Processa Pharmaceuticals, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 12, 2022. Processa is a clinical-stage biopharmaceutical company with four clinical-stage candidates and one candidate in nonclinical development. It reported no revenue and has no immediate sales prospects.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.04 million | $1.48 million |
| General and administrative expense | $1.18 million | $0.72 million |
| Operating loss | $3.23 million | $2.19 million |
| Net loss | $3.23 million | $2.10 million |
| Basic and diluted loss per share | $0.20 | $0.14 |
| Cash used in operating activities | $1.80 million | $2.24 million |
Cash and cash equivalents were $14.39 million at March 31, 2022, down from $16.50 million at December 31, 2021. Total assets were $24.30 million and stockholders’ equity was $23.24 million. Total liabilities were $1.06 million, chiefly accounts payable, accrued expenses, amounts due to a licensor, and operating lease liabilities; the filing reports no borrowings. Gross margin is not applicable because the company had no revenue.
Management believes existing cash can fund operations for at least 12 months from the filing date, excluding potential proceeds from its financing arrangements. It expects ongoing operating losses and negative operating cash flow, and says additional capital may be needed to execute longer-term plans.
Changes versus Q1 2021
- Net loss increased by approximately $1.13 million. R&D expense rose $568,000, mainly from higher clinical-trial and other development costs, payroll, and stock compensation.
- G&A expense rose $468,000, primarily due to higher stock-based compensation, professional fees, and insurance and other costs.
- Operating cash use declined by approximately $441,000, although the company attributed cash needs to trial spending, salaries, and professional fees. Q1 2021 financing included $9.88 million of private-placement proceeds; Q1 2022 had no such proceeds.
- Cash declined by $2.10 million during Q1 2022. The company also spent $300,000 to repurchase 100,000 shares from Aposense, held as treasury stock.
Outlook, developments, and risks
- Pipeline: PCS499 Phase 2B interim analysis and enrollment completion were expected by year-end 2022, with a possible Phase 3 start in 2023 subject to results. COVID-19 had delayed enrollment. PCS12852’s Phase 2A gastroparesis trial enrolled its first patient April 5, 2022; enrollment was expected in the second half of 2022, with top-line results at year-end. The amended PCS6422 Phase 1B trial restarted in April 2022; management targeted defining a regimen by year-end 2022 and a Phase 2B or 3 start in 2023–2024. PCS3117 development includes biomarker work, with a Phase 2B or adaptive Phase 3 trial anticipated in 2023. For PCS11T, the company was evaluating manufacturing and development plans and hoped to submit an IND in the first half of 2024.
- PCS6422 uncertainty: Interim data showed substantial DPD inhibition and increased 5-FU exposure, but a single PCS6422 dose did not sustain inhibition through seven days of capecitabine dosing. The protocol was amended to investigate dosing and duration.
- Financing and dilution: The company had an ATM facility permitting up to $30 million in share sales and a March 2022 agreement allowing sales of up to $15 million to Lincoln Park, subject to conditions and share limits. It issued Lincoln Park 123,609 commitment shares valued at $450,000 and agreed to reimburse $25,000 in fees. No ATM shares were sold in Q1 2022. Additional equity financing could dilute existing holders.
- Costs and contingencies: R&D and G&A spending were expected to increase. The company had contractual obligations of up to approximately $6.2 million for future CRO services; actual obligations depend on trial progress, and contracts generally have termination provisions. It reported no material legal proceedings and no material changes to previously disclosed risk factors.
- Key risks: COVID-19 could delay enrollment, disrupt supplies, extend timelines, and raise costs. The company also cited financing needs, clinical and regulatory uncertainty, competition, intellectual-property risks, and the possibility that actual cash needs exceed estimates. Cash held at banks exceeded FDIC insurance limits.
Important facts for investors to verify
- Whether clinical-trial enrollment, interim analyses, and the stated pipeline timelines were achieved after March 31, 2022.
- Cash runway assumptions and whether subsequent ATM or Lincoln Park share sales were used, including resulting dilution.
- PCS6422’s ability to maintain DPD inhibition through capecitabine dosing and the safety and efficacy of the resulting regimen.
- Actual trial spending and CRO commitments compared with the disclosed estimates, including the potential impact of delays.