. As a result, we
expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have had and will
continue to have an adverse effect on our financial position and working capital. As of December 31, 2021 and 2020, we had an accumulated deficit of
$60.7 and $43.8 million, respectively.
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We are dependent on the success of our Versamune and Infectimune products, which are still in early-stage clinical development, and if our
Versamune and Infectimune products do not receive regulatory approval or are not successfully commercialized, our business may be
harmed.
PDS0101 is only in mid clinical development, and as a consequence, it is too early to determine whether the Versamune and Infectimune-based
products will ever be approved for commercial sale or be marketable. We expect that a substantial portion of our efforts and expenditures over the next
few years will be devoted to PDS0101 and other Versamune and Infectimune-based products. Accordingly, our business currently depends heavily on the
successful development, regulatory approval and commercialization of PDS0101. PDS0101 may not receive regulatory approval or be successfully
commercialized even if regulatory approval is received. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of
PDS0101 is and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each
have differing regulations. We are not permitted to market PDS0101 in the United States until it receives approval of a biologics license application, or
BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. To date, we have only completed Phase 1/2A
clinical trials for certain applications of PDS0101. As a result, we have not submitted a BLA to the FDA or comparable applications to other regulatory
authorities and do not expect to be in a position to do so for the foreseeable future. Obtaining approval of a BLA is an extensive, lengthy, expensive and
inherently uncertain process, and the FDA may delay, limit or deny approval of PDS0101 for many reasons, including:
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the FDA may not agree that the completed Phase 2 clinical trials of PDS0101 satisfy the FDA’s requirements and may require us to conduct
additional testing;
the results of our future clinical trials may not meet the level of statistical or clinical significance required by the FDA for marketing approval;
the FDA may disagree with the number, design, size, conduct or implementation of one or more of our clinical trials;
the contract research organizations, or CROs, that we retain to conduct clinical trials may take actions outside of our control that materially
and adversely impact our clinical trials;
the FDA may not find the data from our preclinical studies and clinical trials sufficient to demonstrate that the clinical and other benefits of
PDS0101 outweigh the safety risks;
the FDA may disagree with our interpretation of data from our preclinical studies and clinical trials;
the FDA may not accept data generated at our clinical trial sites;
if our BLA is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner
or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of
approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;
the FDA may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval;
the FDA may identify deficiencies in our manufacturing processes or facilities; or
the FDA may change its approval policies or adopt new regulations.
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We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the
development and commercialization of our Versamune and Infectimune based products.
We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize PDS0101. Even with
our current cash reserves, we will require substantial additional capital to complete the development and potential commercialization of PDS0101 and the
development of other Versamune and Infectimune based products. If we are unable to raise capital or find appropriate partnering or licensing
collaborations or other nondilutive financing, when needed or on acceptable terms, if at all, we could be forced to delay, reduce or eliminate one or more of
our development programs or any future commercialization efforts. In addition, attempting to secure additional financing may divert the time and attention
of our management from day-to-day activities and harm our development efforts.
Based upon our current operating plan, we believe that our cash reserves will be sufficient to fund our operating expenses and capital expenditure
requirements for at least the next 24 months from the date of this report. Our estimate as to what we will be able to accomplish is based on assumptions
that may prove to be inaccurate, and we could exhaust our available capital resources sooner than is currently expected. Because the length of time and
activities associated with successful development of PDS0101 is highly uncertain, we are unable to estimate the actual funds we will require for
development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on
many factors, including, but not limited to:
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the initiation, progress, timing, costs and results of our planned clinical trials;
the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending potential intellectual property disputes, including any patent infringement actions brought by third parties against us now
or in the future;
the effect of competing technological and market developments;
the cost of establishing sales, marketing and distribution capabilities in regions where we choose to commercialize PDS0101 on our own; and
the initiation, progress, timing and results of the commercialization of PDS0101, if approved, for commercial sale.
Additional funding may not be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of PDS0101 or potentially
discontinue operations. In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital,
which provides that, upon the terms and subject to the conditions and limitations set forth therein, at our discretion, Aspire Capital is committed to
purchase up to an aggregate of $20.0 million of shares of our common stock, or the Purchased Shares, over the 30-month term of the Aspire Purchase
Agreement. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of the Company’s outstanding shares of
common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above
the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share
limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater
than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. On July 29, 2019, we issued 100,654 shares of our
common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. As of
December 31, 2021, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement. The Aspire Purchase Agreement
expired in January 2022 and we have no plans to raise capital under the Aspire Purchase Agreement.
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Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing
arrangements may restrict our operations or require us to relinquish proprietary rights.
We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, as we can
generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances
and license and development agreements in connection with any collaborations. In February 2020, we completed an underwritten public offering, in which
we sold 10,000,000 shares of common stock at a public offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the
exercise by the underwriter of its option to purchase additional shares at the public offering price. We received gross proceeds of approximately $13
million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions. In July 2020, we filed a shelf registration
statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities
and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was
declared effective on July 31, 2020. On August 13, 2020, we sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share
pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase
additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million
and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses. In June 2021, we completed an
underwritten public offering in which we sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf
Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the
public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of
approximately $48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain
available for future sale under the 2020 Shelf Registration Statement.
To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership may experience substantial dilution,
and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing
and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming our stock or making investments.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we
may have to relinquish valuable rights to our technologies, future revenue streams, research programs or Versamune Products or grant licenses on terms
that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, or through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with third parties on acceptable terms, we may be required to delay, limit, reduce or
terminate our PDS0101 development or future commercialization efforts or grant rights to develop and market other Versamune and Infectimune products
that we would otherwise develop and market.
Our future success depends on our ability to retain executive officers and attract, retain and motivate qualified personnel.
We are highly dependent on our executive officers and the other principal members of the executive and scientific teams, particularly our
President and Chief Executive Officer, Dr. Frank K. Bedu-Addo, our Chief Medical Officer, Dr. Lauren Wood, our Chief Financial Officer, Mr. Matthew Hill
and our Chief Scientific Officer, Dr. Gregory L. Conn. The loss of the services of any of our senior executive officers could impede the achievement of our
research, development and commercialization objectives. We do not maintain “key person” insurance for any executive officer or employee.
Recruiting and retaining qualified scientific, clinical, and operational personnel is also critical to our success. We may not be able to attract and
retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.
we also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Our industry has experienced
an increasing rate of turnover of management and scientific personnel in recent years. In addition, we rely on consultants and advisors, including scientific
and clinical advisors, to assist us in devising our research and development and commercialization strategy. Our consultants and advisors may be
employed by third parties and have commitments under consulting or advisory contracts with other entities that may limit their availability to advance our
strategic objectives. If any of these advisors or consultants can no longer dedicate a sufficient amount of time to the company, our business may be
harmed
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If we fail to obtain or maintain adequate coverage and reimbursement for PDS0101, our ability to generate revenue could be limited.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive
treatments. Sales of any of PDS0101 that receive marketing approval will depend substantially, both in the United States and internationally, on the extent
to which the costs of PDS0101 will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations,
or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not
available, or is available only on a limited basis, we may not be able to successfully commercialize PDS0101. Even if coverage is provided, the approved
reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow it to realize a sufficient return on our
investment.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations,
and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price PDS0101 on less
favorable terms than we currently anticipate. In many countries, particularly the countries of the European Union, the prices of medical products are
subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can
take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be
required to conduct a clinical trial that compares the cost-effectiveness of PDS0101 to other available therapies. In general, the prices of products under
such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and
control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for
PDS0101. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and
may be insufficient to generate commercially reasonable revenues and profits.
Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs
may cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or
provide adequate payment for PDS0101. We expect to experience pricing pressures in connection with the sale of PDS0101 due to the trend toward
managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on
healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result,
increasingly high barriers are being erected to the entry of new products into the healthcare market.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of
healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our
revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.
We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations.
Our future financial performance and our ability to commercialize PDS0101 and compete effectively will depend, in part, on our ability to
effectively manage any future growth. As of December 31, 2021, we had 22 employees and 2 consultants. We expect to hire additional employees for our
managerial, clinical, scientific and engineering, operational, manufacturing, sales and marketing teams. We may have operational difficulties in connection
with identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the
need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a
disproportionate amount of our attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.
We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational
mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require
significant capital expenditures and may divert financial resources from other projects, such as the development of PDS0101. If we are unable to
effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we
may not be able to implement our business strategy.
Many of the other pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other
resources, different risk profiles and a longer history in the industry than us. They also may provide more diverse opportunities and better chances for
career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what it has to offer. If we are
unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can select and develop PDS0101 and
our business will be limited.
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Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors
may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could
have an adverse effect on our results of operations.
We are exposed to the risk that our employees and contractors, including principal investigators, consultants, commercial collaborators, service
providers and other vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or
negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws
that require the reporting of true, complete and accurate information to such regulatory bodies, manufacturing standards, federal and state healthcare
fraud and abuse and health regulatory laws and other similar foreign fraudulent misconduct laws, or laws that require the true, complete and accurate
reporting of financial information or data. Misconduct by these parties may also involve the improper use or misrepresentation of information obtained in
the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter
third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or
losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could
have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages,
monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits
and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of
operations.
Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks
Our computer systems and those of our service providers, including our CROs, are vulnerable to damage from computer viruses, unauthorized
access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our or
their operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or clinical trial data from
completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce
the data. To the extent that any disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of
personal, confidential or proprietary information, we could incur liability and the further development of PDS0101 could be delayed.
A cyberattack or similar incident could occur and result in information theft, data corruption, operational disruption, damage to our reputation or
financial loss. Our industry has become increasingly dependent on digital technologies to conduct certain development and financial activities. Our
technologies, systems, networks, or other proprietary information, and those of our vendors, suppliers and other business partners, may become the
target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of
proprietary and other information, or could otherwise lead to the disruption of our business operations. Cyberattacks are becoming more sophisticated and
certain cyber incidents, such as surveillance, may remain undetected for an extended period and could lead to disruptions in critical systems or the
unauthorized release of confidential or otherwise protected information. These events could lead to financial loss from remedial actions, loss of business,
disruption of operations, damage to our reputation or potential liability. Our systems and insurance coverage for protecting against cybersecurity risks may
not be sufficient. Further, as cyberattacks continue to evolve, we may be required to expend significant additional resources to continue to modify or
enhance our protective measures or to investigate and remediate any vulnerability to cyberattacks.
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Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and significant
penalties against us, and adversely impact our operating results.
EU member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose
significant compliance obligations. Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of
the EU Data Protection Directive, was replaced with the EU General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-
ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to
the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the
processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., provides an enforcement
authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the
noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information
between us and our subsidiary, including employee information. The recent implementation of the GDPR has increased our responsibility and liability in
relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure
compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative
actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we
expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States,
the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement actions and
significant penalties against us, and adversely impact our operating results.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns,
and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act, or HIPAA, and associated regulations. For
example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went into effect January 1, 2020. The CCPA,
among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the
right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data
breaches, thereby potentially increasing risks associated with a data breach. The CCPA was recently amended by the California Privacy Rights Act, or
CPRA, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modifications will be made to these laws by
the California legislature or how these laws will be interpreted and enforced. The potential effects of the CCPA and CPRA and implementing regulations
are significant and may cause us to incur substantial costs and expenses to comply.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our
financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our
common stock. Further, we continue to incur significant increased costs as a result of operating as a public company, and our management is
required to devote substantial time to compliance initiatives.
As a public company, we continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In
addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on public companies,
including requiring establishment and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate
governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules
and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the
Sarbanes-Oxley Act, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require
prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. If we are unable to conclude that
our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or
significant deficiency in our internal control over financial reporting once that firm begins its Section 404 reviews or becomes aware of either during the
conduct of an audit, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock
could decline, and we could be subject to sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory authorities. Failure to
remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public
companies, could also restrict our future access to the capital markets.
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Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and
maintaining acceptable internal control over financial reporting, are costly and may increase substantially and, as a smaller reporting
company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to investors.
We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure
controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange
Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and
forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management and other personnel
devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial
compliance costs and will make some activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal
control over financial reporting. In particular, Section 404 of the Sarbanes-Oxley Act will require us to perform system and process evaluation and testing
of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the
effectiveness of our internal control over financial reporting. We are currently a “smaller reporting company,” but we will cease to be a smaller reporting
company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or a non-affiliate public float in
excess of $700 million, determined on an annual basis. As a smaller reporting company, we could take advantage of certain reduced governance and
disclosure requirements, including not being required to comply with the auditor attestation requirements in the assessment of our internal control over
financial reporting. As a result, investors and others may be less comfortable with the effectiveness of our internal controls and the risk that
material weaknesses or other deficiencies in internal controls go undetected may increase. In addition, as a smaller reporting company, we
take advantage of our ability to provide certain other less comprehensive disclosures in our SEC filings, including, among other things, providing only two
years of audited financial statements in annual reports and simplified executive compensation disclosures. Consequently, it may be more challenging for
investors to analyze our results of operations and financial prospects, as the information we provide to stockholders may be different from what one might
receive from other public companies.
Risks Related to Clinical Development, Regulatory Approval and Commercialization
Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they fail to
demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101
and other Versamune and Infectimune-based products.
PDS0101 is still in early-stage clinical development and will require extensive additional clinical testing before we are prepared to submit a BLA
for regulatory approval for any indication or for any other treatment regime. We cannot predict with any certainty if or when it might submit a BLA for
regulatory approval for PDS0101 and other Versamune based products or whether any such BLAs will be approved by the FDA. Human clinical trials are
very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not
agree with our proposed endpoints for any clinical trial we propose, which may delay the commencement of our clinical trials. The clinical trial process is
also time-consuming. We estimate that the clinical trials we need to conduct to be in a position to submit BLAs for PDS0101 will take several years to
complete. We cannot predict the timeline for review of submissions to any regulatory authorities or when any of our product candidates will receive
marketing approval, if at all. The timeline for regulatory approval can be affected by a variety of factors, including disruptive effects of the COVID-19
pandemic, budget and funding levels, agency staffing, and statutory, regulatory and policy changes.
Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In
later stages of clinical trials, PDS0101 may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and
initial clinical trials, and the results of current clinical trials of PDS0101 therefore may not be predictive of the results of our continued or planned Phase 2
and 3 trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy
or adverse safety profiles, notwithstanding promising results in earlier stages of clinical trials.
Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their
immunotherapies performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
Success in preclinical testing and early clinical trials does not ensure that later clinical trials, which involve many more subjects and different indications
than we have studied in Phase 2 clinical trials to date, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical
testing.
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We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing
approval or commercialize PDS0101 and other Versamune based products, including that:
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a
prospective trial site;
● we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts with prospective trial sites, or they may be
unwilling to conduct studies based on out protocols;
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clinical trials of PDS0101 may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct
additional clinical trials or abandon product development programs;
the number of subjects required for clinical trials of PDS0101 and other Versamune based products may be larger than we anticipate;
enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we
anticipate;
● Our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at
all;
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regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons,
including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of PDS0101 and other Versamune based products may be greater than we anticipate; and
the supply or quality of PDS0101 or other materials necessary to conduct clinical trials of PDS0101 and other Versamune based products
may be insufficient or inadequate.
If we are required to conduct additional clinical trials or other testing of PDS0101 beyond those that we currently contemplate, if we are unable
to successfully complete clinical trials of PDS0101 or other testing, if the results of these trials or tests are not positive or are only modestly
positive or if there are safety concerns, we may:
be delayed in obtaining marketing approval for PDS0101;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
be subject to additional post-marketing testing requirements; or
have the product removed from the market after obtaining marketing approval.
Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any
clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten
any periods during which we may have the exclusive right to commercialize PDS0101, could allow our competitors to bring products to market before we
do, and could impair our ability to successfully commercialize PDS0101, any of which may harm our business and results of operations.
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Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult or
rendered impossible by multiple factors outside our control.
We may encounter delays in enrolling, or be unable to enroll, a sufficient number of participants to complete any of our clinical trials. Once
enrolled, we may be unable to retain a sufficient number of participants to complete any of our trials. Late-stage clinical trials of PDS0101 may require the
enrollment and retention of large numbers of subjects. Subject enrollment and retention in clinical trials depends on many factors, including the size of the
subject population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of
competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of subjects to clinical sites and the eligibility
criteria for the study. Moreover, the current pandemic is negatively impacting enrollment in many oncology clinical trials.
Furthermore, any negative results we may report in clinical trials of PDS0101 may make it difficult or impossible to recruit and retain participants
in other clinical trials of PDS0101. Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both,
which could have a harmful effect on our ability to develop PDS0101, or could render further development impractical. In addition, we expect to rely on
CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their
services, we will be limited in our ability to compel their actual performance in compliance with applicable regulations. Enforcement actions brought
against these third parties may cause further delays and expenses related to our clinical development programs.
The successful development of immunotherapies is highly uncertain.
Successful development of immunotherapies is highly uncertain and is dependent on numerous factors, many of which are beyond our control.
Immunotherapies that appear promising in the early phases of development may fail to reach, or be delayed in reaching, the market for several reasons
including: preclinical study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary objectives)
or to have harmful or problematic side effects; clinical study results that may show the immunotherapy to be less effective than expected (e.g., the study
failed to meet its primary endpoint) or to have unacceptable side effects; failure to receive the necessary regulatory approvals or a delay in receiving such
approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, delays in
receiving the necessary products or supplies for the conduct of clinical or preclinical trials, additional time requirements for data analysis, or Biologics
License Application preparation, discussions with the FDA, an FDA request for additional preclinical or clinical data, FDA delays in inspecting
manufacturing establishments, failure to receive FDA approval for manufacturing processes or facilities, or unexpected safety or manufacturing issues;
manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and the
proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized. Success in
preclinical and early and interim clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently
susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to
submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one immunotherapy to the next and may
be difficult to predict. Even if our product candidates are approved, they may be subject to limitations on the indicated uses and populations for which they
may be marketed. They may also be subject to other conditions of approval, may contain significant safety warnings, including boxed warnings,
contraindications, and precautions, may not be approved with label statements necessary or desirable for successful commercialization, or may contain
requirements for costly post-market testing and surveillance, or other requirements, including the submission of a REMS, to monitor the safety or efficacy
of the products. If we do not receive FDA approval for, and successfully commercialize our product candidates, we will not be able to generate revenue
from these product candidates in the United States in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializing
our product candidates will have a material adverse impact on our business and financial condition.
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We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to
compete effectively.
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As
a result, PDS0101 or other Versamune and Infectimune-based products could become obsolete before we recoup any portion of our related research and
development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific and technological factors.
These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments
and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the
United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations.
Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical
companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies.
These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and
retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also
depend to a considerable degree on the continuing availability of capital to us.
We are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention,
diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical products that
have the potential to directly compete with PDS0101 even though their approach to may be different. We believe our top clinical-stage competitors
pursuing cancer immunotherapies and/or vaccines for infectious diseases include, but not limited to Jansen Pharmaceuticals (part of J&J), Sanofi-Aventis,
GlaxoSmithKline plc, Merck and Pfizer, Inovio, Advaxis, Kite Pharma, Hookipa, Moderna, ZIOPHARM Oncology, Heat Biologics, Harpoon Therapeutics,
Oncosec Medical, BioNTech, Osivax, Medicago, Vaxart, and Flugen. Many of these companies have substantially greater financial, marketing, and human
resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical
products). If one or more of these companies is successful in developing their technologies, it could materially impact our business. We also experience
competition in the development of our immunotherapies from universities and other research institutions and competes with others in acquiring technology
from such universities and institutions.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for
investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more effective or
less costly than PDS0101 or our other Versamune and Infectimune-based products.
We will face competition from other drugs currently approved or that will be approved in the future for the treatment of the other cancers and
infectious diseases we are currently targeting. Therefore, our ability to compete successfully will depend largely on our ability to:
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develop and commercialize immunotherapies that are superior to other alternatives in the market;
demonstrate through our clinical trials that PDS0101 is differentiated from existing and future therapies;
attract qualified scientific, immunotherapy development and commercial personnel;
obtain additional patent or other proprietary protection for PDS0101 and other Versamune and Infectimune-based products;
obtain required regulatory approvals;
obtain coverage and adequate reimbursement from, and negotiate competitive pricing with, third-party payors; and
successfully develop and commercialize, independently or with collaborators, new applications for PDS0101 or immunotherapies.
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The availability of our competitors’ immunotherapies and other treatments could limit the demand, and the price we are able to charge, for
PDS0101. The inability to compete with existing or subsequently introduced immunotherapies and other treatments would have an adverse impact on our
business, financial condition and prospects.
Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to license novel
compounds that could make PDS0101 less competitive. In addition, any new immunotherapy that competes with an approved treatment must
demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially
successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving the FDA’s approval for or
commercializing medicines before we do, which would have an adverse impact on our business and results of operations.
PDS0101 may cause adverse effects or have other properties that could delay or prevent its regulatory approval or limit the scope of any
approved label or market acceptance.
Adverse events caused by PDS0101 could cause reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical
trials and could result in the denial of regulatory approval. If clinical trials for PDS0101 report an unacceptable frequency or severity of adverse events, our
ability to obtain regulatory approval for PDS0101 may be negatively impacted.
Furthermore, if PDS0101 is approved and then causes serious or unexpected side effects, a number of potentially significant negative
consequences could result, including:
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regulatory authorities may withdraw their approval of PDS0101 or impose restrictions on its distribution or other risk management measures;
regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;
● we may be required to change the way PDS0101 is administered or to conduct additional clinical trials;
● we could be sued and held liable for injuries sustained by patients;
● we could elect to discontinue the sale of PDS0101;
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our entire Versamune and Infectimune-based pipeline could be then put at risk; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of PDS0101 and could substantially increase the costs of
commercialization.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be
delayed in commercializing, PDS0101, and our ability to generate revenue will be impaired.
PDS0101 and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other
regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for PDS0101 will prevent
us from commercializing PDS0101. We have not received approval to market PDS0101 from regulatory authorities in any jurisdiction. We have only
limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on CROs to assist us in this process.
Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory
authorities for each therapeutic indication to establish the safety and efficacy of PDS0101. Securing regulatory approval also requires the submission of
information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. PDS0101 may not
be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may
preclude it from obtaining marketing approval or prevent or limit commercial use.
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The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary
substantially based upon a variety of factors. We cannot assure you that we will ever obtain any marketing approvals in any jurisdiction. Changes in
marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory
review for each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in
other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for
approval and require additional preclinical or other studies, and clinical trials. In addition, varying interpretations of the data obtained from preclinical
testing and clinical trials could delay, limit or prevent marketing approval of PDS0101. Additionally, any marketing approval we ultimately obtain may be
limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies.
If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not
meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory
approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and
resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our
clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for
our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates
for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects
to another qualified clinical trial site, which may be difficult or impossible. In addition, certain of our scientific advisors or consultants who receive
compensation from us are clinical trial investigators for our clinical trial. Although we believe our existing relationships are within the FDA’s guidelines, if
these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship
may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of
the clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA. Any such delay
or rejection could prevent us from commercializing PDS0101 or any other product candidates.
Even if we obtain FDA approval in the United States, we may never obtain approval for or commercialize PDS0101 in any other jurisdiction,
which would limit our ability to realize each product’s full market potential.
In order to market PDS0101 in a particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a
country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in
other countries or jurisdictions.
In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in
one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional testing and
validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require
additional preclinical studies or clinical trials that could be costly and time consuming. Regulatory requirements can vary widely from country to country
and could delay or prevent the introduction of PDS0101 in those countries. PDS0101 is not approved for sale in any jurisdiction, including in international
markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in
international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be
reduced.
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Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more subject data
become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, topline or preliminary data from our sponsored or investigator initiated clinical trials, such as
preliminary topline results which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are
subject to change following a full analysis of all data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as
part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. In addition, we may report
preliminary analyses of only certain endpoints rather than all endpoints. As a result, the interim, topline or preliminary results that we report may differ
from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully
evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the
preliminary data we previously published. As a result, interim, topline and preliminary data should be viewed with caution until the final data are available.
We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of
the clinical outcomes may materially change as subject enrollment continues and more subject data become available. Adverse differences between
interim, topline or preliminary data and final data could significantly harm our reputation and business prospects. Further, disclosure of interim, topline or
preliminary data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or
may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval
or commercialization of the particular drug candidate, any approved product, and our company in general. In addition, the information we choose to
publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with
what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may
ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate
or our business.
If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the
conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further
develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results,
prospects or financial condition.
Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our
preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and efficacy of our product
candidates; early results and early understanding of product candidate potential may not be predictive of later success.
Our oncology and infectious disease product candidates are susceptible to the risks of failure inherent at any stage of product development,
including the occurrence of unexpected or unacceptable adverse events or the failure to demonstrate efficacy in clinical trials. Clinical development is
expensive and can take many years to complete, and its outcome is inherently uncertain.
The results of preclinical studies, preliminary study results, and early clinical trials of our product candidates may not be predictive of the results of
later-stage clinical trials. Our product candidates may not perform as we expect, may ultimately have a different or no impact than expected, may have a
different mechanism of action than we initially understand or that we expect in humans, and may not ultimately prove to be safe and effective.
Preliminary and final results from preclinical studies and early-stage trials, and trials in compounds that we believe are similar to ours, may not be
representative of results that are found in larger, controlled, blinded, and longer-term studies. Product candidates may fail at any stage of preclinical or
clinical development. Product candidates may fail to show the desired safety and efficacy traits even if they have progressed through preclinical studies or
initial clinical trials. Preclinical studies and clinical trials may also reveal unfavorable product candidate characteristics, including safety concerns. A
number of companies in the biopharmaceutical industry have suffered significant setbacks in clinical trials, notwithstanding promising results in earlier
preclinical studies or clinical trials or promising mechanisms of action. In some instances, there can be significant variability in safety or efficacy results
between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols,
differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical
trial participants. Moreover, should there be an issue with the design of a clinical trial, our results may be impacted. We may not discover such a flaw until
the clinical trial is at an advanced stage.
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We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive
marketing approval or commercialize our product candidates. There may be emerging new data or regulatory questions or disagreements regarding
interpretations of data and results at any stage. For example, the FDA or comparable foreign regulatory authorities may disagree with our study design,
including endpoints, or our interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its
safety risks.
Even if we obtain regulatory approval, we will still face extensive ongoing regulatory requirements and PDS0101 and other candidates may
face future development and regulatory difficulties.
Marketing of PDS0101, if approved, along with the manufacturing processes, post- approval clinical data, labeling, packaging, distribution,
adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for PDS0101, among other things, will be subject to
extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety,
efficacy and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current
Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of
records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and current Good Clinical Practice, or cGCP
requirements for any clinical trials that we conduct post-approval. Even if marketing approval of PDS0101 is granted, the approval may be subject to
limitations on the indicated uses for which PDS0101 may be marketed or to the conditions of approval. If PDS0101 receives marketing approval, an
accompanying label may limit the approved use of PDS0101, which could limit sales.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety and/or efficacy of
PDS0101. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications
and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-
label use and if we promote or otherwise market PDS0101 for indications other than those for which it is approved, we may be subject to certain
enforcement actions. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription biopharmaceutical products may
lead to FDA enforcement actions and investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer
protection laws.
In addition, later discovery of previously unknown adverse events or other problems with PDS0101, manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may yield various results, including:
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restrictions on manufacturing PDS0101;
restrictions on the labeling or marketing of PDS0101;
restrictions on PDS0101 distribution or use;
requirements to conduct post-marketing studies or clinical trials;
● warning letters;
● withdrawal of PDS0101 from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
recalls of PDS0101;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of PDS0101;
seizures of PDS0101; or
injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of
PDS0101. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to
maintain regulatory compliance, we may lose any marketing approvals or licenses that we may have obtained.
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Even if PDS0101 receives licensure, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the
medical community necessary for commercial success.
If PDS0101 receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors
and others in the medical community. If PDS0101 does not achieve an adequate level of acceptance, we may not generate significant revenues and
become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a number of factors, including but not limited to:
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the efficacy and potential advantages compared to alternative treatments;
effectiveness of sales and marketing efforts;
the cost of treatment in relation to alternative treatments;
our ability to offer PDS0101 for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the willingness of the medical community to offer customers PDS0101 in addition to or in the place of other immunotherapies;
the strength of marketing and distribution support;
the availability of third-party coverage and adequate reimbursement;
the prevalence and severity of any side effects; and
any restrictions on the use of PDS0101 together with other medications.
Because we expect sales of PDS0101, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of PDS0101
to achieve market acceptance would harm our business and could require us to seek additional financing sooner than we otherwise plan.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or
indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we are initially developing our lead product candidate, PDS0101 and the other
Versamune and Infectimune-based products. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable
commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates
for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a
particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in
cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and customers
and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, fines, disgorgement, exclusion
from participation in governmental healthcare programs, contractual damages, reputational harm, and the curtailment of our operations, any
of which could harm our business.
Although we do not provide healthcare services or submit claims for third-party reimbursement, we are subject to healthcare fraud and abuse
regulation and enforcement by federal and state governments, which could significantly impact our business, particularly if and when we commercialize
any product candidates and if and when payment becomes available from payors for our products. Additionally, our future arrangements with third-party
payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or
financial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. The laws
that may affect our ability to operate include, but are not limited to:
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The Federal Anti-Kickback Statute (AKS), which prohibits, among other things, persons and entities from knowingly and willfully soliciting,
receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or
the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal
healthcare programs such as Medicare and Medicaid. The Affordable Care Act, among other things, amended the intent requirements of the federal AKS.
A person or entity can now be found guilty of violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the
Affordable Care Act provides that a claim including items or services resulting from a violation of the federal AKS constitutes a false or fraudulent claim for
purposes of the FCA.
The False Claims Act’s civil provisions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be
presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent; knowingly making using, or causing to be
made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to
be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Intent to deceive is not
required to establish liability under the civil False Claims Act.
The False Claims Act’s criminal provisions, which imposes criminal fines or imprisonment against individuals or entities who make or present a
claim to the government knowing such claim to be false, fictitious or fraudulent.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, prohibits, among other actions, executing or
attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or
property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, knowingly and
willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and
willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery
of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
HIPAA, as amended by the HITECH Act, and its respective implementing regulations, now makes HIPAA’s privacy and security standards directly
applicable to business associates independent contractors or agents of covered entities that receive or obtain protected health information in connection
with providing a service on behalf of a covered entity.
Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a), given that even for entities that are not deemed “covered
entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to
keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of its laws. The FTC expects a
company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and
complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that
merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA
Security Rule.
The federal ”Sunshine” and “Open Payments” requirements under the Patient Protection and Affordable Care Act, as amended by the Health
Care Education Reconciliation Act, or collectively, the Affordable Care Act, which require certain manufacturers of drugs, devices, biologics, and medical
supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to
physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers
and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of
up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures.” In 2022 the Sunshine Act will be extended to
payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect
in 2022 for payments made in 2021). In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers
and authorized distributors provide to healthcare providers.
State law equivalents of each of the above federal laws and state laws otherwise addressing the pharmaceutical and healthcare industries, such
as anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
any third-party payor, including commercial insurers, and in some cases that may apply regardless of payor, i.e., even if reimbursement is not available;
state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines (the PhRMA Code) and
the relevant compliance program guidance promulgated by the federal government (HHS-OIG), or otherwise prohibit, restrict or impose tracking and
disclosure requirements related to payments, gifts, or others remuneration that may be made to healthcare providers and other potential referral sources,
or marketing practices to such persons and entities or drug pricing information; data privacy and security laws and regulations in foreign jurisdictions that
may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which
became effective in May 2018) and state laws governing the privacy and security of information in certain circumstances, many of which differ from each
other in significant ways and may not have the same effect, and may apply more broadly than HIPAA, thus complicating compliance efforts.
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In our business, healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of our
product candidates, if approved for marketing. Moreover, while we do not plan to submit claims and our customers will make the ultimate decision on how
to submit claims, from time to time, we may provide reimbursement guidance to our customers. Current or future arrangements with physicians and other
healthcare providers and customers, and third-party payors, may expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our medicines for
which we obtain marketing approval. If a government authority were to conclude that we provided improper advice to our customers or encouraged the
submission of false claims for reimbursement or failed to comply with government price reporting requirements, or engaged in off-label promotion of
products, we could face action by government authorities. Any violations of these laws, or any action against us for violation of these laws, even if we
successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.
We have entered into consulting and employment arrangements with individuals, physicians and other healthcare providers. While we have
worked to structure our arrangements to comply with applicable laws, because of the complex and far-reaching nature of these laws, regulatory agencies
may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant
penalties. We could be adversely affected if regulatory agencies interpret our financial relationships with providers who serve as clinical investigators in
our clinical trials, or influence the ordering of and use our products to be in violation of applicable laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform,
especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of
interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and
settlements in the healthcare industry.
Responding to investigations can be time- and resource-consuming and can divert management’s attention from the business. Additionally, as a
result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of
a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on
our business.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of PDS0101.
We face an inherent risk of product liability exposure related to the testing of PDS0101 in human clinical trials and will face an even greater risk if
we commercially sell any products that we may develop after approval. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for PDS0101 or other immunotherapies that we may develop;
injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
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significant costs to defend any related litigation;
substantial monetary awards to trial subjects or patients;
loss of revenue; and
the inability to commercialize any products we may develop.
Although we maintain product liability insurance coverage in the amount of up to $10 million per claim and $10 million in the aggregate, it may not
be adequate to cover all liabilities that it may incur. We anticipate that we will need to increase our insurance coverage as we continue clinical trials and if
we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.
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If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not
be successful in commercializing PDS0101, if approved.
We do not have any infrastructure for the sales, marketing or distribution of PDS0101, and the cost of establishing and maintaining such an
organization may exceed the cost-effectiveness of doing so. In order to market PDS0101, we must build our sales, distribution, marketing, managerial and
other non-technical capabilities or make arrangements with third parties to perform these services. To achieve commercial success for PDS0101, we will
need either our own, or a third party’s, sales and marketing organization. There are significant expenses and risks involved with creating teams for, or
contracting for, sales, marketing and distribution capabilities. Any failure or delay in the development of our sales, marketing and distribution capabilities,
either internally or in collaboration with third parties, could delay the launch of PDS0101, which would adversely affect commercialization.
We may be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal
team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established
companies.
If we obtain approval to commercialize PDS0101 outside of the United States, a variety of risks associated with international operations could
harm our business.
If PDS0101 is approved for commercialization, we may enter into agreements with third parties to market them in certain jurisdictions outside the
United States. We expect that we will be subject to additional risks related to international operations or entering into international business relationships,
including:
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different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries;
reduced protection for intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign reimbursement, pricing and insurance regimes;
foreign taxes;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to
doing business in another country;
● workforce uncertainty in countries where labor unrest is more common than in the United States;
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potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption
laws in other jurisdictions;
shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons,
floods and fires.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both
the European Union and many of the individual countries in Europe with which we will need to comply.
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Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the difficulty and cost for us to obtain
marketing approval of and commercialize PDS0101 and affect the prices we may obtain and our profitability.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could, among other things, prevent or delay marketing approval of PDS0101, restrict or regulate post-approval
activities and affect our ability to profitably sell PDS0101.
For example, in March 2010, the Affordable Care Act, or ACA, was enacted to broaden access to health insurance, reduce or constrain the
growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance
industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Since its enactment, there have been judicial,
executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial
challenge to ACA brought by several states without specifically ruling on the constitutionality of the Act. Prior to the Supreme Court’s decision, President
Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health
insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that
include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact
health care laws and regulations or our business.
As another example, the Drug Supply Chain Security Act imposes obligations on manufacturers of prescription biopharmaceuticals in finished
dosage forms for commercial distribution. We have not yet adopted the significant measures that will be required to comply with this law. We are not sure
whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or what the impact
of such changes on our business, if any, may be.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that
federal and state governments will pay for immunotherapies, which could result in reduced demand for PDS0101 or additional pricing pressures.
Risks Related to Our Dependence on Third Parties
We have no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We currently have agreements with various third-party manufacturing facilities for production of our products for research and development and
testing purposes. We depend on third-party manufacturers to supply our preclinical and clinical materials and will be reliant on a third-party manufacturer
to produce PDS0101 on a commercial scale, should that product receive regulatory approval. Third-party manufacturers must be able to meet our
deadlines and adhere to quality standards and specifications. Our predominant reliance on third parties for the manufacture of PDS0101 and all of our
Versamune and Infectimune-based products creates a dependency that could severely disrupt our research and development, clinical testing, and sales
and marketing efforts if the source of such supply proves to be unreliable or unavailable. There is no assurance that any third-party manufacturers will be
able to meet commercialized scale production requirements in a timely manner or in accordance with applicable standards or cGMP.
We intend to rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory
manner, it may harm our business.
We intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited
influence over their actual performance.
We intend to rely upon CROs to monitor and manage data for our clinical programs. We expect to control only certain aspects of our CROs’
activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal,
regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
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We and our CROs will be required to comply with the Good Laboratory Practices and GCPs, which are regulations and guidelines enforced by the
FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory
authorities in the form of International Conference on Harmonization guidelines for our products. The Regulatory authorities enforce GCPs through
periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCPs, the clinical data generated
in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials
before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects,
we may be required to repeat clinical trials, which would delay the regulatory approval process.
Our CROs will not be our employees, and we will not control whether or not they devote sufficient time and resources to our future clinical and
nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be
conducting clinical trials, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized
disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to
access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected
deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory
requirements or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval
for, or successfully commercialize PDS0101. As a result, our financial results and the commercial prospects for PDS0101 would be harmed, our costs
could increase, and our ability to generate revenues could be delayed.
If our relationship with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially
reasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is a natural
transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical
development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter
challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects.
If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our strategy may include potential reliance upon strategic collaborations for marketing and commercialization of PDS0101 and other Versamune
and Infectimune Products. We also rely on strategic collaborations for research, development, marketing and commercialization for PDS0101 and other
Versamune Products. We have also been heavily reliant upon third party outsourcing for our clinical trials execution and production of drug supplies for
use in clinical trials.
Establishing strategic collaborations is difficult and time-consuming. Our discussions with potential collaborators may not lead to the
establishment of collaborations on favorable terms, if at all. We face significant competition in seeking appropriate collaborators. Whether we reach a
definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms
and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or
results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for PDS0101
and other Versamune Products, the costs and complexities of manufacturing and delivering PDS0101 and other Versamune Products to patients, the
potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such
ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative
immunotherapies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one
with us for PDS0101 and other Versamune Products.
Our current collaborations, as well as any future new collaborations, may never result in the successful development or commercialization of
PDS0101 and other Versamune and Infectimune Products or the generation of sales revenue. To the extent that we have entered or will enter into co-
promotion or other collaborative arrangements, PDS0101 and other Versamune Products revenues are likely to be lower than if we directly marketed and
sold any products that we develop.
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Management of our relationships with our collaborators will require:
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significant time and effort from our management team;
financial funding to support said collaboration;
coordination of our research and development programs with the research and development priorities of our collaborators; and
effective allocation of our resources to multiple projects.
If we continue to enter into research and development collaborations, our success will in part depend on the performance of our collaborators. We
will not directly control the amount or timing of resources devoted by our collaborators to activities related to PDS0101 and other Versamune Products.
Our collaborators may not commit sufficient resources to our research and development programs or the commercialization, marketing or distribution of
PDS0101 and other Versamune Products. If any collaborator fails to commit sufficient resources, our preclinical or clinical development programs related
to this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative
technologies in preference to those being developed in collaboration with us. If we fail to make required milestone or royalty payments to our collaborators
or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those agreements. Additionally, our
collaborators may seek to renegotiate agreements we have entered into, or may disagree with us about the terms and implementation of these
agreements. If collaborators disagree with us about the terms or implementation of our agreements, we may face legal claims that may involve
considerable expense and could negatively affect our financial results.
The failure of third parties to meet their contractual, regulatory, and other obligations could adversely affect our business.
We rely on suppliers, vendors, outsourcing partners, consultants, alliance partners and other third parties to research, develop, manufacture and
commercialize our products and manage certain parts of our business. Using these third parties poses a number of risks, such as:
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they may not perform to our standards or legal requirements;
they may not produce reliable results;
they may not perform in a timely manner;
they may not maintain confidentiality of our proprietary information;
disputes may arise with respect to ownership of rights to technology developed with our partners, and those disputes may be resolved against
us; and
disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation
or arbitration.
Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in
addition to country-specific privacy and data security risk given current legal and regulatory environments. Failure of third parties to meet their contractual,
regulatory, legal and other obligations may materially affect our business.
Our business could be adversely affected by the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the
recent COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of
clinical trial sites or other business operations. The COVID-19 pandemic could materially affect our operations, including at our headquarters
in New Jersey, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom
we conduct business.
Our business could be adversely affected by health epidemics in regions where we have concentrations of clinical trial sites or other business
operations and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom we rely.
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For example, in December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus spread globally and in
March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic negatively impacted the global economy, disrupted
global supply chains and created significant volatility and disruption of financial markets. In response to the COVID-19 outbreak, “shelter in place” orders
and other public health guidance measures were implemented across much of the United States, Europe and Asia, including in the locations of our
offices, clinical trial sites, key vendors and partners. Our clinical development program timelines were negatively affected by COVID-19, as evidenced by
the delay in the initiation of our planned Phase 2 trial of PDS0101 in combination with KEYTRUDA® in first-line treatment of recurrent/metastatic head and
neck cancer and initiation of the Phase 2 clinical trial at The MD Anderson Cancer Center in combination with CRT. Even though both of these studies
have since been initiated despite the pandemic challenges, the COVID-19 pandemic impacted the pace of enrollment in clinical trials and we may be
affected by similar delays as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices. Such facilities and offices have
been and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, thereby
decreasing availability, in whole or in part, for clinical trial services. Further, due to “shelter in place” orders and other public health guidance measures,
we implemented a work-from-home policy for all staff members excluding those necessary to maintain minimum basic operations. Our increased reliance
on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business. In addition, the COVID-
19 pandemic has affected and may continue to affect the operations of the FDA and other health authorities, which could result in delays of reviews and
approvals. For example, during the course of the pandemic the FDA has at points delayed both domestic and foreign inspections.
As a result of the COVID-19 outbreak, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we
have and may in the future experience disruptions that materially and adversely impact our clinical trials, business, financial condition and results of
operations. Potential disruptions include but are not limited to:
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delays or difficulties in enrolling patients in our clinical trials;
delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site
investigators and clinical site staff;
increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health
conditions or being forced to quarantine;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites
and hospital staff supporting the conduct of our clinical trials;
interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by
federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the
integrity of subject data and clinical study endpoints;
interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;
delays or disruptions in preclinical experiments and investigational new drug application-enabling studies due to restrictions of on-site staff
and unforeseen circumstances at contract research organizations and vendors;
interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing
shortages, production slowdowns or stoppages and disruptions in delivery systems;
limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions and “shelter
in place” orders;
limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including
because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and
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Further, on March 25, 2020, the FDA issued Guidance on Conduct of Clinical Trials of Medical Products during the COVID-19 pandemic for
Industry, Investigators, and Institutional Review Boards to assist sponsors in assuring the safety of trial participants, maintaining compliance with good
clinical practices, and minimizing risks to trial integrity during the COVID-19 pandemic, or the COVID-19 Guidelines. This Guidance was updated on
August 30, 2021 and is intended to remain in effect only for the duration of the Public Health Emergency (PHE) related to COVID-19 declared by the
Department of Health and Human Services on January 31, 2020 and these guidelines are continuing. We have implemented several procedures in
accordance with the COVID-19 Guidelines to address patient safety and clinical trial conduct during the COVID-19 pandemic, including remote monitoring
of patients through telemedical visits, remote monitoring of sites by our clinical trial monitors, remote data entry, and follow-up visits at sites other than the
site where the patient was initially treated. Our implementation of the COVID-19 Guidelines and potential disruptions to patient follow up, site monitoring
or the timely completion of our trials may have a negative effect on our ability to complete trials and associated regulatory filings.
While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the
COVID-19 pandemic on the global financial markets has reduced and may continue to reduce our ability to access capital, which could negatively impact
our short-term and long-term liquidity.
We do not yet know the full extent of potential delays or impacts on our business, financing or clinical trial activities or on healthcare systems or
the global economy as a whole. However, these effects have had and may continue to have a material impact on our liquidity, capital resources,
operations and business and those of the third parties on which we rely and a recession or market correction resulting from the spread of COVID-19 could
materially affect our business and the value of our common stock. In addition, the trading prices for our common stock and other biopharmaceutical
companies have been highly volatile as a result of the COVID-19 pandemic. We will continue to monitor the COVID-19 situation closely.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our Versamune platform, PDS0101, or other Versamune-based Products or if the
scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to
Versamune. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries. We seek to
protect our proprietary position by filing patent applications in the United States and abroad related to Versamune and Infectimune-based products. The
patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost or in a timely manner.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent
protection. The patent applications that we own or license may fail to result in issued patents with claims that cover Versamune and Infectimune-based
products or applications in the United States or in other countries. There is no assurance that all potentially relevant prior art relating, which can invalidate
a patent or prevent a patent from issuing from a pending patent application is known to us. Even if patents do successfully issue, third parties may
challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful
challenge to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of
PDS0101 and other Versamune and Infectimune-based products that we may develop. Further, if we encounter delays in regulatory approvals, the period
of time during which we could exclusively market PDS0101 and other Versamune and Infectimune-based products under patent protection could be
reduced.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions
and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the
laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law
does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other
jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were
the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent
protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our
pending and future patent applications may not result in patents being issued which protect PDS0101 or other Versamune and Infectimune-based
products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and immunotherapies. Changes in either
the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of
our patent protection. Recent Russian Federal Law, No. 46-FZ of March 8, 2022, allows the Russian Government to designate goods for which IP rights
are exempted and this rule applies to all IP rights, including trademarks and this rule may affect our IP in the Russian Federation. There is no guidance
on how broadly this rule will be applied, though the rule appears to be limited only to the year 2022.
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Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent Office, or become involved in derivation,
reexamination, inter parties review, post-grant review or interference proceedings challenging its patent rights or the patent rights of others. In other
countries, we may be subject to or become involved in opposition proceedings challenging our patent rights or the patent rights of others. An adverse
determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our
technology or immunotherapies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize PDS0101
without infringing third- party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is
threatened, it could dissuade companies from collaborating with us to license, develop or commercialize PDS0101 and other Versamune and Infectimune-
based products.
The issuance of a patent is not conclusive as to our inventorship, scope, validity or enforceability, and our owned and licensed patents may be
challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held
unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and
immunotherapies, or limit the duration of the patent protection of our technology and immunotherapies. Moreover, patents have a limited lifespan. In the
United States and other countries, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however,
the life of a patent, and the protection it affords, is limited. Without patent protection for PDS0101 and other Versamune and Infectimune-based products,
we may be open to competition from generic versions of PDS0101 or other similar products using our technology. Given the amount of time required for
the development, testing and regulatory review of new immunotherapy candidates, patents protecting such candidates might expire before or shortly after
such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from
commercializing immunotherapies similar or identical to ours.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, or
defend our products and methods against the property rights of others, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter
infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement
proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the
technology at issue on the grounds that such patents do not cover the technology in question. An adverse result in any litigation or defense proceedings
could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The
initiation of a claim against a third-party may also cause the third-party to bring counter claims against us, such as claims asserting that our patents are
invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-
enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution
of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may
also raise similar validity claims before the USPTO in post-grant proceedings such as inter partes review, or post-grant review, or oppositions or similar
proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity
and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware
during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any
licensed patents against challenge by a third-party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at
least part, and perhaps all, of any future patent protection on PDS0101 and other Versamune and Infectimune-based products. Such a loss of patent
protection could harm our business.
We may also face claims that our products infringe patents that our competitors hold. Claims for alleged infringement and any resulting lawsuit, if
successful, could subject us to significant liability for damages and invalidations of our proprietary rights. Any such lawsuit, regardless of our success,
would likely be time consuming and expensive to resolve and would divert management time and attention. Any potential intellectual property litigation
could also force us to do one or more of the following: (a) stop selling our products; (b) obtain a license(s), from the owner of any asserted intellectual
property, to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or (c) redesign our products to avoid
using the relevant technology.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the
laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a
license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful,
may result in substantial costs and distract our management and other employees.
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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an
adverse effect on the price of our common stock.
Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability
to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and
enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently
uncertain. Patent reform legislation in the United States and in other jurisdictions could increase those uncertainties and costs.
The United States has enacted and implemented wide-ranging patent reform legislation. The United States Supreme Court has ruled on several
patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners
in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained. Depending on actions by the U.S. Congress, the federal courts, and the USPTO, the laws
and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we
have licensed or that we might obtain in the future.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Filing, prosecuting and defending patents covering Versamune and Infectimune-based products throughout the world would be prohibitively
expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own immunotherapies
and, further, may export otherwise infringing immunotherapies to territories where we may obtain patent protection, but where patent enforcement is not
as strong as that in the United States. These immunotherapies may compete with PDS0101 in jurisdictions where we do not have any issued or licensed
patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may
be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or
if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our ability to pursue
strategic alternatives, including identifying and consummating transactions with potential third-party partners, to further develop, obtain marketing approval
for and/or commercialize our drug candidates, and consequently our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual
property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that
our trade secrets will be misappropriated or disclosed.
We seek to protect our proprietary technology in part by entering into confidentiality agreements with third parties and, if applicable, material
transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to
beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential
information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and
other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the
technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and
trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an
adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data
potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade
secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or
publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and
have an adverse impact on our business.
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General Market Risk Factors
Our stock price is expected to be volatile, and the market price of our common stock may drop in the future.
The market price of our common stock may be subject to significant fluctuations in the future. Market prices for securities of early-stage pharmaceutical,
biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our
common stock to fluctuate include:
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the ability of us and our partners to develop product candidates and conduct clinical trials that demonstrate such product candidates are safe
and effective;
the ability of us or our partners to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;
failure of any of our product candidates to demonstrate safety and efficacy, receive regulatory approval and achieve commercial success;
failure by us to maintain our existing third-party license, manufacturing and supply agreements;
impact of COVID-19 and its variants on business operations and clinical trials;
failure by us or our licensors to prosecute, maintain, or enforce our intellectual property rights;
changes in laws or regulations applicable to our product candidates;
any inability to obtain adequate supply of product candidates or the inability to do so at acceptable prices;
adverse regulatory authority decisions;
introduction of new or competing products by our competitors;
failure to meet or exceed financial and development projections we may provide to the public;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain intellectual property
protection for our technologies;
additions or departures of key personnel;
significant lawsuits, including intellectual property or stockholder litigation;
if securities or industry analysts do not publish research or reports about us, or if they issue an adverse or misleading opinions regarding our
business and stock;
if large short positions are taken in our stock and or negative reports are provided, whether they are based in fact or otherwise;
changes in the market valuations of similar companies;
general market or macroeconomic conditions;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
adverse publicity relating to our markets generally, including with respect to other products and potential products in such markets;
changes in the structure of health care payment systems; and
period-to-period fluctuations in our financial results.
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Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of
individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities
litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources,
which could significantly harm our profitability and reputation.
We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, and if we fail to meet such rules
and requirements, we may be subject to delisting. Delisting could negatively affect the price of our common stock, which could make it more
difficult for us to sell securities in a future financing or for you to sell our common stock.
We are required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding
director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate
governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share. If we do not meet
these continued listing requirements, our common stock could be delisted. Delisting from the Nasdaq Capital Market would cause us to pursue eligibility
for trading of these securities on other markets or exchanges, including the OTC BB or QB markets, or on the OTC “pink sheets.” In such case, our
stockholders’ ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes
and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of our securities. There can be no
assurance that our securities, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national
quotation service, the OTC markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting,
would also result in negative publicity, make it more difficult for us to raise additional capital, cause us to lose eligibility to register the sale or resale of our
shares on Form S-3 and the automatic exemption from registration under state securities laws for exchange-listed securities, adversely affect the market
liquidity of our securities, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence.
We do not anticipate that we will pay any cash dividends in the foreseeable future.
We currently expect to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if
any, of our company will be the sole source of our stockholders’ gain, if any, for the foreseeable future.
Future sales of shares by existing stockholders could cause our stock price to decline.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after certain legal
restrictions on resale lapse, the trading price of our common stock could decline. As of December 31, 2021, we had 28,448,612 shares of common stock
outstanding. Approximately 27,113,462 of such shares are freely tradable, without restriction, in the public market. Approximately 1,335,150 of such
shares of common stock are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the
Securities Act and various vesting agreements.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over
matters subject to stockholder approval.
Our executive officers, directors, and 5% stockholders and their affiliates beneficially owned an aggregate of approximately 4.7% of the
outstanding shares of our common stock as of December 31, 2021. Accordingly, these executive officers, directors and their affiliates, acting as a group,
may have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets or any other significant corporate transactions. These stockholders may also delay or prevent a
change of control of our company, even if such a change of control would benefit our other stockholders. This concentration of ownership could delay or
prevent any acquisition of our company on terms that other stockholders may desire, and may adversely affect the market price of our common stock.
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Because the Merger resulted in an ownership change under Section 382 of the Code for Edge, pre-merger U.S. net operating loss
carryforwards and certain other tax attributes will be subject to limitations.
On March 15, 2019, we, then operating as Edge Therapeutics, Inc., or Edge, completed a reverse merger with privately held PDS Biotechnology
Corporation, or Private PDS, pursuant to and in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of
November 23, 2018, as amended on January 24, 2019, by and among us, Echos Merger Sub, a wholly-owned subsidiary of Edge, or Merger Sub, and
Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as our wholly-owned subsidiary, which we refer to as the
Merger. In connection with and immediately following completion of the Merger, we changed our corporate name from Edge Therapeutics, Inc. to PDS
Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation.
As of December 31, 2018, prior to completion of the Merger, Edge had federal and state net operating loss carryforwards, or NOLs, of $128.6
million and $27.1 million, respectively, due to prior period losses. If a corporation undergoes an “ownership change” within the meaning of Section 382 of
the Code, the corporation’s U.S. net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to
limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity
ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state and foreign tax
laws. We believe that Edge may have already undergone one or more ownership changes prior to the Merger. However, the Merger also resulted in an
ownership change for Edge and, accordingly, Edge’s U.S. net operating loss carryforwards and certain other tax attributes available to us are subject to
limitations on their use.
Our effective tax rate may increase in the future, including as a result of tax legislation changes, which may have a material adverse effect on
our business, financial condition and results of operations.
Our effective tax rate may be impacted by changes in or interpretations of tax laws in the United States or in any given jurisdiction in which we
operate, utilization of or limitations on our ability to utilize any tax credit carry-forwards, changes in geographical allocation of revenue and expense and
changes in management’s assessment of matters such as our ability to realize the value of deferred tax assets.
In particular, the U.S. government may enact significant changes to the taxation of business entities including, among others, an increase in the
corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived
from international operations, and an addition of further limitations on the deductibility of business interest. While certain draft legislation has been publicly
released and is under development in Congress at this time, the likelihood of these changes being enacted or implemented is unclear.
Our effective tax rate could also increase due to several factors, including:
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changes in tax rates, tax treaties, and regulations or the interpretation of them;
changes to our assessment about our ability to realize deferred tax assets that are based on estimates of our future results, the prudence and
feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
the outcome of any future tax audits, examinations, or administrative appeals; and
the effects of any acquisitions;
There can be no assurance that our effective income tax rate will not change in future periods. Accordingly, if our effective tax rate were to
increase, it may have a material adverse effect on our business, financial condition and results of operations.
Anti-takeover provisions under Delaware law could make an acquisition more difficult and may prevent attempts by our stockholders to
replace or remove our current or future management.
Because we are incorporated in Delaware, our company is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders
owning in excess of 15% of our voting stock from merging or combining with us. Although we believe these provisions collectively will provide for an
opportunity to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if the offer may be
considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove
then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the
members of management.
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Our eighth amended and restated certificate of incorporation, as amended, provides that, unless we consent to the selection of an alternative
forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum, to the fullest extent permitted by law, for: (a) any derivative action
or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees
to us or our stockholders; (c) any action asserting a claim arising pursuant to the DGCL, our eighth amended and restated certificate of incorporation, as
amended, or our amended and restated bylaws; or (d) any action asserting a claim against us governed by the internal affairs doctrine. This choice of
forum provision does not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act or
the Exchange Act. Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and
regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to
these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its’ choosing for disputes with us
or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
If a court were to find the choice of forum provision contained in our eighth amended and restated certificate of incorporation, as amended, to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our
business, results of operations, and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial
costs and be a distraction to management and other employees.
Provisions in our amended and restated bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or
our directors, officers or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the
U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. This provision limits the ability of
our stockholders to bring claims under the Securities Act in any court other than the U.S. federal courts, which ultimately may disadvantage our
stockholders or be cost prohibitive. Notwithstanding the foregoing, there is uncertainty as to whether a court (other than state courts in the State of
Delaware, which have recently upheld the validity of such a provision) would enforce such a provision and whether investors can waive compliance with
the federal securities laws and the rules and regulations thereunder. Furthermore, the exclusive forum provision only applies to claims brought under the
Securities Act and does not apply to actions arising under the Exchange Act, which is already subject to federal courts as the exclusive forum.
If a court were to find these provisions of our amended and restated bylaws inapplicable to, or unenforceable in respect of, one or more of the
specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could
adversely affect our business, results of operations and financial condition. Even if we are successful in defending against these claims, litigation could
result in substantial costs and be a distraction to management and other employees.
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ITEM 1B. Unresolved Staff Comments
None.
ITEM 2.
Properties
We maintain a month-to-month lease for our research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E,
Princeton, NJ 08540.
We entered into a temporary month-to-month lease as of September 1, 2019 for office space located at 830 Morris Turnpike, Short Hills, NJ
07078 until we entered into a new lease for permanent office space. This lease was terminated on May 31, 2020.
On March 10, 2020, we entered into a sublease agreement, effective as of March 5, 2020, to occupy our corporate and executive office located at
25B Vreeland Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and continues for a term of approximately forty (40) months
with an option to renew through October 31, 2027. On March 17, 2020, the master lessor provided its consent to the sublease in accordance with the
terms of the sublease.
On July 8, 2019, we entered into a lease termination agreement for our office space located at 300 Connell Drive, Suite 4000, Berkeley Heights,
NJ 07922 effective August 31, 2019, or the Lease Termination Agreement. Pursuant to the Lease Termination Agreement, we were required to pay 50%
of the remaining lease payments of $665,802 over three installments on September 1, 2019, December 1, 2019, and March 1, 2020.
We believe our current facilities are suitable and adequate to meet our current needs.
ITEM 3.
Legal Proceedings
The information in Note 11 to the Consolidated Financial Statements contained in Part IV, Item 15 of this Annual Report on Form 10-K is
incorporated herein by reference. There are no matters which constitute material pending legal proceedings to which we are a party other than those
incorporated into this item by reference from Note 11 to our Consolidated Financial Statements for the year ended December 31, 2021 contained in this
Annual Report on Form 10-K.
ITEM 4.
Mine Safety Disclosures
Not applicable.
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PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the Nasdaq Capital Market under the symbol “PDSB”.
Holders
As of March 25, 2022, there were 44 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by
brokers.
Dividends
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on a number
of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other
factors that our board may deem relevant.
Equity Compensation Plans
Information regarding our equity compensation plans is incorporated by reference from the information in our Proxy Statement for our 2022
Annual Meeting of Stockholders, which we will file with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K
relates.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report.
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ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial
statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and
elsewhere in this Annual Report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report.
Introduction to PDS Biotechnology Corporation
We are a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted immunotherapies designed to overcome
the limitations of current immunotherapy and vaccine technologies. We own proprietary T-cell activating platforms designed to train the immune system to
better attack and destroy disease; Versamune ®, for treatments in oncology and Infectimune™, for treatments in infectious disease. When paired with an
antigen, which is a disease-related protein that is recognizable by the immune system, Versamune and Infectimune have both been shown to induce, in
vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells, a specific sub-type of T-cell that is more effective at
killing infected or target cells. Infectimune is also designed to promote the induction of disease-specific neutralizing antibodies. Our immuno-oncology
product candidates are of potential interest for use as a component of combination product candidates (for example, in combination with other leading
technologies such as checkpoint inhibitors) to provide more effective treatments across a range of advanced and/or refractory cancers. We are also
evaluating our immunotherapies as monotherapies in early-stage disease. We are developing targeted product candidates to treat several cancers
including Human Papillomavirus (HPV)-associated cancers, melanoma, colorectal, lung, breast and prostate cancers. Our infectious disease candidates
are of potential interest as vaccines to prevent COVID-19 and universal influenza.
It is well documented that the most critical attribute of an effective cancer immunotherapy is the induction of high levels of active antigen-specific
CD8+ (killer) T-cells. Priming adequate levels of active CD8+ T-cells in-vivo continues to be a major obstacle facing immunotherapy. PDS0101 in its first
human clinical trial provided data supporting the earlier promising preclinical study results and demonstrated the unique in-vivo induction of high levels of
active HPV-specific CD8+ T-cells in humans.
We believe that the Versamune platform has the potential to become an industry-leading immuno-oncology technology and is currently being
applied to the development of a robust pipeline of valuable “new-generation, multi-functional” immunotherapies, both as single agents and as part of
combination therapies with other leading immuno-oncology technologies.
We believe that the key differentiating attributes of the Infectimune platform technology, are strong induction of CD8+ and CD4+ T-cells as well as
antibodies, which can be leveraged to improve treatment and preventive options in several infectious disease indications. Specifically, the COVID-19
pandemic has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more effective and longer
lasting protective vaccines.
PDS0101 in Combination with KEYTRUDA ® Clinical Trial:
In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 (Versamune
plus a mixture of HPV16
antigens) in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) for first-line treatment of recurrent/ metastatic HPV16-positive
head and neck cancer opened and is actively recruiting patients. The clinical trial will evaluate the efficacy and safety of this therapeutic combination as
a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk HPV16 infection.
In this sponsored trial, patients whose cancer has returned or spread following initial treatment, will take this combination of two immuno-therapy
drugs in lieu of chemotherapy. Enrolling patients with more functional immune systems earlier in disease recurrence that have not been compromised by
extensive chemotherapy may allow improved efficacy of the combination. Patients in the trial will receive a total of 5 cycles of combination therapy in the
context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression or intolerance to therapy.
The original trial design for this combination trial was restricted to patients naïve to checkpoint inhibitor (CPI) therapy. PDS amended the protocol
in May 2021 to expand this trial to include patients with advanced head and neck cancer who have failed multiple treatments, including CPI therapy (CPI
refractory patients), a treatment refractory population with extremely high unmet medical need. The amended trial design is a Simon two stage design
that will evaluate objective response rate- or ORR – at six months following initiation of treatment in both the original CPI naïve arm and in the expansion
CPI refractory arm. Objective response is measured by radiographic tumor responses according to RECIST 1.1. There will be a lead-in cohort of 12
patients for the entire trial to assess the safety of the combination. In the CPI naïve arm of the trial, the first seventeen (17) patients will be evaluated for
efficacy with a minimum of four (4) or more patients with documented objective response required to progress to full enrollment of this arm. In the
expansion CPI refractory arm, the first twenty-one (21) patients will be evaluated for efficacy with a minimum of two (2) or more patients with documented
objective response required to progress to full enrollment of this arm.
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In the first quarter of 2022, at the Multidisciplinary Head and Neck Cancers Symposium, we announced the safety data for this trial in more detail,
which showed that PDS0101 in combination with KEYTRUDA® for the treatment of recurrent or metastatic head and neck cancer is likely safe and well
tolerated without evidence of enhanced or significant toxicity.
Also, in the first quarter of 2022, we announced we had met the preliminary efficacy milestone in the checkpoint inhibitor naïve arm and the arm
could proceed to full enrollment of 54 patients. As pre-specified in the clinical trial design, the achievement of an objective response as measured by
radiographic tumor responses according to RECIST 1.1 (tumor reduction of 30% or more) confirmed by two separate measurements among at least four
or more of the first 17 patients in the CPI naïve arm to progress to full enrollment. The enrollment continues in the first stage of the CPI refractory arm.
PDS0101 in Combination with Bintrafusp alfa (M7824) and NHS-IL12 NCI-led Clinical Trial:
In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement, which we refer to as the
CRADA, in a National Cancer Institute, or NCI, led Phase 2 clinical trial evaluating PDS0101, in combination with two investigational immune-modulating
agents Bintrafusp alfa (M7824), a bifunctional “trap” fusion protein targeting TGF-β and PD-L1, and NHS-IL12 (M9241), a tumor-targeting immune-
cytokine. Both Bintrafusp alfa and NHS-IL12 are owned by and are being developed by Merck KGaA, Darmstadt, Germany. The NCI-led trial is evaluating
the novel triple combination for the treatment of both CPI naïve and refractory patients with advanced HPV-associated cancers that have progressed or
returned after treatment. Almost all types of HPV-related cancers (anal, cervical, head and neck, vaginal and vulvar cancers) are represented among the
trial subjects to date. Objective response (tumor reduction > 30%) is measured by radiographic tumor responses according to RECIST 1.1. The NCI
recently achieved the intended enrollment objective of 30 patients in the CPI refractory arm of the trial. The trial has enrolled 45 patients and enrollment in
the trial will continue until the total enrollment of 56 patients is achieved.
The trial was accepted for oral presentation at the 2021 meeting of the American Society of Clinical Oncology (ASCO) held June 4-8, 2021. On
May 20, 2021, we announced the abstract summarizing interim data of 14 patients from the trial. Objective responses were observed in 83% (5 of 6) of
HPV16-positive checkpoint inhibitor naïve patients with advanced disease. Objective responses were observed in 63% (5 of 8) of HPV16-positive
advanced cancer patients who had also failed checkpoint inhibitor therapy.
On June 7, 2021, updated interim data (Abstract 2501) was presented at ASCO by the trial’s Principal Investigator Dr. Julius Strauss. This data
included an update on the initial 14 patients with an additional four (4) subsequently recruited CPI refractory HPV16-positive patients whose data became
available after the abstract submission as well as an additional seven (7) HPV16-negative patients (patients whose cancer was not caused by HPV16
infection) who were not discussed in the abstract. Tumor reduction and objective response was seen in 83% (5/8) of CPI naïve patients with one (1)
achieving a complete response. After a median of eight (8) months of follow-up, 100% (6/6) of these patients were alive, compared to the historical median
survival of 7-11 months. In the CPI refractory arm, tumor reduction was observed in 58% (7/12) patients. These 12 patients included the initial 8 patients
reported in the abstract where 5 of 8, or 63% had tumor reduction. Of the 4 additional patients in this updated data set, 2 patients already had ongoing
tumor reduction but had not yet met the criteria for objective response. Objective response was achieved in 42% (5/12) patients with one (1) achieving a
complete response in this refractory arm. The objective response rates reported in checkpoint refractory, advanced HPV-cancer patients are lower than
those naïve to checkpoint inhibitors, generally only 5-12%. Importantly, 83% (10/12) of all checkpoint inhibitor refractory patients were still alive at median
eight (8) months of follow-up; historic average median survival for this patient population is 3-4 months. Overall, tumor reduction occurred in 67% (12/18)
of the HPV16-positive patients, including both CPI naïve and CPI refractory patients. Of note, in the 7 HPV16-negative patients- those with an HPV type
other than HPV16 that do not express the molecular target of PDS0101, zero (0) of seven (7) patients experienced tumor reduction or an objective
response, providing insight into the potential role of PDS0101 in the observed activity of the triple combination. These data suggest that HPV16-specific
CD8+ and CD4+ T-cell induction by PDS0101 as demonstrated in preclinical studies and phase 1 clinical studies, may promote tumor reduction and
enhanced clinical benefit of the triple combination.
Moreover, PDS0101 did not appear to compound the toxicities already reported to be induced by Bintrafusp alfa and NHS-IL12. This is an
important consideration for combination oncology treatment regimens where a key goal is to avoid additional or excess toxicity associated with limited
anti-tumor activity. As would be expected with both PDS0101 and M9241 being delivered subcutaneously, injection site reactions were seen in 20% of
patients. No new or additional toxicities have been observed to date from the addition of PDS0101 to the combination of the other two immunotherapies.
In the first quarter of 2022, the NCI provided us with data that as of December 31, 2021, the median survival of all patients had increased to 12
months and on-going.
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PDS0101 in Combination with Chemo-Radiotherapy Clinical Trial (IMMUNOCERV):
In October 2020, a third PDS0101 phase 2 clinical trial was initiated with The University of Texas MD Anderson Cancer Center and is actively
recruiting patients. This clinical trial is investigating the safety and preliminary anti-tumor efficacy of PDS0101 in combination with standard-of-care
chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. The trial goals
include evaluation of the rate of regression in patients with a primary tumor that is greater than or equal to 5cm among approximately thirty-five (35)
patients. The rate of complete metabolic response is measured by PET-CT at day 170 and the rate of > 90% tumor volume reduction evaluated by MRI at
30-40 days from the start of treatment. Preliminary data is expected from this trial in 2022. We believe that Versamune’s strong T-cell induction has the
potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication.
PDS0101 as a Monotherapy and in Combination with KEYTRUDA® in a Pre-Surgical Oropharynx Clinical Trial (Mayo Clinic):
In February 2022, a fourth phase 2 clinical trial was initiated with Mayo Clinic. This study is currently open for enrollment. This investigator
initiated clinical trial (MC200710), for PDS0101 as a monotherapy or in combination with KEYTRUDA ®, in patients with HPV oropharynx cancer
(HPV+OPSCC) at high risk for recurrence. The trial treatment will be administered before patients proceed to transoral robotic surgery with curative intent.
Treatment in this setting is referred to as neoadjuvant treatment. This trial will explore wither PDS0101 with or without checkpoint inhibition may increase
HPV-specific anti-tumor responses, potentially resulting in tumor shrinkage, pathologic regression and decrease in circulating tumor DNA (ctDNA).
Other Versamune -Based Products in Development:
PDS0102 – Versamune + TARP antigens
The TARP antigen is over-expressed in acute myelogenous leukemia (AML), prostate and breast cancers. In the U.S. 450,000 patients are
projected to be diagnosed with prostate or breast cancer this year and 19,900 patients are projected to be diagnosed with AML. One hundred percent of
adult and pediatric AML overexpress the TARP tumor antigen while approximately 90% of prostate cancers and 50% of breast cancers overexpress
TARP, providing a potentially significant therapeutic opportunity to impact these diseases. In an early human clinical study, the National Cancer Institute
demonstrated that its proprietary TARP antigens (TARP mix) were recognized by the immune system in prostate cancer patients with PSA biochemical
recurrence leading to a notable reduction in tumor growth rates. In preclinical studies, a dramatically enhanced TARP-specific CD8+ killer T-cell response
was observed when our designed TARP antigens were combined with Versamune (PDS0102). Preclinical development is ongoing. On November 5, 2021
PDS and NCI entered into a non-exclusive, worldwide Patent License Agreement to develop and commercialize a product including TARP antigens. The
patent for the TARP antigens extends through 2034. This license agreement is an important step in the development of PDS0102. We are evaluating the
next steps in the clinical development of PDS0102 and are seeking nondilutive financings to move to human trials.
PDS0103 – Versamune + MUC1 antigens
In April 2020, the PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103. PDS0103 is an
investigational immunotherapy owned by PDS and designed to treat cancers associated with the mucin-1, or MUC1, oncogenic protein. PDS0103
combines Versamune with novel highly immunogenic agonist epitopes of MUC1 developed by the NCI and licensed by PDS. MUC1 is highly expressed
in multiple solid tumors and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian
cancers, for which PDS0103 is being developed. In preclinical studies, and similarly to PDS0101 and PDS0102, PDS0103 demonstrated the ability to
generate powerful MUC1-specific CD8+ killer T-cells. PDS0103 is currently in late preclinical development, and we requested a pre-IND meeting with the
FDA to align on a clinical development plan. In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103. We were satisfied with the
responses and believe we will submit our IND package and will start human trials at the end of 2022.
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PDS0104 – Versamune + TRP-2 and melanoma antigens
Rates of melanoma have been rising rapidly over the past few decades and approximately 96,480 new melanomas will be diagnosed this year
alone. More than 7,000 of these will prove fatal. PDS0104 combines Versamune with various melanoma antigens including the Tyrosinase-related protein
2 (TRP2) antigen which is highly expressed in melanoma. In preclinical B16 animal models of aggressive melanoma, PDS0104 has been shown to have
unique and significant anti-tumor activity as a monotherapy and has also demonstrated strong anti-tumor synergy in combination with checkpoint
inhibitors. As the first approval indications for checkpoint inhibitors occurred in melanoma, there is a growing unmet medical need to identify combination
regimens with potential activity in checkpoint inhibitor refractory patients with this disease. Preclinical development is ongoing.
Infectious Diseases
Our primary focus remains on developing our oncology products and progressing the clinical trials described above. However, we are also
developing preventive vaccines to address several infectious diseases. Based on the key characteristics of Versamune we are progressing preclinical
development of PDS0202, a universal influenza vaccine candidate, which combines Versamune with COBRA (Computationally Optimized Broadly
Reactive Antigen) antigens. These COBRA antigens were designed by renowned influenza expert Dr. Ted Ross at the University of Georgia. PDS0202
leverages Versamune’s ability to induce the immune system to generate high levels of flu-specific neutralizing antibodies, CD4 helper and CD8 killer T-
cells, as well as long-acting memory T-cells to potentially provide broad and long-term protection against multiple influenza strains. PDS0202 preclinical
development is being supported by an agreement with the National Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation
Centers, or CIVIC program. We have completed preclinical formulation and we have entered into an agreement to license COBRA antigens with the
University of Georgia initially to progress into a human clinical trial.
PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential
mutations, based on the understood potential of Versamune to prime the immune system to generate both antibodies for near term protection and T-cell
responses for immune memory and long-term protection against pathogens. Farmacore Biotechnology has licensed Versamune in Latin America to
develop PDS0203 in Brazil. Farmacore is developing and manufacturing the antigen component of the vaccine, leads all regulatory and clinical trial
efforts in Brazil and has selected a top clinical research organization to conduct clinical trials.
On February 22, 2021, PDS Biotechnology and Farmacore announced that Blanver Farmoquímica e Farmacêutica S.A joined their efforts
(collectively the “Consortium”) to develop and commercialize a novel COVID-19 vaccine in Latin America. Under the terms of the agreement, São Paulo-
based Blanver will manufacture, promote, distribute, and commercialize the Infectimune-based COVID-19 vaccine in Latin America.
On March 11, 2021 we announced that the Consortium received a commitment from the Secretary for Research and Scientific Training of the
MCTI, Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of an Infectimune-based COVID-19.
The progression of the Farmacore development program was delayed in the fourth quarter of 2021. After a review of the program by PDS and
Farmacore, the agreement with Farmacore was extended for six months to May 31, 2022 to provide additional time to Farmacore to commence
manufacturing and scale up of drug product for use in clinical trials and any necessary process development work. PDS will continue to monitor
Farmacore’s progress with this program.
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Our current pipeline of Versamune-based targeted immunotherapies and Infectimune-based therapies focuses on the use of selected disease-
associated antigens that have been demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases. Our pipeline is
shown below:
We have never been profitable and have incurred net losses in each year since inception. Our net losses were $16.9 million, and $14.8 million for
the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $60.7 million. Substantially all of
our net losses have resulted from costs incurred in connection with its research and development programs and from general and administrative costs
associated with these operations.
As of December 31, 2021, we had $65.2 million in cash and cash equivalents.
Our future funding requirements will depend on many factors, including the following:
●
●
●
●
●
the timing and costs of our planned clinical trials;
the timing and costs of our planned preclinical studies of our Versamune platform;
the outcome, timing and costs of seeking regulatory approvals;
the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance,
defense and enforcement of any patents or patent applications or other intellectual property rights; and
●
the extent to which we license or acquire other products and technologies.
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Selected Financial Operations Overview
Revenue
We have not generated any revenues from commercial product sales and do not expect to generate any such revenue in the near future. We
may generate revenue in the future from a combination of research and development payments, license fees and other upfront payments or milestone
payments.
Research and Development Expenses
Research and development expenses include employee-related expenses, licensing fees to use certain technology in our research and
development projects, costs of acquiring, developing and manufacturing clinical trial materials, as well as fees paid to consultants and various entities that
perform certain research and testing on our behalf. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation
of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided by vendors on their
actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs
incurred, and are reflected in the consolidated financial statements as prepaid or accrued expenses. Costs incurred in connection with research and
development activities are expensed as incurred.
We expect that our research and development expenses will increase significantly over the next several years as we advance our Versamune-
based immuno-oncology, or I-O, candidates into and through clinical trials, pursues regulatory approval of our injectable Versamune candidates and
prepare for a possible commercial launch, all of which will also require a significant investment in contract and internal manufacturing and inventory related
costs.
The process of conducting human clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in
achieving marketing approval for our injectable I-O candidates. The probability of successful commercialization of our I-O candidates may be affected by
numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are
unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue
from the commercialization and sale of any of our product candidates.
The following table summarizes our research and development expenses incurred for the periods indicated (in thousands):
PDS projects
Clinical consulting
Salaries and other costs
Total
General and Administrative Expenses
Year Ended December 31,
2021
2020
$
$
6,173 $
732
4,349
11,254 $
4,601
942
2,381
7,924
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our
executive, finance, legal, business development and support functions. Other general and administrative expenses include travel expenses, professional
fees for auditing, tax and legal services and facility-related costs.
Other Income
Other income consists of interest income earned on our cash and cash equivalents.
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Critical Accounting Policies
Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K.
As described in Note 2, the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue
generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various market specific and
other relevant assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current
information. Actual results may differ from these estimates. We believe that the following discussion addresses our most critical accounting policies, which
are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective
and complex judgments.
Income Taxes
We file U.S. federal income tax returns and New Jersey state tax returns. Our deferred tax assets are primarily comprised of federal and state tax
net operating losses and tax credit carryforwards and are recorded using enacted tax rates expected to be in effect in the years in which these temporary
differences are expected to be utilized. At December 31, 2021, we had federal net operating losses, or NOLs, carryforwards of approximately $108.7
million, $30.0 million of which expire at various dates between 2028 and 2037, losses generated in 2018 or later of $78.7 million will carry forward
indefinitely. At December 31, 2021, we had federal research and development credits carryforwards of approximately $1.7 million. We may be subject to
the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an
annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon our value
immediately before the ownership change, changes to our capital during a specified period prior to the change, and the federal published interest rate.
Although we have not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited.
Accrued Clinical Expenses
When preparing our financial statements, we are required to estimate our accrued clinical expenses. This process involves reviewing open
contracts and communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed
and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. If we underestimate or
overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in
future periods. Historically, our estimated accrued clinical expenses have approximated actual expense incurred.
Stock-based Compensation
We estimate the fair value of our stock-based option awards to employees, directors and non-employees using the Black-Scholes option-pricing
model, which requires the following assumptions: (1) the expected volatility of our stock is based on volatilities of a peer group of similar companies in the
biotechnology industry whose share prices are publicly available, (2) the expected term of the award is based on the simplified method, which is the
midpoint between the requisite service period and the contractual term of the option, as we have a limited history of being a public company from March
15, 2019 (the date of closing of the reverse merger between us and Edge Therapeutics, Inc.) to develop reasonable expectations about future exercise
patterns and employment duration for our options, (3) the risk-free interest rate based on U.S. Treasury notes with a term approximating the expected life
of the option and (4) expected dividend yield of 0, since we have never paid cash dividends and have no present intention to pay cash dividends.
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Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
Operating expenses:
Research and development expenses
General and administrative expenses
Total operating expenses
Loss from operations
Interest income, net
Benefit from income taxes
Net loss and comprehensive loss
Research and Development Expenses
Year Ended December 31,
2021
2020
(in thousands)
Increase (Decrease)
%
$
$
$
11,254 $
10,185
21,439
(21,439)
4
4,516
(16,918) $
7,924 $
6,978
14,902
(14,902)
55
–
(14,847) $
3,330
3,207
6,537
(6,537)
(51)
4,516
(2,071)
42%
46%
44%
44%
(93)%
100%
14%
For the year ended December 31, 2021, research and development expenses increased to approximately $11.3 million compared to approximately
$7.9 million for the year ended December 31, 2020. The increase of $3.4 million was primarily attributable to an increase in regulatory and clinical costs of
$2.6 million, non-cash stock-based compensation of $1.1 million and personnel costs of $0.4 million, partially offset by an overall decrease in
manufacturing and facility costs of $0.7 million.
General and Administrative Expenses
For the year ended December 31, 2021, general and administrative expenses increased to approximately $10.2 million compared to approximately
$7.0 million for the year ended December 31, 2020. The $3.2 million increase was primarily attributable to an increase in personnel costs of $1.0 million,
non-cash stock-based compensation of $2.5 million, and facilities costs of $0.1 million, partially offset by a decrease in professional fees of $0.4 million.
Benefit from Income Taxes
Income tax benefit was $4.5 million for the year ended December 31, 2021. In the second quarter of 2021, we recognized approximately $4.5
million as a Benefit from Income Taxes from the sale of our NJ tax benefits pursuant to the New Jersey Technology Business Tax Certificate Transfer Net
Operating Loss program. This transaction reduced our reported net loss and comprehensive income for the year ended December 31, 2021 to
approximately $16.9 million, or approximately $2.1 million less than reported for the same period in 2020 which did not include a similar sale of NJ tax
benefits.
Liquidity and Capital Resources
In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital pursuant to which, we
have the right, in our sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice, directing Aspire Capital (as principal)
to purchase up to 100,000 shares of our common stock per business day, in an aggregate amount of up to $20.0 million of our common stock, or the
Purchased Shares, over the 30-month term of the Aspire Purchase Agreement. We may sell an aggregate of 1,034,979 shares of our common stock
(which represented 19.99% of our outstanding shares of common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We
may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has
not been obtained at any time the 1,034,979 share limitation is reached and at all times thereafter the average price paid for all shares issued under the
Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. The
minimum price at which we can sell shares under the Aspire Purchase Agreement is $0.50. On July 29, 2019, we issued 100,654 shares of our common
stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. We recorded the
fair value of the shares at July 29, 2019 of $603,924 as an expense in the third quarter of 2019. Concurrently with the Aspire Purchase Agreement, we
entered into a registration rights agreement with Aspire Capital, or the Registration Rights Agreement. In accordance with the Registration Rights
Agreement, on August 20, 2019 we filed a Registration Statement on Form S-1 (File No. 333-232988) to cover the resale of the Commitment Shares and
any Purchased Shares issuable to Aspire Capital under the Aspire Purchase Agreement. As of December 31, 2021, no Purchase Shares have been sold
to Aspire Capital under the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022.
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Index
In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a public offering price of
$1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the
public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $13 million and net proceeds of
approximately $11.9 million after deducting underwriting discounts and commissions.
In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock,
preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100
million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. On August 13, 2020, we sold 6,900,000 shares of its common
stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the
exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We
received gross proceeds of approximately $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and
offering expenses.
In May 2021, we received approximately $4.5 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant
to our participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss program for State Fiscal Year 2020.
In June 2021, we sold 6,088,235 shares of our common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration
Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering
price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of approximately
$48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain available for future sale
under the 2020 Shelf Registration Statement
As of December 31, 2021, we had $65.2 million of cash and cash equivalents.
Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating
expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued
expenses.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue
as a going concern within one year beyond the filing of this Annual Report on Form 10-K. Our budgeted cash requirements in 2022 and beyond include
expenses related to continuing development and clinical studies. Based on our available cash resources and cash flow projections as of the date the
consolidated financial statements were available for issuance, we believe there are sufficient funds to continue operations and research and development
programs for at least 12 months from the date of this report.
We plan to continue to fund our operations and capital funding needs through equity and/or debt financings. However, we cannot be certain that
additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders. We
may also enter into government funding programs and consider selectively partnering for clinical development and commercialization. The sale of
additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the
instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise
additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future
commercialization efforts or grant rights to develop and market immunotherapies that we would otherwise prefer to develop and market ourselves. Any of
these actions could harm our business, results of operations and prospects. Failure to obtain adequate financing also may adversely affect its ability to
operate as a going concern.
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Index
Cash flows
The following table shows a summary of our cash flows for each of the years indicated (in thousands):
Net cash used in operating activities
Net cash provided by financing activities
Net increase in cash
Net Cash Used in Operating Activities
Year Ended December 31,
2021
2020
$
$
(12,486) $
48,889
36,403 $
(13,149)
29,827
16,678
Net cash used in operating activities was $12.5 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively. The
decrease in cash used in operating activities of $0.6 million includes the $4.5 million NOL sale. Excluding the NOL sale, net cash used in operating
activities would have increased $3.9 million primarily due to the increase in the loss before income taxes of $6.6 million, prepaid expenses and other
assets of $0.9 million, offset by an increase in stock-based compensation of $3.6 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended December 31, 2021 was primarily due to the receipt of net proceeds from the
issuance of common stock of $48.5 million.
Net cash provided by financing activities for the year ended December 31, 2020 was primarily due to the receipt of net proceeds from the
issuance of common stock of $29.8 million.
Operating Capital Requirements
To date, we have not generated any product revenue. We do not know when, or if, we will generate any product revenue and we do not expect to
generate significant product revenue unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. We
anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of,
and seek regulatory approvals for, our tablet vaccine candidates, and begin to commercialize any approved vaccine candidates. We are subject to all of
the risks incident to the development of new products, and may encounter unforeseen expenses, difficulties, complications, delays and other unknown
factors that may harm our business. We expect to incur additional costs associated with operating as a public company and anticipate that we will need
substantial additional funding in connection with our continuing operations.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue
as a going concern within one year beyond the filing of this Annual Report. Our budgeted cash requirements in 2022 and beyond include expenses
related to continuing development and clinical studies. We believe that our existing cash and cash equivalents as of December 31, 2021 are sufficient to
continue operations and research and development programs for at least the next 12 months from the date of this Annual Report. Until we can generate
significant cash from our operations, we expect to continue to fund our operations with available financial resources. These financial resources may not be
adequate to sustain our operations.
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Index
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our
available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and
commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding
requirements will depend on many factors, including, but not limited to:
●
●
●
●
●
●
●
the initiation, progress, timing, costs and results of our planned clinical trials;
the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, on our business
operations, financial condition, results of operations and cash flows;
the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, the
European Medicines Agency, or EMA, and other comparable foreign regulatory authorities;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us now or
in the future;
the effect of competing technological and market developments;
the cost of establishing sales, marketing and distribution capabilities in regions where we choose to commercialize our tablet vaccines on our
own; and
●
the initiation, progress, timing and results of our commercialization of our tablet vaccine candidates, if approved, for commercial sale.
Please see the section titled “Risk Factors” elsewhere in this Annual Report on Form 10-K for additional risks associated with our operations.
Purchase Commitments
We have no material non-cancelable purchase commitments with service providers as we have generally contracted on a cancelable, purchase
order basis.
Operations and Liquidity
While the potential economic impact brought by and over the duration of the COVID-19 pandemic may be difficult to assess or predict, the
COVID-19 pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect our liquidity. In addition, a
recession or market volatility resulting from the COVID-19 pandemic could affect our business. We have taken proactive, aggressive action throughout the
COVID-19 pandemic to protect the health and safety of our employees and expect to continue to implement these measures until we determine that the
COVID-19 pandemic is adequately contained for purposes of our business. W e may take further actions as government authorities require or recommend
or as we determine to be in the best interests of our employees. Given the nature and type of our short-term investments, we do not believe that the
COVID-19 pandemic will have a material impact on our current investment liquidity.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and
regulations of the SEC.
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Index
Smaller Reporting Company
As of January 1, 2021, we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the
JOBS Act. However, we remain a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We will
cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or
a non-affiliate public float in excess of $700 million, determined on an annual basis. Even though we no longer qualify as an emerging growth company,
we may still qualify as a smaller reporting company. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain
disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:
•
•
•
•
being permitted to provide only two years of audited consolidated financial statements in this Annual Report on Form 10-K, with
correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
reduced disclosure obligations regarding executive compensation;
not being required to furnish a contractual obligations table in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations”; and
not being required to furnish a stock performance graph in our annual report.
We expect to continue to take advantage of some or all of the available exemptions.
ITEM 8.
Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in
Item 15.
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A.
Controls and Procedures
Limitations of Internal Control System
Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide
absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have
been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will
prevent or detect all errors and all fraud.
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Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design
and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)), as of December 31, 2021. Based on that evaluation, management has concluded that, as of such date, our disclosure controls
and procedures were effective at the reasonable assurance level.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are
met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.
Management’s Report on Internal Control over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting
based on the framework established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this assessment, our management has determined that our internal control over financial reporting was
effective as of December 31, 2021.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting in our most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
Not applicable.
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Index
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive Proxy Statement for the
Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the Proxy Statement), not later than 120 days after
the end of the fiscal year covered by this Annual Report on Form 10-K, and the applicable information included in the Proxy Statement is incorporated
herein by reference.
ITEM 10.
Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference to the Proxy Statement.
ITEM 11.
Executive Compensation
The information required by this Item is incorporated herein by reference to the Proxy Statement.
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the Proxy Statement.
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the Proxy Statement.
ITEM 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the Proxy Statement.
PART IV
ITEM 15.
Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 185)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the
financial statements or the notes thereto.
(3) Exhibits. The exhibits filed as part of this Annual Report are set forth on the Exhibit Index immediately following our consolidated financial
statements. The Exhibit Index is incorporated herein by reference.
ITEM 16.
Form 10-K Summary
We may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary
information.
86
Index
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
3.4
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
Exhibit Description
Agreement and Plan of Merger and Reorganization, dated November 23, 2018, by and among Edge Therapeutics, Inc., Echos Merger
Sub, Inc. and PDS Biotechnology Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 26,
2018, and incorporated by reference herein).
Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated January 24, 2019, by and among Edge Therapeutics, Inc.,
Echos Merger Sub, Inc. and PDS Biotechnology Corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on
January 30, 2019, and incorporated by reference herein).
Eighth Amended and Restated Certificate of Incorporation of Edge Therapeutics, Inc. (filed as Exhibit 3.1 to the Company’s Current Report
on Form 8-K filed on October 6, 2015, and incorporated by reference herein).
Third Amended and Restated Bylaws of PDS Biotechnology Corporation (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-
K filed on March 15, 2022, and incorporated by reference herein).
Certificate of Amendment to Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Current Report on
Form 8-K on March 18, 2019, and incorporated by reference herein).
Certificate of Amendment to Amended and Restated Certificate of Incorporation (filed as Exhibit 3.2 to the Company’s Current Report on
Form 8-K on March 18, 2019, and incorporated by reference herein).
Form of Certificate of Common Stock (filed as Exhibit 4.1 to the Company’s Pre-Effective Amendment No. 1 to the registration statement
on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
Description of Securities (filed as Exhibit 4.10 to the Company’s Annual Report on Form 10-K filed on March 27, 2020, and incorporated
by reference herein).
Form of Indenture (filed as Exhibit 4.3 to the Company’s registration statement on Form S-3 (File No. 333-240011) on July 22, 2020, and
incorporated by reference herein).
Clinical Trial Collaboration and Supply Agreement, dated May 19, 2017, by and between PDS Biotechnology Corporation and MSD
International GmbH (filed as Exhibit 10.24 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated
by reference herein).
Patent License Agreement, dated January 5, 2015, by and between PDS Biotechnology Corporation and National Institutes of Health, as
amended by First Amendment, dated August 5, 2015 (filed as Exhibit 10.25 to the Company’s Registration Statement on Form S-4/A on
January 25, 2019, and incorporated by reference herein).
Cost Reimbursement Agreement, dated November 1, 2015, by and between PDS Biotechnology Corporation and University of Kentucky
Research Foundation (filed as Exhibit 10.26 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and
incorporated by reference herein).
Cost Reimbursement Agreement, dated November 1, 2015, by and between PDS Biotechnology Corporation and University of Kentucky
Research Foundation (filed as Exhibit 10.27 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and
incorporated by reference herein).
Public Health Service Cooperative Research & Development Agreement for Intramural-PHS Clinical Research, dated effective as of
February 2, 2015, by and between the National Cancer Institute and PDS Biotechnology Corporation (filed as Exhibit 10.28 to the
Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by reference herein).
DOTAP Chloride Enantiomer License Agreement effective November 1, 2008, between Merck Eprova AG and PDS Biotechnology
Corporation (filed as Exhibit 10.29 to the Company’s Registration Statement on Form S-4/A on January 25, 2019, and incorporated by
reference herein).
87
Index
10. 7+
10. 8+
10. 9+
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
10.16+
10.17
10.18
PDS Biotechnology 2010 Equity Incentive Plan, and forms of agreement thereunder (filed as Exhibit 10.2 to the Company’s Registration
Statement on Form S-1/A on September 21, 2015, and incorporated by reference herein).
Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (filed as Exhibit 10.3 to the Company’s
Current Report on Form 8-K on December 9, 2020, and incorporated by reference herein).
Employee Stock Option Agreement under the Second Amended and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan
(filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 9, 2020, and incorporated by reference herein).
PDS Biotechnology Corporation 2009 Stock Option Plan, as amended (filed as Exhibit 99.1 to the Company’s Registration Statement on
Form S-8 on June 4, 2019, and incorporated by reference herein).
PDS Biotechnology Corporation 2018 Stock Option Plan (filed as Exhibit 99.2 to the Company’s Registration Statement on Form S-8 on
June 4, 2019, and incorporated by reference herein).
Form of PDS Biotechnology Corporation Option Agreement for 2009 Stock Option Plan, as amended (filed as Exhibit 99.3 to the
Company’s Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein).
Form of PDS Biotechnology Corporation Option Agreement for 2018 Stock Incentive Plan (filed as Exhibit 99.4 to the Company’s
Registration Statement on Form S-8 on June 4, 2019, and incorporated by reference herein).
PDS Biotechnology Corporation 2019 Inducement Plan, as amended (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K
filed on December 9, 2020, and incorporated by reference herein).
Form of Stock Option Grant Notice and Stock Option Agreement under the 2019 Inducement Plan (filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K on June 20, 2019, and incorporated by reference herein).
Form of Indemnification Agreement for officers and directors (filed as Exhibit 10.9 to the Company’s Registration Statement on Form S-1
on August 14, 2015, and incorporated by reference herein).
Common Stock Purchase Agreement, dated July 29, 2019, by and among the Company and Aspire Capital Fund, LLC (filed as Exhibit
10.1 to the Company’s Current Report on Form 8-K on July 30, 2019, and incorporated by reference herein).
Sublease Agreement, effective as of March 5, 2020, by and between PDS Biotechnology Corporation and COWI North America, Inc. (filed
as Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed on March 27, 2020, and incorporated by reference herein).
10.19*++
Patent License Agreement dated as of November 5, 2021, by and between PDS Biotechnology Corporation and the U.S. Department of
Health and Human Services, as represented by the National Cancer Institute.
10.20*++
Option Agreement with University of Georgia Research Foundation, Inc. effective as of October 25, 2021.
10.21*+
PDS Biotechnology Corporation Change of Control Severance Plan effective as of March 14, 2022.
10.22*+++
Amended and Restated Executive Employment Agreement by and between Frank K. Bedu-Addo and PDS Biotechnology Corporation,
effective as of March 14, 2022.
88
Index
10.23*+++
Executive Employment Agreement by and between Gregory Conn, Ph.D. and PDS Biotechnology Corporation, effective as of March 14,
2022.
10.24*+++
Executive Employment Agreement by and between Matthew Hill and PDS Biotechnology Corporation, effective as of March 14, 2022.
10.25*+++
Executive Employment Agreement by and between Lauren V. Wood, M.D. and PDS Biotechnology Corporation, effective as of March 14,
2022.
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
Subsidiary of PDS Biotechnology Corporation.
Consent of KPMG LLP.
Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS*
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document)
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
+
*
Indicates management contract or compensatory plan.
Filed herewith unless otherwise indicated as furnished herewith
** Confidential Treatment has been requested with respect to certain portions of this Exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
++ Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
89
Index
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
March 31, 2022
March 31, 2022
PDS Biotechnology Corporation
By:
/s/ Frank Bedu-Addo
Frank Bedu-Addo, Ph.D.
President and Chief Executive Officer
By:
/s/ Matthew Hill
Matthew Hill
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed by the following persons in the capacities indicated
below and on the dates indicated:
Signature
Title
Date
/s/ Frank Bedu-Addo
Frank Bedu-Addo, Ph.D.
/s/ Matthew Hill
Matthew Hill
/s/ Gregory Freitag
Gregory Freitag J.D., CPA
/s/ Stephen Glover
Stephen Glover
/s/ Sir Richard Sykes
Sir Richard Sykes
/s/ Kamil Ali-Jackson
Kamil Ali-Jackson
/s/ Otis W. Brawley
Otis W. Brawley
/s/ Ilian Iliev
Ilian Iliev
President and Chief Executive Officer and Director
March 31, 2022
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
90
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
Index
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
PDS Biotechnology Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of PDS Biotechnology Corporation and subsidiary (the Company) as of December 31,
2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years
then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for
the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2)
involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ KPMG LLP
We have served as the Company’s auditor since 2019.
Short Hills, New Jersey
March 31, 2022
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Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
Current assets:
Cash and cash equivalents
Prepaid expenses and other
Total current assets
Property and equipment, net
Operating lease right-to-use asset
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Operating lease obligation - short term
Total current liabilities
Noncurrent liability:
Operating lease obligation - long term
Total liabilities
STOCKHOLDERS’ EQUITY
Common stock, $0.00033 par value, 75,000,000 shares authorized at December 31, 2021 and December 31,
2020, 28,448,612 shares and 22,261,619 shares issued and outstanding at December 31, 2021 and December
31, 2020, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to the consolidated financial statements.
92
December 31,
2021
December 31,
2020
$
$
65,242,622
1,597,569
66,840,191
28,839,565
1,497,665
30,337,230
86
357,611
5,443
547,706
$
67,197,888
$
30,890,379
$
$
1,309,403
2,187,704
258,924
3,756,031
1,415,224
1,735,322
119,904
3,270,450
231,430
3,987,461
490,353
3,760,803
9,387
123,904,602
(60,703,562)
63,210,427
7,346
70,907,315
(43,785,085)
27,129,576
$
67,197,888
$
30,890,379
Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations and Comprehensive Loss
Operating expenses:
Research and development expenses
General and administrative expenses
Total operating expenses
Loss from operations
Other income:
Interest income
Loss before income taxes
Benefit from income taxes
Net loss and comprehensive loss
Per share information:
Net loss per share, basic and diluted
Year Ended December 31,
2021
2020
$
$
11,254,538
10,184,773
21,439,311
7,924,450
6,977,936
14,902,386
(21,439,311)
(14,902,386)
4,346
(21,434,965)
4,516,488
$ (16,918,477)
55,006
(14,847,380)
–
$ (14,847,380)
$
(0.66)
$
(0.89)
Weighted average common shares outstanding basic and diluted
25,597,125
16,745,044
See accompanying notes to the consolidated financial statements.
93
Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
Common Stock
Shares Issued
Amount
Additional
Paid-in Capital
Accumulated
Deficit
Balance - December 31, 2019
Stock-based compensation expense
Issuance of common stock, net of issuance costs
Issuance of warrant exercise
Issuance of common stock from 401K match
Net loss
Balance - December 31, 2020
Stock-based compensation expense
Issuances of common stock, net of issuance costs
Issuance of common stock, from exercise of stock options
Issuance of common stock from 401K match
Net loss
Balance - December 31, 2021
See accompanying notes to the financial statements.
5,281,237
–
16,900,000
65,240
15,142
–
22,261,619
–
6,088,235
82,116
16,642
–
28,448,612
$
$
94
1,742
–
5,581
22
1
–
7,346
–
2,009
27
5
–
9,387
$
40,633,670
432,321
29,750,921
70,437
19,966
–
70,907,315
4,074,458
48,542,989
344,098
35,742
–
$ 123,904,602
$ (28,937,705) $
–
–
–
–
(14,847,380)
(43,785,085)
–
–
–
–
(16,918,477)
$ (60,703,562) $
Total
Equity
11,697,707
432,321
29,756,502
70,459
19,967
(14,847,380)
27,129,576
4,074,458
48,544,998
344,125
35,747
(16,918,477)
63,210,427
Index
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Stock-based 401K company common match
Depreciation expense
Operating lease expense
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Restructuring reserve
Operating lease liabilities
Net cash used in operating activities
Cash flows from financing activities:
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Proceeds from issuances of common stock, net of issuance costs
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Year Ended December 31,
2021
2020
$ (16,918,477)
$ (14,847,380)
4,074,458
35,747
5,357
241,031
(99,904)
(105,821)
452,382
–
(170,839)
(12,486,066)
432,321
19,967
15,608
160,684
810,797
217,504
637,682
(498,185)
(98,133)
(13,149,135)
–
344,125
48,544,998
48,889,123
70,459
–
29,756,502
29,826,961
36,403,057
28,839,565
16,677,826
12,161,739
Cash and cash equivalents at end of period
$
65,242,622
$
28,839,565
See accompanying notes to the consolidated financial statements.
95
Index
Note 1 – Nature of Operations
PDS BIOTECHNOLOGY CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
PDS Biotechnology Corporation, a Delaware corporation (the “Company” or “PDS”), is a clinical-stage immunotherapy company developing a
growing pipeline of molecularly targeted immunotherapies designed to overcome the limitations of current immunotherapy and vaccine technologies. The
Company’s proprietary T-cell activating platforms designed to train the immune system to better attack and destroy disease; Versamune , for treatments in
oncology and Infectimune, for treatments in infectious disease When paired with an antigen, which is a disease-related protein that is recognizable by the
immune system, Versamune and Infectimune have both been shown to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+
helper and CD8+ killer T-cells, a specific sub-type of T-cell that is more effective at killing infected or target cells. Infectimune is also designed to promote
the induction of disease-specific neutralizing antibodies. The Company’s immuno-oncology product candidates are of potential interest for use as a
component of combination product candidates (for example, in combination with other leading technologies such as checkpoint inhibitors) to provide more
effective treatments across a range of advanced and/or refractory cancers. The Company is also evaluating our immunotherapies as monotherapies in
early-stage disease. PDS is developing targeted product candidates to treat several cancers including Human Papillomavirus (HPV)-associated cancers,
melanoma, colorectal, lung, breast and prostate cancers. The Company infectious disease candidates are of potential interest for use in COVID-19 and
universal influenza vaccines.
In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China,
causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization
(WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency on January 31,
2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared
COVID-19 a pandemic and on March 13 the President declared a national emergency in response to the pandemic. PDS continues to learn more about
the full impact of the COVID-19 pandemic which has continued to evolve due to the emergence of variants of concern, resulting in new waves of infection
regionally and globally. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and operations. To date, the start of
two of the three initiated PDS0101 clinical trials were delayed, specifically as a result of the adverse impact the COVID-19 pandemic has had on clinical
trial operations for cancer indications in the United States. The FDA has continued to update its guidance assisting sponsors in assuring the safety of trial
participants, maintaining compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity. Clinical trial sites have implemented
institution-specific measures securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. All three
studies have since been initiated despite the pandemic challenges; however, the evolving COVID-19 pandemic has impacted the pace of enrollment in
clinical trials in general and the Company may be negatively affected with its trials. COVID-19 related travel and other restrictions may also impact the
potential for on-site monitoring visiting and audits and inspections by Company personnel, third parties, and government regulators. There may be
shortages of site personnel and equipment necessary for the timely completion of the clinical trials. The Company is providing support to address these
challenges, but these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical
trials.
Although there is still uncertainty related to the anticipated impact of the COVID-19 pandemic and its variants on the Company’s future results,
management believes the Company’s current cash reserves leave us well-positioned to manage the business through this crisis as it continues to unfold.
However, the impacts of the COVID-19 pandemic and its variants and its variants are broad-reaching and continuing and the financial impacts associated
with the COVID-19 pandemic and its variants are still uncertain.
Despite the economic uncertainty resulting from the COVID-19 pandemic, we intend to continue to focus on the development of our product
candidates and we have expanded our infectious disease pipeline since the pandemic brought renewed resources and interest on technologies such as
the Versamune platform in the context of research and development in prevention of COVID-19. We licensed Versamune to Farmacore in Brazil to
develop PDS0203; a vaccine for the prevention of COVID-19. The Secretary for Research and Scientific Training of The Ministry of Science, Technology
and Innovation of Brazil provided a commitment to fund up to approximately US$60 million to support the clinical development and commercialization of a
Versamune-based COVID-19 vaccine in Brazil. We have not received confirmation of the availability of financial resources within the MCTI to support the
clinical development and commercialization of a Versamune-based COVID-19 vaccine in Brazil. Clinical development and commercialization of a
Versamune-based COVID-19 vaccine in Brazil has not been initiated.
Due to delays in the program, in the fourth quarter of 2021, we met with Farmacore and performed a detailed program review. As the result of
that review, we extended the contract with Farmacore for six months through May 31, 2022. This allows time for Farmacore to begin manufacturing and
scale up of product for the use in clinical studies and further research and development. We are continuing to monitor the status of the technical
manufacturing activities with Farmacore.
PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune
platform. As of December 31, 2021, PDS holds six (6) U.S. patents with granted claims directed to its platform technology and sixteen (16) pending U.S.
patent applications. These issued patents will expire in 2028, 2029, 2031 and 2033. Should the more recently submitted patent applications currently in
prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of March 1, 2022, PDS holds seventy
(70) issued foreign patents and thirty-eight (38) pending or published foreign patent applications. Most of our international issued patents are issued in
multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform
technology. These issued patents will expire in 2031-2037, or later if patent term extension applies. Most recently, the USPTO allowed an application for
PDS’s HPV 16 immunotherapy which when granted will run until October 2037.
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Index
Licensed patents
We have licensed patented antigens from the US government for use in our cationic lipid immunotherapies. We have licensed T-cell receptor
gamma alternate reading frame protein (“TARP”) from the National Cancer Institute (“NCI”) to develop and commercialize TARP peptide-based therapies
in combination with the Company’s Versamune technology and any other of the Company’s proprietary technologies for prostate and breast cancers and
Acute Myeloid Leukemia. These patents are directed to Immunogenic Peptides and Peptide Derivatives for The Treatment of Prostate and Breast Cancer
Treatment and Multi-Epitope TARP Peptide Vaccine and Uses Thereof. These antigens are incorporated in PDS0102 with Versamune. We have licensed
mucin-1 (“MUC1”) novel highly immunogenic agonist epitopes of MUC1 developed by the National Cancer Institute. MUC1 is highly expressed in multiple
solid tumors and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for
which PDS0103 is being developed. We have been granted patents and are pursuing additional patents that cover compositions and methods of use of
cationic lipid immunotherapies with each of the licensed technologies.
We entered into a non-exclusive agreement to license Computationally Optimized Broadly Reactive Antigen (COBRA) with the University of
Georgia Research Foundation. These antigens are developed by Dr. Ted Ross at the University of Georgia. We believe that the combination of these
antigens with our proprietary Versamune technology has potential to induce a broad immune response as a universal flu vaccine.
Note 2 – Summary of Significant Accounting Policies
(A)
Use of estimates:
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses at the date of the consolidated financial
statements and during the reporting periods, and to disclose contingent assets and liabilities at the date of the consolidated financial statements. Actual
results could differ from those estimates. The most significant estimate relates to the fair value of securities underlying stock-based compensation.
(B)
Significant risks and uncertainties:
The Company’s operations are subject to a number of factors that may affect its operating results and financial condition. Such factors include,
but are not limited to: the clinical and regulatory development of its products, the Company’s ability to preserve its cash resources, the Company’s ability
to add product candidates to its pipeline, the Company’s intellectual property, competition from products manufactured and sold or being developed by
other companies, the price of, and demand for, Company products if approved for sale, the Company’s ability to negotiate favorable licensing or other
manufacturing and marketing agreements for its products, and the Company’s ability to raise capital.
The Company currently has no commercially approved products. As such, there can be no assurance that the Company’s future research and
development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject
to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. The Company operates in an
environment of rapid change and is dependent upon the continued services of its employees and consultants and obtaining and protecting its intellectual
property.
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Index
(C)
Cash equivalents and concentration of cash balance:
The Company considers all highly liquid securities with a maturity weighted average of less than three months to be cash equivalents. The
Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits.
(D)
Property and equipment:
Property and equipment are recorded at cost. Depreciation is recorded for property and equipment using the straight-line method over the
estimated useful life of five years. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.
(E)
Research and development:
Costs incurred in connection with research and development activities are expensed as incurred. These costs include licensing fees to use
certain technology in the Company’s research and development projects as well as fees paid to consultants and entities that perform certain research and
testing on behalf of the Company.
(F)
Patent costs:
The Company expenses patent costs as incurred and classifies such costs as general and administrative expenses in the accompanying
statements of operations and comprehensive loss.
(G)
Stock-based compensation:
The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).
ASC 718 requires all stock-based payments to employees, directors and non-employees to be recognized as expense in the consolidated statements of
operations and comprehensive loss based on their grant date fair values. In order to determine the fair value of stock options on the date of grant, the
Company uses the Black-Scholes option-pricing model. Inherent in this model are assumptions related to expected stock-price volatility, option term, risk-
free interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions that are based on factual data
derived from public sources, the expected stock-price volatility and option term assumptions require a greater level of judgment. The Company expenses
the fair value of its stock-based compensation awards to employees and directors on a straight-line basis over the requisite service period, which is
generally the vesting period. The Company recognizes forfeitures as they occur.
In lieu of higher cash compensation, the Company has granted non-employee options to consultants and expensed $ 1,389 and $1,027 during the
years ended December 31, 2021 and 2020, respectively.
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Index
(H)
Net loss per common share:
Basic net loss per common share is calculated by dividing the net loss by the weighted average number of common stock shares outstanding
during the period. Diluted net loss per common share is the same as basic net loss per common share, because potentially dilutive securities would have
an antidilutive effect as the Company incurred a net loss for the years ended December 31, 2021 and 2020.
The potentially dilutive securities excluded from the determination of diluted loss per share as their effect is antidilutive, are as follows:
Stock options to purchase Common Stock
Warrants to purchase Common Stock
Total
(I)
Income taxes:
Year Ended December 31,
2021
3,163,835
197,518
3,361,353
2020
1,650,898
197,518
1,848,416
The Company provides for deferred income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be
recognized for the future tax consequences attributable to net operating loss carryforwards and for differences between the financial statement carrying
amounts and the respective tax bases of assets and liabilities. Deferred tax assets are reduced if necessary, by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
(J)
Fair value of financial instruments:
FASB ASC 820, Fair Value Measurement Disclosures, specifies a hierarchy of valuation techniques based on whether the inputs to those
valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable
inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
•
•
•
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the
measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-
traded instruments and listed equities.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g.,
quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not
active). Level 2 includes financial instruments that are valued using models or other valuation methodologies.
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined
using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
(K)
Subsequent events:
Subsequent events have been evaluated through the date these financial statements were issued. See Note 13.
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Index
(L)
New accounting standards adopted:
Recently Adopted Accounting Pronouncements
Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on our present or future consolidated
financial statements.
Recent Accounting Pronouncements Not Yet Adopted
All recently issued accounting pronouncements are not expected to have a material effect on the consolidated financial statements.
Note 3 – Liquidity and Capital Resources
As of December 31, 2021, the Company had $ 65.2 million of cash and cash equivalents. The Company’s primary uses of cash are to fund
operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when the
Company pays these expenses, as reflected in the change to the Company’s outstanding accounts payable and accrued expenses.
On July 29, 2019, the Company entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital
pursuant to which, the Company has the right, in its sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice,
directing Aspire Capital (as principal) to purchase up to 100,000 shares of the Company’s common stock per business day, in an aggregate amount of up
to $20.0 million of its common stock, or the Purchased Shares, over the 30-month term of the Aspire Purchase Agreement. The Company may sell an
aggregate of 1,034,979 shares of its common stock (which represented 19.99% of its outstanding shares of common stock on the date of the Aspire
Purchase Agreement) without stockholder approval. The Company may sell additional shares of its common stock above the 19.99% limit provided that (i)
the Company obtains stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share limitation is reached and at
all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the
consolidated closing bid price of the Company’s common stock on July 26, 2019. The minimum price at which the Company can sell shares under the
Aspire Purchase Agreement is $0.50. On July 29, 2019, the Company issued 100,654 shares of its common stock to Aspire Capital, as consideration for
entering into the Aspire Purchase Agreement, which the Company refers to as the Commitment Shares. The Company recorded the fair value of the
shares at July 29, 2019 of $603,924 as an expense in the third quarter of 2019. Concurrently with the Aspire Purchase Agreement, the Company entered
into a registration rights agreement with Aspire Capital, or the Registration Rights Agreement. In accordance with the Registration Rights Agreement, on
August 20, 2019, the Company filed a Registration Statement on Form S-1 (File No. 333-232988) to cover the resale of the Commitment Shares and any
Purchased Shares issuable to Aspire Capital under the Aspire Purchase Agreement. As of December 31, 2021, no Purchase Shares have been sold to
Aspire Capital under the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022, and we have no plans to raise capital
under the Aspire Purchase Agreement.
In February 2020, the Company completed an underwritten public offering, in which it sold 10,000,000 shares of common stock at a public
offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional
shares at the public offering price, minus underwriting discounts and commissions. The Company received gross proceeds of approximately $13 million
and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions.
In July 2020, the Company filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of
common stock, preferred stock, warrants, rights, debt securities and units, which the Company refers to collectively as the Shelf Securities, up to an
aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020.
In August 2020, the Company sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf
Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the
public offering price, minus underwriting discounts and commissions. The Company received gross proceeds of approximately $19.0 million and net
proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses.
In May 2021, the Company received approximately $ 4.5 million from the net sale of tax benefits through 2019 to an unrelated, profitable New
Jersey corporation pursuant the Company’s participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss (NOL)
program for State Fiscal Year 2020.
In June 2021, the Company completed an underwritten public offering in which it sold 6,088,235 shares of common stock at a public offering
price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of
its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. the Company received gross proceeds
of approximately $51.7 million and net proceeds of approximately $ 48.5 million, after deducting underwriting discounts and offering expenses.
Approximately $29,300,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.
The Company’s primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund
operating expenses is impacted by the timing of when the Company pays these expenses, as reflected in the change in its outstanding accounts payable
and accrued expenses.
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Index
The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to
continue as a going concern within one year beyond the filing of this Annual Report on Form 10-K. The Company’s budgeted cash requirements in 2022
and beyond include expenses related to continuing development and clinical studies. Based on its available cash resources and cash flow projections as
of the date the consolidated financial statements were available for issuance, management believes there are sufficient funds to continue operations and
research and development programs for at least 12 months from the date of this report.
The Company plans to continue to fund its operations and capital funding needs through equity and/or debt financings. However, the Company
cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company
or its existing stockholders. The Company may also enter into government funding programs and consider selectively partnering for clinical development
and commercialization. The sale of additional equity would result in additional dilution to the Company’s stockholders. Incurring debt financing would result
in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict its operations.
If the Company is unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate
its product development or future commercialization efforts or grant rights to develop and market immunotherapies that the Company would otherwise
prefer to develop and market itself. Any of these actions could harm its business, results of operations and prospects. Failure to obtain adequate financing
also may adversely affect the Company’s ability to operate as a going concern.
Note 4 – Fair Value of Financial Instruments
There were no transfers between Levels 1, 2, or 3 during the years ended December 31, 2021 or 2020.
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets
(Level 1)
Quoted Prices in
Inactive Markets
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Total
As of December 31, 2021:
Cash and cash equivalents
As of December 31, 2020:
Cash and cash equivalents
Note 5 – Property and Equipment
Property and equipment is summarized as follows:
Furniture and equipment
Computer and Telephone equipment
Lab equipment
Total furniture and equipment
Less accumulated depreciation
Property and equipment, net
$ 65,242,622
$
65,242,622
$
$ 28,839,565
$
28,839,565
$
–
$
–
$
–
–
December 31,
2021
2020
14,964
13,545
86,911
115,420
(115,334)
86
$
$
14,964
13,545
86,911
115,420
(109,977)
5,443
$
$
Depreciation expense for the years ended December 31, 2021 and 2020 was $ 5,357 and $15,608, respectively.
Note 6 – Leases
On July 8, 2019, the Company entered into a lease termination agreement for its office space located at 300 Connell Drive, Suite 4000, Berkeley
Heights, NJ 07922 effective August 31, 2019 (the “Lease Termination Agreement”). Pursuant to the Lease Termination Agreement, the Company was
required to pay 50 percent of the remaining lease payments of $ 665,802 over three installments on September 1, 2019, December 1, 2019, and March 1,
2020, which was recorded as lease termination costs in the third quarter of 2019. The Company entered into a temporary month-to-month lease as of
September 1, 2019, for office space located at 830 Morris Turnpike, Short Hills, NJ 07078 until the Company entered into a new lease for permanent
office space. This lease was terminated on May 31, 2020.
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Index
Effective March 5, 2020, the Company entered into a sublease for approximately 11,200 square feet of office space located at 25B Vreeland
Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and will continue for a term of forty (40) months with an option to renew
through October 31, 2027. As of December 31, 2021, there are twenty ( 20) months remaining in the lease term. Upon inception of the lease, the
Company recognized approximately $0.7 million of a ROU asset and operating lease liabilities. The discount rate used to measure the operating lease
liability as of May 1, 2020, was 9.15%. Throughout the period described above the Company has maintained, and continues to maintain, a month-to-
month lease for its research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton NJ, 08540.
Supplemental cash flow information related to operating leases is as follows:
Cash paid for operating lease liabilities
Right-of use assets recorded in exchange for lease obligations
For the year ended December 31, 2021, the Company’s operating lease expense was $ 241,031.
Year ended December 31,
2022
2023
2024
2025
2026 and after
Total future minimum lease payments
Less imputed interest
Note 7 – Accrued Expenses
Accrued expenses consist of the following:
Accrued research and development costs
Accrued professional fees
Accrued compensation
Accrued rent
Total
102
Year Ended December 31,
2021
2020
$
$
170,839 $
– $
98,133
668,764
$
$
294,986
239,469
–
–
–
534,455
(44,101)
490,354
December 31,
2021
227,400
485,400
1,458,310
16,594
2,187,704
$
$
2020
204,780
219,822
1,310,720
–
1,735,322
$
$
Index
Note 8 – Stock-Based Compensation
The Company has three equity compensation plans: the 2009 Stock Option Plan, 2014 Equity Incentive Plan and the 2018 Stock Incentive Plan
(the “Plans”).
In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 91,367 shares as
ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015, and each
January 1 thereafter and prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit
was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31
and (y) such lesser number as the Board of Directors may determine in its discretion. In March 2019, the Plan was amended and restated which removed
the annual increase component and was limited to 826,292 shares.
As previously disclosed, on December 8, 2020, the Board of Directors of the Company adopted, subject to stockholder approval, the Second
Amended and Restated PDS Biotechnology Corporation 2014 Equity Inventive Plan (the “Restated Plan”), which would amend and restate the Amended
and Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Current Plan”). The Company held its annual meeting of stockholders on
June 17, 2021 (the “Annual Meeting”). The stockholders voted to approve the Restated Plan at the Annual Meeting. The Restated Plan is identical to the
Current Plan in all material respects, except as follows: (a) the number of shares of Common Stock authorized for issuance under the Restated Plan will
increase from 826,292 shares to 3,339,243 shares, plus the total number of shares that remained available for issuance, that are not covered by
outstanding awards issued under the Current Plan, immediately prior to December 8, 2020; and (b) the Restated Plan will terminate on December 7,
2030, unless earlier terminated.
In 2018, the Company’s stockholders approved the 2018 Stock Incentive Plan pursuant to which the Company may grant up to 558,071 shares
as (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Preferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards.
Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option
agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four-year term and NQs generally vest over a one-
to-five-year term. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further
awards may be granted and all awards granted under the Plans are no longer outstanding. As of December 31, 2021, there were 190,799 shares
available for grant under the 2018 Stock Incentive Plan.
On June 17, 2019, the Board adopted the 2019 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-
qualified stock options. The Inducement Plan was recommended for approval by the Compensation Committee of the Board and subsequently approved
and adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.
On December 8, 2020, the Company amended the Inducement Plan solely to increase the total number of shares of Common Stock reserved for
issuance under the Inducement Plan from 200,000 shares to 500,000 shares. The 2019 Inducement Plan is administered by the Compensation
Committee of the Board. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, non-qualified stock options under the 2019 Inducement Plan
may only be made to an employee who has not previously been an employee or member of the Board (or any parent or subsidiary of the Company), or
following a bona fide period of non-employment by the Company (or a parent or subsidiary of the Company), if he or she is granted such non-qualified
stock options in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to
his or her entering into employment with the Company or such subsidiary. As of December 31, 2021, there were 127,400 shares available for grant under
the 2019 Inducement Plan.
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Index
The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations and
comprehensive loss for the years ended December 31, 2021 and 2020:
Research and development
General and administrative
Total
Year Ended December 31,
2021
1,395,957
2,678,500
4,074,457
$
$
2020
229,977
202,344
432,321
$
$
The following table summarizes the stock option activity for the Company’ stock option plans for the year ended December 31, 2021:
Balance at January 1, 2021
Granted
Exercised
Forfeited
Options outstanding at December 31, 2021
Vested and expected to vest at December 31, 2021
Exercisable at December 31, 2021
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
11.87
4.35
6.59
29.67
5.57
5.57
6.55
7.03
9.11
–
–
7.90
7.90
6.41
$
$
$
226,731
8,803,138
–
–
10,839,589
10,839,589
–
Number
of Shares
1,650,897
1,958,030
(117,958)
(327,134)
3,163,835
3,163,835
1,437,539
$
$
$
$
$
$
$
As of December 31, 2021 there was approximately $ 11,800,706 of unamortized stock compensation expense, which is expected to be recognized
over a remaining average vesting period of 2.89 years.
The weighted-average grant date fair value of the stock options granted in 2021 was $ 7.65 per share.
The fair value of options granted during the year ended December 31, 2021 was estimated using the Black-Scholes option valuation model
utilizing the following assumptions:
Volatility
Risk-Free Interest Rate
Expected Term in Years
Dividend Rate
Year Ended December 31,
2021
2020
Weighted Average
100.53%
0.49%
6.06
–
97.50%
0.39%
6.04
–
Fair Value of Option on Grant Date
$
7.65
$
1.14
Expected volatility. The expected volatility assumption is based on volatilities of a peer group of similar companies in the biotechnology industry
whose share prices are publicly available.
Risk-free interest rate . The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock
option grants.
Expected term. The expected term represents the period options are expected to be outstanding. The expected term of the options is based on
using the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, since the Company has a
limited history of being a public company from March 15, 2019 (the date of the Merger) to develop reasonable expectations about future exercise patterns
and employment duration for the stock options grants.
Expected dividend rate. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has
no present intention to pay cash dividends.
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Index
Note 9 - Stockholders’ Equity
Preferred Stock
The Company currently has 5,000,000 shares of preferred stock authorized.
Voting
Shares of preferred stock may be issued in one or more series, from time to time, with each such series to consist of such number of shares and
to have such voting powers relative to other classes or series of preferred stock, if any, or common stock, full or limited or no voting powers, and such
designations, preferences and relative, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be
stated in the resolution or resolutions providing for the issuance of such series adopted by the Company’s Board of Directors.
Common Stock
The Company currently has 75,000,000 shares of common authorized.
Voting
Each holder of a share of common stock is entitled to one vote for each share of common stock.
Dividends
Dividends may be declared and paid as and when determined by the Board of Directors and subject to any preferential dividend rights of any
then outstanding preferred stock.
Preemptive Rights.
The holders of common stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Company whether now or
hereafter authorized.
Liquidation Rights
Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of the common stock will be entitled to receive all
assets of the Company available for distribution to its stockholders, subject to any preferential rights of any then outstanding preferred stock.
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Index
Note 10 – Income Taxes
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows:
Federal statutory rate
State taxes
Extraordinary gain
Permanent differences
Research and development
State Taxes/Sale of NOL
Valuation Allowance
Other
Effective tax rate
December 31,
2021
2020
21.0%
(13.0)%
0.0%
(8.9)%
2.8%
21.0%
(1.8)%
0.0%
21.1%
21.0%
6.7%
0.0%
(4.5)%
2.3%
–
(27.1)%
1.6%
0.0%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets were as follows:
Federal net operating losses
State net operating losses
Stock options
Federal tax credit
State tax credits
Amortization
Accrued expense
Depreciation
Lease liabilities
Other
Total gross deferred tax assets
Less valuation allowance
Deferred tax assets, net
Right of use asset
Total gross deferred tax liabilities
Deferred tax, net
106
December 31,
2021
22,831,097
3,426,561
1,374,830
1,661,238
410,089
35,579
4,665
719,666
137,838
15,278
30,616,841
(30,516,318)
100,523
(100,523)
(100,523)
$
$
$
2020
19,757,859
5,704,791
1,687,123
1,089,138
752,791
41,695
352,642
721,024
171,543
18,098
30,296,704
(30,142,744)
153,960
(153,960)
(153,960)
–
$
–
$
$
$
$
Index
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine
whether it is more likely than not that some portion of the deferred income tax will not be realized. The realization of the gross deferred tax assets is
dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. At
December 31, 2021 and 2020, the Company has recorded a full valuation allowance against its net deferred tax assets of approximately $30.5 and $30.1
million respectively. The change in the valuation allowance during the year ended 2021 was approximately $0.4 million.
At December 31, 2021, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 108.7 million. At December 31,
2021, the Company had federal research and development credit carryforwards of approximately $1.7 million. The federal net operating loss carryforwards
begin to expire in 2028, losses generated in 2018 or later will carry forward indefinitely. The federal credit carryforwards begin to expire in 2032. Section
382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research
and experimental tax credits, to an annual limitation in the event certain ownership changes, as defined. The Company may be subject to the net
operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual
limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the
Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published
interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be
limited.
At December 31, 2021, the Company had approximately $ 48.2 million of State of New Jersey NOLs which expire between 2029 and 2041. At
December 31, 2021, the Company had approximately $0.5 million of the State of New Jersey research development credits carryforwards. The State of
New Jersey has enacted legislation permitting certain corporations located in New Jersey to sell state tax loss carryforwards and state research and
development credits, or net loss carryforwards. The Technology Business Tax Certificate Transfer Program enables qualified, unprofitable NJ-based
technology or biotechnology companies with fewer than 225 US employees (including parent company and all subsidiary) to sell a percentage of New
Jersey NOLs and research and development (“R&D”) tax credits to unrelated profitable corporations. In 2021, the company sold New Jersey NOL
carryforwards and R&D Credits, resulting in the recognition of $4.5 million of income tax benefit, net of transaction costs. There is no certainty as to
whether this program will continue.
Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns.
The Company has analyzed its tax positions and has concluded that as of December 31, 2021, there were no uncertain positions. The Company’s U.S.
federal and state net operating losses have occurred since its inception in 2009 and as such, tax years subject to potential tax examination could apply
from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.
Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any
unrecognized tax benefits and has not accrued any interest or penalties for the years ended December 31, 2021 and 2020.
Note 11 – Commitments and Contingencies
Employment Matters
The Company has entered into employment agreements with each of its executive officers. The employment agreements generally provide for,
among other things, salary, bonus and severance payments. The employment agreements generally provide for between 12 months and 24 months of
severance benefits to be paid to an executive (as well as certain potential bonus, COBRA and equity award benefits), subject to the effectiveness of a
general release of claims, if the executive terminates his or her employment for good reason or if the Company terminates the executive’s employment
without cause. Such severance payments may be provided 90 days prior to and for as long as 24 months following the effective date of a change in
control. The continued provision of severance benefits is conditioned on each executive’s compliance with the terms of the Company’s confidentiality and
invention and assignment agreement as well as his or her release of claims.
Rent
For the years ended December 31, 2021 and 2020, rent was $ 185,195 and $183,372, respectively, for month-to-month arrangements not
impacted by the adoption of ASC 842.
Legal Proceedings
On July 23, 2021, David R. Rosener, a purported stockholder of the Company, filed a putative class action and shareholder derivative complaint
in the Court of Chancery of the State of Delaware (C.A. No. 2021-0644 JRS) against the Company and all of its directors and certain of its executive
officers. The plaintiff named all current directors of PDS as defendants as well as PDS’s Chief Scientific Officer and PDS’s Chief Medical Officer and also
named PDS as a nominal defendant. The plaintiff claimed PDS’s bylaws required tabulation of broker non-votes on Proposal 3 at the Company’s 2021
annual stockholder meeting held on June 17, 2021 (the “2021 Annual Meeting”), which sought shareholder approval of the Second Amended and
Restated PDS Biotechnology Corporation 2014 Equity Incentive Plan (the “Restated Plan”). The complaint asserted claims for breach of fiduciary duties,
declaratory judgment, waste of corporate assets and unjust enrichment in connection with the Restated Plan and the granting of an aggregate of
1,040,700 stock options to certain executive officers pursuant to the Restated Plan. The plaintiff sought unspecified monetary damages, to have the
Restated Plan declared void, and recission of the grant of stock options as ultra vires. At the Special Meeting of Stockholders held on January 19, 2022,
the requisite stockholders of the Company voted to ratify the prior approval of the Restated Plan which was adopted at the 2021 Annual Meeting and the
stock options issued under the Restated Plan. Thereafter, on February 22, 2022, the plaintiff filed a notice of voluntary dismissal in the Court of Chancery
of the State of Delaware.
On or about December 27, 2021, Seth Van Voorhees, the former Chief Financial Officer of the Company, filed a Demand for Arbitration against
the Company with the American Arbitration Association, asserting that he was wrongfully terminated. In his demand, Dr. Van Voorhees contends that his
alleged damages are expected to be no less than $3,000,000, plus interest, arbitration costs, attorneys’ fees and punitive damages. We have offered and
accrued $300,000 associated with this matter. The Company denies all alleged wrongful conduct and the Company is vigorously defending the matter.
The Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its business. Such matters are
subject to many uncertainties and outcomes are not predictable with assurance. While there can be no assurances as to the ultimate outcome of any legal
proceeding or other loss contingency involving the Company, management does not believe any pending matter will be resolved in a manner that would
have a material adverse effect on its financial position, results of operations or cash flows.
107
Index
Note 12 – Retirement Plan
The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to
IRS-imposed limitations. The 401(k) employer contribution for the years ended December 31, 2021 and 2020 plan years were $35,747 and $19,967
respectively.
Note 13 – Subsequent Events
On January 19, 2022, the Company granted an option to purchase 765,605 shares of common stock to the management and employees of the
Company with a strike price of $6.28 vesting 25% on the first anniversary and the remaining vesting in equal monthly installments thereafter until fully
vested. Included in the above mentioned grant, the Company granted an option to purchase 291,500, 112,200 and 88,600 to its Chief Executive Officer,
Chief Scientific Officer and its Chief Medical Officer, respectively.
108