Processa Pharmaceuticals, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Processa is a clinical-stage biopharmaceutical company developing next-generation chemotherapy candidates; it has no approved products and no product revenue.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.54 million | $1.63 million |
| General and administrative expense | $1.27 million | $2.48 million |
| Operating loss | $2.81 million | $4.11 million |
| Net loss | $2.73 million | $4.02 million |
| Net loss per share, basic and diluted | $1.11 | $3.53 |
| Net cash used in operating activities | $2.05 million | $2.11 million |
Cash and cash equivalents were $8.92 million at quarter-end, versus $4.71 million at December 31, 2023. The company reported current assets of $9.80 million and current liabilities of $1.01 million. Total liabilities were $1.06 million, primarily lease liabilities and operating payables; the filing reports no significant conventional borrowing. Accumulated deficit was $78.1 million. Margins are not meaningful because there was no revenue.
Q1 financing provided $6.26 million net cash, mainly from a January public offering that generated $6.3 million net proceeds. The filing says cash is expected to fund needs into early 2025, including the start of the NGC-Cap Phase 2 trial. However, without additional funding, cash is not expected to cover at least one year of planned operations after the financial statements became available to be issued; management states substantial doubt exists about the company’s ability to continue as a going concern.
Changes versus prior period and capital structure
- Net loss narrowed by about $1.30 million year over year. Lower G&A drove most of the change, chiefly because Q1 2023 included a $1.31 million nonrecurring warrant expense and had higher stock-based compensation. R&D fell modestly, mainly because fewer clinical programs were active.
- Operating cash use was slightly lower year over year. Management expects R&D costs to rise as the NGC-Cap Phase 2 trial begins.
- On January 22, 2024, the company effected a 1-for-20 reverse stock split. On January 30, it raised $7.0 million gross/$6.3 million net through common shares, pre-funded warrants (exercised at closing), and warrants. The offering and other issuances substantially increased shares outstanding; the balance sheet reports 2,855,981 shares outstanding at March 31, while the cover reports 2,858,007 at May 10.
Outlook, risks, and other material items
- NGC-Cap: The company plans to begin a Phase 2 breast cancer trial, with first-patient enrollment targeted for Q3 2024. Management says the design is set and intends to use offering proceeds for the program. The Phase 1B study identified dose-limiting toxicities in an early regimen, including one patient death; the filing says no other DLTs were noted. Trial outcomes and the planned timing remain uncertain.
- License dispute: Elion notified Processa on May 7, 2024 that it purported to terminate the PCS6422/NGC-Cap license over alleged breach. Processa disputes termination and filed suit on May 10, seeking declaratory judgment and other relief. The license includes a milestone to dose a Phase 2 or 3 trial patient by October 2, 2024; the company says it expects to meet it. An adverse resolution could threaten rights to the asset.
- Other pipeline: NGC-Gem may require additional funding before Phase 2; Processa planned FDA discussions in 2024 and was discussing milestone-deadline extensions with Ocuphire. NGC-Iri IND-enabling and toxicology work was planned for 2024 subject to funding. The company is exploring out-licensing or partnership options for PCS12852 and PCS499.
- Funding risk: Processa expects continuing operating losses and negative operating cash flow, and depends on future equity/debt financing or strategic transactions. Financing may dilute shareholders or require unfavorable terms; insufficient funding could delay or suspend trials and put license rights at risk.
- The company reported up to $984,000 in future CRO services under contract, subject to contract terms and trial progress. Cash held at banks exceeded FDIC insurance limits. Management reported disclosure controls were effective and no material changes in internal control during the quarter. No material legal proceedings were reported apart from the Elion dispute described above.
Important facts for investors to verify
- Whether the Elion license remains in force and the outcome and timing of the litigation.
- Whether NGC-Cap Phase 2 enrollment begins on schedule, and whether the company meets its October 2, 2024 license milestone.
- Cash runway assumptions, operating burn as clinical activity expands, and the timing and terms of any additional financing.
- Potential dilution from outstanding warrants and other equity awards; confirm the reported share count at the relevant date.
- Whether NGC-Gem license milestones are extended and whether the company can fund development of its other pipeline assets.