Processa Pharmaceuticals, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Processa is a clinical-stage biopharmaceutical company with four drug candidates in clinical development and one in nonclinical development. It reported no revenue and no immediate sales prospects.
Financial performance and liquidity
| Metric | Q3 2022 | Nine months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $3.14 million | $8.32 million | $1.72 million Q3; $4.81 million nine months |
| General and administrative expense | $2.92 million | $6.14 million | $1.34 million Q3; $3.39 million nine months |
| Net loss | $6.02 million | $14.41 million | $2.99 million Q3; $8.24 million nine months |
| Basic and diluted loss per share | $0.37 | $0.90 | $0.19 Q3; $0.54 nine months |
| Net cash used in operating activities | Not separately stated | $7.11 million | $5.99 million nine months |
At September 30, cash and cash equivalents were $9.05 million, down from $16.50 million at December 31, 2021. Current assets were $10.89 million and current liabilities $1.19 million; total liabilities were $1.36 million. The filing reports no borrowings or debt balance. Accumulated deficit was $51.24 million. Stock-based compensation was $6.05 million for the nine months and accounted for a substantial portion of the reported loss.
Management said existing cash and amounts available under the Lincoln Park purchase agreement should fund operations for at least 12 months, based on current plans. Lincoln Park may purchase up to $15 million of shares subject to contractual conditions; the company had not sold shares under the facility by September 30. A separate at-the-market facility permits up to $30 million of share sales, but no shares were sold under it during the first nine months of 2022.
Changes versus the prior comparable period
- Nine-month net loss increased to $14.41 million from $8.24 million; Q3 loss increased to $6.02 million from $2.99 million.
- Nine-month R&D expense rose to $8.32 million from $4.81 million, reflecting clinical and preclinical work, higher staffing and compensation, and a $189,000 license milestone expense.
- Nine-month G&A expense rose to $6.14 million from $3.39 million, largely due to higher stock-based compensation and other personnel and professional costs.
- Operating cash use increased to $7.11 million from $5.99 million. Unlike 2021, the company had no private-placement proceeds in the nine-month 2022 period; it also spent $300,000 to repurchase 100,000 shares for treasury stock.
Outlook, developments and risks
- Pipeline: PCS12852 Phase 2A enrollment was completed in September 2022. Early results indicated improved gastric emptying at the 0.5 mg dose versus placebo, but the comparison involved only 14 patients and the reported significance threshold was p<0.10. Further results were expected by year-end, with a Phase 2B study planned for 2023.
- PCS6422 / Next Generation Capecitabine: The Phase 1B study continued. The company said enrollment was expected to finish in the first half of 2023 and planned to discuss a Phase 2B design with FDA in 2023. In an update announced November 1, 2022, after quarter-end, one dosing regimen had caused dose-limiting toxicities in two patients, including one death.
- PCS499: The Phase 2B trial for ulcerative necrobiosis lipoidica faced enrollment delays related to COVID-19 and the rarity of the disease. Management expected interim analysis and enrollment completion in the first half of 2023; a Phase 3 trial could follow depending on results.
- PCS3117 and PCS11T: The company anticipated a possible PCS3117 Phase 2B or adaptive Phase 3 start in 2023, subject to FDA discussions and additional funding. It hoped to submit an IND for PCS11T in 2024.
- Management expects ongoing operating losses and negative operating cash flow, with R&D and G&A costs likely to increase. Longer-term plans, including additional trials, depend on obtaining further capital; equity financing could dilute shareholders, and funding may not be available on acceptable terms or when needed.
- COVID-19, trial-enrollment delays, clinical outcomes and safety, manufacturing and supply-chain issues, regulatory decisions, competition, and the need for additional financing are key risks. The company disclosed up to approximately $4.4 million of future CRO services under cancellable agreements, with actual obligations dependent on trial progress and termination terms.
Investor facts to verify
- Cash runway assumptions and actual drawdown or availability under the Lincoln Park and ATM financing facilities.
- Full PCS6422 Phase 1B safety and dose-regimen results, including details of the reported death, and the planned FDA discussions and Phase 2B design.
- Complete PCS12852 Phase 2A results and whether the early gastric-emptying signal is confirmed in a larger study.
- PCS499 enrollment progress, timing of interim analysis, and the effect of trial delays on costs and financing needs.
- Future dilution and compensation expense: the filing reported substantial unrecognized RSU compensation and expanded the equity plan’s share authorization.