Processa Pharmaceuticals, Inc. — 2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022. Processa is a clinical-stage biopharmaceutical company with no approved or marketed products. It focuses on modifying established chemotherapy drugs to potentially improve their safety and efficacy, using its regulatory-science approach and FDA Project Optimus principles. The financial statements were audited and received an unqualified opinion.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $11.49 million | $6.88 million |
| General and administrative expense | $8.76 million | $4.69 million |
| Impairment of PCS499 intangible asset | $7.27 million | $0 |
| Operating loss | $27.53 million | $12.13 million |
| Net loss | $27.42 million | $11.43 million |
| Basic and diluted loss per share | $1.70 | $0.75 |
| Net cash used in operating activities | $9.61 million | $8.72 million |
| Cash and cash equivalents at year-end | $6.50 million | $16.50 million |
There were no revenues, so revenue-based margins are not meaningful. The company reported no material debt balance; its disclosed liabilities were primarily operating leases and ordinary-course payables and accruals. At year-end, total current assets were $8.39 million and current liabilities were $1.00 million. Operating lease liabilities totaled $229,450. Accumulated deficit was $64.25 million.
Material changes versus the prior year
- Net loss more than doubled, reflecting higher R&D and G&A costs and the $7.27 million PCS499 impairment. R&D increased about 67%, including higher clinical activity, staffing and stock-based compensation; G&A increased about 87%, largely due to stock-based compensation.
- Cash declined by approximately $9.99 million during 2022. Operating cash use rose modestly, while 2021 financing cash inflows included a private placement that did not recur in 2022.
- In February 2023, the company suspended new enrollment in its PCS499 Phase 2B ulcerative necrobiosis lipoidica trial after enrolling only four patients. The remaining PCS499 intangible asset was written down to zero at December 31, 2022.
- In January 2023, Processa announced it would prioritize its three oncology candidates and explore licensing or partnership opportunities for PCS12852 and PCS499.
Outlook, management commentary and risks
- Funding and liquidity: The company reported $6.50 million of cash at year-end and raised approximately $7.0 million gross, or approximately $6.4 million net, through equity transactions after year-end. Management stated that year-end cash and subsequent proceeds were expected to fund operations for at least 12 months. Longer-term plans and clinical development depend on additional financing, strategic transactions or other funding; further equity financing may dilute shareholders.
- Pipeline plans: Management planned to complete the ongoing NGC-Capecitabine Phase 1B study and pursue a Phase 2B trial, subject to funding and FDA discussions. It also planned FDA discussions and further development planning for NGC-Gemcitabine, and IND-enabling and toxicology work for NGC-Irinotecan. These are forward-looking plans, not assured outcomes.
- Clinical safety: In the NGC-Capecitabine Phase 1B study, one dosing regimen caused dose-limiting toxicities in two patients; one of those patients died. Management reported that other regimens showed potentially improved safety and efficacy profiles, but further studies are needed.
- Other candidates: PCS12852 Phase 2A results showed improved gastric emptying at the 0.5 mg dose versus placebo, with generally mild-to-moderate adverse events and no reported serious adverse events. Processa is seeking potential monetization through licensing or partnership. PCS499 enrollment difficulties, disease rarity, COVID-19 effects and a potentially substantial placebo response undermined the feasibility of its trial.
- Principal risks: The company has never generated revenue, has a history of losses and depends on financing, successful clinical trials, regulatory approvals, third-party manufacturers and CROs, and licensed intellectual property. Other risks include patient recruitment, competition, reimbursement and pricing, key-person dependence and potential dilution. Nasdaq notified Processa in March 2023 that its share price did not meet the $1.00 minimum bid requirement; the initial compliance period ran through September 18, 2023.
- Unusual items and controls: The PCS499 impairment and substantial stock-based compensation were major non-cash expenses. Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not provide an internal-control attestation because Processa qualified as a smaller reporting company.
Most important facts for investors to verify
- Current cash, cash burn and financing runway, including the net proceeds and share dilution from post-year-end offerings.
- Updated NGC-Capecitabine safety data and the clinical details and follow-up concerning the reported patient death; confirm FDA feedback and trial timing.
- Whether funding is available to advance NGC-Gemcitabine and NGC-Irinotecan, and whether stated development timelines have changed.
- PCS499’s remaining clinical status and any actual licensing or partnership progress for PCS499 and PCS12852.
- Nasdaq listing compliance status and the potential impact of additional equity issuance, including the announced Spartan warrant arrangement.