PDS Biotechnology Corporation (PDSB) Q1 2020 Earnings Report, Transcript and Summary

Greetings. Welcome to PDS Biotechnology's first quarter 2020 financial results. At this time, all participants are in listen-only mode. The brief question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded.At this time, I'll turn the conference over to Alex Lobo. Alex, you may now begin.

Good morning. And welcome to PDS Biotechnology's first quarter 2020 earnings conference call and audio webcast.With me today are Dr. Frank Bedu-Addo, Chief Executive Officer, and Dr. Lauren Wood, Chief Medical Officer.Earlier this morning, PDS Biotech issued a press release announcing financial results for the three months ended March 31, 2020. We encourage everybody to read today's press release as well as PDS Biotech's quarterly report on Form 10-Q, which has been filed with the SEC.The company's press release and quarterly report is available on PDS Biotech's website at pdsbiotech.com. In addition, this conference call is being webcast on the company's website and it will be archived there for future reference.Before we begin, I would like to caution listeners that comments made by management during this conference call will include forward-looking statements within the meaning of federal securities law, including the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve material risks and uncertainties and the company's actual results may differ materially.For a discussion of risk factors, including, among others, the risk related to the COVID-19 pandemic, the impact such pandemic may have on the company's business operations, financial operations and results of operation, and the company's ability to respond to the related challenges including those noted in this morning's press release and PDS Biotech's filings with the SEC.Investors, potential investors and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.In addition, the content of the conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 13, 2020. Except as required by law, the company undertakes no obligation to revise or update any statements to reflect the events or circumstances that take place after the date of this call.With that, I would like to turn the call over to Dr. Frank Bedu-Addo. Frank, go ahead.

Thank you, Alex. And welcome, everyone, to PDS Biotech's first quarter 2020 earnings conference call. Throughout the first quarter, we continued to leverage the versatility, safety and potency of our novel Versamune platform as we expanded our pipeline beyond immuno-oncology, to include the development of a class of transformative preventive vaccines to protect against infectious diseases such as COVID-19 and influenza.We believe that Versamune's ability to induce a superior range or breadth of protective immune responses uniquely positions us to develop differentiated and more effective vaccines against these infectious diseases.Let me quickly provide you with some background on our proprietary Versamune technology, which is the foundation of all our vaccine and immuno-oncology programs.When paired with disease-specific proteins, Versamune's design enables effective programming of our immune system to better recognize a specific pathogen or cancer. The immune system is enabled to protect and to fight the disease, as well as to potentially provide long-term protection against the specific disease.Versamune has demonstrated powerful ability to activate both the preventive and the therapeutic arms of our immune system to effectively recognize disease-causing agents.The therapeutic arm comprises a component of our white blood cells called T cells. Activated killer T cells have the ability to identify and to kill infectious pathogens and cancer cells.Versamune has also demonstrated a powerful ability to activate the preventive or defensive arm of our immune system to generate what are known as neutralizing antibodies.Versamune's unique ability to train the immune system, not only to generate an effective defense against a specific infectious pathogen by generating antibodies, but also to mount an effective killer T cell attack specifically against the pathogen presents a promising opportunity to develop transformative vaccines that may better protect against infectious diseases and related pandemics.We recently initiated preclinical testing of our COVID-19 vaccine candidates to evaluate the levels of both antibody and T cell induction. We look forward to sharing the results of those studies when they become available.Our goal is to advance a COVID-19 vaccine into human trials as quickly as possible. And we are currently in active discussions with both government agencies and NGOs to determine the most expeditious path forward.Simultaneously, we remain fully committed to our immuno-oncology programs, including our three planned Phase II studies for PDS0101 in human papilloma virus associated cancers, which we hope to initiate when safe to do so.Last year, we reported follow-up clinical outcome data from our previously reported Phase I human clinical trial of PDS0101. PDS0101 is being developed as an immunotherapy to treat advanced human papilloma virus associated cancers such as head and neck, anal and cervical cancers.The study demonstrated successful translation from preclinical animal models to humans of Versamune's novel mechanism of immunological programming and activation. This Phase I study was an open label, dose escalation safety study that included 12 patients with high-risk cancer-causing HPV infection and precancerous lesions of the cervix.Three patients received a 1 milligram dose. Three received a 3 milligram dose. And six received the highest dose of 10 milligrams. In the original reported analysis, the study demonstrated that PDS0101 was immunologically active at all three tested doses. The 3 and 10 milligram doses resulted in about a 20-fold increase in the number of HPV attacking killer T cells. This was quantified in blood drawn within approximately 14 days of treatment. There were no observed dose-limiting toxicities or long-term safety concerns at any dose.Based on the demonstrated ability of the PDS0101 monotherapy to safely generate high levels of circulating killer T cells, we conducted a post hoc retrospective evaluation of clinical outcomes, which was reported at the Society for Immunotherapy of Cancer Annual Meeting in November of 2019.In this retrospective analysis, PDS0101 demonstrated complete lesion regression in at least 60% of evaluable patients at their first evaluation post treatment, which was as early as one to three months after treatment. These results were remarkable as most patients were infected with multiple high-risk HPV types.This initial clinical study of PDS0101 monotherapy provided early clinical proof of concept that allows us to rapidly and strategically develop our pipeline, particularly our lead immunotherapy candidate PDS0101.PDS0101 consists of Versamune with a proprietary mix of short proteins from human papilloma virus type 16. HPV16 is the most virulent and high risk type of HPV and is by far the most prevalent genotype in patients with HPV associated cancers.The formulation of Versamune and the HPV proteins when administered by subcutaneous injection programs the immune system to recognize and to attack the cells in the body, expressing or containing these particular proteins.Currently, approximately 43,000 patients are diagnosed with HPV-associated cancers every year in the United States. In men, it primarily manifests as head and neck cancer and in women as cervical cancer. Anal, penile, vaginal and vulva cancers are also associated with HPV infection.And while there has been a significant uptake in HPV vaccines, this is unlikely to significantly affect the rates of HPV-related cancers over the next decade or more.This is because of a number of factors. First, HPV is by far the most prevalent sexually-transmitted agent worldwide, with about 14 million new infections in the United States every year.Secondly, the current HPV vaccines are only preventive and have no therapeutic benefit. These vaccines are only effective if given before the individual is infected with the virus.Third, the progression of the disease from infection to cancer is extremely slow and could take over a decade. As a result, it has been projected that most of the patients who will be diagnosed with cancer over the next 10 to 20 years may already be infected with the virus. And the current vaccines, as I mentioned earlier, will not prevent progression to cancer.In fact, head and neck cancer has recently been described as a silent epidemic due to the dramatically increasing incidence of the cancer, primarily due to HPV infection. The incidences of anal cancer have also been reported to be on a steep rise.So, with this summary, I'll now hand over to Dr. Lauren Wood, our Chief Medical Officer, to walk through next steps in advancing PDS Biotech's oncology and infectious disease pipeline. Lauren, I hand over to you.

Thank you, Frank. And good morning, everyone. As we look ahead, we remain committed to the initiation of our three PDS0101 Phase II clinical programs addressing advanced HPV-associated cancers. However, due to the COVID-19 pandemic, we are unable to provide exact timelines for when these trials will be initiated.Let me quickly highlight for you these three studies. The first trial is a Phase II study that will evaluate the efficacy and safety of PDS0101 in combination with Merck's anti-PD1 therapy KEYTRUDA in the first line treatment of patients with recurrent or metastatic HPV16 positive head and neck cancer.Historically, the vast majority of combination studies have been designated for second or third line treatment. So, we are very excited about the ability to address this cancer in the first line therapy setting with the standard of care for recurrent metastatic disease.We believe this presents several distinct advantages and opportunities. We're honored to collaborate with Merck and plan to initiate this study when safe to do so.Our second planned Phase II clinical study is being run by the National Cancer Institute. This trial will evaluate PDS0101 in combination with two well-recognized immunotherapies that have shown strong promise in ongoing clinical studies – M7824, a bifunctional checkpoint inhibitor, and NHS-IL12, an immune cytokine, both owned by EMD Serono, also known as Merck KgaA in Europe. This clinical study is a result of highly promising preclinical data generated with this triple combination at the National Cancer Institute.The third planned Phase II clinical study is being run by a leading cancer research institute. This Phase II trial will study the combination of PDS0101 and standard of care chemo radiation in patients with locally advanced cervical cancer.We are working closely with both institutions to determine when these two studies can safely begin and we look forward to providing an update when available.In addition to our work with PDS0101, we recently announced the expansion of our cooperative research and development agreement with the NCI to initiate studies of PDS0103 for the potential treatment of ovarian, breast, colorectal and lung cancers, in which overexpression of the MUC-1 protein in the tumors is associated with a high degree of unmet need.PDS0103 combined with Versamune with novel short sequences from the MUC-1 protein developed by The Laboratory of Tumor Immunology and Biology at the National Cancer Institute that are highly recognized by our immune system and can be used with Versamune to program and arm our killer T cells to better recognize and attack these cancers which express MUC-1.The MUC-1 protein is highly present in multiple tumor types, and it's been shown to be associated with drug resistance and poor disease progress prognosis.Under our expanded agreement with the NCI, we are collaborating to conduct preclinical studies of PDS0103 and potentially human clinical studies in combination with other therapeutic agents.Now that we've discussed our immediate priorities in immuno-oncology, I'd like to highlight next some of our recent activities pertaining to our robust pipeline, specifically for infectious disease programs.The versatility of Versamune and its application in infectious disease is one we've always planned to develop, as evidenced by our recent collaboration with Farmacore in tuberculosis.As the COVID-19 pandemic continues to unfold, the development of vaccines has taken center stage. Our Versamune platform has demonstrated the ability to activate both the preventative and therapeutic arms of our immune system, which presents the potential to provide a greater breadth of long-term protective immunity.We currently have two development programs in the infectious disease space that are moving forward rapidly. Our leading infectious disease program, PDS0203 is advancing as a vaccine designed to potentially provide long-term and broad protection against COVID-19.The Versamune platform, when paired with the viral antigen, induces both protective neutralizing antibodies, as well as attacking killer T cells, and very importantly, memory T cells. A strong T cell response has been associated with enhanced immunity against infectious disease, specifically in SARS, a close relative of the current SARS-CoV-2 virus that is the cause of the COVID-19 pandemic.Versamune's ability to induce both neutralizing antibodies, together with the virus attacking T cells, may provide significantly enhanced immunity against the virus and its potential mutations.This month, we initiated preclinical studies for our COVID-19 vaccine candidates. These preclinical studies will be used to provide initial confirmation of Versamune's ability to induce an anti SARS-CoV-2 immune response. These initial studies will evaluate and characterize the induction of both neutralizing antibodies as well as helper and killer T cells specific to SARS-CoV-2.Further, our proprietary SARS-CoV-2 protein being administered with Versamune includes less variable regions of the virus. This means that the immune system has the potential to be trained to recognize not only the outer shell of the virus, which is more likely to mutate, but also the more stable center part of the virus. This should help provide improved protection against possible mutations of the virus.We are currently in active discussions with both governmental agencies and NGOs on the most accelerated path to advance our COVID-19 vaccine into clinical trials. We look forward to providing additional updates in the near future as we continue to rapidly advance this program.Our second infectious disease program is part of a collaboration with Farmacore Biotechnology for the development of PDS0201, a novel therapeutic tuberculosis vaccine based on Farmacore proprietary TB antigens, combined with Versamune.Tuberculosis is an infectious disease caused by mycobacterium tuberculosis and manifests primarily as respiratory symptoms that can also significantly affect other organs. To date, there is no available therapeutic vaccine for tuberculosis.In preliminary evaluations, our Versamune-based product, PDS0201, demonstrated highly promising TB specific T cell induction in vivo. Under this collaboration with Farmacore, we will continue the development of a product candidate and Farmacore will conduct studies to evaluate safety and efficacy of the formulated product.While this program is still early in preclinical studies, we are hopeful that the data generated through this collaboration will continue to support our Versamune platform as a whole, as well as validate our approach to infectious diseases.With this very robust pipeline of programs, we believe that our Versamune platform holds tremendous value and potential in both treating a variety of cancers and providing protection, as well as treatment of infectious diseases. We look forward to providing additional updates on these programs as we continue to make progress through 2020.I'll now hand back to our CEO, Dr. Frank Bedu-Addo. Frank?

Thank you, Lauren. And now, before I review our financial results for the first quarter of 2020, I would like to note our improved financial position, having successfully completed an underwritten public offering in February, in which we raised approximately $11.9 million in net proceeds for the company, after deducting underwriting discounts and commissions, not including other offering expenses.This amount includes net proceeds from the underwriter's full exercise of their over-allotment option. We believe with this additional cash infusion, we have the necessary working capital to support operations through 2021.With that said, I will now highlight our financial results for the three months ended March 31st, 2020. For the first quarter of 2020, net loss was approximately $4 million or $0.39 per basic share and $0.39 per diluted share. Compare it to a net income of approximately $6.8 million or $1.82 per basic share and $1.47 per diluted share for the first quarter of 2019 and this was related to the merger with Edge Therapeutics.Research and development expenses totaled approximately $1.9 million for the first quarter of 2020 compared to approximately $1 million for the same period in 2019, an increase of 91%.For the first quarter of 2020, general and administrative expenses were approximately $2.1 million compared with approximately $3.9 million for the first quarter of 2019, a decrease of 47%.Total operating expenses for the first quarter of 2020 were approximately $4 million compared to our total operating expenses of approximately $4.9 million for the same period in 2019, a decrease of 18%.As of March 31, 2020, the company's cash balance was approximately $21 million. This amount includes the approximately $11.9 million in net proceeds after deducting underwriting discounts and commissions, not including other offering expenses from PDS Biotech's underwritten public offering, including the exercise of the underwriter's over-allotment option, which closed on February 14, 2020.That concludes our financial statements. Now, before we open the call to questions, I would like to reiterate that we believe that our novel Versamune platform holds significant potential in both infectious diseases and immuno-oncology. And we are continuing to work with our partners at leading companies and academic institutions.In the coming months, we look forward to advancing the preclinical development for our lead COVID-19 vaccine candidate and look forward to providing further updates on the program as they become available.In addition, we remain committed to our immuno-oncology programs, including the two upcoming Phase II studies for PDS0101 with our partners at the National Cancer Institute and the leading cancer research institute we hope to announce in the coming weeks.We are also excited to initiate our third Phase II program evaluating the combination of PDS0101 in Merck's KEYTRUDA in HPV16 associated recurrent or metastatic head and neck cancer for first line treatment when it is safe to do so.We would like to thank our shareholders for their continued support and look forward to providing additional updates as they become available.That concludes our prepared remarks. We'd now like to open the call to questions. Operator?

Thank you. [Operator Instructions]. Our first question is from the line of Joseph Pantginis with H. C. Wainwright. Please proceed with your question.

Hi, guys. This is Pasquale Sansone from the line of Joe. Thank you so much for taking my question. So, I have a couple of questions. One on PDS0103. So, can you give us more color on the program, especially like the competitive landscape and advantages of using Versamune platform? And also, what rationale is behind this indication please?

So, for PDS0103, as Dr. Wood mentioned, this would be addressing lung, ovarian, breast and colon cancers, which could potentially address a significant unmet medical need. So, the rationale behind the design of these novel proteins from the MUC-1 protein is because of the fact that MUC-1 has been studied for several years. It's very well known to be highly immunogenic, meaning that the T cells of our immune system can recognize and respond to those specific proteins, which are strongly associated with poor medical or therapeutic outcomes.And so, based upon the Versamune's ability to effectively – more effectively deliver these specific proteins to the immune system and to train the T cells to specifically recognize all cells in the body that highly contain or express those particular proteins, the goal of the National Cancer Institute and PDS is now to combine those novel MUC-1 proteins that have been designed by the National Cancer Institute to be much more readily or highly recognizable by our immune system with Versamune, with the intention or with the hopes of developing an immunotherapy that will be a lot more effective and powerful at priming and training our immune system to much more effectively combat and kill those cancer cells. So, that's really the thinking behind this. And that's really based upon the experience of PDS and the National Cancer Institute in combining these together to really address these specific cancers.

That's very helpful. Thank you so much. And what about like PDS0101, you said that basically the vaccine consists of the 16 genotype protein fragments. Can you elaborate a little bit on which genes these fragments cover?

So, we're looking at the HPV16 E6 and E7 proteins. The E6 and E7 proteins are well established to be highly oncogenic and highly expressed in these HPV cancers. We've picked HPV16 as the lead program or the lead target because of the fact that HPV16 is by far the most prevalent HPV type in these advanced cancers. So, for example, over 90% of HPV positive head and neck cancers are HPV16 positive. It's also been reported that 70% to 80% of anal cancers and 50% to 60% of cervical cancers are HPV16 positive. And so, that's really the reason for the focus on HPV16, and specifically the E6 and E7 component proteins of HPV16.

So, if I understood correctly, each formulation is going to contain both E6 and E7 fragments. Is that correct?

Yes. So, it's one formulation that's been applied broadly across the various indications. And that formulation contains proteins from both the E6 and E7.

Okay. I see, okay. That's very helpful. My last question is on COVID-19 vaccine program. So, I understand you're working on multiple candidates. Would each vaccine formulation include different viral peptide fragments? And how would the vaccine address potential multiple strains of COVID-19? Thanks.

Yes. So, just to follow-up on what Dr. Wood mentioned earlier, we are looking at a protein. So, we're looking at the recombinant protein rather than peptides. And we're looking at a number of various constructs. The rationale behind looking at various constructs is the fact that we would like to understand which of those constructs can be manufactured much more effectively and then with high yield because that's going to be very important in the commercial setting. And we also want to understand, combine with the induction of both the T cells and antibody responses.So, we're looking at the big picture to really identify which construct will give the best combination of effective production, high yield, and strong immunogenicity. And, as Dr. Would mentioned, we're looking at the variable region of the virus which almost every vaccine is looking at today. But what's also unique about PDS' approach is the fact that due to Versamune's ability to prime the immune system to generate T cells, we can also look at less variable regions of the virus, which would allow us to generate these powerful T cells against more conserved regions within the virus, which therefore provides much broader protection and continued protection, hopefully, as the virus continues to mutate as the more variable regions are what change as the virus mutates. And so, that's really the plan, but it's yet to be confirmed that we would be able to provide that protection against the various mutations. But, theoretically, that is the approach to target not only the variable region, but also to target more conserved regions of the virus to provide a much broader and robust protection for the long term.The other thing Dr. Wood mentioned was the long-term memory. Due to the fact that we can induce these T cells against some of those variable regions, we can provide long-term memory. That's also very important in being able to generate that robust and long-term protection against these agents.

Understood. Thank you. And congrats on the progress.

You're very welcome. Thank you very much.

Our next question comes from the line of Jim Molloy with Alliance Global Partners. Please proceed with your question.

Hi, thanks for taking my question. I was wondering if you could walk through the breakdown of the year where your spend will be between the oncology versus the COVID or the vaccine programs for the rest of 2020. And as we look into vaccine, what's sort of the next timeline you might expect to reasonably guide to for outdate on that program and when do you anticipate that might be?

So, in terms of the spend between the immuno-oncology and vaccines, the focus really is to focus our finances on the immuno-oncology. What PDS is currently doing is talking to some of these government agencies as well as the NGOs to, hopefully, obtain funding to progress the COVID-19 program. And so, our hope is that we would be able to obtain external funding to progress this program forward while we conserve the cash to apply to the immuno-oncology programs. And so, that's the current goal. If there are any changes, we will update our shareholders regarding these potential changes.In terms of the timeline, a lot of the timeline in progression forward is also going to be somewhat dependent on our ability to raise the capital through some of these agencies we're talking to currently to progress the program forward.However, we have initiated basic preclinical studies. And so, those preclinical studies will probably – it will probably take us another month and a half to two months to start generating the initial data, which will then inform exactly how we progress with the constructs that are currently being developed. So, we have formed some partnerships with companies who will be working with us as we talk to these agencies to evaluate the full program.So, one of the key things that we've had to do was essentially develop the program from A to Z, how we're going to perform our preclinical work and manufacture the product all the way through Phase I clinical trials to the larger clinical trials and eventually commercial production. And so, we're doing a full evaluation of that program as we talk to these agencies, with the hope of being able to get the funding and to progress these independent of the cash that we currently have raised.

And knowing that the world has changed a little from what the spend was in first quarter 2020 pretty radically here, what's the thinking on spend sort of going forward? Is $4 million a quarter the right level? Does that number likely change? And when do you reasonably anticipate? I know it's hard to know with everything going on. When might you reasonably anticipate being able to start up the Phase II trials in three indications?

Well, when we start the Phase III trials, it's a little bit difficult to project just because of the current situation. As you know, with oncology trials especially, most new oncology trials have been put on hold just because of the complications, especially associated with oncology patients. So, with the largest trial, which was the Merck trial, in which we're looking at least 20 sites, that becomes a little bit more difficult to project exactly when that will get up and running.The other two programs are probably – since they're being run at single sites are more likely to be able to get up and running in the near term. However, both PIs, both principal investigators, for each of those two programs have informed us that they are hoping to be able to get started at least sometime early in the third quarter, but they cannot confirm, and so they will keep us updated and apprised as to when they will be ready and when they think they can get those trials up and running.And so, the short answer to that question is, it's difficult for us to say exactly when those trials will get up and running.

Certainly understood. And can you comment a little on sort of the expected burn in the quarter going forward? Is the $4 million level where you guys need to be given sort of the delays? Or does that come down pretty dramatically?

Our burn will be in the $3 million to $4 million range per quarter. And so, with that, we are comfortable that we have the funding to take us through 2021.

Thank you very much for taking the questions.

You're welcome. Thanks a lot.

Thank you. And we've reached the end of the question-and-answer session and I'll turn the call back over to Frank Bedu-Addo for closing remarks.

Thank you very much. And, again, I'd like to reiterate our thanks to our shareholders and also to reiterate our belief in our Versamune platform. We look forward to getting these clinical trials, especially with PDS0101, up and running. And we will certainly let our shareholders know once we understand exactly when these trials will be running and if there are any changes to our programs. Whether it's COVID-19 or our oncology programs, we will also let our shareholders know as soon as we have that information. But once again shareholders know as soon as we have that information.But once again, thank you very much for your support and we will continue to keep you updated. Thanks a lot.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.