Processa Pharmaceuticals, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Processa is a clinical-stage biopharmaceutical company with no product revenue. Its five candidates are PCS499, PCS12852, PCS3117 and PCS6422 in clinical development, and PCS11T in preclinical development.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $1.72 million | $0.53 million | $4.81 million | $1.46 million |
| General and administrative | $1.34 million | $0.42 million | $3.39 million | $1.28 million |
| Net loss | $2.99 million | $3.07 million | $8.24 million | $4.68 million |
| Net loss per share | $0.19 | $0.55 | $0.54 | $0.84 |
| Operating cash used | Not separately presented for the quarter | $5.99 million | $0.87 million |
At September 30, 2021, cash and cash equivalents were $19.09 million, current assets were $20.67 million, current liabilities were $1.23 million, and total assets were $29.03 million. Stockholders’ equity was $27.21 million; accumulated deficit was $33.64 million. The company reported no PPP loan balance after forgiveness. Liabilities included $800,000 due to a licensor, split equally between current and non-current, and $101,542 in operating lease liabilities. No revenue or profit margin is applicable.
Changes versus prior comparable periods
- Q3 net loss narrowed by about $84,000 year over year, while nine-month net loss increased by about $3.56 million.
- R&D expense rose $1.19 million in Q3 and $3.35 million for the nine-month period, largely reflecting clinical and preclinical program activity, related personnel costs, and trial spending.
- G&A expense increased $915,000 in Q3 and $2.11 million for nine months, driven mainly by higher professional fees, payroll and stock-based compensation.
- Nine-month operating cash use rose from $0.87 million to $5.99 million. The company reported a $3.68 million net increase in cash, supported by $9.88 million in net proceeds from a February private placement.
- Common shares outstanding increased from 14.19 million at December 31, 2020 to 15.60 million at September 30, 2021. The weighted-average share count also increased substantially, affecting year-over-year per-share comparisons.
Outlook, developments and risks
- Management estimated that September 30 cash would fund budgeted operations into the middle of 2023. It expects continued operating losses and negative operating cash flow, and says longer-term plans depend on obtaining additional financing. This runway estimate is subject to trial costs, timing and other assumptions.
- The company may sell up to $30 million of stock through an at-the-market program; no shares were sold under it in August or September 2021. Future equity issuance may dilute shareholders.
- PCS499 Phase 2B began enrolling in May 2021; management expected an interim analysis in mid-2022, trial completion in the second half of 2022 and, depending on results, a possible Phase 3 start in 2023.
- PCS12852’s IND was cleared in October 2021 for a Phase 2A gastroparesis trial; enrollment was anticipated in the first half of 2022, with completion expected in the first half of 2023.
- PCS3117 was licensed in June 2021. The company planned biomarker assay work and a Phase 2B study beginning in the second half of 2022, subject to development progress.
- PCS6422 interim results showed no dose-limiting toxicities or drug-related adverse events above Grade 1 in the first two cohorts, and substantially reduced 5-FU metabolism with increased exposure. However, DPD inhibition was not sustained through the seven-day capecitabine dosing period. The company planned protocol changes and FDA discussions before restarting the Phase 1B trial in 2022; stated later-stage timelines remain dependent on results.
- PCS11T remained in pre-IND toxicology development; the company hoped to submit an IND in the first half of 2023.
- COVID-19 could delay trials, disrupt clinical supply chains and impair access to capital. Other material risks include clinical and regulatory uncertainty, financing needs, competition and intellectual-property protection.
- The company disclosed up to approximately $3.7 million of future CRO and subcontractor services, subject to trial progress and contract termination terms. Ocuphire’s license also provides for future milestone payments and sales royalties, with amounts not clearly specified in the filing text.
- Management concluded disclosure controls were not effective at period-end. Previously identified material weaknesses in entity-level controls, segregation of duties and documentation remained; remediation efforts were underway.
Important facts for investors to verify
- Current cash runway and financing needs against actual clinical-trial spending, enrollment and timelines.
- PCS6422 protocol changes, sustained DPD inhibition, safety findings and the revised clinical schedule.
- PCS499 Phase 2B interim and final results and whether they support pivotal-trial plans.
- Progress and costs for PCS12852 and PCS3117, including the PCS3117 biomarker strategy and trial plans.
- Potential dilution from the ATM program and other financing, and the terms of any future license milestones or royalties.
- Whether the company remediates its disclosed internal-control material weaknesses.