Processa Pharmaceuticals(PCSA) - 2022 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for Processa Pharmaceuticals, Inc. as of June 30, 2022, and for the three and six-month periods then ended, show a net loss of $8.4 million and $12.1 million in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $12,064,142 | $16,497,581 | | Total Current Assets | $13,960,775 | $18,327,151 | | Total Assets | $21,657,590 | $26,463,505 | | Total Current Liabilities | $1,571,068 | $971,020 | | Total Liabilities | $1,575,723 | $978,405 | | Total Stockholders' Equity | $20,081,867 | $25,485,100 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development expenses | $3,137,292 | $1,614,954 | $5,181,912 | $3,086,401 | | General and administrative expenses | $2,034,456 | $1,329,213 | $3,218,550 | $2,051,073 | | Operating Loss | $(5,171,748) | $(3,459,797) | $(8,400,462) | $(5,653,104) | | Net Loss | $(5,164,368) | $(3,157,043) | $(8,391,499) | $(5,256,523) | | Net Loss per Share - Basic and Diluted | $(0.32) | $(0.20) | $(0.53) | $(0.35) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,133,439) | $(4,437,494) | | Net cash (used in) provided by financing activities | $(300,000) | $9,852,465 | | Net (Decrease) Increase in Cash | $(4,433,439) | $5,414,971 | | Cash and Cash Equivalents – End of Period | $12,064,142 | $20,831,195 | Note 1 – Organization and Summary of Significant Accounting Policies The clinical-stage biopharmaceutical company develops treatments for unmet medical needs, with an accumulated deficit of $45.2 million as of June 30, 2022, but believes current cash is sufficient for the next twelve months - The company is a clinical-stage biopharmaceutical company with five drug candidates in its pipeline, focusing on conditions with high unmet medical needs[20] - The COVID-19 pandemic has caused delays in patient enrollment for the PCS499 Phase 2B trial, potentially increasing costs and extending timelines[23] - As of June 30, 2022, the company had an accumulated deficit of approximately $45.2 million. Management believes current cash is adequate for at least the next twelve months, supported by available financing facilities like the ATM Offering and the Lincoln Park Purchase Agreement[26] Note 3 – Stockholders' Equity Key equity activities include increasing authorized common stock to 50 million shares, establishing a $15.0 million purchase agreement with Lincoln Park Capital, and repurchasing 100,000 shares - On January 1, 2022, the company increased its authorized shares of common stock from 30,000,000 to 50,000,000[37] - On March 23, 2022, the company entered into a Purchase Agreement with Lincoln Park Capital, which committed to purchase up to $15.0 million of the company's common stock[39] - On March 29, 2022, the company repurchased 100,000 shares of its common stock from Aposense Ltd. for $300,000, which are now held as treasury stock[45] Note 4 - Stock-based Compensation Stock-based compensation expense significantly increased in the first half of 2022, with $4.0 million in unrecognized RSU expense and an increase in shares available under the 2019 incentive plan to 6 million Stock-based Compensation Expense | Period | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Expense | $2,838,266 | $1,173,622 | - During the six months ended June 30, 2022, the company awarded 1,363,917 RSUs. As of June 30, 2022, there were 1,777,922 RSUs outstanding[52] - On July 11, 2022, shareholders approved an increase in the number of shares available under the 2019 Omnibus Equity Incentive Plan by 3,000,000 shares, to a total of 6,000,000[47] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The MD&A details the company's business strategy, drug pipeline progress, financial results, and liquidity, reporting a $8.4 million net loss for H1 2022, but with $12.0 million cash deemed sufficient for the next twelve months Our Drug Pipeline The company's pipeline includes five drug candidates, with three in active clinical trials (PCS499, PCS12852, PCS6422) targeting both non-oncology and oncology indications, with key milestones anticipated in late 2022 and 2023 Drug Pipeline and Upcoming Milestones | Drug | Disease Target | Phase | Upcoming Milestones | | :--- | :--- | :--- | :--- | | PCS499 | Ulcerative Necrobiosis Lipoidica | Phase 2B | 1H'23 - Interim Analysis; Complete Enrollment | | PCS12852 | Gastroparesis | Phase 2A | 2H'22 - Complete Enrollment; Top-Line Results | | PCS6422 | Metastatic Colorectal, Other Cancers | Phase 1B | 2H'22 - Complete Enrollment & Preliminary MTD Identification | | PCS3117 | Pancreatic, Other Cancers | Phase 2B | 2H'22 - 1H'23 - Define Possible Paths to FDA Approval | | PCS11T | Small Cell Lung, Other Cancers | Pre-IND | 2H'22 - Select Manufacturing Sites; Define Paths to Approval | - PCS499 (uNL): Phase 2B trial enrollment has been delayed due to COVID-19. An interim analysis is planned for the first half of 2023[87][88] - PCS12852 (gastroparesis): Phase 2A trial enrolled its first patient in April 2022, with top-line results expected by the end of 2022[94] - PCS6422 (Next Gen Capecitabine): A modified Phase 1B trial restarted in April 2022 to better define the dosing regimen, with enrollment expected to complete by the end of 2022[103][104] Results of Operations For the six months ended June 30, 2022, the company reported no revenue and a net loss of $8.4 million, driven by increased R&D expenses of $5.2 million and G&A expenses of $3.2 million Comparison of Operating Expenses (Six Months Ended June 30) | Expense Category | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $5,181,912 | $3,086,401 | +$2,095,511 | | General and administrative | $3,218,550 | $2,051,073 | +$1,167,477 | | Operating Loss | $(8,400,462) | $(5,653,104) | +$(2,747,358) | - The increase in R&D expenses was mainly due to costs for three active clinical trials, including payments to CROs, regulatory fees, and drug product testing[123] - The increase in G&A expenses was primarily driven by a $983,000 increase in employee stock-based compensation and a $68,000 increase in payroll and related costs[131] Liquidity and Capital Resources As of June 30, 2022, the company held $12.0 million in cash, with management believing it sufficient for the next twelve months, supplemented by a $15 million Lincoln Park agreement and a $30 million ATM offering - The company held $12.0 million in cash and cash equivalents at June 30, 2022[142] - Management believes current cash is adequate for at least the next twelve months, without considering potential proceeds from its Lincoln Park agreement or ATM Offering[144] - Financing facilities include a $15 million purchase agreement with Lincoln Park and a $30 million ATM offering to provide capital flexibility[143] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company qualifies as a smaller reporting company - Item 3 is not applicable to the company as it qualifies as a smaller reporting company[153] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2022[154] - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2022[155] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[156] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021[157] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no sales of unregistered securities during Q2 2022, but repurchased 100,000 shares of common stock for $300,000 in the first six months - There were no sales of unregistered securities during the three months ended June 30, 2022[158] - The company purchased 100,000 shares of its common stock for $300,000, which are held as treasury stock[160] Other Information On July 25, 2022, the company changed its transfer agent to Continental Stock Transfer and Trust Company - The company changed its transfer agent to Continental Stock Transfer and Trust Company on July 25, 2022[163]