PDS Biotechnology Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and with the audited financial statements and notes thereto of the Company as of and for the year ended December 31, 2021 on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 31, 2022. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q (this “Quarterly 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: ● 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 Quarterly 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 Quarterly Report, unless otherwise stated or the context otherwise indicates, references to “PDS Biotech,” “the Company,” “we,” “us,” “our” and similar references refer to PDS Biotechnology Corporation, a Delaware corporation. 17 Index Company Overview We are a clinical-stage immunotherapy company developing a growing pipeline of targeted cancer and infectious disease immunotherapies based on our proprietary Versamune ® and Infectimune™ T cell activating technology platforms. Our Versamune based products have demonstrated the potential to overcome the limitations of current immunotherapies by inducing, in vivo, large quantities of high-quality, potent polyfunctional CD4+ helper and CD8+ killer T cells. We have developed multiple therapies, based on combinations of Versamune and disease-specific antigens, designed to train the immune system to recognize diseased cells and effectively attack and destroy them. We continue to advance our pipeline of candidates to address a wide range of cancers including HPV-positive cancers (anal, cervical, head and neck, penile, vaginal, vulvar) and breast, colon, lung prostate and ovarian cancers. Our Infectimune -based vaccines have demonstrated the potential to induce, not only robust and durable neutralizing antibody response, but also powerful T cell responses including long-lasting memory T cell responses. Our infectious disease candidates are of potential interest for use in universal influenza vaccines. In May 2022, we announced that two abstracts had been presented at the 2022 American Society of Clinical Oncology Annual Meeting: Abstract number 6041, PDS0101 a novel type 1 interferon and CD8+ T cell activating immunotherapy in combination with pembrolizumab in subjects with recurrent/metastatic HPV16-positive squamous cell carcinoma (HNSCC) and Abstract number 2518, Phase II evaluation of the combination of PDS0101, M9241, and bintrafusp alfa with HPV16+ malignancies. Also in May 2022, we announced expansion of our VERSATILE-002 clinical trial into Europe and in June 2022, we announced the U.S. Food and Drug Administration (the “FDA”) had granted Fast Track designation to our lead candidate PDS010 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab). The FDA’s Fast Track designation is designed to aid in the development and to expedite the review of drug candidate applications that would potentially treat serious or life-threatening conditions. In order to receive Fast Track designation, a product must also demonstrate the potential to address an unmet medical need. Treatments granted this designation are given the opportunity to have more frequent meetings with the FDA throughout the entire dug development and review process, with the goal of moving promising new drugs more rapidly through the process. It also provides the opportunity to submit sections of a New Drug Application (the “NDA”) on a rolling basis, where the FDA may review portions of the NDA as they are received instead of waiting for the entire NDA submission. In addition, Fast Track designated products are eligible for priority review at the time of NDA or Biologics License Application submission. In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41 st American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine. In November 2022, we announced the presentation of data from two Phase 2 clinical trials at the 37 th Annual Meeting for the Society of Immunotherapy of Cancer (SITC): Abstract number 674, IMMUNOCERV, an ongoing Phase 2 trial combining PDS0101, an HPV-specific T cell immunotherapy, with chemotherapy and radiation for treatment of locally advanced cervical cancers and abstract number 695, Immune correlates associated with clinical benefit in patients with checkpoint refractory HPV-associated malignancies treated with triple combination immunotherapy. 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. 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 commenced 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 treated with the combination of PDS0101 and KEYTRUDA® to evaluate if the addition of PDS0101 might improve the efficacy reported in published studies of KEYTRUDA® alone. 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 who have yet to be treated with a checkpoint inhibitor (CPI naïve) and cohort 2 which consists of patients who have failed checkpoint inhibitor therapy (CPI refractory). 18 Index In 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 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. In May 2022, we announced additional preliminary efficacy and safety data from this trial at the ASCO Annual Meeting. The abstract provided preliminary data on 19 patients (safety) with available imaging data for 17 of the 19 patients (efficacy). Highlights from the abstract were as follows: ● Response rates thus far* (tumor shrinkage greater than 30%) seen in 7/17 (41.2%) patients in comparison to the published results of approximately 19% for approved checkpoint inhibitors, used as monotherapy for recurrent or metastatic head and neck cancer, with 2 of the 7 having complete responses (CR) ● Stable disease (SD) was reported in 6/17 (35.3%) patients, with 4 of the 6 (67%) experiencing tumor shrinkage of less than 30% ● Clinical efficacy (ORR* + SD) was seen in 13/17 (76.5%) patients ● Progressive/ongoing disease was reported in 4/17 (23.5%) patients ● Patients had received a median of 4/5 doses of PDS0101 (range 1-5) and 9/35 doses of KEYTRUDA ® (range 1-18) ● There were no treatment-related adverse events greater than or equal to Grade 3 (N=19) ● No patients required dose interruption or reduction on the combination treatment ● No patients discontinued the combination treatment ● At 9 months of follow up (median not yet achieved): ● Progression free survival (PFS) rate was 55.2% ● Overall survival (OS) rate was 87.2% ● no control or comparative studies have been conducted between checkpoint inhibitors and PDS0101 In May 2022, we announced the expansion of this trial into Europe and in June 2022, as described above, we received Fast Track designation for PDS0101 in combination with pembrolizumab. In August 2022, we announced our independent Data Monitoring Committee (DMC) met and evaluated data from 43 patients and noted there were no Grade 3 or greater treatment-related adverse events attributed to the combination. The DMC recommended continuing the trial with no modifications. In October 2022, we announced an end-of-phase 2 meeting with the FDA for PDS0101 in combination with KEYTRUDA ® . We are currently evaluating the guidance on the key elements of the clinical program that will support the submission of a Biologics License Application for PDS0101. 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-positive 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-positive cancers had 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. Preclinical study results arising from this CRADA were 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. 19 Index 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-positive cancers when treated with CPI are 7-11 months and 3-4 months, respectively. In June 2022, at the 2022 ASCO Annual Meeting, we provided an update to the preliminary data presented at the 2021 meeting. This included data from 30 patients and highlights were as follows: ● Objective response (OR = > 30% tumor reduction) was seen in 88% (7/8) of patients with checkpoint-naive disease; 4/7 (57%) patients’ responses are ongoing (median 17 months). ● With checkpoint refractory patients: M9241 dosing appears to affect response rates, with 5/8 (63%) patients receiving M9241 at 16.8 mcg/kg achieving an OR compared to 1/14 (7%) patients who received M9241 at 8 mcg/kg achieving an OR; 4/6 (67%) patients’ responses are ongoing (median 12 months). ● Tumor reduction was seen in 45% (10/22) of patients with checkpoint-refractory disease, including patients receiving high or low dose M9241. ● In checkpoint refractory patients treated with high or low dose M9241, survival outcomes were similar (p=0.96 by Kaplan Meier analysis). At a median of 12 months of follow up 17/22 (77%) of patients were alive. ● In checkpoint naïve patients 6/8 (75%) were alive at median 17 months of follow up. ● Similar OR and survival were seen across all types of HPV16-positive cancers. ● Preliminary safety data: 13/30 (43%) of patients experienced Grade 3 treatment-related adverse events (AEs), and 2/30 patients (7%) experienced Grade 4 AEs. There were no grade 5 treatment-related AEs. ● The study results to date strongly suggest, in agreement with the published preclinical studies, that all 3 drugs contribute to the clinical outcomes. In September 2022, we announced, in agreement with the NCI, that the CPI refractory patients had been selected as the preferred treatment group in the on-going PDS0101-based triple combination therapy in advanced HPV-positive cancers and the trial was closed to further enrollment given the CPI refractory arm has been fully recruited. We and the NCI hope to meet with the FDA in the coming months to discuss the registrational path forward for the combination therapy as a potential third-line treatment for CPI refractory HPV-positive cancers. In October 2022, we announced expanded interim data as follows: ● Survival data: 66% (19/29) of HPV16-positive CPI refractory patients in the cohort were alive at a median follow up of 16 months ● Safety profile: 48% (24/50) patients experienced Grade 3 treatment-related adverse events (AEs), and 4% (2/50) patients experienced Grade 4 AEs. There were no Grade 3 treatment-related AEs. ● HPV16-positive CPI naïve patients: 75% (6/8) were alive at a median follow up of 25 months and 38% (3/8) of responders had a complete response. 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 Biotech 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. The enrollment rate in this trial has been negatively impacted by the COVID-19 pandemic and enrollment is on-going. 20 Index In November 2022, we announced data from this trial was included in a poster presentation being presented at the 2022 SITC Annual Meeting which included the following: ● 9 of the 17 patients have now completed a Day 170 post-treatment Positron Emission Tomography, Computed Tomography (PET CT) scan to assess the status of the cancer. This includes 78% (7/9) of treated patients with advanced cervical cancer (FIGO stage III or IV). ● 100% (9/9) of patients treated with the combination of PDS0101 and CRT had an objective response. ● 89% (8/9) of patients treated with the combination of PDS0101 and CRT demonstrated a complete response (CR) on Day 170 by PET CT. One patient who received 3 of the 5 scheduled doses of PDS0101 showed signs of residual disease. One patient who had a CR died from an event unrelated to either their underlying disease or treatment. ● 1-year disease-free survival and 1-year overall survival of 89% (8/9) in patients treated with the combination of PDS0101 and CRT ● As previously reported, data confirm PDS0101 treatment activates HPV16-specific CD8+ T cells. This increase was not seen in patients who did not receive PDS0101. The increase in HPV16-specific T cells generated by the treatment is positively correlated with tumor cell death, suggesting cytotoxic CD8+ T cells are important mediators of antigen-specific immunity. ● The data affirm that PDS0101 activates Type 1 interferon pathway in humans, mimicking the mechanism previously demonstrated in preclinical studies in animal models ● Toxicity of PDS0101 remains limited to low-grade local injection site reactions. 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-positive 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. 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 CD8+ 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-positive 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. Other Versamune ® -Based Products in Development: 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-positive 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 polyfunctional 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 funding to progress to human trials. 21 Index PDS0103 In April 2020, the above mentioned, PDS Biotech-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 and prepared to submit our IND package in the first half of 2023. However, the actual submission date may potentially be impacted by the outcome of our meetings with the FDA on the timing of a pivotal trial for PDS0101. Our primary goal is commercialization of PDS0101, and allocation of resources to implement an earlier than planned start of a registrational trial may delay PDS0103 initiation. 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. In January 2022 we announced preclinical data on our universal flu program sponsored by the National Institute of Allergy and Infectious Disease (NIAID) demonstrating the potential of the Infectimune technology with computationally designed influenza proteins developed by the laboratory of Dr. Ted Ross at the University of Georgia to generate broadly protective anti-influenza immune responses across multiple strains of influenza. This data as well as our COVID-19 data has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more broadly effective and longer lasting protective 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. Based on the promising data recently announced with the universal seasonal flu vaccine and the current focus of the NIAID in developing more effective flu vaccines, we have decided to opportunistically focus our near-term infectious disease activities to align with the interests of the NIAID Collaborative Influenza Vaccine Innovation Centers (CIVICs) program. This will involve development of a universal seasonal flu vaccine and the potential development of a universal pandemic influenza vaccine based on similar computationally designed antigens as have shown promise with Infectimune. In July 2022, we announced the presentation of universal flu vaccine preclinical data for PDS0202 at the 41 st American Society of Virology meeting: Abstract number 3733830, Infectimune™ enhances antibodies elicited by COBRA hemagglutinin influenza vaccine. We are evaluating the next steps in the clinical development and funding for PDS0202. 22 Index Our current pipeline of Versamune and Infectimune based therapies is as follows: We have never been profitable and have incurred net losses in each year since inception. Our net losses were $21.7 million, and $10.6 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $82.4 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with these operations. As of September 30, 2022, we had $71.6 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. 23 Index 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 Infectimune based infectious disease candidates into and through clinical trials, pursue regulatory approval of our investigational 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. The probability of successful commercialization of our drug 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. Results of Operations The following table summarizes the results of our operations for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, Increase 2022 2021 $ Amount % (in thousands) Operating expenses: Research and development expenses $ 4,353 $ 3,688 $ 665 18 % General and administrative expenses 2,926 3,274 (348 ) (11 )% Total operating expenses 7,279 6,962 317 5 % Loss from operations (7,279 ) (6,962 ) (317 ) 5 % Interest income (expense), net (145 ) 1 (146 ) (14,600 )% Net loss and comprehensive loss $ (7,424 ) $ (6,961 ) $ (463 ) 7 % Research and Development Expenses Research and development (R&D) expenses increased to $4.4 million for the three months ended September 30, 2022 from $3.7 million for the three months ended September 30, 2021. The increase of $0.7 million in 2022 was primarily attributable to an increase of $0.2 million in clinical study and research costs, $0.3 million in personnel costs and $0.4 million in manufacturing services partially offset by a decrease of $0.2 million in professional fees and facilities. General and Administrative Expenses General and administrative expenses decreased to $2.9 million for the three months ended September 30, 2022 from $3.3 million for the three months ended September 30, 2021. The decrease of $0.4 million is primarily attributable to a decrease of $0.5 million in personnel, a decrease of $0.1 million in facilities offset by an increase of $0.2 million in professional fees. 24 Index Comparison of the Nine Months Ended September 30, 2022 and 2021 The following table summarizes the results of our operations for the nine months ended September 30, 2022 and 2021: Nine Months Ended September 30, Increase (Decrease) 2022 2021 $ Amount % (in thousands) Operating expenses: Research and development expenses $ 13,276 $ 7,865 $ 5,411 69 % General and administrative expenses 9,575 7,252 2,323 32 % Total operating expenses 22,851 15,117 7,734 51 % Loss from operations (22,851 ) (15,117 ) (7,734 ) 51 % Interest income (expense), net (65 ) 3 (68 ) (2,267 )% Benefit from income taxes 1,199 4,516 (3,317 ) (73 )% Net loss and comprehensive loss $ (21,717 ) $ (10,598 ) $ (11,119 ) 105 % Research and Development Expenses Research and development (R&D) expenses increased to $13.3 million for the nine months ended September 30, 2022 from $7.9 million for the same period in 2021. The increase of $5.4 million was primarily attributable to an increase in personnel costs of $1.8 million of which $0.5 million was non-cash stock compensation, clinical studies of $1.5 million, manufacturing and quality of $1.9 million, and research and consumables $0.2 million. General and Administrative Expenses General and administrative expenses increased to $9.6 million for the nine months ended September 30, 2022 from $7.3 million for the same period in 2021. The $2.3 million increase was primarily attributable to an increase in personnel costs of $1.2 million of which $0.8 million was non-cash stock compensation, and professional and legal costs of $1.1 million. Benefit from Income Taxes Income tax benefit was $1.2 million for the nine months ended September 30, 2022 and $4.5 million for the nine months Ended September 30, 2021. A decrease of $3.3 million was due to a smaller portion of the accumulated Net Operating Losses (NOL) through 2020 available for sale. Liquidity and Capital Resources 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. The 2020 Registration Statement was terminated upon effectiveness of the 2022 Registration Statement (as discussed below). In August 2020, we sold 6,900,000 shares of our 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 our participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss (NOL) program for State Fiscal Year 2020. In June 2021, 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. 25 Index In April 2022, we received approximately $1.2 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant our participation in the New Jersey Technology Business Tax Certificate Transfer NOL program for State Fiscal Year 2020. In August 2022, we filed a shelf registration statement, or the 2022 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 $150 million, $50 million of which covers the offer, issuance and sale by the Company of its common stock under the Sales Agreement (as discussed below). The 2022 Shelf Registration Statement was declared effective on September 2, 2022. In August 2022, we entered into an At Market Issuance Sales Agreement, or the Sales Agreement, with B. Riley Securities, Inc. and BTIG, LLC, each an Agent and collectively the Agents, with respect to an at-the-market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $50.0 million, or the Placement Shares, through or to the Agents, as sales agents or principals. Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, the Agents may sell the Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended, including, without limitation, sales made through The Nasdaq Capital Market or on any other existing trading market for our common stock. The Agents will use commercially reasonable efforts to sell the Placement Shares from time to time, based upon our instructions (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay the Agents a commission equal to three percent (3%) of the gross sales proceeds of any Placement Shares sold through the Agents under the Sales Agreement, and also has provided the Agents with customary indemnification and contribution rights. We are not obligated to make any sales of our common stock under the Sales Agreement. The offering of Placement Shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms. During the quarter ended September 30, 2022, we did not sell any shares of our common stock pursuant to the Sales Agreement. In August 2022, we entered into a venture loan and security agreement, or the Loan and Security Agreement, with Horizon Technology Finance Corporation, as lender and collateral agent for itself and the other lenders. The Loan and Security Agreement provides for the following 6 separate and independent term loans: (a) a term loan in the amount of $7,500,000, or Loan A, (b) a term loan in the amount of $10,000,000, or Loan B, (c) a term loan in the amount of $3,750,000, or Loan C, (d) a term loan in the amount of $3,750,000, or Loan D, (e) a term loan in the amount of $5,000,000, or Loan E, and (f) a term loan in the amount of $5,000,000, or Loan F, (with each of Loan A, Loan B, Loan C, Loan D, Loan E, and Loan F, individually a Loan and, collectively, the Loans). Loan A, Loan B, Loan C, and Loan D were delivered to us on August 24, 2022. Loan E and Loan F are uncommitted Loans that may be advanced by the lenders upon their discretion prior to July 31, 2023 upon the satisfaction of certain agreed upon conditions precedent. We may only use the proceeds of the Loans for working capital or general corporate purposes. Each Loan matures on the 48-month anniversary following the applicable funding date unless accelerated pursuant to agreed upon events of default. The principal balance of each Loan bears a floating interest. The interest rate is calculated initially and, thereafter, each calendar month as the sum of (a) the per annum rate of interest from time to time published in The Wall Street Journal as contemplated by the Loan and Security Agreement, or any successor publication thereto, as the “prime rate” then in effect, plus (b) 5.75%; provided that, in the event such rate of interest is less than 4.00%, such rate shall be deemed to be 4.00% for purposes of calculating the interest rate. Interest is payable on a monthly basis based on each Loan principal amount outstanding the preceding month. We, at our option upon at least ten (10) business days’ written notice to the lenders, may prepay all (and not less than all) of the outstanding Loan by simultaneously paying to each lender an amount equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Loans; plus (ii) an amount equal to (A) if such Loan is prepaid on or before the Loan Amortization Date (as defined in the Loan and Security Agreement) applicable to such Loan, 3% of the then outstanding principal balance of such Loan, (B) if such Loan is prepaid after the Loan Amortization Date applicable to such Loan, but on or before the date that is 12 months after such Loan Amortization Date, 2% of the then outstanding principal balance of such Loan, or (C) if such Loan is prepaid more than 12 months after the Loan Amortization Date but prior to the stated maturity date applicable to such Loan, 1% of the then outstanding principal balance of such Loan; plus (iii) the outstanding principal balance of such Loan; plus (iv) all other sums, if any, that shall have become due and payable thereunder. No prepayment premium will be applied to any outstanding balance of any Loan paid on the stated maturity date. As of September 30, 2022, we had $71.6 million in 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. 26 Index 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 after the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and our current plans, which are subject to change, management believes that our existing cash and cash equivalents as of September 30, 2022 will be sufficient to satisfy our operating cash needs for at least one year after the filing of this Quarterly Report on Form 10-Q. 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. Cash Flows The following table shows a summary of our cash flows for each of the periods indicated (in thousands): Nine Months Ended September 30, 2022 2021 Net cash used in operating activities $ (18,181 ) $ (7,985 ) Net cash provided by financing activities 24,581 48,889 Net increase in cash and cash equivalents $ 6,400 $ 40,904 Net Cash Used in Operating Activities Net cash used in operating activities was $18.2 million and $8.0 million for the nine months ended September 30, 2022 and 2021 , respectively. The increase in net cash used in operating activities of $10.2 million was primarily due to an increase in net loss of $11.1 million, an increase in prepaid expenses of $1.1 million, and an increase in finance right to use asset of $0.3 million, offset by an increase in stock compensation of $1.4 million, an increase in amortization of debt discount of $0.1 million, and an increase in accounts payable of $0.7 million. Net Cash Provided by Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the receipt of net proceeds of $24.6 million due to a note payable. 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 after the filing of this Quarterly 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 September 30, 2022 are sufficient to continue operations and research and development programs for at least one year after the date of this Quarterly 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. 27 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 products on our own; and ● the initiation, progress, timing and results of our commercialization of our product candidates, if approved, for commercial sale. Please see the section titled “Risk Factors” elsewhere in the Quarterly Report and Annual Report 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. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q. 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 other factors 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 under different assumptions or conditions. We believe that the discussion in our management’s discussion and analysis 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. There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2022 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. 28 Index 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. Outlook and Impact of COVID-19 on our Business 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 our liquidity and operations. To date, two of the three recently 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 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. 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 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. Although there is uncertainty related to the anticipated impact of the COVID-19 pandemic on our future results, we believe our current cash reserves, leave us well-positioned to manage our business through this crisis as it continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and continuing and the financial impacts associated with the COVID-19 pandemic are still uncertain. 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. 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. 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. We will continue to take advantage of some or all of the available exemptions. 29 Index