Item 1A. Risk Factors 31
Item 1B. Unresolved Staff Comments 59
Item 1C. Cybersecurity 59
Item 2. Properties 60
Item 3. Legal Proceedings 60
Item 4. Mine Safety Disclosures. 61
Part II
Item 6. [Reserved] 62
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69
Item 8. Financial Statements and Supplementary Data 69
Item 9A. Controls and Procedures 70
Item 9B. Other Information 71
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 71
Part III
Item 10. Directors, Executive Officers and Corporate Governance 72
Item 11. Executive Compensation 72
Item 14. Principal Accountant Fees and Services 72
Part IV
Item 15. Exhibits and Financial Statement Schedules 72
Signatures 74
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 Cancer therapy, referring to the drugs in our pipeline that change the metabolism or distribution of existing cancer
drugs to increase potency and reduce toxicity.
“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;
● the risks of holding Digital Assets on our balance sheet;
● our ability to obtain and maintain regulatory approval of our product;
● 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.
Part
I
Item
1. Business
Corporate
Information
Processa Pharmaceuticals, Inc. (“Processa,” “we” or the “Company”) was incorporated under the laws of the State of Delaware on March 29, 2011. Our principal executive office is located at 601 21st
Street, Suite 300 Vero Beach, FL 32960. Our telephone number is (772) 453-2899.
We
make available free of charge on or through our Internet website (http://www.processapharmaceuticals.com) our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC), as well as our Code of Ethics and Code of Conduct. The SEC also maintains
a website which provides online access to reports and other information regarding registrants that file electronically with the SEC at:
www.sec.gov.
The
information contained on our website and social media channels is not included as a part of, or incorporated by reference into, this
report.
Overview
We
are a publicly listed clinical-stage biopharmaceutical company. We are developing a pipeline of Next Generation Cancer therapy
(“NGC”) small molecules, one of which is currently in a Phase 2 trial, while the other is in pre-clinical development.
Our risk-mitigated strategy is to identify existing cancer therapies where the mechanism of action is well understood and that are
cornerstones of current treatment regimens, but are highly toxic, with side effects that are often treatment limiting. We devise
technologies to change the way the body metabolizes them, or the way they are distributed within the body, to improve the
therapeutic effect and reduce toxicity. We then efficiently develop our pipeline of Next Generation Cancer therapies utilizing our
proprietary Regulatory Science Approach, which we believe will further increase the likelihood of regulatory approval. Since the
underlying active metabolites of these drugs are already commonly used in cancer therapy, we believe that if our clinical trials are
successful and are showing a better safety-efficacy profile than the currently used drugs, the commercial adoption for our NGC
therapies will be rapid and broad.
The
NGC treatments in our pipeline are as follows (see Our Drug Pipeline below for a more detailed discussion of each):
We
are currently evaluating options to monetize two non-oncology drug assets, which may include out-licensing or partnering these assets
with one or more third parties.
Our
Strategies
Clinical
Pipeline Strategy
We
believe our strategy reduces clinical risk, regulatory risk and commercial risk, while addressing a critical need in fighting cancer.
Historically,
cancer therapies targeted rapidly dividing cells because cancer cells tend to divide and grow more quickly than normal cells. Unfortunately,
most of these drugs do not distinguish between cancer cells and normal cells that also divide rapidly, such as those in the bone marrow,
digestive tract, and hair follicles. Prior to FDA’s Project Optimus Initiative, oncology drug developers would begin human clinical
trials with dose-escalating studies meant to identify a Maximum Tolerated Dose (“MTD”), which they hoped would be high enough
to impact the cancer. If approved by the FDA, the recommended dose would be at or near the MTD, resulting in many patients suffering
from severe side effects from treatment. Developers were defining the “optimal” treatment dose by the highest dose that may
potentially be tolerated and then assumed that the highest dose would also provide the greatest efficacy, which may not have been correct.
Our
risk-mitigated strategy is to identify existing effective cancer therapies where the active cancer-killing ingredients are well
understood and that are foundations of current treatment regimens, but are highly toxic, with side effects that are often treatment
limiting. We then devise technologies to change the way the body metabolizes the drugs, or the way they are distributed within the
body, to increase potency and reduce toxicity. By modifying the drugs in this manner, we believe our treatments will provide an
improved safety-profile when compared to their currently marketed counterparts. We believe our approach will extend
survival and improve quality of life for many patients fighting cancer. We also believe that we can develop these drug candidates at
a lower cost with a higher success rate than is common in the industry. We call our drug candidates Next Generation Cancer (NGC)
therapies.
Clinical
Risk
We
already know these drugs work. They have been used in cancer treatment for decades, and there are hundreds, if not thousands, of scientific
publications looking at all aspects of the drugs. In many ways, these drugs are better understood now than when they were first approved.
This improved knowledge, added to the data from prior human clinical trials, leads us to believe clinical risk is significantly reduced
when compared to a potential drug that is focusing on a new mechanism of action or new target. By modifying how an existing anti-cancer
drug is metabolized or distributed within the body, thereby making the existing drug less toxic and more effective, we do not rely on
finding an MTD that exceeds what is safe for many patients. Instead, we seek to merely increase the amount of the proven anti-cancer
ingredients in the cancer cells, while reducing those ingredients in healthy cells, often with a lower dose of the approved drug, which
we believe results in less clinical risk.
Regulatory
Risk
Our
strategy is to efficiently develop our pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach
(described more fully in “Regulatory Science Approach” below), including the principles associated with FDA’s Project
Optimus oncology initiative and the related FDA draft guidance (Optimus, 2025). Part of the development includes determining the optimal
dosage regimen based on the dose-response relationship rather than using the only the Maximum Tolerated Dose (MTD). 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 oncology drugs represent the next generation of cancer therapy with an improved safety--efficacy profile, thereby 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.
Commercial
Risk
Since
the underlying drugs are already heavily used in cancer therapy, we believe that, if our clinical trials are successful in demonstrating
better safety-efficacy profile, our NGC therapies will be rapidly and broadly adopted. Why would an oncologist use the older,
more toxic drug if the efficacy is no different?
Summary
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 differentiating
our NGC treatments from the existing treatment in the market.
Operating
Digital Asset Treasury Strategy
On
August 7, 2025, we announced that we were evaluating corporate digital asset treasury strategies as part of our broader financial
and growth objectives. We believe that strategic engagement with emerging financial technologies, including select digital assets
such as CHZ and other cryptocurrencies, tokens, and rights of a similar nature (collectively referred to as,
“Digital Assets”) with potential yield-generating capabilities, may offer novel avenues to diversify our capital
base and enhance financial flexibility, while providing an opportunity for long-term value creation. One of the potential benefits
of a digital asset treasury strategy is the potential of blockchain-based assets to contribute meaningfully to the funding of our
clinical development programs.
As
of March 13, 2026, we had $1.4 million in CHZ tokens, for which we paid $1.35 million and had an unrealized gain of approximately
$77,000. Subject to market conditions, we expect to issue equity or debt securities or engage in other capital raising transactions
with the objective of using all or a portion of the proceeds to purchase additional Digital Assets.
Regulatory
Science Approach
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. Two of our founders, Dr. David Young and Dr.
Sian Bigora, developed trade secrets and know-how developed from the regulatory science research initially developed in collaboration
with FDA and later refined by Drs. Young and Bigora over the last 30+ years. They also expanded the original regulatory science concept
by including it in 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 took steps to define some of the regulatory science required for the FDA approval of oncology products. Historically, most cancer
drugs were dosed at the MTD, which lead to many patients experiencing significant side effects and lower quality of life. What was ignored
was that a lower dose may result in the same efficacy as a higher dose while providing fewer side effects and/or less severe side effects.
Through the FDA’s Project Optimus Oncology Initiative (Optimus, 2025) and the related Draft Guidance on determining the “optimal”
dosage regimen for an oncology drug, the FDA chose 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
Drug Pipeline
Our
oncology pipeline currently consists of NGC-Cap and NGC-Iri (also identified as PCS6422 and PCS11T, respectively) and two non-oncology
drugs (PCS12852 and PCS499). We are exploring options for our non-oncology drugs, which may include out-licensing or partnership opportunities.
The status of our drug pipeline is set forth below:
NGC-Cap
Capecitabine
(NCI, 2025), as presently prescribed and FDA-approved, is an oral prodrug of the cancer drug 5-fluorouracil (“5-FU”) (Casale
J, 2024), which is itself widely used as an intravenous anticancer agent in many types of cancer. Capecitabine is metabolized into 5-FU
where it is then further metabolized to anabolites (which kill both cancer cells and normal duplicating cells) and catabolites (have
no cancer killing properties and may cause side effects) (Yen-Revollo, 2008). In 2021, Medicare Part B alone reports over 9.2 million
dosing units of capecitabine used.
Dihydropyrimidine
dehydrogenase (“DPD”) is an enzyme that helps the body break down thymine and uracil, and inactivates 80–90% 5-FU (Yen-Revollo,
2008). This means the dose of capecitabine must be high enough to account for the DPD effect. However, DPD enzyme activity has been shown
to vary among individuals in a Gaussian pattern (i.e. normal distribution or bell-shaped curve), with as much as a sixfold variation
from the lowest to the highest values. This wide variation in DPD activity is likely responsible for the wide variation in the half-life
observed in patients in population studies (Diasio, 1998). This may suggest a source of the high incidence of moderate to severe side
effects experienced by people taking capecitabine.
Adverse
side effects occur in up to 70% of patients treated with capecitabine (Yen-Revollo, 2008) (Xeloda Package Insert, 2015), including myelosuppression,
cardiac toxicity, mucositis, diarrhea, and hand-foot syndrome (“HFS”). These side effects frequently result in decreased
doses, interrupted doses, or discontinuation of treatment with capecitabine, which limits its effectiveness to the patient. Approximately
30% of patients will experience toxicities above grade 3, and approximately 10% to 20% will require hospitalization to treat these toxicities
(Meulendijks D, 2016).
HFS
occurs in 15.5% to 68.3% (median, 53.5%) of patients treated with capecitabine (Yen-Revollo, 2008). The molecular pathophysiology of
5-FU-induced HFS remains unclear, but since combination therapy of 5-FU with a DPD inhibitor significantly reduces the occurrence of
HFS, it suggests that the toxicity may be due to a byproduct of DPD catabolism of the drug (Yen-Revollo, 2008).
PCS6422
is an orally administered irreversible inhibitor of the enzyme DPD. When capecitabine is given in combination with PCS6422 (“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 greater than FDA-approved capecitabine,
the amount of capecitabine anabolites formed from 1mg of capecitabine administered in NGC-Cap will, therefore, be much greater than would
be formed from the administration of 1mg of existing capecitabine. Therefore, a lower dose of capecitabine would be expected to accomplish
the same, or greater, cancer-killing activity. Importantly, chemically inhibiting DPD activity also reduces interpatient and intrapatient
variability, raises plasma levels of bioavailable 5-FU, and lengthens the time of pharmacologic exposure to the drug (Yen-Revollo, 2008),
meaning that there should be less variability in response and side effects.
On
August 2, 2021, we enrolled the first patient in our Phase 1B trial in patients with advanced refractory gastrointestinal (GI) tract
tumors. Our interim analysis of Cohorts 1 and 2A 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.
The Phase 1B trial completed enrollment in early 2024 and the last subject completed
the study in July 2024. Data from the Phase 1B showed, that although 5-FU exposure at therapeutic doses was 5 to 10 fold greater than
for monotherapy, adverse events from 5-FU catabolites were minimal while anabolite associated adverse events for the highest dose cohorts
were similar to those reported for monotherapy. In these evaluable subjects with refractory or intolerant cancer, the combination of
PCS6422 and capecitabine showed an efficacy with a partial response rate of 11%, stable disease rate of 44%, and a median progression
free survival of 93 days. This safety and efficacy data supports the inclusion of the 2 dosage regimens of PCS6422 in combination with
capecitabine (from Cohort 3 [75 mg BID] and Cohort 4 [225 mg BID]) in the Phase 2 study. The safety review committee determined the MTD
and RP2D as (capecitabine 450 mg/day; 225 mg BID), the Cohort 4 dosing regimen.
In
parallel with the Phase 1B trial, we had discussions with the FDA which clarified that the major goal for the next Phase 2 trial would
be to evaluate and understand the dose- and exposure-response relationship for anti-tumor activity and safety. The specific dosage regimens
for the trial were defined following the determination of the MTD from Phase 1B trial. Following the FDA meeting on December 11, 2023,
we determined 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 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 is to provide safety-efficacy data to preliminarily demonstrate the benefit of NGC-Cap over monotherapy capecitabine. Based on
this expansion to breast cancer, we expanded our Oncology Advisory Board to include key breast cancer oncologists.
The
IND for the evaluation of NGC-Cap for the treatment of breast cancer was cleared by the FDA on July 24, 2024, and allowed for the Phase
2 trial to be initiated. The Phase 2 study (NCT06568692) is a global multicenter, open-label, adaptive designed safety-efficacy trial
comparing two different doses of NGC-Cap to FDA-approved monotherapy capecitabine in approximately 60 to 90 patients with advanced or
metastatic breast cancer. The trial is designed to evaluate the safety-efficacy profile of NGC-Cap versus monotherapy capecitabine, to
determine the potential optimal dosage regimens of NGC-Cap as required by the FDA Project Optimus Initiative and to evaluate the possibility
of personalizing NGC-Cap therapy. The first patient in the trial was dosed on October 2, 2024, and we recently enrolled and dosed our
20th patient. We will conduct our first formal interim analysis to compare safety and preliminary efficacy outcomes
between the NGC-Cap and Mono-Cap treatment arms, which is expected to be completed in the first half of 2026. Enrollment in the
study is currently on temporary hold until the interim analysis from the 20 patients is completed. Once the data is reviewed the potential
addition of a third treatment arm (a second dosage regimen of NGC-Cap) may be added and enrollment of the study will reopen.
Breast
cancer is a frequently diagnosed cancer, representing approximately 15% of all new cancer patients in 2023. It has a prevalence of more
than 3.8 million patients, with nearly 300,000 new diagnoses last year. Over 150,000 women are currently living with advanced or metastatic
breast cancer. The NGC-Cap annual newly diagnosed incidence rate for breast, colorectal and other cancers is greater than 250,000 patients
per year.
NGC-Iri
The
muscle-to-plasma ratio was less than 0.10 for NGC-Iri and greater than 0.4 for irinotecan and Onivyde®
We
are defining the potential paths to approval, which include defining the targeted patient population and the type of cancer. Subject
to available funding, we plan to expand the preclinical analysis, including additional preclinical efficacy and toxicity studies; evaluate
manufacturing options for NGC-Iri; and conduct chemistry, manufacturing and control (CMC) activities and pre-IND enabling studies.
Like
irinotecan, NGC-Iri could be used to treat patients with various cancers such as lung, colorectal, gastrointestinal, and pancreatic cancer.
We estimate at least 200,000 patients in the United States were newly diagnosed in 2022 with lung, colorectal, gastrointestinal, and
pancreatic cancer.
Non-Oncology
Pipeline for Out-licensing or Partnership
Market
Overview
Capecitabine
Market
Drivers:
Market
Size and Growth:
Irinotecan
/ SN-38
Market
Size and Growth:
Market
Segmentation:
Key
Market Drivers:
References
Camptosar
PI. (1996). Camptosar Package Insert. Retrieved from https://www.accessdata.fda.gov/drugsatfda_docs/label/2014/020571s048lbl.pdf
Casale
J, P. P. (2024, 2 16). StatPearls. Retrieved from https://www.ncbi.nlm.nih.gov/books/NBK549808/
Consegic.
(2025, Jan). Capecitabine Market - Size, Industry Share, Growth Trends and Forecasts (2025-2032). Retrieved from https://www.consegicbusinessintelligence.com/capecitabine-market
Dataintelo.
(2024). Irinotecan Market Outlook 2032. Retrieved from https://dataintelo.com/report/global-irinotecan-market
Delveinsight.
(2019, Oct). Gastroparesis: Market Insights, Epidemiology, and Market Forecast-2028. Delveinsight
Diasio,
R. B. (1998). The Role of Dihydropyrimidine Dehydrogenase (DPD) Modulation in 5-FU Pharmacology. Oncology, Vol 12; Issue 10.
GMI
Insights. (2023, October). Capecitabine Market Size - By Indication (Breast, Colorectal, Gastric, Pancreatic), By Synthesis Type (Chemical
Based API, Biological API, Highly Potent API, Mode, Global Forecast 2023- 2032. Retrieved from https://www.gminsights.com/industry-analysis/capecitabine-market
Market
Data Forecast. (2024, June). North America Capecitabine Market Research Report - Segmented By Application, Drug Formulation &
Country (U.S, Canada & Rest of North America) - Industry Analysis, Size, Share, Growth, Trends, & Forecasts (2024 to 2032).
Retrieved from https://www.marketdataforecast.com/market-reports/na-capecitabine-market
Meulendijks
D, C. A. (2016). Improving safety of fluoropyrimidine chemotherapy by individualizing treatment based on dihydropyrimidine dehydrogenase
activity – Ready for clinical practice?. Cancer Treat Rev., 50:23-34.
NCI.
(2025, 1 2). National Cancer Institute - Capecitabine. Retrieved from https://www.cancer.gov/about-cancer/treatment/drugs/capecitabine
Onivyde
PI. (1996). Onivyde Package Insert. Retrieved from https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/207793s016lbl.pdf
Optimus,
F. (2025). FDA Project Optimus. Retrieved from https://www.fda.gov/about-fda/oncology-center-excellence/project-optimus
Yen-Revollo,
J. L., & Goldberg, R. a. (2008). Can Inhibiting Dihydropyrimidine Dehydrogenase Limit Hand-Foot Syndrome Caused by Fluoropyrimidines?
Clinical Cancer Research, 14:8-13.
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 development 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 Dr. Young over the last 30 years.
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:
Sun Pharmaceuticals Yuhan Aposense Elion 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.
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.
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 6, 2024. We dosed
our first patient in a Phase 2 clinical trial on October 2, 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 90-day opportunity to cure such breach (which is shortened
to 15 days for a payment breach). See Item 3 – Legal Proceedings herein for additional information regarding the status of the
Elion License Agreement.
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.
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. 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. 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. 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 Sun Pharmaceuticals Industries Limited (formerly known as CoNCERT Pharmaceuticals, Inc.)
On March 19,
2018, we entered into a Licensing Agreement with CoNCERT Pharmaceuticals, Inc. (which was later acquired by Sun Pharmaceutical
Industries Limited (“Sun Pharma”)) (“Sun Pharma License Agreement”) for the PCS499 compound.
The
Sun Pharma License Agreement provides us with an exclusive (including as to Sun Pharma) royalty-bearing license to Sun
Pharma’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 Sun Pharma 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 Sun Pharma 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. Sun Pharma 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 Sun Pharma 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 Sun Pharma 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.
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 an improved safety-efficacy profile 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-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 FSGS.
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.
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