Item 1A. Risk Factors 27
Item 1B. Unresolved Staff Comments 46
Item 1C. Cybersecurity 46
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 60
Part IV
Item 15. Exhibits, Financial Statement Schedules 60
Signatures 62
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
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 and are summarized below under the “Summary Risk Factors” section. These risks include, but are not limited to, the following:
● our ability to meet obligations under our license agreements;
● 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; and
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.
SUMMARY
RISK FACTORS
We
are providing the following summary of the risk factors contained in our Form 10-K to enhance the readability and accessibility of our
risk factor disclosures. We encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in their
entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from
our recent results or from our anticipated future results.
Risks
Related to Our Financial Position and Need for Additional Capital
● We have a history of losses and we may never become profitable.
● We have limited cash resources and will require additional financing.
Risks
Relating to Clinical Development and Commercialization of Our Product Candidates
Risks
Relating to Our Intellectual Property Rights
● We cannot ensure protection of our licensed intellectual property rights.
General
Company-Related Risks
Risks
Related to Ownership of Our Common Stock
● Our common stock price is expected to be volatile.
Part
I
Item
1. Business
Overview
We
are a clinical-stage biopharmaceutical company focused on utilizing our “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 improving upon
FDA-approved, widely used oncology drugs or the cancer-killing metabolites of these drugs by altering how they are metabolized and/or
distributed in the body, including how they are distributed to the actual cancer cells.
Our
regulatory science approach 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. Regulatory science is the science of developing new tools, standards, and approaches
to assess the safety, efficacy, quality, and performance of all FDA-regulated products. Over the last 30 years, two of our founders,
Dr. David Young and Dr. Sian Bigora, have expanded the original regulatory science concept by including the pre-clinical and clinical
studies to justify the benefit-risk assessment required for FDA approval when designing the development programs of new drug products.
Our
regulatory science approach defines the scientific information that the FDA requires to determine if the benefit outweighs the risk of
a drug in a specific population of patients and at a specific dosage regimen for a specific drug product. The studies are designed to
obtain the necessary scientific information to support the regulatory decision.
Recently,
the FDA has taken steps to define some of the regulatory science required for the FDA approval of oncology products.
Through the FDA’s Project Optimus Oncology Initiative and the related Draft Guidance on determining the “optimal”
dosage regimen for an oncology drug, the FDA has chosen to make the development of oncology drugs more science-based than in the
past. Since the principles of the FDA’s Project Optimus and the related Draft Guidance have been used by our regulatory
science approach in a number of non-oncology drugs, our 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 our regulatory science approach provides us with three distinct advantages:
● greater efficiencies (e.g., the right trial design and trial readouts);
Our strategic prioritization
is to advance our pipeline of NGC proprietary small molecule oncology drugs. The NGC products are new chemical entities, but they work
by changing the metabolism, distribution and/or elimination of already FDA-approved cancer drugs or their active metabolites while maintaining
the mechanism of how the drug kills cancer cells. We believe our 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:
We
have completed our Phase 2A trial for PCS12852 in gastroparesis patients with positive results. Additionally, in February 2023, due primarily
to the inability to identify and enroll patients in our rare disease Phase 2 trial for PCS499 in ulcerative Necrobiosis Lipoidica (uNL),
we decided to cease further enrollment in the PCS499 trial and terminated the trial. We did not experience any safety concerns during
the conduct of either the PCS12852 or PCS499 trial. We are currently evaluating options to monetize these non-core drug assets, which
may include out-licensing or partnering these assets with one or more third parties.
Our
shift in prioritization to NGC oncology drugs 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 and probable path to 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 novel or different ways to treat cancer. Our approach is to take three current
FDA-approved cancer drugs and modify and improve how the human body metabolizes and/or distributes these NGC treatments compared to
their presently approved counterpart chemotherapy drugs while maintaining the cancer-killing mechanism of action; thus, our reason
for calling our drugs Next Generation Chemotherapy (or NGC) treatments. Part of the development includes determining the optimal
dosage regimen based on the dose-response relationship as described in the FDA’s Project Optimus Initiative and Draft Optimal
Dosage Regimen Oncology Guidance. To date, we have data that we believe suggests 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 clearly 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
Our
strategy is to develop our pipeline of NGC proprietary small molecule oncology drugs using our regulatory science approach to determine
the optimal dosage regimen of our oncology drugs. By changing either the metabolism, distribution, and/or elimination of already FDA-approved
cancer drugs (e.g., capecitabine, gemcitabine, and irinotecan) or their active metabolites, we believe that our three new oncology drugs
represent the next generation of chemotherapy with an improved safety profile, improved efficacy profile and/or potentially benefiting
more patients while maintaining the mechanism of how the drug kills cancer cells. By combining these modified approved cancer treatments
with our regulatory science approach and our experience using the principles of FDA’s Project Optimus initiative, we anticipate
that we will be able to increase the probability of FDA approval, improve the safety-efficacy profile over the existing counterparts
of our NGC drugs, and more efficiently develop each drug.
Our
pipeline of NGCs (i) already has 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) targets cancers for which a single positive pivotal trial 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 our 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 President of Research and Development 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 on its Board of Directors 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 our regulatory science approach and principles used and refined by our Founders over the last 30 years.
Our
Drug Pipeline
Our
pipeline currently consists of NGC-Cap, NGC-Gem and NGC-Iri (also identified as PCS6422, PCS3117 and PCS11T, respectively) and two non-oncology
drugs (PCS12852 and PCS499). The non-oncology drugs are not included in the pipeline chart above, as we are exploring our options for
those drugs, which may include out-licensing or partnership opportunities. A summary of each drug is provided below.
Next
Generation Chemotherapy Pipeline
Capecitabine,
as presently prescribed and FDA-approved, forms the cancer drug 5-FU which is then further metabolized to anabolites (which kill both
cancer cells and normal duplicating cells) and catabolites (which cause side effects and have no cancer killing properties). When capecitabine
is given in combination with PCS6422 in NGC-Cap, PCS6422 significantly changes the metabolism of 5-FU, which results in a change in the
distribution of 5-FU within the body. Due to this change in metabolism and the overall metabolite profile of anabolites and catabolites,
the side effect and efficacy profile of NGC-Cap has been found to be different from capecitabine given without PCS6422. Since the potency
of NGC-Cap is also greater than FDA-approved capecitabine based on the 5-FU systemic exposure per mg of capecitabine administered, the
amount of capecitabine anabolites formed from 1 mg of capecitabine administered in NGC-Cap will, therefore, be much greater than formed
from the administration of 1 mg of existing capecitabine.
On
August 2, 2021, we enrolled the first patient in our Phase 1B dose-escalation maximum tolerated dose trial in patients with advanced
refractory gastrointestinal (GI) tract tumors. Our interim analysis of Cohorts 1 and 2A of the ongoing clinical trial found no dose-limiting
toxicities (DLTs), no drug-related adverse events greater than Grade 1, and no adverse events associated with the catabolites of 5-FU
such as HFS. In this Phase 1B trial, it was demonstrated that the irreversible inhibition of DPD by PCS6422 could alter the metabolism,
distribution and elimination of 5-FU, making NGC-Cap significantly (up to 50 times) more potent than capecitabine alone and potentially
leading to higher levels of anabolites which can kill replicating cancer and normal cells. By administering NGC-Cap to cancer patients,
the balance between anabolites and catabolites changes depending on the dosage regimens of PCS6422 and capecitabine used, making the
efficacy-safety profile of NGC-Cap different than that of FDA-approved capecitabine and requiring further evaluation of the PCS6422 and
capecitabine regimens to determine the optimal NGC-Cap regimens for patients.
In
order for NGC-Cap to provide a safer and more efficacious profile for cancer patients compared to existing chemotherapy, understanding
how the different regimens of PCS6422 and capecitabine may affect the systemic and tumor exposure to the anabolites, as well as the systemic
exposure to the catabolites, is required. This can be achieved by following the timeline of DPD irreversible inhibition and the formation
of new DPD using the plasma concentrations of 5-FU and its catabolites.
In
an effort to better estimate the timeline of DPD inhibition and formation of new DPD, we modified the protocol for the Phase 1B trial
and began enrolling patients in the amended Phase 1B trial in April 2022. On November 1, 2022, we announced that data from the Phase
1B trial identified multiple dosage regimens with potentially better safety and efficacy profiles than currently existing chemotherapy
regimens. Since 5-FU exposure is dependent on both the PCS6422 regimen and the capecitabine regimen, safe regimens were identified as
well as regimens that cause DLTs. One of the regimens in the Phase 1B trial did cause DLTs in two patients, one of whom died. The Phase
1B trial is continuing to enroll patients and is expected to complete enrollment in early 2024. The next trial will be a Phase 2 trial
to determine which regimens provide an improved efficacy-safety profile over present therapy using the principles of the FDA’s
Project Optimus initiative to help guide the design of the trial. This FDA initiative requires us to consider NGC regimens that are not
at the maximum tolerated dose or exposure level.
Discussions
with the FDA in April 2023 have clarified that the major goal for the next Phase 2 trial will be to evaluate and understand the dose-
and exposure-response relationship for anti-tumor activity and safety. The specific dosage regimens for the trial will be defined following
the determination of the MTD from our ongoing Phase 1B trial. Cohort 3 in the Phase 1B trial, which dosed patients with PCS6422 in combination
with capecitabine at 150 mg BID (twice a day), completed with no dose-limiting toxicities. Enrollment in Cohort 4 was expanded to include
six patients to further evaluate the safety at this dose. Enrollment in this cohort is now complete and to date, no DLTs have been observed
in this cohort, but safety evaluation for this cohort is still ongoing. Once the cohort and the safety evaluation is complete, the need
for any additional cohorts will be further evaluated. Following the FDA meeting on December 11, 2023, we have decided the next NGC-Cap
trial would be a Phase 2 trial in breast cancer. This decision was supported through discussions with the FDA where we agreed with the
FDA that the development of NGC-Cap in breast cancer would be a more efficient development program than metastatic colorectal cancer
and improve the likelihood of FDA approval. The FDA has agreed that the data generated from past and existing studies could be used to
directly support the Phase 2 trial in breast cancer. Capecitabine is already approved as both monotherapy and combination therapy in
breast cancer, which contributes to the logic and efficiency of our current direction. In addition, the FDA’s agreement that our
present data would support a Phase 2 trial in breast cancer makes the expansion seamless. The objective for the Phase 2 trial will be
to provide safety-efficacy data to preliminarily demonstrate the benefit of NGC-Cap over capecitabine and other treatment options. Based
on this expansion to breast cancer, we expanded our Oncology Advisory Board to include key breast cancer oncologists. We have already
determined the Phase 2 study design, which we expect to share with the FDA soon, and plan to use the funding from our January 2024 public offering to begin
enrolling patients in the third quarter of 2024.
Our
license agreement with Elion Oncology, Inc. (“Elion”) for NGC-Cap requires us 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 include dosing a first patient with a product in a Phase 2 or 3 clinical trial on or before October 2, 2024. We are currently
conducting pre-trial activities and planning to dose the first patient in our Phase 2 trial in the third quarter of 2024.
Our
license agreement with Ocuphire Pharma, Inc. (“Ocuphire”) for NGC-Gem requires us 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) dosing a patient in a clinical trial prior to June 16,
2024; and (ii) dosing a patient in a pivotal clinical trial or in a clinical trial for a second indication of the drug prior to June
16, 2026. We are currently in discussions with Ocuphire to extend these deadlines.
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 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-Cap, the competitive factors will be related to the efficacy and safety of the product when compared to capecitabine. 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-Gem, 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-Iri, 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-Iri.
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 existing and 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-Cap 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 license grant 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 41,250 shares of our common stock to Elion. As part of
the Elion License Agreement, we agreed to issue to Elion 5,000 shares of our common stock on each of the first and second anniversary
dates of the Elion License Agreement.
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.
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 NGC-Cap. 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 determined the dosage for
our Phase 2 study on January 25, 2024 and issued 5,000 shares of common stock to Elion for meeting this milestone.
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 dosing a first patient with a product in a Phase 2 or 3 clinical trial by October 2, 2024. We are currently on track to dose our first patient in a Phase 2 clinical trial by the deadline. 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 we received
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 2,235 shares of our common stock to Ocuphire, a cash payment of $200,000 and assumed
$66,583 in 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. We are currently in discussions with Ocuphire to extend these deadlines. Although we do not
anticipate having any issues in extending the deadlines, there can be no assurance that such negotiations will be successful. 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.
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. The Aposense License Agreement provides us with an exclusive worldwide license (excluding
China), to research, develop and commercialize products comprising or containing PCS11T. The license grant was conditioned on the following
being satisfied within nine months of May 24, 2020 (or the Aposense License Agreement shall terminate): (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 31,250 shares of
our common stock to Aposense. 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.
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 25,000 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 37,500 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.
We
are required to use commercially reasonable efforts, at our sole cost and expense, in conjunction with a joint Processa-Yuhan Board 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) 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 by August 19, 2024. 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 the 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