PharmaCyte Biotech, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations Cautionary Note Regarding Forward-Looking Statements This Report on Form 10-Q (“Report”) includes “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Report, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by use of terminology such as “may,” “will,” “should,” “believes,” “intends,” “expects,” “plans,” “anticipates,” “estimates,” “goal,” “aim,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents we file with the United States Securities and Exchange Commission (“Commission”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in “Part I, Item 1A – Risk Factors” set forth in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021, and for the reasons described elsewhere in this Report. Among others, these include our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; whether the United States Food and Drug Administration (“FDA”) approves our Investigational New Drug Application (“IND”) after we submit a response to the FDA’s clinical hold, so that we can commence our planned clinical trial involving locally advanced, inoperable pancreatic cancer (“LAPC”); the success and timing of our preclinical studies and clinical trials; the potential that results of preclinical studies and clinical trials may indicate that any of our technologies and product candidates are unsafe or ineffective; our dependence on third parties in the conduct of our preclinical studies and clinical trials; the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates; the material adverse impact that the coronavirus pandemic may have on our business, including our planned clinical trial involving LAPC, which could materially affect our operations as well as the business or operations of third parties with whom we conduct business; and whether the FDA will approve our product candidates after our clinical trials are completed, assuming the FDA allows our clinical trials to proceed after submission and review of our response to the FDA’s clinical hold. All forward- looking statements and reasons why results may differ included in this Report are made as of the date hereof, and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Report, the “Company,” “we,” “us” and “our” refer to PharmaCyte Biotech, Inc., a Nevada corporation, and, where appropriate, its subsidiaries. Overview of Business We are a biotechnology company focused on developing cellular therapies for cancer and diabetes based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box ®. ”. The Cell-in-a-Box ® technology is intended to be used as a platform upon which therapies for several types of cancer, including LAPC will be developed. The current generation of our product candidate is referred to as “CypCaps™”. On September 1, 2020, we submitted an IND”) to the FDA for a planned Phase 2b clinical trial in LAPC. On October 1, 2020, the Company received notice from the FDA that it had placed the IND on clinical hold. On October 30, 2020, the FDA sent a letter to us setting forth the reasons for the clinical hold and specific guidance on what we must do to have the clinical hold lifted. To lift the clinical hold, the FDA has informed us that we need to conduct several additional preclinical studies and assays. The FDA also requested additional information regarding several topics, including DNA sequencing data, manufacturing information and product release specifications. We are in the process of conducting these studies and assays and gathering additional information to submit to the FDA. See “Our Investigational New Drug Application and the Clinical Hold” below. 28 The Cell-in-a-Box ® encapsulation technology potentially enables genetically engineered live human cells to be used as a means to produce various biologically active molecules. The technology is intended to result in the formation of pinhead sized cellulose-based porous capsules in which genetically modified live human cells can be encapsulated and maintained. In a laboratory setting, this proprietary live cell encapsulation technology has been shown to create a micro-environment in which encapsulated cells survive and flourish. They are protected from environmental challenges, such as the sheer forces associated with bioreactors and passage through catheters and needles, which we believe enables greater growth and production. The capsules are largely composed of cellulose (cotton) and are bio inert. We are developing therapies for pancreatic and other solid cancerous tumors by using genetically engineered live human cells that we believe are capable of converting a cancer prodrug into its cancer-killing form. We encapsulate those cells using the Cell-in-a-Box ® technology and place those capsules in the body as close as possible to the tumor. In this way, we believe that when a cancer prodrug is administered to a patient with a particular type of cancer that may be affected by the prodrug, the killing of the patient’s cancerous tumor may be optimized. In addition, we have been exploring ways to delay the production and accumulation of malignant ascites fluid that results from many types of abdominal cancerous tumors. Malignant ascites fluid is secreted by abdominal cancerous tumors into the abdomen after the tumors have reached a certain stage of growth. This fluid contains cancer cells that can seed and form new tumors throughout the abdomen. This fluid accumulates in the abdominal cavity, causing swelling of the abdomen, severe breathing difficulties and extreme pain. On November 30, 2021, we announced the commencement of a pre-clinical study to determine if the treatment we use for LAPC can also delay the rate of production and accumulation of malignant ascites. We have also been developing a potential therapy for Type 1 diabetes and insulin-dependent Type 2 diabetes. Our product candidate for the treatment of diabetes consists of encapsulated genetically modified insulin-producing cells. The encapsulation will be done using the Cell-in-a-Box ® technology. Implanting these cells in the body is designed to function as a bio-artificial pancreas for purposes of insulin production. We have also been considering ways to exploit the benefits of the Cell-in-a-Box ® technology to develop therapies for cancer that involve prodrugs based upon certain constituents of the Cannabis plant (“Cannabis Program”); these constituents are of the class of compounds known as “cannabinoids”. Until: (i) the FDA allows us to commence a clinical trial in LAPC described in our IND for which the FDA has placed a clinical hold; and (ii) we validate our Cell-in-a-Box ® encapsulation technology in our planned Phase 2b clinical trial in LAPC, we are not spending any further resources developing the Cannabis Program. Our Investigational New Drug Application and the Clinical Hold On September 1, 2020, we submitted an IND to the FDA for a planned Phase 2b clinical trial in LAPC. Shortly thereafter, we received Information Requests from the FDA related to the IND. We timely responded to all Information Requests. On October 1, 2020, we received notice that the FDA had placed our IND on clinical hold. On October 30, 2020, the FDA sent a letter to us setting forth the reasons for the clinical hold and providing specific guidance on what we must do to have the clinical hold lifted. 29 In order to address the clinical hold, the FDA has requested that we: · Provide additional sequencing data and genetic stability studies; · Conduct a stability study on the final formulated drug product candidate as well as the cells from our Master Cell Bank; · Evaluate the compatibility of the delivery devices (the prefilled syringe and the microcatheter used to implant the CypCaps ™ ) with our drug product candidate; · Provide additional detailed description of the manufacturing process of our drug product candidate; · Provide additional product release specifications for our encapsulated cells; · Demonstrate comparability between the 1 st and 2 nd generation of our drug product candidate and ensure adequate and consistent product performance and safety between the two generations of our drug product candidate; · Conduct a biocompatibility assessment using the final finished capsules after the entire drug product candidate manufacturing process (but without cells); · Address insufficiencies in Chemistry, Manufacturing and Controls information in the cross-referenced Drug Master File Prepared by Austrianova Singapore Pte. Ltd. (“Austrianova”); · Conduct an additional nonclinical study in a large animal (such as a pig) to assess the safety, activity, and distribution of our drug product candidate; and · Revise our Investigators Brochure to include any additional preclinical studies conducted in response to the clinical hold and remove any statements not supported by the data. The FDA also requested that we address the following issues as an amendment to the IND: · Provide a Certificate of Analysis for pc3/2B1 plasmid that includes tests for assessing purity, safety, and potency; · Perform qualification studies for the drug product candidate filling step to ensure that the drug product candidate remains sterile and stable during the filling process; · Submit an updated batch analysis for the drug product candidate for the specific lot that will be used for manufacturing all future drug product candidate; · Provide additional details for the methodology for the Resorufin (CYP2B1) potency and the PrestoBlue cell metabolic assays; · Provide a few examples of common microcatheters that fit the specifications in our Angiography Procedure Manual; · Clarify the language in the Pharmacy Manual regarding proper use of the syringe fill with the drug product candidate; and · Provide a discussion with data for trial of the potential for cellular and humoral immune reactivity against the heterologous rat CYP2B1 protein and potential for induction of autoimmune-mediated toxicities in our study population in the LAPC. 30 We have assembled a scientific and regulatory team of experts to address the FDA requests. That team is working to complete the items requested by the FDA. We are in varying stages of addressing the studies and acquiring the information requested by the FDA. The following provides a summary of the activities in which we are engaged to have the clinical hold lifted: · We have completed a 3, 6, 9, 12 and 18-month product stability study of our clinical trial product (CypCaps™), including container closure integrity testing for certain timepoints; the next time point in this ongoing study will be at 24 months of product stability. · We are involved in various additional studies required by the FDA. These include (i) a stability study on the cells from our Master Cell Bank (“MCB”) used to make the CypCaps™, which are already at the 3-year stability timepoint; (ii) further sequence analysis of the DNA encoding of the Cyp2B1 gene in the cells in the CypCaps™; and (iii) collated existing information on the reproducibility and quality of the filling of the MCB cells into vials ready for CypCaps™ manufacturing. · We are also involved in a (i) Subchronic and Chronic Toxicity study (ii) a Skin Sensitization study; (iii) an Acute Systematic Toxicity study; (iv) an Ames test (Genotoxicity Bacteria and Reverse Mutation tests); (v) an Intracutaneous test; (vi) a Complement Activation test; (vii) a Hemolysis test; and (viii) an In Vitro Cytotoxicity test. Some of the data being generated by these studies will also be used to demonstrate comparability with the CypCaps™ that were used in the two earlier German clinical trials over twenty years ago conducted by Bavarian Nordic. · To enable the biocompatibility studies to be performed, we had Austrianova manufacture and deliver an additional 400 syringes of empty capsules. · We have commenced studies to show that CypCaps™ are not in any way adversely affected by the catheters used by interventional radiologists to deliver them, nor by the contract media used to visualize the blood vessels during implantation of the CypCaps™. · We have commenced studies to demonstrate how robust the CypCaps™ are during delivery and use as well as to document that the syringes used to deliver the CypCaps™ will allow delivery consistently, smoothly, and safely. · With our support, Austrianova is providing additional detailed confidential information to the FDA on the manufacturing process, including information on the improvements made to the live cell encapsulated product since the last clinical trials with respect to reproducibility and safety of the CypCaps™. · We plan to update our IND submission documents to include: (i) more pre-clinical data as discussed above, (ii) some additional parameters for release of the CypCaps™, (iii) a recommendation of the catheters and contrast medium to be used to deliver the CypCaps™; and (iv) an extensive discussion of the potential for cellular and humoral immune reactivity against the heterologous rat CYP2B1 protein and potential for induction of autoimmune-mediated toxicities in our study population in the LAPC. · We have designed an abbreviated study in pigs to address biocompatibility and long-term implantation of the capsules. This animal study will complement the data already available from the previous human clinical trials conducted by Bavarian Nordic showing the safety of CypCaps™ implantation for up to two years in humans. · We have completed the complement activation study. The study results demonstrated that the capsule material we use does not activate a major line of the human body’s innate defense – the complement system. · Another positive result from a completed biocompatibility showed that the empty capsule material is “non-hemolytic.” · Another completed biocompatibility study showed that the empty capsule material is not “mutagenic.” 31 Impact of the COVID-19 Pandemic on Operations The coronavirus SARS-Cov2 pandemic (“COVID-19”) is causing significant, industry-wide delays in clinical trials. Although we are not yet in a clinical trial, we have filed an IND with the FDA to commence a clinical trial in LAPC. While the IND has been placed on clinical hold by the FDA, we have assessed the impact of COVID-19 on our operations. Currently, many clinical trials are being delayed due to COVID-19. There are numerous reasons for these delays. For example, patients have shown a reluctance to enroll or continue in a clinical trial due to fear of exposure to COVID-19 when they are in a hospital or doctor’s office. There are local, regional, and state-wide orders and regulations restricting usual normal activity by people. These discourage and interfere with patient visits to a doctor’s office if the visit is not COVID-19 related. Healthcare providers and health systems are shifting their resources away from clinical trials toward the care of COVID-19 patients. The FDA and other healthcare providers are making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to COVID-19. As of the date of this prospectus, the COVID-19 pandemic has had an impact upon our operations, although we believe that impact is not material. The impact primarily relates to delays in tasks associated with the preparation of the Company’s responses to the clinical hold, including all requested preclinical studies. There may be further delays in generating responses to the requests from the FDA related to the clinical hold. As a result of the COVID-19 pandemic, commencement of our planned clinical trial to treat LAPC may be delayed beyond the lifting of the clinical hold by the FDA should that occur. Also, enrollment may be difficult for the reasons discussed above. In addition, after enrollment in the trial, if a patient contracts COVID-19 during his or her participation in the trial or is subject to isolation or shelter in place restrictions, this may cause him or her to drop out of our clinical trial, miss scheduled therapy appointments or follow-up visits or otherwise fail to follow the clinical trial protocol. If a patient is unable to follow the clinical trial protocol or if the trial results are otherwise affected by the consequences of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the clinical trial may be compromised or not be accepted by the FDA. This could further adversely impact or delay our clinical development program if the FDA allows it to proceed. It is highly speculative in projecting the effects of COVID-19 on our proposed clinical development program and the Company generally. The effects of COVID-19 may quickly and dramatically change over time. Its evolution is difficult to predict, and no one can say with certainty when the pandemic will subside. Performance Indicators Non-financial performance indicators used by management to manage and assess how the business is progressing will include, but are not limited to, the ability to: (i) acquire appropriate funding for all aspects of our operations; (ii) acquire and complete necessary contracts; (iii) complete activities for producing genetically modified human cells and having them encapsulated for our preclinical studies and the planned clinical trial in LAPC; (iv) have regulatory work completed to enable studies and trials to be submitted to regulatory agencies; (v) complete all required tests and studies on the cells and capsules we plan to use in our clinical trial in patients with LAPC; and (vi) ensure completion of the production of encapsulated cells according to cGMP regulations to use in our planned clinical trial involving LAPC. There are numerous items required to be completed successfully to ensure our final product candidate is ready for use in our planned clinical trial involving LAPC. The effects of material transactions with related parties, and certain other parties to the extent necessary for such an undertaking, may have substantial effects on both the timeliness and success of our current and prospective financial position and operating results. Nonetheless, we are actively working to ensure strong ties and interactions to minimize the inherent risks regarding success. We do not believe there are factors which will cause materially different amounts to be reported than those presented in this Report. We aim to assess this regularly to provide accurate information to our shareholders. 32 Results of Operations Three and six months ended October 31, 2021, compared to three and six months ended October 31, 2020 Revenue We had no revenues for the three and six months ended October 31, 2021, and 2020. Operating Expenses and Loss from Operations The following table summarizes our operating expenses and loss from operations for the three and six months ended October 31, 2021, and 2020: Three Months Ended October 31, Six Months Ended October 31, 2021 2020 2021 2020 $ 1,004,843 $ 949,515 $ 2,028,194 $ 1,831,191 The total operating expenses for the three months ended October 31, 2021, increased by $55,328 from the three months ended October 31, 2020. The increase is attributable to an increase in general and administrative (“G&A”) expenses of $170,665, an increase in legal and professional expense of $196,470 net of a decrease in director fees of $8,263, a decrease in compensation expense of $287,450, and a decrease in R&D expense of $16,094. The increase in G&A expenses were mainly attributable to increases in consulting fees, filing fees and expenses related to the annual shareholders’ meeting. The total operating expenses for the six-month period ended October 31, 2021, increased by $197,003 from the six months ended October 31, 2020. The increase is attributable to an increase in G&A expenses of $414,259, an increase in legal and professional expense of $240,462 net of a decrease in director fees of $17,128, a decrease in compensation expense of $297,535, and a decrease in R&D expense of $143,055. The increase in G&A expenses were mainly attributable to increases in consulting fees, filing fees and expenses related to the annual shareholders’ meeting. Other (income) expense The following table sets forth our other (income) expense for the three and six months ended October 31, 2021, and 2020: Three Months Ended October 31, Six Months Ended October 31, 2021 2020 2021 2020 $ (25,097 ) $ 677 $ (23,030 ) $ 2,945 Total other (income) expense for the three months ended October 31, 2021, decreased by the amount of $25,774 from the three months ended October 31, 2020. The decrease is attributable to the increase of interest income of $25,619 a decrease in interest expense in the amount of $635, net of an increase in in foreign exchange losses of $480. Total other (income) expense for the six months ended October 31, 2021, decreased by the amount of $25,975 from the six months ended October 31, 2020. The decrease is attributable to the increase of interest income of $25,619 a decrease in interest expense in the amount of $1,248, an increase in income taxes of $800 and an increase in foreign exchange losses of $92. 33 Discussion of Operating, Investing and Financing Activities The following table presents a summary of our sources and uses of cash for the six months ended October 31, 2021, and 2020, respectively: Six Months Ended October 31, 2021 October 31, 2020 Net cash used in operating activities: $ (2,626,834 ) $ (1,801,453 ) Net cash used in investing activities: – – Net cash provided by financing activities: 87,362,049 4,624,171 Effect of currency rate exchange 1,291 (175 ) Net increase in cash $ 84,736,506 $ 2,822,543 Operating Activities : The net cash used in operating activities for the six months ended October 31, 2021, is a result of our net losses, increases in rent deposit, an increase in prepaid expenses and an increase in securities issued for services and compensation, net of decreases in accounts payable and accrued expenses. The cash used in operating activities for the six months ended October 31, 2020, is a result of our net losses, an increase in prepaid expenses, an increase in securities issued for services and compensation, decreases to accounts payable and accrued expenses. See Condensed Consolidated Statements of Cash Flows on page 7. Investing Activities : There were no investing activities in the six months ended October 31, 2021, and 2020. Financing Activities : The cash provided from financing activities is mainly attributable to the proceeds from the sale of our common stock net of the use of funds for payment of issuance costs for the six months ended October 31, 2021. The cash provided from financing activities is mainly attributable to the proceeds from the sale of our common stock, net of issuance costs and insurance financing for the six months ended October 31, 2020. Liquidity and Capital Resources As of October 31, 2021, our cash totaled approximately $86.9 million, compared to approximately $3.7 million as of October 31, 2020. Working capital was approximately $87 million as of October 31, 2021, and approximately $1.6 million as of October 31, 2020. The increase in cash is attributable to proceeds from the sale of our common stock net of an increase in our operating expenses. During the six months ended October 31, 2021, funding in the amount of approximately $87.4 million, was provided by investors to maintain and expand our operations and R&D. Sales of our common stock, Pre-funded warrants and exercise of Common Warrants were consummated using the Third S-3 and the Registered Direct Offering in August 2021. During the six months ended October 31, 2020, we continued to acquire funds through our Second S-3 pursuant to Block Trades transactions in a program which was structured to provide up to $25 million dollars to us less certain commissions. 34 Off-Balance Sheet Arrangements Except as described below, we have no off-balance sheet arrangements that could have a material current effect or that are reasonably likely to have a material adverse effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Service Agreements We entered into several service agreements, with both independent and related parties, pursuant to which services will be provided over the next twelve months related to the clinical hold on our IND submission involving LAPC. The services include developing studies and strategies relating to clearing the clinical hold. They also cover a 24-month stability study, which includes the container closure integrity testing, of the clinical trial product syringes. The total cost is estimated to be approximately $305,000, of which the related party portion will be approximately $219,000. New Accounting Pronouncements For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” of the Notes to our Condensed Consolidated Financial Statements contained in this Report. Available Information Our website is located at www.PharmaCyte.com . In addition, all our filings submitted to the Commission, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all our other reports and statements filed with the Commission are available on the Commission’s web site at www.sec.gov. Such filings are also available for download free of charge on our website. The contents of the website are not, and are not intended to be, incorporated by reference into this Report or any other report or document filed with the Commission or furnished by us, and any reference to the websites are intended to be inactive textual references only. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The information called for by Item 3 is not required for a smaller reporting company.