PDS Biotechnology Corporation (PDSB) Earnings Call Transcript & Summary

Good morning, and welcome to PDS Biotech's call to discuss the company's year-end 2023 financial results and clinical strategy update conference call. [Operator Instructions] Following the formal presentation, we'll open up the call for a question-and-answer session. I would now like to turn the conference over to Tom Johnson with LifeSci Advisors. Please go ahead, sir.

Thank you, operator, and good morning, everyone, and welcome to PDS Biotech's 2023 Year-end Results and Clinical Strategy Update Call. Today, we will discuss financial results for the year ended December 31, 2023 and provide a business and clinical programs update. This morning, the company issued a press release of these results, which can be found under the Investor Relations section of the PDS Biotech website. I am joined on the call today by the following members of the company's management team: Dr. Frank Bedu-Addo, Chief Executive Officer; Lars Boesgaard, Chief Financial Officer; and Dr. Kirk Shepard, Chief Medical Officer. Dr. Bedu-Addo will begin with the corporate and clinical programs update, and then Mr. Boesgaard will review financial results for 2023. Following the company's prepared remarks, Dr. Shepard will join the call to help address questions from covering analysts. As a reminder, during this call, we will be making forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from these statements. Any such statements should be considered in conjunction with the cautionary statements in our press releases and risk factors discussed in our filings with the SEC, including our quarterly reports on Form 10-Q and annual report on Form 10-K, and cautionary statements made during this call. We assume no obligation to update any of these forward-looking statements or information. Now I'd like to turn the call over to Dr. Bedu-Addo. Frank?

Thank you, Tom, and good morning, everyone. I am pleased to be speaking with all of you today and to be joined by 2 new members of the PDS Biotech leadership team. Lars Boesgaard joined us last November as Chief Financial Officer. He is an experienced CFO with an impressive track record of guiding biotech companies to create strategic growth. We welcome his insights as well as his financial expertise and oversight as we continue to mature our business and advance our clinical programs. In January of 2024, we also announced the appointment of Dr. Kirk Shepard. Kirk is a distinguished board certified medical oncologist and hematologist with more than 30 years of experience in the pharmaceutical industry. Most recently, Kirk was Chief Medical Officer, Senior Vice President and Head of the Global Medical Affairs Oncology Business Group at Eisai. We are particularly pleased to have Kirk on board as his wealth of oncology and clinical expertise will be invaluable as we begin to execute the updated clinical development strategy we will be discussing today. As Tom mentioned, Lars will walk you through our financial results for 2023 later on the call, and Kirk will be available to take questions during the Q&A session. So let's begin. Our fourth quarter of 2023 in recent weeks have been a busy and productive period for PDS Biotech, during which we made significant advancements with our PDS01ADC, our IL-12 fused antibody-drug conjugate clinical programs, as well as our PDS0101 Phase II programs. Over this period, compelling data from several Phase II trials became available. This includes long-term survival data from the National Cancer Institute led triple combination trials of PDS01ADC in combination with Versamune HPV, formerly known as PDS0101, and an investigational immune checkpoint inhibitor, or ICI. We also obtained data from our own VERSATILE-002 study of Versamune HPV and KEYTRUDA. Collectively, these data have provided us with clarity regarding how our drug platform technology works in advanced cancer and have informed the strategic decision we announced today to advance this triple combination of Versamune HPV, PDS01ADC and KEYTRUDA in recurrent and/or metastatic head and neck cancer, also referred to as head and neck squamous cell carcinoma or HNSCC. This program will be our top clinical development priority in place of the previously planned VERSATILE-003 trial. This decision enables us to focus our resources on a regimen which we believe has the highest potential benefit to patients with head and neck cancer and the potential to drive shareholder value. On today's call, we will walk you through the data that has driven this decision, discuss the careful vetting we've undertaken to confirm our approach, and outline the advanced preparations on trial design and regulatory engagement we've already begun. To set the stage, I'll first review the critical limitations that remain in the use of immunotherapies to treat solid tumors. First, the innate or acquired resistance these tumors have to immunotherapies, including immune checkpoint inhibitors or ICIs and CAR T-cell approaches. These approaches all rely on activating T cells to attack the cancer. They therefore attack the cancer from the outside. However, most advanced solid tumors house their protection against the immune system in their inner core. These tumors can, therefore, prevent T cells from recognizing or infiltrating the tumor. In addition, these tumors may be able to inactivate any infiltrating T cells due to the presence of suppressive cytokines or inhibitory factors within the tumor. The second important limitation is that current immunotherapies have not demonstrated the ability to generate the right type and quantity of effective tumor infiltrating in tumor killing T cells, unlike what we have demonstrated with our Versamune platform to date. Recent long-term survival results and clinical data provide clarity on the dual mechanism of action of combining PDS01ADC and Versamune and its potential to overcome most critical immuno-oncology limitations. The insights into the PDS01ADC mechanism of action provided by this recent data clarify the potential of this drug therapy in combination with Versamune HPV and an immune checkpoint inhibitor. PDS01ADC utilizes an antibody that binds to DNA found in the inner core of the tumor, and therefore, delivers the IL-12 into the internal compartment of the tumor. The IL-12, once within the tumor, limits the presence of inhibitory factors within the tumor, thereby weakening the tumor's defenses against the immune system. Versamune HPV simultaneously generates a powerful T cell attack on the exposed or less protected tumor, resulting in compelling antitumor responses, which we will discuss shortly. The data show that with this combination, the mechanism uniquely acts on both the inside and outside of the tumor. The data was announced last November from the Phase II National Cancer Institute led triple combination trial for the treatment of recurrent and/or metastatic HPV16-positive, ICI-naive and ICI-resistant cancers. This included head and neck cancer, among other tumor types, and provided proof of concept of the mechanism of action and support for prioritizing the triple combination. In the ICI resistance group, the 12-month overall survival rate was 72%, and the median overall survival was approximately 20 months. With current approaches, the 12-month overall survival rate in HPV-positive, ICI-resistant cancer is approximately 30%, and median overall survival is only 3.4 months. A 63% overall response rate, or ORR, was observed in patients with the optimal dose of PDS01ADC. Published data to date suggest ORR of less than 20% in ICI resistant HPV-positive head and neck cancer. In the ICI-naive group, 75% of patients remain alive at 36 months, and therefore, the median overall survival was not reached. With immune checkpoint inhibitors, published results show a 36-month survival rate of approximately 20%. Overall response rate of 75% was seen in patients treated with a triple combination with a complete response rate of 38%. Published ORR of less than 40% is seen with immunotherapeutic agents. With the triple combination, responses were seen in all HPV-positive tumor types. These data are further supported by our robust clinical data set in over 430 patients treated with either Versamune HPV or PDS01ADC or the combination, including over 110 head and neck cancer patients to date. Importantly, with respect to safety, we have seen acceptable tolerability in over 300 patients treated with PDS01ADC and in over 170 patients with Versamune HPV to date. Additionally, the National Cancer Institute has completed a detailed dose optimization study for PDS01ADC based on safety and clinical response, which is a critical consideration for the FDA. This large database of patients provides a robust clinical data set that validates the potential efficacy and safety of our platforms, which we believe supports our decision to prioritize our Versamune PDS01ADC platform in combination with KEYTRUDA. Based on the totality of data generated to date from VERSATILE-002 and the National Cancer Institute led triple combination study, our triple combination trial to be progressed will, therefore, consist of Versamune HPV, PDS01ADC and KEYTRUDA. We engaged the FDA regarding our decision, and the FDA has provided clear guidance on clinical study design and regulatory pathway for the triple combination. We also engaged with top U.S. and EU key opinion leaders to confirm interest in the triple combination and participation in a clinical trial. We are pleased to announce that Dr. Katharine Price of Mayo Clinic, who is also an investigator on the VERSATILE-002 trial, will be the lead investigator in the planned pivotal trial of the triple combination. We are also conducting rigorous evaluation of the competitive landscape in both ICI-naive and ICI-resistant head and neck cancer. This careful research takes time, but we are taking the necessary steps to ensure that our decision is in the best interest of patients and our shareholders. We intend to move strategically and aggressively to advance the triple combination into a pivotal trial. By initially addressing the rapidly growing unmet medical need in recurrent metastatic HPV-16 positive head and neck cancer, we strongly believe that this approach has the potential to rapidly establish the combination of PDS01ADC and Versamune as a transformative oncology platform. The data suggests that the triple combination may result in a significant improvement in overall survival rates for patients who currently lack an effective treatment option. We are deeply grateful to our patients who participate in our trials and to our collaborators who continue to show immense confidence in our platforms and who have been instrumental in working with PDS Biotech to achieve what we now believe are potential significant advances in cancer treatment. With that, I will turn it over to Lars for a review of our financial results. Lars?

Thanks, Frank, and good morning, everyone. I look forward to engaging with you as we advance the clinical program that Frank has just presented. Turning to our financial results. Net loss for the year ended December 31, 2023 was approximately $42.9 million or $1.39 per basic and diluted share, compared to a net loss of $40.9 million or $1.43 per basic share and diluted share for the year ended December 31, 2022. The higher net loss was primarily the result of increased operating loss and increased net interest expense. Our research and development expense for the year ended December 31, 2023 decreased to $27.8 million compared to $29.4 million for the year ended December 31, 2022. The decrease of $1.7 million was primarily attributable to the $10 million purchase of the rights to PDS01ADC in 2022, partially offset by an increase in clinical costs of $6.1 million and an increase in personnel costs of $2.1 million. As a reminder, we entered into an exclusive worldwide license for PDS01ADC in late 2022 for a consideration of $5 million in cash and $5 million in company shares. General and administrative expenses for the year ended December 31, 2023 increased to $15.3 million, compared to $12.2 million for the year ended December 31, 2022. The $3.1 million increase was primarily attributable to an increase in personnel costs of $1.5 million and an increase in professional fees of $1.6 million. Total operating expenses for the year ended December 31, 2023 were $43 million, an increase of approximately 3.3% compared to $41.7 million in total operating expenses for the year ended December 31, 2022. Net interest expense increased to $1.3 million for the year ended December 31, 2023, compared to $0.4 million for the year ended December 31, 2022. This change was due to higher interest expense related to the company's notes payable, which was partially offset by higher interest income on our bank deposits. During the fourth quarter of 2023, we raised approximately $10.5 million in net proceeds from our at-the-market sales agreement. In conclusion, our cash balance as of December 31, 2023, was $56.6 million. Our annual report, which will be filed within a few days, will contain a going concern opinion reflecting substantial doubt about our ability to meet our obligations for 12 months following the filing of the annual report. Based on our currently available cash resources and cash flow projections, we believe that without commencing a pivotal clinical trial and without our notes payable being called by the lenders, our current cash balance is sufficient to fund our operations and research and development programs into the fourth quarter of 2025. With that, I'll turn the call over to the operator for our Q&A session.

[Operator Instructions] And our first question will be coming from the line of Louise Chen with Cantor Fitzgerald.

This is Carvey on for Louise Chen from Cantor. Our first question is, given you're prioritizing PDS01ADC triple combo study over VERSATILE-003, how are you thinking of OpEx management differently for the rest of the year as a result of the switch? And secondly, as we're thinking about the rest of the year and into 2025, what are your biggest milestones or data readouts in the next 12 to 18 months?

Carvey, could you please go over the first one again? I lost the last part of the first question.

Yes, essentially, we are asking about since you guys are prioritizing the ADC triple combo over VERSATILE-003, how are you guys thinking about OpEx differently? Or is it going to be similar? Just want to get your color on that.

Okay. Thanks a lot, Carvey. I'll answer the second part of the question first, and then I'll hand the OpEx portion to Lars to address. So in terms of our milestones for 2024, as you know, there are a number of programs that we are simultaneously running in parallel with our lead programs with a triple combination in VERSATILE-002. We do expect for VERSATILE-002 that we will have an update sometime in the second or early part of third quarter on where the trial is to date. We've completed recruitment in that trial, and we are hopeful that we'll be able to give updates on survival in the 002 trial. As you also may be aware, we have the IMMUNOCERV trial that's being run at MD Anderson Cancer Center that's looking at locally advanced cervical cancer. And we have some updates in November, but we expect this year, in the second half of this year that we'll have an update, a clinical update specifically. So -- and response rates as well as survival, potentially long-term survival, on those patients whose data was presented last year. And so that will be a very important update that we would be expecting in the second half of this year. And of course, we also have the trial ongoing at the Mayo Clinic, which is the neoadjuvant trial of PDS0101 monotherapy and PDS0101 plus KEYTRUDA in early-stage oral cancer. We have not had any data from that trial yet, but we are hopeful that in some time in the second half of this year, we will have the preliminary data release on -- for that trial. So those are key updates that we could potentially expect this year. And we are also planning to move our PDS0103 program into the clinic. So we are looking to file the IND for PDS0103 also in the second half of this year. And the information that we have obtained recently regarding how our assets are working becomes critical in designing that trial and also finalizing the combination for that trial where again, we expect to utilize the PDS01ADC/Versamune combination in that program also. So those could be key updates that we could be expecting this year from PDS. And Lars, I'll hand over to you to address the operating costs for 2024.

Thanks, Frank, and thanks for your question, Carvey. So we'll be writing our K in a few days, and so it will be clear from that. So right now, you can see -- you'll see that we have incurred an operating burn of approximately $8 million per quarter. As also stated in the prepared remarks, without initiating the triple combination pivotal study, we expect that burn to continue through the first 2 to 3 quarters of 2024 as we wrap up VERSATILE-002, and thereafter, you should probably see a slight decrease in that quarterly burn. I should probably also mention that during the first quarter or through the first quarter of 2024, we pulled down approximately $19 million under the ATM. So that, of course, also bolsters our current cash holdings.

Our next question is from the line of Mayank Mamtani with B. Riley Securities.

I appreciate the comprehensive update and the sensible strategy pivot here. Can you please clarify the 38% CR and triplet has been confirmed [ for resist ]? And if there's going to be another update to that in 2024 that could be informative to how you think of your next study for the triplet? And maybe just a related question, what steps remain in finalizing the registration-enabling study with a triplet? And is there an end of Phase II meeting there that you feel you're prepared for? Or is there some additional work you have to do, given the PD-1 that was used in your earlier study as we now change to KEYTRUDA? And then I have a quick follow-up.

Mayank, thanks a lot for your question. So starting with the triple combination and the complete responses. So the triple combination study that was led by the National Cancer Institute has been completed. So that's study is now final. The results that we went through today are the final results from that study, right? So the 38% response rates are confirmed objective response rates. And as I mentioned, the follow-up for the naive patients was 3 years. And so one of the key things that we were looking for was not only the data from the VERSATILE -- the refractory arm of the VERSATILE-002 study to understand how the dual combination is working, but also to really understand the long-term survival in the triple combination. So we had really good survival for year 1 in the first 17 months. What we needed to understand was would we get a significant drop-off after 1 to 2 years or would this be a durable response and these patients continue to survive. And what we saw was that all patients who were alive at 2 years remained alive at 3 years. That was very important, but was also very important was the safety, right? So as you may know, our PDS01ADC is an IL-12 based antibody drug conjugate. And in the past, recombinant IL-12 have seen significant toxicities. And so one of the key reasons that we needed additional data was really to confirm the safety profile of our IL-12 antibody drug conjugate and also to really confirm that it is significantly different from the recombinant IL-12 that have been evaluated in the past and that continues to be evaluated today, right? So the safety data from over 300 patients that we've evaluated today was very critical in forming this decision, also really confirming that safety profile and tolerability in these patients who have taken the IL-12 antibody ADC. So that was, again, very important in this decision-making process also. Now what was also very important is what you just brought up, is there a clear regulatory pathway for the triple combination? And so that was why we initiated discussions with the FDA to get feedback from the FDA in terms of what they would want to see in a clinical design of PDS01ADC, Versamune HPV and KEYTRUDA. With PDS0101/KEYTRUDA forming the basis for that program, we've seen a very good survival, impressive survival with just PDS0101 and KEYTRUDA based upon the quality of T cells that we're generating, and now adding the PDS01ADC on top of that to really overcome the tumor's defenses, right? And so we had that discussion with the FDA last month, and the FDA has given us very clear guidance on what they would want to see in the clinical design. And so what we are currently doing is implementing the feedback from the FDA. And then once we have done that, we want to get alignment with the FDA that, okay, we've taken these -- your advising guidance into consideration. Here is the trial and get alignment with the FDA. And at that point, we will then make the protocol publicly available, but I would hate to go into saying exactly what the design is until we have gotten that alignment with the FDA based upon the feedback they gave us. But that's a valid process that we've gone through to date.

Yes. Got it. Very helpful. And then on the opportunity set here, like what specific indication you're looking as your lead? Is it the same population where you have this data? Or you're looking at this more broadly in HPV-positive solid tumor types, which there are many. If you can just categorize the broader opportunity set and also like how you get there in terms of different trials you would need, that would be helpful.

No, Mayank, that's a really good question. So we have done extensive market research talking to key opinion leaders to really understand the potential in both ICI-naive and ICI-resistant patients. From all the information we're getting, the KOLs see it as potentially very important in both the unmet needs in both the ICI-naive and ICI-resistant patient population. As you know, currently, the response rates in ICI naive are only about 20%. The very significant unmet need there in the ICI resistant, practically nothing is really working in those patients. Our focus initially guided by the FDA is to focus on head and neck cancer rather than going broadly into all types of HPV-associated cancers, which is what we are initially thinking about. But what we've discussed with the FDA and the guidance we've been given is let's focus first on head and neck cancer, which is where we've generated the bulk of our data today, right? Over 110 patients in head and neck cancer patients have been treated with our product today. So we have really good confidence around the head and neck cancer patients. In the NCI trial, of course, we went beyond head and neck cancer to look at other HPV types where we saw responses, equally good responses across the board. And so the way we envision this is let's first focus on the biggest market and the most rapidly growing market, which is the head and neck cancer space, get that done and then potentially progress from there into the other HPV cancer tumor types. But our initial focus is going to be specifically recurrent metastatic head and neck cancer.

The next question is from the line of James Molloy with Alliance Global Partners.

So I apologize, it's challenging to follow sometimes the -- so the VERSATILE-003 Phase III combo with KEYTRUDA, HPV-positive head and neck squamous cell, CPI-naive patients, that trial is now shelved or that trial is now ongoing, but you're adding in the 01ADC, the formerly called 0301?

James, thanks for your question. So VERSATILE-003, we are not performing VERSATILE-003. So based upon the information we have today, our goal as a company is to provide to the patients the drug in combination that we believe provides them with the best opportunity for managing their disease. And today, based upon the information we've generated and our understanding of the mechanism by which these assets work, we believe that the triple combination is what provides these patients with the best opportunity to manage the disease. But also what's very important for us, based upon the key opinion leader research, is which combination is really going to put PDS Biotech in a dominant leadership position in head and neck cancer. And that comes down to where oncologists believe the combination has the best opportunity to help their patients and to continue to help their patients survive long term, right? And when you look at it from all those angles in terms of potential market domination potential for the patients, it comes down to the triple combination. And so that is the decision we have made is not to move forward with VERSATILE-003 but to add the IL-12 ADC to that combination as the best opportunity and the best combination for the patients and also for market success.

Okay. I think we worry about market domination later. We get through the trials first. I think VERSATILE-002, the data that came out of that was that the KEYTRUDA with HPV-positive -- HPV16-positive head and neck squamous cell, a combination with the KEYTRUDA was best in the CPI naive and that's why VERSATILE-002 is going to go forward in the naive. And the last guidance we had was back in November, October, first patient by year-end. But obviously, that's done. So 003 is wrapped up, it's done. It's not going forward. So then on the triple combo, 01 plus the commercial checkpoint inhibitor plus the ADC or CPI refractory patients, I think the plan had been -- that was going to be with the CPI refractory, is that trial still going forward?

Again...

Triple combo with the [ NIH NA3 ] cancer, is that trial now going forward?

Correct. So now rather than having 2 separate trials, one with the doublet and one with the triplet with -- if you recall, the triplet had an investigational immune checkpoint inhibitor, right? And so the VERSATILE-002 with the doublet, what we saw was extremely compelling long-term survival data. We have 74% survival at 2 years. When we look one of the key -- pardon?

That was in CPI-naive patients. Not under...

Correct. So when we move to the refractory patients, so this is very important because if you recall, that was some of the data that we've mentioned over the last couple of earnings calls that we really needed to get that data in the resistant patients to really understand the impact of the various components, right? And so with that data in the refractory patients with VERSATILE-002, what we found was, again, prolonged survival but 0% objective responses, right? So the T cell induction was really leading to prolonged survival of these patients, even though they weren't seen prolonged tumor shrinkage. Now when you compare that with what we found in the triple combination where we then have the low-dose IL-12 and the higher dose IL-12, with a low-dose IL-12, we were seeing very strong correlation with what we saw with the doublet, very weak objective responses. With the higher dose IL-12, we're seeing dramatically improved objective responses and also improved survival, right? So when you look at those 2 together, so that data was very informative for us in really understanding the role of each of those components. And that was also critical and drove that decision to say we have to provide our patients with the best opportunity. And by adding the IL-12 onto that doublet, which has shown a really good safety profile, like we saw a really good safety profile with PDS0101 and KEYTRUDA, right, even better results than even KEYTRUDA monotherapy, which I explained earlier on as to why we believe we are seeing those safety -- very high safety, and then adding the IL-12 ADC on top of that validated combination, right? And so that's how these have come together, how that data has actually led us to this decision. So this is really, very simply put, a data-driven decision. That's led us to this point where we've now merged the two trials into one trial, [indiscernible] from the two trials into one.

The last question for me then. Last question, is the Phase II combo trial PDS01ADC plus docetaxel in metastatic cancers and prostate cancer with the NCI? It's a Phase II trial. Is that still ongoing?

Yes. So we have a number of other trials ongoing at the National Cancer Institute. So currently, as PDS as a company, we are 100% focused on moving this triple combination into the pivotal trial. However, our collaboration with the NCI is still ongoing. And based upon -- today, one of the key -- if you look at what we're looking at there in the prostate cancer, at the MUC1-positive cancers, liver cancer, combining PDS01ADC with other standards of care, the strategy there is we understand how Versamune is working. We understand that Versamune is inducing tumor-specific T cells. We also know that not every cancer has a checkpoint inhibitor as a standard of care. So what's now very important for us to understand is how our IL-12 ADC works with other standards of care. That then allows us to very rapidly progress into pivotal trials with a triple for some of those other cancers for which checkpoint inhibitors may not be the standard of care. So those trials are ongoing. They have been done as an IIT, the prostate cancer trial with docetaxel was a Phase II trial. The advanced -- locally advanced prostate cancer trial in combination with radiation therapy is also ongoing. And the hepatic infusion pump study in liver cancer is also ongoing as well as the study in Kaposi sarcoma. So all those studies are still ongoing under the NCI collaboration while we focus 100% on our triple combination in getting that to the finish line.

I am showing no further questions. I'll turn it back to Dr. Bedu-Addo for closing remarks.

Thank you very much. I would -- before we leave, I would like to express our gratitude again to all our patients who have participated in our trials, to all our collaborators as well as our shareholders, and also to my colleagues and our employees at PDS Biotech whose contributions have been essential in getting PDS Biotech to where we are today, with really strong potential to take a key step to make these key advances in cancer treatment. Thank you very much again for all your time today, and I wish you all a wonderful day. Thank you very much.

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