Author’s note: This article is an abridged version of an article originally published for members of the Integrated BioSci Investing marketplace on October 20, 2022.
Beware of investment activity that produces applause; the great blows are usually greeted with yawns. -Warren Buffett
In biotech investing, you can see that some small companies can lose most of their value after a negative binary event (whether regulatory or clinical). Usually, most of these companies then lose their NASDAQ listing and thus find themselves in the forgotten land of OTC stocks. Nevertheless, some firms are determined to forget their past and thus work diligently to make a comeback under a new identity.
PDS Biotech (NASDAQ:PDSB) is one of those companies that hasn’t let obstacles stop it from growing. After failing in the field of neuroscience, PDS is now focusing heavily on the immuno-oncology sector. Over the past month, this stock has gained about 40%. Interestingly, there is a big catalyst that can catapult stocks to a new high. In this research, I will present a fundamental analysis of the PDS and share with you my expectations of this attractive equity.
Figure 1: PDS Chart
About the company
As usual, I will present a brief overview of the company for new investors. If you know the company, I suggest you skip to the next section. Operating out of Florham Park, New Jersey, PDS Biotech is a clinical-stage company focused on the innovation and commercialization of drugs to treat life-threatening cancers. Leveraging its two technology platforms (Versamune and Infectimune), PDS is preparing a deep/broad pipeline of interesting molecules, as shown below.
Figure 2: Therapeutic pipeline
From pessimism to optimism
Formerly known as Edge Therapeutics, PDS lost most of its value in 2018. That is, the company was developing a very narrow pipeline of only two drugs (EG1962 and EG1964). Due to EG1964 lack Phase 3 data, the pipeline collapsed. Subsequently, the company renamed itself PDS Biotech. Besides the brand name, PDS now focuses on cancers rather than neurological bleeding. With its Versamune platform, PDS is now able to advance a diverse pipeline, as shown in the previous figure.
Mechanism of Action (MOA): Versamune Platform
Let’s shift into high gear, review the various fundamental developments relating to the PDS. Since the success of PDS is closely tied to Versamune, you need to assess its underlying science. By mastering its science, you will better appreciate its mechanism of action (i.e. MOA) which helps you “read the tea leaves” in future data reports.
As a platform technology, Versamune is essentially a delivery vehicle that is positively charged, which helps it retain tumor antigens inside. As such, Versamune’s structure tricked the body into thinking it was a man-made virus. As you can imagine, the body’s natural defense system (i.e. the immune system) would engulf these Versamune-like viral particles.
Figure 3: Versamune Vehicle
As you can see, the ingenious thing about Versamune is that it contains the antigen (from various cancers) which then triggers key immune cells. They include T cells – both CD4+ (T-helpers) and CD8+ (killer T cells) – which function as “the generals” of the body’s natural defense (i.e. immune) system.
Among these cells, killer T lymphocytes are involved in the direct destruction of cancers. As for helper T cells, these types coordinated the “memory formation” that allowed the body’s immune system to recognize cancers. With intelligence/recognition, the body then amplifies/copies more T cells, B cells (i.e. commanders), and other cells to eradicate cancers. More importantly, these memories can prevent some relapses.
Figure 4: Mode of action of Versamune
Disease background (i.e. DC): various cancers
As you can imagine, the MOA corresponds perfectly to the pathological context of cancers. You have heard that cancers are so hard to cure. Plus, they tend to keep coming back (i.e. relapses). This is because as cancers grow, they release chemicals that suppress the immune environment. Simply put, cancers shut down the body’s defense system.
With Versamune being able to wake up the immune system and rally the troops, you can see there’s excellent effectiveness. Here, the MOA and the DC fit perfectly like matching puzzle pieces.
First supporting data
Even when the MOA and DC fit together perfectly, there is no guarantee that the data will turn out positive. As such, you need to check the available data to see if your thesis works. Looking at the figure below, you can see that Versamune treatment leads to the best tumor reductions compared to various controls.
Figure 5: First preclinical results
More supporting data
Beyond the first data, PDS has recently present more advanced data at the American Society of Clinical Oncology 2022 (i.e. ASCO). Interestingly, treatment with PDS0101 resulted in 76.5% of patients achieving clinical efficacy. You can view this efficacy as the sum of the 41.2% objective response rate (i.e., 0RR) plus 35.3% stable disease.
Figure 6: Phase 2 study (VERSATILE-002)
During the ASCO, PDS also presented the results of the 30 patients enrolled in the phase 2 triple combo trial which evaluated PDS0101 in refractory HPV-positive cancers. Specifically, 88% of patients who received no checkpoint inhibitor (i.e., CPI-Naive) achieved an overall response rate (i.e., ORR) of reduction tumor of more than 30%. Historically, patients treated with IPC alone experience only an ORR ranging from 13% to 24%.
Figure 7: NCI-led Phase 2 Triple Combo Study
For patients who are already resistant to CPI therapy, the majority (ie 77%) are still alive at 12 months. On October 11, PSD also reported more data for this trial. Specifically, 66% of these patients remained alive at 16 months follow-up, which is extremely strong. You can understand that this is very significant because the historical processing of the CPI only lasts for an average of 3-4 months of survival. Commenting on the development, the President and CEO (Dr Frank Bedu-Addo) enthused,
We made tremendous progress this quarter with our lead candidate, PDS0101, in the four ongoing Phase 2 clinical trials, as well as our advanced oncology candidates PDS0102 and PDS0103. Our clinical data at this year’s ASCO meeting not only reinforced our confidence in our Versamune platform, but also in the potential of PDS0101 to make a significant difference in the treatment of patients with HPV16 positive advanced cancer. with significant unmet needs. With this data, we hope that our upcoming meetings with the FDA will clarify our regulatory path for PDS0101.
Just like you would get an annual physical for your well-being, it is important to check the financial health of your stock. For example, your health is affected by “blood flow” because the viability of your stock depends on “cash flow”. With this in mind, you need to assess the 2Q2022 results report for the period ended June 30.
Like most development-stage biotech companies, PDS has no revenue. As such, you should check other more meaningful metrics. As a result, research and development (ie R&D) recorded $3.7 million compared to $2.7 million for the same period the previous year. I saw the 37.0% increase in R&D positively, as money invested today can turn into huge profits tomorrow. After all, you have to plant a tree to enjoy its fruits.
Additionally, there were net losses of $5.8 million ($0.20 per share) compared to declines of $588,000 ($0.03 per share) for the same comparison. As you can see, the increase in R&D spending reduces the bottom line.
Figure 8: Key financial indicators
On the balance sheet, there was $53.0 million in cash. In addition to the $35.0 million in recent funding, cash is increased to $88.0 million. Based on quarterly operating expenses of $7.0 million, there should be sufficient capital to fund operations through 2Q2025. Simply put, the cash position is strong relative to the low consumption rate.
Since investment research is an imperfect science, there are always risks associated with your stock, regardless of its fundamental strengths. More importantly, the risks “depend on the growth cycle”. At this point in its life cycle, the main concern for PDS is whether the drug Versamune (i.e. PDS0101) will continue to generate positive clinical data. The other risk is that Merck was unwilling to fund the VERSATILE-002 trial. As such, it doesn’t give Versamune technology much validation. At least not at this stage.
After renaming Edge Therapeutics, PDS Biotech is now in a completely different biotech niche. As the first vehicle for treating deadly cancers, the Versamune platform is full of promise. The first data and the results of phase 2 are extremely robust. Whether more positive data are reported in November, PDS shares are likely to rally. Also, other developments like better partnership would follow.