Processa Pharmaceuticals, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The audited financial statements are presented in U.S. dollars; share and per-share amounts reflect the 1-for-20 reverse stock split effected January 22, 2024.
Business context
Processa is a clinical-stage biopharmaceutical company with no approved products or revenue. It is prioritizing three investigational oncology candidates—NGC-Cap, NGC-Gem and NGC-Iri—designed to modify the metabolism or distribution of established chemotherapy drugs. The company also completed a Phase 2A study of PCS12852 for gastroparesis and discontinued further enrollment in its PCS499 rare-disease trial; it is exploring partnering or licensing options for both assets.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.80 million | $11.49 million |
| General and administrative expense | $5.66 million | $8.76 million |
| Impairment of intangible asset | $0 | $7.27 million |
| Operating loss | $11.46 million | $27.53 million |
| Net loss | $11.12 million | $27.42 million |
| Net cash used in operating activities | $8.06 million | $9.61 million |
Net loss per share was $8.48 in 2023 versus $34.05 in 2022, on reverse-split-adjusted weighted-average shares. The loss narrowed substantially, in part because 2022 included the $7.27 million PCS499 impairment; lower R&D and stock-based compensation also reduced expenses. Interest income was $336,000, versus $101,000 in 2022. With no revenue, profit margins are not meaningful.
At year-end, cash and cash equivalents were $4.71 million, current assets $5.63 million and current liabilities $731,000, implying working capital of approximately $4.90 million. Total liabilities were $797,000, primarily accounts payable, accrued expenses, a licensor liability and lease obligations; the filing shows no interest-bearing borrowings. Cash declined $1.80 million during 2023. Operating lease obligations totaled approximately $161,000.
In January 2024, the company raised $7.0 million gross, or $6.3 million net, through a public offering of shares and warrants. Management said year-end cash plus the offering proceeds was expected to fund operations into early 2025, based on current plans. The auditor and management nevertheless reported substantial doubt about the company’s ability to continue as a going concern absent additional financing.
Developments, outlook and key risks
- NGC-Cap: Following an FDA meeting on December 11, 2023, Processa selected a Phase 2 breast-cancer trial, with first-patient enrollment planned for the third quarter of 2024. The Phase 1B study later completed enrollment in the first quarter of 2024. The filing reports that one Phase 1B regimen caused dose-limiting toxicities in two patients, including one death; other regimens are still being evaluated.
- NGC-Gem: The company planned FDA discussions on study design in 2024 but said additional financing would be needed for Phase 2. It was seeking an extension of a license milestone requiring a patient to be dosed in a clinical trial by June 16, 2024; success of the extension discussions was not assured.
- NGC-Iri: IND-enabling and toxicology work was planned for 2024–2025, subject to funding. The company also faces license-development milestones for its pipeline assets.
- Non-core assets: PCS12852 Phase 2A results showed improved gastric emptying at the 0.5 mg dose versus placebo; the study included 25 patients. PCS499 enrollment was terminated after only four patients were recruited, chiefly because of the rarity of the condition and enrollment challenges. The company reported no safety concerns in either study.
- Financing and dilution: Processa expects continued operating losses and needs further capital to fund trials. Future equity financing could dilute shareholders; debt or partnerships could impose restrictions or require rights to be relinquished. January 2024 offering warrants create potential additional dilution.
- Development and execution risks: No candidate has demonstrated efficacy sufficient for approval, and clinical outcomes, regulatory decisions, patient recruitment, third-party manufacturing and CRO performance are uncertain. The company relies on licensed intellectual property and must meet contractual diligence milestones to preserve certain rights.
- Unusual items and controls: A 1-for-20 reverse split occurred in January 2024, and authorized common shares had been increased to 100 million in June 2023. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal controls, consistent with the company’s smaller-reporting-company status.
Most important facts for investors to verify
- Current cash, cash burn and financing needs relative to the stated early-2025 runway and the going-concern warning.
- Whether the NGC-Cap Phase 2 breast-cancer trial began on schedule, and the full safety and efficacy data—including details and follow-up relating to the Phase 1B patient death.
- Whether Ocuphire agreed to extend NGC-Gem milestones and whether Processa can fund its planned development program.
- The fully diluted share count and potential dilution from the January 2024 offering and outstanding warrants, including placement-agent warrants.
- Progress in licensing or partnering PCS12852 and PCS499, and any resulting proceeds or obligations.