Processa Pharmaceuticals, Inc. — Q1 2023 10-Q
Reporting period: Three months ended March 31, 2023. Processa is a clinical-stage biopharmaceutical company developing modified oncology drugs. It reported no revenue and has no revenue under contract or immediate sales prospects.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.63 million | $2.04 million; down $0.42 million |
| General and administrative expense | $2.48 million | $1.18 million; up $1.29 million |
| Net loss | $4.02 million | $3.23 million |
| Net loss per share, basic and diluted | $0.18 | $0.20 |
| Cash used in operating activities | $2.11 million | $1.80 million |
| Cash and cash equivalents at period-end | $10.74 million | $6.50 million at December 31, 2022 |
| Total assets / total liabilities | $12.43 million / $2.29 million | $8.62 million / $1.15 million at December 31, 2022 |
Gross margin is not applicable because the company had no revenue. No income tax benefit was recorded. The company reported no borrowings; liabilities include operating lease obligations of $0.21 million. Current assets were $12.22 million versus current liabilities of $2.16 million.
Changes and financing
- Net loss increased by $0.79 million year over year. Lower R&D costs, mainly due to completed PCS12852 and curtailed PCS499 trial activity and no intangible-asset amortization, were outweighed by higher G&A.
- G&A included a $1.31 million expense and accrued liability for a warrant granted to consulting firm Spartan; the warrant to purchase 3,160,130 shares was issued April 17, 2023, with a $1.02 exercise price.
- The company raised $7.0 million gross, or $6.4 million net, through equity sales of 8,432,192 shares. This included a February registered direct offering of 7,812,544 shares at $0.80 per share, yielding $5.6 million net. The share count increased materially; 24,631,474 shares were issued at quarter-end, of which 24,531,474 were outstanding.
- Cash increased by $4.24 million, primarily reflecting equity proceeds. The filing’s cash-flow statement reports a $4,238,007 increase, while the MD&A table reports $4,238,077; the text also gives conflicting operating-cash-use figures of $2,114,070 and $2,144,070. The filing text does not provide a clear reconciled value.
Outlook, programs, and risks
- Management expects continued operating losses and negative operating cash flow. It believes cash is adequate for at least 12 months based on current plans; the MD&A specifies this estimate excludes amounts available under the Lincoln Park purchase agreement. Longer-term plans, including future trials, depend on additional financing, with no assurance funding will be available on acceptable terms.
- NGC-Capecitabine Phase 1B enrollment was expected to finish in 2023. The filing reports that one tested regimen caused dose-limiting toxicities in two patients, including one death. After FDA discussions in April 2023, the planned Phase 2 is to assess dose- and exposure-response; additional funding is required before the trial can proceed.
- For NGC-Gemcitabine, management planned FDA discussions in 2023 and submission of a Phase 2B protocol in the second half of 2023. NGC-Irinotecan IND-enabling and toxicology work was planned for 2023–2024, subject to funding.
- Further enrollment in the PCS499 ulcerative necrobiosis lipoidica trial ceased in February 2023 because of recruitment challenges and likely greater-than-expected placebo response. The completed PCS12852 Phase 2A trial showed improvement in gastric emptying at the 0.5 mg dose versus placebo; the company is evaluating licensing or partnering options for both assets.
- At March 31, 2023, the company had up to $3.0 million of future CRO services under contract. It reported no material legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls. Cash deposits exceeded FDIC insurance limits.
Important facts for investors to verify
- Reconcile the cash-flow figures that conflict between the financial statements and MD&A.
- Assess cash runway assumptions, expected trial and manufacturing costs, and the timing and availability of further financing.
- Review the capecitabine regimen associated with two dose-limiting toxicities and one death, and the status of ongoing Phase 1B enrollment and Phase 2 planning.
- Evaluate dilution from the 2023 share issuance, outstanding equity awards and warrants, including the Spartan warrant.
- Confirm progress on planned NGC-Gemcitabine and NGC-Irinotecan regulatory and development milestones, and potential partnering outcomes for PCS12852 and PCS499.