UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For
the fiscal year ended December 31, 2022
or
☐Transitional Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission
File Number 001-39531
Processa
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
7380
Coca Cola Drive, Suite 106,
Hanover,
Maryland21076
(443)776-3133
Securities
registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.0001 par value per share PCSA The Nasdaq Stock Market LLC
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its managements’ assessment of the effectiveness
of its internal controls over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C 7262(b)) by the registered
public accounting firm that prepared or issued its audit report ☐
If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
aggregate market value of the voting and non-voting common equity held by non-affiliates on June 30, 2022, the last business day of the
most recently completed second quarter, based upon the closing price of Common Stock on such date as reported on Nasdaq Capital Market,
was approximately $33.8 million.
The
number of outstanding shares of the registrant’s common stock as of March 27, 2023 was 24,557,592.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Proxy Statement for the registrant’s 2023 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed
within 120 days of the end of the fiscal year ended December 31, 2022 are incorporated by reference into Part III hereof. Except with
respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as a part
hereof.
Table
of Contents
Part I
Item 1. Business. 5
Item 1A. Risk Factors 27
Item 1B. Unresolved Staff Comments 47
Item 2. Properties. 47
Item 3. Legal Proceedings. 47
Item 4. Mine Safety Disclosures. 47
Part II
Item 6. [Reserved] 48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 57
Item 8. Financial Statements and Supplementary Data 57
Item 9A. Controls and Procedures 58
Item 9B. Other Information 59
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection 59
Part III
Item 10. Directors, Executive Officers and Corporate Governance 59
Item 11. Executive Compensation 59
Item 14. Principal Accounting Fees and Services 59
Part IV
Item 15. Exhibits, Financial Statement Schedules 60
Signatures 61
GLOSSARY
OF CERTAIN SCIENTIFIC TERMS
The
medical and scientific terms used in this Annual Report on Form 10-K have the following meanings:
“Active
metabolite” means a drug that is processed by the body into an altered form which effects the body.
“Agonist”
means a chemical/drug that binds to a receptor in the body and activates that receptor to produce a biological response.
“Analog”
means a compound having a structure similar to that of an approved drug but differing from it with respect to a certain component of
the molecule which may cause it to have similar or different effects on the body.
“cGCP”
means current Good Clinical Practices. The FDA and other regulatory agencies promulgate regulations and standards, commonly referred
to as current Good Clinical Practices, for designing, conducting, monitoring, auditing and reporting the results of clinical trials to
ensure that the data and results are accurate and that the rights and welfare of trial participants are adequately protected.
“cGMP”
means current Good Manufacturing Practices. The FDA and other regulatory agencies promulgate regulations and standards, commonly referred
to as current Good Manufacturing Practices, which include requirements relating to quality control and quality assurance, as well as
the corresponding maintenance of records and documentation.
“CMO”
means Contract Manufacturing Organization.
“CRO”
means Contract Research Organization.
“Deuterated
analog” means a small molecule in which one or more of the hydrogen atoms are replaced by deuterium.
“EMA”
means the European Medicines Agency.
“FDA”
means the Food and Drug Administration.
“IND”
means an Investigational New Drug Application. Before testing a new drug on human subjects, the company must file an IND with the FDA.
Information must be produced on the absorption, distribution, metabolism, and excretion properties of the drug and detailed protocols
for testing on human subjects must be submitted.
“Indication”
means a condition which makes a particular treatment or procedure advisable.
“Moiety”
means an active or functional part of a molecule.
“NDA”
means a New Drug Application submitted to the FDA. Under the Food, Drug, and Cosmetic Act of 1938, an NDA is submitted to the FDA enumerating
the uses of the drug and providing evidence of its safety.
“NGC”
means Next Generation Chemotherapy, referring to the drugs in our pipeline
that have active cancer killing metabolites that are the same or have very similar chemical structure to existing FDA-approved chemotherapy
treatments, resulting in our NGCs killing cancer cells following the same mechanism as the FDA-approved treatments.
“NL”
means Necrobiosis Lipoidica, a rare chronic and granulomatous disorder.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTOR SUMMARY
This
Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. All statements other than statements
of historical facts contained in this Form 10-K are forward-looking statements. In some cases, you can identify forward-looking statements
by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “target,” “will,” “would,” or the
negative of these words or other comparable terminology. We have based these forward-looking statements on our current expectations and
projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-
and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Form 10-K. Moreover, we
operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management
to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of
these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur, and
actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these
uncertainties, you should not place undue reliance on these forward-looking statements. These risks are discussed more fully in the “Risk
Factors” section of this Annual Report on Form 10-K. These risks include, but are not limited to, the following:
● our ability to obtain funding for our future operations;
● our ability to recruit and enroll suitable patients in our clinical trials;
● the pricing and reimbursement of our product candidates, if approved;
● developments relating to our competitors and our industry;
● our financial performance.
You
should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected
in the forward-looking statements are reasonable as of the date of this Form 10-K, we cannot guarantee that the future results, levels
of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake
no obligation to update publicly any forward-looking statements for any reason after the date of this Form 10-K to conform these statements
to new information, actual results or to changes in our expectations, except as required by law.
You
should read this Form 10-K and the documents that we reference in this Form 10-K and have filed with the SEC as exhibits with the understanding
that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we
expect.
In
this Form 10-K, “we,” “us”, “our”, “Processa” and “the Company” refer to
Processa Pharmaceuticals, Inc. and its subsidiary.
Part
I
Item
1. Business
Overview
We
are a clinical-stage biopharmaceutical company focused on utilizing the Processa Regulatory Science Approach, including the principles
associated with FDA’s Project Optimus Oncology initiative and the related FDA Draft Guidance, in the development of Next Generation
Chemotherapy (NGC) oncology drug products. Our mission is to provide better treatment options than those that presently exist by extending
a patient’s survival and/or improving a patient’s quality of life. This is achieved by taking FDA-approved, widely used oncology
drugs or the cancer killing metabolites of these drugs and altering how they are metabolized and/or distributed in the body, including
how they are distributed to the actual cancer cells.
Regulatory
science was conceived in the early 1990s when the founders of Processa and other faculty at the University of Maryland worked with
the FDA to develop multiple FDA Guidances. Over the last 30 years, two of our founders, Dr. David Young and Dr. Sian Bigora,
have expanded the original regulatory science concept to include other factors, such as the principles of Project Optimus, that can
affect the risk-benefit analyses that FDA conducts for every FDA drug approval. In fact, the principles of FDA’s Project
Optimus have been used by Drs. Young and Bigora to identify and justify an “optimal” dosage regimen for a number of
non-oncology FDA-approved drugs. The Processa Regulatory Science Approach and our past experience with the principles of Project Optimus differentiates us from
other biotechnology companies by focusing us not only on the clinical science, but also on the equally important regulatory process.
We believe utilizing the Processa Regulatory Science Approach provides us with three distinct advantages:
● greater efficiencies (e.g., the right study design and study readouts);
● improvement over existing therapy and greater acceptance by patients/doctors.
In
January 2023, we announced our strategic prioritization to advance our pipeline of Next Generation Chemotherapy proprietary small
molecule oncology drugs. By changing either the metabolism, distribution and/or elimination of already FDA-approved cancer drugs
while maintaining the mechanism of how the drug kills cancer cells, we believe our three Next Generation Chemotherapy (NGC)
treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts - capecitabine,
gemcitabine, and irinotecan. All future studies of these drugs are subject to availability of capital to conduct the
trials.
The
three NGC treatments in our pipeline are as follows:
Due to enrollment difficulties that we have experienced since the beginning
of our rare disease trial for PCS499 in ulcerative Necrobiosis Lipoidica (uNL), we decided to suspend further enrollment in the PCS499
trial in February 2023. In addition, the clinical findings for PCS12852 were positive in gastroparesis patients
and there were no safety concerns during the conduct of either the PCS12842 or PCS499 trials. With our focus on the NGCs in our pipeline,
we are evaluating options to monetize PCS12852 and PCS499.
Our
shift in prioritization of the products does not change our mission. We
continue to be focused on drug products that improve the survival and/or quality of life for patients by improving the safety and/or efficacy
of the drug in a targeted patient population, while providing a more efficient path to FDA approval, increasing the probability of FDA
approval, and differentiating our drugs from those on the market or are currently being developed.
Historically,
much of oncology drug development has searched for a new or different way to treat cancer. Our approach is to modify and improve three
different, currently approved, and widely used chemotherapy treatments so that the human body handles these NGC treatments differently
than their presently approved counterpart drugs while the cancer killing mechanism of action remains the same. FDA’s Project Optimus
Oncology initiative and Oncology Guidance recommends that the dose-response (both safety and efficacy) relationships be evaluated for
all oncology drugs. We have begun this process for our NGC treatments. To date, we have found that our NGC treatments are likely to have
a better safety-efficacy profile than the current widely used marketed counterpart drugs, not only potentially making the development
and approval process more efficient, but also differentiating our NGC treatments from the existing treatment. We believe our NGC treatments
have the potential to extend the survival and/or quality of life for more patients diagnosed with cancer while decreasing the number
of patients who are required to dose adjust or discontinue treatment because of side effects or lack of response.
Our
Strategy
With
the Processa Regulatory Science Approach, our strategy is to obtain and develop drugs that will not only treat patients with unmet medical need conditions, but also
have the potential to be more efficiently developed with a greater probability of development success than what typically occurs in
the biotech-pharma industry, as well as a better return on investment given more efficient development and high commercial value. We
applied rigorous standards to identify drugs for our portfolio, the three most important being:
Our
rigorous requirement resulted in the in-licensing of five drugs: three NGC drugs and two non-oncology drugs. These clinical candidates
had significant pre-clinical and clinical data that de-risked the programs.
In
January 2023, we announced our plan to prioritize our team’s time
and our capital resources on the continued development of our NGC drugs while exploring opportunities, including non-dilutive licensing,
collaborations, and other strategic transactions, for our non-oncology drugs. By changing either the metabolism, distribution and/or elimination
of FDA-approved drugs while still maintaining the mechanism of killing cancer cells, we believe that our three NGC treatments provide
improved safety-efficacy profiles when compared to their currently marketed counterparts of capecitabine, gemcitabine and irinotecan.
These modifications differentiate our NGC treatments from the existing therapies while being potential life-changing treatments for patients.
Our
pipeline of NGCs (i) already have data demonstrating the desired pharmacological
activity in humans or appropriate animal models and is able to provide improved safety and/or efficacy by some modification in the formation
and/or distribution of the active moieties associated with the drug and (ii) target cancers for which a single positive pivotal study
demonstrating efficacy might provide enough evidence that the clinical benefits of the drug and its approval outweighs the risks associated
with the drug.
Our
Team
Our
drug development efforts are guided by our knowledge and experience in applying the Processa Regulatory Science Approach to decrease
manageable risks, costs, and time toward achieving marketing authorization from regulatory authorities including the FDA. We have
assembled a seasoned management team and development team with extensive experience in developing therapies, including advancing
product candidates from preclinical research through clinical development and ultimately regulatory approval and commercialization.
Our team is led by our CEO and Founder David Young, Pharm.D., Ph.D. who has extensive experience in research, regulatory
approval and business development and who served at Questcor Pharmaceuticals for eight years, initially as an independent director
and subsequently as its Chief Scientific Officer.
To
execute our strategy, we assembled an experienced and development team with a successful track record of drug approvals and
successful exits. Our team is experienced in developing drug products through all principal regulatory tiers from IND-enabling
studies to New Drug Application (NDA) submission. Throughout their careers, the combined scientific, development and regulatory
experiences of our team members have resulted in more than 30 drug approvals in indications reviewed by almost every division of the
FDA including the oncology divisions, over 100 meetings with the FDA and involvement with more than 50 drug development programs,
including drug products targeted to patients who have an unmet medical need and cancer patients. In addition, the FDA Project
Optimus Oncology initiative and recent FDA Oncology Guidance applies the Processa Regulatory Science Approach and principles used
and refined by our Founders over the last 30 years.
Our
Drug Pipeline
Our
pipeline currently consists of three oncology drugs (NGC-Capecitabine, NGC-Gemcitabine and NGC-Irinotecan previously identified as PCS6422,
PCS3117 and PCS11T, respectively) and two non-oncology drugs (PCS12852 and PCS499). A timeline and summary of each drug is provided below.
Next
Generation Chemotherapy Pipeline
Non-Oncology
Pipeline for Out-licensing or Partnership
Manufacturing
and Clinical Supplies
We
do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue
to rely, on multiple third-party contract manufacturing organizations (CMOs) for the supply of current Good Manufacturing Practices
(cGMP)-grade clinical trial materials and commercial quantities of our product candidates and products, if approved. We require all of
our CMOs to conduct manufacturing activities in compliance with cGMP. We have assembled a team of experienced employees and consultants
to provide the necessary technical, quality and regulatory oversight of our CMOs.
We
anticipate that these CMOs will have the capacity to support both clinical supply and commercial-scale production, but we do not have
any formal agreements at this time with any of these CMOs to cover commercial production.
We
also may elect to pursue additional CMOs for manufacturing supplies of drug substance and finished drug product in the future. We believe
that our standardized manufacturing process can be transferred to a number of other CMOs for the production of clinical and commercial
supplies of our product candidates in the ordinary course of business.
Competition
Many
of our potential competitors may have significantly greater financial resources, a more established presence in the market, and more
expertise in research and development, manufacturing, pre-clinical and clinical testing, obtaining regulatory approvals and reimbursement,
and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may
result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also
prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These potential
competitors may also compete with us in recruiting and retaining top qualified scientific, sales, marketing and management personnel
and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary
to, or necessary for, our programs.
The
key competitive factors affecting each of our products, if approved, are likely to include the efficacy, safety, convenience and
price of the products relative to other approved products used on- or off-label for each unmet medical need condition. Although
preliminary clinical data exists to support the possibility of improved efficacy and safety profiles for our drugs, more in-depth
randomized, controlled studies are required for our products to determine if our preliminary findings will support the approval in
the designated unmet medical need indication.
For
NGC-Capecitabine, the competitive factors will be related to the efficacy and safety of the product when used in combination with existing
cytotoxic drugs such as capecitabine and fluoropyrimidines compared to the efficacy and safety when these cytotoxic agents are administered
without PCS6422 or with reversible enzyme inhibitors. The market penetration will depend on how much improvement will occur in
the efficacy and/or safety profiles when administered in combination with PCS6422. Currently, there are no other reversible or irreversible
enzyme inhibitor products approved in the US and no irreversible enzyme inhibitors approved ex-US, which may make PCS6422 the first DPD
irreversible inhibitor available.
For
NGC-Gemcitabine, the competitive factors will include establishing market penetration against other cytidine analogues, such as gemcitabine,
which is currently used as first or second line chemotherapy either alone or in combination with other chemotherapy agents. The market
penetration will depend on the potential for an improved efficacy profile in patients who have developed tolerance to other agents.
For
NGC-Irinotecan, the competitive factors will include establishing marketing penetration against the existing irinotecan product (Camptosar®)
and the newer liposomal irinotecan product (Onivyde®). The establishment of that market will be based upon improved efficacy and/or
safety of NGC-Irinotecan.
For
PCS12852, the competitive factors will include establishing marketing penetration against the metoclopramide products (the only approved
drug to treat gastroparesis) and other 5-HT4 receptor agonists used off label. The market penetration will depend on the potential for
an improved safety profile due to the very selective 5-HT4 receptor binding by PCS12852 and similar or greater efficacy in the treatment
of gastroparesis.
For
PCS499, there are currently no FDA-approved drugs for the treatment of patients with NL, and few drugs are used off-label for NL given
the lack of efficacy and/or side effect concerns.
Our
commercial opportunity for any of our product candidates could be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe side effects,
than any products that we may develop. Our competitors also may obtain FDA, EMA or other regulatory approval for their products more
rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are
able to enter the market.
Intellectual
Property
Our
success will depend in large part on our ability and that of our licensors to:
● prosecute and defend our future patents, once obtained;
Although
we rely extensively on licensing patents from third parties, we intend to seek appropriate patent protection for product candidates in
our research and development programs, where applicable, and their uses by filing patent applications in the United States and other
selected countries. We intend for these patent applications to cover, where possible, claims for compositions of matter, medical uses,
processes for preparation and formulations.
Our
current patent portfolio consists of the number of patents related to our drug candidates licensed from each third-party licensor. In
addition to the international patents and/or international and U.S. patent applications licensed from our third-party licensors, we have
licensed at least the following number of U.S. patents:
CoNCERT Yuhan Aposense Elion Ocuphire Total
A
provisional patent for NGC-Capecitabine has been filed.
Besides
relying on patents, we may also rely on trade secrets, proprietary know-how and continuing innovation to develop and maintain our competitive
position, especially when we do not believe that patent protection is appropriate or can be obtained. In addition, we continuously evaluate
opportunities to obtain exclusivity through our regulatory filings with the FDA. We seek protection of these trade secrets, proprietary
know-how and any continuing innovation, in part, through confidentiality and proprietary information agreements. However, these agreements
may not provide meaningful protection for, or adequate remedies to protect, our technology in the event of unauthorized use or disclosure
of information. Furthermore, our trade secrets may otherwise become known to, or be independently developed by, our competitors.
License
Agreements
The
following descriptions of our license agreements are only summaries. You should also refer to the copies of such agreements which have
been filed as exhibits to this Annual Report.
License
Agreement with Elion Oncology, Inc.
On
August 23, 2020, we entered into a condition precedent License Agreement with Elion Oncology (“Elion License Agreement”),
pursuant to which we acquired an exclusive license to develop, manufacture and commercialize PCS6422 globally. The grant of license was
conditioned on the following being satisfied by October 30, 2020: (i) our closing on an equity financing of at least $15 million in gross
proceeds and (ii) successful up-listing to Nasdaq.
On
October 6, 2020, all conditions were satisfied, resulting in the addition of PCS6422 to our portfolio, and we paid $100,000 cash and
issued 825,000 shares of our common stock to Elion. Such shares were subject to a lock-up, with 50% of such shares released from
such lock-up after six months and the remaining 25% tranches were released following 9 months and 12 months,
respectively.
As part of the Elion License Agreement, we agreed to issue to Elion 100,000 shares of our common stock on each of the first and second
anniversary dates of the Elion License Agreement, which we fulfilled on October 5, 2021 and 2022, respectively.
As
additional consideration, we will pay Elion development and regulatory milestone payments (a portion of which are payable in shares of
our common stock and a portion of which are payable in cash) upon the achievement of certain milestones, which include FDA or other regulatory
approval and dosing a patient. In addition, we must pay Elion one-time sales milestone payments based on the achievement during a calendar
year of one or more thresholds for annual sales for products made and pay royalties based on annual licensing sales. We are also required
to split any milestone payments received with Elion based on any sub-license agreement we may enter into.
On
May 17, 2022, we amended the third Milestone Event of Section 6.4 of our License Agreement with Elion Oncology, Inc. changing the third
Milestone Event from “1st Patient in Dose Confirmation Study” to (a) determination of the maximum tolerated dose
(MTD) or (b) determination of the recommended Phase 2 Dose. Prior to this amendment, the third milestone was not considered probable
since it was unknown when, or if a dose confirmation study was going to be conducted. As a result of the modification, we consider it
probable that the recommended Phase 2 dosage regimen could be determined in connection with our current Phase 1B trial for PCS6422. We
recorded an expense and related liability of $189,000 representing the value of the shares we anticipate issuing to Elion at the fair
value on the date of modification. No other terms or conditions of the License Agreement were modified.
We
are required to use commercially reasonable efforts, at our sole cost and expense, to research, develop and commercialize products in
one or more countries, including meeting specific diligence milestones that consist of: (i) dosing a first patient in a Phase 1B clinical
trial with a product within 12 months; and (ii) dosing a first patient with a product in a Phase 2 or 3 clinical trial within 48 months.
Either party may terminate the agreement in the event of a material breach of the agreement that has not been cured following written
notice and a 90-day opportunity to cure such breach (which is shortened to 15 days for a payment breach).
License
Agreement with Ocuphire Pharma, Inc.
On
June 16, 2021, we executed a License Agreement with Ocuphire Pharma, Inc. (“Ocuphire Agreement”) under which provided us
with a license to research, develop and commercialize PCS3117 globally, excluding the Republic
of Singapore, China, Hong Kong, Macau and Taiwan.
As
consideration for the Ocuphire Agreement, we issued 44,689 shares of our common stock to Ocuphire, a cash payment of $200,000 and assumed
certain liabilities. Additional consideration includes future development and regulatory milestones payments to Ocuphire upon our achievement
of certain defined clinical milestones, such as dosing a patient in pivotal trials and receiving marketing authorization by a regulatory
authority in the United States or another country. In addition, we are required to pay Ocuphire one-time sales milestone payments based
on the achievement during a calendar year of the highest annual Net Sales for products made and pay royalties based on annual Net Sales,
as defined in the Ocuphire Agreement.
We
are required to use commercially reasonable efforts, at our sole cost and expense to oversee such commercialization efforts, to research,
develop and commercialize products in one or more countries, including meeting specific diligence milestones that consist of: (i) first
patient administered drug in a Clinical Trial of a Product prior to June 16, 2024; and (ii) first patient administered drug in a Pivotal
Clinical Trial of a Product or first patient administered drug in a Clinical Trial for a Second Indication of a Product prior to June
16, 2026. Either party may terminate the agreement in the event of a material breach of the agreement that has not been cured following
written notice and a 120-day opportunity to cure such breach (which is shortened to 15 days for a payment breach).
License
Agreement with Aposense, Ltd.
On
May 24, 2020, we entered into a condition precedent License Agreement with Aposense, Ltd. (“Aposense License Agreement”),
pursuant to which we were granted Aposense’s patent rights and Know-How to develop and commercialize their next generation irinotecan
cancer drug, PCS11T (formerly known as ATT-11T). The Aposense License Agreement provides us with an exclusive worldwide license (excluding
China) to research, develop and commercialize products comprising or containing PCS11T. The grant of license was conditioned on the following
being satisfied within nine months of May 24, 2020: (i) our closing of an equity financing and successful up-listing to Nasdaq and (ii)
Aposense obtaining the approval of the Israel Innovation Authority for the consummation of the transactions contemplated by the Aposense
License Agreement.
On
October 6, 2020, all conditions were satisfied, resulting in the addition of PCS11T to our portfolio, and we issued 625,000
shares of our common stock to Aposense. Such shares were subject to a lock-up, with 40% of such shares released from such lock-up after
six months and the remaining two 30% tranches were released upon completion of the next two subsequent quarters. As additional consideration,
we will pay Aposense development and regulatory milestone payments (up to $3.0 million per milestone) upon the achievement of certain
milestones, which primarily consist of having a drug indication approved by a regulatory authority in the United States or another country.
In addition, we will pay Aposense one-time sales milestone payments based on the achievement during a calendar year of one or more thresholds
for annual sales for products made and pay royalties based on annual licensing sales. We are also required to split any sales milestone
payments or royalties we receive with Aposense based on any sub-license agreement we may enter into.
License
Agreement with Yuhan Corporation
On
August 19, 2020, we entered into a License Agreement with Yuhan Corporation (“Yuhan License Agreement”), pursuant to which
we acquired an exclusive license to develop, manufacture and commercialize PCS12852 globally, excluding South Korea.
As
consideration for the Yuhan License Agreement and related Share Issuance Agreement, we issued to Yuhan 500,000 shares of common stock.
As additional consideration, we will pay Yuhan development and regulatory milestone payments (a portion of which are payable in shares
of our common stock based on the volume weighted average trading price during the period prior to such achievement and a portion of which
are payable in cash) upon the achievement of certain milestones, based on a Yuhan affiliate purchasing 750,000 shares of common stock
for $3,000,000 in our October 2020 underwritten public offering. The milestones primarily consist of dosing a patient in pivotal trials
or having a drug indication approved by a regulatory authority in the United States or another country. In addition, we must pay Yuhan
one-time sales milestone payments based on the achievement during a calendar year of one or more thresholds for annual sales for products
made and pay royalties based on annual licensing sales. We are also required to split any milestone payments received with Yuhan based
on any sub-license agreement we may enter into.
In
conjunction with a joint Processa-Yuhan Board to oversee such commercialization efforts, we are required to use commercially reasonable
efforts, at our sole cost and expense, to research, develop and commercialize products in one or more countries, including meeting specific
diligence milestones that consist of: (i) preparing a first draft of the product development plan within 90 days; (ii) requesting an
FDA pre-IND meeting for a product within 6 months; (iii) dosing a first patient in a Phase 2A clinical trial with a product within 24
months; and (iv) dosing a first patient with a product in a Phase 2B clinical trial, Phase 3 clinical trial or other pivotal clinical
trial with a product within 48 months. Either party may terminate the agreement in the event of a material breach of the agreement that
has not been cured following written notice and a 60-day opportunity to cure such breach (which is shortened to 15 days for a payment
breach).
License
Agreement with CoNCERT Pharmaceuticals, Inc.
On
October 4, 2017, Promet entered into a License Agreement with CoNCERT (“CoNCERT License Agreement”). On March 19, 2018, we,
Promet, and CoNCERT entered into an Amended Option Licensing Agreement (“March Amendment”) that, among other things, assigned
the CoNCERT Agreement from Promet to us and we exercised the exclusive commercial license option for the PCS499 compound from CoNCERT.
The
CoNCERT License Agreement provides us with an exclusive (including as to CoNCERT) royalty-bearing license to CoNCERT’s patent rights
and Know-How to develop, manufacture, use, sub-license and commercialize compounds (PCS499 and each metabolite thereof) and pharmaceutical
products with such compounds worldwide. We are required to pay CoNCERT royalties, on a product–by-product basis, on future worldwide
net sales, or pay a percentage of any sublicense revenue.
We
will incur royalty obligations to CoNCERT on a country-by-country and product-by-product basis that expire on a country-by-country and
product-by-product basis on the later of (i) expiration or invalidation of the last patent rights covering such product in such country
or (ii) the tenth anniversary of the date of the first commercial sale to a non-sublicensee third party of such product in such country.
We
are required to use commercially reasonable efforts, at our sole cost and expense, to develop and obtain regulatory approval for one
product in the U.S. and at least one other major market and, subject to obtaining regulatory approval in the applicable major market,
commercialize one product in the U.S. and at least one other major market. CoNCERT may terminate the agreement if, following written
notice and a 60 day opportunity to demonstrate a plan to cure, it believes that we are not using commercially reasonable efforts to develop
and obtain regulatory approval for one product in the U.S. and in at least one other major market for any consecutive nine month period.
The
term of the CoNCERT License Agreement continues in full force and effect until the expiration of the last royalty term. On a country-by-country
and product-by-product basis, upon the expiration of the royalty term in such country with respect to such product, we shall have a fully
paid-up, perpetual, irrevocable license to such intellectual property with respect to such product in such country. In the event of a
material breach of the CoNCERT Agreement, either party may terminate the agreement provided such breach is not cured in the 90 days following
written notice of the breach (which is shortened to 15 days for a payment breach). In addition, either party may terminate the agreement
upon an assignment for the benefit of creditors or the filing of an insolvency proceeding by or against the other party that is not dismissed
within 90 days of such filing.
Government
Regulation
The
FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements
upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing.
These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture,
quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval
monitoring and reporting, sampling and export and import of our product candidates.
U.S.
Government Regulation
In
the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.
The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes
and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements
at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative
or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold,
issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions,
fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The
process required by the FDA before a drug may be marketed in the United States generally involves the following:
● submission to the FDA of an NDA;
● satisfactory completion of an FDA advisory committee review, if applicable;
Pre-clinical
studies
Before
testing any biological product candidate in humans, including our product candidates, the product candidate must undergo rigorous pre-clinical
testing. The pre-clinical developmental stage generally involves laboratory evaluations of drug chemistry, formulation and stability,
as well as studies to evaluate toxicity in animals, to assess the potential for adverse events and, in some cases, to establish a rationale
for therapeutic use. The conduct of pre-clinical studies is subject to federal regulations and requirements, including GLP regulations
for safety/toxicology studies. An IND sponsor must submit the results of the pre-clinical studies, together with manufacturing information,
analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND.
An
IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human
clinical trials may begin. Some long-term pre-clinical testing, such as animal tests of reproductive adverse events and carcinogenicity,
may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises
concerns or questions before that time related to one or more proposed clinical trials and places the trial on clinical hold. In such
a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission
of an IND may not result in the FDA allowing clinical trials to commence.
Clinical
trials
The
clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the
supervision of qualified investigators, generally physicians not employed by, or under control of, the trial sponsor, in accordance with
GCPs, which include the requirement that all research patients provide their informed consent for their participation in any clinical
trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures,
subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol,
and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must
be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals
participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the
informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical
trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results
to public registries. Information about most clinical trials must be submitted within specific timeframes for publication on www.clinicaltrials.gov.
Information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the
clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results
of their clinical trials after completion. Disclosure of the results of these trials can be delayed in some cases for up to two years
after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress
of development programs.
Human
clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
Post-approval
trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to
gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow
up. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a biologics license
application (BLA).
Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse
events occur. The FDA or the sponsor may suspend or terminate a clinical trial at any time, or the FDA may impose other sanctions on
various grounds, including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB can
refuse, suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance
with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
Concurrently
with clinical trials, companies usually complete additional pre-clinical studies and must also develop additional information about the
physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities
in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product
candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of
the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted
to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
Marketing
Approval
Assuming
successful completion of the required clinical testing, the results of the pre-clinical studies and clinical trials, together with detailed
information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted
to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of
an NDA is subject to a substantial application user fee.
The
review process typically takes twelve months from the date the NDA is submitted to the FDA. The FDA conducts a preliminary review of
all NDAs within the first 60 days after submission to determine whether they are sufficiently complete to permit substantive review before
accepting them for “filing.” The FDA may request additional information rather than accept an NDA for filing. In this event,
the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the
FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews
an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured,
processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity. Under the current
guidelines in effect in the Prescription Drug User Fee Act (PDUFA), the FDA has a goal to review and act on the submission within ten
months from the completion of the preliminary review of a standard NDA for a new molecular entity.
In
addition, under the Pediatric Research Equity Act of 2003, as amended and reauthorized, certain NDAs or supplements to an NDA must contain
data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations,
and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on
its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval
of the product for use in adults, or full or partial waivers from the pediatric data requirements.
The