MKKGY - PDS Biotechnology: Late-Stage Biotech With Enormous Potential

2023-04-26 13:15:56 ET

Summary

• Initiation of phase 3 study using PDS0101 in combination with Keytruda for the treatment of patients with unresectable, recurrent/metastatic Human Papillomavirus positive head and neck cancer expected Q4 of 2023.
• It is said that the global head and neck squamous cell carcinoma market could reach $6.2 billion by 2029.
• It licensed a fusion protein from Merck KGaA known as PDS0301.
• PDS Biotechnology Corporation had $73.8 million in cash as of December 31, 2022; it will likely need to raise additional cash before end of 2023.

PDS Biotechnology ( PDSB ) is a great speculative biotech play to look into. The reason why I state that is because it has huge potential after having achieved positive results in using a few of its clinical candidates such as PDS0101 and PDS0301. In particular, there are two programs in the pipeline which I believe could add long-term shareholder value, should they ultimately succeed. The first of these programs would be the use of PDS0101 in combination with Keytruda for the treatment of patients with human papillomavirus [HPV] 16-positive recurrent or metastatic head and neck cancer. It received clearance from the FDA to begin a phase 3 study using this combination to treat this patient population. However, it has to submit an updated IND for this trial in Q3 of 2023 and then doesn't expect to initiate this late-stage registrational study until Q4 of 2023. In addition, it licensed from Merck KGaA ( MKKGY ) a fusion protein asset known as PDS0301. This was an important license for the fact that it is being used in a triple combination trial. That is, PDS0301 added together with PDS0101 plus an approved immune checkpoint inhibitor [ICI] in a phase 2 study generated some impressive data.

The Treatment Of Patients With Unresectable, Recurrent/Metastatic Human Papillomavirus [HPV] 16-positive Head And Neck Cancer

PDS0101 in combination with Keytruda for the treatment of patients with unresectable, recurrent/metastatic Human Papillomavirus positive head and neck cancer. Head and neck squamous cell carcinoma [HNSCC] develop from the mucosal lining of the upper aerodigestive tract. It is the 9th leading cancer cause worldwide and it accounts for 90% of all head and neck cancer cases . In the United States, there are about 50,000 new incidents of HNSCC each year. These groups of cancers can affect multiple parts of the body like: mouth, nose, throat and sinuses. These patients can experience several symptoms that may arise and they include:

• Soreness or lump in parts of the body
• Consistent sore throat that doesn't go away
• Difficulty swallowing
• Changes in someone's voice

This is a larger multi-billion dollar market as well. It is said that the global head and neck squamous cell carcinoma market could reach $6.2 billion by 202 9. The thing to note is that PDS Biotech is specifically only going after head and neck cancer patients who are HPV 16+. This is the first target, but PDS Biotechnology is expanding its potential to go after many other types of cancers that are HPV 16+. This will be laid out in the triple-combination study that is being done separately in another section below.

As such, PDS Biotechnology ran a phase 2 open-label study known as VERSATILE-002 . This is a mid-stage study done as a collaboration with Merck ( MRK ). It was looking at safety and efficacy of PDS0101 in combination with Merck's Keytruda. The goal of this study was to explore this combination in adults with HPV16 and PD-L1 positive recurrent or metastatic head and neck squamous cell carcinoma [HNSCC]. Patients in this study received 200 mg of intravenous Keytruda once every 3 weeks and then PDS0101 together with Keytruda on cycles 1-4 and again at cycle 12. There was some positive preliminary safety data which was reported at the 2022 Multidisciplinary Head and Neck Cancers Symposium. One thing to note is that this study is split into looking at two different HNSCC populations, which are:

• Checkpoint inhibitor [CPI] naive patients (meaning haven't received CPI treatment yet)
• CPI refractory patients (These are patients who have already received CPI treatment and failed on it)

Preliminary data was good in terms of both safety and efficacy. On the safety front, the combination of PDS0101 and Keytruda was well tolerated . There was no evidence of toxicity in the first 18 patients who were recruited into the study. Not only was it safe, but there was preliminary evidence of efficacy. That is, the biotech met its preliminary efficacy milestone when looking at the CPI naive arm (patients who have not yet received CPI therapy). The last time I spoke about this biotech, it had a catalyst approaching to present efficacy results from the phase 2 VERSATILE-002. I'm happy to report that the results released at the 2022 American Society of Clinical Oncology [ASCO] Annual Meeting were very positive. It was reported that head and neck cancer patients who received PDS0101 and Keytruda achieved an objective response rate [ORR] of 41% and overall survival rate of 87% at 9 months in 17 evaluable patients. Why are these results positive though? There are two major reasons why this is the case. The first reason is that a 41% ORR obtained with PDS0101 in combination with Keytruda far exceeds that of what is typically achieved for those who only receive checkpoint inhibitor monotherapy, which is an ORR of 19%. The second reason is because PDS Biotech had a successful end-of-phase 2 meeting with the FDA based on these positive results from the VERSATILE-002 study. That is, the FDA cleared PDS Biotechnology to initiate a phase 3 study.

This brings about a major catalyst opportunity in that the phase 3 registrational VERSATILE-003 study is not expected to begin until Q4 of 2023. The downside here in my opinion is that with the phase 3 study not starting until the end of this year (Q4 of 2023), results from it likely won't be released from it until 2025/2026. On the flip side, this is a registrational study, thus it will be able to submit a Biologics Licensing Application [BLA] of PDS0101 plus Keytruda for the treatment of this patient population after that by 2025/2026 if the study meets the intended primary endpoint.

Financials

According to the 10-K SEC Filing , PDS Biotechnology Corporation had cash and cash equivalents of $73.8 million as of December 31, 2022. The reason for the cash on hand is because of two financial instruments that were done back in August of 2022. The first of such transactions it entered into was an At Market Issuance Sales Agreement or "Sales Agreement" with B. Riley Securities and BTIG, Limited Liability Corp. With respect to this financing agreement, it gives PDS Biotechnology sole discretion to sell from time to time an aggregate offering price of up to $50 million. Based on this agreement, for the year ending December 31, 2022 it sold 1,238,491 shares of its common stock for a net gain of about $9.9 million. In Q1 of 2023, it sold about 553,293 shares of its common stock for net proceeds of about $4.6 million. Then, there was another financial transaction that was achieved in August of 2022. That is, it entered into a venture loan and security agreement (Loan And Security Agreement) with Horizon Technology Finance Corporation. This loan security agreement provided multiple loans up front as follows:

• Term Loan A that gave $7,500,000
• Term Loan B that gave $10,000,000
• Term Loan C that gave $3,750,000
• Term Loan D that gave $3,750,000
• Term Loan E that can give up to $5,000,000
• Term Loan F that can give up to $5,000,000

The reason why I stated that Term loans "E" and "F" can give up to $5,000,000 each is because they have not yet been enacted. When this agreement was signed and completed only Term loans A, B, C and D were given upfront upon closing. Based on the current cash on hand, it believes it has enough to fund its operations until at least Q3 of 2024. This means that by at least Q3 of 2023, I feel it may need to possibly enact some other fundraising activities.

Risks To Business

There are several risks that traders/investors should be aware of before investing in this biotech. The biggest risk of all to consider would be with respect to the initiation of the phase 3 VERSATILE-003 study, using PDS0101 plus Keytruda to treating patients with HPV16 and PD-L1 positive recurrent or metastatic HNSCC. That's because an amended IND needs to be submitted first in Q3 of 2023 for this late-stage study. Only if the FDA clears this IND, will PDS Biotech be able to initiate it in Q4 of 2023. If there is a problem with the IND, then the initiation of such a phase 3 study could be delayed. A second risk to consider would be final data to be released from this VERSATILE-003 study. It will likely be a few years before data from this study is going to be released and even then, there is no guarantee that the primary endpoint will be met upon completion of it. A third risk to consider would be with respect to its financial position. That's because it only expects its cash to last until at least Q3 of 2024. As biotechs tend not to wait until the very end to raise cash, I believe that it will choose to raise additional funds in the coming months.

Conclusion

The final conclusion is that PDS Biotechnology is a good speculative biotech play to keep an eye on. That's because it expects to file an updated IND in Q3 of 2023 so that it can initiate a phase 3 study known as VERSATILE-003. This late-stage study is expected to start in Q4 of 2023 and will use PDS0101 in combination with Keytruda to treat patients with HPV 16-positive recurrent/metastatic HNSCC. In addition, it is testing out PDS0301 + PDS0101 + checkpoint inhibitor as a triple combination treatment for this patient population. It generated some positive data using this triple combination and received guidance from the FDA for potentially advancing a late stage study based off of it. This indication is also a very large market opportunity for PDS. It is said that the global head and neck squamous cell carcinoma market could reach $6.2 billion by 2029. With the initiation of the phase 3 VERSATILE-003 study in Q4 of 2023, plus the potential to target the same indication with a triple-combination as well, these are the reasons why I believe that PDS Biotechnology is a good speculative biotech play to look into.

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