Processa Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Processa is a clinical-stage biopharmaceutical company with no marketed products, customers, or revenue. Its strategy centers on three next-generation chemotherapy candidates: NGC-Cap, NGC-Gem, and NGC-Iri.
Financial performance and liquidity
| Metric | Q3 2023 / Sep. 30, 2023 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None reported |
| Operating expenses | $2.17 million | Q3 2022: $6.06 million |
| Net loss | $2.08 million; $0.08 per share | Q3 2022: $6.02 million; $0.37 per share |
| Nine-month net loss | $8.72 million; $0.34 per share | Nine months 2022: $14.41 million; $0.90 per share |
| Cash and cash equivalents | $6.86 million | $6.50 million at Dec. 31, 2022 |
| Current assets / current liabilities | $7.91 million / $0.83 million | Working capital: approximately $7.08 million |
| Total liabilities | $0.91 million | Includes $0.17 million in operating lease liabilities |
| Operating cash flow | Nine-month use of $5.94 million | Nine months 2022: use of $7.11 million |
| Financing cash flow | Nine-month inflow of $6.30 million | Primarily equity proceeds |
Margins are not meaningful because the company reported no revenue. There is no material borrowing debt reported; lease obligations are the principal disclosed liabilities. Cash increased by $0.36 million over the nine months, primarily reflecting equity financing that offset operating cash use.
Material changes versus prior comparable periods
- Q3 research and development expense fell to $1.15 million from $3.14 million; nine-month expense fell to $4.48 million from $8.32 million. The company attributed the decline mainly to completion of the PCS12852 trial, termination of the PCS499 trial, lower stock-based compensation, and no 2023 amortization of the impaired PCS499 intangible asset.
- Q3 general and administrative expense declined to $1.02 million from $2.92 million. Nine-month expense declined to $4.51 million from $6.14 million, principally because of lower employee stock compensation, partly offset by Spartan Capital warrant expense and increased payroll and professional fees.
- In the first nine months, the company raised $7.0 million gross and $6.4 million net through sales of 8.43 million common shares. The February registered direct offering accounted for 7.81 million shares at $0.80 per share.
- Outstanding common shares increased from 16.04 million at Dec. 31, 2022 to 24.63 million at Sept. 30, 2023. Spartan Capital also received warrants to purchase 3.16 million shares, exercisable at $1.02 per share.
Outlook, developments, and risks
- Management estimated that available cash would support completion of the ongoing NGC-Cap Phase 1B trial, preparation for a Phase 2 trial, and administrative costs through Q2 2024. The planned NGC-Cap Phase 2 trial is targeted for 2024 and requires additional funding.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after the financial statements become available to issue. Management expects continued losses and negative operating cash flow and said it hoped to raise funds in late 2023 or early 2024, subject to acceptable terms.
- Without additional capital, the company may need to delay, reduce, or suspend trials, and could fail to meet license-agreement diligence obligations. Further equity financing could dilute shareholders; collaborations or licensing could require relinquishing valuable rights.
- NGC-Cap Phase 1B Cohort 3 had no dose-limiting toxicities; Cohort 4 enrollment and safety evaluation were ongoing. The company disclosed that a regimen in the trial had caused dose-limiting toxicities in two patients, including one death. FDA discussions in April 2023 clarified the planned Phase 2 focus on dose- and exposure-response.
- NGC-Gem Phase 2 planning and NGC-Iri enabling work are also subject to funding. The company was negotiating with Ocuphire to extend NGC-Gem license deadlines. It terminated further enrollment in the PCS499 trial because of recruitment difficulty and is evaluating licensing or partnership options for PCS499 and PCS12852.
- George Ng became CEO and a director in August 2023; the COO resigned effective August 31. Management reported effective disclosure controls and no material changes in internal control over financial reporting. No material legal proceedings were reported.
- Other risks include clinical and regulatory uncertainty, reliance on third-party manufacturers and research organizations, intellectual-property protection, financing availability, and cybersecurity threats. The company also disclosed that bank deposits exceeded FDIC insurance limits.
Important facts for investors to verify
- Whether additional financing was secured and on what terms, including resulting dilution and the company’s updated cash runway.
- NGC-Cap Phase 1B enrollment, safety findings, and timing and funding for the planned Phase 2 trial; confirm progress toward the October 2, 2024 license milestone.
- Whether NGC-Gem license deadlines were extended and whether planned NGC-Gem and NGC-Iri development work received funding.
- The status, exercise terms, and potential dilution from the 3.16 million Spartan Capital warrants and other outstanding equity awards.
- Whether partnership or licensing transactions advance for PCS12852 or PCS499, and whether trial and vendor commitments change.